ELECTION 2015 Conservatives look to Australia for solution to foreign buyer issue
But experts are split if similar policy would cool housing market here
VICTORIA — A re- elected Conservative government would consider an Australian-style ban on foreign investors who wish to purchase existing residential housing in red-hot markets like Metro Vancouver.
Prime Minister Stephen Harper floated the idea in his party’s full election platform, which was released Friday in Richmond.
“Given the importance of home ownership, our government wants to make sure it remains a dream within reach for the average Canadian family,” read the platform.
“Some reports have suggested that speculative foreign nonresident buyers are a significant factor in driving homes out of the price range of average families, especially in Vancouver and Toronto. If speculators are driving up the cost of housing to unaffordable levels, that’s something the government can and should address.
“Other countries, like Australia, have put in place regulations that limit the ability of foreign buyers to purchase existing houses for investment purposes.”
Five years ago, Australia implemented a ban on foreign purchases of existing housing, unless the house is demolished and redeveloped in a way that increases the number of housing units. Foreign buyers are mainly restricted to building new housing. Temporary foreign visitors can buy existing homes as long as they are resold before that person leaves Australia.
The policy is supposed to prevent wealthy foreign buyers from driving the price of average homes beyond the reach of Australian families, while at the same time growing the country’s housing stock.
But academics, the B.C. real estate industry and Premier Christy Clark’s provincial Liberal government don’t agree that Australia’s approach of targeting foreign buyers is the solution to slowing the growth of housing prices in the Lower Mainland.
“We’re not intending to zero in a punitive way on people who come here to invest,” B.C. Finance Minister Mike de Jong told The Sun earlier this month. “Our general approach in building the economy has been that foreign investment is good for B.C.
“So to approach that in a punitive way I believe sends a signal we don’t want to send.”
Premier Christy Clark also told The Sun this week she has no plans to target foreign investors, but welcomes a pledge from federal parties to further research the issue. The Clark government has said it doesn’t believe wealthy foreigners are driving up average home prices in Metro Vancouver, and the market is instead rising due to limited supply, high demand, municipal development requirements and low interest rates on mortgages.
Analysts remain split on whether foreign investment is inflating prices in Vancouver’s residential real estate market.
“I’d be really hesitant to want to specifically target foreign ownership,” said David Wachsmuth, an assistant professor at McGill University’s school of urban planning, who recently taught at UBC.
“In my opinion, a much better way is to deal with the problem itself, which is people buying houses and then not living in those houses. The easiest way to deal with this is to introduce a fee or tax on vacancy.”
B.C. Real Estate Association chief economist Cameron Muir said prices on the high end of the market may be driven higher by foreign investment, but he’s seen no evidence it’s affecting average homes.
Australia’s restrictions haven’t curbed foreign purchasers, argued Muir.
“We’ve seen a steady upward trend in Australia over the last five years and that’s despite the restrictions,” he said.
There’s little Canada can learn from the Australian model, other than what not to do, said Meg Holden, an associate professor in urban studies and geography at Simon Fraser University.
“This isn’t a policy that should be applied in Canada. It doesn’t even work in Australia,” she said.
“These policies do not help with escalating prices in Melbourne or Sydney, which are the two markets most comparable to Vancouver.”
This isn’t a policy that should be applied in Canada. It doesn’ t even work in Australia.
MEG HOLDEN ASSOCIATE PROFESSOR IN URBAN STUDIES AND GEOGRAPHY, SIMON FRASER UNIVERSITY