Five years ago, Burnaby resident Raymond Wong launched a parliamentary petition against foreign buyers of Canadian real estate, particularly in Metro Vancouver.
It was April 8, 2016, a time when foreigners were blamed for the high price of housing.
Shortly thereafter, the government of then-Liberal premier of British Columbia Christy Clark announced a tax on foreign buyers in metro Vancouver that year.
In 2017, after John Horgan and his BC NDP took power, the tax was increased and its coverage extended to other areas of the province.
Purchases abroad declined in the following years, and when the COVID-19 pandemic hit and shut down immigration and travel, they fell to almost zero.
Even though the foreign currency became negligible, house prices continued to rise.
In 2020, the average price of a home in British Columbia rose to $ 782,027, which is an 11.7% increase from $ 700,369 in 2019.
In addition, the real estate market continued to accelerate in 2021.
In particular, the Greater Vancouver Real Estate Board reported that sales in March 2021 were “the highest monthly sales total on record in the region.”
Likewise, the Fraser Valley Real Estate Board announced that transactions in March were the largest monthly tally since the board was formed in 1921.
Coming back to Wong, his 2016 petition was presented to the House of Commons by NDP MP for Burnaby South Kennedy Stewart, now mayor of the city of Vancouver.
Wong is a member of Housing Action for Local Taxpayers, a group dedicated to the issue of what he describes on their website as “the housing crisis fueled by foreign money.”
On April 16, 2021, Wong launched another parliamentary petition, and overseas buyers are no longer the target.
This time on Wong’s sights is a tool used by the Bank of Canada, and it’s called quantitative easing or QE.
To explain, quantitative easing is monetary policy.
This is the practice of central banks buying back government bonds sold by the government to financial institutions, such as commercial banks. This lowers interest rates or bond yields.
Falling bond yields lower the rates of other financial instruments such as mortgages and business loans. Low mortgage loans increase the demand for housing. Increased demand for homes means higher house prices.
To illustrate further, it is useful to go back to the speech delivered virtually by Paul Beaudry, Deputy Governor of the Bank of Canada, on December 10, 2020.
Beaudry spoke to members of the Greater Moncton Chamber of Commerce, the Fredericton Chamber of Commerce and the Saint John Region Chamber of Commerce about quantitative easing.
The deputy governor said:
When the Bank buys government bonds of a given maturity, it increases their price. This, in turn, lowers the interest rate that the bond pays to its holders. When the interest rate on government bonds is lower, it spills over to other interest rates, such as mortgage and business loans. This stimulates more borrowing and spending, which helps inflation move closer to the 2% inflation target.
Speaking of inflation, the term refers to the increase in the average price of goods and services.
The Bank of Canada has set a target of 2% for the country’s inflation rate.
Inflation is measured by the consumer price index.
Statistics Canada reported that the CPI was 1.1% in February 2021, which is below the target of 2%.
In his speech on quantitative easing, Beaudry said the power plant at the time “was buying a minimum of $ 4 billion a week in bonds through this process.”
“Overall, we’ve bought just over $ 180 billion since the program started in March,” he said.
The parliamentary petition launched by Wong on April 16 argues that quantitative easing “makes the rich richer at the expense of the working class.”
“The manipulation of interest rates causes real estate and asset inflation, encourages high debt levels and punishes savers,” the petition states.
He adds that “the decisions made by the Bank of Canada have an impact on everyday life.”
“They decide who gets rich, who stays poor, how consumers spend and whether the economy values savings,” the petition says.
The petition makes four demands on the government.
One request reads: “Ask the Bank of Canada to consider ‘housing’ as part of its decision to raise or lower interest rates.”
The petition will be presented to 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.