Canadian Investment Review

Are House Prices in Shanghai, Toronto, and Vancouver Connected?

Written by Caroline Cakebread on Monday, May 8th, 2017 at 8:50 pm

divorce-lawyer-propertyNew research makes the link between housing markets in China and those of Canada’s two biggest cities. In “Do House Prices Spill Over Across Main Cities of Canada and China: Evidence From Causality Analysis,” a team of researchers present their findings about the link between prices in Shanghai and those in Toronto and Vancouver.

Using statistical analysis to study to causal relationships between Toronto, Vancouver, and Shanghai the authors examine the possible spillover effect of house price development in Canadian and Chinese cities from 2009 to 2016. They find that both the Toronto and the Vancouver housing markets do indeed have a causal relationship with Shanghai, supporting the argument that there is a direct housing price spillover effect through Chinese investment in the Canadian real estate market over the last decade.

However, Toronto and Vancouver each have distinct relationships with Shanghai – Vancouver’s housing market shows a very short-term link with that of Shanghai whereas Toronto’s connection to the Chinese city is both long- and short-term. The authors posit that Vancouver is attracting more investment immigrants versus Toronto, with an influx of immigrants set to live and work there.

The authors also looked at another Canadian city – Regina. According to the research results, however, there is no causal relationship between house prices in Regina and those of Shanghai. That finding shows that the link between real estate prices in Canada and those in China are city-specific.

Download the paper.

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