Dear Minister Oliver*,
I’m writing you to express my concern about an issue that affects every current and potential homeowner in Canada: the lack of access to accurate data in the real estate market. The average Canadian household has 60% of its wealth tied up in its primary residence, and yet:
-
Analysts are unable to effectively assess the state of the market, especially projections weighing heavily on the percentage of total sales made to foreign investors.
-
The way new construction sales are currently recorded is inherently flawed.
-
Due to a lack of open data, entrepreneurs are unable to drive innovation in the real estate sector, which ultimately means consumers are losing out on valuable products to make educated decisions.
Industry commentators have claimed that the Canadian real estate market is experiencing a bubble countless times over the past few years, with a particularly large emphasis on allegedly overheated condo markets in Vancouver and Toronto. These commentators have identified investors and, more specifically, foreign investors as the primary culprit for the potential overvaluation. Why is foreign investment potentially worrisome? Foreign investment is typically categorized as “hot money,” which means it flows in and out of the country quickly depending on market conditions. This “hot money” makes the overall market incredibly volatile. It can be so problematic that Australia, another country that had massive influxes of foreign investment, put incredibly stringent requirements on foreign investors. Specifically, the Australian government mandated that:
…[F]oreign non-residents can only invest in Australian real estate if that investment adds to the housing stock, and…investments by temporary residents in established properties are only for their use whilst they live in Australia.
This is an extreme reaction to foreign investment in the residential real estate market, but it begs an important question: if some countries are enacting seriously preventive laws against foreign speculation in residential real estate, then shouldn’t Canadians at least know what percentage of home purchases are made by foreign investors? This critical missing data point renders the opinions of industry commentators unreliable at best, and destructive at worst. The Wall Street Journal recently noted that:
It’s notoriously difficult to determine how much foreign investment there’s been in Canadian housing over the market’s last few years of bidding wars, booming construction and surging prices…unlike some other countries, there’s no official record of foreign investment in Canadian housing.
This lack of data puts Canadian homeowners at risk of losing a large portion of their savings, as foreign investment volatility could have a serious impact on home demand and, consequently, prices. By making both the intended use of the property and the primary address of each party accessible, one could determine the number of foreign investment purchases as a percentage of total sales.
Another issue is with the way we currently record sales for buildings that are not complete, especially with regard to condos. Buildings that are under construction or in the preconstruction phase do not record their sales until the building is actually complete and registered, which creates a lot of distortion in residential sales data. These sales need to be recorded when the purchase agreement is actually signed, rather than years later when the building is complete and closing occurs.
Data is a rich resource that entrepreneurs can harness to create incredible products. The Obama Administrations released an Open Data Policy in May 2013, which declared information a “valuable national asset” that can drive innovation and, ultimately, empower consumers.
‘One of the things we’re doing to fuel more private sector innovation and discovery is to make vast amounts of America’s data open and easy to access for the first time in history. And talented entrepreneurs are doing some pretty amazing things with it,’ said President Barack Obama. ‘Starting today, we’re making even more government data available online, which will help launch even more new startups. And we’re making it easier for people to find the data and use it, so that entrepreneurs can build products and services we haven’t even imagined yet.’
In the U.S. every single deed transaction goes on public record. You can either access that information on the public record itself, or go to a website that aggregates the data and displays it in a more intuitive interface than what the government offers.
Companies like ours are using the American data to create a complete picture of the home’s cycle, from the time it was listed to the final sale. Here is an example of how a deed transfer appears on the New York City public records website and here is an example of what BuzzBuzzHome does with that information to make it more accessible and put the data into context. Armed with this information, end users will be able to make better decisions and, ultimately, the market becomes more competitive.
Here is what we are calling on the federal government to require to create a transparent, competitive Canadian real estate market:
-
That every property sale in Canada is recorded within 30 days of its occurrence and placed on a public online database that is searchable and machine-readable.
-
That the date of record for current preconstruction/under construction units is amended to the signing date, rather than upon completion and closing of the building.
-
That the fields related to the transaction included will be: the date, the price, the address (and unit number, if applicable), the primary use of the property, the property type and the parties’ addresses.
-
That the misrepresentation of any data entered into this record is a serious, punishable offence.
With these changes, consumers would be empowered with the data they need to make the most important financial decision of their lives.
Sincerely,
Kiyoko Fujimura
Executive Vice President
BuzzBuzzHome Corp.
Please show your support for changing the way real estate transaction data is collected and shared by signing our online petition here.
*Following Jim Flaherty’s resignation we have updated the letter adding Joe Oliver’s name to the address field.
