Running head: FINAL RESEARCH PAPER 1 Final Research Proposal: Affordable housing in Vancouver Achraj Nanda (1812932) University Canada West Professor: Professor: Dr. Dereje Bezabih RSCH 600: Research Methodologies & Inquiry 16th June 2019 FINAL RESEARCH PAPER Index Abstract…………………………………………………………………………...3 Introduction………………………………………………………………………4 Statement of Problem ……………………………………………….…. ………5 Purpose of the study……………………………………………………………….5 Research Questions…………………………………….……..................................6 Research Hypothesis………………………………………………………………7 Literature Review………………………………………………………………….7 Research Methods…………………………………………………………………15 Data Samplings…………………………………………………………………….17 Data Analysis……………………………………………………………………….19 Ethical Issues & Considerations……………………………………………………21 Project Work Plan & Deliverables…………………………………………………22 References……………………………………………………………………………24 Appendix……………………………………………………………………………..27 2 FINAL RESEARCH PAPER 3 Abstract This paper shows the correlation of hidden variables between the microeconomic determinants responsible for Influx in housing market prices and foreign investment in the city of Vancouver. Is cost the main reason for forcing people working in the city to move to different suburbs nearby, the role of tourism in spiking the rates of properties. The monthly data of the last five years is taken in research to know deeply about the changes in rent and cost. An analysis is included at the very end of the research paper to serve the purpose of showing the relationship and dynamics between the key variables and future accession in prices of Vancouver real state market. Another objective of this paper is to compare the critical pointers to find out their predicting expertise. The resulting model will show the correlating coefficient between the rising housing market and several housing fundamentals like the ratio of rent and vacancy rates of the housing market. FINAL RESEARCH PAPER 4 Introduction Vancouver housing it is one of the most controversial market right now, it is almost impossible to find an affordable house in Vancouver, unreal hike in housing prices makes it almost impossible for the people with minimum wages to rent or buy a home in this city. As a problem people of Vancouver are shifting to nearby suburbs like Surrey, Burnaby, and Richmond for the sake of lower housing prices. The goal of this literature is to find out the significant housing factors influx and compare the housing prices to the suburbs with the Vancouver and check for the significant factors influencing the hike of prices in Vancouver. Due to fluctuation the trend has moved upwards with the rising prices, it has always been Canada’s most expensive real estate market, people find it hard to buy a house in Vancouver due to its high rise and un-stability. Renting is also one of the major problems that major students and professional who come from different city or country, homelessness is also one of the major concerns of this city, absurd rentals have forced people working or studying in the city to live in nearby towns and commute to and for to work. City of Vancouver has implemented lots of plans to provide the room to the people of minimum wages but they have failed to build the low cost rentals, planners are trying to figure FINAL RESEARCH PAPER 5 out a way to deliver to the hard hit group that has been knocked out by the most serious house affordability problem on the planet. Statement of problem The reason why this research is important is that the fluctuations in house prices in Vancouver can help us further understand the macro and macro-economic factors that affect the local economy and example of that would be. The median income of an average household living in metro Vancouver when compared to the median income of the households who are living in the surrounding income surrounding suburbs such as Burnaby and Richmond. An addition the housing market can also provide us with other macro-economic indications such as the average spending of an average household living in Vancouver and compared to the average household as in nearby suburbs of Burnaby, Richmond and Surrey . What I hope to learn from this research is that how the real estate market operates in a diverse city as Vancouver and how this housing market would affect not only the local economy in Vancouver but also effects the economy of suburbs such as Burnaby, Richmond and surrey. Purpose of the study This research would contribute to our current understanding of the role of the free market forces that effects the housing market of Vancouver and how such forces would affect local market of other goods and services that a city such as Vancouver would provide for its residents as well as international students and temporary workers. The possible benefits that would be derived from conducting this research will give the Vancouver city council essential data that can aid them not only further understand the issue of FINAL RESEARCH PAPER 6 the housing market but also provide solutions for Vancouver’s housing problems as well as give possible ways to introduce affordable housing for low income households and tenants. This research could