China's new capital controls are just one factor influencing Vancouver housing prices

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      Some media coverage of new Chinese capital controls underscores the widely held view that overseas Chinese investors are driving the Lower Mainland property market.

      According to Reuters news agency, banks and other financial institutions must report all cash transactions exceeding 50,000 yuan (CDN$9,460.90).

      Banks must also report overseas transfers of 200,000 yuan or more (CDN$37,833.25 or more), which cannot be invested in real estate, life insurance, or bonds.

      This is on top of the former requirement limiting conversions of yuan to a maximum of US$50,000.

      The new currency restrictions have fuelled media speculation about a possible crash in Vancouver's real estate market.

      But there are several other factors to keep in mind.

      The Lower Mainland population continues growing at a remarkable rate, driven by interprovincial migration and immigration.

      From July 1, 2015 to June 30, 2016, it rose by 41,469, according to B.C. Stats.

      Surrey's population rose by 16,641 people over that period, a 3.2 percent increase in a single year.

      Meanwhile, the seasonally adjusted annual rate for housing starts last year in the Vancouver metropolitan region was 25,980, according to the Canada Mortgage and Housing Corporation.

      While that set a record, it's still shy of accommodating the growing regional population.

      Actual housing starts in Surrey reached 3,461 in 2016, which was down from 4,561 the previous year, according to CMHC statistics.

      Another important factor driving housing prices is interest rates.

      On February 1, Bloomberg reported that if President Donald Trump does what he says he'll do, the Bank of Canada may have to reduce interest rates.

      According to Deutsche Bank AG macro strategist Sebastien Galy, who was quoted in the article, the Trump plan for tax cuts, infrastructure spending, and a border-adjustment tax could slow the Canadian economy. This would force the Bank of Canada's hand, depending on the degree of substitution of Canadian goods being used in the U.S. economy.

      This could suppress housing prices if overall employment declines in Canada.

      However, if the Bank of Canada responds with quantitative easing, i.e. flooding the economy with more money, this could have an inflationary effect, which might drive up the cost of housing.

      Then there's movements of capital from real estate into equities, or vice versa. Recently, housing markets have slowed as stock markets have taken off. But there's no guarantee that the herd of investors might not reverse course and decide that property is a safer bet than paper assets, particularly if Trump decides to do something unanticipated, like go to war with Iran.

      Domestic Chinese politics are another consideration. It's very possible that President Xi Jinping is cranking up his war on corruption to ensure he survives the next Communist Party congress, which takes place later this year.

      Once he's ensconced for another five-year term, who knows what might happen? He might decide that it's time to loosen the rules somewhat to enhance Chinese influence abroad, particularly if China's foreign currency reserves are on the rise.