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Vancouver Housing Tax Pushes Chinese to $1M Seattle Homes
- taurath 10y agoFrom the article, 50% of homes sold in Seattle and its suburbs are foreign investments. That's absolutely insane - totally disincentivising people from actually living there from trying to buy a home. Guess it's time to find another city.
- curtis 10y ago> From the article, 50% of homes sold in Seattle and its suburbs are foreign investments. The article does say that, but as a Seattle resident, that really does not sound right to me. As a counterpoint, this article[1] in the Seattle Times says: Chinese money now accounts for about 55 percent of all homes purchased by foreigners in Washington, the Realtors association says. and “It’s definitely helped in driving prices up,” Riley said. In some parts of the Eastside, in particular, she said “we’ve had a large influx of international buyers coming in. They’re the buyer about 50 percent of the time right now.” That's 50 or 55% in some parts of the market, not the Seattle metro market as a whole. That's a lot more believable. [1] http://www.seattletimes.com/business/real-estate/seattle-becomes-no-1-us-market-for-chinese-homebuyers/ http://www.seattletimes.com/business/real-estate/seattle-bec...
- jsolson 10y agoI find that number... Odd. I've spent a fair amount of time pulling together King County Recorder's office data, and I don't believe that number unless they're all doing business as... strings that look an awful lot like names.
- libria 10y ago> About half of the homes sold in Seattle’s suburbs are going to Chinese buyers I suspect this is supposed to read "sold in some of Seattle's suburbs" and probably refers to Bellevue (and possibly Medina) which already has a strong Chinese community and is heavily favored by Chinese investors.
- loeg 10y ago> From the article, 50% of homes sold in Seattle and its suburbs are foreign investments At this time, the article just says "About half of the homes sold in Seattle’s suburbs are going to Chinese buyers," — excluding Seattle proper.
- nugget 10y agoWhen Amazon and Microsoft go through the next inevitable downturn and housing prices take a hit then all of these investors will learn a painful lesson. I know a lot of young software developers who have moved to Seattle for job opportunities but not many of them want to stay long-term and are happy to explore jobs elsewhere. The there attitude seems very distinct from the Bay Area where people would love to stay - and tend to hang on as long as possible before grudgingly realizing they should move away.
- nsamuell 10y agoWell done, Vancouver city council! The housing market in Vancouver is totally bananas
- caidh 10y agoSounds like Seattle (and many other cities) should consider doing the same thing that Vancouver did since it appeared to be effective.
- cperciva 10y agoThe tax in question was enacted by the government of British Columbia. You may be confusing this with the "vacant homes tax" which the City of Vancouver enacted recently?
- refurb 10y agoForiegn ownership is only a small part of why Vancouver real estate is so high. The last stats I saw said foriegn sales amounted to 10-15%. It's mostly Canadian citizens, coupled with low interest rates that are causing this bubble. I saw a stat that said 40% of condos purchased in Toronto (another crazy market) were bought by speculators. Foriegn sales are even lower (sub 10%) than in Vancouver. These laws focused on foriegners are good for scoring political points, but they don't really address the issue.
- kareemm 10y ago> It's mostly Canadian citizens, coupled with low interest rates that are causing this bubble. If that's true, how do you explain that the median home price to household income ratio is roughly 12x?[1] Affordable is defined as 3x. 1 - For house price I used the 900k avg house price from the parent article. For median family income I used 76k from StatsCan's 2014 census. http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/famil107a-eng.htm http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/f...
- toodlebunions 10y agoSeattle should immediately enact a 25% foreign buyer tax and an extra annual property tax assessment for vacant foreign owned homes. Likewise, Midwest cities that are economically in the dumps could offer incentives to attract foreign buyers.
- ajmurmann 10y agoWhy not just tax for vacant homes, regardless if foreign or not?
- solatic 10y agoBecause that would ultimately discourage new construction. If you're an investor and you want to invest in a house to hopefully rent out (not keep empty just-in-case for yourself), then you have to factor in the risk of not being able to rent out the property. Having a tax if you fail to rent the house only increases the risk of failing to rent, and thus, makes investing in real estate more risky. Pro-development policies need investment to be less risky, not more risky.
- oakwhiz 10y agoThe investment risk does not increase very much if the price is decreased accordingly.
- tomcam 10y agoOn top of Seattle's already high property taxes? Should owners of vacant properties get a rebate because they aren't using the infrastructure they are paying for? Should I be able to tax you for not using your car at least 16 hours a day?
- hactually 10y agoSeattle is a city built by it's people, they have created ideal conditions for home ownership by participating in building a peaceful, prosperous economy which respects individual rights. By having foreigners coming in and buying this 'society' up - beyond the first generation of land owners - they are penalised for having built their own country up, as they end up unable to afford to live in it, burning up valuable income into paying high rents and house prices. A tax is one of the best way to correct this imbalance, by charging the cost of enforcing individual rights to those who benefit from it.