be used by a number of organizations especially Marketing firms who can utilize this data to seek out new potential customers for new and existing products. This can be done by using the housing market as a blueprint for understanding the spending habits of a potential household as well as the median income that a household may earn. Scope of research The scope of research is to “as mentioned above”, is to understand how the housing market is in Vancouver operates at the micro and macro-economic level as well as how the Vancouver housing market can be compared to housing market in Vancouver, Burnaby and Richmond and surrey and what factors affect each of this market. For purpose of this research, It would utilize five sources ranging from books, journal articles and statistical data which would aid in analysis of the research and provide evidence for research hypothesis, these sources will also help us address the issues that were raised for these research paper and provides solutions to address the concerns that were raised in this course paper. Research Questions i) What is the main reason for the rise of property prices in Vancouver? ii) Is tourism affecting Vancouver? iii) What is the housing cost difference in nearby suburbs? iv) How can Vancouver have more affordable houses so that minimum wages resident can also afford to live there? v) What is the government doing to help this issue? FINAL RESEARCH PAPER 7 Hypothesis It is hypothesized that rise in housing prices in Vancouver is because of tourism, foreign investment. Alternate Hypothesis It is hypothesized that Rising housing prises doesn’t have any relation to increasing homeless in the City. Literature Review: Affordable housing is one of the biggest concern which Vancouver is facing without any doubt, this article (Yu & Bai, 2017) shows the factor influencing housing prices like rent ratio vacancy rate and the cost housing capital according to MLS home price index the houses prices in nominally double from January to December 2016 in Canada with major Metropolitan Vancouver saw the price hike up to 2.37 times, like most of the resilient cities, As there is less inventory in renting options it leads to spike in renal costs, for instance, London, New York, and Chicago are also struggling to provide affordable housing for the residents. They have mentioned that foreign investment is one of the significant factors for an increase in housing prices. FINAL RESEARCH PAPER 8 Previous reports have stated that its practically impossible for people with minimum wages to afford to rent or buy a house in Vancouver, a massive report showed that in new Vancouver housing strategy was focused on building lots of houses for different income levels and there were almost 15,400 were approved in 2017-18, 1000 of them were $80000 a year. Some of them were social housing, only 85 of them were for the income group between 1500030000 a year and 776 for those making 30000-50000 per annum. (Connolly, 2018) This article establishes the connect between the wage and income that shows their affordability to rent a house in particular region. Following article by Jim Clayton, 1997 refers to the irrational factors influencing housing prices and real estate market upswings, the intangible expectations that leads do raising rates AR unreasonable house price expectation and investor’s psychology other than huge swings in housing market fundamentals (Clayton, 1997). They also investigate the efficiency of the market of single-family homes and they also provide a study that covers the effectiveness of Vancouver’s Condominium Apartments Market using a cross-section line to time series data on eight months abilities in Vancouver metropolitan area includes the scores from the year 1982 to 1994 for the sample. Following article reflects the difference of demand and cost variation between family home over the years. FINAL RESEARCH PAPER 9 In 2018 Canadian housing market had an uneven and mixed rise in interest rate and affordability concerns according to the Journal in the Conference Board of Canada (Wiebe, 2018) tells us that the housing market of Toronto, Montreal and Vancouver saw a downfall in demand due to their Rising prices when compared it with Fraser Valley, Winnipeg, Sudbury, London and Windsor Whereas, cities in Alberta and Saskatchewan remain the same while at the end report suggests that the prices of Vancouver with the highest comparing it to other cities as the seals went down by 39.2%, but the prices went up by 1.9%. As one of the most fluctuating and unstable market Vancouver’s housing market have its ups and downs quiet often and that’s what makes it tough to buy a property in this city. In earlier times, the house was usually purchased as a long-term asset, people used to think of it as a place to spend their whole life but nowadays everybody is looking for a return on investment. This complex economic ecosystem became the main reason for the financial crisis in US 2008 when mortgage subprime Market collapsed for the U.S. It had a significant effect on the economy for the economic depression (Holt 2008). There is a secure connection between the housing market and the