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If it’s been a while since you listened to the radio, make the next time you turn up the dial The Early Edition with host Rick Cluff on CBC Television. His take on local news as well as the influence of international affairs on our local communities in the Lower Mainland are spot on. One particular podcast caught our attention recently, when Cluff spoke with several experts around the globe about the current state of our real estate market. The round table discussion puts an interesting perspective on our market as part of the whole. Read on, or listen to the full podcast here.
Rick Cluff: There’s much debate on the role of foreign investment in Vancouver’s real estate market. We don’t collect data on how many homes are bought by overseas buyers, though the BC government says it’s going to begin doing that. But, we do know the top international wealth managers are advising clients to invest in Vancouver real estate and our city just topped places such as San Francisco and Sydney as the #1 luxury real estate market in the world. CBC’s Catharine Rolson took a trip around the world to find out how the debate over foreign ownership is playing out in other cities, and what they’re doing about it.
Catharine Rolfsen: Before we head overseas, let’s start a little closer to home with our neighbours to the south. I spoke to Kathleen Pender, business columnist with the San Francisco Chronicle and she says prices in that city have gone up astronomically as well.
Kathleen Pender: Many people feel like it’s a combination of people with high paying tech jobs and people coming from overseas with lots of cash wanting to invest in our market. It’s as much as an investment as a place to live. Those two factors are making housing unaffordable for most people in the Bay area.
CR: Sound familiar? Kathleen says she’s interviewed realtors in parts of the bay area who say that 20-30% of their sales are to foreign buyers.
RC: So what are they doing in San Francisco about foreign ownership?
KP: Nothing! As far as I can tell there doesn’t seem to be any effort to find out how many are buying or restricted in any way which is kind of surprising because there’s been a lot of protests against the tech people. In the Pier area there’s a lot of animosity that all these high paid tech workers are driving up the costs for everybody. We’ve had protests in front of school busses and that sort of thing.
CR: Isn’t that interesting to hear the bulk of anger of housing prices is directed towards tech workers!
CR: Last year the UK introduced a hefty capital gains tax on sales of foreign- owned residential property, but really that move just leveled the playing field between overseas investors and British residents.
Daniel Bentley with the London Think Tank Cevita says the political attitude in London is to really embrace foreign real estate investment. But another conversation is beginning to emerge, –and that’s the fickle nature of foreign investment in real estate.
Daniele Benltleu: The danger of attracting hot money into London is that when it was good, it was good. Now it might be turning and if people get scared off by that, things can quickly go wrong.
CR: And that’s a discussion that’s starting to emerge in Vancouver too: on the impact on our local economy if foreign investments begin to back out of town.
RC: So it sounds like London and San Francisco are pretty much taking a hands-off approach when it comes to foreign investment. Did you find places in the world that are cracking down?
CR: We've heard on our program people are citing the example of Australia. I spoke to Alison Chung, she’s a real estate reporter for a news court in Australia. She says the debates in cities like Sydney can sometimes take on a racial tone.
Allison Chung: There is a bit of a Chinese community in north Sydney and there was a man who was protesting among them. He didn’t realize there are a lot of local Chinese people living there who have probably been there for the past two to three decades.
CR: Of course we hear that concern in Vancouver, too, about the danger of conflating international investors with Chinese-Canadian residents or new immigrants.
RC: So what’s Australia done then about the actual issue of foreign ownership?
CR: Foreigners are only allowed to buy new properties, hey have to seek official approval to do so, and it costs at least $5000 just to make an offer. But the challenge is enforcing the rule. Last year, Australia stepped up its crackdown on illegal property purchases. Foreigners who break those rules can face up to 3 years in jail and lawyers and realtors can face penalties as well for helping them. Allison told me about a recent high profile case where the government forced a sale of a $39mil mansion that was bought illegally by one of China’s richest men. It showed the government is actually trying. But Allison says agents tell her that many other such sales go under the radar and officials have limited resources to chase down those kinds of transactions.
RC: So then is Australia a model that Vancouver should be considering or further investigate?
CR: I had a really interesting conversation with Allison comparing the rules in Australia with those in Canada.
AV: Canada doesn’t seem to have any restrictions or any taxes for foreign buyers. That’s definitely the first step to enforcing some form of regulation, but I wouldn’t say Australia is the perfect model. We’re definitely still struggling ourselves.
CR: So if we do decide foreign ownership is a problem that needs solving here in Vancouver, I’d say Australia can definitely offer some ideas, but also some lessons: there is no perfect solution.
What’s your take on foreign investment in Vancouver? Let us know in the comments!
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