As in Auckland, the Canadian cities of Toronto and Vancouver are facing soaring house prices – more than 90% of all detached homes in Vancouver are now worth more than C$1 million according to an article in The Guardian on 17 June 2016.
Unlike New Zealand, however, the Canadian Government is prepared to recognise that, although the issue is complex, the major influx of foreign capital into Canada in recent years is playing a significant role in that country’s housing affordability crisis. It has therefore set aside funds to analyse the extent to which this influx of foreign capital is responsible for the rapid price increases.
To his credit, the Canadian Prime Minister obviously does not see the evidence of overseas capital contributing to increasing house prices as being “diddly squat” as our Housing Minister does – nor is he content to simplistically blame Canada’s planning legislation, the existence of green belts, or lack of land supply. Demand from overseas investors is clearly a major part of the issue.
Earlier this month, the Berry Simons team expressed concerns as to whether the proposed NPS on Urban Development Capacity would be effective in addressing the Auckland housing crisis. One of the three key points we made was that:
“…the lack of housing … is not due to lack of land supply but rather the high level of demand (for both new and existing housing stock) from investors (including overseas investors). As all real estate agents and resource management practitioners in Auckland know from their daily dealings, a very large number of both existing housing and that being built are being snapped up by overseas investors – young and low income New Zealanders are simply unable to compete.”
We suggested that the Government address the factors, that it should know are the root cause of the problem, as a priority ahead of the proposed NPS, which will take some time to have any meaningful effect. We reiterate the suggestion that the Government take a similarly responsible approach as its Canadian counterpart and instigate meaningful research into this issue, including the extent to which houses are being purchased by New Zealand “shelf” companies with predominantly foreign shareholdings.
See The Guardian article, “Canada's housing 'affordability crisis' fuelled by overseas money, Trudeau says”.