labor and financial Market which makes it challenging to define the separation between them (Gonzalez, 2014) FINAL RESEARCH PAPER 10 One method, suggests the process of taking out the cost of housing capital it can be further helpful in this research Diaz and Prado, 2008 stated different methods for measuring the user cost and explain the concept of the Shadow price on buying a house “consists recent transaction costs former return do housing equity and the amount of mortgage adding future. Expected transaction cost and property tax and maintenance minus expected capital gains”. (Diaz and Prado, 2008) Nominal house prices were adjusted using the house price of October 2006 as the base amount of 100. As can be seen from the ‘figure 2’, referred in the appendix section. in general, house prices in Canada have been going up fairly steadily with the single most significant decrease in 2008 affected by the subprime mortgage financial crisis in the United States. One of the sharpest slop appeared in 2016 boosted mainly by Vancouver and later Toronto, with a last similar level fluctuation (Yu & Bai, 2017) It has happened before and after 2008. Besides, an overall cyclical pattern was displayed from the graph with slight decreases occur at almost every year end which in line with the phenomena of generally lower sales of houses in winters. Real rents, on the other hand, presented a much less volatile trend and smaller interval increases. Within the most recent ten years, actual composite rents in Canada has been rising with no noticeable decline, revealing a relatively stable supporting economy. Small deviations could be useful for our method of calculating estimated rent with CPI increase rate. However, rent prices would always come back on the original track, returning to the trend-line. FINAL RESEARCH PAPER 11 According to data from Canadian housing society Vancouver had a high rise compared to all the other cities in the Canada, Toronto was second, followed by Saskatoon. Major Metro towns in Canada have developed a similar Trend with an influx of housing prices in every city, with an exceptional increase in real house prices in Vancouver recently this year. There was a higher increase in rent compared with the previous year due to high demands. In 2016 and December of 2017 (Georgieva, 2017) foreign buyers played a significant role in increasing the cost of the housing, so the government of "British Columbia" implemented the additional property transfer tax for foreign buyers however after this policy got implemented, nothing changed but it triggered the shooting up of real estate prices in Vancouver. This article relates the hike of prises and the influence by foreign buyers on the market, due to high return and money laundering majority buyers from Asia are impacting the economy. There was a research done by Canada Mortgage and Housing Corporation (CMHC) in 2014, it was testing out that how many houses are under Western name and number of houses those are under traditionally Chinese name are under name on housing market under foreign investment reveals that 46% of the luxury homes in British Columbia especially Vancouver and Richmond the owner of the house had a traditional Chinese name we still say that Chinese investment is impacting Vancouver’s housing a lot. FINAL RESEARCH PAPER 12 Many studies imply that, in the Canadian context, the empirical work in the housing market of foreign investment is limited, (Allen et al., 2006) study of the determinants of the housing market is minimal. Allen et al. (2006) conclude that after analysis done on city and country level, foreign investment was the primary key to an increase in housing prices. This analysis would be helpful in research about affordable houses in Vancouver. The research proves that the significant reason for the hike in property prices are the foreign buyers and majorly Chinese. The primary reason that the Canadian market, especially Vancouver is facing influx in the housing market is because of buyers majorly because Chinese investors are capitalizing on countries growing economy, stable government, and high living standards. Rental properties and “fixing upper” hos became the primary investment strategy (Guest and Rohde, 2017), they are keenly looking for high profit in a shorter span of time, some argue that there is a spillover effect of increasing prices of luxury homes in the market (Liao et al., 2015). Guest and Rohde (2017) argue that Gauder et al. underestimate the effect of foreign investment on housing prices and the stability of the housing market. Immigration influences British Columbia and mainly Vancouver's population growth, British Columbia has had the fastest growing population in Canada with a 2.5% growth rate over the last two years. It was twice as fast as the nation-wide growth during this period (1.2%). In 1995, British Columbia received 37, 192 (net) immigrants (DeVorez, 1996) with 87per cent FINAL RESEARCH PAPER 13 destined for greater Vancouver. However, 1/3rd of them moves out from Vancouver to nearby suburbs like Richmond and Surrey. In this era of globalisation people from all parts of the world are migrating to British