Housing prices are on a steep climb again in Metro Vancouver, causing some to react with suggestions that restrictive measures are needed to cool what they perceive is an overheated market.
A new wave of overseas investment interest, primarily from mainland China, is creating a frenzy in some parts of the market. Bidding wars are erupting over houses listed for sale in Richmond and on the west side of Vancouver.
We are experiencing the spillover effect in other parts of the market as well. The lag in supply of new housing to a Metro Vancouver market recovering from an almost halt three years ago, amid the worldwide recession, has prices on the upward climb almost everywhere as demand surges again.
When the average home costs almost 10 times the median household income, as it does in this region today, it’s tempting to react by suggesting drastic measures be taken to try to temper things.
Former Vancouver city councillor and business columnist Peter Ladner suggested one of those dramatic measures last week when he said that Vancouver might learn a lesson from China, where restrictions have been implemented limiting non-locals to buying only one property.
Are we ready for foreign-investment restrictions on our local real estate market? Perhaps it’s worth debating all of the issues that impact housing prices and livability, including this one about imposing restrictions.
In such a debate, I’ll continue to defend an approach that recognizes the basic realities of supply and demand in managing our housing markets. We need to focus on removing all the barriers that stand in the way of supplying the housing stock that is required to meet the demand caused by people migrating to the area. That means more efficient land use, limiting development restrictions and hidden taxes, speeding up development approval processes and embracing new housing and urban design ideas.
Some will argue that regardless of how much supply you put on the market, if foreign investors want to park their money in our housing market, homes will sit empty as offshore buyers bid up prices on properties that are little more than commodities for them.
It’s an argument that is difficult to counter. However, we also need to look at what impact investment trends have over the long term. Waves of foreign real estate investment have shaped our city and region since the earliest days of European settlement.
A gold rush that attracted people from around the world had settlers staking out properties in the small townsites on the shores of the Fraser River and Burrard Inlet in the 1860s. Property speculation around the transcontinental railway’s arrival in Vancouver in the later years of the 19th century created a real city that is now Vancouver. The return of veterans from a world war created a frenzy for new homes in the neighbourhoods that are now the first-ring suburbs of Vancouver in the early 1950s.
If we’re looking for one lesson around the impact of foreign real estate investment worth studying, perhaps the best one is the first wave of Asian investment that was sparked by the sale of the former Expo 86 site to Hong Kong billionaire Li Ka-shing in 1988. The redevelopment of the vacant site on the north shore of False Creek by Li’s Concord Pacific not only created a new template for the rebirth of Vancouver’s downtown, it also put Vancouver on the radar screen of foreign investors.