Foreign investment to blame?
The difficulty, however, stems from the fact that at this time there is no way to track the statistics of how many buyers are foreign investors or homegrown residents. Concerns have been raised by many economists in Canada after recent media reports in London where Real Estate prices are climbing rapidly as the result of wealthy foreign investors buying up properties.
In London, the trend is for elite members of Russian society to park their money in England by buying up investment properties, something which has created large repercussions on Real Estate prices in the country. One report stated that in the areas of Kensington and Chelsea oversea buyers accounted for as much as 70% of the homeowners. Some neighbourhoods are reported to feel almost empty as so many of the homes are vacant as their owners have no interest in actually living there.
These residents do not pay taxes in the UK, and yet hold large volumes of Real Estate. Britain does not have any legal restrictions on overseas investors owning property, and if you do not live in the country for more than 183 days a year you are not liable to pay taxes on your worldwide capital gains. Furthermore, property tax in the UK is determined largely by the number of adult residents and not the actual market value of the home like we see in Vancouver homes.
For tax payers and residents of London, this does not bode well as affordability is now out of reach for many residents – something which many would-be homeowners in North Vancouver can relate to. A small home of 3 adults could pay the same property tax as a sprawling multi-million dollar home that sits vacant.
So the question remains what would people be saying here if the statistics surrounding foreign investment were made available to the public? What sort of outrage might be created if we had the ability to quantify how much more we have to pay to buy a piece of North Vancouver Real Estate? With Vancouver ranked as the 2nd least affordable city in the world, and London ranked 13th – it’s an interesting notion to think of the impact!
Now, that being said it’s important to remember that there are many Canadians and residents of the North Shore that have benefited from foreign investment. With market prices as high as they are now, many residents are looking to ‘cash-out’ and sell their homes, opting to try condo living or moving to more remote suburbs instead. Buying a home in North Vancouver in 1990 may have cost around $300,000, while that same home today can sell for $1.3 million simply because of the demand for North Vancouver homes in certain neighbourhoods. In Edgemont Village even the oldest houses are expensive simply because builders are looking to buy up land.
Furthermore, it’s important to understand just how much of the BC economy comes from spin-off activity related to Real Estate. Activity resulting from foreign investments is not all together a negative occurrence, as many jobs and tax revenue streams are created as a result of each transaction.