Douglas Todd: How disastrous has the COVID19 pandemic been for Canadian housing?
Douglas Todd
The Vancouver Sun
Opinion: Ottawa’s war against the pandemic has had an outsized impact on millions of Canadians frozen out of home ownership. But politicians have proved oblivious
Since the coronavirus hit house prices across Canada have jumped 34 per cent. jpg
Just how much of a disaster has COVID-19 been for housing affordability in Canada? Let us count the ways, if there is a stomach for it.
Since the pandemic began in March 2020 house prices across Canada have jumped 34 per cent.
The chasm between average household incomes and home values has grown far worse in Canada than in any other G7 country.
The “grim” reality is affordability is the worst in 31 years, according to RBC economist Robert Hogue. Metro Vancouver, on top of it, has the most out-of-reach properties: The cost of owning in the city now accounts for 64 per cent of residents’ median household income.
The average value of a dwelling in Canada has shot up to $780,000 (US$604,000). That compares to US$312,000 south of the border, which has been buffeted arguably worse by the coronavirus.
In other words, the war against COVID has not only scored a direct hit on restaurants, the cruise ship industry, the entertainment sector and airlines. It’s had an outsized impact on the millions of Canadians frozen out of home ownership.
Courtesy of Vancouver real-estate analyst Steve Saretsky
Inflation has risen in most Western countries as Ottawa has heightened monetary stimulation (the printing of money) and handed out extremely low interest rates, to head off a slowdown. But our politicians have gone much further than most.
And that means, as Vancouver Island University real-estate prof. Mark Holland says, “Super-low interest rates are great fiscal policy for economic recovery in most sectors. In our real estate industry, however, (they are) steroids, speed, crack.”
About one in three Canadian adults, more than eight million people, don’t own their own homes. And a recent Ipsos poll found three of four who don’t own, but want to buy, say they can’t afford to. “The situation,” says Ipsos, “has developed into a tragedy for many prospective homeowners.”
Of course not everyone in Canada is struggling. Some, indeed, might be rubbing their palms in glee.
During the pandemic housing investors and speculators, both domestic and foreign, have been raking in the profits, at least on paper.
Investors, those who own more than one property, have swelled into the biggest buyer group of all in Toronto. Across the country they now account for one out of five owners.
In the city of Vancouver more than 34 per cent of all residential properties are not occupied by those who own them, while in the city of Toronto the rate is 25 per cent. Investors are especially obsessed with snapping up condo tower units, with some renting them out.
Real estate agent Karen Staddon keeps a social distance while showing a home to a client wearing a mask. Photo: Christinne Muschi, Reuters Photo by CHRISTINNE MUSCHI /REUTERS
Prime Minister Justin Trudeau’s government has mostly displayed obliviousness, even while home prices have gone up 81 per cent since he was elected six years ago.
While Trudeau and Finance Minister Chrystia Freeland produced campaign rhetoric for the September election about how housing should provide shelter for Canadians who live here and not serve as an investment vehicle for the global elite, their actual behaviour has been woefully passive.
The only promise to curb demand on which the Liberals have followed up is trivial. And Trudeau first made it in 2019. On Jan. 1 of next year Ottawa is going to usher in a national one-per cent tax on foreign buyers, piggybacking on those already in place for B.C. and Ontario’s larger cities.
As for Trudeau’s copycat campaign pledge to impose a two-year ban on all foreign buyers, first proposed by Conservative Party leader Erin O’Toole, there has been nothing but vague verbiage from the latest of the Liberals’ rotating housing ministers, Ahmed Hussen.
There is no doubt urban Canadian housing is highly desirable to foreign investors. One in five newly built condos in the city of Vancouver were bought by non-Canadians. The rate expands to one in four in Richmond.
University of Waterloo international affairs specialist Bessma Momani, for instance, says too much of China’s investment in Canada has “gone into real estate as a way for Chinese elite to funnel money outside of the country.” But the pressure is coming from wealthy people everywhere.
More importantly, the Liberal Party’s promise to mildly tax buyers who don’t hold Canadian passports ignores a much larger prod for prices. Hussen has given no indication he understands the difference between “foreign buyers” and more significant “foreign capital,” much of which streams into Canadian housing through so-called “satellite families.”
That’s why the B.C. NDP pushed for the speculation and vacancy tax, which is aimed at purchases by households where most of the income is earned offshore, where it goes untaxed.
While interest rates, investment schemes and housing supply all impact prices, so does immigration. Even though immigration levels went down during COVID-19, investors were buoyed by Trudeau’s promise to return them to record highs of 400,000 per year, which has happened. Statistics Canada data shows an immigrant, on average, pumps more money into Canadian housing than the domestic born.
These Ottawa policies, which have produced excessive demand on housing, have been especially hard on new immigrants who don’t bring lots of money from their homelands, as well as Canadian-born residents who are young or putting up with the nation’s generally listless wages.
COVID-19 has been unprecedented. But so has the way the Liberals have exacerbated the calamity of housing affordability. While most nations have tempered the worst of the damage, our leaders have mostly tried to divert eyes away from the car crash and its many victims.
@douglastodd
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