Not in my Backyard
I recently read an article about a lower mainland couple who doesn’t like how a neighbouring $2 million house sits empty all the time. The yard is unkempt, there are no cars in the driveway and the lack of human presence is “driving [the couple] slightly bananas.”
Sacré bleu! You mean to tell me that there are people who buy property only for investment purposes? How dare they offer above market price to purchase a house here, so that Canadians can unlock the full value of their real estate. What can we do with cash anyway? Buy a diversified portfolio of liquid assets like stocks and bonds to provide passive income for retirement? No thanks. I’d much rather put all my nest eggs into a single illiquid asset that produces no income, and lies on a major fault zone. 😛 Those pesky foreign investors who don’t even live here think they can just not contribute any waste to our sewage system, and not use the city’s garbage services, but somehow think they still have the right to pay the full brunt of utility tax and property tax. Some nerve! How dare those foreigners help fund our police, fire, and public education system when they don’t even have kids here to overcrowd our classrooms. It’s also unfortunate how quiet their house is all the time. Who would want to live beside quiet neighbours anyway? Not me. 🙄
Sarcasm aside, foreign ownership of real estate is a hot button issue around here. Should non-residents or non-citizens be allowed to purchase Canadian residential property?
There’s actually a petition to restrict foreign investment in Canada’s most expensive real estate market, which I’ve signed and shared on social media. To be frank I don’t believe this petition will bring about any meaningful change, but I think it’s an important discussion for fellow Vancouverites to have. 🙂
There will also be a rally outside the Vancouver Art Gallery on May 24th, to focus on the problem of affordable housing for young people in a city where the average house costs more than $1 million. Feel free to attend and take a stand if you believe in the cause. 🙂
Foreign Real Estate Ownership
Some believe foreign ownership drives up the cost of housing which makes it less affordable to live in the city. But I think that’s largely a myth. The amount of foreign owned property is just a fraction of the overall market. Foreign investment laws haven’t changed much in Canada over the last decade. However mortgage interest rates have been cut in half over the same period. Raise the interest rate and watch as prices correct overnight.
The couple in the above article complain that foreigners have taken away the sense of community in their neighbourhood. But the fact that most of their previous neighbours have sold their properties, lined their own pockets with money, and move elsewhere indicates that they don’t share the same desire to prolong that “community” as the couple does. Yet those who sell to foreign buyers rarely get scrutinized by the public. They get a pass on criticism even though it takes two parties, equally willing, to participate in a real estate transaction. It’s never the fellow Canadian’s fault for downsizing and selling to the highest bidder. Blaming foreigners for all our problems is more convenient. But everyone is simply doing what’s best for themselves within the rules of this fast changing world of globalization that’s driven by money, debt, and power. 😕
Taxing Foreign Ownership ?
Speaking of rules and regulations, one argument to limit offshore investment speculation is to tax foreign owners. The petition mentioned earlier is a good start, but I don’t think it’s a very realistic solution.
The problem with local taxation in Vancouver is that it will just redirect foreign funds into other parts of Canada and make housing less affordable in Toronto, Calgary, Montreal, etc. 😐 Once money enters the country it can be deployed anywhere within it. A person with $1 million sitting in an account with a credit union in Ottawa, can easily buy a $1 million house in Vancouver, thanks to the digital age we all live in. Long time blog readers will remember that I bought farmland in Saskatchewan a few years ago without even leaving British Columbia, lol. If our premier, Christy Clark, curtails foreign investment to here the money will simply flow into other provinces.
So if we are going to tax foreign ownership it has to be at the federal level. However I don’t believe there is any political will in Ottawa to discuss this issue. We don’t even have government data on foreign ownership statistics yet.
Foreign Investment vs Government Spending ?
When governments go into deficit to inject money into a part Canada it’s applauded as an economic stimulus. Yay! But when offshore investors dump their money here, it’s criticized as speculative, dirty money that makes housing unaffordable. Boo!
But from a personal financial perspective this double standard doesn’t make any sense. 😐
Money is money no matter where it comes from. Both government stimulus and foreign investment create asset bubbles, jobs, and inflation. The difference is government stimulus comes from the creation of public debt which tax payers are on the hook to pay back. But foreign investment is technically free money as far as Canadians are concerned because there are no strings attached . 🙂
It’s funny how some Vancouverites complain about foreign investors pricing the locals out of the housing market, and then they fly down to their vacation homes in Florida for the winter. Canadians remain the largest foreign investors in U.S. real estate. Last year 89% of homes purchased by Canadians in Florida were done in all cash. I wonder how Americans feel about Canadian snowbirds? What goes around, comes around. 😉
Do you think real estate ownership in Canada (or in the U.S.) should be more restrictive for foreign buyers, or should we let the free market decide and leave things the way they are?
Random Useless Fact: