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I found this to be either highly ironic, or expertly-timed.

Earlier this week, I read an article about the lawsuit filed in British Columbia on behalf of Foreign Buyers who believe the Foreign Buyer’s Tax is unfair.

Later in the week, the CMHC released a study that shows most Canadians believe that foreign buyers are influencing the price of real estate.

Two courts are at work here: the courts in British Columbia, and the court of public opinion…

By a quick show of virtual hands, does anybody think that foreign buyers have affected the Canadian real estate market, specifically those in BC and Ontario?

Good.  You all raised your hands.

Now my second question would involve a slight alteration to the first: Does anybody think that foreign buyers have substantially affected the Canadian real estate market?

Now perhaps the room is split.

To define “substantially” is, of course, a whole other task.

But I think it’s fair to say that in the context of supply and demand, foreign buyers have shifted the curve.

Take a very simple example – there’s a town with 100 properties for sale, and there are 100 buyers.  That market is in perfect equilibrium.

But then add, say, five foreign buyers, and suddenly demand exceeds supply, and there’s a deficit.

Now what if you added…….twenty foreign buyers.  How much would that have an effect on price?

To suggest that 20% of buyers in Canada are foreign is a massive stretch.  And to suggest that, at any point here in Toronto, foreign buyers represented even a double-digit percentage of buyers, is probably an exaggeration as well.

But what about Vancouver?

We know that no matter how hard the CMHC tries, they can not, and never will, come up with any accurate data on the percentage of foreign ownership, anywhere.  We can’t even define foreign ownership, because when either a “Permanent Resident,” or, a Canadian Citizen purchases a property in Canada, but the money came from overseas, and the property is really, truly, “owned” by a person overseas, there’s just no way to account for this information.

So then, may we use empirical evidence?  And by that, I almost mean opinion, guesstimation, and gut-checks?  Because that’s essentially how the folks in Vancouver came to the conclusion that foreign buyers were blowing up their market.  And to be quite honest, it’s a measure that I may have used myself, a few times.

Recall the first four months of 2017, which many of us refer to as “the craziest market we’ve ever seen.”

I specifically recall condos that I had for sale downtown, where most of the buyers were, in some way, shape, or form, foreign.

This is an inexact science, and I’m opening myself to criticism here, especially in the obsessively politically-correct social structure of 2018.

But when you look at the name on the offer, the name of the agent, the brokerage the agent belongs to, and then………interact with that agent, you have a pretty good idea where these folks originate.

So having made that inexact, unscientific, possibly-offensive definition, let me go back to early 2017.

Last February, I had a listing for a 1-bedroom condo at Yonge & Front, that produced 15 offers.

How many of the buyers did I suspect had roots in a foreign country?  13.

13 of 15.  It was epic.

This trend continued until April when the market changed, and after that, the “foreign-sounding” names went away.

What was going on in the market was not a secret, and as listing agents, we dealt with buyer agents who would tell us that their clients were in China, in reference to the timing of receiving a deposit cheque, or their ability to sign the offer, etc.

This is one case where the “word on the street,” exaggerations and exacerbations aside, would probably be more accurate than some survey that the CMHC sends out.

So where does that leave us now, approaching the summer of 2018?

Well, it leaves us dealing with this:

“Foreign Buyer’s Tax On Trial – But B.C. Claims Crisis Called For Action”

Ah yes, in the wonderful world of 2018, every right is a wrong, and every wrong is a right.  Those who have been wronged, rightfully or wrongly, can seek to make things………..right?

Here’s the meat of the CBC article, but click the link above to read it all:

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A landmark civil trial kicked off Monday testing the legality of a foreign buyers tax enacted by the province of British Columbia in response to a housing affordability crisis.

The legal battle pits the government against a proposed class of foreign nationals who claim they’ve been discriminated against in violation of the Canadian Constitution.

A lawyer for the province told B.C. Supreme Court Justice Gregory Bowden that the volumes of arguments, affidavits and authorities on display in his courtroom belied the very simple set of circumstances that gave birth to the law.

“There was an affordability crisis in the Greater Vancouver real estate market,” Karen Horsman said as she laid out the justification for the tax.

“Local residents were in effect being priced out of the market.”

Introduced in July 2016 under the previous Liberal government, the tax initially required foreign entities (including foreign nationals) to pay an additional 15 per cent on the purchase of residential property in Greater Vancouver.

The current NDP government increased the amount to 20 per cent in February and expanded its reach to include the Fraser Valley, Capital Regional District, Nanaimo Regional District and the Central Okanagan.

