Does Canada Need Restrictions on Foreign Ownership of Residential Real Estate?

[whatnext]

This has become a very hot topic in Vancouver. And we see the same scenario unfolding in Toronto. Is it time for Canada to follow other jurisdictions and restrict foreign ownership of residential real estate?

“Go for a walk through the neighbourhood I told you about..16th to 33rd / Arbutus to Dunbar or Macdonald to make it really obvious. I am not exaggerating one bit. There you will find 4 or 5 homes per block that sit empty… New homes are empty not old homes… I lived there, I saw it- go see for yourself. Not only do they sit empty but they are being bought and sold many times (flipped) and still never lived in. It has nothing to do with me being a renter… the facts are the facts. No kids playing in the yards, nothing. I’m being told one of our city’s reporters is doing a piece on the specific issue, stay tuned. But go for a walk and see for yourself.” …
http://vreaa.wordpress.com/2012/04/1...ears/#comments

[caltrane74]

Dont need it, won't happen.

Canada is a free market. No government interferance in the free market.

[yyzer]

Originally Posted by caltrane74

Dont need it, won't happen.

Canada is a free market. No government interferance in the free market.

Totally agree...

[WhipperSnapper]

What do you mean by free market?

I'm not sure of the best solution but a number of submarkets are out of control and most residents are losing aside from a couple skyscraper geeks getting off on all the towers going up. An educated individual making a decent wage should be able to afford more than a badly designed and finished shoebox in the urban area of a city.

With that said, government apparent "lack of interference" somehow still makes them a ton of money. I don't see them touching this cash cow unless the masses revolt.

[Doug]

What Canada needs are more stringent financing requirements for non-owner occupied units. For example, the down payment on an investment or recreational property should be much higher than it is on on owner occupied property. Currently, it is much easier to leverage an investment property than it is any other type of investment such as a stock.

[yyzer]

that's already in place....required downpayment for an investment property is 20%, whereas for owner occupied is 5%...

edit: also BTW, if you live outside of Canada (offshore buyer), you are required to have a 35% downpayment...

[whatnext]

Originally Posted by caltrane74

Dont need it, won't happen.

Canada is a free market. No government interferance in the free market.

Australia is a free market, yet they have it. Singapore is arguably one of capitalism's greatest success stories, and they have it.

Downpayments and interest rates aren't even a factor when most are paying cash.

[MichaelS]

Originally Posted by whatnext

Australia is a free market, yet they have it. Singapore is arguably one of capitalism's greatest success stories, and they have it.

Downpayments and interest rates aren't even a factor when most are paying cash.

And Australia has an even more difficult housing market to get into for first time buyers than Canada (from what I saw when living there and talking to Australian friends recently).

By restricting the amount of investment in a market (foreign or otherwise) you will restrict the amount of development, and thus supply, resulting in higher prices as supply will not be able to meet demand as easily.

[whatnext]

Originally Posted by MichaelS

And Australia has an even more difficult housing market to get into for first time buyers than Canada (from what I saw when living there and talking to Australian friends recently).

By restricting the amount of investment in a market (foreign or otherwise) you will restrict the amount of development, and thus supply, resulting in higher prices as supply will not be able to meet demand as easily.

Developers will always produce supply adequate to serve the home market, that's their job in a free market. Why wouldn't they - that's how they derive their income. Its when a market becomes distorted by people not working and earning in that market that problems arise.

If you check out the link I posted its clear that in Vancouver, lots which contained perfectly livable homes and were worth $500k a decade ago have only become $1.5 million teardowns because there arer external forced driving up the prices. I assure you Vancouver is not awash in great-paying jobs that are fueling that increase. And now we see the same feeding frenzy moving into other Canadian cities:

Overseas investors are snapping up properties in Canada's largest cities, driving up prices and pushing ordinary Canadians out of the housing market, observers say.

Real estate experts call it the "new reality," and the high price paid for a north Toronto bungalow is the latest evidence.

This month, the three-bedroom bungalow, circa the 1960s and without much updating, sold for $421,800 over the asking price, creating a buzz among agents and other buyers. Located in Willowdale, where similar detached houses typically sell for just short of $900,000, the bungalow at 300 Dudley Ave. was listed at $759,000.

