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A sign advertises a new home for sale in Carleton Place, Ont., on March 17, 2015. THE CANADIAN PRESS/Sean Kilpatrick

Sean Kilpatrick/The Canadian Press

Once upon a time, Vancouver was the home to the Wild West of stock markets. The Vancouver Stock Exchange was a place where rules went to get bent. The old VSE is gone, but its ethically flexible ethos is alive and well in Canada's wildest real estate market.

Last week, a Globe and Mail investigation revealed a shocking but lucrative practice among some Vancouver-area realtors. Agents are making agreements to purchase homes, but before the deals close and the ostensible buyers take possession, agents are flipping the properties, selling to someone who may have been quietly lined up before the initial purchase.

Sometimes the realtor is even an investor in the flip, which is officially known as a contract assignment. The assignment grey market appears to be booming – and if an assignment sale happens before the official sale closes, then no land transfer tax is owing. It's a neat loophole allowing real estate speculation, tax-free.

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These cases look like conflicts of interest, with agents not being transparent about whose interests they're working for, and the public purse being denied money it's otherwise owed. Caveat emptor, meet caveat realtor.

The Globe's revelations led to outrage in a province where the exploding cost of housing is a constant irritant. The Christy Clark government's Speech from the Throne was hastily rewritten to include a promise to "look into any allegations of improper behaviour in the housing market" and "take action."

As for the Real Estate Council of B.C., the body representing realtors, it also promised an investigation, and said it "will be reminding all licensed real estate professionals, in the strongest possible terms, of their legislated duty to act in the best interests of their clients." You know you've got a problem when you have to be reminded not to stick it to customers.

B.C. may not be the only place where this is going on – the Greater Toronto Area is Canada's other long-hot housing market, and the Real Estate Council of Ontario said this week that it too is considering reminding its members of their duty to avoid conflicts.

But even if grey market sales disappeared, and realtors cleaned up all possible conflicts of interest, it would be unlikely to solve the biggest issue for residents of Vancouver and Toronto: Why does housing appear to be so expensive, and why have prices been rising so sharply for so many years? On that score, B.C.'s fired-up assignment market is probably more symptom than cause.

Prices in the Greater Vancouver area are up more than 109 per cent in the past decade, and 12.5 per cent in the past year, according to the Teranet-National Bank House Price Index. The Real Estate Board of Greater Vancouver's MLS home price index puts the price of a benchmark home in Greater Vancouver in January at $1.27-million; in the area MLS defines as Vancouver West, a benchmark home is going for $2.98-million. In Toronto, Teranet-National Bank says prices are up by 80.5 per cent over a decade and 8.6 per cent last year. In January, the average single-family home in the 416-area code sold for more than $1-million, according to the Toronto Real Estate Board.

Some of what's happening in Vancouver and Toronto is just demographics. Greater Vancouver's population has increased by nearly a third since the mid-1990s, while Greater Toronto has grown even faster, adding more than two million people over the same period. The size of households has also been steadily falling: A generation ago, there were 3.5 people in every Canadian family; by 2011 that had dropped to 3. That means it takes nearly 20 per cent more homes to house the same number of people.

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And record low interest rates have made borrowing cheaper than at any time in history, further pumping up prices.

But even after tallying up those factors, some Canadian housing markets still look at least a little bit frothy. According to an annual survey of global prices conducted by Demographia, Vancouver is one of the world's most unaffordable cities, with the median home selling for 10.8 times the average family income. Greater Toronto was the second most unaffordable Canadian city, with a multiple of 6.7. A normal ratio would be closer to 3:1. Vancouver's ratio has nearly doubled in the past 12 years, and Toronto's is up 70 per cent.

If the figures are right, then local housing prices are outpacing local incomes. And that means these price increases either aren't sustainable – prices can't rise faster than incomes forever – or the market is being supported by more than just local incomes.

Unfortunately, the data to solve the puzzle remains remarkably hard to come by. Are non-resident, foreign investors pouring money into Canadian real estate? How much? What's the impact on prices? Good question. A recent CMHC study found the role of foreign housing investors to be insignificant – a finding few experts are willing to buy.

For example, a report last week from two Scotiabank economists described Vancouver as "a regional housing market driven by Asia-Pacific and some local fundamentals," and argued that a low Canadian dollar makes it easier for outside investors to buy B.C. properties – further bidding up prices.

The truth is, Canada still isn't gathering the data to answer some key questions about our own housing market. The role of foreign investors – big or small, negative or positive? – remains poorly understood. As a result, the question of whether any action should be taken to limit purchases of Canadian homes by non-residents can't be answered with confidence.

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Yes, it's a scandal that some Vancouver real estate agents have been doing ethically questionable things in a murky market. The greater scandal, however, is how little Canadian policy-makers know about the shifting ground beneath one of Canada's economic pillars.

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