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Vancouver, the gleaming city in British Columbia in far western Canada, boasts the highest real estate prices in North America, and second-highest in the world (after only Hong Kong), according to a study by Demographia International Housing Survey, a housing pricing service.

For example, the average house in the wealthy West Side district of Vancouver clocks in at C$2.1 million (US$2 million), second only to Hong Kong. Over the past five years, the average price of detached properties on the West Side has soared by 45.3 percent, according to the Real Estate Board of Greater Vancouver. On the city's less affluent East Side, the average price for a home is still a hefty C$850,000, having surged by 35.2 percent over the past half-decade. In Vancouver's suburbs, including such satellite towns as Burnaby and Richmond, prices of single-family detached homes have jumped by 24.4 percent to C$922,600 over the past five years.

Much of the blame (or credit, depending upon one's perspective) for Vancouver's skyrocketing housing costs has been directed at deep-pocketed immigrants from mainland China who have poured into British Columbia in recent years, buying up luxury properties en masse. Joy Mo, 42, a Chinese-born Vancouver-area resident for 11 years, is one who blames wealthy investors from mainland China, shunting off prospective buyers like herself. “I’m quite disappointed,” she told the South China Morning Post of Hong Kong. “This is a place for all of us, and if you drive all the local buyers out of the market, what is the community going to be?” Mo and her husband are renting a home in the suburb of Port Moody, about 20 miles east of Vancouver, after having sold their home in 2008 (just before the huge spike in local property prices). Now, they find it impossible to afford a home in Vancouver proper again.

But she won't blame all Chinese immigrants for Vancouver's soaring housing costs. “Most immigrants who came here before 2008 or 2007 were mostly independent immigrants who came here with certain technical backgrounds,” she said. “They tried to find a job, settle themselves here. But after that, all of a sudden, there are a whole bunch of investor-category immigrants. Those are the ones that have a lot of money. They are generally not working and they don’t really care about finding a job because they have a business back in China.”

Indeed, literally tens of thousands of millionaire “investor-class” migrants from China have entered Canada simply by loaning C$800,000 (US$750,000) apiece in cash to the local provincial government – interest-free for five years. (That federal program ceased in 2010, according to the Globe and Mail, due to criticism and a huge backlog of applicants). Over the past eight years, almost two-thirds of the nearly 37,000 “investor-class” migrants” who settled in British Columbia originated in mainland China. (Adding migrants from Hong Kong and Taiwan, that proportion climbs to 81 percent).

Mo said she was shocked by the attitude of Chinese in Vancouver who thought real estate prices in the area – where individual homes can cost as much as $4 million or much more -- were “quite cheap.” “I just gasped,” she stated. “These numbers are just nothing to them, and I don’t understand why they don’t pay income tax and only pay the same property tax as everybody else. I don’t think it’s right. Our politicians overlooked this or don’t think that it’s a big deal… There’s a loophole here.” Mo said that when she and her husband applied to purchase a home in Vancouver, they were outbid by a Chinese investor.

To alleviate the problem, Mo suggested that foreign home-buyers in Vancouver should be subject to higher property taxes. The 15 percent levy that Hong Kong slaps on foreign buyers might be a good idea for Canada, she thinks. “I’m not sure [such a tax] would actually push the real estate prices down, but at least [offshore buyers] would contribute a little bit more to society,” she said.

Citing data from Landcor Data Corp., the South China Morning Post reported that in 2010, among purchases of luxury homes and properties in Vancouver’s West Side district, as well as the satellite city of Richmond, an overwhelming majority (74 percent) involved buyers with mainland Chinese surnames.

Julia Lau, a Vancouver real estate agent, told the paper that the actual figure is closer to 80 percent, but she views the influx of Chinese money as a boon. “I see a lot of [local] people here who bought in West Vancouver a long time ago, they can sell for a lot of money and move somewhere else outside Vancouver,” she said. Moreover, Ming Pao, a Vancouver-based Chinese-language newspaper, reported that mainland Chinese and second-generation Chinese are the largest buyers of homes valued at $4 million or above in the region.

Thus, the lofty price of housing in Vancouver has far outraced the pace of household income. Put another way, the RBC Housing Trends and Affordability Report determined that in Vancouver it now requires more than 84.2 percent of pre-tax household income to service the cost of owning a home in the area. The comparable figure in Toronto is 55.6 percent, and in Montreal, only 38.3 percent.

