Bogus ‘analysis’ obscures the role of foreign money in Vancouver’s runaway housing market
BC’s government is relying on flawed data provided by the real estate industry
If there’s one thing that should unite both sides of Vancouver’s debate about housing affordability and the role of foreign money in the real estate market, it’s the need for more data.
That analysis, in turn, cited estimates that “foreign buyers” likely make up “less than 5 per cent of home sales activity in Greater Vancouver”.
If there’s a shortage of data, where did this swift and comforting estimate come from?
As usual in Vancouver, all roads lead to the real estate industry.
The BCREA's expert opinion
The expert opinion that formed the basis of the ministry’s analysis was that of the BC Real Estate Association and its chief economist Cameron Muir, who wrote to the ministry on May 28.
But there are enormous inadequacies in the BCREA’s analysis.
It misleadingly cites foreign occupancy as a substitute for foreign ownership. Even worse, by setting “foreign owners” or “foreign investors” as the focus, the analysis ignores foreign money: that is, foreign-sourced wealth that is poured into Vancouver real estate by rich immigrants, who conveniently escape the BCREA’s “foreign” designation.
From an affordability perspective, it really matters not if a buyer is foreign - it matters if their money is foreign. But the BCREA would much rather everyone stop looking at the money and focus on the official residency of the buyer.
Those 45,000 rich immigrants who arrived in Vancouver under wealth-determined schemes from 2005-2012? They simply don’t count, as far as the BCREA is concerned. As permanent residents, they are not foreign, no matter where their money comes from.
In assessing foreign ownership, the BCREA analysis cites authoritative-sounding 2011 Census data. But this data doesn’t even mention foreign ownership (let alone foreign money), and instead depicts “the share of private dwellings that were either unoccupied or occupied by foreign or temporary residents on Census day”.
But it’s a bogus proxy. Why would a foreign owner capable of buying an “investment” property in Vancouver NOT have a contact address of some sort in Canada (say, a lawyer, accountant, property manager, or a relative) – and particularly if that owner was a Chinese national illicitly circumventing the nation’s cash-export restrictions to buy a home overseas? That such a person would blithely have their Vancouver tax assessment sent to them in China defies common sense.
The last rotten plank upon which the BCREA builds its 5 per cent conclusion is its own “informal monthly poll” of realtors who are asked to identify whether their clients are “foreign investors”. Never mind the fact that the result, 3.2 per cent, wildly exceeds the Urban Futures estimation of the same group (0.4 per cent) by 700 per cent. It doesn’t really matter, because, once again, the “foreign investor” designation neatly excludes foreign owner-occupiers, as well as all wealthy immigrants, regardless of whether they are investors or not.
Clarity is a foreign concept
Let’s consider just how pointless the BCREA’s definitions really are, in light of a couple of high-profile cases.
Lai Changxing is a convicted smuggler now serving a life sentence in China. He initially fled to Vancouver in 1999 with his wife and family, and, according to the Globe and Mail, paid C$1.3 million for a home in South Granville, despite having no income source in Canada.
Yet Lai and his dirty cash would escape all of the BCREA’s various designations of “foreignness”. For a start, Lai was an owner-occupier. His property wasn’t for “investment” purposes. And, if asked by a census taker whether he considered Canada to be his place of primary residence, Lai would most certainly have said yes (he never achieved permanent residency, but staged a long battle for refugee status). I rather doubt he ever had his Vancouver property tax assessment sent back to Xiamen.
The home at 4787 Drummond Drive is in Chen’s name. This makes it virtually certain Chen has previously attained residency in Canada, since a Chinese resident is generally prohibited from exporting more than US$50,000 per year – unless they apply for exemption on the grounds that they are emigrating.
The point here is not to demonise folk like Chen Mailin, who is well within his rights to seek a fine and comfortable life in Vancouver for his family, while making his living in China (tax issues notwithstanding). His is an extreme case. But it’s not just the impact of mega-buyers like Chen being excluded from the affordability issue by the BCREA’s definitions - it’s the impact of thousands of standard-issue millionaire migrants who flock to Vancouver.
The BCREA’s approach is grossly misleading if the goal is to understand the impact of foreign money on housing affordability. Putting it on Ministry of Finance letterhead and calling it “analysis” doesn’t make it any less so.
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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 protected] or on Twitter, @ianjamesyoung70.