Five years ago, Burnaby resident Raymond Wong launched a parliamentary petition against foreign buyers of Canadian real estate, particularly in Greater Vancouver.
That was on April 8, 2016, a time when foreigners were being blamed for high prices of homes.
Not long after, the government of then B.C. Liberal premier Christy Clark around summer that year announced a foreign buyer tax in Metro Vancouver.
In 2017, after John Horgan and his B.C. NDP assumed power, the tax was increased and its coverage expanded to other regions in the province.
Foreign purchases decreased over the following years, and when the COVID-19 pandemic hit and closed immigration and travel, these dropped to almost zero.
Even though foreign money has become negligible, home prices have continued to rise.
In 2020, the average price of a home in B.C. rose to $782,027, representing an 11.7 percent increase from $700,369 in 2019.
Moreover, the real-estate market continued to accelerate into 2021.
In particular, the Real Estate Board of Greater Vancouver has reported that sales in March 2021 were the “highest monthly sales total ever recorded in the region”.
Similarly, the Fraser Valley Real Estate Board announced that deals in March constituted the biggest monthly tally since the board was created in 1921.
Going back to Wong, his 2016 petition was presented in the House of Commons by NDP Burnaby South MP Kennedy Stewart, now mayor of the City of Vancouver.
Wong is a member of the Housing Action for Local Taxpayers, a group dedicated to the issue of what it describes on its website as “foreign money fuelled housing crisis”.
On April 16, 2021, Wong initiated another parliamentary petition, and foreign buyers are no longer the target.
This time on Wong’s crosshairs is a tool wielded by the Bank of Canada, and it is called quantitative easing or QE.
To explain, quantitative easing is a monetary policy.
It involves the practice wherein central banks purchase back government bonds sold by the government to financial institutions, like commercial banks. This reduces the interest rates or returns on bonds.
Lowering the returns of bonds leads to a reduction in rates of other financial instruments like mortgages and business loans. Low mortgages increase demand for housing. Increased demand for homes means higher property prices.
To illustrate further, it’s helpful to go back to the speech delivered virtually by Paul Beaudry, deputy governor of the Bank of Canada, on December 10, 2020.
Beaudry addressed members of the Greater Moncton Chamber of Commerce, Fredericton Chamber of Commerce, and Saint John Region Chamber of Commerce about the topic of quantitative easing.
The deputy governor said:
When the Bank buys government bonds of a given maturity, it bids up their price. This, in turn, lowers the rate of interest that the bond pays to its holders. When the interest rate on government bonds is lower, this transmits itself to other interest rates, such as those on mortgages and corporate loans. This stimulates more borrowing and spending, which helps inflation move closer to the 2 percent inflation target.
Talking about inflation, the term refers to the increase in the average price of goods and services.
The Bank of Canada has set a target of two percent for the country’s inflation rate.
Inflation is measured through the Consumer Price Index.
Statistics Canada has reported that the CPI stood at 1.1 percent in February 2021, which is below the target of two percent.
In his speech about quantitative easing, Beaudry said that the central bank, at the time, was “buying a minimum of $4 billion a week of bonds through this process”.
“Overall, we have purchased slightly more than $180 billion since the program was launched in March,” he said.
The parliamentary petition started by Wong on April 16 argues that quantitative easing “enriches the wealthy at the expense of the working class”.
“The manipulation of interest rates is driving real estate and asset inflation, encouraging high levels of debt, and punishing savers,” the petition states.
It goes on to say that “decisions made by the Bank of Canada impact everyday lives”.
“They decide who gets rich, who stays poor, how consumers spend, and if the economy values saving,” the petition states.
The petition makes four demands to the government.
One demand reads: “Ask the Bank of Canada to consider ‘housing’ as part of their decision to either hike or drop interest rates.”
The petition will be presented in the House of Commons by Brad Vis, Conservative MP for Mission—Matsqui—Fraser Canyon.
The petition is open for signature until August 14.
To sign, see here.