As Vancouver’s house prices lift off into lotus land, the debate over just how much local real estate activity is fuelled by wealthy Asian investors is getting more heated. There are no hard statistics to settle the matter, but a recent development indicates that ultra-rich foreign investors are becoming a force to be reckoned with: they now have an exclusive web-based listing service to call their own.
The Private Listing Service (PLS) connects rich Asian buyers with luxury properties predominantly located on the West Coast. “There’s a river of money leaving China, and we’re participating in it,” says Cam Good, founder of Vancouver real estate marketing agency Key Marketing Inc., which launched the service earlier this year.
PLS is a play on the MLS, or Multiple Listing Service, where more than 90% of Canadian homes for sale are marketed. The difference is PLS listings can only be accessed by wealthy clients, and ideally can’t be found anywhere else. Good is tapping into his network of Asian buyers—Key has offices in Hong Kong and Beijing—and demand in the People’s Republic for Canadian real estate.
That demand stems from the perception of Canada as a safe haven amid global volatility. Between 2006 and 2011, residential house prices here grew by 28.7%, according to British-based property research firm Knight Frank. That makes Canada the eighth-strongest real estate market in the world. In terms of luxury real estate, however, Canada doesn’t even register. Knight Frank also tracks premium real estate in more than 20 cities around the world, and no Canadian locale is significant enough in terms of value and investor interest to warrant attention yet.
Good maintains that interest from Chinese residents looking to park their cash in Canada is strong, and that PLS will appeal to this demographic because of buyer psychology. Wealthy Chinese view properties on MLS as stock that has been picked over and rejected by the masses, he says. PLS listings, by contrast, are available only to a privileged few. That exclusivity comes at a price, of course, and Good contends that the properties will sell for more on PLS than they would elsewhere.
It’s hard not to wonder if such a sales method could artificially inflate prices in an already hot market, particularly around Vancouver, where the bulk of the 20 properties currently listed on PLS are located. The city was recently ranked the second-least-affordable major market in the world by Demographia, a U.S. research firm, with median home prices 10.6 times the median pre-tax household income. (The only place pricier was Hong Kong.) Other B.C. markets such as Victoria, Abbotsford and Kelowna are rated as “severely” unaffordable. Good brushes off these concerns. “I don’t think we’re keeping anybody homeless,” he says.
The influence of luxury real estate on the broader market is difficult to tease out. Last year, the Vancouver area experienced a surge in multimillion-dollar home sales that skewed the national average, but it may have only been a temporary blip. If the run-up is sustained, however, it would likely push up prices elsewhere, says Tsur Somerville, a real estate professor at the University of British Columbia. “There’s clearly something to suggest it’s having an effect,” he says, though he stresses it’s too early to say.
The Canadian Real Estate Association, for one, expects luxury sales in the Vancouver area to slow, as last year’s pace was pushed up by people who rushed to buy before tightened mortgage rules took effect. That may put a damper on the prices PLS can get, but it’s welcome relief for the ordinary home buyer.