Foreign ownership of Vancouver property: the long answer

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Foreign ownership of Vancouver property: the long answer
Reported by Luke Brocki
Monday, May 30, 2011
Opened by w0rld
Thursday, May 26, 2011

Hunting for data on foreign ownership

Reported on Monday, May 30, 2011

While reporting this story, the usual suspects failed to provide any hard numbers on foreign ownership in Vancouver’s real estate market—the Canadian Real Estate Association, the Real Estate Council of British Columbia and the Real Estate Board of Greater Vancouver all told OpenFile they don’t collect any statistics on foreign ownership. However, some data on the issue does exist, and it's buried in individual property assessment notices BC Assessment sends out to property owners.

BC Assessment is a provincial crown corporation that values all property in the province and verifies its ownership through the Land Title and Survey Authority. A private firm, Landcor Data Corporation, has become the clearinghouse for all of the BC Assessment data. Landcor analyzes the numbers and sells reports to realtors, banks and others interested in so-called "real" properties.

Andrew Ramlo is executive director at Urban Futures, another Vancouver firm specializing in long-range economic demographic forecasts. He started mining the data after a colleague at Landcor sent him the raw numbers. “We chose to look into the available data, rather than rely on anecdotes. And what the data show, versus the anecdotes, paints a dramatically different picture.”

Data: Limited, but better than nothing

In his calculations, Ramlo considered all sales data from the Lower Mainland, from Lions Bay east to Abbotsford. “As part of the tax assessment, there is a flag for each property that indicates the location to which the assessment notice is mailed.”

Ramlo focused on properties whose assessment notices were sent to addresses outside of Canada. He admits there are limitations to the data, as foreign owners could use intermediaries such as lawyers or property management companies to handle their annual tax obligations. “There is absolutely no means for us to track intermediary properties, so [the data] is descriptive rather than being precise,” he says. “But it’s the only source of data that we have outside of realtors who seems to be telling everybody that it’s foreigners driving the market.”

Data brings big surprise

The numbers Ramlo came up with were so surprising and contrary to the anecdotal evidence, he thought he may have miscalculated. But after checking and re-checking, the results remained the same. For example, of all the condos sold in Vancouver in 2008 (26,731 properties), 368 assessment notices were mailed to non-Canadian addresses, 1.4 per cent of the total. The percentage was even lower in 2010. Of 21,708 properties sold, 159 assessments were mailed to addresses outside of Canada, 0.7 per cent of the total. The trend is very similar for detached housing sales in Vancouver, as illustrated in the charts below.

“Double the number, [and] it’s still very small. Multiply it by a factor of 10, it’s still very small. And it’s declining in number relative to 2008 and it’s declining in share relative to all sales. So I don’t see it as driving the market.”


Telling the whole story

In order to understand the whole picture around foreign real estate ownership in Vancouver, Ramlo says he would like to see more focused collection of data around ownership details. “This is something the real estate boards can collect,” he says. “They have all of their realtors out there. They can simply ask their clients to fill out some data as part of their transaction.”

The Real Estate Board of Greater Vancouver does that to some degree, but only in the form of monthly internal surveys it declines to make publicly available. Still, board president Rosario Setticasi says those surveys, which see as many as 500 realtors participating monthly, also indicate small numbers of foreign owners in Vancouver.

“Our internal polling shows that foreign investment is at 3.5 to 4 per cent of [total] sales. It represents still a very small percentage of the marketplace and when I look over the months, that percentage really has not changed much.”

Setticasi says the board may consider having local realtors collect more specific information about new owners at a later date, but he is happy with the status quo, at least for now.

“Vancouver has always welcomed investors into our region and the members of the board do not distinguish the origins of a consumer in order to do business. They’re there to serve everybody,” he says. “A good open market has served us very well over the years. Hopefully it will continue to serve us well, well into the future.”

Has foreign investment played a part in driving up Vancouver’s real estate market? The short answer, according to real estate experts and others, is that there’s no way to know for certain due to a lack of data.

