Western Canada: Will these two measures to curb real estate prices in B.C. actually work?

Good morning, it’s Wendy Cox in Vancouver.

When introducing measures aimed at curbing the skyrocketing price of real estate, governments are especially fond of those that can be summarized for voters in a sentence. In British Columbia, two of those measures have come with the added benefit of the government being able to say that it was the first in Canada.

The federal government’s plan, announced in the budget earlier this month, to ban foreign housing purchases is one such policy.

In 2016, B.C. was the first province to introduce an effort to dull the appeal of Vancouver’s real estate for foreign owners when it introduced a foreign-buyer tax. And in its recent budget, Ottawa announced a plan to ban foreigners from buying Canadian real estate for two years.

But the long-lasting impact of such a measure is debatable, as Mike Hager and Justine Hunter reported.

In July of 2016, foreign buyers accounted for almost 30 per cent of real estate transactions in the city of Burnaby, and 27 per cent of sales in Richmond. In August, when the tax came into effect, foreign buyers made up one per cent of buyers in Burnaby, and two per cent in Richmond.

Housing prices cooled quickly – but then began to rise again. Prices have since cracked new records.

Jill Atkey, chief executive officer of the BC Non-Profit Housing Association, said investors are no doubt driving up home prices across the country, but foreigners make up a fraction of these homeowners and have ceased to be the disruptive force they were in and around Toronto and Vancouver five to 10 years ago.

Instead of a ban, she said, Ottawa should address the distortion caused by Canadian homeowners who are purchasing second, third and fourth properties.

Hafiz Rahman, an economics professor with Thompson Rivers University in Kamloops, B.C., said Statistics Canada pegs foreign buyers as representing five per cent of the overall market across the country, but banning them could still have an impact on prices in some larger cities.

Research published last year by Dr. Rahman and his colleague Jabed Tomal, a statistician who teaches at the same university, found that prices stopped skyrocketing in Chilliwack when the B.C. government expanded its foreign-buyer tax to this Vancouver suburb in 2018, while Kamloops – a similar market further inland that has remained exempt from the levy – saw its home prices continue to rise rapidly over the next two years.

The second measure British Columbia likes to take credit for is its announcement of a beneficial ownership registry.

Three years ago, the province pledged to create a public registry of property owners in the province, the first of its kind in Canada, aimed at ending the use of trusts, corporations and partnerships to shield transactions from public view.

The move was supposed to crack down on tax evasion and money laundering in the real estate sector. The Land Owner Transparency Act established a public registry of beneficial owners that requires corporations, trusts and partnerships that buy land to disclose their beneficial owners. Failure to disclose would result in fines of up to $100,000 or 15 per cent of the assessed property value, whichever is greater.

But as Frances Bula reported this week, the registry has been slow to get off the ground.

It only had information on 37,000 owners, with a total of 66,000 properties. That’s a tiny fraction of the province’s 2.2 million titles worth $2-trillion.

Full compliance with the registry, which was supposed to be in effect by November, 2021, has now been delayed a year, a result of heavy lobbying by B.C. lawyers. They have complained that the province’s definitions of beneficial ownership are unclear, and that there are problems with how much personal information is revealed.

The sluggish rollout is no surprise to those familiar with how complex and multilayered property ownership can be.

“It was a very difficult law to write. We’ve brought in this very complicated system,” said Ron Usher, general counsel for the Society of Notaries Public of B.C.

The federal Liberal government has also promised a beneficial ownership registry, a database of details about who owns and controls millions of private companies.

The pledge was included in minsters’ mandate letters, made public late last year. Missing, though, was the pledge to ensure the registry was “publicly accessible.”

They’re just two words, but without them, Canada’s forthcoming beneficial ownership registry will be a guaranteed flop, writes Globe columnist Rita Trichur.

Both solutions are easily sold to the public: Thwart foreigners from owning Canadian real estate! Reveal the names of people who hide behind numbered companies and other opaque ownership vehicles!

Living up to the billing will be difficult on both counts.

This is the weekly Western Canada newsletter written by B.C. Editor Wendy Cox and Alberta Bureau Chief James Keller. If you’re reading this on the web, or it was forwarded to you from someone else, you can sign up for it and all Globe newsletters here.