Peter Ladner says Vancouver’s home prices are out of control, and with China and Australia already restricting foreign ownership, Vancouverites should at least examine whether the idea makes sense.

“Ironically, many of the people driving up the prices are coming here from mainland China where soaring real estate prices have caused the Chinese government to introduce new limits on foreign purchases of residential or commercial property in the country,” he wrote in a recent article published in Business in Vancouver.

Ladner says he isn’t isn’t taking a position on the issue, but he wants a debate. He notes there has been virtually no public research on the level of foreign ownership in Metro Vancouver and its effect.

But he says prices are forcing people raised in Metro Vancouver to move elsewhere and preventing others from moving to the area.

“If our prices are being driven up by people who are simply investing in our community and not living here, there are a whole lot of problems that result,” Ladner told CBC News.

“You end up with a resort community that is unlivable despite our reputation as one of the most livable cities in the world.”

Ladner notes across Canada, that PEI, Manitoba, Saskatchewan and Alberta already have various laws in place the restrict the non-residents’ rights to buy land.

Vancouver leads with unaffordable housing

Tsur Somerville of the UBC Sauder School of Business says the debate over foreign ownership would be nothing new.

The number of sales was 30 per cent lower and the number of listings was 30 per cent higher in Vancouver in June 2010, compared to June 2009. CBC “If you go back to the 1980s, and the worry about Hongcouver, and all these kinds of things, Vancouver has been through this story before and I think most people think this city is better off now than it was in 1987,” said Somerville.

Vancouver has the highest housing prices in Canada, the greatest price increases, and the world’s least affordable housing prices, according to recent figures.

Some of the most rapid price increases around Metro Vancouver have been in Richmond where the price for a detached home has climbed 20 per cent, or about $215,000 over the past year to above the $1-million mark.

Realtor have attributed the rapid price increases to a sudden influx of mainland Chinese buyers, but in recent months many realtors have noted mainland Chinese buyers have been active in many of the region’s other more expensive markets, such as the West Side of Vancouver and the North Shore.

Various indicators paint a rosy picture of the property market activity in Vancouver. Housing sales in the January-August period are about 14 per cent higher than in the same period last year. Yet, this compares to an expected decline in housing sales of nearly 15 per cent in the country as a whole. In fact, the home sales rebound in Canada, forecast for next year, will be driven primarily by a robust recovery in sales in British Columbia and Alberta, with the Vancouver area leading the way. Increased housing demand, especially given limited inventory levels, will put an upward pressure on prices, making investments in real estate in Vancouver highly desirable.

In fact, inventory levels in Vancouver have already fallen as many home buyers have taken the advantage of low mortgage rates and well-priced properties in desirable locations. New listings are down approximately 23 per cent from last year. According to RE/MAX Canada, residential real estate market in Vancouver is currently considered balanced, with purchasers and vendors on the same page for the first time in years. This has exerted pressures on prices, which bodes well for those expecting to earn capital returns on their investment properties.

On the other hand, although the unemployment rate in British Columbia has increased by 3.5 percentage points in a year to 7.7 per cent in the second quarter of 2009, wages in the region have actually increased by 2.2 per cent. At the same time, consumer confidence has rebounded and most Canadians now believe that the market is expected to turn around, making this the right time to buy. Considering the impending economic recovery, British Columbia, including Vancouver, should see employment and wages rebound. As the region is expected to lead the rebound in the housing activity in Canada next year, Vancouver real estate investments should benefit from the current and emerging economic trends.

In fact, Canadian real estate market—and especially that of Vancouver—should prove attractive to international real estate investors for several reasons. Canada’s economic growth next year will be at least double that expected in the United States and more than quadruple that of Europe. Moreover, the Canadian banking sector, which is ranked by the World Economic Forum as the soundest banking system in the world, has created a sound financial environment in Canada that ensures the security of real estate investments in an otherwise highly volatile global investment environment. Besides, the advent of the 2010 Olympics and the opportunity to showcase Vancouver globally should bode well for residential real estate in the coming year. Therefore, investing in Vancouver’s real estate could be a sound investment strategy for international investors.

In general, prospects for a strong demand for real estate in Vancouver look optimistic. The expected rebound in housing activity, along with an economic recovery, strong financial sector, and the coming 2010 Olympics all bode well for investments in Vancouver’s real estate. Investing in Vancouver properties has proven lucrative so far and will likely continue to be a choice for many local and international investors.