Brent Toderian, Former COV Director Of Planning – “The competition between external demand and local demand is one of the reasons that barring a collapse and a crash, we are going to remain a very expensive city to own in.”

Question (woman at microphone): “I would like to hear your comments on limiting foreign ownership as it addresses local affordability.”
Brent Toderian [Brent Toderian, former Director of City Planning, COV]: “Great question.”
Other male panelist: “I call that the elephant in the room.”
Toderian: “I’m really glad you brought it up because I had it on my list. That is the elephant crushing the table. It’s not under it, it’s not on top of it. It’s something the Mayor’s Task Force on Housing Affordability dropped the ball on. The competition between external demand and local demand — that’s the nicest way I can put it — is one of the reasons that barring a collapse and a crash, we are going to remain a very expensive city to own in.”
– from exchange at a keynote panel discussion on “Living Affordably in Greater Vancouver” at BUILDEX (convention on designing, building and managing real estate), Vancouver Convention Centre, 13-14 Feb 2013. Quoted in comment by ‘urbanizta’ at their own blog ‘CityHallWatch’, 15 Feb 2013 at 12:01am

To say “barring a collapse and a crash, we are going to remain a very expensive city to own in” is a tautology; it’s like saying “if prices don’t go down, they will stay up”. In other words, to say this is to say nothing at all.
That aside, this exchange, and the article above the comment, does demonstrate how people are continuing to wrestle with the issue of ‘foreign ownership’ and how it may effect the Vancouver market. The discussion is hobbled by a number of things: lack of actual data, lack of political will to gather pertinent data, the mixing-up of local and foreign buyers, and a lack of understanding of what constitutes speculation. We anticipate that this issue will continue to be ineffectively churned over in many similar discussions while prices begin to collapse. Once the price collapse is convincingly underway, we won’t hear much about ‘foreign ownership’ for quite some time. Firstly, because foreign buyers, like local speculators, will disappear in a falling market; they are momentum players and hate any asset falling in price. Secondly, many locals will be dearly wishing for buyers – any buyer – to rescue them from their real estate holdings. Once prices have ground down into a trough (likely over years); once speculation has been wrung out of the market and the dust settles; – then there will likely be a meaningful place for civic discussion about the wisdom of regulation of foreign ownership.
Currently, the far, far larger ‘elephant in the room’ is a speculative mania that has yet to unwind.
– vreaa

49 responses to “Brent Toderian, Former COV Director Of Planning – “The competition between external demand and local demand is one of the reasons that barring a collapse and a crash, we are going to remain a very expensive city to own in.”

  1. ….”that, barring a meteor impact”…

    [NoteToEd: and we all know how unlikely those are… Oh, wait…]

    • Naked Official #9000

      No meteor is a match for the protective hedge of real estate!

      Unlike meteors, RE always goes up!

      This panel is composed of splittist demagogues, radicals and bandits! They preach an ideology of xenophobia and intolerance!

  2. “Currently, the far, far larger ‘elephant in the room’ is a speculative mania that has yet to unwind.”

    It’s pretty obvious, isn’t it 😉

    In terms of meaningful discussions of foreign ownership, if things are in the pooper I expect quite the opposite push: do everything possible to get foreign cash to buy depressed properties. That’s certainly the case not only in many parts of the US catering to foreign investment — not least Canadian — but also in parts of BC’s vacation communities hit hard since the GFC.

    Further, venture a few km outside of Vancouver and the concept of “foreign ownership” that prices out locals is, well, quite foreign. This is a very specific problem to Vancouver and some of its suburbs but is not prevalent. The reason this gets so much press is, in my view, because foreign investment is seriously encroaching on more affluent areas. These areas also happen to be low density and close to the city core, so there’s a 1-2 punch going on, with selective foreign speculation and a longer-term trend of density pressures that has been building for over a generation.

    There are many things that can be done to reduce prices, none are palatable to the incumbents. A corollary to said elephant is the inability of residents to embrace meaningful solutions. The best one I’ve found is the land trust idea; with a few tweaks it would provide security of tenure but no chance of gains from speculation.

    • The reason why foreign ownership gets so much press is because it works as a marketing tool. That’s why we had the yellow helicopter and the “sisters” from Mac. Add the occasional high profile drive-by purchase by a Chinese “entrepreneur”…

  3. 2011: William McCarthy, BA, FRI, CPM®, CLO

    Seller Beware: The Impact and Consequences to Date of Asian Investment in Metro Vancouver's Real Estate Market

    "The condominium market has fueled much of Vancouver’s recent real estate activity as these are very basic developments and Vancouver is one of the premier pre-sale markets in the world."

    Pre-sales banned on flats in Shenzhen

    Time to change housing presale system

    Keep the Housing Pre-Sale System or Not?


