The one thing a new study on vacant homes in Vancouver did not do is dampen the debate about the role of foreign buyers in sky-high real estate prices in the city.
How did Vancouver City Councillor Kerry Jang characterize the report? “This really makes you think the myth of foreign buyers is just a myth.”
Hold on, Mr. Jang. Before anyone can make that declaration there is a lot more data that would have to be accumulated and tested. Data, it needs to be pointed out, that would contradict and undermine the irrefutable information that exists to the contrary.
We’ll get to that in a minute. First, the report.
One of the many points emerging from the heated discussion taking place around Vancouver’s insane real estate prices has been the role foreign purchasers (mainly from mainland China) are having on the market. There has been a growing belief that many of these same purchasers are scooping up expensive single-detached homes in the city primarily as a safe haven for their money and then leaving them empty, or using them as a pied-à-terre for a couple of months in the summer. In the process, these vacant properties have helped lead to the rapid rise in real estate costs in the city. Or so the theory has gone.
The same thing was also supposed to be happening with condos, although the said impact on prices wasn’t nearly as great.
But this week the city released a study that showed vacancy rates among detached homes and condos weren’t out of line with other Canadian cities and really hadn’t grown that much over the past 10 years or so. This, naturally, made those who have been uneasy about the link being inferred between house prices and foreign buyers deliriously happy. The real estate alarmists had been put in their place! The suggestion homes were being left vacant by evil foreigners was a complete myth! The entire controversy was a media-contrived fabrication!
Except that’s not true.
Even the study’s authors concede to the limitations that using just BC Hydro data imposed on their final results. Lots of homes that are vacant have no electricity and consequently would not have been picked up by the researchers. Some of these properties were identified in an in-depth report by The Globe and Mail in February that showed the impact “shadow flipping” was having on prices. Often the house being flipped – more than once in some cases – sat vacant for months while it was flipped again. The Globe uncovered dozens of transactions that fit this description.
Some have also suggested that the city’s study on vacancies didn’t reflect the fact that an undetermined number of homes are being lived in for only a couple of months of the year, remaining empty the rest of the time.
So there are those considerations.
All that said, I’ve never completely understood the correlation people have tried to make between vacant properties and rising house prices. The thinking is a vacant house hurts supply and it’s the lack of housing supply that is driving up prices. But how is a vacant house hurting supply any more than the neighbour next to the vacant house who doesn’t want to sell? It’s not. It’s a red herring.
There are likely far more vacant houses in Vancouver than the study suggested. I also think there are concentrated pockets of them, primarily on the city’s west side, and their existence isn’t evident when included in a study that looks at data from a broader, citywide perspective.
Now, has the degree to which vacant homes are a problem in Vancouver been overstated in the past year? Probably somewhat. But then so has the degree to which they may have been affecting house prices to begin with. To my mind, the biggest issue with vacant homes has been an aesthetic one; people don’t like having them in their neighbourhood.
The nationality of those buying homes in Vancouver should be irrelevant. And if some of these people only want to live in their home here two months of the year, it should be nobody’s business. Wealthy Canadians do the same thing all around the world. Besides, the provincial and federal governments are not going to introduce any measures aimed at compressing the rise in house prices in Metro Vancouver. That is a given. People need to accept that and move on.
Buyers bidding hundreds of thousands of dollars over the asking price is driving the ridiculous rise in property costs far more than vacant houses are. What the governments should be turning their attention to is some of the more nefarious mechanisms being employed to influence the price surge, including the house-flipping transactions recently revealed by The Globe.
Bad characters flock to where big money can be made fast and easy. In that respect, the real estate market in Metro Vancouver has become a prime target.Report Typo/Error