The winning bid of $1,180,800 came from a university student whose parents live in China and own a business in San Francisco. There were four other bids of more than $1 million...

http://www.cbc.ca/news/canada/story/...investors.html

[jlousa]

The market corrects itself, we need to stop trying to micromanage things. Cycles are normal in life and are will always happen in markets no matter how much we try to stop them.

[rbt]

Originally Posted by whatnext

Its when a market becomes distorted by people not working and earning in that market that problems arise.

...

The winning bid of $1,180,800 came from a university student whose parents live in China and own a business in San Francisco. There were four other bids of more than $1 million...[/I]

This is a university student attenting classes in a Toronto university (I.e. living here full time).

Toronto has had very good luck in keeping around international university students long after they finish their classes, either directly as residents or indirectly through business partnerships with local firms.


There is a very good chance that this student and their children will be contributing to Toronto's economy for decades. They also tend to draw the parents into the city as well through business partnerships.


Big difference between someone investing sight-unseen and someone buying a family member a place to live.

[MolsonExport]

No.



.

[yaletown_fella]

No but we need to put an end to the artificially low interest rates. The elite punishing savers is nothing new.

The Bank of Canada needs to be abolished.

[Waterlooson]

I think we should take a look at what Australia has done, and determine whether that would be appropriate for Canada, or at least for some over-heated Canadian cities. I don't like the fact that people are moving from Vancouver or Toronto due to excessively high real estate prices.... on the other hand, I suppose that this would help weak markets.

[whatnext]

There's a good rundown on what other jurisdictions around the world do to combat runaway foreign ownership in this article:

http://www.rew.ca/articles/240

[casper]

Originally Posted by whatnext

There's a good rundown on what other jurisdictions around the world do to combat runaway foreign ownership in this article:

http://www.rew.ca/articles/240

The first part of the article tries to define the problem (if there is a problem):
http://www.rew.ca/articles/is-china-...ancouver--238/

Reading this article it sounds like a large portion of the off-shore money is either after $2 M and up properties or they are in fact people who plan to move and live in Vancouver. The article also identifies the recent agreement that permits people from mainline China to more easily travel to Canada as a driver for some of the activity. That sounds like legitimate demand. I think we should be welcoming of new immigrants and investors from China or other countries. It adds to the cultural mix of Canada.

[someone123]

Originally Posted by casper

Reading this article it sounds like a large portion of the off-shore money is either after $2 M and up properties or they are in fact people who plan to move and live in Vancouver. The article also identifies the recent agreement that permits people from mainline China to more easily travel to Canada as a driver for some of the activity. That sounds like legitimate demand. I think we should be welcoming of new immigrants and investors from China or other countries. It adds to the cultural mix of Canada.

Even if we are talking about people who want to move here it may be bad for Canadians, particularly younger people who do not already own property and cannot cash in on the current market. It's easy to create a permanent underclass of people who can never afford property and do not have the capital to participate in investment markets that really pay off. It's not hard to imagine Vancouver becoming a city of renters with shitty service jobs where real estate is priced for foreign capitalists, because we're already halfway there.

Free trade, freedom of movement, etc. are in general good things, but it's important to remember that these ideals do not exist globally. Canadians can't immigrate to China for example and there are restrictions on the property they can purchase there. If there were zero restrictions on Chinese participation in the Canadian economy then Chinese people would effectively be privileged over Canadians.

[The Chemist]

Originally Posted by someone123

Canadians can't immigrate to China for example and there are restrictions on the property they can purchase there. If there were zero restrictions on Chinese participation in the Canadian economy then Chinese people would effectively be privileged over Canadians.

Not really. China does have a residency requirement for property purchases, but foreigners who have lived in China for more than one year ARE permitted to buy any residential property they choose.

Foreigners can also get permanent residence in China, though the number of foreigners who actually do so is very small as the process, as with many issues involving the government here, is quite convoluted.

[caltrane74]

We should ban foreign ownership in the resource sector.

It should be owned by Canadians.

Honestly I'm not a Communist.

[Wharn]

Originally Posted by caltrane74

We should ban foreign ownership in the resource sector.

It should be owned by Canadians.

Honestly I'm not a Communist.

OK, sure.

But have fun raising capital from a country that has fewer people than California.