The province has asked Bowden to determine whether or not the tax is legal in a summary trial — as opposed to beginning with a certification hearing on the class action.

The province will argue that the tax is not in breach of the Charter of Rights and Freedoms.

And that even if it were, the infringement is the kind of reasonable limit allowed given the pressing need for political action in the face of the housing crisis.

The plaintiff, Jing Li, is a Chinese student who moved to Canada in 2013 to complete a master’s degree in public administration.

Weeks prior to the introduction of the tax, she claims she signed a contract for the purchase of a $559,000 home in Langley.

She says the foreign buyers tax added an additional $83,850 to her bill.

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What I find more interesting than the lawsuit, and the article itself, is that as mentioned above, there is another story out this week on foreign buyers, only this one is on the public opinion:

“Many Homebuyers Still Believe Foreign Ownership Is Heavily Influencing Housing Prices: CMHC Survey”

From the article:

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A study from the Canada Mortgage and Housing Corporation released Wednesday found that 68 per cent of Vancouver respondents, 48 per cent of Toronto respondents and 42 per cent of Montreal respondents believe foreign buyers are having “a lot of influence” on their markets and are driving up home prices.

The insight into perceptions around foreign buyers that 30,000 respondents in the three cities shared with the Crown Corporation between September and mid-October is in stark contrast with recent data from Statistics Canada showing foreign buyers own only 4.8 per cent of Vancouver properties and 3.4 per cent of homes in Toronto.

“What is striking is the significant gap between perceptions of the public and available data, so much so that the perception of non-resident ownership takes centre stage when discussing the drivers of price growth,” CMHC’s report said.

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Wow, it’s like they took the words right out of my mouth!

Statistics Canada shows that only 3.4% of properties in Toronto are foreign-owned, and if you asked any experienced Toronto real estate agent with listings what they thought, that number would be at least double.

And 48% of Torontonians think that foreign buyers are “having a lot of influence” on the market.  To be fair, many of the people surveyed might have absolutely zero evidence, insight, or data to support this, but rather they might just be jaded that they can’t afford what they want, and when offered with the suggestion that foreign ownership is driving up prices, they agreed.

In any event, as the trial in B.C. takes shape, I find the survey results incredibly ironic.

I believe that if you took a poll – with absolute anonymity, of residents of entire country, an overwhelming amount of Canadians would vote to incorporate a foreign buyer’s tax, a ban on foreign ownership, or restrictions of some type, rather than pay more personal income tax.

I mean, why wouldn’t they?

We’re living in very strange times, where nationalism, at all costs, is making a huge comeback in certain countries.

Canada has always been different.  Sometimes, a bit too left-leaning for my liking, but somewhat level-headed in the context of the other 200-something countries around the globe.

So as this trial in B.C. takes shape, one has to wonder whether an idea as far-fetched as foreign buyers suing the government of a country in which they’re guests, for imposing a tax as they are (and this is in debate) legally permitted to do, will lead to our government caving-in, and turning face, even as the rest of the country silently sits by and grits their teeth.

And perhaps that’s the issue: people don’t speak up enough.

“People don’t speak up enough.”  I can’t believe I just said that, in a time when every human on the planet has a voice, through technology and social media.

But whereas most people choose to take photographs of their salad and put it on Instagram, I don’t know if enough people care to opine on something like whether or not foreigners, who look at a Canadian one-hundred-dollar bill as though it were a penny in the ashtray of their Maserati, should be able to “drive the price of real estate higher for Canadians.”

This trial in B.C., plus the survey from the CMHC coming out in the same week, simply must get people talking about this.

My question is: will the government listen?

If 68% of Vancouver residents believe that foreign buyers are having an influence on the market, then perhaps even more would be in favour of some sort of efforts to curb, or restrict, their ownership.

And what do we make of the fact that non-permanent residents in Hong Kong are subject to a 15% tax on the purchase of real estate, and there’s a similar 18% tax in Singapore?

Could it be that we’re only now seeing this issue take shape?

When I brought this topic up in the office on Thursday, specifically speaking of the case before the B.C. courts, a colleague said, “This will be the last of it.”

I’m not so sure.

I honestly think we’re closer to the beginning of this story, playing out long-term, than we are to the “last of it.”

For those not polled by the CMHC (that means all of you reading this), I’m eager to hear your two cents…

The post The Two Sides Of B.C.’s Foreign Buyer’s Tax appeared first on Toronto Real Estate Property Sales & Investments | Toronto Realty Blog by David Fleming.