Vancouver's market isn't really comparable to the Bay Area. They have actually been building quite a lot of new housing, and have been for some years. Vancouver's real estate boom was mostly caused by foreign buyers (Chinese) using it as an investment vehicle and a place to park their money. This is a reason why Vancouver is among the top 2 or 3 most unaffordable cities, because the median wage (~60k CAD) there doesn't support owning a family home, which could easily be over a million CAD.
I doubt a foreign buyer tax would have much of an effect on the Bay Area, since much of it is driven by internal demand and high salaries. On the other hand, places like Sydney, Auckland, etc. have similar problems with foreign buyers and could probably benefit.
Vancouver's real estate boom was mostly caused by foreign buyers (Chinese) using it as an investment vehicle and a place to park their money.
Although foreign buyers do have an impact on the Vancouver housing market, I think people really overestimate the effect it has.
After lots of discussion about hoards of Chinese buyers, the BC gov't started tracking purchases. It peaked at 13% just before the tax (and most of that was concentrated it the top of the price range).[1] Also, that definition of foreigner is just someone without Canadian citizen or permanent residency. If you live and work in Canada and are on a work visa, then you would still count as a foreigner (which I don't think is fair).
That means only 1 out of 8 homes were bought by a foreigner and 7 out of 8 were purchases by resident Canadians.
What people seem to ignore is the absolutely shocking way that Canadians are overextending themselves when it comes to real estate. It's a "now or never" mentality and mortgage products like the ones that brought down the US economy are becoming more and more common in Canada.
The foreigner tax is likely the straw that broke the camel's back when it came to the Vancouver real estate market. Even without the tax the market was about to turn.
> After lots of discussion about hoards of Chinese buyers, the BC gov't started tracking purchases. It peaked at 13% just before the tax (and most of that was concentrated it the top of the price range).[1] Also, that definition of foreigner is just someone without Canadian citizen or permanent residency.
You can still purchase permanent residence status with cold hard cash in Quebec. A lot of Canadian "citizens" / "permanent residents" are nothing of the kind, they are citizens of convenience. The passport and house is for getting out of Dodge when the sht hits the fan.
Similarly, a lot of multi-million dollar houses are owned by Chinese students.
I'd feel very comfortable betting the truly* foreign percentages is far, far higher than the government is telling us. It took high levels of public outrage before the government finally released a subset of the statistics, if they were really now interested in telling the truth, they'd publish all the metadata available for citizens to examine.
Admittedly I'm not an expert in this, but isn't demand for housing relatively inelastic? I have no idea whether 13% foreign buyers is considered high for a city, but it seems conceivable that it could fuel a large boom in real estate. Especially if a lot of these units aren't even being lived in.
I have a hard time believing that Vancouver real estate prices have been driven by 'organic' demand. It's a beautiful city, for sure, but the economy isn't exactly stellar. Canadians are probably overextending themselves, but I doubt the average young Canadian with 60k income can quality for a 1 million dollar mortgage.
"That means only 1 out of 8 homes were bought by a foreigner and 7 out of 8 were purchases by resident Canadians."
1 out of 8 is more than is necessary to create a massive bubble, and is the driving factor - along with low interest rtes.
In a housing market - nobody knows for sure which direction it's going to go.
So how do they price? They price on 'similar properties'. So when 'the similar house down the street' sells for '5% above asking' that sends a 'validating pricing signal' to other buyers of homes in the neighbourhood.
It's not so much that it's 'foreign buyers' - if they were normal buyers it wouldn't have much on an effect - it's that they are generally 'price insensitive'. They need to get their money out of China and into something and they generally com e in and buy above asking, and out-bid everyone or whatever.
In a 'normal situation' a house may not sell for some time, it gets buyers skittish, and they wait, and maybe give low-ball offers. Sellers may be weary and then sell it.
But all it takes is for a few 'over asking bids' to come into an area and it props ALL of the homes up in price. Local buyers feel confident taking out their massive loans because 'that's what the house is worth, i.e. it's an investment'.
Without some upward driver on prices, they'll collapse to a different level - and guess what that level is? The level that people earning the local Houshold income feel comfortable buying at :) given all the variables.
Especially when the word 'bubble' is floating around, it means the only way local buyers will buy is if there is the 'up signal'. So - no 'foreign inelastic buyers' -> 'no up signal' -> depreciation.
As for: "What people seem to ignore is the absolutely shocking way that Canadians are overextending themselves when it comes to real estate"
This is rational behaviour. If the market is going up-up-up - and you're a family in Van - you either buy a home now while you can barely afford it - or be left out of the housing market forever, and rent - and within a few years, rents will be too much - and you have to leave Vancouver!
So the effect of 'price inelastic foreign buyers' is forcing otherwise normal people into a serious economic quandry - the system is forcing them to gamble their entire life of 'net worth' in a crazy crapshoot - when people just want a place to live.
Globalization is having a crazy effect on real estate - and outside of maybe a few 'globalist' cities like London and NYC - I believe that every nation should have a 15% tax on foreign buyers - so that local citizens are given a kind of advantage - or rather just a 'protection' from foreign blips of money coming and ruining them all. The local banks will pay a price as well. A serious Vancouver housing crash could kill a bank, in which case taxpayers have to come in and bail it out.
When the entire world is interconnected, the bad decisions of one government can send shockwaves through the world. That's why 'some kinds of walls' are good. Think 'economic firewall'.
I doubt a foreign buyer tax would have much of an effect on the Bay Area, since much of it is driven by internal demand and high salaries. On the other hand, places like Sydney, Auckland, etc. have similar problems with foreign buyers and could probably benefit.