Harvard Review: "Vancouver Hedge City"
The west coast Canadian city is North Americas least affordable urban housing market. Local incomes and property prices are extremely out of syncVancouver has the median income of Reno (roughly $70,000 CAD) and the skyrocketing property prices of San Francisco
Vancouvers imbalance may reek of a domestic housing bubble, particularly in the wake of the US real estate crash of 2007, but its story is quite different. The citys property prices have been inflated by massive foreign investment from Mainland China. It has become a hedge city, a safe financial haven for Chinas wealthiest investors
Chinese real estate purchases in Vancouver are not intended to produce enormous returns, but to hedge against crisis
Home ownership is a form of conspicuous consumptionowning an extravagant mansion in an exclusive neighborhood is a more visible display of wealth than a Swiss bank account or a safe of gold
Wealthy immigrants will live part of the year in Canada while maintaining their lives and lucrative business ventures back in China. This explains how Vancouver home prices have become so out of step with local incomeshomebuyers
Russias recent economic woes have created mayhem in the London housing market. As the ruble tumbled in value at the end of 2014, Russias super-wealthy panic-bought London real estate, while moderately wealthy Russians scrambled to pull out of the market. As a result, demand for Londons most expensive propertieshomes worth £20 million or morehas skyrocketed just as the market for mainstream properties has crashed.
And most importantly:
Hedge cities can hope for the best, but in a truly globalized real estate market, their fates are out of their hands.
Full article here: http://hir.harvard.edu/archives/10888