Maria Mak. Burnaby Real Estate Agent - Why Vancouver housing is
unaffordable and what to do about it
Edward Yang is sad about the city he grew up in. His parents emigrated from Taiwan to B.C. without much money, yet in the early 1990s they were able to afford a small house in East Vancouver.
But Yang and his wife, who earn strong incomes in Los Angeles while bringing up their child, doubt they will ever be able to follow a dream to return to the West Coast Canadian metropolis.
“Vancouver’s become a city where no middle-class family will ever be able to afford purchasing a stand-alone house in the city. I find it sad that the only people who can afford the housing prices today are extremely rich, usually from offshore, and often able to buy in cash.”
Yang is far from alone in his dejection. University of B.C. geography professor David Ley has found great “private anguish” among Metro Vancouver’s ethnically diverse residents, especially young families, struggling to pursue decent housing.
Edward Yang and his wife, who earn strong incomes in Los Angeles while bringing up their child, doubt they will ever be able to follow a dream to return to Vancouver. UBC geographer David Ley has found a great deal of “private anguish” among young people.
“The generational issue is huge. So many young people are leaving the city. I’m surprised it’s not a public issue in B.C.,” says the author ofMillionaire Migrants: Trans-Pacific Life Lines(Wiley-Blackwell), which explores how wealthy Asians have radically transformed real estate markets in Vancouver and other Pacific Rim cities.
The data that Ley collected over decades shows Metro Vancouver has become similar to other Pacific Rim “gateway” cities in the way housing costs have been fuelled by high immigration-driven population growth and foreign investors.
As he works on extensive new studies of housing prices in Metro Vancouver, Hong Kong, Singapore, London and Sydney, Ley says, “In every one of these cities the market is being driven by something other than owner-occupiers. Not just new immigrants, but investors, including offshore investment.”
Politicians in Hong Kong, London, Singapore and Sydney are responding in more proactive ways to their housing dilemmas than the elected officials responsible for Metro Vancouver, Ley said in an interview.
Ley discovered almost a one-to-one correlation over a 25-year period between Metro Vancouver becoming one of the most unaffordable real estate markets in the world and a surge of international immigration and offshore investing.
University of Waterloo geographer Markus Moos and Queen’s University planner Andrejs Skaburskis back up Ley’s analysis. They say Metro Vancouver is an “exceptional” example of how “globalization” can affect a local housing market.
Moos and Skaburskis found, beginning in the 2000s, “immigrants, particularly from Asia, increasingly arrived with established wealth, and many were known to continue earning income outside the country. This led to a decoupling of housing from local labour market participation.”
The Metro Vancouver regional district has released data showing almost nine of 10 newcomers in the past 20 years were born outside the country, mostly in Asia. Many are “circulatory migrants” who invest in property in Canada while working elsewhere.
Ley’s data contradicts real estate developers such as Bob Rennie, who recently argued that Metro Vancouver’s housing prices are reasonable and labour market related, if you “take out the top 20 per cent” of property sales that “are for rich guys and foreign money.”
On the contrary, Ley said, a “trickle-down effect” occurs when well-off immigrants and investors push up housing prices in places such as the west side of Vancouver.
“It’s not as if you can draw a clear partition. The property values in the west side influence the prices in the east side. Demand is just deflected, for example, from Kitsilano to Main Street and Commercial Drive.”
The residents of Hong Kong, Singapore, London and Sydney have more openly discussed soaring housing costs than people in Metro Vancouver, Ley says. And their politicians have been more responsive.
Residents of other gateway cities, Ley said, have not been silenced, like people in Metro, by developers who have for two decades made “self-serving” claims that it borders on “racist” to draw links between migration, foreign ownership and the mounting cost of local housing.
“The racism charge in Metro Vancouver is a smokescreen,” Ley said.
“What’s causing high prices is simply an empirical question, and I’m very confident in my data. If we were talking about high housing prices in Kelowna, we would be analyzing the effects of buyers from the Alberta oilpatch.”
Increasingly, realtors in Vancouver, Sydney, London and across the U.S. are courting such upmarket offshore investors.
Urbanland, a magazine for U.S. developers, describes how American builders have been launching marketing “missions” in Asia to attract “wealthy foreigners” to a fast-track immigrant-investor program known as EB-5.
Most of the marketing missions have occurred in China. “And for good reason,” says Urbanland article. Four of five participants in the U.S. immigrant-investor program (which demands a larger financial commitment from newcomers than Immigration Canada’s recently cancelled investor program) have been Chinese.
Hong Kong recently placed a15-per-cent surcharge on foreign buyers,mostly from China, who have made the city the most “unaffordable” of 360 cities in nine English-speaking countries, according to Demographia, which measures local incomes against housing prices.
In Singapore, which provides much more social housing than Metro Vancouver, the city-state has also placed a “stamp tax” on foreign buyers similar to Hong Kong.
Australia already has a policy that permits foreigners to buy only new housing, and temporary residents to sell Australian properties when they leave. Still, under public pressure, the Australian government this year began launching an inquiry into offshore investment.
Planner Andy Yan laments how “whispers of racism” have stopped an important dialogue over housing in Metro. He is among many proposing an extra tax on offshore investors who “park” their fortunes in Metro real estate.
It could follow the lead of Toronto, which has already raised development fees for condominiums. And the federal government recently cancelled its investor-immigrant program, which brought more wealthy Chinese newcomers to Metro Vancouver than any other Canadian region.
University of B.C.planner Andy Yan, who works for Bing Thom Architects, joins leading Canadian economists such as Benjamin Tal of CIBC World Markets in urging governments to provide much better data on foreign ownership.
While echoing Ley in lamenting how “whispers of racism” have stopped an important dialogue over housing in Metro, Yan proposes an extra tax on offshore investors who “park” their fortunes in Metro real estate.
Even the free-market B.C. Chamber of Commerce last month urged the province to introduce a modest version of the Hong Kong “stamp tax.” It would raise the property transfer tax for foreign buyers to double that for Canadians buying residences.
While the idea of a higher B.C. property transfer tax is not dramatic, Ley said it could form part of a package of policy changes that may eventually lower the extreme cost of housing.
“Combining a lot of small responses,” Ley said, “can have a beneficial effect in the long run.”