By Geri LoGiacco
Published: March 13, 2016
Published: March 13, 2016
MY EX-HUSBAND and I moved from Toronto to Squamish in 1992 because we could not afford to buy a home there; at the time, the average price was $300,000. We were able to build a home in Squamish which would now sell for about $700,000. My children, university educated, may not be able to afford to buy a house in the place they call home. Nor may many of their contemporaries here in Squamish or Vancouver. They find themselves in the same market 24 years later.
Interest rates of 8 to 9 per cent prevented us from purchasing that $300,000 home; today’s rates allow for bigger mortgages but have contributed to the high cost of housing. Although, I would like to see home ownership more affordable, I do not see a speculation tax as the answer. The provincial government is going to start tracking the citizenship of people buying homes in BC. This data may tell us what effect foreign ownership is having on our market. While foreign ownership may be fuelling the fire, a speculation tax will decrease property values which will translate into a reduction in equity for existing home owners. The property value depreciation would not be enough to solve the crisis, and the resulting sudden decrease in equity would be harmful to many who have borrowed against it under today’s low interest rates. The cost of the bureaucracy that would be created to oversee this tax is another aspect to be considered. Do we really want government to enter into the market to that degree?
Although foreign ownership may be a significant contributor to the overheated market, the tactics used by real estate agents and speculators in flipping houses also have to be considered as contributing factors. Kathy Tomlinson of The Globe and Mail recently wrote of the contract assignment technique. Real estate agents and speculators are finding buyers willing to pay more for properties before the deal is closed, flipping the property several times (without paying any property transfer taxes until the last assignment) until the last buyer pays more than what the original seller receives. Tomlinson claims that some real estate agents charge fees of up to $50,000 for facilitating the deals or they participate as investors themselves.
Perhaps the government already has enough money to be used to influence home ownership rates. The government coffers are already overflowing because of the heated Vancouver market. BC has a budget surplus which some say is largely as a result of a property transfer tax intake of $1 billion. A portion of this $1 billion should be used to encourage builders to build higher-density housing, to increase subsidized housing, and to grow our region’s transportation system. Living near frequent transit makes it easier to absorb high housing costs. Reducing the cost of and increasing transportation options will help make home ownership more feasible for many people. Using the surplus to support the growth of medium to heavy industry which provide family-supporting jobs will also help increase the potential for home ownership.
I think there are many factors contributing to the over-heated Vancouver/Squamish market. We need to focus on all of these factors, not just foreign ownership. The populist rancor against foreign ownership as being the one significant cause of the over-priced Vancouver market is coming from a place of fear and frustration and smacks of racism. Can you say niqab?
Geri LoGiacco is a legal secretary at ICBC