Ng Weng Hoong, OnePacificNews, Wednesday, February 28, 2018

Could Canada, with the right approach and rules, turn the ‘problem’ of global capital seeking safe havens into a solution for the housing and infrastructure needs of its rapidly-growing cities?

Since 2008, the world has been hit by a tsunami of money created out of nothing by the US Federal Reserve Board and other major central banks. Their Quantitative Easing (QE) programmes pumped trillions of dollars into the global economy to prevent its collapse from the combined weight of the US sub-prime crisis and President Bush’s wars in Iraq and Afghanistan. QE has also created a legacy of extreme wealth inequality, asset bubbles, inflated stock prices, and out-of-whack housing cost in the world’s most desirable cities.

Canadians have reacted with justifiable anger that some of this ‘funny money’ has washed into Vancouver and Toronto. But the growing anger, increasingly and unfairly aimed at Chinese immigrants and their wealth, threatens to cloud policy-making to the detriment of Canada’s own interest.

Consider the case of Singapore which has deep experience dealing with both the offshore money and affordable housing challenges since independence in 1965.

With 5.6 million people densely packed onto a 720-sq km plot, Singapore, which handles vast amounts of capital flows from all over the world, should have been overwhelmed by now. Instead, and somewhat incongruously, it is the ‘housing crisis’ complaints of Metro Vancouver’s 2.5 million living on a generous land mass four times as large that are heard around the world.

Singapore is not without its problems, and its highly centralised system of government is unsuited for Canada. Nevertheless, it offers useful lessons for Vancouver and Toronto as the three cities share common challenges in an increasingly globalised, urbanised world.

For a start, Singapore operates a public housing system exclusively for citizens and permanent residents. While much has been made of New Zealand’s recent ban on foreigners buying existing homes, Singapore has been practising “locals only” for decades with great success.

Asia’s most globalised country is constantly rated among the world’s freest economies, so the ban on foreign ownership represents a paradox. Balancing this nativist policy, Singapore courts foreign investors for its private housing. Developers freely market expensive projects to foreign buyers as well as wealthy locals. For most citizens, a measure of their success in life is to move out from public into private housing.

Today, 80% of 3.8 million Singaporean citizens and permanent residents live in more than one million public housing apartments that they mostly own. HDB flats, as they are called, are affordable, safe, modern, and well served by amenities. The remaining 1.8 million non-citizen population and wealthier Singaporeans occupy private housing that includes some of Asia’s most expensive homes. In 2016, a single-family house on a 25,741-sq ft plot in the prime Cuscaden Road area sold for S$145 million, according to StreetSine Technology Group which provides a full range of real estate services. (C$1=S$1.05).

The result of this dual-track housing market is that Singapore has had the best of both worlds for decades: affordable housing for locals, and investments from wealthy foreigners to contribute to its S$400-billion economy. Of the country’s $914-billion housing market, the private segment is worth S$490 billion, said Streetsine.

“Foreign capital is generally welcome as it’s good for the economy,” said Colin Lauw, a senior manager at the Urban Redevelopment Authority (URA) that manages the country’s scarce land resources.

Singaporeans don’t have sleepless nights worrying about foreigners parking their surplus money in empty downtown condominiums. Indeed, far from provoking local anger or envy, these passive investments are seen as an international vote of confidence in the Singapore economy. Also, most Singaporeans prefer to live in the suburbs where they have community, and access to affordable housing, schools, transit, and services.

Instead, it’s the government that frets about a potentially under-lived downtown core, said Lauw in an interview in Singapore.

“Empty condos don’t fit well with the image of a vibrant city,” he said.

This situation sharply contrasts with British Columbia which voted in the NDP-Green Party government last year partly on its promise to go to war against offshore money and speculation in the housing market. Cheered on by the media, the alliance government has expanded and extended BC’s existing foreign buyers tax in its maiden budget. The mainstream narrative increasingly lumps foreign buyers together with sensational stories about money launderers, drug dealers, gangsters, and tax evaders as the cause of Vancouver’s housing problems.

While criminals undoubtedly abound in the world of international finance, BC’s prolonged and exaggerated fears of offshore money hamper Metro Vancouver’s ability to plan clearly for its long-term economic future. To popular applause, the Green Party recently released its report calling for the usual slew of bans and taxes to punish foreign investment in BC’s housing. Yet, if anything, the province needs global capital — lots of it — to deliver the housing and infrastructure to maintain the high living standards that its heavily-indebted people are used to. There’s no precedent for what BC faces, but studying Singapore’s pragmatic attitude and calmer approach in tapping global capital to serve its own self-interest would be a good start.

* an edited version of this article was published in the Globe and Mail on March 25, 2018