"People living off drug-related profits are just another pool of buyers. They may be using elaborate strategies, but they’re not throwing money around on the purchase price, driving up the market."

In ‘The Illegal Drug Trade and High Real Estate Prices’ in the latest Vancouver Magazine (1 Sep 2011), Frances Bula concludes “People living off drug-related profits are just another pool of buyers. They may be using elaborate strategies, but they’re not throwing money around on the purchase price, driving up the market.”
There may be a small direct effect. But small: even at an estimated $6B-$8B the drug trade only makes up a small percentage of our domestic GDP. And, just watch, our bubble will implode while simultaneously the drug-trade merrily chugs along.

We extract here two personal anecdotes from the article:
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“THE 1930s-STYLE HOME—a well-maintained, nondescript two-level on West 12th near Trimble—had been owned by a succession of engineers and built to withstand earthquakes. It fit in nicely on the street. Yet three weeks after Betty Yan and her husband took possession, they started tearing the place apart. They had interior walls removed, the fireplace dismantled, and the main staircase redone—twice. They also added a bathroom. On the outside, they landscaped the yard three or four times, redid the front porch, took it down again. It was like minor Hollywood celebrities had invaded West Point Grey.
Joan Bryans was one of many neighbours who thought it weird how much work the family was doing—rumour pegged the renovation at $800,000, almost half the purchase price of $1.776 million. “It was very obvious that it was outrageously unnecessary.” Not everyone felt so strongly. “The house did need a little updating,” recalls the seller, an about-to-retire engineer at the City of Vancouver. “So the only thing I thought was a little funny was that they took so long to renovate.”
In April 2009, news broke that Yan had been found shot dead in her Mercedes in a Richmond parking lot. Stories after her death described her as a ruthless and violent loan shark who, after coming to Canada as a refugee in the late 1980s, connected with the Big Circle Boys gang. The gang had branched out from drug trafficking into many other ventures, legal and illegal. Among its enterprises, according to police: loan-sharking, human smuggling, money and goods counterfeiting, and exporting stolen cars.
Suddenly the costly renovation made a lot more sense: one of the key vehicles for cleaning up illegal money is real estate. There are dozens of ways to launder money in real estate, from paying cash for down payments or renovations to buying houses in the names of dummy owners to establishing elaborate mortgage-repayment schemes that convert bags of dirty cash into legitimate-seeming transactions.”
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“Cam Hui was stunned when he moved back to his hometown after a stint on the East coast. “This city is not overrun with the super-rich,” he says. “But you can’t get into the Vancouver West Side for less than $1.5 million for something that’s not falling down.” In Stamford, Connecticut, where Hui, an investment counsellor, lived previously, prices were just as high. But there it was understandable. The place was infested with people working in the investment business. Stamford has the head office of GE Capital, and, with Swiss bank UBS, the world’s largest trading floor.
Hui doesn’t see that level of financial activity here; nor does he buy the standard explanation for Vancouver’s real-estate prices: that offshore investment or Asian money is largely responsible. In a private blog, he argues that there has to be a connection to the drug industry.”
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There is nothing that is happening in the Vancouver RE market that is not explained by a speculative mania driven by easy lending. -vreaa