Offshore investing heats up Vancouver’s housing market

It’s been posited that offshore investment has inflated prices in both of Canada’s hottest housing markets — here and in Vancouver — and a recently released study confirms the suspicion for West Coasters.

Data obtained by the NDP MLA for Vancouver-Point Grey, David Eby, and subsequently turned over to University of British Columbia adjunct planning professor and analyst Andy Yan, looked at 172 sales of properties with prices of more than $1.25 million in three west side neighbourhoods.

By screening out non-anglicized Chinese names, which has been used to pinpoint those likely to belong to recent immigrants, it was concluded that two-thirds of all the detached homes in the study were purchased by recent immigrants from China — of those homes priced at more than $5 million, the group accounted for 88%.

82% of the total were purchased with a mortgage (of which 80% were held by owners with non-anglicized Chinese last names), with 52 of the properties held by a single owner with “homemaker” as the most common occupation.

Yan deduced from the information that they were purchased with money from mainland China, especially considering the fact that the median income for 25- to 55-year-olds with bachelor’s degrees in Vancouver have a median income of just under $42,000 annually.

Eby said that the data supported “mounting evidence that foreign money has priced local incomes out of the market,” according to the Globe and Mail. Eby concluded from the data that a mom at home, a kid in school, and dad back in China working to support it all was the most likely scenario.

“I hear stories of families who scrape and save and borrow money and then they go out to buy a home and they are dramatically outbid,” Eby said in the Globe and Mail. “And the outbidding is happening because the market is now international – it’s no longer connected to the local realities of what people can earn from a local job in Vancouver. … I don’t think we have to be that imaginative, looking at current trends and guessing where we are heading here — which is that Vancouver will functionally become a gated community.

“What an awful vision of the future of our city.”

"Vancouver aerial view" by Photo by ecstaticist via Free For Commercial Use - Flickr: High Diver. Licensed under CC BY-SA 2.0 via Commons

Premier Christy Clark and others remain in denial, it would seem, armed with a BC Real Estate Association report that said foreign investment hadn’t significantly affected the first-time buyer segment, accounting for only about 5% of market demand.

Eby was quick to say that the study was not meant to call out one particular ethnic group, but rather to ensure that the rules are followed and appropriate taxes paid. “The worst outcome would be these moms and kids from China become scapegoats for what is really a government problem,” he said in the Globe.

It’s already been reported recently that our loose tax laws are letting foreign buyers avoid payment by putting homes in the names of relatives or corporations. In early October, The Globe reported that one private equity manager bought a $2.3-million house in Vancouver while supposedly earning just $19,000 annually and sending his stay-in-Vancouver wife more than a quarter of a million dollars each year.

The investigation said that such buyers were not breaking any laws, but rather leveraging loopholes to avoid taxes, including paying no income tax while importing their wealth into Canada through their wives and children.

StatsCan reported that in the Vancouver neighbourhood of Dunbar, a quarter of “couple families” (households exclusive of seniors) declared incomes in the lowest tax bracket, i.e. less than $35,000 annually, and yet the property taxes alone on the $2 and $3 million homes they occupied amounted to more than $10,000 annually.

It’s no secret that we lovely Canadians tend to be apologists, and there are already cries of “racism!” going around social media, but that’s exactly the kind of knee-jerk reaction that will keep us from actually addressing what is a very real problem.

We’re not talking about discouraging immigrants from buying homes, nor are we talking about discouraging immigration at all. Canada, and perhaps particularly Vancouver, was built on immigration. We’re proud of our multiculturalism.  But the fact is that many of these homes are unoccupied for great chunks of the year while residents are getting priced out of the market.

And the only argument against those cries of racism that should be needed is the simplest — China restricts foreign ownership. Foreign buyers must live in China for a year before they can own a property, and are limited to only one property for their own use.

We need to know what foreign ownership is really doing to our real estate prices, and we need to protect our domestic markets. Anything else is just ineffective political correctness.

Feature image: "Downtown Vancouver Sunset" by MagnusL3D. Licensed under CC BY-SA 3.0 via Commons