    This is the core problem, not foreign ownership. Lax lending and a presale selling scheme originated from Hong Kong in the 1990s that was initially (and still)  driven by state-government stimulus to boost incomes and local productivity. We've adopted a system that our governments know very little about, presumably with the assumption that, what worked for Hong Kong and China, will work for Canada. This notion is completely false, dangerous and must be reversed in city councils' strategy on affordability. There are numerous studies that prove a how forward markets increase speculation, which is why Hong Kong and China are starting to limit or outright ban presales.

    The solutions put forth by city councils on affordability is short-term thinking and does not address the mid-to-long term structural changes that are needed. City councils need to be aware of this issue and consider banning or limiting presales.

  4. The only way to kill the speculative mania in real estate is for municipal, provincial, and federal governments to raise the majority of their revenue through property taxes. Do this, and it will instantly level the playing field between foreign and local buyers. Instantly, real estate will cease to become a global speculative asset and instead become place to live with prices linked to the INCOMES (not the WEALTH) of those that want and/or have to live there. Vancouver will still be the most expensive city in Canada, just not insanely so. No need to single out foreign buyers specifically. Just treat all speculative buyers — in fact all buyers — the same way. Sadly, this would be political suicide for any any politician to put forward. The only path to affordable housing is for prices to fall or incomes to rise. It’s going to be a lot of hurt for someone; no way around it.

    • Bingo! Land Value Tax FTW!

    • From McCarthy's report posted aboove.

      British Columbia and the City of Vancouver have an ad valorem property tax system whereby the local government sets a mill rate that is charged against the provincially assessed value of the property. By statute, local governments in this province cannot run deficit budgets, so they simply adjust the property mill rate and raise taxes to meet their expense needs. It is therefore in their best interest from a taxation standpoint to have high property values from which the taxable property base can be extracted from. The tax rate gap between residential and commercial property owners is significant, with business owners paying on average about six times the rate of residential owners, and without a vote in municipal elections. This tax system works very well for local politicians and growing bureaucracies. Of the City of Vancouver’s 2010 operating budget of $961 million, 63 percent came from property taxes, with 18 percent from user fees and other charges (including development cost charges), and the balance of 18 percent from utility fees.41

      How can the issue of affordability be resoved if the interest of BC's government is to keep home prices high?

      • Don’t they just increase the mill rate if values drop?

        And I’m all for businesses paying a fair share of taxes, but 6x seems a bit excessive.

      • I don’t know why but my post doesn’t show and says awaiting moderation.

        [There are a number of filters (many out of my control) that will at times hold back comments for no apparent reason. These are released from the mod queue as soon as I see them. At times, it has even trapped my own comments. (!) – ed.]

      • > “It is therefore in their best interest from a taxation standpoint to have high property values from which the taxable property base can be extracted from.”

        Not really. Why would that be the case? They budget based on what services and service levels they want to deliver, and then adjust the mill rate accordingly. If property values jump across the board, the mill rate drops across the board.

        Higher property values do not equal higher taxes necessarily. If your property is MORE valuable than the average property in your City, and/or if your City’s electorate has made decisions over the years in favour of “cadillac” vs. “basic” service delivery, then these will influence, but not property value alone.

      • You need to research how tax rates are set in BC.

      • B.C. Ferries must pay taxes on terminals

        “But the new rules aren’t a complete victory for municipalities, many of which will lose thousands of dollars under the deal and result in tax hikes for homeowners.”

        That’s one way to boost the mill rate.

      • It is personal, Watchdog.

        Yes…I am just kidding…really…sincerely.

      • Farmer -> If I coulda held back that comment, I woulda…


      • Ha Ha. Don’t I know it….I am just happy the machine is roughing up somebody else for a change. That screener sure is hard on Nem though. But in his case he actually has a vocabulary that is larger than the computers. I suspect it is jealousy on HAL’s part.

      • “By statute, local governments in this province cannot run deficit budgets, so they simply adjust the property mill rate and raise taxes to meet their expense needs.”

        What will happen if property prices drop 30-50% in a fairly quick period of time?

        Will municipalities have to cut spending and lay off staff in what would probably be a local recession? Will they raises taxes more than the drop to compensate? Will the province actually (temporarily) step in and make up the lost revenue even if they face budget problems from a downturn?

        This seems exactly like what happened in America where most of the states have balanced budget laws.

    • Not the “only way”, there are other options, none palatable to voters.

    • Realtor behavior

      You guys really don’t understand, do you? These politicians are not naïve, they are the cartel of the RE conspiracy, they are the mastermind behind this RE ponzi scheme. It’s not the “the foreign cash” that trigger this speculative mania, it’s our local government, the councillors and their horde behind the screen! As bubbly just said above, “The reason why foreign ownership gets so much press is because it works as a marketing tool.”

