The real problem with Vancouver’s outrageous house prices

[whatnext]

Originally Posted by quobobo

The 'existing culture'? Chinatown's been here a lot longer than you or I. Also, this thread is about buying property - why are you bringing culture into this?

Agreed. Culture has nothign to do with it. There are plenty of immigrants from Mainland China who have come here to live, work and make a life in Canada. One of the neatest things about watching the crowds at Canucks games is to see how many different groups have come together to support the run for the cup.

[quobobo]

Whatnext, I'm genuinely curious - what makes you think that banning purchases by foreigners is a better solution than A) taxing them or B) just zoning for more housing?

Personally I'm pretty happy whenever someone is willing to pay a ton of property taxes here and isn't a financial drain on the taxpayer.

[giallo]

Another 'glass is half full' scenario is that because of these foreign buyers we are getting a huge amount of housing stock that otherwise may not have been built.

[Hourglass]

Originally Posted by Pinion

Interesting how you say "umm no" then back up what I said.

My opinions are based on facts and personal experience. I have no problem with immigrants in general - I am one myself. If mainland Chinese people want to live here, great, but respect the existing culture (and as I say this, I repeat, I am NOT from Canada), and don't exploit it. Other cultures, including other asians, seem to have no problem doing this.

Did I? You said that Vancouver's property market was somehow screwed up because of laws in China. I provided a link to an article suggesting that there had been a frothy property market in China but recent laws had been enacted to try to let some air out of this bubble. Unfortunately for your argument, Chinese interest in Vancouver property (and Hong Kong, and London and the US and...) predates these laws. So tell me again how these laws in China screw up Vancouver property?

Maybe it's me but i find it odd that you seem to single out Mainland Chinese for integration issues? Other cultures integrate better?

Just saying...

[Hourglass]

Originally Posted by whatnext

That's not an apt comparison . Albertans are Canadians, living and earning their wages under the same tax regime (lack of PST isn't a significant variable), as well as labour and environmental regulations.

Part of their personal income tax does indeed go to the federal government. But the remainder goes to a different tax regime ie the government of Alberta, which, boasts the "lowest personal taxes in Canada". Alberta doesn't invest in BC's infrastructure or social services, and is more than happy to compete for business. Same tax regime? Not exactly. And with lower personal income taxes, a resident of Alberta will have more disposable income than a resident of BC.

Originally Posted by whatnext

Sigh. Yeah, when it was anecdotal evidence from realtors the rebuttal was "that's just hearsay". Now we 've had articles in the Sun, the Globe & Mail, Business in Vancouver, Real Estate Weekly and the NY Times. Hardly the sensationalist press.

Yet look closely at these articles and there doesn't seem to be much hard data, just anecdotes and real estate agent spin, as twoNeurons has said. And of course we all know that headlines don't sell newspapers...

Originally Posted by whatnext

By segregating Mainland Chinese investors off from criticism you're actually indulging in a strange reverse racism. Stop trying to make it a racial issue. No doubt you would have told people warning of a US housing bubble in 2006 to "just get over it".

Ooh, zing! You'd be a great reporter for Maclean's -- or maybe News of the World. Just take the soundbite and use it completely out of context to score cheap points. As an aside, that's why I seem to have so many out-of-body experiences in any discussions with you. I'm not the one making this a racial issue. But by continually pointing to the Mainland Chinese as a factor (neglecting the Koreans, Taiwanese, Europeans etc etc), you certainly are, whether you intend to or not.

My POINT is that you've been bitching over this for months but looking over your posts, I would be hard pressed to recall a single solution suggested. Nada. Just more complaints. So yes, get over it. We get it. Property prices are out of whack. That's the economic reality. What to **constructively** do about it? (and blaming the boogeyman du jour isn't constructive in my books).

Originally Posted by whatnext

I have. Elected politicians in Canada should bear only one responsibility - to Canadians. Not to foreign real estate investors.

Only partly right. The responsibility of the government should be to provide regulation to miminise distortions in the market and protect Canadians from market excesses. You argue that there is a major distortion in Vancouver real estate. I agree. Therefore I believe it is the responsibility of elected officials to take action on this issue.

Let me say again, I don't disagree with you that Vancouver housing valuations are wacky. What I refuse to do is blame foreigners for the problem. We don't have a choice on the circumstances that global market trends force upon us. We do, however, have a choice in how to manage the effect of these influences on Vancouver and there are examples from many developed countries of how to do so. Some solutions may be politically acceptable. Others less so. But there ARE solutions out there.

