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The benchmark Vancouver house price is up 12.5 per cent since last year.DARRYL DYCK/The Globe and Mail

If a city defines itself as interdependent communities that are connected, funded and guided by a taxpaying base of businesses and full-time residents, then Vancouverites are now finding themselves on the sidelines.

They're often not even on the radar of real estate marketers, especially where purchases of high-end properties or bulk-sale condo presales or land assemblies are concerned. Those high-stakes buys drive the market from the top down, pushing prices up across the entire region. And yet a good many of those purchases are made by the mysterious international investor, a nebulous "other" who has all this power and yet so much anonymity. Who are they? What are their primary residences? How many properties do they own? Which properties do they own?

Answers to these questions could give clarity to those who need it most, the local who is at the mercy of an unaffordable housing market. The Real Estate Board of Greater Vancouver issued a press release this week that said sales of detached properties in April had gone up 70.6 per cent since April, 2013. The benchmark price had gone up 12.5 per cent this year over last, to $1.079-million. The same release said the supply is simply not meeting the insatiable demand. Considering that the median family income in Vancouver is $66,000 – and we carry household debt that exceeds the national average – that demand isn't coming from anywhere inside the province.

It's not even coming from inside the country, according to geography professor David Ley, who gave a presentation last week at Simon Fraser University's HOUSE: Rethinking the Affordability Crisis symposium.

Dr. Ley has been studying the unaffordability crisis in Vancouver and cities such as London, Sydney, Hong Kong and Singapore for several years. He has found a direct correlation between net immigration and Vancouver housing price increases over a 30-year period. As house prices continue to climb crazily while incomes stagnate, there is a decoupling under way between the local economy and the housing market. As one local pundit put it, the market is no longer income driven – but capital driven.

"Incomes are low, and there is very negligible net migration into Vancouver from the rest of Canada, and those are the two leading indicators that usually tell you something about a housing market," says Dr. Ley. "In this case, the capital that's coming to the market is clearly not from the people with those low incomes, and the new people are coming in as immigrants."

He sees no end in sight for the insatiable demand by foreign investors. In fact, he sees prices only intensifying – as does University of Melbourne urban geography professor Kate Shaw, who was in Vancouver this week. And the weakened dollar is stimulating the demand, offering the foreign buyer a price reduction of 20 per cent.

"I don't think it's a bubble," Dr. Shaw says. "I can't see Vancouver and Toronto and Melbourne and Sydney becoming unsafe places to invest. I think it could go on for a very long time."

The effects of an unaffordable housing market can be profound. Last year, a study found that one in seven Australians is living in poverty, partly due to high housing costs. Dr. Shaw argues that simply throwing more supply at the problem won't create affordability. Instead, the focus should be on the demand, which isn't going to stop any time soon.

"The inequities are already profound, and it's dividing cities – which is an interesting and highly problematic situation in itself," she says. "Because that alone could contribute to a level of destabilization no investor or economist is thinking about."

Other cities under tremendous pressure of foreign investment are taking a lot more action than Vancouver.

"The Aussies have also been very concerned about affordability," says Dr. Ley. "There's no end of government reports on this issue."

While the city of Vancouver has relatively modest resources, the federal and provincial government, in particular, could take action, Dr. Ley says.

"I think it is negligence. There is just no interest in dealing with these questions at the provincial level. It is just a non-issue."

Other cities have taken action with varying degrees of success. London's stamp duty reform has cooled that market. For two decades, each time the housing market in Hong Kong has overheated, the government has intervened, Dr. Ley says.

"The experience in London is that some of the tax interventions have slowed the market, and the same in Singapore. In Hong Kong, even though they've thrown everything at it, they just cannot slow down the market there. It went up 14 per cent last year."

Hong Kong, however, is reaping the revenue from a stamp duty on foreign ownership – $75-billion (Hong Kong), $11.7-billion (Canadian), in the past year. Hong Kong also approved a double stamp duty last year on people buying second homes. Mainland Chinese investors owned more than 40 per cent of Hong Kong's new luxury market in 2012. That figure was recently halved due to cooling measures such as stamp taxes.

In Australia, all capital cities are being hit hard by rising prices, particularly Sydney. That city has seen values increase by 35 per cent in the past five years, forcing a segment of the population to clear out of the city – a phenomenon known as "economic housing refugees." The foreign investment problem is compounded by the fact that because of major tax incentives, locals are also investing heavily in real estate, according to Dr. Shaw.

There have been interventions, such as a law that foreign purchasers can buy only new homes, and must obtain permission from the Foreign Investment Review Board (FIRB). However, the process is voluntary, and stories about dubious real estate agents selling properties illegally are emerging. Australian Prime Minister Tony Abbott made headlines the other day when he announced there could be jail time for foreign purchasers who make illegal purchases. Dr. Shaw says convictions are unlikely.

"How are they going to jail a non-resident foreign investor?" she said.

"It's not going to happen. At worst, in the high-profile cases, the government would compulsorily acquire property back and repay the illegal purchaser the amount they paid in the first instance. That would be the extent."

But the plan includes financial penalties that would affect local real estate agents – which is a start, Dr. Shaw says.

"Australia and Canada are in very similar situations in that both nations went through the global financial crisis fairly unscathed," Dr. Shaw says. "The impact of that has been property prices remained very strong, meaning those two countries are probably the safest investment prospects for property in the world. So there is capital coming in from a lot of very unstable economies – Russia, the Middle East, China in particular, and Europe, with problems in the European Union. So as a consequence, everybody in those economies is pulling out money and putting it into property in safe economies. And that demand is increasing at a very, very high rate."

An offshoot of the demand for homes as investments has been the problem of empty houses, or ghost neighbourhoods. An estimated 22,000 homes sit empty in London when they could be housing in the order of 55,000 people. According to Dr. Ley's findings, 85 per cent of central London's new properties have been purchased with offshore money. Melbourne's high-rise developments in Southbank and Docklands are estimated 90-per cent investor-owned and 25-per cent empty, according to Dr. Shaw.

In Vancouver, we have no such data on empty houses yet. But anecdotal evidence suggests the figure on the west side of the city is in the hundreds, which is a disturbing trend.

Both academics see government intervention as mandatory in Canada and Australia, if the average-income resident is going to manage for the coming decades.

"The solutions are pretty easy," says Dr. Shaw. "Taxation is a very powerful mechanism and you can absolutely disincentivize as much as incentivize. So it's not that we don't have solutions. The politics around it are an entirely different matter. Possibly the biggest problem is the political class in Australia is one of the largest beneficiaries of the taxation regime, so there's not a lot of appetite."

But judging from this week's jail-time announcement, Australia's political class is clearly having to respond to its voters. The only way there will be government intervention here is if people demand it, Dr. Ley says. "The only reason I could see for government interest is if there is a political push-back by people, that this becomes a political issue."

In other cities, push-back has resulted in demonstrations. In Vancouver, there's a surprising apathy around the issue. During last year's civic election, only left-leaning Coalition of Progressive Electors candidate Meena Wong suggested a levy on empty homes. But the lack of data are undoubtedly confusing the issue for people.

"I'm quite surprised that there has not been a politicization around this," Dr. Ley says. "I think the fact that we suppress data means they can't be well informed. The kind of data that is normal in other cities, we just don't have here."