Douglas Todd a seasoned writer for the Vancouver Sun calls it directly: if you want to see what is happening in the Vancouver housing market, just take a look at what is happening in China, Australia and New Zealand. As Douglas Todd observes: “A clutch of real-estate industry and government officials in Canada still want the public to believe foreign capital and immigration policy have little to do with the sky-high housing markets in Vancouver and Toronto. But the evidence is pushing their vested voices to the fringe of the affordability debate. Profits made in China and East Asia, then invested in Canadian real estate, have been responsible for a significant portion of exorbitant housing costs in Canada’s big cities. Yet Australia and New Zealand are doing much more than Canada to face the same challenge. They’re openly reining in the offshore demand that is contributing to housing havoc for locals, many of whom are being forced to leave their cities.”
Douglas Todd then backs this argument with evidence, citing University of British Columbia’s David Ley and Simon Fraser University’s Qiyan Wu who observe that as 13 billion dollars has been spent by Chinese investors in Vancouver in one year, this foreign investing is now a “fundamental” in the local real estate market. Federal policies tightening cash flow in China may be why housing at the top-level of the market has seen prices drop by as much as 20 per cent. Meanwhile condo units have been soaring in value, which may be because of “smaller buyers get in on the tail-end of a run initially created by high-end investors” typical of a boom-bust cycle.
Increasing supply and adding more density will not work to make housing more affordable according to Douglas Todd’s evidence. “Many Chinese use foreign real-estate purchases as a means to safeguard a portion of their assets,” said a senior immigration manager in China, as reported in the December edition of the newsletter, Lexbase.“It is clear many heads of family have purchased expensive homes in Canada and installed their families there while they continue to work in China.”
While there has been a release of information from Canada Mortgage and Housing Corporation (CMHC) suggesting that 20 per cent of new condo housing is being bought by foreign owners, that data does not look at purchases done by “Canadian real estate through proxies, such as spouses, children, trusts or companies, all of which, along with the tactic of flipping pre-sale purchases first made in East Asia, can shield the identities of real owners. Nor does the CMHC report capture the purchases of well-off immigrants, many of who move their families to Canada and buy their homes with overseas wealth (which is normally not taxed in Canada), a trend outlined in a groundbreaking December study by UBC geographer Daniel Hiebert.”
Identifying that the federal government has not looked at the issues of offshore capital and migration as factors in affordability, Australia and New Zealand are initiating ways to stem foreign nationals buying into their housing markets. The New Zealand government is banning the selling of any housing to foreigners. What can the Provincial and Federal governments do to ensure that workers in Vancouver who make a fraction of the amount required to own a housing unit here can live here? How can we make housing less of a commodity and more of a necessity for the health of a city? As Douglas Todd surmises “No doubt the B.C. government has other ideas up its sleeve. Whatever the government does in February, however, it’s almost guaranteed 2018 will be another tumultuous year for beleaguered Metro residents, especially the hundreds of thousands who still can’t yet afford to rent or buy a decent place to live.”