Now, for the long answer...

In recent weeks, local realtors have been telling stories of rich mainland Chinese investors snapping up pricey west-side homes like hotcakes, to the detriment of disappointed and formerly aspiring local buyers. Michelle Adamick, who has worked in Vancouver for the past seven years, is one of those realtors.

“Not once, besides this year, have I had to leave the inner city with my buyers to help find them a property,” she says. “This year I’ve sold homes in New West, Coquitlam, Burnaby, we’re looking in Port Moody.”

Adamick says few of her friends in their 30s can afford to buy anything in perennially expensive Vancouver. “They can’t even buy a one-bedroom condo. They’re either renting or moving to the suburbs for the rest of their lives.”

She says it’s because foreign investors with deep pockets are cutting into local housing stock. “We are hearing of new property buyers from China buying homes in the west side,” she says. "I do think a lot of it is non-residents and it’s making it very difficult for locals to afford a home.”

Adamick is hardly alone. Other Vancouver realtors with similar claims have been featured in recent articles in local and international media:

April 24, 2011: The Globe and Mail spoke with Chinese buyers, citing anecdotal reports from local players that “suggest investment cash from China is a small but significant factor, especially in the market for expensive homes.”

May 16, 2011: Financial news giant Bloomberg noticed and cited a veteran Vancouver realtor who suggested a name for the alleged trend: “The current group of Chinese homebuyers in Vancouver is the third 'wave' from Asia since 1990, following Taiwanese and Hong Kong immigration…”

May 18, 2011: The Vancouver Sun cited a Re/Max report, saying “…while foreign investment has augmented sales activity in several Canadian markets, its influence was only significant in Metro Vancouver. Most regions reported that locals were the primary drivers of demand for luxury homes.”

That’s enough for some to adopt a protectionist stance and call for restrictions on foreign ownership of residential properties in the city. Peter Ladner is a former Vancouver councillor and now columnist at Business in Vancouver. Ladner argues foreign investment restrictions could work to make housing in Metro Vancouver more affordable to people who want to “live, work and pay income taxes.”

In an interview with OpenFile, Ladner said the current attitude to accept foreign investors with open arms is hurting the local economy. “People cannot afford to hire people who can afford to live here. When you can’t have workers in this city, you can’t have an economy,” he says. “Every time you hear about housing prices going up, it’s always portrayed as a good thing; even though for a lot of people it’s not a good thing.”

“Our housing stock is being used as an investment asset for people from overseas and I’m not just talking about people from China. There are also people from Iran and the United States, Switzerland, England. It’s hugely good for homeowners and that’s why there’s no change,” he says.

“The result is a widening of the split between the rich and the poor because if you don’t have other sources of income or inherited money, you can’t get into the housing market.”

Ladner says Canada should consider restricting foreign property ownership, just as other jurisdictions have done. China, for one, has made it more difficult for foreign investors to secure loans for estate investments and limited the number of properties a single buyer can own.

Tsur Somerville sees things differently. Somerville is an associate professor at the Sauder School of Business and director of the UBC Centre for Urban Economics and Real Estate. He says Ladner and others should hold off on calls for policy changes in the absence of hard numbers to support the theory of foreign investors eating up Vancouver housing stock.

“We don’t put restrictions on ownership by the citizenship designation. Some countries do that, but we don’t,” he says.

“As with all these things, there’s an element of truth to it. Do we want housing prices set by people speculating and flipping them from overseas? No, that’s not what we want. But it’s not clear to me that the west side of Vancouver has become this ghost town just yet.”

Somerville says the investors who do buy in Vancouver rarely leave their properties vacant. Instead, they go into the pool of local rental supply. He also says it would not make sense for Vancouver to make its housing stock unavailable to foreign buyers.

“We’re claiming to be a world-class city, but are we going to be a world-class city that doesn’t allow other people to come into it? If you want to be a world-class city, you’re an international city. That means you have to allow people who are not from your place to own property.”