Columbia and essentially the immigrants want to move in major metropolitan area of Canada that is Vancouver and Victoria. In fact, in the last two decades, data from the Canadian.Census have shown some immigrant dispersal outside major metropolitan centres to little suburbs. (Bonifacio and Kobayashi, 2012). As the migration policies are more lenient in Canada people from all around the world are coming to settle in Canada and is one of the reasons for price hike in Vancouver and Victoria as these are the biggest cities of the province. The search of house for immigrants in the residential market, residential mobility and city-level concentration processes, encompassed under the concept of the 'housing career', are key aspects when it comes to understanding this population's integration into the host society (Murdie, 2003). For immigrants, especially those from low-income or economic migrant families, finding a suitable place to live in a new community is an important step towards successful integration. (Teixeira, 2014) Since the base of being comfortable as a immigrant in the new city is finding a place to live, due to the high prices, the low income family of immigrants are not having a good time working in the city. FINAL RESEARCH PAPER 14 Tourism has emerged as an important industry throughout the world. As was demonstrated at the Globe '90 Conference on Tourism in Vancouver. There is a remarkable objection of the influence it had on host societies. The article was written from a European perspective with particular reference to package holidays.(Ryan, 2002) Companies and governments in tourism have applied only part of the marketing mix to tourism, that is, promotion, with little attention getting paid to the other components of marketing, but if tourism is to survive by generating satisfaction among interacting tourists and hosts, it must adopt societal marketing strategies. Many wealthy tourists buy property in Vancouver and use it as a place to stay on vacations; as a result, it gets difficult for everyday people to buy a house in this beautiful city Detailed literature map is attached in the appendix section for the further detail. The main fallout in this research is, the majority of the sources are relative of the recent year if there were older sources it would have been better for finding out the primary reasons why housing prices are so high in Vancouver. We could get a better Insight on it, but further research down the road would give a better understanding of what is happening here compared to the previous decade. FINAL RESEARCH PAPER 15 Literature about this Canadian housing is emerging however not much has been done primarily in the context of foreign investment that is affecting the housing market in Vancouver however there is data, but it is not reliable and consistent on the city level. Moreover, whatever data we have is inconsistent in their sources, and it is all based on assumptions. Research Methods Data Collection Procedures & Methodology Study will use mixed method approach because of the participation of quantitative and qualitative data means. Considering, data collection is performed through qualitative and quantitative measures, it will be culmination of primary and secondary data to get through the findings of market influx. Research will use a mixture of survey of 10 open and close-ended questionnaire. These questionnaires would help us in the analyzing and hypothesis part of the research. In primary, we will use focus group of 10 participants and asking about their experience rent experience, do they live in Vancouver or the nearby suburbs, and nationality of the owner. Samples for surveys are going to be taken from the universities and the people in Vancouver City's downtown area, and all the participants will be sampled on the simple sampling method and stratified sampling method. This method would require four individuals from each suburb and Vancouver so that we get the exact average rent and the housing cost, and the margin of error would be comparatively less. For secondary data, study will use MLS, the housing index that would show the housing prices off the several towns. Longitudinal data on housing rent/buying will be collected through FINAL RESEARCH PAPER 16 housing industry publications and reports. Ad-hoc, govt. and private surveys will also be considered. Data Collection Type This research will use qualitative and quantitative data collectively, as finding the price of houses is a callous and complex process different researchers used different methods and methodologies to find out housing price data in their research. In the following research the primary source of data collection would be Face to face interviews and telephonic interviews. The secondary source of data collection will include the data collected by governmental institutions, similar to MLS home price index to show the fluctuation in housing prices MLS is data that is developed using the listing service from multiple sources and helps to show the fluctuation in the housing market. Journals for the housing market along with the Canadian government real estate websites will also be used to find out