> One good rule of thumb is that whenever people are blaming foreigners for their problems, they're wrong.
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.
> barely saw anyone else come and go from the building the entire week I was there
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.
Interesting side-point: I live in a rental only high rise development in London. When I moved in it was about half full. During the year it’s been almost completely rented out, and this is pretty obvious from the rapid increase of people in the common areas
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
You have to show proof of citizenship and residency during conveyance. When my wife and I recently bought, our driver licences and passports were recorded by the lawyer, pretty much just to tackle this issue.
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.
Suppose I’m in the position of the person in comment I replied to above: I look out of my window and see some empty apartments. Some time later, I write on hacker news that they were not for sale but held by foreigners as investments. Are you suggesting that, between these two steps, I would conveyance the sale of one of those apartments and thereby determine that it was bought as an investment property by a foreigner? I’m sure that’s not what you mean but I don’t get what you are suggesting?
Conveyance is the act of transferring ownership, done by real estate lawyers. If you, as a foreign investor, bought before this law came in, then when you tried to sell it, your identity as a foreign investor could be noted, triggering a check of when you purchased it with respect to this law. but the point here isn't to look around and find all the foreign investor owned properties. It's that investments are bought and sold, and getting into that step is sufficient to carry out action. In this case, the foreign investor would have to sell to someone who's a Canadian citizen, which returns housing stock to being locally owned.
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.
Sorry, I don’t understand the relevance of this to the question above. Maybe I wasn’t clear. Let me try to rephrase that question:
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.
So why are they doing this in Vancouver and not like Detroit, where you can get almost 20 median priced homes (60k each) for the price of a single median price home in Vancouver (1.2m each)? It's about just buying property and storing cash right, why not try and corner the Detroit market since its actually possible with these numbers?
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.
So what you saw was empty high rises. Everything you’ve said about foreign investors is pure speculation.
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.
Sounds like the actual problem is people buying homes and leaving them empty.
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.
So I live in a small mountain town where we've seen a massive influx of foreign investors driving up the price of housing because they're coming here and paying off locals to find them houses to buy for a private holiday house.
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.
Why are only foreign rich people, and not local ones, interested in your mountain town?
> 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.
I don’t want to name countries but they’re buyers from a country where people have a lot of disposable cash, where I live people don’t have that kind of money, that’s why.
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.
> I don’t want to name countries but they’re buyers from a country where people have a lot of disposable cash, where I live people don’t have that kind of money, that’s why.
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.
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.
So the "rich people" in this country just stay at hotels when they visit here. I don't know why the mentality is different but it is. I guess they just feel it's easier to access so less anxiety about "securing a piece of land" or something.
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.
In Canada, the vast majority of rich foreigners buying property are American. Chinese investors, the favourite villain of the "rich foreigners" class, make up only about 4% of foreign real estate investment.
It would be funny though, if you were trying to say that Chinese foreign ownership isn't a problem in places in the world, because I mean, it's absolutely smashed Sydney's housing prices.
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 ?
Yeah, I wasn't fully clear. I'm talking about Canada, where Chinese investment is only 4%, contrary to perception that "Chinese money" is the source of our troubles. 4% is still a significant impact, but it's pretty much pure racism that singles out the Chinese as the primary driver.
It is not known how many transactions are conducted via proxy buyers, the Canadian government does not allow public access to the data that is required to determine what is actually going on in their country. Thus, the imagination steps in and fills in the gaps.
How do you know they are foreign? Either way, if you live in say some little ski town, you are going to have people both foreign and domestic who want a ski lodge. That's just the order of things. As long as you throw your hands in the air and say "they are buying up our limited housing stock, lets do anything but make more housing stock" then people will continue to be priced out by those who can afford to compete on the finite amount of housing on offer.
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.
The reason that the government started moving on foreign investment in BC initially back with the taxes in 2015 was that it was so dominant that it was changing the types of housing that was being built.
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.
Well I think the main reason is that it annoyed the populace that felt they were now having trouble buying a place due to all this foreign competition, and politicians need to serve the populace, not foreign investors.
