Money that was not earned in Canada/money not subject to Canadian income taxes.

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2 1. KEY TERMS

3 Global Capital Money that was not earned in Canada/money not subject to Canadian income taxes. The Great Wall of Money The title of an annual report published by Cushman & Wakefield (a global real estate services firm) tracking the amount of newly raised capital targeting real estate globally since the onset of the financial crisis. The 2017 Wall of Money is pegged at $435 billion.

4 Foreign Buyer An individual who is not a Canadian citizen or permanent resident of Canada, a foreign corporation, or a Canadian corporation controlled by foreign entities. A.k.a. A Non- Resident Buyer. Foreign Involved Transaction A real estate transaction in which at least one foreign buyer is involved.

5 Foreign Buyer Tax An additional, one-time, 15% tax that foreign buyers or taxable trustees pay in addition to the general property transfer tax on transfers of residential property located in the Greater Vancouver Regional District (GVRD). Foreign nationals who are in the process of becoming permanent residents (via B.C. s provincial nominee program) are exempt.

6 2. WHAT WE KNOW ABOUT: Data Availability

7 CANADA There is no systematic tracking of foreign investment in Canadian real estate at the national level. (Isolated and incomplete data exists here and there, e.g. in the 2011 census)

8 BRITISH COLUMBIA The B.C. Government began tracking the purchase of B.C. real estate by foreign buyers in June The data released so far gives us a partial snapshot of recent activity, and is the best data currently available. Key Limitations The B.C. data (and therefore ALL of the charts on the other whiteboards) underestimate the total flow of global capital into B.C. real estate. Due to methodological limitations, the B.C government data: o o o DOES NOT capture transactions in which a non-resident purchases property that is nominally held by a resident family member in B.C. (e.g. spouse, student). DOES NOT capture the significant amount of capital that has arrived via investor immigration programs. DOES NOT capture global investment in condo pre-sales. In general, the current B.C. methodology tracks the foreignness of the buyer rather than the foreignness of the money. The B.C. data releases are somewhat inconsistent o o o o o City-specific data availability varies. More data is released for cities where the 15% FBT currently applies. Public release of data has been unpredictable & less frequent than promised (partially due to the election). Media backgrounders often contain different types of information than what s available online. Certain kinds of high-value information e.g. total investment from foreign buyers (based on % ownership) are inconsistently available, online.

9 CAPITAL REGIONAL DISTRICT For 2016, the province has only released regional data. Municipality-specific data is available for the CRD starting in 2017, but it s limited. In Victoria and Saanich we know how many foreign involved transactions there were, and value of those transactions, but the publicly available data does not tell us how much actual foreign investment was involved in those transactions (some transactions may involve a mix of resident and non-resident buyers). For smaller CRD municipalities, the data is even more limited, because transaction counts and values are not released when the count is between 1 and 4 in any given month (even if that represents a significant percentage of that municipality s transactions).

10 MISCELLANEOUS DATA Before B.C. starting collecting data on foreign buyers, a number of miscellaneous studies attempted to estimate the extent of activity, drawing on: Informal surveys of realtors, property managers and superintendents. Analysis of quintessential PRC or pure Chinese names of buyers. Analysis of addresses to which property assessment data was being mailed. BC Hydro data. The 2011 national census. Other partial/indirect information. In general, these earlier data are inferior to the data currently provided by the B.C. government.

11 WHAT S MISSING From the current publicly available data, we DO NOT have: Data that captures the total flow of global capital into residential real estate. Data on the types of residential real estate being purchased with global capital (e.g. condos, single detached, multi-family, farms, etc.). What, precisely, are foreign buyers buying? Public data for smaller municipalities like Oak Bay where the month-to-month foreigninvolved transaction count is between 1 and 4 (but where the % may nonetheless be quite high).

12 3. WHAT WE KNOW ABOUT: Foreign buyers in Metro Vancouver vs. the CRD

13 Percent of Real Estate Transactions Involving Foreign Buyers CRD exceeds Metro Vancouver since the introduction of a foreign buyers' tax there 16.0% 14.0% 12.0% 10.0% 8.0% Capital Region Metro Vancouver 6.0% 4.0% 2.0% 0.0% (Jun) (Jul) (Aug) (Sep) (Oct) (Nov) (Dec) (Jan) (Feb) (Mar) (Apr) (May) (Jun) (Jul) (Aug) (Sep)

14 Percent of Real Estate Transactions Involving Foreign Buyers An example of a CRD municipality eclipsing a Metro Van municipality (Saanich data available starting in 2017) Saanich Surrey (Jun) (Jul) (Aug) (Sep) (Oct) (Nov) (Dec) (Jan) (Feb) (Mar) (Apr) (May) (Jun) (Jul) (Aug) (Sep)

15 Fair Market Value of Transactions (Average) Looked at regionally, foreign buyers are generally targeting higher-than-average-priced properties $2,500,000 $2,000,000 $1,500,000 $1,000,000 CRD - Foreign Involved CRD - All MVRD - Foreign Involved MVRD - All $500,000 $ (Jun) (Jul) (Aug) (Sep) (Oct) (Nov) (Dec) (Jan) (Feb) (Mar) (Apr) (May) (Jun) (Jul) (Aug) (Sep)