the real estate estimated cost in Vancouver. There is a methodology by Housing Pricing Index (HPI), according to that the MLS housing prize index is a far more superior have a far more superior assessment criteria, so it would be very reliable source in our research criteria. Moreover, let us also shows the information also, that data described by location area demographic attributes it also shows the change in prices due to geographical characteristics like being near streets hospital and schools. FINAL RESEARCH PAPER 17 Sampling methods I.) Stratified Sampling This research will use this sampling method to find out the average renting prices of houses in different suburbs compared to Vancouver to find out the difference between renting prices and know the cost of property, in this method we are going to ask people who are working or studying in Vancouver area, who actually live in nearby suburbs and come here to Transit. This research will use Simple Random Sampling (SRS) out of 12 people (for each subcategory mentioned below) from our University and in downtown area, study will select four people from every suburb and Vancouver to find out: - The average rent that they pay each month, - The nationality of the owner of the house (to find out about the impact of foreign investment). - If they own the house then what is the cost the property and how much mortgage they pay? This method would not only be speedy but would also reduce sampling error. II.) Finding average rents (Random Sampling method) Finding out enough information about the rents in Vancouver compared to nearby suburbs like Richmond and Surrey can tell us a lot about the research and the market fluctuation. FINAL RESEARCH PAPER 18 The survey would target the private rentals for at least six months it should be an individual survey and the data from RMS that is a rental market survey from every year to find the mortgage rates. Data from SRMS secondary drain to Market Survey conducted by CMHC can also be a consideration when it comes to finding renting prices. Surveys The sample size that the research would be targeting would be 152 people. UCW, along with three different places in the urban areas, will be selected as the interviewing. The survey also targets five privately owned residential properties and two individual inaugurated structures that have been in the market for at least five months, it will also collect data for total market rent, rental availability, turnover, and vacancy. The survey plan would include a combination of interviews by email and discussions with the focus groups, property managers and building administrator. Benefits of research The beneficiary from this research would be the household who falls between medium and low income, people with minimum wages, and the University students as those are the most significant people who most impacted by the regulations, economy and fluctuation off housing Market. Through this study, society will get better understanding off housing market, and these indicators can also be used to forecast future ups and downs of housing prices that are derived from the historical data and empirical studies. FINAL RESEARCH PAPER 19 Data Analysis There are complex matrix's that is used for the factors that influence the real estate markets and the mechanism that affects the macroeconomic variables are the national GDP, the disposable income, the mortgage rate, and the growth. The growth of the economy has a direct relation with the housing prices and the house rentals, and the other relationship is with the interest that is rapidly increasing in the property tax rate, and after the income tax, it can be combined with maintenance and depreciation rate. To find out and analyze the accurate actual cost of housing is actually the major challenge in this research, It would use two different types of methods to find the cost of housing capital, one method “adds current transaction cost, cost of mortgage, Property Tax, Maintenance, and property tax – Capital gain”. (Diaz and Prado, 2008) Secondly, another method (Gallin,2008) has a similar approach to find out the cost of housing which shows the relationship between housing prizes and cost in that beautiful method that it assess the cost of houses he also tells that the cost of houses can be accelerated by the FINAL RESEARCH PAPER 20 relation between finances plus liquidity minus the debt on them, the formulae below finds out the relationship. In this method Rt stands for rent, Pt is the house price, It is nominal interest rate, Is marginal income tax, associated with housing is is maintenance and depreciation together, the risk and the expected capital gains would be EtGt.. The data collected Primarily from questionnaires and the secondary data from the CREA and MLS will be compiled and analyzed using quantitative analysis method. Also, the primary data taken by Focus group discussion and interviews would be analyzed under qualitative data method. After finding housing cost, we can compare that are suburbs better option than then renting or buying a place in Vancouver. FINAL RESEARCH PAPER 21 Ethical Issues & Considerations The major issue that would come