Case Study: The Real Story About Foreign Investment

One of the major factors for the skyrocketing of local housing price are heavy mortgages and low-interest rates.

We’re well aware that foreign investment has played a huge role in Metro Vancouver’s high housing prices, but this is not the only factor according to researchers.

Although it may seem like the annulment of the Canadian Immigrant Investor Program witnessed measurable impact on housing prices in the country, however, Andrey Pavlov from SFU’s Beedie School of Business reported that foreign investment doesn’t necessarily depict the whole story regarding Vancouver’s housing market. Other prospects like low-interest rates and heavy mortgage insurance for banks are also affected.

“Those two factors keep interest rates and mortgages very low and also don’t remove the incentive of banks to monitor risk so those two factors combined make lending very easy and very loose in Vancouver and as I said it’s those people who stretch themselves beyond their means and bring up prices,” he says. “Beyond the study, we have to use our common sense and the common sense suggests that the impact of this foreign investment cannot possibly explain the recent run-up. It is big, it is substantial but there are other factors at play.”

He also went on as he emphasized on his main point, and added that other factors like poor transportation infrastructure are also a reason for this.