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Herbert Grubel: In Praise Of Real Estate Speculators

Herbert Grubel: In praise of real estate speculators

By HERBERT GRUBEL for Vancouver Sun

Throughout history, politicians and the public have hated speculators on the grounds that they create scarcities, raise prices and cause hardships for consumers. This view is behind the recent decision by the B.C. government to impose a tax on unoccupied housing presumed to be owned by speculators and which is expected to lower the cost of housing.

The implementation of this policy has run into a number of problems that can be solved by some tweaking of the law, but it will do nothing to reduce prices in the long-run. Speculators raise house prices when they buy and keep them empty or rent them out. The speculators realize profits only when they sell them later, at which time they lower prices. In effect, speculators do not add to the demand for and cost of housing, but only smooth it through time. The real cause of the high and rising cost of housing is a continuous excess of demand over supply.

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The excess demand in Metro Vancouver is determined by the high level of immigration, which in recent years has brought 250 families to the region every week. Under the policies announced by the current government, by 2020 this number will be 375 families a week. Adding to this demand are the housing requirements of foreign students, who in 2017 numbered 130,000 and are expected to grow substantially in the future.

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