in the research would be ignoring other side of research that contradicts the finding the research. Purposefully manipulating data when you receive data that is contradictory to thesis statement would be unethical to ignore. Research data findings should be shared as it despite the outcome and should not be misleading. Project Workplan and Deliverables The figure above elaborates the project plan divided into 14 weeks; it starts from the literature review and will go till report writing, the whole research would take roughly three months (14 weeks to be precise). The literature review would take weeks and, the questionnaire development around one week. FINAL RESEARCH PAPER 22 The second most important thing would be to identify the target groups as we have taken people from different suburbs along with Vancouver. The research will focus on an equal number of respondents from different cities, 1 week would be used to identify a Target group one week for questionnaire distribution. To obtain primary data from interviews and questionnaires, it would take do weeks. After collecting all the primary and secondary data adjust the whole essence of the data would be required to conclude the analysis. Data analysis all alone would take three weeks to, and the last three weeks would be used four-leaf and review of the research. After collecting all the data from the research would go to the final stage of This research that is compiling all the data and showing the result, to get the final draft, it would take around three weeks to finish. FINAL RESEARCH PAPER 23 References Allen, J., Amano, R. Byrne, D., & Gregory, A. (2006). Canadian City Housing Prices and Urban Market Segmentation’, Bank of Canada Working Paper 2006-49. Retrieved April 29, 2019 Arestis, P., & Gonzalez, A.R. (2014) ‘Modelling the Housing Market in OECD Countries International Review of Applied Economics, 28(2), 131-153. Retrieved April 29, 2019. Clayton, J. (1997). The Journal of Real Estate Finance and Economics,14(3), 341-363. Retrieved April 29, 2019. Bonifacio, G.T. and J. Drolet.(2011) (Eds.) (submitted). Canadian Perspectives on Immigration in Small Cities. Cham, Switzerland: Springer. Retrieved April 29, 2019 Darden, J. and E. Fong. (2012). “The Spatial Segregation and Socio-Economic Inequality of Immigrant Groups,” in Immigrant Geographies of North American Cities, edited by C. Teixeira, W. Li and A. Kobayashi. Don Mills, Ontario: Oxford University Press, pp. 69-90. Retrieved April 29, 2019 DeVoretz, D. J.. (1996). (n.d.). Retrieved April 30, 2019, from https://www.researchgate.net/profile/Don_Devoretz/publication/228432419_Immigration_to_Va ncouver_Economic_Windfall_or_Downfall/links/56b7786e08aebbde1a7df818/Immigration-toVancouver-Economic-Windfall-or-Downfall.pdf. doi:Oct/1996 Retrieved April 29, 2019 Diaz, A. and Luengo-Prado, M. J. (2008). The User Cost, Home Ownership and Housing Prices: Theory and Evidence from the US. International Encyclopedia of Housing and Home by Elsevier. Retrieved April 29, 2019. FINAL RESEARCH PAPER 24 Gallin, J. (2008). The Long-Run Relationship Between House Prices and Rents. Real Estate Economics V36, 4:pp.635-658 Georgieva, V. (2017, December). The effect of foreign investment in housing prices in major Canadian cities. Retrieved April 26, 2019, from https://ruor.uottawa.ca/bitstream/10393/37177/1/Georgieva_Vania_2017_researchpaper.pdf Guest, R., &Rohde, N. (2017) ‘The Contribution of Real Estate Investment to Housing Price Growth in Australian Capital Cities.’ Abacus, 53(3), 304-318. Retrieved April 29, 2019. Holt, J. (2009). A Summary of the Primary Causes of the Housing Bubble and the Resulting. Credit Crisis: A Non-Technical Paper.’ The Journal of Business Inquiry, 8(1), 120-129. Retrieved April 29, 2019. Liao, W., Zhao, D., Lim, L., & Wong, G. (2015). ‘Foreign Liquidity to Real Estate Market: Ripple Effect and Housing Price Dynamics.’ Urban Studies, 52(1). 138-158. doi: 10.1177/0042098014523687. Retrieved April 29, 2019. Murdie, R. A. and C. Teixeira. (2003). “Towards a Comfortable Neighbourhood and Appropriate Housing: Immigrant Experiences in Toronto” in The World in a City, edited by P. Anisef and M. Lanphier. Toronto: University of Toronto Press, pp. 132-191. Retrieved April 29, 2019. Ryan, C. (2002, May 14). Tourism and marketing - a symbiotic relationship? Retrieved April 30, 2019, from https://www.sciencedirect.com/science/article/pii/026151779190064Z FINAL RESEARCH PAPER 25 Teixeira, C. (2014). “Living on the „edge of the suburbs‟ of Vancouver: A Case Study of the Housing Experiences and Coping Strategies of Recent Immigrants in Surrey and Richmond,” The Canadian Geographer, 58: 168-187. Retrieved April 29, 2019. Weibe, R. (2018, October). Canadian Outlook with the Chief Economist: Economic Growth Slumps in the Short Term. Retrieved April 26, 2019, from https://www.conferenceboard.ca/e-library/research/mrs/2018/9968 Yu, M., & Bai, G. (2017, December). FUNDAMENTALS AFFECTING CANADIAN HOUSING MARKET. Retrieved April 26, 2019, from http://summit.sfu.ca/item/17821 Appendix FINAL RESEARCH PAPER The Canadian Real Estate Association (CREA). MLS Home Price Index Methodology. 26 FINAL RESEARCH PAPER 27