A few months ago, a friend of mine passed along a story he felt epitomized the lunacy of what we are witnessing in the Vancouver real estate market.
A buddy of his lived in a lovely home on the west side of the city, near the University of British Columbia. Since 1992, not a single human being had lived in the house next door, yet it had been sold and resold nine times. Not that long ago, his friend decided to do a records check on the property.
As it turns out, every owner since 1992 was from China. In two instances, the property exchanged hands between a husband and wife. After that, it was sold to various others, who would hang on to it for a while and then sell it for a healthy profit. Most recently, the abode sold for $9-million.
It has been stories like this that have, until now, been the apocryphal fuel that has ignited a very real backlash in Vancouver toward foreign investors, primarily from China, who are being blamed for everything from driving up the cost of real estate to destroying the city's character by tearing down heritage homes to erect soulless monstrosities that fill every inch of a property.
Exacerbating the anger has been the fact that many of these investors have left their condos and houses vacant, in a city where available rental housing is almost non-existent. And, of course, no one likes to live beside a house that isn't occupied, where the grass isn't cut nearly as often as it should be and the sense of community every neighbourhood desires is compromised. And then, of course, there have been the perennial rumours that many of these investors have been using real estate to launder money and avoid paying taxes.
Well, it is mythology no more thanks to a Globe and Mail investigation by reporter Kathy Tomlinson. Her months-long probe has confirmed people's worst suspicions about what has been going on; foreign investors, mainly from China, have been playing Canada for dupes.
Even though the jungle telegraph has been alive for years with stories about the nefarious activities of these investors, governments reacted with shock and dismay over the revelations in the Globe report; the B.C. government promised to close a relatively minor tax loophole that some foreign investors have been laughingly jumping through for years now.
But the fact is, most of the abuse is taking place at the federal level, with investors dodging income and capital gains taxes. It's an absolute disgrace and should be a federal election issue. This is not only a Vancouver problem. It's happening in Toronto, too.
I urge everyone to read Ms. Tomlinson's articles. But in a nutshell, I can tell you that, among other things, she found that investors have been lying about their income to Canadian authorities (one person claimed to make only $19,000 a year in China, while sending payments of $260,000 a year to his wife in Vancouver). In fact, investors have been moving millions into Canada while claiming to be impoverished.
The Globe looked at 250 properties that had sold recently in Vancouver for $2-million or more; 85 per cent of the purchasers had Chinese names. One-third of the properties were registered to homemakers, students or corporations, which clouds the real buyers' identity and helps them to avoid paying income or capital gains taxes.
Ms. Tomlinson's reports also exposed weaknesses in our immigration system, under which foreigners can acquire permanent resident status – which gives them access to our health-care system, among other benefits – and not pay any income tax as long as they stay in Canada less than six months a year.
I wish I could tell you I am confident that there is a deep, abiding desire inside the B.C. government to do something about the utter unethical madness we are witnessing. But I'm not. In the end, a runaway real estate market produces far greater economic benefits for the province than a few million dollars it has been losing through tax loopholes.
The far greater worry in Victoria is that any effort to crack down on what has been taking place, any legislative measures to stifle foreign investors, might just kill the goose that laid the golden egg. And no one wants that.
Ultimately, soaring house prices are good for business. Who cares if the homes are occupied?