Kris Wallace and Andy Ali of Vancouver say their search for a larger condo to give their family more room has been frustrating. Real estate and rental costs in the city are so high that their 26-year-old daughter is still living with them and they’re all feeling the squeeze.
A year ago, the federal government instituted a foreign buyer ban after passing the Prohibition on the Purchase of Residential Property by Non-Canadians Act in 2022. The two-year ban, which came into effect on Jan. 1, barred non-citizens, non-permanent residents and foreign controlled companies from buying up Canadian property as an investment.
But Wallace says that ban didn’t do much for her family.
“There’s all of these very luxurious buildings going in all around us that are outrageously priced,” said Wallace, after attending an open house at a promising $1.1-million condo. “The foreign buyers tax … I don’t think that’s making an iota of difference.”
Critics say the foreign buyers ban, which was aimed at making housing affordable for Canadians, had many exemptions and was more of a political manoeuvre. They say it’s clear housing remains out of reach for too many in Canada, and that the country should look to other places in the world to find strategies to foster home ownership.
Though Housing Minister Sean Fraser’s office declined an interview request, his spokesperson said the government had worked with cities across the country to help “over 250,000 new homes get built over the next decade.” Earlier this month, the government announced a deal with Vancouver — $115 million to fast track the building of 40,000 homes in coming years.
In an email, the Canadian Mortgage and Housing Corporation (CMHC) said 2023 data from the Canadian Housing Statistics Program is not yet available to determine the ban’s full effect.
The CMHC said Ottawa is “working to ensure every Canadian … has an affordable place to call home,” citing moves to forgive GST from newly constructed rental units, $20-billion in apartment financing and other initiatives.
In Vancouver late last month, Deputy Prime Minister Chrystia Freeland said the ban “is making a difference” by preserving housing where people can live. Earlier in November, Conservative Leader Pierre Poilievre said that rather than helping to make housing affordable, the government’s policies have instead “made the problem worse.”
The housing minister acknowledged the housing crunch earlier this month, but challenged Poilievre’s strategy. “He seems content to tap into the anxiety of Canadians without putting forward a plan that’s actually going to help them,” said Fraser.
CMHC data reveals that only two per cent of real estate purchases in 2021 were made by non-Canadians, according to communications obtained by Global News through Access to Information.
A few months after the ban was put into place more exemptions were added. These included students, first-time buyers and properties under $500,000.
“There were so many exemptions to the foreign buyer ban that it really didn’t make any difference at all,” said Tim Sabitov of Team 3000 Realty Ltd, in Vancouver.
Any impacts of the ban were short-lived, according to Brendon Ogmundson, the chief economist for the B.C. Real Estate Association. “The foreign buyer ban was more political than economic policy or housing policy,” he said.
This year, Toronto’s market has softened, but the average home price is still $1.1-million — and the typical price of a home in Vancouver was $1.2-million in September, according to data from the Toronto Regional Real Estate Board (TRREB) and the Canadian Real Estate Association (CREA).
Even as Canadian home sales fell off in October, the average sale price rose 1.8 per cent that month, compared to the same period in 2022, according to the CREA. It was up 5.8 per cent in Vancouver, with the benchmark price for a detached home rising to $2,001,400, according to the Real Estate Board of Greater Vancouver (REBGV).
In 2016, B.C. introduced speculation and vacancy or empty homes taxes. Ontario followed the next year. These taxes were applied to high-demand areas to discourage people from buying property as an investment.
Thomas Davidoff, an associate professor at the University of British Columbia’s Sauder School of Business, and UBC PhD student Keling Zheng studied the effect of foreign buyer taxes in B.C. and Toronto and found they resulted in an initial drop in the price of housing that soon levelled off.
The city of Vancouver says CMHC data showed that speculation taxes helped cool the market and convert vacant properties into long-term rentals between 2017 and 2021.
Based on that success, B.C. has expanded the speculation tax program to 59 municipalities and the federal government is adopting many provincial policies encouraging transit-oriented and multi-unit developments, according to B.C.’s housing minister Ravi Kahlon.
“The Federal housing minister just recently went to Toronto Council and said, ‘Adopt what British Columbia is doing,’ ” Kahlon told CBC in Victoria on Nov. 30.
“We’re not waiting for the federal government. We’re taking action here already.”
According to Davidoff, high-end home prices did plummet initially after the foreign buyers ban — but he says the real driver was soaring interest rates that triggered an economic slowdown.
“The most affordable products actually rose in price for whatever reasons after the foreign buyer tax.”
He says he’s not sure focusing only on foreign buyers helps make things more affordable and believes the focus should be on how a property is used — not who owns it.
Mike Stewart, a realtor with Vancouver New Condos, says “the ban was maybe a way for certain federal politicians to do better at the next election as opposed to trying to help housing affordability.”
Those who do advocate for taxes and bans say they need to be tougher to work.
“Canada’s ban was full of holes,” said Andy Yan, director of the City Program, a continuing education program focusing on urban planning and development at Simon Fraser University. “I would tell people it was more like cheesecloth than duct tape.”
Yan says places like Hong Kong and Singapore use much higher taxes and rigid buyer restrictions to cool prices.
The foreign buyer ban came long after speculation taxes already discouraged non-resident property investors in B.C., he and other housing experts note. And the country has other problems.
Stagnant wages, a lack of affordable housing stock and a legacy of attracting global property investors due to weak regulations all feed the affordability problem, according to David Ley, author of Housing Booms in Gateway Cities.
The retired UBC Urban Geography professor says Canada could learn from success stories like Singapore, which boasted one of the highest home ownership rates in the world in 2022 at 89 per cent.
“Singapore has solved its housing question. Now, how many cities in the world could we say that of?” asked Ley.
He credits Singapore’s success to aggressive speculation taxes — 60 per cent compared to B.C.’s 25 per cent — and the use of those taxes to create robust public housing stocks.
Singapore’s housing is 80 per cent public, compared to Canada’s, which sits closer to six per cent.
Ley says Singapore controls “investor play” in the housing market “so there is opportunity for local buyers to be successful.”
Back in Vancouver, Wallace and Ali are still hunting for a condo, for they say many are priced too high, especially given today’s interest rates.
“Most of the building owners seem financially able to sit tight and wait. Which is frustrating for buyers,” said Wallace.
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