      I remember when I was studying a part-time short cert course on Investment and Taxation back in early 2008. An instructor, who was also an accountant by day, told us that we should go ahead and invest in properties, cuz it couldn’t go down, the reason behind this was intriguing though. He said our councillors, and the officials in the local government themselves were also realtors and developers themselves. “They were heavily invested in properties themselves. If anything happened to the property market, they will change laws to keep the RE markets booming!” I knew a family got bombarded by realtors to buy as Van RE properties crippling after the US RE bubble got busted late 2008. The family finally bought a house for a bit over $400K on a 4000 sqf lot around commercial st area Vancouver. Couple months after the transaction, when they were still reeling with worries for the RE market, there came the blast – the HAM, foreign rich students buying again, helicopters trips….. and all the fanfare. Remember the BC railway transaction, they even picked the tabs for the criminals who admitted taking bribes, these are the insiders’ jobs! They just sold out the any sort crown properties and then pocket wealth for their own.

      When HK RE market was booming, Van RE was languishing! And then, there you go, the blast of HAM. The truth is HAM can’t turn the whole market upside down, look no farther like just south of the border, but HAM can be the marketing tool used by the RE cartels, the bankers, the realtors and our government.

      The truth about ‘HAM’ buying Canadian properties is, most of this “cash buyings” are money laundering by venal Chinese officials or top corporate CEOs manipulated by local RE cartels as a marketing tool to convince local people to buy into their ponzi scheme. Money to be laundered isn’t gonna and can’t stay put for investment, it needs to be put in and take out to become legitimate and hidden! As this money can’t stay, they cannot boost the market at all! But it can be manipulated as a marketing tool to boost the market! As a matter of fact, local people are buying into this Kool-aid!

      And there comes the butterfly effect, when Vancouver RE blasted, the whole BC RE was also boosted. Can you imagine 30-50-yr mobile homes in Abbotsford paying for 5-700 monthly pad rent can ask for 50-100K, and wood sheds in North BC out of nowhere are asking for 150-250 K, while many bungalows with 3000- 5000sqf-lot in downtown area in the East province are only selling for less than 100K?

      Vision Vancouver claimed that they tried to fixed the regulations to increase supplies in Vancouver by legalizing second suite, laneway houses, multi-plex houses… guess what? Seriously, helping local? These actually are schemes employed to keep the cash flow from drying up, and feeding into the “RE industries”. When a house tried to be sold at 2 million but cannot be sold, so they separate it into 4, each for 500-600K, and with help by-law changes, there goes the hot market again. And when the Vancouvrites are overly invested, what con have these RE cartels do next? They have launched toll fees on bridges, around Vancouver downtown, the Green activities and gas tax, the translink ticket hike every 6 months; while average joes getting no pay hike or even slashes in their paycheck, they still needed to cram into Vancouver as their would be no commute service during the early and late hours and especially the weekends between downtown and its surrounding area like Surrey; that means couple people sharing an apartment to survive. And then there comes the discussion of the Broadway Corridor subway! Oh, yeah, the Casino! You can see when the Surrey Mayor voted down a new Casino built in South Surrey, how indignant Rich Cole has become! When have you ever heard anybody in our BC government care for Surrey that much? The Casino was supposed to build for money laundering! The RE is going down, the Libs are going down too; but they need to claim their windfall before they leave. But who cares, another cartel, another boss riding this BC money grabbing ship! The people really in trouble are not those who are homeless, or who are not able to make ends meet, but are those who have bound themselves and their families with hefty debt.

      An average joe in China do not earn anywhere close to the Canadian folks, not to mention no sitting on piles of cash. Foreign investment won’t come here to invest on properties unless they are planning to immigrate here; buy they can’t immigrate until they have proven wealth and the source of wealth. If these people really want to make investments, all kinds of investment tools are already available in their local market or also Hong Kong market for the Chinese. Mainlanders can just cross the border to Hong Kong to invest and live where they share similar culture, which is not anything available here even in Richmond! The Mainlanders have every intention to stay in Hong Kong, which is not the intention of most of these people “investing” in Canada on their own, other than stashing their bleached money! People that rich has the power to manipulate their own people, don’t want to come to Canada! Even they send their children to Canada to study in the Western Culture, what they want most is an “Escape passport” or “Panic passport”. It’s very different from people who are born in Hong Kong which has been under UK ruling for decades; those people value democracy and freedom and really wants to live in Canada, in the 1980-90s; even they can’t stand lives here afterwards. However, those old immigrants staying behind are have so much regrets right now bc our BC government are being so venal.

      • We personally don’t believe that well organized ‘cartels’ have caused the Vancouver price action. There may be a bit of that, sure, but this couldn’t possible cause the degree of price action we’ve seen.
        When a speculative mania occurs, a very large number of people in a group have coinciding interests (all related to the apparent short term benefits of rising prices), and it is easy to imagine that this is occurring because of collusion, whereas it is largely the effect of lots of individuals acting in their own self interests.

