Role of Land Speculators in the High Cost of Development

The growing demand for reform in the real estate market industry poses a challenge to both land speculators and developers. Many people are asserting that owning a home is getting out of reach for most of the population. They claim that the Greater Vancouver and Canadian real estate market should be about supplying housing for people, and not generating money for land speculators alone.

Indeed, price inflammation is a hot topic that continues to prevail in the Canadian real estate and housing construction industry. Surging prices continue to occupy the whole of Vancouver and nearby communities. So, to help us better understand this concept; let us discuss land speculation and the roles that land speculators play in the high cost of development.

Developers argue that a prevailing housing problem exists in Greater Vancouver and the rest of Canada. The scarcity of properties on the market produces higher prices on the available land. Furthermore, in today’s market, speculators are outbidding people who are looking for homes.

Investors who buy and develop land to have it rented out contribute significantly to the housing supply. However, investors who speculate on land just to trade them without any intention of renting them out is another thing. With speculators competing for properties, prices upsurge. In this case, speculators get richer while most home buyers find it hard to afford lands to build their homes, therefore going for a cheaper option that is, renting a house or condominium.

Land speculators buy a property thinking that it will have a higher value in the future when they can sell and take profit of it. They capitalize on the supply of land and hold on to it until a higher market demands for it, making land acquisition a profitable investment for them.

Developers argue that land speculation causes an issue in the supply of land. Land speculators drive up the cost of construction and development, affecting home prices in general. This is one of the primary reasons renters and buyers couldn't afford purchasing their own homes. Real estate speculators take advantage of price upsurge, earn a substantial financial return, and pay small taxes.

The federal government addresses this issue by implementing stricter rules in getting mortgage and speculation tax.

The Government of Canada will introduce speculation tax which will target local and overseas investors who speculate on land and do not pay income tax. The tax was initially drafted to financially penalize some locals with vacation homes that they hold for decades. It would apply to both British and non-British Columbians who fall under the abovementioned criteria. The following areas would be affected:

• Metro Vancouver;

• Fraser Valley;

• Capital Regional District;

• Nanaimo Regional District; and

• Municipalities of Kelowna and West Kelowna.

The tax aims to get home speculators out of the market.

We always aim for success. Our founders, Dan Greenhalgh and Colin Lacey, built the team to develop properties that help increase the supply of rental and residential homes in Greater Vancouver and nearby areas.