Last month, Canada announced the cancellation of the Immigrant Investor Program along with its 65,000 applicant backlog. Some analysts have predicted that this will have a negative effect on our housing market and the media has picked up on this sensationalist narrative. We here at Macdonald Realty have been following the situation closely as there is certainly some merit to the theories that these analysts have.
To start, the immigration investor program was introduced in mid 1980s by the federal government to promote the immigration of business people and their families. Quebec subsequently negotiated with the federal government to have its own, parallel program. The investor program enables qualified investors to obtain permanent resident status in Canada and are then eligible to obtain Canadian citizenship after residing in Canada for a number of years. To be qualified for this program (prior to the cancellation), applicants needed to have at least two (2) years of business management experience, have minimum net worth of CDN$1,600,000 and make an investment of CDN$800,000 (interest free loan to the government for 5 years), and meet certain health and security requirements. The federal government admitted about 2500 families per year (with Quebec admitting a similar number) under this program. For the past 8 years the main source of investor applicants are multi-millionaires business people from China and most of these immigrants purchased properties in some of Macdonald Realty’s market areas.
But let’s put some things in perspective first:
- In the most recent set of data available (2012), Canada admitted 257,887 immigrants
- Of these 257,887 people, 2,616 families, representing 9,350 people, entered via the Immigrant Investor category (3.6%)
- Quebec continues to run a parallel Investor Immigrant category that (as of now) continues to process applicants at roughly the same number as the now-discontinued Federal Program (roughly 2,500 families/year)
- Canada now has a 10-year, multiple entry VISA that many immigrants in the queue may find even more attractive than citizenship
- Canada has announced that they will be replacing the discontinued program with a new one (but apparently not the Quebec one), although details have yet to be announced
So if that’s it, why all of the fuss?
- The vast majority of applicants in this category were from mainland China and have large fortunes
- The majority of these applicants were likely planning on residing in the Lower Mainland, specifically Richmond, West Vancouver, and the Westside of Vancouver
- Most of these applicants would have (or already have) bought a substantial house/condo in these areas
- If, for example, 2,000 families each buy a $1 million house, that’s $2 billion in foregone investment in a relatively small market area. Every year.
So on the face of it, it seems as though there is certainly the potential for a correction, but remember, this is foregone FUTURE investment. The money that has already entered the housing market will likely stay here. If there were rampant speculation happening in the lead up to this announcement, we would be worried, but our data shows that speculation has been at a relative low point for several years now after a flurry from 2008 – 2010.
The key question that everyone is trying to answer is how will this impact the housing market moving forward.
The reaction of our immigration consultant contacts in China has been surprisingly muted. Most have already diversified away from Canada and are now focused on the US immigration programs, although they say that, all things being equal, Canada (meaning Greater Vancouver) is still a preferred destination. Some of their clients who were in the Federal Program queue had, because of the long processing times, already given up on Canada and applied to other countries anyway. Others, whose hearts are set on Canada, may find different, admittedly constrained, methods to immigrate (the British Columbia “Provincial Nominee Program, as “international students” for children, 10-year multiple-entry visas, or the revamped federal investor program). Surprisingly, few China-based immigration consultants express much concern about Vancouver’s housing market.
Our view therefore is that, while there will certainly be some affect from these changes, they will be only another variable in a host of factors that affect BC’s housing market.
This view is shared by others, including respected immigration lawyer, Dave Thomas:
“Will this affect the Vancouver real estate market?
I don’t believe it will. Firstly, the Investor program has effectively been closed for almost 3 years now. Quebec also has an Investor program but it had drastically limited its intake of new files. So even though the immigration route has slowed, we have not seen the slowdown in the movement of capital out of China. There are more “Chinese push reasons” than “Vancouver pull reason” for that capital to make its way here, regardless of current immigration programs.
Historically, the business immigration programs for “wealthy immigrants” only made up about 2-3% of the total number of immigrants coming to Canada each year. Admittedly, their presence in places like Vancouver was more apparent, especially when it came to high end real estate.
There are other ways to come into Canada. Younger people are coming as students, and then availing themselves of post-graduation work permits that lead to permanent residence. Younger people with good English language skills and a job offer will have a good chance.
One negative trend, certainly, is that older immigrants with limited English skills will have more difficulty in immigrating to Canada, no matter how much money they have.”