      • As if there’s no free will. As Chris Rock said, dealers never sold him drugs he didn’t want

  5. Doesn’t this whole MAC controversy demonstrate that HAM (foreign ownership) is largely an artificial construct foisted on us by the RE and main stream media?

    • 🙂 … pb is and has always been access to credit that should not have existed and which is disappearing upon unwinding of the cycle … it cannot be fixed by tax policy – that would only add another layer of perversion on the cake … meanwhile, note plan b if yen debasement doesn’t work out … (disclaimer: this is not a hoax @1:34)

      • The Poster Formerly Known As Anonymous

        @ 1:34 – If my Katakana/Hiragana isn’t too rusty, it says “unko baagaa.” The choice of words in the English translation is quite normal in Japan.

      • The Poster Formerly Known As Anonymous

        I lolled so hard. Had to rewind to see if that really said what I thought it said!

    • No, the MAC controversy shows that HAM will mislead to stampede other buyers into their project. What people need to remember is HAM really has about 2 decades max of experience with capitalism. Not hard to stampede the unsophisticated. These are the people who believe $5 million for a Cambie Street lot is a shrewd bet.

      • 4SlicesofCheese

        In the MAC case specifically, HAM are not doing the misleading, nor are they the target audience. This is directly aimed at locals to mislead them to think that they have to buy now or be priced out forever by the hordes of HAM.

        That is not to say HAM is never targeted, have you ever seen local chinese language tv? It is filled with actual commercials from developments. You never see that on english language channels.

        This MAC scheme would never work to HAM audience because it is so laughable that Chinese spend their new years vacation to go to Vancouver to buy real estate, if anything the kids go back home to their mother country.

        As for Cambie St lots, who do you think are the buyers of those townhouses that get built :). But obviously in this market the investors of the lots are going to take a bloodbath.

  6. Shark. Jump. Toupee. TeeHee!

    [CBC] – Trump Tower brand coming to Vancouver project

    …”But also like the Toronto project, Donald Trump and his daughter are not investing in the Vancouver tower, merely selling the Trump brand to the developer.

    “We are naturally excited about Vancouver. It is a great city with tremendous access to the Asian market and we look forward to continuing to explore the potential of bringing the Trump flag to this location,” said a statement released by the pair.”…

  7. It always amazes me that policy makers treat Vancouver as if it is unique and somehow exempt from global forces. I know this is the BPOE, but there are all sorts of nice places on earth and many offer much better investments than Vancouver RE.
    If you really wanted to get some indication of foreign investment in our RE market you could look at capital flows into Canada and the composition of capital investment in Canada. I am too busy/lazy to do this, but from what I know of financial markets there has been a lot of capital sloshing around the globe in recent years and a dearth of good investments. Around 2009 Canada became a popular place to invest because it was considered safe and stable. But other than oil and gas, and rocks and trees, there are not a lot of places to invest in Canada. So a lot of foreign money probably sloshed into Vancouver and Toronto RE.
    However, probably sometime in 2011 Canada stopped being the trendy place to invest, partly because of financial market concerns about property bubbles and private debt levels . Capital started flowing toward better, less risky, opportunities. Now it is mostly heading south of the border and that is likely to continue.
    BPOE or not, that capital is not flowing back for a while. So price to incomes and other domestic factors will matter more than they might have a few years ago.

  8. Because the population distribution is not steady, with equal or near equal distribution amongst co-horts… you can expect a Real Estate LiquidityTrap to take viscous hold for several years. This is the lesson of Japan.

    I’m amazed at our stats.. over 70% home ownership rate, way above the mean at 60%. The correction required will take home ownership rates to 50% of the population, or less. The mainstream media sold the dream, the illusion… good luck to all in the years ahead as the Real Estate Titanic sinks. It will be citizens who have no debt that get the life-rafts first… sorry Heloc ladies, and children of homeowners getting stuck the mortgage….. glub,glub,glub….

  9. Overheard at the checkout:
    “Hey, good to see you! How are you? How is the business going?”

    “I’m okay but business is really, really slow. How are your kids?”

    “Okay. The youngest has taken over the dealership but he’s struggling because it’s so slow.”

    The event – a closing down sales. We’re so screwed.

  10. Real Estate Tsunami

    According to Richmond realtor Arnold Shuchat, 226 (25%) of SFH on the market are vacant. Medium asking price is $1,580,000.
    Question: Who owns these vacant SFH? Local Richmond yokels?
    I think not!

    • Yeah, they’ve already bought elsewhere and don’t immediately require the funds as they’d rather wait for another yokel to pony up a $mill or two under the “false pretense” that HAM are buying Vancouver. Apparently, the banks are still cool lending beacoup bucks to the locals despite a stagnant over-priced market and not being able to get CMHC insurance anymore.

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