Some observers say high-end homes in Metro Vancouver are in for a price drop due to the federal government’s budget move to eliminate immigrant investor visas, cutting off the path to B.C. for tens of thousands of wealthy Chinese.
New applications for immigrant investor visas had already been capped since 2012, but Ottawa’s decision wipes out a big backlog of applicants worldwide.
An estimated 45,000 applicants for the so-called millionaire visas were wealthy mainland Chinese intending to come to B.C., according to the South China Morning Post.
Vancouver immigration lawyer Richard Kurland said wiping out the backlog will suddenly deplete the number of incoming wealthy immigrants vying for pricy homes.
“Publicly you heard ‘moratorium’ or ‘no new cases,'” he said. “But that’s not what was happening because visas were still being churned out at high levels.”
Kurland estimates it’s meant a steady influx of 1,000 to 1,500 new buyers each year seeking luxury property.
“It’s a hit to the Vancouver real estate market,” he said. “All of a sudden all of those buyers are not going to be in the market. What does that do to the supply and demand curve? The prices can only go one way and that’s down.”
Kurland said he’s watching for evidence of other Asian owners of Vancouver property quickly moving to sell as a result of the change.
While immigrant investors tended to pay millions of dollars for top properties, Kurland suggested the drop in demand will translate into reduced prices, not just at the high end of the market, but percolating down to other price points and suburbs in the region.
Central 1 Credit Union economist Helmut Pastrick said the visa change likely means “some softness ahead” at the high end of the market.
“We’re talking west side Vancouver, West Vancouver, Richmond and potentially other areas as well, such as [Coquitlam’s] Westwood Plateau,” he said.
“I would expect over time the values will hold and gain. But there may be some initial impact based on the announcement.”
Pastrick said foreign buyers of B.C. property have less actual impact on markets than the public tends to perceive.
“There’s this broad conception that it’s more than it really is,” he said. “In the Lower Mainland it’s a single digit percentage of total sales that are due to offshore buyers.”
Pastrick said other federal budget measures to tighten the availability of mortgage credit, including a lower limit on CMHC mortgage insurance, may actually do more to cool real estate markets than the final cut-off of the immigrant investor program.
Pastrick’s December forecast for Lower Mainland residential housing markets in 2014 called for small single-digit price gains. He said he would revise the projections downward somewhat if he were to revisit them now.