Love is all around us in February. It’s a good reminder of how to treat people we meet and how we wish to be treated in return. There has been lots in the news lately of how some in our profession have not been treating the public properly. Although it is not PC to say so, it seems clear from all the reports that it is a small group whose business practices were learned in another culture and whose clients don’t expect anything better because they are gaming the system too.
Downtown Vancouver by Michael Nugent
Jay and I have laughed over the scene in the film "Casablanca" where Claude Rains as Captain Renault, the chief French law enforcement official in Casablanca, has just been chastised by the Nazi Occupation Force Colonel for allowing gambling in Rick’s Cafe. As Captain Renault says "I’m shocked--- shocked--- that gambling is going on in here" the waiter arrives to hand him his winnings. That’s the analogy of what’s going on in our out of control real estate market. Right now every regulatory body, every political leader including the Real Estate Board of Greater Vancouver, the Real Estate Council, the Superintendent of Insurance, the Premier is trying to paper over their culpability. "Oh no, we had no idea"; "oh no, we didn’t know that homes are being left empty as investment vehicles, oh no, we thought people were coming to live in them and become part of the community"; "oh no, we didn’t believe the letters we received in regard to suspect business practices"; "oh no, we didn’t follow up with audits of offices where there were indications of fraudulent practices by realtors and clients not reporting their tax evasion and money laundering activities to CRA"; "oh no, we didn’t think a speculation tax or home ownership rules like they have in Australia were important. Oh no, we weren’t worried about getting re-elected." Oh no indeed. Well everyone involved is running for cover today.
We can give thanks to the Globe and Mail for spending the money to investigate the high prices in the Vancouver real estate market and for having the courage to publish the article with names and ethnicities attached. The news was not news to the vast number of honest ethical professional above board realtors and their clients who don’t get a chance to offer on available properties because they have been sold by secret assignment to offshore investors with everyone in the chain taking a profit except the seller and the final buyer who is paying the assignment premium plus the Land Transfer Tax (formula: 1% on the first $200K, 2% on the balance of the purchase price.) When homes are offered on the open market the offshore investors with their pots of suspect funds make pre-emptive bids so local buyers are shut out. Part of the problem is that the new mortgage rules have made the banks so skittish they require weeks of paperwork to approve financing for most local buyers and the sellers are not going to wait for their windfall profit either.
A Vancouver night by Justin Norris
Australia has the same problem with rising home prices and lack of affordability in Sydney and Melbourne. Vancouver and Sydney are among the most expensive cities in the world in relation to incomes. In Australia they have much tighter foreign ownership rules. The country tracks all buyers of real estate and foreign owners from all over the world are only allowed to purchase new houses or apartments. Last week the Conservative government ordered the sale of eight multi-million A$ properties, mainly Chinese owned, although offending owners have come from Canada, China, India, Malaysia, the US. So far in the latest crackdown 27 properties have been ordered sold with heavy penalties to the owners for breaching the Australian laws on foreign ownership. In the last few months the government has investigated 1300 property sales with 800 presently under investigation. In Australia some economists blame the low interest rates and locals speculating in real estate. Some say that the stats there show that foreign buyers are only 15% of the market. One researcher said he checked the water bills for Melbourne and 60,000 homes did not turn on their water for a year. It’s a little different in Vancouver where no level of government has tracked foreign ownership or water usage and there is no restriction on foreign buyers stacking up vacant investment properties.
According to Barbara Yaffe of the Vancouver Sun we can expect no major changes from the Provincial Government in the upcoming Budget. She writes that when Premier Christy Clark stated last year that she would do nothing that might harm people’s home equity she closed out any meaningful addressing of house flipping and foreign buying that are at the root of the rising prices. This means that any talk of enhancing affordability will be peripheral such as minor changes to the Property Transfer Tax to assist first time buyers. Nobody in government wants to antagonize a large segment of the people who actually go out to vote...older homeowners.
However, when the public wakes up to questionable business practices everyone talks about fairness and frowns upon the politicians. The Finance Minister actually smiled upon a Green Party private members bill that would revive the old Land Title law whereby the citizenship or Permanent Resident or foreign investor status and location in Canada or elsewhere of the buyer’s primary residence was recorded with the title which sounds like there may be some news in the forthcoming Budget. Some columnists thought that the Finance Minister’s warm response was to pre-empt suggestions from the NDP in the Legislature. Other suggestions probably more difficult to enact include one to widen the Land Transfer Tax to include charging LTT to changes of ownership in a Contract before the title is finally registered.