Reasons behind the Vancouver Housing Bubble 2016
Reasons behind the Vancouver Housing Bubble 2016
Canada is a great place to live despite its cold weather. It offers spectacular sights which are definitely a great attraction to come to this country. In addition to this, Vancouver is one of the loveliest places in Canada to live where the living standard is really high with a high cost of living. It is home to natural scenic views, historical sites as well as a lot of opportunities for entertainment and shopping. It has been the most expensive place to live since years but towards the end of 2015 and beginning of 2016, housing industry saw a new boom. The prices of the real estate escalated rapidly in this short period depending on a number of factors. Here are the major reasons behind the creation of this housing bubble as a result of high prices of housing which made it unaffordable for most of the working class:
• Greater rate of Immigration
There was a greater influx of immigrants from around the world in Vancouver due to brighter business prospects, a higher standard of living and greater opportunities for success. The immigrants demanded accommodation and as the number of immigrants increased so did their demand for housing also rose. As the basic law of demand states, an increase in demand leads to an increase in price so the same happened in the case of Vancouver. Thus, the increased rate of immigrants played a role in fueling the housing bubble.
• Lower Interest Rates
When the interest rates are lower people are discouraged to keep their money in the banks. This is because the value of their money will decline at a greater rate than the income they earn as the amount of interest on it. Hence, they are motivated to invest their money in more lucrative purposes as housing prices were already high in Vancouver. Thus, mostly people who had excess money were motivated to invest in housing because as the prices in housing will increase their capital gains will increase as well. This again increased the demand for houses and lead to the creation of housing bubble.
• Chinese Billionaires
Most of the economists blame the Chinese investors for hiking up the prices of property in Vancouver. The inflow of foreign currency especially Chinese currency leads to increased economic activity, which leads to general inflation as well as particularly affected the housing industry because Chinese billionaires were interested in buying property in Vancouver.