One good rule of thumb is that whenever people are blaming foreigners for their problems, they're wrong.
Investment in housing and price increases are related. But it's the price increases that cause the investments, not the other way around.
Investment in housing and price increases are related. But it's the price increases that cause the investments, not the other way around.
Another good rule of thumb is to not dismiss issues just because they don't fit an over-generalized idea of how all situations must work.
The housing situation in Canada is weird. I visited a friend who lived in a high rise and barely saw anyone else come and go from the building the entire week I was there. From the windows we could see into other nearby high rises, most of which were empty. Empty not because they were for sale, but because they had been purchased as investment vehicles by foreign investors who had no intention of ever living there. An entire industry had popped up to cater to these foreign investors and help facilitate their purchase of these properties.
I can't say if this law will be able to curb that weirdness, but it should at least make a dent.
Then charge a vacancy tax.
If nobody is doing the following in a week, I am: set up Canadian entities, pay Canadians to manage it, buy houses and raise offshore capital with variable-rate notes tied to some index that's basically the value of the underlying homes.
My point: if it wasn’t rental only, I really wonder how many neighbours I’d have in a development like this, which seems like it would be a prime target for shoebox buyers around the upper-middle of the market
A foreign investor would need to arrange for straw purchasers to avoid the law, but that in itself would be an act of consciousness of guilt for breaking this law.
Something that's not been brought up much in this discussion is that foreign real estate investment is a diversification tactic: they're buying to get money into a different market than the rest of their wealth. That's why it isn't Canadians driving most of this. Foreign real estate is primarily a safe offshore hedge.
Above, 'PragmaticPulp wrote that:
> I visited a friend who lived in a high rise and barely saw anyone else come and go from the building the entire week I was there. From the windows we could see into other nearby high rises, most of which were empty. Empty not because they were for sale, but because they had been purchased as investment vehicles by foreign investors who had no intention of ever living there.
And my question is how they knew that those apartments were empty because they were owned by some foreign investor (who presumably also wasn’t interested in making money on rent)?
I don’t understand how rules about conveyancing answer that question.
Because its not about just buying for property buying sake. It's just an asset. People invest in assets to hopefully see a return. The fact they are buying in vancouver and not detroit is because these investors expect to see a substantial gain with the vancouver asset versus the detroit one. SPY is down 20% this year while vancouver properties actually saw a gain, its even better to invest in vancouver real estate than the stock market currently.
So how do you walk this back and not make housing in vancouver such a great speculative asset? Easy, you devalue housing, by allowing for apartments to be built in the ~80% of vancouver that is limited to single family or low density development.
This is what drives me crazy about this story. The vast, vast majority of evidence suggests that the problem is with domestic investors. But because of a nice little story, suddenly it’s foreigners who are the problem.
Foreigners are just a correlate.
Going after foreigners for this is like banning men from all bars in Canada because of the high correlation between date-rape drug usage and being a man.
https://www.toronto.ca/services-payments/property-taxes-util...
There are middle men who do the finding then flip the property for 500% of what they buy the house off a little old lady for, on selling it to a rich person from overseas, who use the house for 2 weeks of the year, price all the local would be family buyers out and now, because the investor paid so much for it, it will likely never been affordable to the people of this area again.
The interesting thing about all this is that for the people buying, it's still so cheap it's like buying a car for them, so it's a massive detriment to the local community, and for those buying, it's like a rounding error in their bank account.
Do you call this "blaming foreigners" wrong? Because the people who are organizing this scheme do understand they're ruining the local culture. I'm pretty sure people who are buying the houses are aware they're just storming in using their cash and not really trying to integrate at all, they're not stupid.
What annoys m the most about these parasites, is they don't pay tax, they buy a property, use all the local resources I pay for as a tax payer, contribute zero to the local area.
It is a type of invasion whether you like that word or not.
> What annoys m the most about these parasites, is they don't pay tax, they buy a property, use all the local resources I pay for as a tax payer, contribute zero to the local area.
Why are they exempt from property taxes?
The property taxes are a flat rate for everyone who lives here. This is to be fair everyone I guess. Anyway, whatever the tax is, it’s easy for the people with money to pay it, it’s not a disincentive.
Property tax and income tax are different things. The people who own holiday houses don’t pay income tax here. Which is the bulk of the tax I pay.
They don't just have a lot of disposable cash, they would rather get some of it out of their country and out from its control as insurance. An authoritarian government can completely wipe you out next week without much safeguards, so people in this country hedge like crazy.
Didn't you benefit from the taxes their windfall transaction generated?
There is a middle man, a foreigner who is not from this area, who is paying the locals little money, through coercion, dishonesty, taking advantage of kindness etc.
He is also paying locals off to convince other locals, mostly elderly people to sell their places at a fairly low price, they're elderly and mostly just kind people who don't think about what's going on. They lie and tell them stories about why they need the property over others with less money.
This sounds bad too, but there is a mentality with the locals that foreign people are nice, special, and they try to help them...I don't quite understand it but it exists.
