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20th of January 2018

Canada



Editorial: A ban on foreign buyers is a bad idea

Green Party leader Andrew Weaver is calling for a complete ban on home sales to foreign buyers, but many think that isn't a good idea. CHAD HIPOLITO / THE CANADIAN PRESS FILES

Green Party Leader Andrew Weaver is calling for a ban on foreign buyers investing in B.C. real estate. He says the move is necessary to curb the demand side of the market and make home ownership a reality for more people.

The idea has appeal for many who have been shut out of the Vancouver housing market as foreign buyers disconnected real estate prices from local incomes. Vancouver’s median income grew only 5.2 per cent from 2010 to 2015 adjusted for inflation while real estate prices soared 78 per cent.  

But a ban on foreign buyers could be a double-edged sword. First, less drastic measures adopted recently have lowered the assessed value of some properties in Vancouver, particularly on the West Side, representing a real loss in net worth. An outright ban on a certain class of buyers would accelerate the downward spiral.

Second, a jurisdiction from which foreign buyers are banned may return the favour. Many Vancouverites own vacation properties in Hawaii, Arizona, California and Mexico. Even if their ownership is grandfathered, the resale value of their properties would be much diminished if the market was restricted to locals.   

There are other ways to address this problem, such as a surtax on foreign buyers or a ban on foreign purchases of resale homes. The latter is the approach New Zealand has adopted. Foreigners can only buy new builds under strict conditions.

To prevent money laundering through Vancouver’s residential real estate market, the industry must become more transparent. Beneficial owners must not be allowed to hide behind shell companies and trusts and the source of their money must be disclosed to authorities. 

The NDP government has said a ban on foreign buyers is not in the cards and that, although steps are being considered to deal with speculation, newcomers are welcome here. That sets the right tone. 

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