Somerville says if governments want to take any action on the real estate puzzle, they should address Vancouver’s status of being one of the most livable cities in the world. “I live in a much smaller house than I’d like to live in in order to live in a certain neighbourhood and I’m not thrilled by it. It annoys the hell out of me,” he says.

“If this was a flat prairie, we wouldn’t have this problem. Take a place that’s really desirable and really attractive and has very little land. All else being equal, it’s going to be more expensive and incomes will be lower."

The result, he says, means affordability will be a problem regardless of what the government does. Currently, according to him, "the biggest restrictions on housing are government restrictions. The government restricts the density of housing through zoning.”

Restrictions on property buyers are already in place in Australia, China and many other places in the world. I have lived my whole life in Richmond, B.C. and real estate prices have skyrocketed. The reason for the sudden increase in property prices are because of foreigner investors flooding the market. I feel that it is unfair that the house prices have gone out of reach for me, family and friends because of foreigner investors speculating in our market. We need strict laws preventing this. China has introduced laws to stop speculation in there real estate market because they obviously see it as a threat. Why should we not do the same?

The sad thing is I have not heard any politician speak of this problem and would like to know which party will do something about this. The only person I have seen speak out about this serious problem is Peter Ladner: "Peter Ladner favours restrictions for property buyers."

Like I said before I grew up in Richmond, B.C. I went through preschool, elementary, high school and now finishing college in Richmond. I have been a part of Richmond sports teams since I was a kid, and have volunteered in various activities in Richmond. I hope you understand where I am going with all this. All of this time spent in my life, in the place I call home and now I am getting priced out because of foreigner speculating investors. I would like someone to take charge and change something to stop all of the high housing prices, so an original person which has spent his whole life here can have a family of his own so they may also call Richmond home. I hope this cry for help does not go unheard and someone has a serious debate on this topic. Please help. Thank you very much for your time and effort.

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Colleen Kimmett's picture

Interesting story and topic. I wrote an article in BC Business magazine recently about Vancouver's "disposable housing" and how the home demolition sector in the city is thriving -- and sending a lot of waste to the landfill.

Demolition of course is closely linked to the real estate market, and every contractor I spoke to said Chinese investment (combined with city policies encouraging denser zoning) was playing a huge role. In other words, investors buy a house, knock it down, build two or more on the same lot. More anecdotal evidence, but there you go...

Joseph Jones's picture

This topic was well covered in The Mainlander weeks before Peter Ladner [weighed in] …

Vancouver Needs to Emulate Chinese Housing Policy (25 Feb 2011)
Assessing the China Factor (3 May 2011)

w0rld's picture

Former city councilor Peter Ladner has been encouraging debate on whether Vancouver should introduce restrictions on foreign ownership of Vancouver real estate. The basis for his argument is that, in a twist of irony, many big cities in mainland China have imposed real estate ownership restrictions. In many cases this limits the number of units that can be owned to two and also limits who can qualify to buy (city residents only). Chinese officials have imposed these restriction in an attempt to cool the overheated real estate market in China. Vancouver’ s real estate market has certainly felt the spillover effects of these restrictions in China as much of that wealth pours into our housing market.

BonnieOWong's picture

Ooh, a senstive subject and not to be taken lightly. I just moved to Vancouver from London, England, where there was a similar issue - foreign investors with significant amounts of money buying up property, propping up demand, and inflating values. The worst is when properties just sit empty! One could argue that affordable housing is a basic need - like water, energy... health care, education... that should be provided as part of a government's social security policies. However, global economies have been rapidly swaying towards the free market economy... greater restrictions or regulation leans economies towards socialism or even communism and some people (namely those who believe they have a lot to lose) become uncomfortable with that.

