Justin Trudeau Vows Two-Year Ban on Foreign Home Buyers in Canada Election

Meanwhile, https://www.worksinprogress.co/issue/the-housing-theory-of-e...

Having foreign buyers buy very so-so, if not shitty for the price houses with 20% 30% premiums is a story which many realtors in Vancouver can talk about.

Although, I admit, the root cause is still the understudy of housing in big, fast growing cities.

Assuming they don’t work around it through straw purchasers…

So a key part of the picture this kind of argument misses out is that price appreciation is primarily an effect of *marginal* demand and supply, not inventory. To put it another way as long as there's even a little bit of demand exceeding supply, prices will go up till sufficient marginal buyers drop out of the market. A very small imbalance is enough to push prices up. To begin appreciating how and why this happens, you may want to analyze a granular item level time series dataset of a market or auction (I once looked deep into a course auction at my alma matter) - it's quite eye opening.

In this case, there's presumably fairly price in-elastic foreign buyers and/or corporate structures like REITs buying into the residential buying market. Note that at any time, the entire market is never at play as most families wouldn't want to sell and move or change their lives - personal risk plays a factor - if we sell now & prices keep rising, how will we afford a house in the future etc. So prices keep rising.

Note that interestingly housing market is asymmetric in the sense that prices don't fall quite as much when marginal supply out-strips demand. Potential sellers who occupy their own houses generally prefer to stay in their homes and simply go out of the market. That's why prices drop in a big way only during major economic crises when people lose jobs, are unable to fund their mortgage and are forced to sell or let the banks foreclose.

In terms of fixes, creating additional supply by easing restrictions will definitely help. An additional way would be to disallow or disincentivize non-resident ownership. Eg. By banning price inelastic absentee overseas owners and investment companies from residential properties, taxing second and third home purchases by individuals with high duties etc but the key thing is to codify regulation at the "intent" level rather than at execution level so parties exploiting loopholes can be prosecuted and enforcing them.

https://twitter.com/Birdyword/status/1435984024619601925

Our housing prices are wildly high, partially or even significantly, because of very wealthy foreign purchasers who often don't even live in the homes they buy. They jack the price up and sell them to other very wealthy people from their respective home countries. Rinse and repeat. It affects the prices of homes all around the property in tandem.

Basically those wealthy people who aren't contributing to the economy outside the house they bought, are making housing outrageously expensive for the people who do live here, because regular people can't financially compete with the wealthy purchasers that see the home as nothing more than a money maker to trade in overseas properties stacking.

> Nice, this will curb the unacceptably high 4% of home buyers who are foreign who are definitely responsible for driving the market prices up.

These 4% are driving up prices of the most elite real estate, and crowding out rich elite upper-middle-class Canadians, who invest in real estate, and live in big cities (read Toronto, and Vancouver.) That's the real problem for them.

So, these unacceptably high 4% is mostly visible on West Georgia, and Cambie, and then DT Vancouver, and Toronto.

Most people unhappy about it are rich recent immigrants wanting to buy a house themselves. Please make a distinction in between migrants with Canadian passport, or PR, and foreign buyers without any relationship to the country.

But just because foreign ownership is only 4% doesn't mean it can't have a sizable impact on home prices. Prices are always set at the margins, and since foreign ownership, especially in Vancouver, is really treated as a "safe place for cash" from foreign buyers, it can cause prices that are out of whack with the intended purpose of a home as being place to live.

Also, when your primary use of a house is simply a store of value to park your cash, you're likely going to want to put it into areas that are already supply constrained, because that means the risk of prices falling is lower.

Government backed lending is a primary cause. Just like how student loans enabled university costs to skyrocket.

“Using new data from the Canadian Housing Statistics Program (CHSP), this paper provides a basis for an integrated account of the Canadian housing market in the last two decades. It shows how the housing markets in Vancouver and, to a lesser extent, Toronto have become de-coupled from local incomes due to significant flows of foreign capital.”

Regardless, is there a case to be made why a country should allow its housing supply to be treated as an investment vehicle, instead of the more beneficial purpose of housing its citizens? In cases like this, where a state’s obligation to the welfare of its people seems self-evident, the burden of proof is on you to to show that the massive and widespread foreign investment in real estate leading up to a housing affordability crisis somehow was not a factor.

Foreign investment of construction is a thing but I’ve not seen any studies on the net effect.

it gives them a place to flee later in life. many of the houses bought by foreigners are vacant and have never been occupied.

For a gimps into this, look at Meng Wanzhou’s Vancouver mansions

How many mansions does a chinese national need in Vancouver?