If you have noticed a persistent ringing in your ears lately, take heart as we all are hearing it. It is the sound of government cash registers as they rake in revenue from Vancouver’s record-breaking real estate market.
What you will certainly not hear above the din is any politician saying they will make any changes that could risk driving down housing prices. That is because they are too dependent on the dollars it brings into government coffers.
In you still think that an elected official will come to the rescue of those trying to buy into Vancouver’s hyper-inflated single-family housing market, please note the following.
There are 757 million reasons why the B.C. government will not intervene. That figure represents the total the amount in dollars the government raised in property transfer taxes in the last fiscal year. Buying and selling homes is big business in B.C., and that figure could go as high as $1 billion if 2015 sales projections hold.
There are nearly 1.9 billion reasons why Mayor Gregor Robertson will keep his mouth zipped over double-digit property assessment increases across our city. The City of Vancouver issued $1.88-billion worth of residential permits in 2014. Overall this represents a 77 per cent increase over 2008.
The mayor is consistent in his view that he thinks the city is cash-starved — so why would he dare to turn off the flow of revenue home-building provides? One might surmise then that Robertson’s talk about housing affordability is as empty as the homes he wants citizens to report on a snitch website.
Then there is the thorny politics of home prices. If you are in the market already as a homeowner, chances are you are praying that your real estate investment will continue to appreciate. Many of us lament the loss of affordability, but none of us are likely to respond by selling to the lowest bidder.
Furthermore, homeowners are more likely to vote, and if their home price drops because of political intervention, you can kiss their support goodbye at election time.
Some assert that as long as home prices continue to rise, politicians at city hall have job security. They point to the last time Vancouver experienced any prolonged property price depreciation in 1999 to 2002. It was during that time that the incumbent NPA council was routed by Larry Campbell and COPE.
Rest assured that our mayor and council understand there are political consequences for putting the squeeze on home price values.
This does not mean elected officials are impervious to pressure from citizens. Tens of thousands have already signed a petition at Change.org demanding our politicians restrict foreign investment in our real estate market. They cite similar policies tried in Australia and England to cool — albeit unsuccessfully — spiking real estate prices overseas.
Opposition politicians have naturally seized the issue, although one has to wonder if they would do the same in government. An NDP Member of Parliament is demanding that government provide resources to study the impact of foreign investment in housing.
The terms of reference for this kind of plan alone would be daunting. There are approximately 4,000 municipalities in Canada, and most of them would love to have Vancouver’s revenue growth statistics.
The question is even more basic for the federal government. Why would you use limited tax dollars on a project whose end-goal is to deflate tax revenue from the real estate market?
It is debatable if any plan to curb foreign investment would even work. An Australian study determined that domestic buyers — taking advantage of low interest rates — have overwhelmingly driven up real estate prices in that country.
Do not despair, however, because our politicians can do something about housing affordability: allow more of it to be built.
The laws of supply and demand are no different here in B.C. than anywhere else. We have seen since the increase of development of attached housing that prices of condominiums have levelled off. This is happening in spite of some well-documented involvement of foreign buyers.
Barring a significant increase in interest rates, however, Vancouver’s limited supply of detached homes will continue to appreciate in value. That means we will continue to hear another sound.
The ringing of alarm bells over declining affordability.