After writing my story on the Friedman house in Point Grey — which had gone on the market for $4 million and would have undoubtedly been at risk of demolition — a young Ottawa techie and his wife stepped up and purchased the house. Cory Fauser contacted me through this website and asked to be put in touch with the sellers. I gave him the necessary contact, and a few days later they’d purchased the house. The Fausers intend to live in the house, which is an oddity in the west side market of Vancouver housing, where it’s now routine to buy and hold, or buy and rebuild (cheap spec housing dressed up to look flashy). It was pretty nice to write a story with a positive outcome for once.
In Vancouver’s half-empty Shaughnessy, it’s Christmas every day. The caretakers of beautiful empty old houses, awaiting demolition permits, are sure to decorate them with wreaths and (uncarved) pumpkins. However, they seldom go to the bother of taking down the decorations until many months have passed. As one long-time Vancouver Realtor told me: “I point to Christmas decorations on my street and say, ‘hey kids, look, it’s still Christmas!'”
The story behind my Globe and Mail story is that I got a tip from an industry insider who told me that the brewery had sold to Concord Pacific. This puts to end months of speculation about a mysterious Chinese syndicate that had attempted to crowd fund the building as an ocean view condo property. When I asked Molson about those media stories, their spokesperson said only that those stories were speculation and rumour. There’s a good chance we’ll never know what that was all about. For now, we are left to wonder if the city will cede to Concord’s plans for a residential mixed use project. Concord is a residential builder. The brewery is industrial. The developer paid about three times what the property is worth. Obviously, they have a plan, and it might takes many years to bring it to fruition, but I’m guessing they’re sticking to it.
So much has changed in the last few months, at least in how we perceive the real estate situation in Vancouver.
For so many years, we could barely acknowledge foreign ownership because of a misdirected sense of political correctness. More often, the people stopping the conversation had a vested interest in shutting it down. After all, a lot of people are making money off the cash flow coming into the city through China, our chief source of global real estate buying. Now, finally, it seems like a dam has broken. We are free to discuss what is before our very eyes: the incredible transformation of our city due to the staggering amount of wealth that has flooded into the market. It started as a relatively slow enough trickle, back in the late 80s and early 90s, when the government introduced incentives for wealthy investors from Asia. But in the last six years, the wealth, and the spending spree, has grown to an overwhelming, and disturbing, degree.
We are seeing the impact all around us — locals who are driven out of their communities because they can’t afford to rent or buy; mom and pop businesses closing down, the new type of wealthy-class businesses opening up. Small communities such as Victoria, or even around Nanaimo, are noticing the inflow of offshore money. In northern BC, Chinese companies are buying up mines, pulp and paper mills, farmland, and other asset properties.
Of course, the problem is that our government is allowing the buying spree to continue unabated, without regulations to limit the buying and protect locals from being shoved out of the market, and their communities. In the process, they’re leaving a huge amount of money on the table in the form of taxes that aren’t being paid, either as undeclared income, or property transfer taxes, or capital gains.
They’ve left us to the mercy of market forces, and they’re defiantly quiet on the topic. It makes me wonder if they’ve got a Plan B — or is this it? Our economy is now based on the continual tearing down and rebuilding of houses to serve as “safety deposit boxes” or “holding companies” for the world’s 1 per cent?
My story in the May issue of the Walrus attempts to cover all aspects of the situation, and forecast where we are headed. I wish I had a happier outcome, but at this pace, I don’t see it.
At least we’re talking about it now. We have that.
A heritage expert I know decided to do a little digging and find out what really happens with all that demolished housing material.
He was watching the demolition of one of Main Street’s original houses on the last weekend in November. The house, built in 1911, was well known to locals, who were sorry to see it go. As he watched, he noticed that the city’s recycling and salvaging requirements for pre-1940 houses were not being followed. The house was knocked down and its materials unceremoniously thrown into a big dump truck. My source decided to follow the truck to see what would happen next. He followed it south to Kent Street, not far from the city’s transfer station. He watched as the truck entered a huge building with an even bigger lot filled with debris, about eight stories high. He got out of his car and scurried across the rail way tracks so he could get pictures. I’ve attached some of them here.
