Foreign buyers are fueling the Vancouver housing bubble
The headline turns first year economics on its head.
More below the fold.
"But now the government of the Province of British Columbia is doing something about it – trying to at least. The Globe & Mail:
The British Columbia government is in the midst of a wide-ranging overhaul of how the housing market is regulated and taxed, amid growing concerns that foreign ownership, rampant speculation and unscrupulous real estate agents are fueling an affordability crisis.
During the past several months, the province has announced an end to self-regulation, largely in response to a series of Globe and Mail investigations into questionable practices within the industry; a tax on vacant homes in the City of Vancouver; and a 15 per cent tax on home purchases involving foreigners."
Damn foreigners! Get off my lawn!
"To slow foreign demand the BC provincial government has added a 15% tax on houses purchased by foreigners. This translates into an extra $300,000 tax for a foreigner buying a $2 million house. The City of Vancouver is also planning on adding a tax on empty homes after a study revealed that there were roughly 10,800 empty homes in the city as of 2014."
Brilliant. People want to come to Canada, and invest money in Canada, so Canadians make that difficult. Because people bringing money into Canada to spend, and invest is a bad thing? Are these people for real? How can idiots like this wipe their tush let along get elected to any office?
As I have noted before, the problem with this nonsensical level economic analysis is that it requires an analysis of both supply, and demand to understand what is happening in a market. Here we have wealthy Chinese buyers entering the market ready, and able to buy property. But because there are strict limits on property development in Vancouver, and Toronto, there is no way for supply to keep up with demand.
This is not a demand problem, there is plenty of demand, this is a supply problem. This is a problem created by government, it is not a temporary inability to supply enough property developed in the way people want, it is government not allowing property to be developed in the way people want.
We have seen this in Portlandia since the mid to later 1980s. It is a very bad outcome since it causes housing prices to jump, and forces young people to leave the area or live in incredibly expensive, cramped housing which they do not want.
What makes this even more strange is Canada is nothing but a vast wasteland of unpopulated land, mile after mile of unpopulated land. So, wherever people want to live the government limits development. Why? To what end?
While it is true that taxing foreign buyers will reduce sales, why would Canada want that? It will simply reduce the amount of money flowing into the Province, which is not a positive.