The Sun reports on the just-completed media conference by Finance Minister Mike De Jong:
Main findings include, between June 10 and June 29, 2016:
- 10,148 residential real estate transactions in B.C., totalling more than $7.6 billion.
- 337 transactions (3.3%) involved foreign nationals, worth $390 million (5.1%).
- In Metro Vancouver, there were 5,118 transactions worth nearly $5.4 billion, of which260 involved foreign nationals (5.1%), worth $351 million (6.5%)
- In the City of Vancouver, there were 1,139 transactions, totalling more than $1.6 billion. 47 of these involved foreign nationals (4.1%), worth $64 million (3.9%).
Source: B.C. Government
PT: From watching the conference, one thing was clear: after years of stonewalling, the Liberals finally understood the political imperative of getting information, getting it out and getting some policy response for a very pissed-off public.
UPDATE: From Business in Vancouver:
A provincial government statement that only 3% of B.C. residential sales are made to foreign buyers and that Chinese nationals represent just 2.5% of Metro Vancouver home buyers drew rolling eyeballs and laughter at the packed July 7 Asia Real Estate Association of America (AREAA) conference in downtown Vancouver.
“No. Absolutely not,” said an incredulous Byron Burley, Shanghai-based vice-president of Chinese-language juwaii.com, China’s largest foreign residential real estate search engine. “It is way, way higher than that.” Burley noted that millions of Chinese nationals use his site, which has from 3,000 to 5,000 residential listings from B.C. at any time.
Can someone clarify, would a Chinese businessman who enters Canada through the Immigrant Investor Program and buys 10 houses in Vancouver be classified as a permanent resident? Same as a student who buys a $31M house and applies as a permanent resident?
They are granted PR status as far as I know.
Fyi, his name is De Jong.
This data doesn’t seem that useful in that they didn’t pull out people granted PR status who are obtaining money from elsewhere. Adding people coming in under the immigrant investor program seems likes a logical thing to do.
If 5% is going to foreign nationals and the same amount is going to investor immigrant PRs, then this could be a lot bigger issue. Who knows though, the PRs could be the ones dumping a disproportionately high amount of money here. The percentages of properties going to foreigners or investor immigrants in Burnaby and Richmond could easily be as high as 30%.
The most obvious thing is that this data confirms this is mainly a Chinese immigration based issue based on the data. 78% is a huge amount for any one specific group of foreign nationals, greatly dwarfing the amount of American money here.
Even if permanent residents doubled the foreign national figures, that means 90% of transactions were from NON-foreign nationals and NON-permanent residents. That is, the data is still incomplete and should identify the source of all transactions in the Metro.
A great deal of angst and ink has been spent on the topic of rich mainland Chinese buying up everything. What’s next, English Bay? These numbers give an average of $1.35 million per foreign national. Yes, some will be dirty filthy stinking rich who buy in blocks, but clearly there are many more who are middle class and are looking for a better place to live. This will be greatly catalyzed if China’s huge sovereign debt turns around and bites them and more money radiates from Asia, which is indicative of the tenuous condition of the world economy.
However, if taken at face value, these graphs indicate that so far foreign money explains only the top layer or two of our high housing prices, like a thick expensive marzipan icing on a supply and demand cake. Local speculation may account for a sugary sub-layer. But there is a multitude of other forces at work here too.
Monaco isn’t even on the local map, Kerry.
Here’s a great interview with Ian Young from The South China Morning Post on the influence of the Quebec Investment Program on Vancouver Real Estate
http://omnyapp.com/shows/lynda-steele-show/investigative-reporter-ian-young-has-come-up-with
Missing in this report is the concentration of foreign money onto specific neighborhoods, specifically high end properties that are almost 100% non-local these days. The math: if 20% of MetroVan is classified as “desirable” and foreigners buy in the top 25% of that area and 5% of total investment is foreign then I conclude that almost 100% of high end desirable neigborhoods are foreign. Where is the data for that ? Is this sound immigration, land or social policy ? Does this make good neighborly relations ? Missing is also the lack of taxation due to un- or under-reporting. If a BC corporation buys an asset with a Canadian director but primarily offshore money is this a foreign transaction or local ?
But generally speaking we have TEN factors converging, resulting in high demand and thus, high prices!
1) Interest rates are low low LOW .. and they will not go anywhere. They might head lower in fact, like in Europe. A Canada 5 year bond is 0.6%, and a 10 year bond is a whooping 1.1%. Prime rate is at 0.5%. Don’t believe the myth that rates will go up anytime soon.
2) Baby boomers working longer, living longer & healthier and are not moving in very large numbers to areas outside of MetroVan. Yes, some folks move to the Okanagon, Sunshine Coast or Vancouver Island but it is not a very large percentage.
3) Baby boomers kids – the Gen Y folks now in their late 20’s and early 30’s – want to buy, and with mom’s and dad’s bank are flush with downpayment cash, and banks are happy to lend.
4) SFH supply is non-existent except condos and far away tiny homes or townhouses. Almost no single family houses (SFHs) are developed anywhere in the MetroVan area. A few hundred maybe which is a drop in the bucket compared to the 50,000 or so folks who arrive here annually in the Greater Vancouver region. Condos remain affordable further out: Surrey, New West, Abbotsford, Langley and appeal to some but not to folks that wish to stay near the water.
5) No more land is created due to pressure by radical environmentalists, green movement, sheer laziness and a political class unwilling to make a bold move to create more land, say in Boundary Bay, off Delta in the Fraser River delta, off UBC even or up the mountains, say Indian Arm.