However, since it is impossible to obtain exact data on foreign ownership of Canadian properties, the sentiment that Chinese buyers are driving up home prices is largely anecdotal, cautions Craig Alexander, chief economist at TD Bank Group in Toronto. Alexander said foreigners buying Vancouver properties is only one of several factors pushing up local prices. In a telephone interview, Alexander explained that Canada avoided the worst excesses of the global financial crises and emerged largely unscathed during the recovery, making it an attractive place to invest in. “Canada has also enjoyed low interest rates and low fixed mortgage rates, all of which provided a strong incentive for people to buy houses,” he said.

Vancouver, he added, has many appealing qualities for both foreign and domestic home buyers. “It is beautiful, clean, safe and has a very mild climate,” he noted. “As far as Asians are concerned, Vancouver is easily accessible from the Pacific Rim, more so than, say, Toronto or Montreal. Plus, Vancouver already has a large Asian community established, enabling friends and family from overseas to settle there.”

Meanwhile, Vancouver Mayor Gregor Robertson has denied that local home prices are jumping thanks to mainland Chinese investors, adding that the Chinese have brought a “great influx of talent and culture” to his city. “We don’t want to take any rash actions that might impact investment in the city,” he said, according to the Canadian Broadcasting Corp. “We’re not Hong Kong. They saw real estate prices rise 26 percent last year, which is unbelievable – they had to take rash actions to deal with that.”

But Robertson conceded that Vancouver housing price tags have indeed increased too high, too fast. “There are warning signs that we have to watch very carefully, and we may have to take action in the future if it’s warranted,” he added.

The Post noted, however, that unlike the enmity against mainland Chinese in Hong Kong, there appears to be little backlash against mainlanders buying up Vancouver properties and driving up prices. “It is mostly a mystery to me why more people in the Canadian media do not look more closely at how high immigration and foreign ownership affect the property market,” said Douglas Todd, a columnist for the Vancouver Sun. “That said, journalists are like most ‘nice’ Canadians and are very fearful of offending any ethnic or immigrant group.” Todd added: “I occasionally get accused of writing articles in which hyper-vigilant people say they detect an ‘undercurrent of racism’. They say ‘undercurrent of racism’ because they can't find any actual racism, because it's not there.”

Jillian Kohut, an economist at IHS Global Insight in Toronto, suggested that many foreign (that is, primarily Chinese) investors may be buying up properties in Vancouver simply as an investment. “Anecdotally, we have seen Chinese buyers purchasing houses and then letting them fall apart and become dilapidated,” she said in a phone interview. “Ultimately, the real value is in the land, not in the houses. I suspect that what’s really driving this are internal factors in China itself, which is compelling wealthy investors to park their money elsewhere, especially Canada, which is viewed as quite a stable and attractive place to invest.”

The Vancouver Condo Report speculated on what would happen to the local condo property market – already heavily leveraged to Chinese buyers – if and when China's own precarious housing bubble pops. “If the Chinese housing bubble does burst, Chinese buyers who have invested in Vancouver condos will likely liquidate to shore up assets at home,” the report stated. “But because these buyers have pushed up prices beyond the reach of local buyers, there's no local market for their condos. Prices will have to drop significantly, and that will mean heavy losses for both the Chinese investors and the developers catering to this market.”

VCR warns that with such a large portion of the local housing market dependent on one source of buyers, speculation places a “huge burden” on Canadians homebuyers. “Households priced out of a market will have to increase their commute time to find affordable accommodation,” VCR predicted. “The result is increased urban sprawl, increased pollution, increased taxes and a deteriorating quality of life.”

Alexander, however, pointed out that making forecasts about Vancouver’s housing market is rather compromised by the fact that there is apparently so much foreign ownership in the region. “Foreign money is not affected by domestic interest rates or most other domestic fundamentals,” he said. “Foreign investment works rather like a wild card in this scenario.” Still, Alexander believes that Vancouver properties are clearly “overvalued,” but it’s too early to call the market a bubble yet. “You really can’t identify a bubble until it has burst, but I think there are some concerns that the market is overheating.”

Kohut of IHS said threats of a bubble in Vancouver were probably greater two or three years ago, adding that the risks have likely waned since as the pace of property price growth has slowed. Indeed, she noted for example that most measures of property values on Vancouver (including the MLS Home price index) actually declined for several months in 2012. “Prices have actually backed off a bit, which tells me the threat of a bubble burst has eased up,” she added.