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| UBS Global Real Estate Index released in September 2016 shows Vancouver with highest "bubble risk" in the world for housing prices. |
Government
stats show foreign purchasers buying up real estate equal in value to all new
home construction.
Bill Tieleman’s 24
Hours Vancouver / The
Tyee column
July 12, 2016
By Bill Tieleman
"Buy
land; they're not making it any more."
Chinese and
other foreign investors buying up homes are spending an amount almost equal to
the value of all new housing being built in Metro Vancouver, creating
skyrocketing prices that are driving local people out of the market.
That
conclusion is easily drawn from last week's B.C. government release of new statistics
on foreign housing purchases.
While
woefully inadequate, they still show that the new supply of housing built each
month effectively disappears from the market as foreign buyers -- mostly
Chinese -- scoop up real estate of equivalent value.
And, as
Twain says, they aren't making land anymore. It's like exporting a
non-renewable resource.
UPDATE: BC Liberal Premier Christy Clark did a complete
reversal in late July on her previous strong position that no action was
needed to deal with skyrocketing Metro Vancouver housing prices caused by
foreign buyer speculation. The BC
Liberal imposition of a foreign buyer property tax of 15% in Metro Vancouver
has significantly reduced
non-Canadian home purchases to about 1.3% of sales from 13.2% earlier this
summer.
But composite benchmark housing prices
remain extraordinarily high despite the tax:
they are up 28.9% since September 2015 and down only 0.1% since August –
meaning Metro Vancouver is still utterly unaffordable to most citizens.
The Metro Vancouver
ramifications are enormous:
• Insanely
high housing prices, up 32 per cent
this June over June 2015, for an average price of $917,800.
•
Phenomenally low rental vacancy rates that mean rents are consequently going
through the roof, with Vancity Credit Union reporting
young workers are being priced out of the Vancouver rental market.
• A
development and home construction industry that has become dependent on Chinese
foreign sales and escalating prices to prosper, meaning any ownership
restrictions could seriously hurt employment and the B.C. economy.
Government
data flawed, but revealing
First, look
at the government numbers released by Finance Minister Mike de Jong last week.
De Jong
deliberately directed media attention to the apparently low percentage of
foreign housing buyers, even though the statistics came from just three weeks
of June data that suspiciously did not include the final day of the month, when
most sales go through.
Nor was that
information definitive.
The government counts on buyers to declare their nationality voluntarily; it
doesn't consider whether the real owners are using family members or others
representatives to buy housing; nor does reveal whether a buyer with permanent
residency actually works or pays taxes in Canada.
These flawed
statistics are challenged by estimates like that of the National Bank of Canada
stating
that Chinese buyers may have spent up to $12 billion on Metro Vancouver real
estate last year -- one-third of all sales.
Regardless,
the B.C. stats show that from June 10 to 29 the value of Metro Vancouver house
sales to foreign nationals was $351 million, or 6.5 per cent of the total of $5
billion in sales.
The
overwhelming majority of sales -- 234 out of 284 -- are to Chinese nationals.
Citizens from Korea and Taiwan were second at just five purchases each.
If that $351
million over 20 days is extrapolated to an entire year, the estimated value of
foreign residential sales would be $6.4 billion, far less than the National
Bank's estimate, but still huge.
Compare that
to the value of new building permits per year in Metro Vancouver -- roughly
$6.5 billion in 2015, Statistics Canada figures
show.
That means
foreign buyers' purchases are virtually equal to the value of new building
permits in Metro Vancouver each year.
It's
about money, not race or nationality
Pointing
that out is not racist. It's a factual observation based on the B.C.
government's incomplete but still indicative data collection.
As Ian
Young, the South China Morning Post's Vancouver correspondent, noted,
the issue is money, not race. "Why would you think that someone was better
defined by the colour of their skin than the colour of their money?" asks
Young, who is of Chinese origin himself, raised in Australia and Hong Kong.
If foreign
investment is equal to all new construction, is it any wonder prices are going
through the roof?
The
important number is not the 6.5 per cent of sales to foreign buyers -- it's the
ratio of foreign investment to new construction.
To be clear,
foreign buyers are not snapping up all the new homes. But their purchases have
a value greater than all the new construction.
And if
foreign nationals don't occupy or rent their new homes, the rental market
shrinks. Even those who can't possibly afford to buy their own home in Metro
Vancouver are screwed.
The Vancity
report "Rent Race:
The Growing Unaffordability of Rent in Metro Vancouver" makes
for depressing reading.
"We
have made an assumption that the rental market is there for people who can't
afford to get into the housing market as an owner," Vancity community
investment vice-president William Azaroff says. "What we're saying is:
'Hmm. Not so fast. That's not true.'"
With average
Metro Vancouver rents of $1,144 per month and vacancies at less than one per
cent, younger and lower-income households are in deep trouble.
And
Vancouver city is even worse, with an average rent of $1,233 late last year,
and a vacancy rate of 0.6 per cent.
So forget
the nationality of homebuyers and ask why anyone would let another country's
citizens make homes unaffordable?
Ridiculous?
That's why I repeat my call for a six-month ban on the foreign purchase of B.C.
homes to find longer-term solutions and stop the insanity.
.
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