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While new data suggests that Asian foreign investment is not behind inflated home prices in Vancouver, a new report from CIBC World Markets Inc. Thursday argues that flaws in the numbers means foreign activity may actually be grossly underestimated.

Benjamin Tal, deputy chief economist with CIBC, obtained sales data from Landcor Data Corp. that showed only 10% of foreign transactions in Vancouver over the past five years were actually worth more than $1-million, and the average price was just under $600,000.

Mr. Tal said there are reasons why the data, which also shows only 2.6% of overall sales inVancouver over the past five years involved foreign cash, does not actually match up with the Asian foreign investment theory.

“There are many reasons to believe that a significant portion of what is perceived to be buying by offshore investors is, in fact, driven by Chinese immigrants that are integrated into the community but still maintain strong links to Mainland China, with many residing and working in China while their family establishes roots in B.C.,” he said.

The key flaw in Landcor’s data is that it is based on where property tax assessments are mailed, which would exclude offshore buying on behalf of children or local proxies. This means what little data there is on foreign activity may be seriously underreported.

So there is some truth to the working theory that foreign investors, particularly those from Mainland China, are looking for places to park their cash and have settled on Vancouver, which boasts a sizeable Asian community and a stable economic climate.

“Many, including Bank of Canada Governor Mark Carney, point the finger at foreign — mainly Asian wealth — as the main driver here,” Mr. Tal said.

That said, the true reason for why Vancouver home prices jumped 25.7% year-over-year in May alone is likely more complex than any single theory.

The key then, is when the housing market will correct, and what that correction will look like.

“In Canada, a sharp and brisk tightening cycle is unlikely,” he said. This is because two triggers for a price crash, quick increases in interest rates and a high-risk mortgage market sensitive to changes, are not in play.

In particular, the weakest segment of the mortgage industry, households with both low equity positions and high debt-service ratios, accounts for only 4.6% of the total.

“Shock the system with a 300-basis point rate hike and that number would rise to a still-tempered 6.5%,” Mr. Tal said. “Historically, even in that group the default rate has been well below 1%. Short of a huge macro shock, there does not appear to be the risk of large scale forced selling that would typically be the trigger for a precipitous plunge in the national average house price.”