[whatnext]

Originally Posted by Hourglass

...My POINT is that you've been bitching over this for months but looking over your posts, I would be hard pressed to recall a single solution suggested. Nada. Just more complaints. So yes, get over it. We get it. Property prices are out of whack. That's the economic reality. What to **constructively** do about it? (and blaming the boogeyman du jour isn't constructive in my books).

I have suggested solutions in the past:
1) Implement a tax on all Canadians on offshore income. This will quickly deter those who have no intention of living in Canada other than for just a couple of months a year. This isn't a radical concept, many Western countries do it.
2) Abolish the investor immigrant class. The idea of selling citizenship has always been questionable and the threshold, even with recent increases, is too low. Foreign citizens are already free to invest in Canada without selling them a passport.
3) Restrict foreign owners to holding only one property, as they do in China.
4) Implement resident-only restrictions on property purchase. My least favourite, cause it would be hard to plug the loopholes, but its worth a shot.

Originally Posted by Hourglass

Only partly right. The responsibility of the government should be to provide regulation to miminise distortions in the market and protect Canadians from market excesses. You argue that there is a major distortion in Vancouver real estate. I agree. Therefore I believe it is the responsibility of elected officials to take action on this issue.

Let me say again, I don't disagree with you that Vancouver housing valuations are wacky. What I refuse to do is blame foreigners for the problem. We don't have a choice on the circumstances that global market trends force upon us. We do, however, have a choice in how to manage the effect of these influences on Vancouver and there are examples from many developed countries of how to do so. Some solutions may be politically acceptable. Others less so. But there ARE solutions out there.

Exactly why I'm harping on it - because there are still people who deny its even an influence. If we allow people to minimize the impact then you can guarantee politicians will do nothing about it, and none of them will look for the solutions you ask about. Especially at the Federal level where there seems to be little interest in what happens "way out here".

[Hourglass]

Originally Posted by whatnext

I have suggested solutions in the past:
1) Implement a tax on all Canadians on offshore income. This will quickly deter those who have no intention of living in Canada other than for just a couple of months a year. This isn't a radical concept, many Western countries do it.
2) Abolish the investor immigrant class. The idea of selling citizenship has always been questionable and the threshold, even with recent increases, is too low. Foreign citizens are already free to invest in Canada without selling them a passport.
3) Restrict foreign owners to holding only one property, as they do in China.
4) Implement resident-only restrictions on property purchase. My least favourite, cause it would be hard to plug the loopholes, but its worth a shot.



Exactly why I'm harping on it - because there are still people who deny its even an influence. If we allow people to minimize the impact then you can guarantee politicians will do nothing about it, and none of them will look for the solutions you ask about. Especially at the Federal level where there seems to be little interest in what happens "way out here".

I think you risk throwing the baby out with the bath water with some of these proposals. Remember, non-residents who own property in Vancouver still benefit the treasury through property taxes, as well as purchase goods and services while they are in the country (and maybe even become future citizens). Also, people and businesses have choices as to where they invest and getting too draconian means this money will flow elsewhere (some people may say they don't care, but I would disagree as Canada competes on the world stage). Finally, I'm not convinced (the Globe and Mail as well as Macleans to the contrary) that foreign demand for Vancouver property is the main driver in the price rise.

I would prefer instead a system similar to certain Western European countries where:

1/ foreign ownership is restricted to certain areas (as in Switzerland). In Switzerland this might be ski resorts and the like.

2/ foreigners can only live in their property a maximum of 6 months a years. The remainder of the time they are free to rent it out. As in many cases, these are resort properties, they can still earn a decent return on the property.

3/ there is a high tax on people selling properties within 5 years of purchase. In Austria, this could be as much as 50%, which is a strong disincentive against speculation. Note that partly as a result of this, though, increases in property values in, say, Vienna, have not been that high.

4/ I'm not familiar with the details of the Canadian immigrant investment scheme, but in Hong Kong, they have a similar plan where I believe HKD10M needed to be invested to gain residency. To try to slow the increase in property values, buying a flat no longer counts against the investment. I think directing investment to areas where our economy needs it would be more useful than canning the scheme altogether.

There. We CAN have a constructive discussion.

[Millennium2002]

I wonder... has anybody mentioned Vancouver's tendency to build small as a reason for high house prices? Like seriously, other than the Downtown core, development here is pretty stagnant and only results in so many low rises, mostly because local residents complain big-time if they see anything higher.