6) Property gains are untaxed if it is a personal residence, unlike any other investment that is taxed at at least capital gains rates (around 22-25% tax) or as investment income (close to 50% tax) making housing an attractive investment class.
7) No inheritance tax in Canada, allowing cash to be gifted down the line. A few hundred billion will be passed on to kids and grandkids over the next few decades. We really expect they all will rent after they received a 6- or often 7-digit cheque from grandpa or mom ?
8) 1% or so immigration into Canada, many with cash, and the first thing folks want to acquire is a home, especially status obsessed Asians. A higher concentration if immigrants arrive in MetroVan than say, Saskatoon or Yukon where housing is cheaper but climate is not as desirable.
9) Foreign money is arriving in record numbers from unstable regions of the world with autocratic governments, corruption or mere undesirability. We honestly expect the world to be calm soon ?
10) Even new condo supply is getting more expensive due to more and more rules, levies or surcharges heaped onto developers. Add land scarcity and condo prices will continue to climb, albeit not as much as SFH.
Yes, we may get a speculation tax to take away some element of popular gambling with housing, and yes we may get a surcharge tax on foreigners, but that still leaves 9 reasons why demand is high and prices will not drop.
Still, we need more detailed data on foreign money in specific areas and then need to decide if this is desired as a region, and if the benefits outweigh the disadvantages.
“Missing in this report is the concentration of foreign money onto specific neighborhoods, specifically high end properties that are almost 100% non-local these days.”
I think that we should wait for a little more than 3 weeks of data before drawing conclusions.
I also think that it is important to understand the source of the funds, not just the resident status of the purchaser or company directors.
But using what limited data we have, I don’t see that the foreign investment is concentrated in specific neighbourhoods. It may be, but not based on transaction prices.
Vancouver City shows as 4% of transactions being by foreign nationals, but also 4% of transaction values. That does not support a conclusion of a weighting to rich neighbourhoods.
And if all the foreign investment is concentrated in ‘desirable neighbourhoods’, does that mean that Burnaby at 11% of transactions and 10% of transaction values is almost three times as desirable as Vancouver at 4%? Richmond at 14% makes sense directionally, but is it that much more desirable?
Lots more data required, but let’s at least follow the trail of the limited data we have.
Report linked here:
http://s3.documentcloud.org/documents/2943160/PPP-Housing-Data-Final.pdf
Details matter. Details are missing.
People have drowned in rivers one foot deep on average (TM ).
Finally somebody talking sense about things. I’d also like to add that zoning rules restrict supply greatly and Canadian millennials are set to receive TRILLIONS of dollars in inheritance over the next several decades. There is literally no precedent in world history to the amount of wealth about to be passed down as folks kick the bucket.
Thomas, your reality checks are really refreshing on a blog in which a lot of east van lunacy, hysterics and conspiracy theory thrives. But careful on the absolute statements.
“SFH supply is non-existent …… Almost no single family houses are developed anywhere in the MetroVan area.”
Between 2006 & 2013, Willoughby ‘hood in Langley added 2,400 multi-fam units as well as 2,800 new SFDs. More since. Also check up in Coquitlam, Pitt & Maple; lots of SFDs.
2800 over seven years = a few hundred per year .. As I said very few indeed !
As it turns out, the data was from a short period in June when they first started to collect it. This analysis is far from done, and I think it’s best to wait for the federal data and other research in a year’s time before concluding that Chinese money is sweeping Vancouver into the sea, or that Chinese money is active in only 5% of sales.
This was a very premature release of very preliminary data, and you have to wonder what game the BC Libs are playing by doing so.
I believe that would be the first instinct of politicians and bureaucrats kicking in.
Always cover your butt.
I think this data understates the true financiers of the real estates. Remember that UBC student who bought that 31 million dollar house. She was probably a PR or Canadian citizen but the source of the money was not from Canada. I believe the focus should be on how much tax a person pays in each property not if they are foreign or not. IE everyone who owns a property above lets say 500K should be required to pay some sort of income tax otherwise where is the money coming from to finance that kind of mortgage?
Indeed. We need to link property purchase to CRA. A big gaping loophole widely exploited by folks that happen “to forget” to report their non-resident house sale. If you own one, no problem if you are a resident. If you own 4: taxes are usually due. If you own 2 but declare no tax on a likely gain then that can be investigated. The issue in Canada is that houses do not attract any capital gains taxes if they are your personal residence. So many folks happen to pretend their home is a residence, or their 4 ! THAT is where the true enforcement power lies and the lost billions in unreported property gain related taxes. I would go as far and tax houses as consumption on acquisition, say full PST (perhaps rebated to some) and cap the life time capital gains, like small businesses. You get $1M, once. Anything above that: it is taxed.
Don’t you mean Principle Residence, instead of Personal Residence? Meaning that there is just one of them, not four, for a single taxpayer or couple. Being in the property management and investment business, I would think that would be important to your clients.
Note that the Property Transfer Tax Return shown in this link (page 5) asks about duration of residency (meaning that taxes are to be reported) and previous years tax returns if it is less than a year.
http://s3.documentcloud.org/documents/2943160/PPP-Housing-Data-Final.pdf
I don’t think this system goes far enough yet, but it is doing more than is being suggested.
Correct. Your personal (and principal) residence. Many folks have 3 or 4: one here, one in Hongkong, a 3rd in London and a fourth in Boston. They shift money around to lowest tax jurisdictions. As such, I have advocated elsewhere that we ought to tax properties more (like consumption as that what it is) and incomes less. Property taxes by and large in US cities are far far higher than here.