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Turmoil in Chinese stock market likely won’t affect Vancouver real estate, experts say

Turmoil in Chinese stock market likely won’t affect Vancouver real estate, experts say
 

Investors sit in front of a screen showing market movements in a stock firm in Hangzhou, eastern China’s Zhejiang province, on Wednesday. China’s benchmark Shanghai stock index was down more than 4.5 per cent by mid-morning as additional government moves failed to shore up the tumbling market, and contagion began to spread elsewhere. — Getty Images

Photograph by: STR , AFP/Getty Images

Despite the current turmoil in the Chinese stock market, experts are wagering that real estate in B.C. will be insulated from its effects in the short term.

It’s been three weeks since China’s most prominent exchange, the Shanghai stock index, reached a 52-week high of 5,178.19, then began a sharp descent to close at 3,507.19 on Wednesday. But analysts say B.C. shouldn’t expect the slide to shake up the local housing market any time soon.

Yves Tiberghien, director of the University of B.C.’s Institute of Asian Research, said that because the market surged only recently — about 150 per cent over the past year — most investors who’ve diversified into Canadian real estate didn’t lose wealth as the market plummeted.

“Anyone who has been in the stock market in China more than three months is still sitting on profit,” he said. “And so the big real-estate companies or private entrepreneurs or officials who are taking money out — all those are not ‘new-new’ rich — they’re people who have been sitting on money for a while.”

Eva Busza, vice-president of research and programs at the Asia Pacific Foundation of Canada, said research suggests that 80 per cent of the investors in China’s stock market are retail investors, smaller “mom-and-pop” companies, many who only recently began buying up stock by borrowing from brokers.

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Busza said a lack of data about the profile of Chinese investors diversifying into Canadian real estate makes it challenging to draw conclusions, but she also said it seems such investors were already wealthy and not from the working or middle class.

“The likelihood is that the impact on Vancouver real estate would be pretty minimal because the people who are investing in China are unlikely to be the ones who have the kind of assets to be able to be investing in Canada and Vancouver,” she said. “It’s probably a very different set of investors, so it’s not likely to have an immediate impact.”

Tsur Sommerville, director of UBC’s Centre for Urban Economics and Real Estate, called the stock market’s boom and bust “a classic bubble that is completely disconnected” from the Chinese economy.

”I think the capital outflows you’ve seen from China that have affected aspects of our real-estate market — and immigration from China of people from wealth — are not things that are going to be affected by turns one way or the other in the Chinese economy,” he said. “They’re going to be much more sensitive to the ability of people to leave China and the ability of money to leave China.”

Robin Wiebe, a senior economist at the Conference Board of Canada, monitored links between China’s economy and Vancouver’s housing market in 2014.

His research looked at three variables in Vancouver’s housing market — growth rate of resale prices, housing starts and resale or sale volumes — and revealed all three were statistically related to China’s gross domestic product, a “proxy” for wealth, he said.

“If the damage or downturn in the stock market in China is relatively well-contained then I wouldn’t expect an outflow of wealth from Vancouver or the Pacific Rim, based on what I’ve seen so far,” he said. “It’s only when it really gets to be a big economic problem that the expatriates might start withdrawing their money from Vancouver housing ... but so far I just don’t see it.”

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