Two items today – the first from Business in Vancouver:
Demand from foreign buyers is also playing a significant role in these two markets (Vancouver and Toronto), and is also beginning to play a role in Montreal.
While many downplay this factor (‘it’s only X% of the buyers!’), Economics 101 will tell you that the marginal buyer sets the price; and, if you introduce a wave of new buyers on an already tight market, prices will soon reach for the sky as the demand curve shifts even slightly to the right,” Porter and Kavcic write.
Excess global savings sloshing around have driven many asset prices rocketing higher in recent years — bonds, commercial real estate, infrastructure, private equity, residential real estate in Manhattan and London — and now that wave has washed upon Canada’s biggest cities.
Both Vancouver and Toronto are now showing signs that speculation is in play: Porter and Kavcic find evidence of speculative behaviour in the increase in number of Vancouver properties being bought and sold within 12 months, and the recent steep increase in condo prices.
The two economists said policy makers should focus on foreign buyers who seek to use real estate as a safe haven, rather than wealthy landed immigrants. Recent policy moves to increase how much homebuyers need to put towards their down payments have focused on domestic buyers; those measures will “simply crowd out the domestic buyer and leave the field wider open for foreign capital inflows.
This is from the Bank of Montreal, for gawd’s sake. Could it get any clearer? It leaves no wiggle room for decision-makers in the future to say, unlike in 2008, ‘who could have predicted this unfortunate outcome.’
And then this from The Sun:
Nine rural schools slated to close next year have been tossed a lifeline with new provincial government funding announced Wednesday.
Premier Christy Clark announced that districts outside of Greater Victoria, Metro Vancouver and Kelowna will be able to apply for ongoing funds to keep those schools open. Some districts will be eligible for amounts equal to what they would save by closing them. …
About 50 schools in the province are at risk of school closure, including about five in Richmond and up to 20 in Vancouver that are not eligible for this funding. …
Could Premier Clark be any clearer: Vancouver, we truly don’t care about you because we really don’t need you.
The issue of rural school closures has sparked a grassroots backlash in some communities against Liberal MLAs, who face the prospect of angry voters at the polls.
Indeed provincial and federal policy makers are asleep at the housing policy switch. Far higher taxation of foreign money is such a no-brainer.
But then, common sense is not so common.
As to bailing out the inept VSB I 100% agree that VSB needs to clean up its own mess first, by for example closing schools where FOR YEARS it has been clear they have declining enrollment and/or by leasing off or developing extremely valuable school lands. It is not even being studied to my knowledge in Vancouver.
You obviously do not know any teachers. Or have not paid attention to the cold data lurking behind the overheated headlines.
The BC Libs have been playing games with the VSB for years, starting when Christy was minister of education. Vancouverites paid something like $530 million in school taxes last year, based on a % of mightily escalating property values, and returned only ~$475 million, leaving a shortfall of several tens of millions. The province has been cutting public education for years while concurrently emptying dumptrucks of public cash on private and religious schools, institutions that are exempt from paying property taxes. The premier’s own son attends St Georges, a private school for the rich which sits on prime taxable west side real estate.
Don’t you think the province has a stake in the demographics of the cities it oversees? Why can’t Christy bring herself to address housing affordability and help foster an atmosphere where less expensive family housing is built in areas that will repopulate the schools? She and Gregor are political rivals, but together they hold the keys to address housing affordability and to increase family demographics in our neighbourhoods. Gregor may spout off, but Christy is downright arrogant and aloof from issues revolving around the Big City and prefers to “rescue” rural and small school boards elsewhere rather than in the city suffering with the same funding issues only because that is where her political base is.
That is not the way to manage education.
People in rural areas have legitimate concerns which the government is belatedly addressing. Close an elementary school in Vancouver and the next one is 1-2 km’s away. Close the only elementary school in a small town and your 5 year old is on a bus for an hour or more each way to the school in another town or city. That devastates the entire town as people are less likely to move there if there is no school.
Utter nonsense. Of course a city with higher property values pays more on average than rural areas so on average any rural area gets more $s per pupil than a city. It has NOTHING to do with CC or the Liberals.
VSB needs to be held accountable for its poor decision as it was clear FOR YEARS that some schools have to be closed in areas of lower or falling enrollment.
Funding per pupil has been going up annually.
Teachers’ salaries need to be looked at, as has their evaluation and salary adjustment based on competence like any normal profession, staring lower and topping out far higher for truly excellent teachers. Some actually have to be laid off once in a while.
Utterly unaddressed by VSB is the monetization of the billion of land value under their management. If they get this right it they could pay their teachers far more, upgrade schools and pay the province a stipdend back annually. Much work required here rather than asking the province for more money, they ought to pay some back as the land most schools sit on in Vancouver is worth BILLIONS.
Of course the drop in enrollment is directly connected to the increase in house prices – families cannot afford to live in the City of Vancouver, so it’s becoming a city of empty nesters or foreign buyers who leave their houses empty. Maybe schools built in the future should be modular and mobile so that they can move with the population.
There’s too much one-sidedness on this issue, particularly among PT commenters. It’s either ‘fix supply’ or ‘fix demand’, and the endless promotion of one or the other of these biases makes it easier for provincial Liberals and the city to dismiss responsibility for any sort of reform at all. I personally don’t agree that high housing prices are primarily a demand problem, but know enough to know that when enough people perceive something as a problem, it becomes its own problem. At the same time, one can’t deny supply’s effect on price with a straight face.
How about a two-pronged approach that places higher fees on foreign buyers (however that may be identified and enforced) while also removing barriers to new construction? Instead of simply looking to win an academic argument, advocacy of a balanced approach that holds both the City and Province’s feet to the fire may actually yield results. Because this endless trumpeting of only one side of the problem or the other is only managing to fuel a very tired debate.
There is too much good sense in that idea, Dan. A task force to address land use and the effects of foreign money on real estate? No, that’s way too complicated for premier. And she would never agree to stoop to the mayor’s level, or sit at the same table as the locals from the hated Big Smoke to discuss these mundane topics. She is just way above that as long as the property tax revenue keeps pouring in, and her backers keep whispering instructions in her ear at those $20,000 a plate lunches to not do anything.
Maybe the mayor should host a lunch with John Horgan instead, and ask him to bring David Eby to do a Power Point presentation on housing. That will get Christy’s attention, but it may convert her arrogance to wrath, all in time to be witnessed live during next year’s election.
There was a link here recently to an urban land study done in the 1990s projecting how much new housing would be required. Only a small fraction of that number has actually been built. While construction lagged demand, construction of ground oriented units was left behind at the starting gate. Only in the last few years has there been a boom in townhouse and row house construction. That boom needs to continue for another decade just to catch up to where supply should have been 5 years ago.
On the demand side we’ve seen an influx of money from overseas fuel a speculators market for local investors. People who can afford to gamble millions of dollars are buying up properties (rental buildings, commercial buildings, houses, condos, etc.) with a mixture of stagnant stock market/commodities funds and low interest loans against existing assets in the expectation that price appreciation will continue to outpace the S&P 500 and that no long term losses are likely. Through all the booms and busts desirable Vancouver real estate has been going up in value by an average of 10% per year since the early 1960s. If Vancouver does suffer a long term drop in property values it’s still a great place to live or visit so there’s a high non-monetary value in holding onto property here.
Name another investment vehicle that offers essentially no downsides and the potential for fabulous gains?
All the teachers that I know freely acknowledge that the VSB and the BCTF are and have always been primarily far left wing political organizations.