Trying to push down housing prices by lowering the housing demand could hurt B.C.’s economy, the B.C. Real Estate Association says.
Chief economist Cameron Muir said their models show that even a 10-per-cent rapid drop in home prices could mean a 1.5-per-cent economic downturn, 26,000 jobs lost, and 10,000 fewer housing starts.
“It could effect the economic growth of the province in terms of economic output, but also retail sales, labour market, unemployment rate, housing starts and of course also the loss in equity and homeowners which comprise 70 per cent of B.C. households,” said Muir.
“Home prices don’t fall on their own. There are ramifications to that.”
The NDP government has faced near-constant backlash since it announced a speculation tax in February. The tax would charge homeowners who don’t pay income taxes in B.C. up to two per cent of property values each year in a bid to cool the market.
The foreign buyers tax – a 20-per-cent tax on property purchased in B.C.’s major urban areas by non-Canadian citizens or residents introduced by the previous Liberal government – made a lot of potential homebuyers “skittish,” he said, delaying home purchases for several months and without doing much to push down prices.
Developers see potential buyers hesitate, he said, and in turn, slow down the pace of their construction projects.
Instead, he said, the province could focus on ramping up supply because that would not only ease the pressure on prices but also provide plenty of jobs.
Muir pointed to the record-breaking 42,000 homes being built in Vancouver currently, up from a previous high of 27,000 units.
That number is mirrored across the province, he added, with many homes under construction set to be complete within the next several quarters.
Once those homes are built, house prices will flatten, Muir said.
“The prime culprit for rising prices is that it takes so long to complete a housing project … we’re talking five years or longer.”
A 2017 Fraser Institute report found that on average, it takes 10.2 months just to approve a home build in the Lower Mainland.
Most new housing starts are multi-family, Muir added, which take longer to build, even if they eventually house more people.
Although he said there’s “no silver bullet” for getting more houses built, stopping a record-breaking building season is certainly the wrong choice.
“In my mind, it’s folly to stall out the construction industry now.”