The Canadian Press/Darryl Dyck Huawei chief financial officer Meng Wanzhou is escorted by her private security detail while arriving at a parole office, in Vancouver, Wed. Dec. 12. Meng's arrest could have an unexpected casualty: Vancouver's already struggling housing market.

Existing Chinese migrants could "reconsider their overall commitment to a Canada move for the extended family, as well as encouraging potential new China migrants to consider shifting migration patterns to more friendly climates," the report stated.

The tensions between the two countries could empty Vancouver of Chinese real estate investors, putting further downward pressure on the market, according to a recent research note at SmartKarma Insights.

The diplomatic spat between Canada and China that broke out in the wake of the arrest of Huawei's CFO, Meng Wanzhou, could have an unexpected casualty: Vancouver's already struggling housing market.

This could mean that "Canada property price corrections in key markets might gain momentum," report author Charles De Trenck wrote.

Many Chinese businesspeople are warned not to travel through the United States, and "you might end up with guidelines that they shouldn't go through Canada either," De Trenck, a former China strategist for UBS Securities, told HuffPost Canada.

Many Chinese nationals in Canada who work for Chinese firms may be worried that they could find themselves under arrest in the midst of the growing confrontation between the two countries, De Trenck added.

Chinese investors have largely been seen as a major (though not the only) force driving up Vancouver's house prices in the past several decades. The city has had the dubious honour of being North America's least affordable housing market in recent years.

But over the past two years Vancouver's housing market has seen a pronounced decline in interest from Chinese migrants, due to the foreign buyers tax the province introduced in 2016, and efforts by China's government to slow the flow of money out of the country.

Home sales collapse

With demand dwindling and mortgage rates on the rise, Greater Vancouver's housing market slumped to historic lows this year. Home sales dropped 42.5 per cent in November, compared to the same month a year earlier, the region's real estate board reported.

It's the lowest sale count for a November since 2008.

At just above $1.5 million, the benchmark price for a detached home was 6.5 per cent lower than a year earlier. Condo prices kept growing, however, up 2.3 per cent in a year to $667,800.

Huawei's Meng and her family are investors in Vancouver real estate. In court hearings last week, it was revealed Meng's family owns two homes in the city, one in the ritzy Shaughnessy Heights neighbourhood and another on West 28th Ave. on the city's west side.

The homes are estimated to have a combined value of $30 million.

Watch: Latest news updates in the Meng Wanzhou case