A new peer-reviewed study from Simon Fraser University (SFU) shows that the “decoupling” of property prices from incomes in Metro Vancouver and to a lesser extent Toronto has been caused by “significant sums of foreign capital that have been excluded from official statistics”.
In particular, Richmond, West Vancouver, the city of Vancouver and Burnaby have the highest concentration of foreign-ownership, and with it the highest housing prices and low average declared incomes:
In de-coupled housing markets, the pattern may be quite different. Wealthy households may use foreign income or wealth to purchase housing and declare relatively low incomes, as in many satellite family arrangements. For example, for recent immigrants in the federal investor immigration program, the median assessed value of single-detached houses in Vancouver was $2.55 million in 2018 (Gellatly & Morrisette, 2019). Yet, this same cohort declared an average of only around $20,000 in income in the first ten years after landing, according to a 2014 federal government study (CIC, 2014). This would imply astronomical ‘individualized’ house price to income ratios of around 125. If there were many such cases, then the median income of working-age households in a municipality (CSD) might not align well with the high house prices found there, as the median income figure would be held down, and the house price to income ratio in a municipality (CSD) could be very high…
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Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
