5 ms·

"With limited data, those who had their eyes open often had to rely on anecdote. But inconveniently for the real estate lobby, the inferential, and no longer ju

by msie 9y ago

"With limited data, those who had their eyes open often had to rely on anecdote. But inconveniently for the real estate lobby, the inferential, and no longer just anecdotal, case was growing stronger and stronger. The report I wrote last year on Vancouver, for instance, which made the case that foreign capital was playing a major role, did not rely on a single anecdote. All the data it presented were carefully gathered, some of them by Canadian governments. But the evidence had to be pieced together to get a clearer grasp of the issue – including by eliminating other alleged, but ultimately insufficient, causal contributors. When the B.C. government finally collected data, then, it was no surprise that the amount of “foreign citizen buying,” about 13 per cent, in Vancouver was much more than the 3 to 5 per cent estimated by the real estate industry." "Why did speculative buying and total sales suddenly pick up in 2014–15 after a few years of stability? The obvious explanation is that capital flight from China acted as a catalyst." Josh Gordon: It's all the fault of the foreigners. Government: But they only make up 13% of the buyers. Josh Gordon: Ok, foreigners only make 13% of the buyers but they're a CATALYST. Um ok, so no one else is to blame?

Jack000 9y ago
In 2014 the CAD was nearly at parity with USD, now it's 0.74 The average price of goods has increased accordingly. As far as I can tell the actual value of a house has stayed about the same, and the purchasing power of Canadians has gone down. Foreigners are a convenient scapegoat, but the 15% tax in Vancouver was barely a speed bump. The chart in this article is pretty misleading as it implies that the tax worked and deflected the foreign buyers to Toronto, when in fact prices has rebounded well beyond the previous peak.
- kareemm 9y ago
  > when in fact prices has rebounded well beyond the previous peak. Feb 2017: "The average resale price in Greater Vancouver was $878,242 in January, down 18.9 per cent from a year earlier, when it stood at $1.038 million, according to numbers from the Canadian Real Estate Association." Source: http://www.huffingtonpost.ca/2017/02/15/vancouver-average-house-price-january-2017_n_14775268.html http://www.huffingtonpost.ca/2017/02/15/vancouver-average-ho...
  - Jack000 9y ago
    The problem with talking about housing prices in Vancouver is that it's a heavily politicized issue with all sides pushing an agenda. this article specifically compares jan 2016 to jan 2017 in order to push the narrative the tax worked, but you could easily find a more recent article that says the opposite: http://www.news1130.com/2017/04/18/despite-price-drop-housing-market-royal-lepage/ http://www.news1130.com/2017/04/18/despite-price-drop-housin... which better matches my anecdotal experience in house shopping in the last month.
    - kareemm 9y ago
      I'm not sure if you've read Gordon's work, but he actually advocates a surtax based on whether an owner's worldwide income is filed in Canada rather than an n% tax on foreign owners at purchase. There are more effective ways to cool the market and he's well aware of them. I suspect if you sat him down for coffee he'd tell you that the BC Liberals wanted to be able to point to a measure to say they were doing something to slow the market, while being fairly confident the market wouldn't slow down that much at all.
kareemm 9y ago
Several points here: > Government: But they only make up 13% of the buyers. At what point does the additional percentage of buyers have a drastic impact on a market? At the margins, buyers can exert large upward pressure on price. There was a great article in the NY Times a while ago about how Goldman figured this out in the IIRC Oil market and created havoc. Basically, each additional buyer has a potentially non-linear impact on price. > Ok, foreigners only make 13% of the buyers but they're a CATALYST. If you've bought a house you know price is often driven by comparable sales. When a foreign buyer bids e.g. 5% higher on a house, he's now driven up prices on comparable homes by at least 5%. When there are multiple buyers, it can play havoc with prices. That's one way price-insensitive buyers are a catalyst (relative to people whose incomes are tied to local fundamentals). > Um ok, so no one else is to blame? I'm not sure "blame" is the right word to use here. I'd say something like "there's no other cause". That said, Gordon has spent a lot of time analyzing both the Vancouver and Toronto markets. I have an interest in both markets as I live in Vancouver and am from Toronto, so if you have an alternate, data-backed explanation I'd love to hear it.

by msie 9y ago

Jack000 9y ago

In 2014 the CAD was nearly at parity with USD, now it's 0.74 The average price of goods has increased accordingly. As far as I can tell the actual value of a house has stayed about the same, and the purchasing power of Canadians has gone down. Foreigners are a convenient scapegoat, but the 15% tax in Vancouver was barely a speed bump. The chart in this article is pretty misleading as it implies that the tax worked and deflected the foreign buyers to Toronto, when in fact prices has rebounded well beyond the previous peak.

kareemm 9y ago
> when in fact prices has rebounded well beyond the previous peak. Feb 2017: "The average resale price in Greater Vancouver was $878,242 in January, down 18.9 per cent from a year earlier, when it stood at $1.038 million, according to numbers from the Canadian Real Estate Association." Source: http://www.huffingtonpost.ca/2017/02/15/vancouver-average-house-price-january-2017_n_14775268.html http://www.huffingtonpost.ca/2017/02/15/vancouver-average-ho...
- Jack000 9y ago
  The problem with talking about housing prices in Vancouver is that it's a heavily politicized issue with all sides pushing an agenda. this article specifically compares jan 2016 to jan 2017 in order to push the narrative the tax worked, but you could easily find a more recent article that says the opposite: http://www.news1130.com/2017/04/18/despite-price-drop-housing-market-royal-lepage/ http://www.news1130.com/2017/04/18/despite-price-drop-housin... which better matches my anecdotal experience in house shopping in the last month.
  - kareemm 9y ago
    I'm not sure if you've read Gordon's work, but he actually advocates a surtax based on whether an owner's worldwide income is filed in Canada rather than an n% tax on foreign owners at purchase. There are more effective ways to cool the market and he's well aware of them. I suspect if you sat him down for coffee he'd tell you that the BC Liberals wanted to be able to point to a measure to say they were doing something to slow the market, while being fairly confident the market wouldn't slow down that much at all.

kareemm 9y ago

Several points here: > Government: But they only make up 13% of the buyers. At what point does the additional percentage of buyers have a drastic impact on a market? At the margins, buyers can exert large upward pressure on price. There was a great article in the NY Times a while ago about how Goldman figured this out in the IIRC Oil market and created havoc. Basically, each additional buyer has a potentially non-linear impact on price. > Ok, foreigners only make 13% of the buyers but they're a CATALYST. If you've bought a house you know price is often driven by comparable sales. When a foreign buyer bids e.g. 5% higher on a house, he's now driven up prices on comparable homes by at least 5%. When there are multiple buyers, it can play havoc with prices. That's one way price-insensitive buyers are a catalyst (relative to people whose incomes are tied to local fundamentals). > Um ok, so no one else is to blame? I'm not sure "blame" is the right word to use here. I'd say something like "there's no other cause". That said, Gordon has spent a lot of time analyzing both the Vancouver and Toronto markets. I have an interest in both markets as I live in Vancouver and am from Toronto, so if you have an alternate, data-backed explanation I'd love to hear it.