Instead I have this solution: instill a culture and behaviours that promote long-term use value in property rather than encourage price speculation or people generating financial wealth from property values rising. i.e. don't sell out. Start teaching a different sort of land economics in schools, university, and TV (enough of these property tycoon and property ladder type of TV programs). Put land back into common ownership (see Community Land Trusts or wider-scale, more mainstream applications of co-operative housing models). Back in London, I had been working on a model to enable groups of people to form communities and buy property, be able to effect better long-term ownership and stewardship of property instead of leaving property vulnerable to developers and speculators - essentially help create Community Property Developers of Shared Values Housing. Looks like the model I'm working on might have some applications in Vancouver as well.

By the way, a tax on investment isn't really enough, if there isn't the land to build on or land becomes too expensive for the city to do anything reasonable with the tax dollars. The idea isn't to restrict investment, but rather enable an alternative form of investment - and that is by groups of people in a community, with shared values and ways of working together over the long-term.

w0rld's picture

As Canadians go through yet another election, politicians of all stripes are busy dusting off campaign slogans, attack ads and policy books. Each party puts forth its best ideas to fix what ails the country and what will propel it forward on a wave of prosperity.

The amazing part of this election campaign is that nobody seems to be addressing the 800 pound gorilla in the room. That gorilla is named “Canadian Real Estate”. The overvaluation of real estate(“bubble” is so overused it has lost its shock value)in many parts of Canada has been propelled by a Canadian addiction to debt and federal government policies that helped to create a runaway freight train in the form of real estate prices. Outside of the Canadian political campaigning trail the Conservatives have paid lip service to the issue through their recent series of mortgage lending restrictions, however, this tightening is only undoing the Conservative party’s mortgage lending loosening from a few years earlier. Again, both key facts are rarely mentioned by any of the political parties currently campaigning.

Some economists and even the Canadian Finance Minister have argued or proclaimed that a Canadian estate bubble does not exist. They point to the fact that Canadian mortgage lending standards are more rigorous than those that contributed to the US real estate meltdown. In part, this is true. However, the role of the Canadian Mortgage and Housing Corporation (CMHC) in helping to push real estate prices to their current levels seldom receives the attention it deserves.

w0rld's picture

The other side of the coin in this discussion is: who is going to provide service for all these folks? Can anyone imagine a City of Richmond firefighter being able to afford a house in Richmond? When the big one hits, it is nice to know that off-call first responders will be able to quickly get to their jobs...with the ridiculous prices from offshore investors this is no longer the case in much of Metro Vancouver.

Vanessa Carter's picture

Yes, there should be restrictions and also a heavy tax to all who invest here. Its the speculative markets that have caused the huge increases in homes as well as the private rental market. Something needs to be put in place to prevent owners from jacking the rent to impossible levels. So many people are spending 70% of their net income on rental units leaving very little to set aside for retirement not to mention the beasics such as food. I wonder why the Housing minister has not introduced a measure to counter act this bleeding that the people in the West End are feeling?

w0rld's picture

China has Restrictions on foreigners buying property in China, but we do not have any restrictions on foreigners buying property in Canada. Something needs to be done about this. I have not heard one word from anyone on this topic, which is very serious in matter.
Ask your government WHY?

w0rld's picture

Someone needs to ask the government why we do not have Restrictions on Foreign Investment in the Real Estate Industry. Speculators are going to cause our economy a very big problem and something needs to be DONE ASAP !

w0rld's picture

Do we need restrictions on foreign ownership?
Housing prices are on a steep climb again in Metro Vancouver, causing some to react with suggestions that restrictive measures are needed to cool what they perceive is an overheated market.

A new wave of overseas investment interest, primarily from mainland China, is creating a frenzy in some parts of the market. Bidding wars are erupting over houses listed for sale in Richmond and on the west side of Vancouver.

We are experiencing the spillover effect in other parts of the market as well. The lag in supply of new housing to a Metro Vancouver market recovering from an almost halt three years ago, amid the worldwide recession, has prices on the upward climb almost everywhere as demand surges again.

When the average home costs almost 10 times the median household income, as it does in this region today, it's tempting to react by suggesting drastic measures be taken to try to temper things.