He returned to his car and climbed into the driver’s seat when he realized he had been followed by a man who was in an absolute fury. “You’re trespassing! What are you doing, taking pictures? Delete those right now!” the man screamed.
My source quite rightly told him he had every right to take pictures on public property. He got out of there and sent me the pics. And now we know what happens to old houses that get demolished each day in Vancouver — a stomach-turning three to four houses per day.
Interesting aside: the company on the signage was fined $50,000 last year for accepting materials that could have been recycled.
My story in this week’s Globe and Mail was on Andy Yan’s startling new data that 66 per cent of all detached house sales west of Alma over a six month period were purchases by Mainland Chinese buyers. Yan obtained land titles from NDP MLA David Eby, who had them pulled at the legislative library. The librarian did the work off the side of her desk, and it took her about a week. If the average Joe had attempted to do the same, it would have cost around $15 a title. MLAs have free access to such data, so Eby made use of the service.
He then turned the titles over to Yan, who analyzed them for around three months and released a study. Yan had promised me exciting new data for several months, so I know how hard he’d worked on this. Finally last week, Yan contacted me, someone at the Vancouver Sun, the Province, Reuters and Bloomberg and handed over the report. Our stories ran on Monday and basically blew up the internet, as well as TV and radio, with the findings. Since it’s impossible to know a buyer’s immigration status, he used peer-reviewed methodology that screened buyers according to non-Anglicized Chinese names. If he’d included Anglicized names such as his own, the number of buyers would have gone up to 73 per cent. But he stuck with non-Anglicized names since those people were more likely to be recent immigrants. It’s an imprecise methodology, but it’s still pretty useful considering the high number — two-thirds of all sales.
What was particularly aggravating, however, is the effort to shut down his hard work with the old and increasingly tiring accusation of racism. CBC’s the National did a particularly disappointing job of journalism by creating a story of alleged racism when they interviewed Mayor Gregor Robertson saying the name methodology was racist, and developer consultant Bob Ransford saying the same.
This is pretty rich considering that Mr. Yan is a third generation Canadian whose family knows a thing or two about actual racism. Instead of questioning Mr. Yan’s academic research, perhaps we should take a look at the people who are hauling out the racist card every time we get closer to data that shines a light on the major inflow of foreign money into the city. Who are they? Do they have an interest in silencing the conversation? How do they get paid? These are just some of the questions that need to be asked.
Mayor Gregor Robertson had asked for data on foreign ownership. Andy Yan delivered, and then got the racist card thrown in his face. That hardly seems fair, or useful. Is the city saying that it only wants data on foreign ownership that doesn’t involve people from another country?
Because this is making about as much sense as that.
Heritage lovers breathed a collective sigh of relief last week when city council voted unanimously to effectively ban the demolition of First Shaughnessy homes.
The new heritage conservation area designation for First Shaughnessy is a city first, and it means that the city now has the ability to truly protect the historic neighbourhood from losing its character. Previous attempts had been made over the years, as far back as the early 80s, with zoning that included guidelines in keeping with the character of pre-1940 homes. However, as the city came under siege with the globalization of real estate, development became rampant and Shaughnessy was especially targeted by high net worth individuals wanting to own in the prestigious neighbourhood.
As it became clear at the hearings held to decide on the heritage conservation area, many of the new homeowners are less interested in heritage than in owning bigger, newer houses — which is in direct opposition to the intention of the zoning. My interview with real estate agent Peter Saito drove home the perspective by many who see the values of the Shaughnessy homes purely in the land, and not in the beautiful arts and crafts mansions that were built under the direction of the CPR. You can read my story here.
I attended the hearings and listened to dozens of speakers, and it also became clear that the no side was spreading misinformation. Someone showed me a letter that had been circulated to the homeowners in First Shaughnessy, and it said that according to a real estate agent, home values could drop by as much as 30 per cent if made into an heritage conservation area. I interviewed Victoria heritage planner Murray Miller, who’s worked all over the world, and he said he’s never seen values drop after an HCA designation. It just doesn’t happen. Furthermore, a 30 per cent drop in a super heated real estate market just doesn’t make sense for one of the city’s most coveted neighbourhoods. The fear mongering had worked, however, because seniors who were banking on cashing out at top dollar spoke openly about their concerns at the hearings.