There is one other very important and interesting dynamic at play here which is this: Local people, are ashamed to leave the community, like they're letting the place down. Sometimes though, they know it would be best / easier if they left to be closer to hospitals etc. These people doing the property deals know this and they offer them confidentiality. Like, "if you come to me, and sell to me directly, I won't tell anyone anything". While this in itself sounds like almost a good service, it has one significant drawback for the seller, there is zero transparency on how much money they "could" be getting.
Didn't you benefit from the taxes their windfall transaction generated?
I'd say not really enough to matter, it's a once off payment, and honestly, what I think they're doing is, the "middle man" buys the house at say $50,000 USD, then sells it for the same, but they do the rest of the transaction off shore using "gift money" or other schemes to avoid the taxes.
Honestly it's a total racket, the "middle man" is your classic rich guy type, lives here with security, priceless paintings, smokes cigars and drinks expensive whiskey, it's quite hilarious how much of a stereotype he is. I actually don't hate the person, I actually speak with him, he has told me he has had his life threatened before because of his work. People around here often joke about accidentally running the dude over.
Nice job I guess?
I will say that in a lot of cases, the local government could be doing more, so maybe that's why people say there's no point in blaming foreigners, but if they do implement something, apparently it will be "side stepped" according to 99% of Hackernewsers.
Our theory is that for the foreign owners of the properties, it's mostly a status symbol, like a gucci bag or something, to say "I've got a place in blah, please come visit sometime".
But yeah, as most have said, even for a wealthy person from this country, they generally aren't a match if a bidding war kicks off, they'll lose.
Also as I said earlier, there is a weird preferential treatment given to "white people", it's really hard to understand but it does exist as much as I hate to say it. Even though mostly properties end up being owned by foreigners from Asia, the white people are the face of the operation.
Like I said, I hate to say it, but it's just facts, it's sad it's happening really.
There are efforts for local intervention, such as a "council" who seems to be trying to put together a fund to buy places before they move to offshore ownership, they just seem a bit slower than the property pros.
Not saying there's anything "wrong" with any ethnic group, but there are sources of money in this world and some are particularly more present than others.
I don't know why but I'd say Chinese foreign ownership is much lower in the USA than in Australia, parts of Asia. Either way, I'd say 4% is still a pretty large part of American real estate ?
If you keep allowing for building and taxing to pay for infrastructure, however, growth will continue at a more sustainable rate until demand is eventually satiated and builders have less work, and there won't just be infinite demand either. There are limiting factors here too: maybe the ski resort has a finite number of lift tickets being sold per day, or maybe the local airport only sees so many flights per day.
Companies such as Westbank were making projects like Oakridge, Alberni, Butterfly, Canada House with condo units specifically designed as pied-a-terres, marketed with storefront showrooms in major cities across Asia.
Even setting aside the whole issue of prices, when the actual product being made, the thing that is drawing huge amounts of local labour for years, is not designed with the needs of locals in mind (ie. tiny hotel-like pied-a-terre) that is a huge long term problem.
As soon as the tax was brought in pretty much overnight Westbank dumped this business model and started building purpose built rental for a local renter market. As things should be.
Why not keep building these condos and rake in the money?
But the real problem is that building housing is a physical process that takes time and limited manpower. If we're devoting our trades to building empty condos for rich people, then they are not spending their time building housing for regular local workers. That means there is less supply of regular housing, increased scarcity and rising rents and prices. Unhappy local workers.
There's no simple matter of just training more trades because that takes time and effort too, so when you think about all this in an environment of rapidly rising prices where we need a solution NOW not later, it makes a lot of sense to destroy foreign investor demand at a stroke of a pen and effectively force local development companies to focus their product once again on a local buyer.
That makes some pragmatic sense, but to me, it's at best short-sighted.
At worst it's a cover for NIMBY-ism and/or xenophobia.
With this new Fed ban I'm not so sure what the data that is driving it is, maybe it is just politics with this one, but I do feel confident that with the earlier Foreign Buyer Tax brought in in BC there was real data and troubling trends to support the notion.
1. Believe that their domestic real estate market is overpriced or will respond very quickly to market pressures that will make any investment undervalued. 2. Believe there is non-market benefits to owning foreign real estate that compensate for any additional risk associated with investing overseas.
I believe that both of these factors are at play, Canadian real estate rules make markets dysfunctional so property values tend to increase disproportionally compared to what they should. But it is also the case that a upper-middle class Chinese person looking to secure assets outside the purview of the authoritarian government they are forced to live under will pay a premium.
Ideally what we all want is a situation where the Canadian market is very dynamic and investments provide a reasonable return but any foreign investors that are investing for non-market benefit reasons are compelled to put their properties into the market for rental at market rate for economic reasons but still get to enjoy the bit of freedom that foreign investment affords them.
I think this plays such a significant role in the motives behind the foreign investment that even if housing was going down they would still make this trade.
That number doesn't change because foreigners can't buy.
A: People who want to live in a city need housing and are ready to either 1: pay X/month (rent) or 2: buy the house.
B: This law do not create new unit to be rented or bought, and do not do anything for the cities attractiveness, IE the migratory trend will stay the same
C: The renting price is complex and while location and regulation do have an effect, the price is based on supply and demand, not on "how much did you pay for this house" (unless you have rent limits in canada).
