5,000 jobs gone in four months, says Vancouver Home Builders' Association
Construction industry says real estate tax on foreign buyers hitting members hard
People who build homes in Metro Vancouver say they are bracing for serious losses over the next few months, as the effect of the 15 per cent real estate tax on foreign buyers penetrates the market.
Bob de Wit, CEO of the Greater Vancouver Home Builders' Association, is predicting the loss of 5,000 jobs in the region by the beginning of December.
That's about 10 per cent of approximately 50,000 people in the region directly involved in the home construction trade, including electricians, plumbers and framers, among others.
De Wit said within days of the tax announcement in late July, building contracts started to vanish.
"I was surprised at how quick it was," he said. "The very next day we were getting emails from our members about contracts falling through."
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More job losses to come
Christy Clark's Liberal government introduced the 15 per cent tax on foreign buyers — with the aim to increase affordability in the housing market — in late July, with no exemptions for pre-existing contracts. The tax took effect in early August, just seven days after it was announced.
De Wit said many of the early construction contracts that collapsed were with recent home buyers who were suddenly subject to the tax, and who balked at paying for renovation work on properties that would now cost more.
He now expects some larger building projects that are in the early stages of construction to collapse or scale down, forcing layoffs in the trades.
That's because banks demand a certain percentage of units to be pre-sold before financing is approved, and de Wit said foreign buyers who have recently made those purchases — and who haven't paid much yet — may walk away from the deals and leave the projects in jeopardy.
"This is happening — it's happening," he said.
"There's new communities in Burke Mountain that have a lot of foreign buyers. West Vancouver — some communities have a high percentage."
Looking ahead, he said the industry will come back, but he's bracing for fewer home starts in the long run, and uncertainty until the market levels out.
"Every time you have a disrupted economy it's nerve-wracking," said de Wit.
"If you're in the shoes of the construction worker who will lose their job because this policy [the foreign buyer tax] you'd feel differently about it."
Will tax improve affordability?
De Wit said he supports measures to improve housing affordability, especially for people in the construction trade, where the average salary is about $55,000 per year.
But he argues the tax won't achieve that. Rather, he believes the government introduced the tax to score political points ahead of the provincial election next spring.
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The multiplier effect
James Brander, a professor at the University of British Columbia's Sauder School of Business, said the loss of 5,000 jobs over a short period of time — as predicted by de Wit — would be significant.
He says if that happens there could be even more job losses in other industries connected to home construction, such as transportation and appliance sales.
"We're also talking about individual workers who maybe lose their jobs, get laid off, or don't work as much, who don't earn as much, who spend less," he said.
"They maybe don't go out to restaurants, so people in the restaurant industry lose jobs."
Brander said the spillover effect often gets exaggerated, but he said it's reasonable to believe another 1,000 to 2,000 jobs could be lost over and above the initial 5,000 predicted.