Year to date, the Canadian dollar is down more than seven per cent against the U.S. dollar.
Historically, when the Canadian dollar is depressed, the country sees an uptick in institutional and individual investment from the U.S., according to Tsur Somerville, senior fellow at the University of British Columbia’s Centre for Urban Economics and Real Estate.
But this time around, foreign investment in B.C. has flatlined, suggesting that currency valuations may not have an impact on real estate at the moment, especially in a market like Vancouver.
According to Brendon Ogmundson, chief economist for the British Columbia Real Estate Association, it is difficult to determine the extent to which any country is investing in the province. But across the board, there has not been an uptick in foreign investment.
Despite what may seem like favourable conditions, there is economic uncertainty as a result of interest rate hikes, said Somerville. In addition, inflation removes the competitive edge that a lower Canadian dollar may provide.
But economic uncertainties are not the only reason foreign investors may see Vancouver as undesirable.
In a statement to BIV, Joo Kim Tiah, CEO of TA Global and the Holborn Group, said that factors such as a small market and population, issues with workforce productivity, high personal taxes and safety issues downtown make Vancouver an uncertain investment.
“When it comes to real estate investment, Vancouver is super idealistic, with the highest standards in the world with regards to sustainability and livability, which we all know cost money, but at the same time, [Vancouver has] been very timid with regards to density.”
According to Tiah, other investment considerations include the time it takes to get permit approvals, and local government bureaucracy.
For many, the foreign buyers tax would also seem like a deterrent. But, according to Tiah, it only acts as a consideration in the sense that it sends the wrong signal to foreigners.
“I mean we are supposed to be an open and welcoming country, and this goes against what Canada is supposed to stand for.… Foreign investors that are looking to strictly invest, would look at other regions or countries that don’t have this.”
But Tiah added that many foreigners don’t invest or buy into Vancouver real estate. The majority of buyers are citizens and residents. ]Ogmundson said that the extra tax tells foreigners that they are not welcome to invest here. He acknowledged that a balance has to be met and that there is such a thing as too much foreign investment.
“But the correct number is not zero, either. There are some times, especially in larger projects when you need to access deeper capital markets and maybe you need to go outside of Canada,” he said.
