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| China's ownership of Canadian homes is rapidly increasing |
Huge impact of Chinese foreign buyers
can't be ignored, and raising the issue isn't racist.
Tuesday June 21, 2016
By Bill Tieleman
"One
simple conclusion: a massive amount of money from China entered the Vancouver
real estate market in the past year or so."
- Josh
Gordon, Simon Fraser University public policy professor
Call it the
"China Syndrome" -- an unfortunate paralysis afflicting Canadian
politicians and stopping them from speaking the truth about what is happening
to B.C.'s housing market.
The reality,
Josh Gordon wrote last month, is that an enormous amount of Chinese capital is
flooding in to buy Vancouver homes. The National Bank of Canada estimates
Chinese buyers spent $12.7 billion in Vancouver alone in 2015 -- that's about
one-third of all sales!
It's part of
the estimated US$1 trillion
that left China in the last 18 months seeking safe investments.
And there's
much evidence that buyers from China are scooping up vast swaths of the
available homes and driving prices sky high and out of reach of ordinary
Canadians.
University
of British Columbia business professor Tom Davidoff agrees.
"Look,
home prices are up about 40 per cent in the last year and Vancouver didn't get
40 per cent more undersupplied than it used to be in the last year,"
Davidoff told CKNW on Friday.
Davidoff
said there's "a flood of cash" from foreign buyers looking for a safe
haven.
"This
year its China, who knows next time," he said. "Rich people who want
to go to a low tax, low regulation, high safety environment, great physical
space, are going to want to come to Vancouver."
But federal,
municipal and especially provincial politicians are all scared witless to say
out loud what everyone else knows: we are letting ultra-wealthy Chinese and
other investors make housing unaffordable. Not just in Metro Vancouver, but in
Victoria and other regions.
Not
racist to talk about foreign investment and affordability
Last week I proposed
the B.C. government ban foreign purchases of residential property for a
six-month cooling off period, creating time to find longer term solutions.
Some thought
that was xenophobic. In fact, it is simply protecting the ability of ordinary
British Columbians to afford housing in their own communities.
Gordon's
detailed study looked at the causes of the radical increase in housing prices
in Metro Vancouver. He's careful to note that pointing out the facts about the
impact of Chinese buyers is not racism.
"The
problem is that the money is foreign, and that it is sufficient to seriously
distort the housing market, not that it is Chinese money," Gordon writes.
Exactly. And
then he hits the nail on the proverbial head.
"Most
citizens want to be able to have a chance to buy decent real estate if they
work hard and play by the rules; in Vancouver that is becoming increasingly
difficult, in large part because of massive flows of money from abroad,"
Gordon says in the report
titled Vancouver's Housing Affordability Crisis: Causes, Consequences and
Solutions.
Both
Davidoff and Gordon have lots of potential solutions to stop the insane housing
price escalation -- something to discuss in a future column.
But they
both likely know the province won't act as long as the real estate industry
that profits enormously from selling homes to foreign buyers also contributes
huge amounts to the BC Liberal Party. Gordon even refers to the influence of
Bob Rennie, the real estate mogul who also heads Premier Christy Clark's
fundraising efforts.
That would
be the Rennie who recently suggested action to curb foreign real estate
investment would start a trade war. "China buys $6 billion a year in
British Columbia exports," he said. "Are we going to tamper with
those jobs and our economy?"
Gordon calls
out those who fund political parties.
"The
fundraising is being dominated by prosperous developers and others closely tied
to the housing boom," he writes. "This is the second lesson about
housing market politics from the past decade: inside players, with large vested
interests, are willing to shovel over massive amounts of money to political
parties to keep the boom booming."
Gordon says
the political right and left have been reluctant to confront the impact of
foreign real estate investment.
But he notes
that only the BC Liberals who oppose a ban on corporate and union political
donations. The provincial NDP and the city's Vision Vancouver have repeatedly
called for such a ban, which is already in place federally.
Gordon says
the BC Liberals run the risk of being caught in a real estate crash.
"The
provincial government has put itself in a tight spot: ride the bubble or tackle
it and basically admit that they screwed up," he writes. "I highly
doubt the latter. And so this problem will worsen, at least so long as China's
own worrisome housing and credit bubble continues."
Turning
Vancouver into a 'playground for elite'
The
government has put itself in the "rock and a hard place' situation, Gordon
says.
"They
have been in power for 15 years and this crisis has been a long time in the
making. At a number of crucial points they have in fact tried to silence
criticism and deflect attention from the issue. Perhaps more unsettling,
they've recently doubled down," Gordon writes.
Indeed, the
BC Liberals' response to soaring house prices has been to tinker around the
edges to make it appear they are addressing problems. Nothing substantive has
yet been proposed, let along implemented.
That means
the crisis is coming. And Gordon predicts taxpayers will be on the hook to come
to the real estate industry's aid. "Then, when the bubble bursts, the rest
of us are forced to pick up the tab, and indirectly bail these people
out," he adds.
If nothing
changes, argues Gordon's paper, "Vancouver is well on its way to becoming
simply a pretty resort town."
"Many
people who grew up in the City of Vancouver, West Vancouver, North Vancouver
and to a lesser extent Burnaby and Richmond do not have a realistic chance of
owning a house in these places, and even a family-friendly condo is a stretch
for many."
And, as
Davidoff says, "As long as money floods in, in the long run this is going
to be a global playground for the elite, and not a place to live and work, a
place to have money and not to make money."
.