Unfortunately, this influence on keeping things small like a resort town will only price out those who need to live close to where they work... and it'll continue to do so until the city realizes that it has to grow more... probably after more employers leave when they find out they can't recruit more talent. =O

As for the foreign ownership issue... being nationalistic, I'm personally not a big fan of it and the immigration system behind it... because of the fact that it might give us a whole pile of people with rather questionable loyalties.

Now surely, the same could be said of any immigrant or refugee, but still, most have to be investigated and take the test anyway, while the business immigrants (as they are called) can essentially pay their way out of that, according to the document below:

http://www.cic.gc.ca/english/resourc...ons/busimm.asp

[Pinion]

Originally Posted by Hourglass

Did I? You said that Vancouver's property market was somehow screwed up because of laws in China. I provided a link to an article suggesting that there had been a frothy property market in China but recent laws had been enacted to try to let some air out of this bubble.

Exactly, which led to (more) mainland Chinese investment to Vancouver.

Originally Posted by Hourglass

Maybe it's me but i find it odd that you seem to single out Mainland Chinese for integration issues? Other cultures integrate better?

Just saying...

I find it odd that you take it so personally. Reality is reality.

When I immigrated to Vancouver, I became Canadian. I associated with Canadians and immersed myself in the existing culture. I even lost my old accent eventually (for the most part).

Some immigrants pretend integration is impossible, but I'm proof that it isn't. It's a choice. I don't like their choice to destroy the culture that existed here. It's not an upgrade.

I should note that I am a home owner. I have made a lot of (potential) money from the bubble. And frankly I'd be out of here ASAP if I could convince my wife to give up her friends and family and move... but it looks like we're going to end up attempting to weather the bubble bursting. It's not going to be pretty.

[mrjauk]

Here's an interesting story in the Globe and Mail about the Mainland China phenomenon. I agree 100% with this take. The Mainland Chinese have never seen a market crash. They have no idea what is coming down the road.

Dan Scarrow, vice president of corporate strategy for Vancouver-based Macdonald Realty, believes that an office based in Asia is more useful for getting listings than selling condos.

“Having an office there is more a ploy to get listings with developers,” says Mr. Scarrow, who speaks Mandarin. “You are not going to sell many units in China. The Chinese are like any other buyer. They need to see the project to buy it.”

He also believes that the new Chinese buyer is fuelling the Vancouver market because they believe in the appreciation of real estate.

“A large number of Chinese people who’ve come over recently, their experience with capitalism is that everything goes up forever, because it has for the last 20 years in China, so they have that mentality. “

Link to the article

[trofirhen]

What you say is plain-spoken, bullshit-free, frank, and right on, IMHO

[delboy]

Originally Posted by quobobo

So what would your proposed remedy be if you thought rich Canadian buyers were responsible for high prices?

Apples to oranges my firend, your comment is so off topic it's hardly worth commenting on. But here goes. No doubt Canadian buyers are also pushing up prices, it comes with any area that is popular...location, location, location.

But with resident buyers, at least you are likely to have money spent back in the economy. They willl be consumers of everything from vehicles to services etc. They may operate businesses and provide employment. The are also contriubing to the socialist system and our tax regime.

With foregin absent owners, they are taking much of their money out of the economy. It's also true that the seller (and likely developers) will benefit from higher equity which in turn can make its way back into the economy. But i'd suspect that reduced holding costs would see more discretionay spending make its way back into the local economy on the backs of those who are not faced with losing upwards of 70 percent of their income on housing costs. I'd suggest that this would benefit the economy more so than a select few cashing in.

Granted we cant blame it all on foreign investment, but when something like 70 percent of all recent sales of SFH in richmond and west van recently were to Chinese nationals, many paying over asking, you have to apprecaite that at some leve it is putting upward pressure on prices.

There is also, limited land due to geography and the ALR (basic supply and demand), cheap money, and a pimp and pump mentality with RE in this city....

[delboy]

Originally Posted by trofirhen

What you say is plain-spoken, bullshit-free, frank, and right on, IMHO

I second that!

[logan5]

Can somebody in the know tell me if there's a difference between a market crash or bubble bursting and a market correction. It seems to me that there will always be a market for real estate in Vancouver due to its strong growth. Any glut in the market can be avoided by adjusting prices to take advantage of this strong growth and demand from a different economic bracket.

[delboy]

As previously noted, here are how the the following cities rank with average rental rates. Vancouver is most, but not by much, especially when cost of RE is considered. I would also imagine that the others would have higher utility costs:

1.Vancouver, at $1,181
2.Toronto, at $1,124
3.Ottawa-Gatineau, at $1,056
4.Calgary, at $1,040
5.Edmonton, at $1,029

[quobobo]

Originally Posted by delboy

But with resident buyers, at least you are likely to have money spent back in the economy. They willl be consumers of everything from vehicles to services etc. They may operate businesses and provide employment. The are also contriubing to the socialist system and our tax regime.

