“YOU’RE not a Capitalist”, the words rang out across the kitchen table, breaking the silence and nervous ticking of an old clock. “You’re a walking contradiction. How can you support globalism, the fundamentals of entrepreneurialism, and still be in favour of government intervention on real estate pricing?”. To this day these words from my mentor still echo in my head.
Over two years ago on a late summer evening, a conversation about the affordability of housing and real estate between myself and my mentor had become the subject of a heated debate. Now looking back, he was right to claim that at the time I was being narrow minded and not seeing the bigger picture. Fast forward to today and sure government intervention has helped stem some of the craziest real estate runs that B.C. has ever seen – but it’s temporary, the floodgates will burst.
2016 was the year of intervention and the realization of sobering results in Vancouver and surrounding municipalities. A ‘wild west’ of sorts for the last few years, construction has boomed, empires were created and business practices ran unchecked in a loosely unregulated environment. This summer the sector woke up to a bad hangover. The provincial government stepped in imposing the 15% foreign buyers tax, a re-haul of real estate practices, a vacancy tax starting in 2017 within the city of Vancouver, and not to mention that CRA has spread a blanket across the Lower Mainland and is targeting any business practices remotely tied to real estate.
I am a firm believer that while government initiatives and regulatory control will slow growth for a brief moment, it shall be fleeting as regulation cannot stop demand. Take for example that the 15% foreign buyers tax is on residential real estate only, it does not apply to commercial nor to the non-residential component of mixed use. Talking to individuals on the front lines in condo pre-sales, supply is limited as condo’s are flying off the shelves like hot-cakes. Despite, recent restrictions in China on outflowing capital, foreign monies will still come into Vancouver and the surrounding cities as a safe haven to invest and foster growth.
With the ascendancy of president-elect Donald Trump, the coming months will show us a possible influx of U.S. immigration and businesses, indirectly immigration from global sources may increase as the White House adopts a tougher stance south of the border. A greater influx of both refugees and new immigrants under the Trudeau administration is also fuelling demand in Surrey. B.C. Stats has our net inflow population projection at a conservative 52,000 new individuals for 2017.
Contrary to public opinion, even though CRA is specifically targeting construction and real estate, this will not slow down the need for supply. Take into consideration that earlier this week Business in Vancouver published 15,000 construction jobs will be needed to be filled in 2017 due to the sector’s growth. With B.C. currently looking more attractive than Alberta, we are also seeing an internal migration of workers and skilled labour from the oil-fields coming back home.
Of course, as always there are two sides to the coin, but as was candidly pointed out to me, two years ago, we live in one of the most desirable places in the world. The 2010 Olympics put us on the map, it’s just a matter of time before our population exponentially multiplies. We can implement all the regulations and red-tape we want, but we have to face reality, this is just the calm before the storm.