Politicians desperate to appear to be doing something to cool Canada’s red-hot housing market are once again turning to their favourite villain: Foreign buyers.
The only problem is, recent experience in B.C. has shown that it’s actually locals, not foreigners, who are the ones buying and leaving vacant investment properties in this province.
The federal NDP and Conservative parties were quick out of the gate this week with housing affordability promises, with both parties correctly guessing the issue to be top-of-mind with voters especially here in B.C., with skyrocketing real estate and rental markets.
NDP leader Jagmeet Singh promised a 20 per cent foreign buyer’s tax when non-Canadians purchase residential real estate.
Conservative leader Erin O’Toole went even harder, promising a two-year ban on foreign residents purchasing any residential real estate in Canada.
The Liberals haven’t revealed their housing platform yet, but the governing party’s last budget proposed a 1 per cent annual tax on foreign owners who leave residential properties vacant or underused.
With all this focus on foreign buyers, you might think there’s actually some sort of evidence behind foreign ownership supercharging our real estate market.
But B.C. has data that proves different.
The province introduced the speculation and vacancy tax in 2018, promising penalties on anyone who left second properties vacant in the hopes it would encourage owners to rent or sell additional homes in markets were affordability is a concern.
B.C. initially billed the tax as a way to combat foreign speculation in our real estate market, by penalizing wealthy offshore investors who buy-up condos and homes and then leave them vacant, with the goal of flipping them later.
But the most recent data from B.C. earlier this year revealed the largest group hit as real estate speculators under the tax are now British Columbians.
Foreign owners paying the tax fell by 48.9 per cent from 2018 to 2019. Now, British Columbians and Canadians outnumber foreign owners and satellite families. And the market is still red hot.
B.C. politicians have long used foreign ownership as an easy way to stir outrage and lay blame for housing unaffordability, dating back to former premier Christy Clark’s 12 per cent foreign buyer’s tax.
But real estate experts have been consistently saying for some time now that it’s locals, not foreigners, who are cashing in on real estate like a lottery ticket.
It’s particularly an issue for Metro Vancouver residents who can cash out their homes at huge values and move to other parts of the province where they might be able to work remotely and can afford to pay premium dollar for more housing space.
It’s also an issue for aging parents who can sell their old family home for a small fortune and then give the cash to their children to help them get into a housing market they might not otherwise be able to afford, thereby legitimizing prices that would otherwise be unreachable for ordinary working British Columbians.
Low interest rates, scarce supply and pent-up demand are also issues.
While politicians continue to focus on foreign buyers, banks, economists and others have suggested they do something more bold to cool the market: Consider a capital gains tax on primary residences that would apply if people buy and flip a home for profit in say two to five years.
The Liberals and Conservatives have quickly ruled that out, as has the B.C. NDP government, because none of them want to tick off local homeowners already in the market who expect to be able to enjoy astronomical returns.
The same local voters driving the hot market even hotter.
Much easier for politicians to point to a foreign buyer as the bogeyman. Even if it’s not true.
Rob Shaw has spent more than 13 years covering BC politics, now reporting for CHEK News and writing for The Orca. He is the co-author of the national best-selling book A Matter of Confidence, and a regular guest on CBC Radio.
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