This is Part 2 in a five-part series on the state of real estate in Metro Vancouver. Read Part 1 here.
British Columbia’s housing market has cooled to a level that some experts call “recessionary.”
But the slowdown appears to have come largely by design.
The brakes were applied intentionally, in some respects, by multi-level government policies put in place to rein in a frenzied market.
WATCH: Real estate reality check — Taking the temperature of Metro Vancouver’s real estate market
“We’ve had the foreign buyer tax expanded geographically and made even stricter, we have the speculation tax, we’ve also had the mansion tax,” Tom Davidoff, an assistant professor at the University of British Columbia’s Sauder School of Business, said.
Those changes are not only impacting sales and pricing but also supply.
“The presales just aren’t happening,” Coquitlam City Coun. Dennis Marsden said.
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Some developers are now hitting the pause button on major builds, like the Highpoint rental project near the Burquitlam SkyTrain station, due to financing regulations.
“Generally, to get construction financing, you have to presell 60, 65 per cent of a building at a minimum within a nine-month period to get construction financing,” realtor Steve Saretsky said. “If you can’t sell that many units, you basically have to halt the project.”
Fewer shovels in the ground mean less new supply.
It is unusual for any government to artificially suppress its own housing market — and it comes at a cost.
In B.C., economists estimate nearly $89.2 billion in equity was wiped off the map between April 2018 and April 2019.
That means major losses in property transfer taxes, which are reflected in this year’s budget. The province has reduced its revenue estimates by up to $500 million.
When asked if she worries about the course of action her government has taken, Finance Minister Carole James said: “I certainly worry about how challenging this issue is to take on.
“There is no question, it’s probably one of the toughest files to deal with because we don’t have all the tools.”
WATCH: Housing sales projected to decline for two years
That lack of tools means the government also lacks the means to satisfy all constituents. Regulations that somewhat level the playing field for buyers also impact the equity of homeowners.
“I think it’s really important to be careful about playing with the economy because it’s important to everyone,” said Larry Benge of the Coalition of Vancouver Neighbourhoods, which represents 27 community residents’ associations.
But with hundreds of millions of dollars in taxes flowing into government coffers annually to fund new housing supply, the province says it has no plans to take its foot off the brake.
On Friday, Global News Radio 980 CKNW will host a live special dedicated to examining B.C.’s housing crisis. The four-hour-long show, Gimme Shelter: A CKNW Housing Special, will take an in-depth look at the current state of affairs and the proposed strategies intended to assist those struggling the most.
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