Former Vancouver city councillor and business columnist Peter Ladner suggested one of those dramatic measures last week when he said that Vancouver might learn a lesson from China, where restrictions have been implemented limiting non-locals to buying only one property.

Are we ready for foreign-investment restrictions on our local real estate market? Perhaps it's worth debating all of the issues that impact housing prices and livability, including this one about imposing restrictions.

In such a debate, I'll continue to defend an approach that recognizes the basic realities of supply and demand in managing our housing markets. We need to focus on removing all the barriers that stand in the way of supplying the housing stock that is required to meet the demand caused by people migrating to the area. That means more efficient land use, limiting development restrictions and hidden taxes, speeding up development approval processes and embracing new housing and urban design ideas.

Some will argue that regardless of how much supply you put on the market, if foreign investors want to park their money in our housing market, homes will sit empty as offshore buyers bid up prices on properties that are little more than commodities for them.

It's an argument that is difficult to counter. However, we also need to look at what impact investment trends have over the long term. Waves of foreign real estate investment have shaped our city and region since the earliest days of European settlement.

A gold rush that attracted people from around the world had settlers staking out properties in the small townsites on the shores of the Fraser River and Burrard Inlet in the 1860s. Property speculation around the transcontinental railway's arrival in Vancouver in the later years of the 19th century created a real city that is now Vancouver. The return of veterans from a world war created a frenzy for new homes in the neighbourhoods that are now the first-ring suburbs of Vancouver in the early 1950s.

If we're looking for one lesson around the impact of foreign real estate investment worth studying, perhaps the best one is the first wave of Asian investment that was sparked by the sale of the former Expo 86 site to Hong Kong billionaire Li Ka-shing in 1988. The redevelopment of the vacant site on the north shore of False Creek by Li's Concord Pacific not only created a new template for the rebirth of Vancouver's downtown, it also put Vancouver on the radar screen of foreign investors.

Many of the condos that Concord developed were sold to foreigners, both those who immigrated here and those who simply invested their money in Vancouver's real estate market. More foreigners followed, from all parts of the world, making Vancouver an international city from a lifestyle and a business point of view.

The sale of the Expo lands to a foreign developer was a controversial one. Some might recall that a local consortium tried to put forward a bid for the government-owned lands that would have included development of a Disney-like theme park on the downtown's fringe, along with some housing. Their financial capability would have likely meant a much slower redevelopment of what we fondly today call "Yaletown" and a much different redevelopment.

Had the provincial government heeded the warnings of those who cautioned against a massive foreign investment in Vancouver's downtown property market, we would see a much different Vancouver today. It would certainly be one much less multicultural. It would also probably be one with a much less diversified economy and a less sophisticated urbanism. It would also likely be a city less vibrant, more provincial and with a slower pace. Perhaps some would welcome that today.

Given the realities of globalism, whether or not you like the trend, Vancouver and our province would be a much different place if we erected walls around us. Closing the door on foreign investors who want to invest in our real estate market will change the future of this place. Will it change it for the better or for the worse? This is certainly worth debating.

Bob Ransford is a public affairs consultant with COUNTERPOINT Communications Inc. He is a former real estate developer who specializes in urban land use issues. Email: ransford@ counterpoint.ca

w0rld's picture

"A record number of multi-million dollar property sales in Richmond and (the west side of) Vancouver are pushing up average prices for Greater Vancouver, BC and nationally."

w0rld's picture

The average price of a home in Vancouver has shot up 13 percent over the last year and now tops $780,000. Even as home prices fall in most major U.S. cities, housing in tony San Marino, Calif., has shrugged off the financial crisis to reach a record high last year. Demand for real estate in Melbourne and other Australian coastal cities is up.