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.
There is 100% some xenophobia and nimbyism at the margins and those sort of people latching on to "foreign buyers!!" fears to advance their motives, but I do think there was underlying real problems and 100% not-xenophobic, wonky economist policy people in the government were concerned about real outcomes.
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.
Lets try to avoid the sophistry. I dont think the native Americans were wrong to consider the influx of European settlers as being a threat to their existence. Also like "But it's the price increases that cause the investments, not the other way around." is completely nonsensical. Investment is about the expectation of the future price. If something has increased in price it might indicate that it will decrease in price in the future (so called over-priced).
The expectation of the future price of housing for foreign investors is entirely about believing that future construction will be restricted. If investors, foreign or otherwise, believed that housing was a market that responded to market forces in a timely manner they would not invest. It is therefore reasonable to assume that the foreign investors:
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.
>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
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.
And any jurisdiction that loosens zoning restrictions can benefit from the investments that will expand availability instead of being harmed by the consumption of a scarce resource. Potential for a win-win situation.
The question is how many sales will it actually forbid? If the sales (or bids) that push the prices up are coming from people who will be banned, maybe prices will be depressed a lot. If they’re coming from Canadians who have good jobs and a bunch of cash and won’t be forbidden then maybe prices won’t be affected much.
By definition it will. Fewer potential buyers always means lower top prices. Especially in this case, where the whole point is to prevent rich foreigners from outbidding poor locals.
I don't think you understood what GP meant, so i will try to formulate it in another way:
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.
But D is not true. If a property costs one million today, but could sell for two million in a few years, then simply buying it and holding it will earn you a reasonable rate of return even if you never rent it out. In fact renting it out is risky simply because it will make the property harder to sell when the time comes.
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.
But D is true though. Housing price is mostly based on the price-to-rent ratio when outside a bubble, and the average investors know it way better than the average Canadian [0]
Isn't the price-to-rent ratio in the us around 16? And from what i just researched, it's like 18 in Canada, so not "Only if the buyer intends to rent it out". The price-to-rent ratio is 18 in Canada, hence it's not yet a bubble, hence housing as an investment is related to renting prices more than just something to happen in a bubble.
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.
I'm claiming the fundamental underlying demand is for actual housing. Canadian cities are not allowing enough housing to be built for their increasing population, which leads to a price spiral, which in turn attracts savvy investors.
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!
You may not believe it, but the situation is very well documented and certainly a thing that is removing housing stock from cities around the world.
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.
The buyers who are being excluded do not want to rent. They might want a place they can visit for a few weeks, but mostly they want an investment property.
A lot of these properties apparently are bought by wealthy foreigners purely speculatively, and sit vacant. If they were buying them to rent them out, I'd agree with you, but as it is, they end up reducing the housing stock that's available to be lived in while the number of people stays the same, so they do drive up price.
it largely does not. in the high-dollar markets like vancouver and toronto the cost to purchase has little to no relation to the actual houses-to-live-in market, and the cost to own is many times higher than the cost to rent because the housing market is purely a speculative financial market.
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).
i don't think there's too many people (or at least, people making these decisions) who think foreign ownership is the real problem here. it's just the portion of the problem that's politically easiest to tackle.
banning foreign ownership will help, even if only a little bit.
However many foreigners will be punished as a result, even if their participation in the housing market was going to be in good faith and aligned with the public interest.
If the actual problem is vacant units, then punish vacancy.
Failing to do that is admitting that xenophobia is easier than good policy.
> One good rule of thumb is that whenever people are blaming foreigners for their problems, they're wrong.
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.
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.
> 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.
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).
Sure, they should blame their government instead -- which allowed those foreigners to cause the problems, instead of protecting the citizens they are meant to serve.
> One good rule of thumb is that whenever people are blaming foreigners for their problems, they're wrong.
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.
> 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.
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?
>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.
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.
Investment in housing and price increases are related. But it's the price increases that cause the investments, not the other way around.