Last week a friend of mine sent me a really fascinating article from The Economist talking about the role of foreign investors in Vancouver’s housing market. If you subscribe to The Economist, you can click here to read the article. If you don’t subscribe, you’ll have to rely solely on what I’m about to say.

In case you weren’t aware, Vancouver is an incredibly expensive city when it comes to real estate. The average price for a single-family detached house is now around C$1 million. By some measures, that makes it the most expensive housing market in North America. Here’s a chart that looks at house prices as they relate to household income:

According to The Economist, the median household income in Vancouver is $68,970. This places them 23rd out of 28 in terms of Canada’s major cities. So how is it that homes are, on average, selling for $1 million? The locals don’t seem to be able to afford them.

Well, it’s a well known fact that Chinese buyers continue to be an integral part of Vancouver’s housing market. In fact, up until this year, Canada offered a fast track option for citizenship applications if you brought at least $800,000 into the country.

So we know that foreign buyers are having an impact. It’s a phenomenon we’re seeing in many other cities around the world, such as London. But to what extent is hard to measure–which has forced analysts to get creative.

To try and figure out what percentage of homes are going to foreign buyers, analysts have been looking at macro data, filing through sales records, and even monitoring utility bills to see which homes might be sitting empty.

What they found is that there’s a fairly significant correlation between economic activity in China, and Vancouver’s housing market. When the Chinese economy does well, so do Vancouver homes. Interesting. Still, that doesn’t quantify impact.

When analysts looked for utility bills that would suggest an empty home, they found that only about 8% of high end downtown condos were likely sitting empty. That’s a relatively small amount. It could be vacancy rate.

But when they looked for “mainland Chinese-sounding names” on sales records, they found that for homes priced $3M and up, almost ¾ of the buyers could be from mainland China. Now that’s a significant number!

I found this all rather fascinating and I thought you all might as well. It yet again reminds me of how much opacity there is in real estate markets. We’re all craving better data. Why else would people be scouring utility bills?

The “ground plane” is an important reference in architecture. The ground is typically where people walk. The ground is where our fabricated buildings meet the earth. And the ground is where our experience of the urban environment–however good or bad it may be–truly takes shape. Often times I feel that we, city dwellers, spend far too much time worrying about the height of buildings and not enough time worry about the ground floor.

But what if there were no clearly defined ground plane? This morning I stumbled upon an interesting book called, Cities Without Ground: A Hong Kong Guidebook. The authors call it “a manifesto for a new theory of urban form.” And the argument is that Hong Kong has developed a unique series of public/private spaces that allow it to function as a fully three-dimensional city. 

Through underground tunnels, above ground walkways, escalators, and other connective infrastructure, Hong Kong is reinventing the way we typically think about cities–both from a user experience and a real estate standpoint. Here’s an excerpt from the Guardian architecture and design blog:

The phenomenon began in the 1960s, when the Hongkong Land company, one of the main developers in the region, built an elevated walkway to connect a luxury hotel to the second storey of an adjacent shopping mall. An insignificant move, perhaps, but it in fact had the effect of changing the rentable values within the building: suddenly the mall’s second floor units could be rented out for more than those at ground level. It entirely recalibrated the vertical logic of real estate value.

Now, you could argue that Hong Kong is a unique place. And it is. Other, less dense cities, have found above and below grade walkways to be a destroyer of urban vibrancy. But in Hong Kong it works and, as many other cities around the world focus their energies on urban intensification, we may find that Hong Kong is indeed a new model for urban form.

Yesterday evening I was reading the Spring Summer Candy GPS Report put out by London-based property developer Candy & Candy. If you’ve never heard of Candy & Candy, then I guess you haven’t been in the market for a £60m apartment. Candy & Candy are the developers behind One Hyde Park in London, which is said to be the world’s most expensive residential development.

But what is interesting about a project like One Hyde Park is that it’s really only possible in a global city, like London, that attracts a massive amount of foreign investment. A project like One Hyde Park is a possibility of globalization, not a result of local employment numbers.

Which is why if you take a look at the Candy GPS report, you’ll see that their interest is in tracking the habits of ultra-high-net-worth-individuals (UHNWIs)–those with wealth exceeding US$30 million. Last year, the world was estimated to contain almost 200,000 of them, with a combined wealth of almost $28 trillion. This number is expected to rise to $40 trillion by 2020.

Now, you may not be in the market for the most expensive apartment in the world, but I thought it would be interesting to talk about where this money is coming from and which cities it’s going into–at least when it comes to real estate.

The top 3 countries for UHNWIs investing in real estate are Germany, Japan and the United States, respectively. The US has the most ultra rich people, but they have a lower propensity to invest in real estate compared to Germany. Nonetheless, these are the countries that dominate.

But who are the recipients of this money?

Well, first of all, it’s going into cities. But it’s flowing into a small number of them. Cities representing 5% of the world’s population are said to attract over 50% of the real estate investments made by the richest people on the plant. 

According to Candy GPS, the top cities are Hong Kong, London, Moscow, Singapore and New York, respectively. Hong Kong sits at the top, largely because of money flowing in from mainland China, but London is said to have the broadest investment reach.

So there you have it, a quick overview of where the ultra rich buy real estate.