D: The buying price is complex but also half based on the renting price. I think AirBNB jacked things up, and we now see housing as a commodity so the number could be higher, but when i was a kid the common sense was: monthly rent * 12 * 20 > house price: buy, else don't.
If A,B, C and D are all true, then i don't see how this law can change prices. If i'm wrong on any point, it might.
And with a small but significant population of potential buyers excluded, the property prices will not not rise nearly as much and they may even fall. If there are enough rich Canadians in the coming generations then prices may rise again, making the investment worthwhile, but there is significant risk there.
[0] https://www.investopedia.com/terms/p/price-to-rent-ratio.asp
Owning housing produces a certain income for the owner. Either as the rent you can charge from tenants, or increase in the resale price. Both depend on the local supply/demand situation.
Who ultimately owns the properties does not really enter into the price equation.
I know the stories of how foreigners are so greedy that they buy houses but decide to forego the income from renting them out. Those anecdotes don't pass my smell test. Greedy people like to have income!
Housing has a value as an investment, and leaving the housing unoccupied reduces the cost to maintain the investment. Tenants have a lot of protections in many jurisdictions, and an owner is responsible for maintenance, depreciation and damages, while a tenant cannot be evicted by the landlord who wants to sell a unit without a substantial waiting period, if at all.
https://bostonagentmagazine.com/2018/09/11/study-bostons-new...
https://nypost.com/2021/08/05/nearly-half-of-luxury-units-em...
https://www.nytimes.com/2017/07/21/upshot/when-the-empty-apa...
Many of the purchases remaining as rentals or unoccupied
many of the properties are left empty for extended periods of time because the owners value liquidity over rental income, and having a renter makes it more difficult to sell quickly when market conditions change (or if you simply want to shift your portfolio).
But a lot of it has been. Vancouver has for many decades massive influx of Chinese buyers:
https://www.fortunebuilders.com/one-third-of-vancouvers-real...
banning foreign ownership will help, even if only a little bit.
If the actual problem is vacant units, then punish vacancy.
Failing to do that is admitting that xenophobia is easier than good policy.
there is no good reason to buy a house you don't plan to live in.
So what? That's the point. Locals are already being punished!
I don't think history reflects this view. You might remember something like the Revolutionary War, et al. One country often targets and exploits other groups of people. In modern terms, "foreigners" is a practical way to describe the exclusion of a specific nation's members and it's allies. In the USA/China sometimes there's policy that's populist misinformation. In retrospect (decades later) the sentiment is seen as reasonable.
Let's take for granted that you meant "in housing markets". In Canada and the Seattle^ area, luxury homes and goods were commonly considered to be dominated by wealthy Chinese "investors". I dont remember the exact Chinese tax law change enacted by Xi (which effectively taxed foreign holdings), but it caused a mass exodus of Chinese investment and crashed the luxury good market for the Bellevue area over a handful of months. I had left the area by then, so I didn't track it too closely. Seattle is back as a top destination for Chinese millionaires...but I don't know much about that either.
^ https://www.nytimes.com/2014/09/21/business/in-suburban-seat...
^ https://www.seattletimes.com/business/real-estate/seattle-be...
p.s. I do think there's some strange belief that people making broad claims are stupid or less connected and informed than in the past. Almost anyone can talk to brokers and realtors and get this information, as opposed to random internet assumption of inaccuracy.
China doesn't tax property even in China, so I would be surprised if it taxed property held in America. I haven't heard of any specific tax laws on foreign holdings (and in general, China unlike the USA does not tax worldwide income for its citizens and residents). What could have happened is something more informal, like a threat to the upper class to reign in their excess, but Bellevue, at least, is still heavily being populated by Chinese (primarily techies, not investors, who wouldn't be affected by whatever Xi said anyways).
The current trend is that people from nations that were colonisers are the cause of, and are responsible for, the woes of descendants of colonised peoples. It's good to see that you can see through the bullshit too.
There are only select groups that can invest in property, they must reach the baseline investment sum and ongoing payback before they can play the game. Having unchecked offshore ownership is massively damaging to the local people, it raises the bar all that much more. Offshore control of property can easily be weaponised, where it's not about investment but instead about legal denial of property to the locals.
NZ suffers from some of this.
What? I don't think that's what the OP is saying at all? If the descendants of colonizers and the colonized peoples have been living in the same country for centuries, what does this have to do with foreign investment in local assets?
Feel free to point out where he didn't make two distinct statements.
> If the descendants of colonizers and the colonized peoples have been living in the same country for centuries...
Good to see we're on the same page.
> ...what does this have to do with foreign investment in local assets?
Perhaps you missed the rest of my comment.
>NZ suffers from some of this.
Given all of the geopolitical problems China's creating now that was absolutely the right call. Of course the country's still massively exposed with more than 30% of the economy built on trade with China. We've effectively handed an authoritarian regime a button which when pushed will trigger the outright destruction of our economy, and there aren't any politicians in parliament with the intelligence or foresight to see why that's a problem.