By Emma Co
Is it a case of supply and demand or Foreign Money that are driving unaffordability in real estate Market in Vancouver?
The BC government continues to see that the real estate industry’s rapid home price increases are due to supply and demand while two Vancouver-based economists specializing in real estate say that outside capital flows are the driving forces to unaffordability right now. “These housing prices do not make sense as a live and work proposition. They make sense as bags of cash hiding out in real estate looking for a safe return”.
The BC Budget for 2016 try to resolve and help the home ownership within reach of more people with the following added:
PTT (Property Transfer Tax) exemption for buyers of new homes that are priced up to $750,000 to $800,000
An increase to 3% for properties more than $2M for PTT; and buyers to self-report their nationality when they register their property.
In Budget briefing documents, the province states that the Lower Mainland has historically had high housing prices and supply constraints demand from population growth are behind the price increases.
One director of a huge Urban Development mentioned that the lack of supply was the only answer to this dizzying levels of home price increases, another UBC professor mentioned that Vancouver’s land constraints and population increases were the main factors behind price increases. Another point is the volatility of the Canadian exchange rate against a basket of currencies and massive change in the official currency reserves in China where wealthy individuals and companies are trying to get their money out in response to their economic slowdown.
There is a group of academics at UBC and Simon Fraser University who developed a proposal to charge higher property tax if property owners don’t live in the property or don’t report income in Canada. The government seems to be seriously considering the proposal.