Never not talking about real estate in Vancouver (blog)

The home on the left is in Victoria; the home on the right is in Vancouver. Both are listed in the $5 million range 

Real estate discussions regularly suck all the air out of the room in Vancouver, but this week was particularly heated.

Over the weekend, a 33-year-old political science professor from Simon Fraser University started things off with a report that was sort of a combination literature review and passionate political argument.

Yes, Canada does not collect data on foreign ownership, Josh Gordon argued, but enough academic work on the issue has been done to be pretty darn sure foreign investment is having a big effect on residential real estate prices in Metro Vancouver. 

On Monday, Business in Vancouver and polling firm Insights West published our regular six-month political report card, showing that housing, poverty and homelessness has now overtaken the economy and jobs as British Columbian’s top political issue. You can read further analysis by Insights West’s Mario Canseco here.

Then NDP MLA David Eby and Finance Minister Mike de Jong went at it in the legislature.

At a press conference the same day, de Jong introduced new rules designed to prevent shadow flipping and more details on the province’s new requirement that property owners divulge their citizenship when they register a property. And he once again reiterated his skepticism that foreign investment is playing much of a role in what has become an extremely heated real estate market in Metro Vancouver, saying he believes the problem is lack of supply.

It's a position that has become increasingly at odds with what economists who study real estate say are the factors behind 2015’s 20% increase in home prices. As this chart from Urban Future shows, home prices only continued to accelerate in the first months of 2016.

The week seemed to bring a constant flow of other little tidbits: Vancity’s report showing that property-owning millennials in Vancouver and Toronto have the least discretionary income, and a survey from Royal LePage about the role foreign investment is playing in Canada’s high-end housing market. Today brought this note from CIBC economist Benjamin Tal, questioning whether a tax targeted toward foreign investment in real estate is needed:

"It’s true that we do not have all the information we need, and we must accelerate the process of collecting that information," Tal wrote. "While we wait, we can start dealing with the speculative aspect of foreign investment. We don’t know how big it is, but we know it’s not constructive. We know that flipping is not the main motivation among foreign investors, but it does exist. Applying a flipping tax on foreign investors might be a step in the right direction. It won’t solve the problem, but it might be an effective way to remove the most problematic element of foreign investment in Canadian real estate."

Christie's International Real Estate ranked Victoria number three on its list of hottest luxury real estate markets. Victoria is generating more interest, the firm says, because it's much less expensive than Vancouver. Here is what you can buy in Victoria for $5 million versus what that small fortune will get you in Vancouver:

Left: a $5.3 million, 8,000 square foot mansion on a sixth of an acre (there's a pool and a very large lawn behind that house) in Victoria's Uplands neighbourhood. Right: a $5.5 million 3,800 square foot house that promises to be fabulous upon completion on a 6,250 square foot lot in Kitsilano | Photos and information source: Multiple Listing Service

In next week's issue of Business in Vancouver, look for more stories exploring whether Vancouver is in a real estate bubble; we take a closer look at a building boom in East Vancouver; and ask real estate players how the crackdown on shadow flipping will affect their industry.