“Scary is a word I’m hearing a lot these days,” one real estate developer tells me.
Scary price jumps. Scary prospects for people not already in the real estate market. Scary bubble-mania that provokes buyers to pay more than they can afford unless even scarier price increases continue.
“Insanely hot” was how another realtor described the current mainland Chinese buyers’ market in the Vancouver Sun. A west side resident said there’s a real estate “gold rush” in his Kerrisdale neighbourhood, with four realtors knocking on his door begging him to sell at handsome offering prices.
Some of the most expensive properties in Vancouver are being exclusively marketed in China, according to real estate entrepreneur Cam Good, quoted in the Vancouver Sun.
At this rate, it won’t be long before we move from No. 3 to No. 1 most unaffordable city in the world – unaffordable for some, bargain-priced for others comparing the Vancouver quality of life with their penthouses in Sydney, Hong Kong, London, Shanghai or under the permanently grey skies of Beijing.
Ironically, many of the people driving up the prices are coming here from mainland China where soaring real estate prices have caused the Chinese government to introduce new limits on foreign purchases of residential or commercial property in the country.
Last month, the Beijing municipal government prohibited new- home purchases by Beijing families who own two or more apartments and by out-of-town families who already own apartments. Out-of-town families without a family member living in Beijing can’t buy an apartment there at all. Beijing is among 30 cities in China that have home purchase limits.
China isn’t the only place that tries to hold down housing prices by limiting outside buyers.
In Australia, foreigners can only buy into new developments, and then only up to half the units in the development. In Prince Edward Island, non-resident buyers need special permission to buy lots over five acres or sizable waterfront.
In Manitoba, non-residents can’t own farmland unless they plan to move there within two years, while in Saskatchewan they can’t own any land over 10 acres and in Alberta they can’t own more than 20 acres.
One real estate developer suggested to me that instead of restricting ownership we could redirect development away from what foreign investors want and more toward what local residents can afford.
He proposes restricting the size of a single-family new-home redevelopment on bigger city lots.
A new owner in search of a 6,000-square-foot house site would be forced to stay with an existing home’s smaller footprint or else build a duplex or triplex of smaller accommodations.
Spreading high single-family lot land costs over two or three homes on the same property would drive down the unit price of the new (smaller) homes and discourage the trophy homes on large lots beloved by so many overseas investors.
It would achieve marginal improvements in affordability by adding to supply and taking away the appeal of many properties for investor-buyers.
Getting changes along these lines from our municipal governments would require political pressure that has yet to make itself felt. City politicians are still mainly financed by the real estate industry and elected by homeowners, both major beneficiaries of soaring real estate prices.
In Vancouver’s case, the city is deeply into the luxury residential development business itself, eager for ever-higher prices in southeast False Creek and increasing valuations in its massive Property Development Fund portfolio.
Messing with the free market in real estate is, yes, messy and fraught with complications and unintended consequences. But it may be less ugly than surrendering our city to overseas property speculators – and the consequent hollowing out of real economic activity.