The city’s decision was a sound one. If people had bought into a historic neighbourhood expecting to demolish and rebuild, they should have done their due diligence. By arguing against the HCA, they were arguing against the closing of a loophole that should have been closed a long time ago.
Here’s a summary of Harper’s speech today.
For many Canadians, owning a home is their most important investment and the achievement of a key life goal.
Our homes are the focus of our daily life. They are the place where we raise our children and relax with friends and family. But budgets are tight, and buying a home can be especially difficult in some parts of the country.
That’s why the Harper government believes in helping Canadian families purchase and invest in their first home. We’ve taken steps including:
Establishing the First-Time Home Buyers’ Tax Credit – a $5,000 tax credit to help with the costs associated with purchasing a home such as legal fees, and land transfer taxes
Increasing the Home Buyers’ Plan from $20,000 to $25,000 to help
first-time home buyers make their down payment.
Establishing and expanding the Tax-Free Savings Account so Canadians can save and invest their money tax-free.
Prime Minister Stephen Harper today announced two improvements to help aspiring homeowners purchase their first home. These announcements build on Prime Minister Harper’s commitment to introduce a permanent Home Renovation Tax Credit, to help homeowners maintain and increase the value of their residences.
Home Buyer’s Plan
The Home Buyer’s Plan allows aspiring homeowners to make tax-free withdrawals from their Registered Retirement Savings Plans to finance the purchase or new construction of their first home.
This program has become an important method of financing for first-time homeowners. Since its start, 2.7 million Canadians have used the program responsibly to purchase their first homes.
In 2009, the Harper Government increased the allowable withdrawal from $20,000 to $25,000 – the first increase since the program was established a generation earlier in 1992.
A re-elected Harper Government will raise this limit once again – from $25,000 to $35,000. Increasing the limit will cost an additional $30M starting in 2017-18.
With this increase in the allowable withdrawal, the Harper Government will continue to help families achieve the pride and stability of home ownership.
Speculative Foreign Capital
Affordability of housing is a significant issue for first-time home buyers in some areas of Canada.
Real estate commentators have suggested that speculative foreign buyers are a significant factor in driving homes out of the price range of average families, especially in Vancouver and Toronto.
Some estimate that as many as 15 percent of condos in Vancouver sit empty year round – perhaps owned by real estate speculators who only benefit when the price of homes rise. Residents and aspiring home owners in cities like Vancouver and Toronto have regularly expressed frustration with foreign buyers who buy up available homes, and leave them vacant.
Anecdotal evidence from real estate agents, local residents and home buyers suggests that foreign buyers may play a role in driving up housing costs in certain regions by reducing the availability of homes for sale or engaging in expensive bidding wars.
If, in fact, these speculators are driving the cost of housing to unaffordable levels, that is something the government can, and should, find a way to address. However, in Canada, we do not currently collect the data we need to know the scope of the issue.
That’s why the Prime Minister Stephen Harper will commit to collecting data on foreign buyer activity in Canada’s housing market, particularly in Vancouver and Toronto, at an incremental cost of $500,000 starting in 2016-17. And, as necessary, we will take concrete action in coordination with provinces to curb foreign speculation in Canada’s residential real estate market.
Canada’s peers around the globe have grappled with this same issue, with many jurisdictions taking steps to ensure that foreign investment in housing results in a sector that is sustainable and affordable for local residents.
Countries like the United Kingdom and New Zealand have chosen to address foreign speculation in real estate through tax tools, specific to their national context. In the United Kingdom, these tools have been deployed at the national and municipal level.
Other countries, like Australia, have put in place regulations that limit the ability of foreign buyers to purchase existing homes for investment purposes, but permit foreign investment that results in the construction of new homes. Foreign individuals residing temporarily in Australia may purchase an existing home, provided that they live it while in the country and sell it when they leave.
At the centre of the Australian model is the principle that foreign investment in residential real estate should increase Australia’s housing stock.
