A whopping 90 percent of Metro Vancouver residents support the region’s new 15-percent tax on foreign buyers of residential real estate. At the same time, only three percent of respondents to the same poll, conducted by the Angus Reid Institute, say the tax goes far enough, and 71 percent describe it as simply a step in the right direction.
While the region waits to see what kind of impact the new tax will have on the market, pundits are debating what additional measures the government should take. That’s turned a lot of attention to the Quebec Immigrant Investor Program (QIIP), a path exclusively for wealthy immigrants that, despite its name, lets newcomers settle in B.C. Those home buyers are counted as locals and therefore are not subject to the region's new tax on foreign nationals. Some observers argue the QIIP deserves much of the blame for driving up the price of a home in Vancouver.
On July 28, Premier Christy Clark revealed she’s approached her Québécois counterpart and opened discussions on the issue.
“We’re going to work together on it,” she told Global News. “We’re going to try and support him [Premier Philippe Couillard] in finding ways to make sure their program, their investor program, is for Quebec and for Quebec alone. And that when people come into Quebec, that’s where they stay.”
But eliminating this source of wealthy immigrants might not have as sizable an effect on Vancouver real estate as some have suggested.
According to the latest Citizenship and Immigration Canada data, during the first three months of 2016, there were just 268 principal applicants admitted in the immigrant-investor class.
Projected out to the end of the year, that’s an estimated 1,072 people. According to a 2014 federal evaluation, two-thirds of them will settle in B.C., which equates to about 700 home sales in 2016.
Tom Davidoff is an associate professor at the UBC Sauder School of Business who’s proposed improving housing affordability by shifting more of the tax burden from income to property. Using a slightly more conservative estimate of 500 QIIP immigrants making their way to B.C. this year, and assuming all of them settle in Metro Vancouver, he calculated they’ll account for 1.25 percent of the roughly 40,000 residential real-estate transactions in 2016 and about three percent of the value that changes hands in those deals. (These estimates are based on cities covered by the Real Estate Board of Greater Vancouver. Municipalities that fall under the Fraser Valley Real Estate Board such as Surrey and Langley are not included. If they were, the impact of the QIIP would appear less significant.)
While those numbers are small, Davidoff suggested that eliminating the QIIP could still have a noticeable effect in B.C. With a rough calculation, he guessed that removing those buyers from the market could bring prices down by between four and 10 percent.
“It would be a helpful step,” he said. Combined with other measures such as the new 15 percent tax on sales to foreign nationals, Davidoff suggested these policies, if they really work to minimize foreign investment in the market, could slowly begin to bring down prices, eventually by as much as 25 to 50 percent.
The QIIP is what remains of two programs that once comprised investor-class immigrants. The QIIP’s federal counterpart, the Immigrant Investor Program (IIP), stopped accepting applications in 2012. Applicants trickled in for a few years after, but were down to just 84 in 2015.
The IIP and QIIP permit a foreign national to move to Canada in exchange for a five-year loan of $800,000 to the federal or Quebec government. With the IIP eliminated, the Quebec program now accounts for virtually all immigration counted under the investor class.
In 2014, there were 2,080 principal applicants admitted to Canada under both the IIP and QIIP. Then 1,547 in 2015. And now a projected 1,072 for 2016.
Jonathan Cooper, Macdonald Realty’s vice president of operations, told the Straight that it’s hard to gauge what impact ending the QIIP would have on Vancouver real estate.
“It’s not a market-breaking effect, but I think it would have some effect,” he said in a telephone interview. “If most of these people coming in are of a higher net-worth category, which I think they would be under the QIIP, you would see a discrete effect in the higher end of the market.”
But Cooper cautioned that shutting the QIIP should not be viewed as a solution to Vancouver’s affordability crisis.
“There are significantly more immigrants from other categories coming here,” he explained. “And the fundamentals, in terms of low supply, low interest rates, and positive population growth, those would still remain. And I think that would suggest we would not see a big correction in prices [if the QIIP were eliminated].”