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Editorial: Housing supply needs boosting

The increase in home sales to foreign buyers in Greater Victoria is worth monitoring, but it shouldn’t be allowed to distract from the core problem: the shortage of supply. B.C.

The increase in home sales to foreign buyers in Greater Victoria is worth monitoring, but it shouldn’t be allowed to distract from the core problem: the shortage of supply.

B.C. Finance Minister Mike de Jong says the province will increase scrutiny of the region’s real-estate market after sales involving foreign nationals jumped to 55 in October, compared to 27 the previous month. The value of the sales to foreign buyers nearly tripled to $54 million from $19 million.

In August, the B.C. government implemented a 15 per cent property-transfer tax for foreign buyers in Metro Vancouver in an attempt to cool the hot housing market there. Speculators from abroad, particularly from China, have frequently been cited as contributing to high housing prices and short supply.

Vancouver’s housing market did, indeed, cool. Before the tax was implemented, about 13 per cent of real-estate sales were to foreign buyers. That proportion was 1.8 per cent in September and three per cent in October.

That same month, reported the Real Estate Board of Greater Vancouver, saw a 38.8 per cent year-over-year decline in home resales. The region is also experiencing a decline in new-home construction.

The imposition of the foreign-buyer tax raised concerns that investors from abroad would look elsewhere, particularly to southern Vancouver Island. And October’s statistics seem to give weight to that concern.

Yet it’s too soon to draw firm conclusions. Evan Siddall, president of the Canada Mortgage and Housing Corp., said in a speech in Vancouver Wednesday that the Lower Mainland’s market was already starting to slow for other reasons before the tax was reduced.

While offshore buyers are a factor contributing to unaffordability, said Siddall, they are not the only factor. The most important long-term factors, he said, are rising disposable incomes, more people moving into the region and lower mortgage rates.

Lagging supply is also a major problem, he said. Mountains and ocean constrain where housing can be built, he said, and another problem is the favouring of single-family homes over higher-density housing.

“Our attachment to low-density single-family housing in many neighbourhoods represents regressive urban planning and makes the problem worse,” Siddall said.

“This is basic economics. The more we hold back supply, the faster prices will rise in response to increased demand.”

So while it’s prudent to keep track of who is buying property in Greater Victoria, we should not give in to the temptation to blame foreigners for all our housing woes. October’s increase in sales to foreigners might be a blip, not a trend.

Of more importance is the housing supply, and that’s a domestic issue to be tackled by all levels of government. Municipalities in the region are already finding ways to increase housing density; the provincial government has committed funding for more affordable housing; and the federal government is planning to invest more in housing.

Those are the solutions that will make more difference than merely targeting foreign buyers.

The concept is not that complicated — as long as potential buyers exceed the number of houses available, prices will continue to rise.