As I watched the round-the-clock outrage that followed recent Globe and Mail revelations of “shadow flipping” in the Metro Vancouver real estate market (nothing illegal, mind you), it struck me anew why people feel smacked by the soaring Vancouver real estate market.
The flipper buying the sucker property, be it a real estate agent or whoever, had access to a market of buyers unknown to the selling agent or the seller. The price went higher because of shadow buyers playing by different rules.
This piles onto the palpable frustration of renters, newcomers and growing families watching the region’s most prized real estate – multi-bedroom detached homes in desirable locations – shoot out of range. Yes, we all know that there are affordable homes of various sizes and shapes out there beyond the Most Preferred Location zones. But the preferred properties are going to people with capital, often not people dedicated to living, working and raising families here. That’s what our current rules dictate.
And then the wannabe homeowner does the quick math: limited land base, growing population, our “world-class city” reputation on too many top-three real estate market lists, clean air, stable government, OK economy, housing supply that can’t keep up, stagnant wages, average prices 10 times local incomes, and we’re still cheap by global standards. It all adds up to a whole new swath of local people who aren’t already in the game, or who don’t have rich parents or an inheritance or a suitcase brimming with cash from another country, being left behind. They know it and they feel powerless.
Even surviving in the rental market has become a new challenge. A friend got 90 responses to her ad for a basement suite in Kitsilano. She said choosing a tenant was like picking a Rhodes Scholar. What do ordinary people do? When investors pay what one expert called “insane” prices for rental properties in the West End, rent increases can’t be far behind.
This is growing inequality moving in with shackles: more people having less chance of climbing the equity ladder. The deeper frustration is being sentenced to a commuter existence to make room for someone who may not even live here or pay income taxes here.
Sure, there’s a sense of expectation and entitlement at play here, but the anger and anxiety among young working people vital to the health of our economy and society are real. Hootsuite CEO Ryan Holmes, who depends on such people, wrote recently that “Vancouver risks becoming an economic ghost town, a city with no viable economy – other than the service industry catering to wealthy residents and tourists.”
These valued young people are getting the message: live somewhere else where your skills and education deliver more than your inheritance.
It’s true that low interest rates, quantitative easing and faltering supply are making housing similarly unaffordable in many other cities around the world (Vancouver is only the third most unaffordable city in the few countries surveyed by Demographia), but that doesn’t make our pain any less real.
Whether it’s a surtax on luxury homes offset by income, as proposed by a group of University of British Columbia and Simon Fraser University economists, or a stamp duty on foreign buyers (as in Hong Kong and the U.K.) or outright restrictions on foreign ownership of certain properties (as in Australia, Alberta and Prince Edward Island) or different property transfer tax rates for non-residents or a progressive property tax rate, it’s past time for a co-ordinated government effort that gets beyond the delusion that a $280,000 annual increase in average property value is “painstakingly” earned.
More supply alone won’t do it.
We can’t stop the demand to buy property in this city, but we can at least try to slow it down, subdue it with stricter tax enforcement, extract more from non-resident investors and send a message that this province is open for business, not speculation.