“In any market, in any country, there are developers who make money. So I say all of this doom and gloom, but there will always be people who make money, because people always want homes.” - Sarah Beeny
BurnabyNow.com released a news article yesterday that reported that 25% of new condos in Burnaby built in 2016 and 2017 are owned by non-resident buyers. When it comes to single family homes built in 2016 and 2017, non-residents purchased 25.8% of the listed homes in Burnaby. Only Vancouver and Richmond reported higher non-resident home ownership rates than Burnaby. These figures are far higher than previous reports, and I thought that it would be timely to address the impact on BC real estate.
What is interesting is that non-residents were more apt to purchase newly built properties, and shied away from older homes, or even homes that had been substantially renovated. They represented a substantial segment of the population for BC condos built in 2016 and 2017, as StatsCan reported that 19.2% of all newer BC condos were owned by at least one non-resident of Canada. “It’s a pretty high number,” said urban planner Andy Yan, director of the SFU City Program. “It’s not about foreigners, it’s about foreign capital landing in the (local) real estate market.”
It would be disingenuous to suggest that this did not impact the home prices for buyers, and as a result, there was a marked increase in home prices during those years that many local buyers faced. It created a seller's market which benefited sellers as they were able to ask for more and more money, as the market was very busy and multiple offers more common than today. For sellers, they would likely have viewed the market as simply recovering from the recession faced in 2008 while some buyers viewed the influx on non-resident buyers inflating the values of properties. It seems that it may be a topic that requires more discussion, and more study before a conclusion is reached.
The lack of transparency in statistics reporting created confusion and disbelief as home buyers came to learn that the prices of homes continued to rise past what they could afford. Eric Bond, CMHC's market analysis principal, did not offer his opinion at a recent panel as to whether or not non-resident buyers are detrimental to domestic buyers, but recommended that their impact should be studied further. In particular, he wonders "if people who don’t live, work and pay taxes in the region are distorting housing prices?".
It is too soon to predict how non-resident home owners will impact BC's real estate industry. The BC government increased the foreign buyer tax in 2018 to 20%, imposed a speculation tax, and announced its intention to create a new database on pre-sale condo assignments to crack down on tax evasion. I feel that the government should have released critical information to the public and ensured that it was addressing illegal funds coming from elsewhere to be funneled through real estate to "wash" money. It is unfair to blame home buyers (regardless of where they originate) who took advantage of lax rules and viewed real estate in BC as a safe investment. The issue arises when the public are told that non-resident buyers are not impacting the real estate market, when it is clear that they had a definite impact.
What is critical for a sustainable real estate market is ensuring that measures are taken to ensure affordability for local buyers wanting to purchase their first home, and that there is availability of product for buyers to choose from. In many cases, real estate is cyclical by nature. However, when news reports clammer to produce sensational headlines (like the one at the top of this blog), it can become difficult for home sellers and buyers to know what to do to navigate a changing real estate market. I think that buying what you can afford is critical for buyers today. Remember that real estate is a long-term investment and that you will end up paying rent either to a landlord or the bank as you pay down the principal of your mortgage. Staying the course is more important than anything else, as real estate has traditionally been a solid investment over time.