The 2016 budget released by the Liberal administration included allocation for more in-depth research on the effects of foreign capital in Canada’s housing markets, but academics at the Simon Fraser University’s School of Public Policy argued that decisive and effective action should be the federal government’s top priority.
“We don’t need to wait around for data to tackle the issue – we need action now,” assistant professor Josh Gordon and master’s student Anjum Mutakabbir wrote in an analysis piece for The Globe and Mail.
The authors pointed at the wealth of information that already exists to support the conclusion that foreign ownership is pushing domestic investors out of the country’s hottest markets, including multiple studies that noted a correlation between the influx of migrants and the sharp growth spike in real estate prices between 1980 and 2012.
“While some analysts claim that this has no impact on the rest of the market, it doesn’t take much imagination to see how it creates cascading price pressures elsewhere: When many higher-income Canadians can no longer afford the most expensive neighbourhoods, they buy in less expensive parts of the city, which in turn pushes out those who would previously buy in those neighbourhoods, and so on,” the academics stated.
Gordon and Mutakabbir pointed at figures released by the National Bank of Canada as the most damning evidence for foreign influence in Canadian housing. Last year alone, Chinese investors spent $12.7 billion on residential properties at the Greater Vancouver area.
“From January, 2015, to January, 2016, the benchmark price for detached homes, condos and townhouses sold in Greater Vancouver surged 19.6 per cent,” the authors wrote. “At the same time, the battered Canadian dollar lost about 10 to 15 per cent of its value and $1-trillion (U.S.) left China seeking safety. There were no sudden movements in interest rates, local incomes, the supply of housing or anything else that might explain such a price spike in Vancouver.”
“If the B.C. government really believes that foreign money is playing a minimal role in housing prices, as it maintains, then it should put its view to the test and adopt the policy. Delaying action and thus fuelling the bubble is irresponsible and wastes valuable time in a growing crisis. By all means collect the data – but don’t wait to act,” the experts concluded.
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