This same principle is at the heart of our commitment. Prime Minister Stephen Harper is committed to ensuring that foreign investment in housing supports the availability and affordability of homes for Canadians.
The practical, serious solutions introduced by the Prime Minister to help aspiring homeowners contrast against the ineffective and expensive schemes proposed by his opponents.
Justin has promised yet another vague, meaningless “national strategy” that will create work for bureaucrats in Ottawa but will do nothing for families. He just doesn’t understand the issue.
Mulcair and the NDP have promised expensive benefits for developers and investors that he can’t afford and that won’t help middle class families.
“Vancouverites looking to get into the real estate market might be disappointed. Mulcair steered clear of promising any help to first time home buyers. He also said the NDP won’t wade into the debate over foreign ownership in B.C. “No, that’s not part of my plan.” (News Talk 980 CKNW, June 7, 2015)
I wrote a story last week about collective housing, which is a growing subculture of people who form groups and rent big houses and penthouses from absentee landlords. Because there is a big group of them, the rent is cheap, and they’ve got a built-in community. As part of my story in this issue of the Globe, I asked property manager Denis Krasnogolov if he thinks foreign money is a big deal. I said the reason I’m asking is that there are many people in Vancouver who still don’t believe it is much of a problem, that it’s been overblown. “Are you kidding?” he said. He shook his head and laughed. Krasnogolov and his business partner David Blokh are from the Ukraine, they speak Ukrainian and Russian, and they deal with foreign investors all the time. A lot of them are from China, but many are coming from countries in the Eastern Bloc, where they’ve made their money in natural resources.
Krasnogolov is a licensed real estate agent. He and Blokh both have families here in Vancouver, and they are young entrepreneurs who are trying to launch a startup that makes sense in an increasingly bizarre housing market.
They formed Mansion Management in response to the near-zero vacancy rate and high price of rental housing.As I say in my story, the two men have found a niche market in connecting organized groups of renters with owners of big houses. The big houses are almost always owned by offshore investors who are parking their money in Vancouver land, which is stable, secure, and (because there are many more like them) going up in value every month. They often buy more than one property. They either sit on it or tear the existing house down and build a bigger house to boost the property value. They don’t care if the house sits empty because it’s comparatively cheap on the international market, and it’s purely a speculative investment, anyway.
“They don’t care about the house. They don’t care if it’s rented. They just want to hold land until time comes to sell,” Krasnogolov told me.
Necessity is the mother of invention, and people are getting more creative and resourceful in order to stay living in Vancouver. Planner and statistics nerd Andy Yan told me that overcrowding is always a byproduct of unaffordability. Some might view the collective housing movement as a happy return to community, like one big extended family, while others will just see a crowded house full of renters. Whatever spin we put on the phenomenon, one thing is certain: as long as they’re trying to make homes out of a distant landlord’s land bank, they’ll always be at the mercy of that investor’s whims.
I’ve been writing about the impact of foreign money a lot in my seven and a half years as a Globe and Mail real estate columnist. Only recently has the topic reached a boiling point, which is long overdue. However, it continues to mystify me how several intelligent commentators on the Vancouver scene continue to question its relevance. The impact of foreign money on Vancouver’s property market should be a given by now, and yet there are those who insist that it’s not the true culprit behind unaffordability. It’s as if they’d rather see everything except for the elephant that is standing in front of them. Maybe it’s guilt? Maybe they’d rather not admit to themselves or anyone else that they’re benefitting from an overheated market, building equity in their homes that they could have only dreamed of a decade ago. For whatever reason, they’re not willing to state the obvious, and in terms of getting clarity on a massive problem with huge economic and social implications, their denial is only setting us back.
Let’s just get quiet and listen to Prof. Ley, shall we?
UBC geography professor David Ley, who wrote Millionaire Migrants, has supplied me and several other journos with reams of research on the impact of the transient global community, mostly people from Mainland China who’ve made Vancouver a second home.
They are wealthy people with loads of money to invest, and compared to other livable cities in the world, Vancouver is a bargain. That might be hard to believe for the average Vancouver household that brings in around $65,000, but compared to London or Palm Beach, believe me, we’re a sweet deal for a millionaire.
