Fact or fiction: Foreign ownership is adversely affecting the residential housing market in Canada? The most truthful answer to that question is that no one knows for certain. What is undeniable is that housing prices in many markets, most noticeably in the country’s larger markets have skyrocketed. According to a survey released by the CBC earlier this year Vancouver is the second most unaffordable place in the world to buy a home, coming in just behind Hong Kong.
In the ongoing debate over foreign (primarily Asian) ownership there are two primary schools of thought. That it’s a good thing as it generates increased activity in the residential marketplace, even in Nanaimo’s, which is a boost for the local real estate sector. But of course there are those who believe it is a bad thing, as prices have been artificially inflated, and once purchased by offshore buyers the newly acquired properties sit empty and vacant, which can adversely affect the property values of those who continue to actually live in the neighborhood.
One of the largest issues supporters on either side of the argument have to face is the fact there are little to no statistics readily available on the origins of buyers, foreign or otherwise. “The data is not being collected, currently, by government,” explained Cameron Muir, Chief Economist with the B.C. Real Estate Association in a recent interview. He stated in the report that he personally believes it is the Lower Mainland’s congested geography and limited supply of detached homes, and not demand from foreign buyers, which is propelling prices skyward.
The Canada Mortgage and Housing Corporation (CMHC) echoed Muir’s concerns, saying recently that constitutionally there was no way to categorize home buyers by race or country of origin. That’s simply not a Canadian way of doing things. But Canada is not alone when confronted by rising foreign home ownership. In Britain for example foreigners who purchase real estate in the UK face higher taxes and surcharges on property transfers. The British Government has opted to focus on taxation as a way of limiting foreign investment in its real estate market.
In April of this year the government introduced a capital gains tax on non-residents selling local property. The tax amounts to 18 – 28 percent of the property’s value for individuals. In 2014, a 15 percent stamp tax was applied to corporations purchasing properties worth more than £500,000.
In Australia, where home prices in the major centers have exploded, the Australian government has taken steps to curtail foreign ownership by tightening its laws on foreign home ownership. These steps include restricting foreign real estate purchases to existing residential properties, and only allowing foreign buyers to purchase new homes, not older properties. The government has also begun charging fees on foreign investment, which start at $5,000 on residential properties worth up to $1 million (AUS). While controversial the moves also include levying fines against Australian individuals and companies who aid foreign buyers in breaking the rules.
So what happens in Canada? As mentioned, no one knows for certain. There has been an increase in foreign residential real estate purchases in recent years – that is an undeniable fact. But, what percentage of the country’s home buyers are from offshore, and have these purchases artificially impacted local home sale prices? No one with any authority can truthfully say one way or another. You cannot solve any problem without accurate information.
Before taking a stance on either side of the foreign ownership argument it is incumbent on the government and such agencies as CMHC and the various real estate boards and other governing bodies to collect and distribute accurate and timely information. With only conjecture and best guesses circulating in place of facts, misunderstandings and ill feelings can develop – which can only serve to inflame an already touchy subject.