The B.C. Liberals are walking a fine line on the Metro Vancouver real-estate dilemma, between curbing the inflated, speculative gold rush that’s underway, and curtailing the wealth that’s driving it.
They’ve maintained the balancing act by doing relatively little in the face of mounting concern from both the haves (owners) and the have-nots (priced-out renters).
There are winners and losers on either side of the line, and developments from here on could make real estate one of the hot-button political issues leading up to the May 2017 election. Residents left behind by the market are getting more resentful about the prices and more suspicious about what’s driving them. Owners are luxuriating in equity increases, but increasingly aware that it’s only paper value.
The pervasive belief that Chinese money is fuelling much of the boom carries its own perils. The focus on where the demand is coming from subtracts from the urgent need to address supply by expediting new residential developments to dampen down prices. And the spillover effect that started hitting Victoria and other markets recently only broadens the problem.
Two steps announced Tuesday that were noted in the February budget will determine whether the government departs from the balancing act and opts to take a firm stand.
The first is a clamp-down on shadow flipping, where predatory realtors assign pending house deals to other buyers at higher prices before they’ve closed, unknown to the original vendor.
Premier Christy Clark said unethical or predatory conduct in the real estate market won’t be tolerated. The government is glossing over the fact that shadow-flipping was a significant problem up until a Globe and Mail investigation in February, and that regulatory officials didn’t appear to have a clue it was going on.
New regulations starting next week give original vendors more control. They have to consent to having their deal assigned to a different buyer, and the further profit realized on assigned deals has to be returned to the original seller.
Those regulations should cut down on the number of sharks in the water. But they have been ahead of the oversight agencies all along, so it remains to be seen if it the crackdown will work.
The second step looks innocuous at first glance, but it’s going to generate the most attention later. The government is changing a form.
It restores the question about citizenship on the Property Transfer Tax return that was dropped in 1998. That form will be the basis for a data-collection drive that will give the province a clearer understanding of the real estate market and what is driving it. Despite all the anecdotal evidence about foreign investment, the government said everyone is operating on just estimates, because conclusive data were not available.
Citizenship information will start being collected next month and shared with federal tax authorities. Finance Minister Mike de Jong said they’ll have enough data within six months to start analyzing the problem and release aggregated information on where buyers are from.
But as one of the ranking members of cabinet and minister responsible for oversight, de Jong is still firmly opposed to making decisive tax moves to curb foreign speculation.
He told reporters there are lots of “theories” about real estate and it’s tempting to blame prices on one phenomenon. But that’s an oversimplification and there’s a lack of accuracy on speculators’ share of the market. He said concern about vacant homes built up a head of steam a few months ago, but then a study found vacancies were relatively low.
“I tend to have a bias against singling out foreign investment for a separate punitive tax,” he said.
The Opposition has advocated a new tax on owners of homes that are left vacant, but de Jong said it’s irresponsible to pitch that without hard information.
He said other jurisdictions have tried to tax foreign buyers and the effect on affordability was negligible.
He spoke against “rushing headlong into a course of action that may be a short-term political agenda, but does nothing to address affordability.”
NDP Leader John Horgan said Tuesday’s moves don’t address affordability or the root cause of speculation.
Offshore money is distorting the market and people are complaining “it costs too much to live here,” he said.