This isn’t exactly a revelation anymore, and it’s not rocket science to figure out how the global market has impacted the city’s affordability. If someone pays above-market value for a house on a street on the west side, that single transaction raises the values of all the houses in the area. Multiply that activity by even just 5 per cent, and the values for the entire neighbourhood go sky high. If the demand continues, which it has, it pushes prices into the stratosphere, which has obviously been the case. We don’t need U.S. based Demographia to tell us that we’re one of the priciest cities in the world. We’ve living it.
For those locals who can no longer afford the neighbourhoods on the west side, they now look to the east side, or North Van, or Burnaby. As a result, those average income earners — whose incomes are attached to the local economy, not outside wealth — push prices higher in those areas. If there’s no release valve to decrease the pressure, the market for detached houses continues to grow. High house prices radiate outward.
This isn’t to appoint blame to the foreign market that is applying the pressure. It’s not to say that there aren’t other factors, such as locals who are throwing money at tiny bungalows to get into the market. Or baby boomer parents who are giving their kids down payments on over priced homes. Or low interest rates that are motivating those who would otherwise not even try to get into the market.
It’s a simple acknowledgement that interest rates, or boomer equity, or domestic buyer behaviour alone could not have the same impact on house prices. After all, the interest rate here is the same as the interest rate in Winnipeg, and you don’t see that city’s house prices making top 10 lists. And how could domestic buyers drive a market into a frenzy like this one when their relatively low salaries could never afford the average $2.23 million house? Clearly, there is an outside force at play.
To quote Prof. Ley, “you’re either misleading or you’re mislead” if you don’t acknowledge the tremendous pressure of new global money. Iain Reeve of the Squeeze Generation counted all the applicants to the immigrant investor programs that came to BC and told an Australian publication this:
“Vancouver has seen more millionaires immigrate to the city than all of America in the past 15 to 20 years.”
How could our real estate market not be directly impacted? To those who continue to resist the evidence, I say, let’s stop the wilful blindness.
Global investment is driving our market, the same way it’s driving markets in London, Melbourne, Sydney, New Zealand, New York, Singapore, Hong Kong and Los Angeles. It is the biggest driver of the market in Vancouver, and it continues unabated, with no government regulation or intervention.
To me, that is a problem. It’s also a problem to millennial housing activist Eveline Xia, who started the #donthave1million social media campaign, and to the guy who started the petition for government intervention (who doesn’t want to be named), and to Saeid Fard, who wrote the blog called the Decline of Vancouver that went viral. These are young, worldly, educated, highly employable people who are trying to carve out a life in Vancouver but are feeling the squeeze of unaffordability. They’ve got their eyes wide open. They see the situation. They’re not denying the existence of the elephant in the room.
And yet, what baffles me, is the flip flopping among politicians and reluctance among my journalism colleagues to acknowledge that foreign money is the major issue. For example, the premier admits that foreign investment is a key part of the economy — while also claiming that she can’t address it because she doesn’t have data to proves it. That’s a bit of double speak for you.
To illustrate the failure of local media to get real on the topic, I give you this, an excerpt from one of Vancouver’s long-time local columnists:
“First, there’s little evidence of speculation-driven price increases in the market for condos and townhouses, which constitute the main options for entry-level buyers. Second, foreign ownership is not great enough to be driving up prices except in the market for homes and properties at the highest end. Third, prices for detached single-family homes are being driven upward by two factors that have little to do with real estate speculation and/or foreign ownership. Rather, it is because they aren’t building them any more in Vancouver and the existing stock is shrinking, owing to the trend toward densification, when detached homes are torn down and replaced with multiple dwellings. The supply is shrinking and everyone wants one? Of course prices are soaring.”
Evidently the culprit is a shortage of detached houses. It’s supply, not demand. Who knew? Does it matter that the houses are being paid for with foreign money? And the buyers are insanely rich? Apparently not.
Is this a case of someone who is mislead, or is misleading? I can only assume they are mislead, which is hugely disappointing. Because until we acknowledge the problem — with or without data — we’re just going to keep going in circles until there’s nobody left living in the city who’ll actually care anymore.