So where are the numbers you have on this? I'd love to see one of you actually back up this assertion that all these rich foreign buyers spend no money in Vancouver. And again, even if these homes are empty, that means that someone is paying a ton of property tax and not consuming services.

If you want to have a debate about whether people living in Canada should pay tax on their income earned overseas, great. Instead you seem to want to ban them from purchasing property here altogether. Why?

There is also, limited land due to geography and the ALR (basic supply and demand), cheap money, and a pimp and pump mentality with RE in this city....

Land is limited but housing supply is only constrained by our homegrown regulatory barriers to dense housing.

[logan5]

Originally Posted by quobobo

Land is limited but housing supply is only constrained by our homegrown regulatory barriers to dense housing.

Yes. Why is it so hard to rezone in this city when it is so clearly needed. We needed the Cambie corridor rezoned 8 years ago, and these neighborhoods with all these Vancouver Specials should be rezoned. The solution to high housing costs seems simple to me. Increase supply.

[Hourglass]

Originally Posted by Pinion

Exactly, which led to (more) mainland Chinese investment to Vancouver.

I'm not going to get into a 'you said - I said', but reread your original post and do the logic for yourself.

Originally Posted by Pinion

I find it odd that you take it so personally. Reality is reality.

When I immigrated to Vancouver, I became Canadian. I associated with Canadians and immersed myself in the existing culture. I even lost my old accent eventually (for the most part).

Some immigrants pretend integration is impossible, but I'm proof that it isn't. It's a choice. I don't like their choice to destroy the culture that existed here. It's not an upgrade.

What reality exactly are you stating? Who's choice don't you like to destroy the culture that existed in Canada? Perhaps you mean what the original British settlers did to the First Nations?

It seems to me that a country that celebrates multiculturalism as Canada does celebrates the contributions and culture of all newcomers -- as opposed to the melting pot approach of the US.

My observation is that immigrants all over the world face integration issues. Some integrate better -- as you have done -- into their new country. Others, for whatever reason, seem to have more trouble. But to generalize to specific ethnic groups is a bit absurd.

Originally Posted by Pinion

I should note that I am a home owner. I have made a lot of (potential) money from the bubble. And frankly I'd be out of here ASAP if I could convince my wife to give up her friends and family and move... but it looks like we're going to end up attempting to weather the bubble bursting. It's not going to be pretty.

I thought there was going to be a significant market correction a couple of years ago with the financial crisis, but prices didn't go down nearly as much as I thought they would.... The thing is, it's always very hard to time these things. Regardless, I do believe action needs to be taken to try to cool the market.

[Millennium2002]

On second thought, I wonder if people are just being reactionary to home prices going up so high... I mean, immigrants may be a factor yes... but in a way one wonders if people are just using that excuse to make themselves feel better that the problem doesn't actually originate from our doorstep when it does?

(i'm still concerned though about immigrants' loyalties and whether they're actually contributing to BC growth... also getting a little irritated at the possible visible increase in Chinese smokers... but that's a different story altogether...)

In the end we do still have a peculiar supply-demand problem where the supply may be high but it's just overpriced for most of us... building more units may depress the price somewhat but that doesn't generate a lot of profit for developers and irritates lots of residents. So until either of the two or the economy gives way, the next places that everyone will surely move to if they're looking for cheap housing are the suburbs. =S

[mrjauk]

Originally Posted by allan_kuan

On second thought, I wonder if people are just being reactionary to home prices going up so high... I mean, immigrants may be a factor yes... but in a way one wonders if people are just using that excuse to make themselves feel better that the problem doesn't actually originate from our doorstep when it does?

You and I are on the same page. You'd have to be blind to dismiss the Mainland Chinese as a factor (amongst many) in some of the Lower Mainland's markets. How big a factor, though, we are unable to discern given the lack of adequate data. That being said, this real estate bubble is a Canada-wide phenomenon, and the marginal buyer--in Vancouver, let alone Halifax, Saskatoon, and Guelph--is definitely NOT Mainland Chinese.

Here's a trivia question: since 2001, in which cities have real estate prices increased more (on a percentage basis)?

a) Vancouver
b) Toronto
c) Saskatoon

The answer may surprise many of you. The Canada-wide surge in real estate prices since 2000 (and the concomitant correction during 2008) has been caused by one thing: an unprecedented supply of cheap and easy credit.