The link? Well-heeled Chinese home buyers are increasingly shopping abroad, pushing up prices in real estate markets around the world. Evidence of the trend:

“We think that in a relatively short period of time and in a way that is measurable, Chinese buyers are going to account for something on the order of 10-20 percent of the London market,” said Gerald Allison, a director at global real estate agency DTZ in London.
“The Chinese are my most important clients now,” said Cindy Chan, chairman of AGC Property Centre Pty Ltd, Sun’s property agent in Australia. “The number is growing very fast.”
Chinese have overtaken Malaysians as the second-largest overseas buyers in Singapore’s residential market, despite the Singaporean government introducing measures aimed at cooling down the market.

One factor driving Chinese home buyers to think globally — rising real estate costs at home. The average house in Beijing runs $300 per square foot, or roughly what you might pay in many Western cities. Interest rates also are rising in China, as the government tries to cool the racing economy. Measures aimed at discouraging speculation, such as a restriction barring people from owning more than two properties, is also spurring real estate investors to consider foreign markets.

San Marino: Recession-proof

Vancouver’s natural splendor, good schools and large Asian-speaking community are a particular draw for wealthy Chinese. That has helped make the city the hottest real estate market in Canada, even as home resales around the country remain generally flat. Prices for an ordinary two-story house in the city are up 10 percent this year, to $1.1 million.

In Southern California’s San Gabriel Valley, meanwhile, small, upwardly mobile San Marino is the only affluent community in the region where housing prices haven’t fallen. That owes partly to Chinese investors and home buyers, local real estate agents say:

“If you go to mainland China and someone asks, ‘Where do you live?,’ San Marino represents that you are wealthy,” said YanYan Zhang, a real estate agent whose clients include overseas buyers looking for homes here.

The surge in Chinese customers hasn’t been lost on realtors. For instance, Los Angeles-based CB Richard Ellis (CBG) offers services specifically geared to helping Asian buyers shop for homes abroad. Agents in China are also setting up tours of foreign cities for Chinese investors keen to scout overseas real estate.

Take note, Federal Reserve

China’s global real estate binge obviously makes for a stark contrast to the plunging prices and tide of foreclosures here in the U.S. And some observers will interpret it as yet one more indication that China is set to surpass the U.S. as the world’s leading economic power, as the International Monetary Fund predicted this week.

But perhaps even more striking than this economic reversal of fortune is how much more aggressive Chinese financial authorities have been in trying to puncture their housing bubble than the Federal Reserve was in the years leading up to the financial crisis.

Beijing vs. the housing bubble

China has the benefit of witnessing the carnage in the U.S., of course. But there’s no questioning how aggressively Beijing has moved to rein in its galloping real estate market, where prices have risen upwards of 50 percent since 2009. Its central bank has raised interest rates four times since last fall, while in January the required down payment on second homes was increased to 60 percent. Some cities also are raising property taxes. Meanwhile, China is taking precautions for when the bubble pops, including repeatedly lifting banks’ reserve requirements in recent months.

Despite these measures, there’s no guarantee that China’s landing will be a soft one. Some market analysts foresee an increase in bad loans, and the credit rating agency Fitch puts the odds of a full-blown banking crisis in China at better than 50-50. The kind of political unrest sweeping the Middle East also could flare in the People’s Republic, where economic empowerment may eventually prove incompatible with dictatorship.

As a result, it’s uncertain how long the real estate booms in Vancouver, San Marino and other cities fueled by the influx of Chinese buyers will last. Inflation these days — and financial bubbles — travel as comfortably from East to West as in the other direction. As China will learn, home prices don’t always go up.

Meghan Mast's picture

This is a problem in Vancouver too--I know, particularly in Coal Harbour. Friends of mine lived by Coal Harbour, and the apartment building across from them was eerily uninhabited. Every time I walked by, the swimming pool was empty and throughout the whole apartment building only a few lights would be on.

Pieta Woolley's picture

This is a great story idea.
I believe Saskatchewan recently started allowing non-residents to buy, and prices there have gone up accordingly. Also, I believe PEI still has a nonresident no-buying rule.
In the last Vancouver election, the idea of a tax on homes bought for investment purposes (and not occupied) was floated, but never acted on.
Good luck!
P

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