Comment by djfergus | Hacker News Reader

Comment by djfergus | Hacker News Reader

There is a lot of speculation that Chinese buyers are driving up the Canadian market. I have no insight to whether this is true but leaving homes vacant does correlate with my observations - Asian and especially Chinese property buyers value a home that has never been lived in significantly higher than a 'used' home. This is regardless of age. From my understanding its a combination of feng shui/superstition (bad spirits!) and lack of taste/trust (interior decor preferences, dodgy renovations).

I saw this a lot in the Malaysian market during the previous frothy years until 2014, many many vacant units, zero ability to negotiate rent - owners were going to get their asking price (rent or sale) or sit on an empty house/apartment. They were making ~10% a year so who can blame them. Then the Malaysian government slapped a retroactive (!) punitive capital gains tax on foreigners. In addition Selangor state (think most of the Kuala Lumpur suburban area) banned foreigners from buying landed, non-strata property.

Instead of lowering prices, this had the effect of driving the transactions to almost zero (very few forced sellers), very little property over RM1m (the minimum limit for foreigner purchase) sells these days. Lots of RE agents are losing their jobs/driving uber to make ends meet. The foreign (predominantly Chinese) owners have deep pockets and holding power. The coming years will be interesting if it continues though.

I look forward to reading the economic thesis papers in the future on whether this Canadian measure works and what the unintended 2nd/3rd order effects are. Its fun when govt's experiment like this, good grist for the mill for economic/psychological research.

In reality, the simple solution is to build more housing; one may notice that articles about housing shortages in Houston and Dallas don't crop up. See http://www.vox.com/cards/affordable-housing-explained. Housing ought to be a fantastic export: http://www.slate.com/blogs/moneybox/2013/05/19/exporting_hou..., but we restrict building enough of it.

The problem isn't building more housing, the problem is that existing housing is being bought above-market by foreign deep-pocketed buyers and left empty. This doesn't just increase housing prices above affordable levels, it also destroys neighborhoods by hollowing out actual residents.

I'd really suggest you read the original links in the parent post, which address this very issue.

I read both of Yglesias' articles.

You wrote "the simple solution is to build more housing", and point to Houston and Dallas as examples where there is no housing problem.

Yglesias proposes a more restricted solution, high-density zoning. This lets people build more housing in the same area, rather than going outwards as Houston and Dallas do.

gamblor956 mentioned a problem which is an issue in London and a few other places; foreign investment in (nearly unused) second homes has secondary negative effects. For example, with fewer actual residents there are fewer restaurants, stores, and other services for those people who live there, and who moved there because there were services.

The NYT at http://www.nytimes.com/2013/04/02/world/europe/a-slice-of-lo... gives a few real-world examples. It's made worse in London by the low tax rate for secondary homes, which is why Vancouver specifically wants higher tax rates for those homes.

Along the lines of Yglesias' description in Slate, suppose foreigners purchased American-made luxury cars from union factories in Detroit and parked them all in your neighborhood. As Yglesias says, "Great news, right?" It builds a lot of upstream production in the US, and "it should be providing lots of employment for working class men."

Except that now you don't have anywhere to park your own car, or for visitors to park, or even for the delivery truck to park.

How much livability would you give up for the benefit of the rest of the country? How much livability should Vancouver residents give up?

Foreign ownership of unused housing decreases density. I think it's possible to compensate by building even more density, with the expectation that 1/3rd of it won't be used. (Hopefully the market will be stable enough.) But my point is that it isn't as simple as looking towards Houston and Dallas.

How do you build more houses in a geographically constrained environment? Vancouver is surrounded by the US border, the ocean and mountains.

Build up.

Just out of curiosity, are there many squatters in these empty homes?

I having seen any articles about squatters. For actual houses owners will hire companies to make them look lived in. Setting out pumpkins on Halloween for example. For Condos you need a fob to enter and use the elevator so not many people who don't belong are going to get in. Some newspaper articles have quoted that around 10% of the condos in Vancouver are empty.

The point of the Vancouver tax isn't to force foreign buyers to sell their properties, but to encourage them to open those properties up for rent.

Early indications are that it will succeed in that goal.

As an Asian, this comment.

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