Facing a real-estate bubble driven by Chinese buyers, our British Columbia neighbor took extreme actions. Would you?
On Aug. 2nd, a 15 percent tax on foreign buyers of real estate took effect in metro Vancouver, B.C. It was intended to at least take the froth off one of the hottest housing markets in North America, ease a bubble and discourage speculative “hot money” from China.
By early measures, it has succeeded. The proportion of foreign buyers who closed deals Aug. 2-31 was only 0.9 percent, compared with 13.2 percent in the seven weeks before the tax was implemented. In September, sales fell 33 percent from a year ago. Ottawa also tightened mortgage requirements. This doesn’t mean Vancouver is now inexpensive.
Some observers say the tax has sent the hot money to Seattle or Toronto. China has a savings glut and Chinese buyers are attracted to appealing cities in advanced nations with the rule of law.
How much foreign buyers affect the Vancouver housing boom is a subject of debate. “Low interest rates, robust population and employment growth, limited housing supply and the proximity of protected areas collectively known as the Agricultural Land Reserve are among the reasons real estate in the Vancouver region is so expensive,” the Globe and Mail reported, citing a Canada Mortgage and Housing Corp. report. It is unclear how much foreign capital is bidding up Seattle prices (and improving equity of Seattle homeowners).
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Old Seattle had an ugly history of anti-Chinese activism. But this is now. Would you support a Vancouver-like tax?
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Today’s Econ Haiku:
New German sanctions?
Will Putin make Angie’s list?
That would be a gas