VANCOUVER (NEWS 1130) – It’s the topic that continues to dominate discussion in our region. The cost of housing, and real estate prices which for a long stretch didn’t seem to show any sign of hitting a ceiling.
The real estate story in Metro Vancouver has been a wild ride, with single family homes increasing in value by as much as 40 per cent or more over the last year, often selling well above asking.
Given wages in our region have been largely stagnant, there were fierce debates about the involvement of foreign buyers, as prices became completely detached from local incomes.
After initially taking a hands-off approach, the province announced two new taxes — one on luxury homes, another on foreign buyers — and next month it’s bringing in a program which allows first-time home buyers to get a loan that’s interest and payment free for the first five years.
“I think it’s important that government is there to help people,” Premier Christy Clark said as the province announced its loan program earlier this month. “Our economy is growing at a fast pace. We’re the fastest growing economy in the country. We can afford to make these investments.”
Before those measures were brought in by Clark’s government, the NDP’s Housing Critic David Eby raised his profile significantly with his push for action — even Clark jokingly refers to the man who defeated her in Vancouver’s Point Grey riding last election as the “incoming leader” of her rival party during question period at the Legislature.
“[This year] feels like a real turning point year for a number of reasons,” says Eby. “It was the first time that the provincial government recognized formally that we had a problem in our real estate market, despite people ringing the alarm bells for some time.” And Eby’s feeling that we’ve hit a key juncture is shared by experts at Royal LePage — which project a potential correction in the double digits in 2017.
“There are significant headwinds,” explains economist Tom Davidoff with the Sauder School of Business, who specializes in studying real estate. “There’s federal mortgage policy, there’s the [Metro Vancouver] foreign buyers tax and I think the vacancy tax in Vancouver may lead many people either to sell their properties or put supply on the rental market, and I think the strength of the rental market has been an important source of growth of Vancouver in terms of price pressure in 2016 — the so-called fear of missing out, and renters priced out of renting.”
In some respects, it appears various levels of government are intervening in ways that don’t seem to be entirely coordinated.
In October, the federal government made an attempt to cool the housing market, unveiling more strict “stress testing” for people taking out insured mortgages, and clamping down on loopholes which have allowed real estate speculators to get out of paying capital gains taxes when selling investment properties.
It seems that move, on top of Metro Vancouver’s 15 per cent foreign buyers tax, brought sales to a standstill in the region, with home sales down 33 per cent in September compared with the same month last year, according to numbers provided by the Real Estate Board of Greater Vancouver.
And Davidoff believes the province brought in its first-time homebuyer loan program to counter the cooling effect we’ve seen since from the foreign buyers tax and the moves announced by Ottawa in October. “I suspect that’s why the [BC] Liberals intervened to add some extra heat at the lower end of the market, which has been impacted by federal policy,” says Davidoff.
But whether that home buyer loan program is a good idea is very much a subject of debate.
“A home-buying grant does not help people who are not close to buying,” UBC economist Joshua Gottlieb told NEWS 1130 the day the program was unveiled, adding the supply of homes needs to be increased and vacancies decreased to make rents affordable. Gottlieb believes such subsidies “worsen the affordability problem and reward speculation” as well as “encouraging leverage and risk-taking” by home buyers and the provincial government.
There are other questions too.
Should the province be propping up home buyers who are struggling to put together their first down payment, using $700 million of taxpayer money? Will people who use this loan program have the discipline to plan for payments and interest that kick in five years after buying the home? Should the government even get involved in stabilizing a market that appears to be cooling?
Another question needs to be asked — is this a $700 million “investment” in helping first time homebuyers get into the housing market? Or is it $700 million of taxpayers’ money being used to prop up a real estate industry which has contributed generously to the reigning BC Liberals in recent years?
To give you a sense of this, IntegrityBC, which describes itself as a non-partisan, non-profit political watchdog, has compiled numbers which indicate property developers have donated $16.9 million to the BC Liberal party since 2005, in contrast with the NDP, which has received $378,000 during the same time period.
— IntegrityBC (@INTEGRITYBC) December 20, 2016
There are many factors to consider next year when evaluating where prices are going to go from here, and it seems the only thing that’s certain is plenty of uncertainty and discussion on this topic again in 2017.