16 Percent of Real Estate Transactions Involving Foreign Buyers In Metro Vancouver, there's signijicant variation between municipalities, and the 15% FBT applies to them all 35.0% 30.0% 25.0% 20.0% 15.0% Vancouver Burnaby Surrey Richmond 10.0% 5.0% 0.0% (Jun) (Jul) (Aug) (Sep) (Oct) (Nov) (Dec) (Jan) (Feb) (Mar) (Apr) (May) (Jun) (Jul) (Aug) (Sep)

17 Total Value of Foreign Involved Real Estate Transactions (June 2016 to Sept. 2017): METRO VANCOUVER: $6.1 billion CAPITAL REGION: $591 million # of Foreign Involved Real Estate Transactions per 1,000 people (June 2016 to Sept. 2017): METRO VANCOUVER: 1.95 CAPITAL REGION: 1.90

18 4. WHAT WE KNOW ABOUT: Foreign buyers in Victoria & Saanich

19 Percent of CRD's Total Foreign Involved Transactions On any given month, Saanich & Victoria compete for most transactions within the CRD 60.0% 50.0% 40.0% 30.0% Victoria Saanich 20.0% 10.0% 0.0% Jan 2017 Feb 2017 Mar 2017 Apr 2017 May 2017 Jun 2017 Jul 2017 Aug 2017 Sep 2017

20 Percent of Real Estate Transactions Involving Foreign Buyers On this measure, Saanich signijicantly exceeds both Victoria and the region overall 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% Capital Region Victoria Saanich 6.0% 4.0% 2.0% 0.0% Jun 2016 Jul 2016 Aug 2016 Sep 2016 Oct 2016 Nov 2016 Dec 2016 Jan 2017 Feb 2017 Mar 2017 Apr 2017 May 2017 Jun 2017 Jul 2017 Aug 2017 Sep 2017

21 Fair Market Value of Transactions (Average) In Saanich, foreign buyers have gravitated towards more expensive properties, with a downward trend through 2017 $1,200, $1,000, $800, $600, Saanich - Foreign Involved Saanich - All $400, $200, $0.00 Jan 2017 Feb 2017 Mar 2017 Apr 2017 May 2017 Jun 2017 Jul 2017 Aug 2017 Sep 2017

22 Fair Market Value of Transactions (Average) In Victoria, the data suggest the opposite: foreign buyers gravitating towards cheaper properties $800, $700, $600, $500, $400, Victoria - Foreign Involved Victoria - All $300, $200, $100, $0.00 Jan 2017 Feb 2017 Mar 2017 Apr 2017 May 2017 Jun 2017 Jul 2017 Aug 2017 Sep 2017

23 5. WHAT WE KNOW ABOUT: Foreign buyers in Smaller CRD Municipalities

24 A Quirk in the Data When the foreign involved transaction count for any given month is between 1 and 4, the province does not release the exact number to avoid residual disclosure of personal information. This means that for smaller municipalities in the CRD we re missing much of the data and can only provide a range of possible values (Low End to High End). We ll look to the province to release annual, exact totals starting in 2018.

25 Percent of Real Estate Transactions Involving Foreign Buyers (Jan to Sep 2017) By this meausure, some smaller CRD municipalities are likely experiencing signijicant foreign buyer activity 14.0% 12.0% 10.0% 8.0% 6.0% High End Low End 4.0% 2.0% 0.0% North Saanich Oak Bay Saanich Highlands Gulf Islands Colwood Sooke Sidney Victoria View Royal Langford Central Saanich Esquimalt Metchosin

26 Total Number of Foreign Involved Transactions (Jan to Sep 2017) Predictably, Victoria & Saanich account for ~70% of foreign buyer activity in the region High End Low End Saanich Victoria Gulf Islands Langford Sooke Oak Bay North Saanich Colwood Sidney View Royal Central Saanich Esquimalt Highlands Metchosin

27 6. WHAT WE KNOW ABOUT: Impact of the 15% Foreign Buyers Tax

28 TANGIBLE IMPACT: TAX REVENUE COLLECTED (Aug 2016 to Sep 2017) METRO VANCOUVER: $223.4 million CAPITAL REGION: $0 (the FBT has not be in effect, here) (Revenue collected from the 15% foreign buyers tax can be made available to affordable housing initiatives and other programs)

29 HYPOTHETICAL IMPACT: TAX REVENUE IN THE CRD With the current publicly available data, we don t know exactly how much tax revenue could have been collected in the CRD. Data on the percent of foreign ownership within foreign involved transactions isn t available for the CRD, like it is for Metro Vancouver municipalities. But, if we assume similar figures between the two regions, we can estimate that between August 2016 and September 2017: ~ $50 million in foreign buyer tax revenue could have been collected in the CRD.* *Assumes % ownership is similar to Metro Vancouver, at ~60% overall, and that residential transactions account for ~90% of total foreign involved transactions. For those who saw an earlier estimate of ~$80 million, that number was based on an initial, less rigorous calculation.

