Is Vancouver too tough for doing business, other than being the ideal retirement place?
Economic history turns in cruel cycles. A decades-old problem (familiar to many in Hong Kong) has finally peaked in Canada, as real estate critics and citizens who cannot afford to live in Vancouver are demanding every kind of restrictive policy against foreign buyers to control prices.
But the emerging political and economic policies of the New Democratic Party-Green Party provincial government in British Columbia could actually worsen housing affordability and business development.
While the outgoing provincial government seemed tired of governing, the incoming NDP-Green government represents the most socialist, anti-business policies in North America. They have not advanced a single new idea for economic development.
Instead, the party is dominated by environmental activists, social welfare advocates and professional protesters bent on strangling and taxing small and big business for the sake of advancing a radical environmental agenda with the fervour of scorched earth economic jihad.
Premier John Horgan recently completed a 10 day trip to meet with governments in China, Korea and Japan to back projects for liquefied natural gas (LNG).
Yet, his Green Party counterpart Andrew Weaver has explicitly tweeted that “the NDP government will fall in non-confidence, if after all that has happened, it continues to pursue LNG folly.”
The province is embroiled in a struggle over LNG development and global warming. And Horgan needs Weaver’s support to stay in power.
But their hostility towards LNG has been costly and sent worrying signals to foreign investors. Opposition by environmentalists were partly responsible for persuading Malaysia’s state oil company Petronas to pull out of its US$36 billion Pacific NorthWest LNG project. On its part, Petronas blamed protracted delays and depressed global prices for its decision.
Then, a few months later, Nexen Energy ULC, the Canadian subsidiary of China’s CNOOC Ltd, and Japan’s INPEX, withdrew from a feasibility study to construct a US$28 billion project.
The provincial NDP made a campaign promise to block Kinder Morgan’s US$7.4 billion Trans Mountain Pipeline that moves oil from Edmonton to the coast in Burnaby. Approval from the federal government and the National Energy Board means nothing in Canada as First Nations aboriginals and protesters along the way have delayed its construction with endless court challenges.
Foreign LNG and oil investors are justifiably perplexed at how Canadian officials encourage them to spend millions on environmental impact studies, only to be frustrated at local levels with long and uncertain delays. It is becoming a national security issue as the federal government cannot gain legal access to its coastlines for commerce.
The demands of environmentalists must confront the government’s needs for tax revenues and royalties generated by oil and gas to pay for the NDP’s expanding social welfare agenda. The NDP’s innate hostility to business and industry threatens the province’s economic development and standard of living. Hence the oft-heard Chinese remark that “Vancouver is only a nice place to retire and too tough to do business,” unless the “business” concerned is the speculative flipping of upscale apartments.
The real estate scare of Asian investors has become so irrational that no one believes statistics any more. According to data released last December by Statistics Canada about the Greater Vancouver area, residential property ownership by non-residents represented only 4.8 per cent; condominium-apartments was 7.9 per cent, and single detached houses was 3.2 per cent.
Critics claim the non-residents figure is much higher hiding behind offshore companies, nominees and trusts. They complain about money laundering as if all mainland Chinese are criminals, but according to private bankers, the macroeconomic reason behind the global capital flow is the need for Chinese to diversify their wealth under the barriers of a controlled currency and capital account.
Vancouver’s residential real estate market has become an international enclave, a subset of the local economy carved out by foreign buyers who create their own market. It’s just like in London and New York’s Kensington, Belgravia and Park Avenue, whose price movements bear no resemblance to the local or national economy.
Peter Guy is a financial writer and former international banker.