In last week’s editorial, the focus was on the key housing measures outlined in the provincial government’s 2016 BC Budget. However, it’s also important to address the other new policy that was set out by Finance Minister Mike de Jong, and that is the promise of collection of data on overseas buyers.
For those who missed it, the BC government has pledged that, as of this summer, everybody buying a home in BC will be required to state whether they are a citizen or permanent resident of Canada. If they are neither, they must disclose their country of citizenship. In corporate property purchases, the directors of the company must disclose their citizenship.
Sounds reasonable enough. We’ve all heard about how they’re already doing this in Sydney, Australia, to try to stem that city’s soaring prices, also widely believed to be caused by overseas investors. So surely this is the step we’ve been waiting for, to finally get an insight into the impact of overseas investors on the price of Vancouver real estate – right?
No, I don’t think so.
Sure, it would be nice to think that if an overseas investor were buying a home in BC, they would dutifully fill in their form, announcing their foreign citizenship and residency. That would give us the data that could actually be used to help inform policy. But the truth is that a lot of overseas investors – and I’m talking about people who neither live nor work in Canada – who buy into Canadian real estate, do so using a proxy.
This means that, most of the time, the name that will end up on the home purchase form will be that of a Canadian citizen or permanent resident – whether it be a family member of that investor, their business partner or even a real estate agent acting on their behalf. Sure, there will be the occasional buyer who declares themselves as being an overseas investor, but those declarations will likely be few and far between. Therefore this information will tell us almost nothing about the impact of overseas investment on our market.
You only have to look the test case at Sydney to know that nothing is going to change. Sydney is held up by many as a pioneer for Vancouver to follow. In fact, Sydney even took its measures a significant step further by not only requiring overseas investors to declare themselves, but also restricting the amount of real estate such buyers may purchase, and raising taxes for those purchases. And what good has it done Sydney? Real estate prices are still climbing, the city is still seeing a lot of overseas investment, especially from China, and the data being collected is inconclusive.
This is one of the reasons why the BC government has been so reticent about collecting data on overseas investors. Yes, another reason is that it doesn’t want to rock the money-making boat that is our local real estate market, as the provincial coffers benefit greatly from skyrocketing prices and the accompanying taxes. But Victoria also knows that this kind of data collection is a waste of time, effort and taxpayer money.
In fact, the BC government made their feet-dragging reluctance abundantly clear in the Budget announcement, pointing out in the slide presentation that this information was previously collected, until 1998, when it was discontinued “due to the cost of compliance and lack of data use.” The slide adds that it is reintroducing the policy because “now there is a consensus that the data are required.” So the government is basically telling the people, “Hey, you folks asked for this data, you insisted on it, so here you go – let’s see what good it does you.” For all its faults, the BC government is pretty well stuck between a rock and a hard place on this one.
And what will happen when the data turns out to be useless? There will be more angry finger-pointing, more calls for data, only different data this time, home prices will keep rising and the people of this fair city will continue to gnash their teeth over offshore buyers.
So what, then, is the answer? Here's an idea. Maybe there is no way of accurately assessing the impact of overseas investors on our real estate market. Maybe we should throw our hands up and say, live and let live. Maybe we even embrace the influx of overseas money, however much it may be, as an opportunity to collect more revenues for our city and province and, in doing so, raise funds for innovative affordable housing programs for those struggling to find a home. The recent vacant home tax proposal by the team at UBC Sauder School of Business is a good example of the kind of innovation we need.
Maybe it’s time to stop obsessing over the wealthy, and start directing our energies (and their money) towards ways to help out the less fortunate.