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Short-Sighted Politicians Are Fuelling Canada’s Housing Crisis

May 31, 2015

Short-Sighted Politicians Are Fuelling Canada’s Housing Crisis

The latest example of Canadian politicians’ (in)action in regard to real estate prices getting out of control is the recent decision by the B.C. Premier Christy Clark, to reject the idea of raising taxes for overseas investors — despite a petition from her constituents that attracted some 25,000 signatures. “By moving foreign owners out of the market, housing prices will drop,” she reasoned, voicing her concern about the (possible) loss of present homeowners’ equity.

Many homeowners in Vancouver and Toronto have become “equity-millionaires” in the last few years due to unusually high appreciation of their homes thanks to persistently strong demand by foreign investors, mostly from China. In their haste to park their money overseas in a hurry, most of them don’t even bother to make a trip to view their investments. The Wall Street Journal article, “The Mechanics of Moving Cash Out of China,” reveals the clandestine, if not outright illegal ways that wealthy mainland Chinese are bringing their funds to Hong Kong, and from there on to other parts of the world. Most of it ends up invested in their favourite foreign destinations — the US, Australia, and Canada. It is a crime for any mainland Chinese to bring more than $50,000 out of the country, but many wealthy Chinese are, nonetheless, smuggling out billions.

Transfer of money from Hong Kong to Canada is legal, but no one is really paying attention to its origin. It seems that for the B.C. Premier, our Federal Finance Minister Joe Oliver, and our Prime Minister Stephen Harper, the influx of dubiously obtained money from China is of little concern. In fact, judging from their latest comments, they seem to be quite content with it. A CTV News report from May 14 quoted Prime Minister Harper as saying that limiting foreign investment in housing is not something he is “contemplating at the current time.”

 

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