30 IMPACT ON GLOBAL CAPITAL FLOWS Not all global capital is impacted by the foreign buyer tax, which can be avoided by various means. Of the transactions caught by the tax, B.C. data show a sharp drop in foreign buyer activity in Metro Vancouver immediately after the tax came in, followed by a partial rebound. Activity is still significantly lower than in June 2016 (before the tax). Anecdotal accounts suggest many foreign buyers now accept the tax as a cost of doing business. We don t know what would have happened without the 15% FBT (e.g. foreign buyer rates could be much higher than they are today).

31 7. WHAT WE KNOW ABOUT: Real Estate Economics

32 SOME BASICS Housing prices are a function of supply AND demand AND market psychology. Demand for housing comes from all sorts of people, who may want to use it as: o A primary residence (for themselves or family); o A secondary residence (for themselves or family); o A long-term investment (e.g. rental income + equity gains); o A short-term investment (e.g. speculators/flippers); o A safe, secure place to shelter money (without expecting gains); Often, people have a combination of motivations for buying property. Developers propose and build new supply to align with demand. An example of market psychology is the fear of missing out in a rapidly rising market. This fear can spur buyers to enter the market earlier than they had planned, and can spur existing buyers into bidding wars that further inflate prices.

33 A SMALL NUMBER OF BUYERS CAN HAVE A BIG IMPACT Economics 101 instructs that prices are set "at the margin". That's a fancy way of saying prices are set by whoever s willing to pay the most. This person willing to pay top dollar is called the "marginal buyer. The marginal buyer is very important. Why? Because the marginal buyer not only determines price levels, but also their stability and degree of volatility. The behavior of the marginal buyer, as well as the degree of competition for his/her "top dog" spot, sets the prices of nearly every asset class held by today's investors. Foreign buyers = source of marginal buyers. So, a foreign buyer rate of ~5% may sound small, but remember that (a) that number is likely an underestimate and (b) a small number of aggressive, marginal buyers can have a big impact.

34 RIPPLE EFFECTS When housing costs skyrocket in one community, it can trigger ripple effects as people migrate to other communities and then drive up prices, there. Example: people escaping Metro Vancouver and moving to the CRD, which helps drive up prices here. With prices increasing here, more people choose to move up island, driving up prices there. This means that even if a community is not experiencing high levels of foreign buyer activity, they may be feeling the indirect effects of that activity happening elsewhere. Global speculation fuels domestic speculation.

35 BUILDING HOUSING IS HARD Imagine there s a worldwide shortage of nails. Speculators keep hoarding nails for themselves, driving up the price. Weird. The good news is it s relatively easy to ramp up the worldwide production and distribution of nails, helping drive the price back down. In comparison, building housing is extremely difficult. Faced with speculative demand (from foreign and domestic investors alike), the supply side of the equation often can t keep up, and prices climb higher and higher. So in addition to doing our best to build a diversity of quality new homes, e.g. near transit corridors and in existing single detached neighbourhoods, it s very important to consider demand-side interventions.

36 7. WHAT WE KNOW ABOUT: Resistance to extending the 15% Foreign Buyers Tax to the CRD Earlier this year, it was proposed that the 15% Foreign Buyers Tax be extended to the CRD. The idea encountered resistance, for reasons that included:

37 CONCERNS ABOUT RACISM, XENOPHOBIA & DISCRIMINATION Feeling that it is essentially a racist policy, with references to the Chinese head tax. Feeling that it would send a general signal that our community is unwelcoming. Observation that the FBT was currently being challenged in court by plaintiffs who argue it perpetuates prejudice and stereotyping on the basis of national origin. Belief that we shouldn t treat domestic and global capital any differently; e.g. a local councillor wondered why we would treat a buyer from the maritimes any differently than a buyer from overseas.

38 NOT SURE ABOUT THE REAL EXTENT OF FOREIGN BUYER ACTIVITY Confusion arising from perceived differences between the anecdotal information being presented e.g. by some realtors, and the statistics being released by the B.C. government. A sense that foreign buyers were only targeting super expensive properties, which are out of reach for most residents, anyways. Limited availability of municipality-specific provincial data.

39 BELIEF THAT THE NUMBERS IN THE CRD ARE TOO LOW TO REPRESENT A PROBLEM Belief that the monthly statistics being released by the province - showing the percentage of real estate transactions in the CRD involving foreign buyers varying between 3 and 7 percent - wasn t particularly troubling. Debate within Victoria city council included the suggestion that we shouldn t act until we had three consecutive months of >10% foreign involved transactions reported by the B.C. government s [under-reporting] methodology.

40 BELIEF THAT A 15% FBT WOULDN T HAVE A MEANINGFUL IMPACT IN THE CRD Observation that although the provincial data show a sharp drop in foreign involved transactions in Metro Vancouver immediately after the introduction of the tax, this drop has been followed by a [partial] rebound. Belief citing media reports and anecdotal accounts that foreign buyers were accepting the tax as a cost of doing business in Metro Vancouver, and so weren t being meaningfully deterred by it.

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