This author published a similar post in the December 2016 edition of Western Investor.
In July 2016, the government of British Columbia slapped a 15 percent tax on any foreign national buying real estate in the province. This sudden move was designed to dampen the market for the steady inflow of offshore money which has been blamed for Vancouver’s red-hot real estate market.
Some have speculated that Premier Christy Clark, who is facing re-election this year, took this measure to ease what was a growing chorus of criticism for her government’s “inaction” in curbing what many believe is an overheated market. The tax seems to have had its desired effect: the volume of transactions since the summer of 2015 has fallen dramatically, although prices remain relatively steady with only a minor dip in the past few months.
Vancouver has been – and remains – what we in the real estate trade call a “super prime city.” We’re in great company as this category includes Tokyo, Shanghai, Hong Kong, Singapore, London, Paris, Monaco, San Francisco, New York and Los Angeles. The cities attract people with high net-worth who want to establish residence somewhere they have confidence their investment is safe and secure.
So, do I believe a 15 percent tax will stop Asians, particularly Chinese, from investing in Metro Vancouver? Absolutely not.
Moreover, such a tax won’t have a negative impact on the Asian thirst for an investment beachhead abroad. Period! It’s already been implemented in places like Hong Kong and Australia and it has not slowed the inbound investment from China. The Chinese currency, the Renminbi, continues its devaluation which is fueling fears of a “bubble” in China. People are looking for ways to preserve and protect their wealth, which is another reason why foreign safe havens will be in high demand well into the future.
Some of the attractions to Vancouver for Chinese aren’t about to change, either.
- There’s a deeply-established and vibrant Chinese and Asian community here. In fact, it continues to grow. According to the Asian Pacific Foundation, within the next 20 years Vancouver will be home to the largest Chinese population outside of China itself.
- In many ways, it’s a microcosm of Canada itself. It doesn’t matter what corner of the world you happen to be from, you can find a place – a community – that provides a warm embrace and sense of belonging within Canada. That’s the very cool reality in Metro Vancouver for many Asians. And because of that, word has spread.
- There are 140 direct flights between Asia and Canada. Our political and business leaders spend a lot of time promoting the virtues of investing in Canada to Asians. So it should not come as a surprise to anyone that Asia has taken notice!
- Asians want to set down roots (which means buying property). People sometimes forget that Asians seek to invest overseas for far more fundamental reasons than just a hefty financial return. Clean air, clean water, safe streets and political stability top the list.
The common perception is that Vancouver’s home prices have risen to stratospheric heights because of wealthy Chinese where, in fact, the continued growth comes from the Chinese middle class. This is a relatively new segment of people with college education who are primarily engaged in white collar, high-skill and high paying jobs. They are savers, not spenders. They are buyers, not renters. And by some estimates, their population is said to be more than 500 million people and growing.
Whether or not Christy Clark is premier this spring or a class action lawsuit challenging this new tax succeeds, the desire of Chinese and other Asians to live and invest in Vancouver will continue. It’s a desire born from deep respect for our country and all it has to offer. This should be a source of pride and strength – not anxiety and apprehension – for all Canadians.