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Photo: Huffington Post

 

Interesting article in the Globe and Mail from Josh Gordon, assistant professor in the Simon Fraser University School of Public Policy on how building additional housing stock will do nothing to ease unaffordability if foreign speculation and purchasing is not controlled through policy.

“Young Vancouverites (and Torontonians) are currently being put into competition with massive amounts of foreign money, sometimes of dubious origin, which is something older generations never faced. Please don’t tell us where to move or what our expectations should be until you acknowledge those facts and help us address them. We know it will be harder to buy a detached house than it was before, but first, put us on a level playing field.”

Full Article here

 

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  1. The guy doesn’t arrive with any proof; just an assertion that because “leading columnists” have some consensus on foreign (Chinese) capital’s skewing of the housing market, it must be true. He then goes on to partially agree that there is in fact a supply shortage contributing to the problem of high prices, but that it would be dangerous to continue building new units because when demand is curtailed through a sudden and inevitable act of political will, the oversupply will ruin us all. Talk about leading yourself into your own squirrel trap. Oy vey.

    1. Post
      Author

      How can the author provide proof when all forms of Government will not collect data? One could turn it around and say show me the data that Foreign buying is NOT affecting the market.

      1. Of course it is. That’s not in question. The real question is to what level it is affecting the market?

        The preponderance of rhetoric implies it’s the only thing affecting the market. That is demonstrably incorrect. Foreign money could be a thick layer of icing on a tall supply / demand / cheap credit / demographic cake. Remove the icing and you’ve still got a really big cake.

        Foreign money is a recent phenomenon that doesn’t explain the rise since 2000.

    2. To be sure, the consensus that foreign capital’s is skewing the Vancouver housing market seem very well shared by foerign observers. …
      Vancouver RE has attracted the attention of many international medias, BBC, australian TV, and that also includes french medias,

      A french news network, BFM, was just talking about Gregor Robertson today:
      http://bfmbusiness.bfmtv.com/mediaplayer/video/benaouda-abdeddaim-le-maire-de-vancouver-compte-freiner-l-investissement-immobilier-chinois-1006-831781.html

      The french reporter doesn’t seem to think too much of the Vancouver mayor, he reports that “Roberston was calling the hypothesis as ridiculous in 2013, then calling racist a study of this hypotheisis in 2015,…to finally start asking for regulation on it in 2016 (!)”…”too late” think the media…

      “It’s supply stupid” was also the mantra in Spain not so long time ago…Spain was building as much as the rest of Europe altogether at some point… and still was not able to damp its RE demand…and then ..all of suddenly spain found itself with over supply making the matter much much worse…

      If it was a supply issue, rent could have been out of control too…

        1. Rental or owned It is the same problem , Not enough supply . When renters can’t afford to buy they they don’t vacate their rental unit

    3. Those who disregard land supply and demographic demand, exacerbated by super cheap credit, are also disregarding the salient facts of geometry.

      Calgary can build five or six sprawling, distant subdivisions every year without batting an eye because it has hundreds of square km of cheap (i.e. undervalued) farmland at its disposal at the city’s edges. **

      Metro Vancouver has the ocean, the mountains, protected agricultural land and the US border. This perfectly obvious fact has influenced prices years before foreigners started buying real estate here. If speculation and foreign money are so important to those who hold strong opinions about it, then how about putting your money where your thoughts lie?

      I am willing to bet a six-pack of Sapporo that:

      – foreign investment and speculation are responsible for less than 1/3rd of current prices, probably even less than 20%

      – foreign investment and speculation are building upon a previously high rate resulting from supply & demand issues

      – taxing foreign investment and speculation will not lower prices significantly; many investors will merely chalk the tax up as a cost of doing business, like they do in Australia where post-tax prices are still high in Sydney and Melbourne

      – banning all immigration from China will not lop 10 years off current prices (see item #1 above)

      To be sure, foreign money and spec investors are having an effect, but it’s not the only fish in the pond. Obviously a 20-30% reduction will be welcome by all, but it will not counter the fact that Metro Vancouver land still won’t be cheap even after an anti-wealthy immigrant spate of policy.

      ** Note that Calgary’s real estate prices have plummeted along with new housing construction due to the crappy oil economy. The outflow of workers to Alberta from BC has reversed over the last two years as BC’s more diversified economy has maintained a strong pace unencumbered by one commodity price.

  2. Only the federal government has control on immigration.

    Remember too that the Globe piece is just an opinion? It was ‘contributed’ to the Globe free.

  3. Adding supply isn’t a complete answer because demand is too high. Bob Rennie claiming that more supply is the only solution to housing affordability is like the President of General Motors claiming that more roads are the only solution to traffic congestion. Both have a vested interest in keeping demand high because it means selling more units.

    No one has full data, but many feel that there’s demand beyond just people looking for housing. There’s speculation, AirBnB, empty mansions, etc. Prices are already too high for median income families who are just looking for a place to live. And, I don’t think we can build fast enough to bring the supply vs demand curve intersection point down to an affordable level. Once local prices got decoupled from local incomes, it was no surprise that Vancouverites started blaming foreign incomes.

  4. The utter ignorance of our federal and provincial “leaders” is astounding. OF COURSE foreign capital has a massive influence. Why is it not taxed more ? Why is there no database to link real estate purchases with CRA so we can track taxation theft by the BILLIONS annually ? Why do we not raise land transfer taxes, property taxes and capital gains sufficiently high to make an impact ?

    1. Yes supply is an issue, but so is excessive undertaxed demand by foreign capital (be it locals with foreign connections or outright non-residents) who buys up the choiciest real estate. If 5% of SFHs (single family house) is bought by foreigners, and if we assume 25% of Metrovan is desirable to live in and out of that 20% is high end SFH then ALL of high end desirable SFHs are bought by foreigners, or almost all of them. Is this sound housing policy ? Is this good tax policy ? Is this healthy for a city ? is this desired, and if so, why ?

      I bet we leave BILLIONS of taxes on the table today with existing laws by poor enforcement of the personal residence status or lack of withholding taxes on non-resident owned real estate. BILLIONS. With a few minor tweaks of laws, say increased property or land transfer taxes for non-residents we could generate a few BILLION more. Is this not what we should do ? Monetize the brand called Canada, BC or Vancouver or Toronto ?

      Don’t stop foreign investment. MONETIZE IT BETTER !

        1. BC proposed that all purchasers (but not sellers) have to identify as Canadian or non-resident with SIN # . BC will use this database to check with CRA presumably.

          I wonder why not the sellers.

          A tiny step in the right direction. Tiny tiny.

    2. Single Family Detached is so sky high, though, that it’s spilling over into everything else. $800-$1000 per square foot for condos is pretty common and is historically out of line with local incomes. And, we’re still seeing overnight line-ups for presale condos.

      I don’t think there’s really a solution to either traffic or housing. Has any city figured it out? More roads, more transit, and more housing density seem to have no effect in places like New York and Hong Kong. The root cause is just too much demand. Demand that continuously grows faster than anyone can build supply.

      But, unlike other cities, there’s a feeling (even a consensus) that a lot of Vancouver’s demand is not just locals looking for a place to live. And, now there’s a worry that there’s too much unhealthy, speculative, investment demand that could just crash if the market returns to “fundamentals”.

  5. Most, if not all metropolitan areas across the world are growing. Greater Cairo is ~17 million, they have 80 km of metro. The city is expected to double in size by 2030.

    Townhouses with communal amenities and a garage are selling in Grandview Heights for 350-400 sq’. They can’t build ’em fast enough.

    Vancouver might want to consider Jutaku micro homes.

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