Vancouver Mayor Gregor Robertson suggested that a tax should be levied on vacant property owners in Vancouver although this is just one of his proposed opinions that have failed in addressing the Canadian market situation. During the course of the year, prices of houses have been on the increase with more buyers clamoring for houses with the supply for houses not matching up.
From the records, it shows that only Calgary and a few other cities have not experienced these increases in house prices. But at the rate at which things are going, the entire Canadian housing market will soon experience the inflationary effects of a red-hot housing market.
This rapid increase in prices is as a result of three major contributing factors that are affecting the housing market. These factors are low-interest rates, movement of people especially of wealthy foreign individuals from China and a shortage in the supply of houses which includes the availability of land.
Earlier this year the founder of the Fraser Institute, Michael Walker, spoke in a report debating the issue of the international interest rates and how it is affecting the housing market. He also explained that the movement of people from one country to another has increased the rate of unpaid debt and a “dearth of borrowers and hence a relatively saver to borrower ratio.” This increases the chances of having the interest rates stay the way it is for a long period.
Furthermore, he emphasized that the foreign money that is present in the Canadian housing market is having a negative effect on the price of houses. Foreign investors have a great influence on house prices and this is not a good sign for Canadian buyers.
Walker went on to explain that the chances for the suggestions of Mayor Robertson to levy tax on vacant properties to work are very slim as most of these landowners are wealthy and can afford the current housing price, therefore paying a small amount as tax will not be a hindrance to such individuals.
Other suggestions that were put forward to help the current price situation was to limit the owners of houses in Canada by foreign individuals, but this didn’t work as it is a breach of existing housing laws. Every house owner has the right to sell a property to a buyer of their choice.
With the ongoing debates about the way forward to help control the prices of houses, little is being talked about the supply of houses. And quite surprisingly, it is one of the major factors that is affecting the housing market. However, results from a survey conducted suggested that making more lands available in the Vancouver area has little effects on the house prices. Rather there will be further increases in the house prices as more buyers will be flooding in.
According to Walker, the way out is not through limiting foreign ownership nor a change in interest rates, things will only get better if more lands are made available in various parts of the country which will reduce the inflationary effect of a concentration of demand in one particular area.