Why HK-style property tax may not cure Vancouver's China syndrome
Does Vancouver need a Hong Kong-style tax on foreign home buyers to ease the problem of mainland Chinese demand?
The question is more complicated than it appears at first blush, mainly because Vancouverites can’t agree on whether such demand exists, and, if it does, whether it’s a problem. They also can’t seem to agree on what, exactly, constitutes a foreign buyer.
On Twitter, ever a source of hard-reasoned debate, I was last week informed in no uncertain terms (warning: strong language) that suggestions of a link between Chinese buyers and Vancouver’s berserk property prices were based on anecdotal claims, not “real evidence”.
The proposition was supported by a Globe and Mail article whose headline seemed unequivocal: There’s scant evidence behind the myth about foreign buyers of Vancouver real estate.
A key piece of statistical evidence furnished in the “myth” article seemed pretty clear: data produced by the Landcor company last year supposedly showed only 0.2 per cent of Vancouver residential property buyers in 2012 lived outside Canada.
End of discussion?
Because an oft-quoted 2011 analysis by Landcor showed that 74 per cent of luxury home purchases in Vancouver’s Westside and Richmond in the previous year were made by mainland Chinese buyers (or, at least, by people with mainland-style names, with no Cantonese or English-spelling variants).
There is no fundamental contradiction here: the “myth” data rests on its exclusion of migrants, such as the thousands of Chinese millionaires who have been pouring into Vancouver in recent years under the immigrant investor programme. In the past eight years, more than 36,000 rich migrants have moved to British Columbia under the federal scheme, which allows people to buy their way into Canada in exchange for handing over C$800,000 (HK$5.86 million) as a no-interest loan to the government. Two-thirds were from mainland China.
If we accept both sets of Landcor data, then perhaps the question should not be whether Vancouver has a problem with foreign buyers, but whether it has a problem with foreign money. A fortune made in Vancouver and spent in Vancouver is one thing; a fortune made in China and spent in Vancouver is quite another. Is this responsible for the yawning gap between Vancouver incomes and housing prices?
Cameron Muir, chief economist of the BC Real Estate Association, is among those who argue that the impact of Chinese buyers in Vancouver has been “over exaggerated”. Muir said BCREA figures suggest only 1-4 per cent of buyers are “foreign investors”. But to satisfy this definition, a buyer would have to live outside Canada, thus excluding migrant buyers.
Muir said buyers whose previous homes were outside Vancouver - a categorisation that should cover the bulk of sales to new migrants - accounted for 7-12 per cent of purchases. Muir said that this data was drawn from responses from around 200 real estate agents per month, and acknowledged that it was “not a formalised survey”.
“There are no hard and fast numbers,” he said.
He said that while Chinese buyers might be concentrated in the top end of the market, as reflected in Landcor’s 2011 data, such sales would be dwarfed by the 30,000 total annual sales in Greater Vancouver.
“No question, you’ve got more of the uber-rich buying in those neighbourhoods [Vancouver’s Westside and Richmond],” he said. “It would have an impact on certain neighbourhoods, but not enough to swing a market the size of Vancouver.”
This brings us back to considering the likely impact of a non-resident property tax. In the case of Hong Kong, perceptions that mainland Chinese buyers were fuelling a runaway market resulted in the imposition of a 15 per cent tax on residential property purchases by non-permanent-residents in October last year.
Yet if the same was attempted in Canada, the thousands of millionaire migrants who bought their way into the country via the immigrant investor scheme - by definition, permanent residents - would be exempt.
The pool of potential targets for such a tax is reduced to non-resident speculators. Do such buyers even exist in Vancouver’s market in substantial numbers? I have not seen any data proving that they do - and I’ve never met one, Chinese or otherwise.
I have, however, encountered a couple of impersonators.
If Vancouver can agree on one thing about Chinese buyers, it should be that it doesn’t need any fake ones.
The Hongcouver blog, is devoted to the hybrid culture of its namesake cities: Hong Kong and Vancouver. All story ideas and comments are welcome. Connect with me by email email@example.com or on Twitter, Ian Young @ianjamesyoung70