Vancouver downtown city in British Columbia. Photo / 123rf
Housing affordability, or the lack of it, has been a topic dissected ad nauseam in Australia and New Zealand, so it may come as some surprise that other world cities are looking here to curb their own woes.
As hard as it might be to believe for Aussies and Kiwis looking to get a foot on the property ladder to believe, one city in particular has sought inspiration from Australian housing policy and seen an almost 20 per cent drop in house prices.
The picturesque city of Vancouver, on Canada's western seaboard, claimed third spot in the annual Demographia International Housing Affordability Survey earlier this year.
In second came Sydney, equally picturesque and in demand, while the tiny financier island hotspot of Hong Kong came in first.
But while Sydney and Vancouver are almost on par, last year, the Canadian city took inspiration from Australia by clamping down on foreign buyers purchasing existing homes in the seaside city.
Like Australian cities, Vancouver property is in hot demand from international investors, particularly the growing Chinese middle classes.
But unlike Australia, Canada has no restriction on foreigners buying real estate - and in a country where property taxes are very low, that was driving prices skywards in Vancouver, which frequently battles it out with Melbourne for the title of the World's Most Liveable City.
While property taxes in Canada are low, income taxes are high.
Many homes bought by foreign investors are left vacant, to avoid paying the income tax rental money attracts.
The impact was twofold.
It drove the prices out of reach for local buyers and, with so many homes sitting vacant, greatly contributed to the city's crippling rental crisis.
Just seven homes in every thousand are available for rent in Vancouver, making competition for homes ultra-competitive.
So, in August last year, Vancouver's provincial authority, British Columbia, the equivalent of our state governments, moved.
They introduced a 15 per cent tax on homes bought by foreign investors, which added about $150,000 to the cost of a million dollar home.
Associate Professor Tom Davidoff, the director of the University of British Columbia's Centre for Urban Economics and Real Estate, said the impact was almost immediate.
"There was a significant correction in the single family home market in particular, starting from about February," Prof Davidoff said.
In the four months from August last year, foreign investment in British Columbia dropped from 13 per cent to four per cent.
From January 2016 to January 2017 house prices in Vancouver fell 18.9 per cent.
"China was a very important player and so after the tax, the fraction of foreign buyers dropped and prices definitely dropped, especially for single family homes," Prof Davidoff said.
"But that said, those markets were slowing even before the tax came in, so it is hard to gauge the true impact."
What is apparent, he said, is that local buyers returned to the market en masse, snapping up apartments, in particular.
"The condo market has gone totally bananas since about February," Prof Davidoff said.
In Australia, foreign ownership laws of residential property dictate that foreigners can only buy properties to live in.
When they are no longer living in them, they must sell them.
However, the restrictions do not apply to the purchase of off-the-plan homes, a move designed to stimulate chronic undersupply problems that are at the heart of affordability woes in Sydney, in particular.
Vancouver has also adopted that strategy, with the 15 per cent tax exempt from the foreign purchase of what they call "pre-sale" homes.
"A lot of the pre-sale market is now foreign money," Prof Davidoff said.
"With that going on, in the long run, I think that's positive for affordability.
"If people buy pre-sale units and sell them before they are complete, they are not part of demand, they are part of supply."
The new measures in Vancouver bring that city into line with Australian foreign investment laws.
So why are home prices still skyrocketing in Australia while our measures, adopted by another city, have had such a dramatic impact on property prices?
The answer lies in Australia's love affair with negative gearing.
Unlike the land Down Under, Canadians do not get tax breaks for purchasing investment properties.
While foreign investment is often demonised as contributing to Australia's escalating house prices, the University of Sydney's senior lecturer in urbanism, Dallas Rogers, said it has been far easier for foreigners to invest in Canada than it has in Australia, hence why the new measures in Vancouver have had such an impact.
On the opposite side of the country, Toronto is now also looking at introducing similar measures.
In Australia, he said, the major problem is the evolution of property as a means to make money, rather than as simply a place to live.
"It comes down to the way we think about homes and the way we are still thinking about homes," he said.
"From about World War II we've had this changing view of a house as a place to live and to raise a family, to, increasingly, thinking of it as a source of capital.
"We need policy that will arrest the investor activity, we need to get back to first home buyers, security of tenure for renters and start to move away from high proportion of investors.
"We hear that it's just about housing supply, but of course there is demand, CGT exemptions, negative gearing.
"We need to look at the whole picture, we need to cool the investor activity."
The Vancouver changes demonstrate just how quickly a policy change can transform the market.
But there are political ramifications for those who enter the transformative fray, and in Australia, the booming investor market means there are plenty of voters with a lot to lose by abolishing or scaling back negative gearing.
But while Canada does not have negative gearing, it had its own unique property tax breaks that were putting enormous pressure on the rental market.
Vacant houses were a huge problem in Vancouver, Prof Davidoff said, as prospective tenants fought it out for the few properties that went on the market.
It was not just foreign investors but local investors investing in property to hold and then onsell to make money that was virtually tax free.
The problem created by that practice was that renting the house out attracted heavy income taxes, so many investors just left them empty.
"Property taxes are low but income and sales taxes are high, which is inviting people to invest in real estate, but not work for a living," Prof Davidoff said.
In response, last November, the City of Vancouver introduced a one per cent empty homes tax, which averages at about $10,000 per year, in a bid to free up more rental stock.
Official estimates had about 25,000 homes sitting vacant as prospective tenants battled it out for the few properties that hit the market.
The tax has not had the desired impact.
Dr Rogers said unfortunately for the city authorities, the desired outcome of houses either being rented or sold has not been achieved.
"The broad thrust of the policy is that there is all of this investor stock on the market and the idea is the way you free up that stock, is you put a tax on it, and that will force them to rent out that property, or you get them to sell it," he said.
"But there have been a couple of strange developments. The assumption is that if you tax somebody they will behave in the way you want them to.
"The other option is they just pay the tax, which will generate revenue, but it might not lead to increased supply in particular places.
"I'm all in favour of these taxes, it's a good way of freeing up this excess housing stock but the second problem is, how do you work out the property is vacant?
"Vancouver is using electricity and water metering to work out if it's vacant, but there are all sorts of ways you can dodge that."
Prof Davidoff is also in favour of the tax, but agreed it had not, so far, had much impact.
He said while there were many differences between the Australian and Canadian property markets, there was one big similarity.
Creativity was constrained by politicians balancing the competing needs of citizens and influential developers.
"There's lack of creativity, which, is often tied to political constraints," he said.
"It's not easy, dealing with land use, the stakes are high, everybody needs a roof over their head and municipalities really hold up developers for financial benefit."
And between Sydney and Vancouver, there seems another striking similarity.
"I was never here when housing wasn't an issue," Prof Davidoff said.
OPINION: You need to consider interest, taxes and fees.