- rpedela 10y agoI am beginning to think there is another housing bubble, but this time I am not exactly sure how it would play out if it burst assuming there is one forming. Would it affect the Chinese economy? The economy in each US city? The larger US economy? The global economy?
- refurb 10y agoGoogle the Case-Shiller home index. Average prices in the US are as high as they were during the 2007 bubble.
- MagnumOpus 10y agoNot quite correct. The CS20 home price index is... - 7% lower than the 2006 peak in nominal terms. - 22.6% lower than the 2006 peak in inflation-adjusted terms (adjusted by the BLS's US CPI-urban NSA) - 27.3% lower than the 2006 peak as a percentage of wages (adjusted by the BLS's average hourly earnings paid to private-sector employees) Together with massively lower mortgage rates (3.9% rather than 6.2% for a 30yr fix), the situation is nowhere near as bubblicious as 2006. We are maybe around 2003 levels - easily sustainable.
- adrenalinelol 10y agoThere should be similar laws all over. In a global economy, if "regular people" have to compete with multi-millionaires and billionaires who can move capital wherever, whenever they want, housing where any decent paying jobs are located will continue to become more and more unaffordable. Please note: I'm fully aware this isn't the ONLY reason for ridiculous housing prices.
- tomcam 10y agoSo you should have the ability to force other people how to use the house they paid for? Should I be able to tell you how to use your computer, phone, or car?
- nugget 10y agoThe broadest solution is very high property taxes - ideally a land value tax - in order to encourage productive use of property and limit speculative bubbles.
- tomcam 10y agoWho decides what productive means? I think you should be working a second and third job. I don't think you're productive enough.
- jaredklewis 10y agoIt's strange that there is so much push back against foreign investment. Rather than enact a bunch of projectionist policies, wouldn't it be better to just adapt to the investment in a way that benefits natives? After all, when foreign people want to buy something you have, that is called an export, and most people agree those are good for the economy. If foreigners are investing in housing, local governments will receive a huge influx of tax income from property taxes. If there is no property tax, then now is the perfect time to add it (or the similar but more progressive land value tax) or increase it. The income from these taxes can be used to fund infrastructure, education, and reduce other taxes like consumption taxes. The other thing to when demand for housing in your city is high, is to increase supply. Seattle is not full. The Seattle metropolitan area is 15,000 sq. km with a population of 3.7 million. To compare, the Tokyo metropolitan area is 13,500 sq km, with a population of 37 million. No idea about the accuracy, but this site showed that rents were more reasonable in Tokyo (which matches my own impressions): https://www.numbeo.com/cost-of-living/compare_cities.jsp?country1=Japan&country2=United+States&city1=Tokyo&city2=Seattle%2C+WA https://www.numbeo.com/cost-of-living/compare_cities.jsp?cou... If we are going to take legislative action anyway, instead of a bunch of protectionist policies that will create long lasting opportunities for arbitrage and market inefficiencies, why not just make taxes to help the people benefit from the foreign investment and let development happen to help reduce costs long term?
- TheSpiceIsLife 10y agoDoes it make sense to think of foreign real estate ownership as an export? If so, at what point should we expect the Chinese militarily to park it's boats off the coast to protect its property? Edit: fixed a word
- the_economist 10y agoThat would be after the Chinese defeats us in WW3 and a treaty prohibits us from fielding our own military for the next 100 years.
- nugget 10y agoI think the push back comes from the fact that in many of these places, Government policies are very favorable to owners and investors. In California, for example, property taxes are extremely low, while sales and income taxes are the highest in the entire country. As domestic home ownership decreases, the domestic political support for such favorable policies will decrease as well. As California's home ownership rate decreases (and fiscal pressures increase), there's no doubt in my mind that proposition 13 will eventually come under attack and eventually be repealed. If property taxes were 3%, like in Texas, I don't think as many people would complain about absentee ownership since so much of the value flows back to the community each year.
- TheSpiceIsLife 10y agoSo what happens when foreign owners start voting in council elections? At what point does foreign real estate ownership start affecting local politics? If imposing a tax has no affect on, or only slows, foreign real estate investment, what do we suppose will be the long term outcomes?
- bootload 10y ago"The week that the government announced Vancouver’s foreign tax," Which government? Fed, state, municipal?
- Tiktaalik 10y agoThe article is pretty lazy with describing the tax. The municipal government of Vancouver doesn't have any of these taxing powers, and the tax comes from the Provincial government. It only applies to the Metro Vancouver area however, so some are already stating that there has been a spillover effect in other areas of the Province, such as Victoria.
- elchief 10y agoThe foreigner tax is provincial (applying only to Metro Van). The vacancy tax is municipal, applying to CoV. The city requested special taxing powers from the province for this tax and received it.
- bootload 10y agothanks for the reply @Tiktaalik, I couldn't work out if this is a top down or bottom up response. So it's Provincial (State in my country). Interesting.
- wenbert 10y agoBuy in Auckland New Zealand lol