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If we're going to move toward a solution to the housing affordability crisis, we have to get beyond foreign-money denial.

We've heard a lot lately from a small but influential camp of foreign-money deniers. If they do concede that foreign money is jacking up Vancouver property prices, they'll only admit to it affecting the extreme high end. That's safe territory, because relatively few people can afford a house that costs more than $3-million. It lulls people into mistakenly believing it's a rich person's problem.

The foreign-money denier will also use the government's failure to collect data on foreign ownership as proof it doesn't exist. As someone else said, that's similar to the tobacco industry maintaining the safety of cigarette smoking in the 1950s.

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Cameron Muir, chief economist at the B.C. Real Estate Association, maintains that foreign investment is hugely over-hyped. The provincial government has used B.C. Real Estate Association feedback to support its decision not to institute a luxury tax, or give penalties to speculators who flip properties, or give the city the ability to fine owners of empty properties. In other words, they would not intervene in any way, despite a request that came from Mayor Gregor Robertson.

"My sense is that if foreign investment in housing disappeared today, the average household in Vancouver wouldn't notice a thing," Mr. Muir told me. "You would likely see some softness at the high end of the market for a while, but I don't see it having any profound effect. If we had some evidence that foreign investors were having a significant impact, I'd be all over that. But to date there isn't a single outlier that we can point to."

And recently, Dan Scarrow, managing director of Macdonald Realty's Canadian Real Estate Investment Centre, said that while Mainland Chinese buyers accounted for 70 per cent of his company's high-end sales for 2014, the wealthy Chinese buyers are not affecting the remainder of the market.

"There is little doubt in my mind that outside money is driving the luxury housing market in Vancouver," Mr. Scarrow, who e-mailed me from his office in Shanghai, said. "There is much less evidence to suggest that's the case with the rest of the market. And a very strong case to be made that the rest of the housing market is rising from an overall higher population, constrained supply, record-low interest rates, and a belief that Vancouver will remain one of the most desirable places in Canada for people from the rest of Canada and around the world."

Low interest rates have their effect, but considering the entire country enjoys the same rates, we can be sure that something else is at play in making Vancouver one of the least affordable cities in the world.

It's not news any more that the average house price in Vancouver proper is $2.23-million. And the median Vancouver household income is around $70,000, in line with Nashville. By comparison, Calgary has a median household income of $98,000.

How is it possible that such low incomes could be driving house prices into the stratosphere? According to Macdonald Realty data, Mainland Chinese buyers were responsible for 21 per cent of transactions between $1-million and $3-million and 11 per cent of sales below $1-million. Of those sales that were more than $3-million, Mainland Chinese buyers comprised 70 per cent of the total. Those are significant numbers. And that's just one real estate firm, albeit one that targets that particular market.

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How is it possible for foreign wealth to have no impact on the entire market? Not so long ago, Vancouverites dependent on local incomes used to be able to afford homes in Dunbar, Kerrisdale and Point Grey. Residents were teachers, social workers, professors, doctors and lawyers – anybody with a decent income could afford a nice home. The days of upward mobility are over.

Mr. Muir, however, is not buying it.

"I've heard this argument a lot," he said. "It's a displaced person's argument, that they have to move further away. And I don't know if that quite qualifies as being displaced.

"When we look at prices on the west side or any other parts of Vancouver going up solely because of foreign investors – which we have no evidence are there – it doesn't hold water in terms of a domino effect."

Mr. Muir said local incomes and house prices have always "been out of sync."

"It's not about income so much as net wealth," he said.

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University of B.C. geography professor David Ley is one of the few who have assembled data, although nobody at the government level seems to be paying attention. Prof. Ley is not new to the game. His book, Millionaire Migrants, released in 2010, is about the migration patterns of wealthy East Asians into countries such as Canada and Australia. He's been studying the phenomenon of migrant wealth and housing market bubbles around the world for years, including the problem of growing inequality. He will participate in a sold-out Urban Development Institute panel on foreign ownership with Mr. Muir and immigration lawyer Jeffrey Lowe on Oct. 7.

Prof. Ley has used Citizen and Immigration Canada statistics to estimate that 200,000 people have come to the Vancouver region through wealth-based immigration programs since 1980. An estimated 70,000 millionaire migrants have arrived in the past decade, so there's been a recent surge in numbers. Their arrival directly correlates with the rise of real estate prices.

University of Waterloo professors Markus Moos and Andrejs Skaburskis wrote a paper called "The Globalization of Urban Housing Markets: Immigration and Changing Housing Demand in Vancouver." In it, they say: "The arrival of primarily wealthy and skilled migrants resulted in a de-coupling of housing from local labor markets as Vancouver was transformed from resource centre to gateway city."

A trickle-down effect is particularly noticeable when an incredibly wealthy group of people buys up houses and redevelops them into bigger, more expensive homes. In doing so, they have driven up prices by creating housing stock that is appealing only to other wealthy people, Prof. Moos said.

"The prices of nearby properties rise as well because suddenly the potential of these properties is that they could also be sold to higher-end owners or investors," Prof. Moos said.

The people who once could afford the west side are now pushed into areas they can afford – the east side, Burnaby, Coquitlam, North Vancouver and New Westminster. And in turn they are pushing up house prices in those areas. The effect is a lack of affordable houses throughout the region.

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The west-side market does not operate in isolation. We can see the trickle-down effect on prices. West-side benchmark prices rose 52 per cent in the past five years. Prices for the east side rose 61 per cent.

"There is no firm line between high-, medium- and low-end," analyst and consultant Richard Wozny, whose company works on major real estate developments for developers and landowners, said. "Prices are on a continuum. Strong sales in one price range [have an impact on ]adjacent price ranges, and it affects the entire market. Overwhelming demand and a severe shortage of supply [affects] all housing. The market distinction between the east side and west side of Vancouver is an example of how higher values in one area spread to another.

"It's the gentrification of everywhere."

Donald Gutstein is adjunct professor at Simon Fraser University and author of one of the first books on the impact of foreign investment in Vancouver real estate. His 1990 book, The New Landlords: Asian Investment in Canadian Real Estate, focused on the impact of Hong Kong investors' buying habits. That wave of immigrant buying was a trickle compared with what the city is currently experiencing, alongside intense speculation.

"There was a kind of an emerging global market where people who already had substantial real estate assets maybe in Paris or London or Hong Kong would buy another property here or in Whistler," he said. "And then you had the local market, and at the time they were quite separate. But now I think the magnitude of the investment at the high end has crashed down on the entire market.

"I can see it on my own street," he added. "We live in a working-class neighbourhood in Burnaby overlooking Burnaby Lake, and four doors up this guy who drives a community bus bought a house and for the past five years he's been fixing it up. Just last week, he put it on the market and sold it within two or three days as a tear-down, for $1-million.

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"When we bought our house, we always had an eye for it as an investment, but that was pretty secondary. Now, that's become the dominant value."

Mr. Wozny, born and raised in Vancouver, is equally shocked at the speed and magnitude of change.

"No one person ever imagined this would happen. It's extreme and unique and it has the potential to alter the city in ways that no one can imagine.

"I feel for the people whose children just graduated from medical school. That used to be the way for the future. Now, they're a middle-class mortgage slave."

Editor's Note: The original print and online versions of this story contained a mathematical error in the calculation of purchases by Mainland Chinese buyers through Macdonald Realty. This online version has been corrected.

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