|
Archived Articles
Simeon Mitropolitski is a Canadian analyst, of Bulgarian origin, and a former syndicated columnist with the Bulgarian News Agency (BTA). He is the author of several hundred articles dealing with hot political and economic topics, both national and international.
He was part of the first group of Bulgarian intellectuals and students that began the opposition movement that finally put an end to the communist regime in this country in 1989, and in 1996-1997 participated in international observation teams during the elections in several Balkan countries - Romania, Albania and Bulgaria.
In 2002 Simeon and his family moved from Bulgaria to Canada where they live now in Montreal, province of Quebec. Simeon is a Master of Political Science from McGill University and a B.A. of Political Science and History.
Global Real Estate Project
|
 |
Canada: New developments, bad for both rich and poorCanada presents an obvious paradox. Not always commercial and residential real estate demand is followed locally by adequate market supply. Many people have desire and resources to move to city downtowns and to nearby suburbs. They are often countered by united front of insiders ready to use all the administrative power of their municipalities in order to block these new developments. Surprisingly it doesn't matter whether the municipalities are predominantly rich or poor. They main concern is to keep the value of their properties high (rich) or not to allow infiltration of big money that will erode their buying and renting power (poor). At the end if they are well organized they win in almost all cases. Their victories however come always at the cost of long-term municipal economic decline. On the other hand, these epic battles give a chance for new municipalities to develop.
Rich against new developmentsTaking rational choice argumentation as basis, people in rich neighborhoods want to keep and eventually to increase the value of their real estate. They are predominantly owners instead of tenants. Many more properties on one particular territory can lead to market devaluation or slower inflation everything else being equal. The owners have impression, very rightly we should add, that newcomers may have more choice between buying old or new property instead of choosing only among old properties. Therefore new residential developments become a threat for property value understood as investment. Most new commercial developments also fall into this category of risky enterprises. They may not increase supply of residential properties, but may decrease the quality of life within the neighborhood.What is the pretext these owners use in order to block new developments? They of course never put forward their investment concerns. They instead try to use municipal administration in order to block new developments using different politically correct arguments. Thus new developments suddenly become very threatening to ecological balance within the neighborhood; expected more people suddenly produce additional road traffic in rush hours; larger and higher properties housing more than one family block the view; the list of false pretexts may be very, very long. When the neighborhood is old and population relatively settled through the time such opposition becomes almost insurmountable for municipal authorities looking for extra cash out of newcomers' property taxes. Many new developers after facing such public opposition prefer to look elsewhere, usually in the new suburbs, and never come back.
Poor against new developmentsAssuming that rich people have all investment incentives to block new developments, it looks surprising that people in poor neighborhoods make calculations with very similar conclusions. At first it would seem that more property supply will make finding housing easier and competition among owners will bring down the level of residential rents. Unfortunately it doesn't work that way and people in poor downtown neighborhoods, predominantly tenants, have enough rational arguments to stop as much as possible any new development, both residential and commercial. Their calculations go like this: new developments bring more money and thus bring up the value of physical capital, including the residential real estate. Investors looking for fast returns may invest in such poor neighborhoods hoping to bring the price levels in par with richer neighborhoods. By making lucrative offers no landlord can refuse they may buy out fast at relatively low price the whole neighborhood, erase it and start new developments. Even if the old tenants are protected and new developments are first offered to them to rent, the chances are that these poor tenants won't be able to afford these new residences. In fact the old population will be evicted and new rich persons will settle down either as tenants or as owners.The pretexts these old and poor tenants use to block new developments are the following: new developments are condemned because they contradict with the character of old neighborhood, luxurious condos don't look nice surrounded by very old buildings and ruins; big money should always pay some social price, for example by building enough social housing for those who may be evicted in the process of transformation; of course rich newcomers will create more road traffic problems; and last but not least, the retail sector will respond to more money by inflating prices thus diminishing the purchasing power of the poorer tenants. In general poor urban neighborhoods are almost always heavily subsidized by central authorities and never depend entirely on property taxes, the municipal authorities almost always are ready to give right to their poor constituency instead of giving right to outsider investors. Unless the big money is either ready to pay the social price asked by the population or it's so extremely powerful as to be able to buy out all relevant politicians on all levels, any new project seems very problematic.
A new chance for youngest municipalitiesNew investment is actually very easy to be scared and to be turned away. This however is a good chance for all new suburban municipalities that attract more and more citizens from the city downtowns. Without strong corporate interests of either owners or tenants, these young municipalities have long windows of opportunity by providing construction rights for new developments.On the other hand, both rich and poor neighborhoods pay heavy toll for their reluctance to go against the interests of some of their citizens. Rich neighborhoods gradually lose new citizens and thus lose opportunity to enlarge their tax base. As the general urban population is growing, there are chances that these reluctant downtown neighborhoods turn increasingly into transit transportation hubs; so they must pay more for just maintaining their road infrastructures, which inevitably adds new tax burden on those living there. The poor neighborhoods become heavily depend on the central authorities for money instead of looking for self-taxation as solution; each major fluctuation in national politics therefore may lead to predictable financial defaults.
--------------------
See also the directory of companies providing real estate services in, and general real estate information of Canada.
|
See also:
