With Lunar New Year beginning on Friday, Vancouver realtor Grace Kwok smiles and notes that this year’s zodiac figure — it’s the Year of the Dog — carries with it advice that she would follow year in and year out in the world of real estate: Consider your needs first before consulting the stars.
Under Chinese zodiac lore, if you were born in a Year of the Dog, one of the 12-year cycle of signs, you possess the best traits of human nature. According to the website, www.yourchineseastrology.com, you are honest, friendly, faithful, loyal, smart, straightforward, and you have a strong sense of responsibility.
The Chinese government crackdown on capital flight from that country has combined with the 15 per cent foreign buyers’ tax on residential properties to dampen buyer demand in Vancouver’s sizzling real estate market.
But two senior executives at Macdonald Commercial, a real estate brokerage firm that monitors Chinese investment in Canada, say that the Chinese real estate investment slowdown will likely be a short-term trend.
“My sense is that it’s more of a struggle for Chinese investors to send funds from China now, but we are still seeing some significant income and land deals being done in Metro Vancouver,” says Tony Letvinchuk, managing director of Macdonald Commercial.
As an example of China’s abiding interest in our region, China Minsheng Investment Group recently purchased Grouse Mountain ski resort for an estimated $200 million. An unidentified banker said that Minsheng had been searching for a year throughout Canada for investments.
As well, several other significant state-related Chinese companies have set up shop in the city over the past year and are quietly buying up real estate around the province, despite the official policy, says Dan Scarrow, head of the Canadian Real Estate Investment Centre and Macdonald Commercial’s representative office in Shanghai.
Chinese foreign investment outflows — which have fallen from nearly $1 trillion in 2016 to $126 billion so far in 2017 — will continue to play a key role in Vancouver real estate in the long term, he said.
He noted that despite attempts to control capital flight, the Chinese government is simultaneously nudging the country into economic superpower status, a process which necessarily involves diversification of global investment over the long-run.
Metro Vancouver is heading for a rental housing crisis this fall as a “perfect storm” of factors pushes an already record low vacancy rate even lower, says a leading Vancouver-based real estate firm.
“There has traditionally been a shortage of rental housing for students when they start school in the fall, but this year it looks like that shortage is going to be a lot worse,” said Nick Marini, vice-president at Macdonald Property Management.
Based on government statistics, Macdonald is forecasting a seven-per-cent increase this year in international students attending B.C. educational institutions. Meanwhile, the market-dampening 15-per-cent foreign buyers’ tax and tighter mortgage qualification requirements mean that parents of students are less likely to buy homes for their children, said Marini. As a result, a larger number of students will be hunting for rental housing this fall, increasing demand for accommodation.
Marini said the government steps to cool the red-hot housing market — such as the 15-per-cent foreign buyers’ tax and mortgage restrictions requiring that first-time buyers have higher incomes — have only pushed the housing affordability crisis to the rental market.
At least one major Vancouver real estate firm believes that the election results mean that housing policy in the province will remain uncertain for the foreseeable future.
“The one thing you want the government to provide is certainty in policy,” said Dan Scarrow, vice-president of Macdonald Realty, which has almost 1,000 staff and agents throughout B.C. “This election result means that housing policy in the province will be up for negotiation between the three major parties.”
Scarrow said many believe that government holds the solution to issues like affordable housing. He said the reality, however, is that governments’ power, particularly the power of provincial governments that do not control either immigration or interest rate policies, is limited because there are so many forces that impact the real estate market.
“People have already forgotten that when the 15-per-cent foreign buyer tax came in, it was a shock to the system,” he said. “At the time, even the most vocal critics of foreign investment in Vancouver acknowledged that this was a far bigger move than anyone could have anticipated. And now, less than a year later, it has had no discernible impact on demand.”
Scarrow points to examples all over the world of cities struggling with affordability. “The one commonality seems to be that governments are incapable of stopping demand. Draconian policies to restrict demand have been tried in Hong Kong, Singapore, Sydney and many first-tier cities in China with limited to no effect. Vancouver can now be added to this list,” he said.
In fact, some argue that local governments often make things worse by artificially restricting supply. The 13th Annual Demographia International Housing Affordability Survey: 2017, which ranked Vancouver as the world’s third-least affordable market, states: “The affordability of housing is overwhelmingly a function of just one thing: the extent to which governments place artificial restrictions on the supply of residential land.”
Scarrow said that affordable housing is a complex problem for which there is no easy solution. “Everyone’s definition of affordability is different,” he says. “So if no one’s defined the end goal, we just end up building a highway to nowhere.”
Ultimately, regardless of what policies are eventually introduced, the issue of affordability will likely remain. Says Scarrow: “I expect to see this as a major election issue in 2021. And 2025.”
The article was originally printed in The Province newspaper on May 11th, 2017 and posted on vancouversun.com May 12, 2017. Written by Michael Bernard.