Canada ban foreign real estate investors

[TSwizzle]

This will be worth watching;

A new Canadian law took effect January 1 that essentially bans foreign buyers from buying residential properties as investments for two years. The law was passed because of a spike in Canadian home prices since the start of the pandemic – and some politicians’ beliefs that foreign buyers were responsible by snapping up supply of homes as investments. “The desirability of Canadian homes is attracting profiteers, wealthy corporations, and foreign investors,” said the campaign website of Prime Minister Justin Trudeau’s party this past year. “This is leading to a real problem of underused and vacant housing, rampant speculation, and skyrocketing prices. Homes are for people, not investors.”

News

I think this may be a step in the right direction.

 

[robnisch]

This will be worth watching;

A new Canadian law took effect January 1 that essentially bans foreign buyers from buying residential

properties as investments for two years. The law was passed because of a spike in Canadian home prices since the start of the pandemic – and some politicians’ beliefs that foreign buyers were responsible by snapping up supply of homes as investments. “The desirability of Canadian homes is attracting profiteers, wealthy corporations, and foreign investors,” said the campaign website of Prime Minister Justin Trudeau’s party this past year. “This is leading to a real problem of underused and vacant housing, rampant speculation, and skyrocketing prices. Homes are for people, not investors.”

News

I think this may be a step in the right direction.

Part of

This will be worth watching;

A new Canadian law took effect January 1 that essentially bans foreign buyers from buying residential properties as investments for two years. The law was passed because of a spike in Canadian home prices since the start of the pandemic – and some politicians’ beliefs that foreign buyers were responsible by snapping up supply of homes as investments. “The desirability of Canadian homes is attracting profiteers, wealthy corporations, and foreign investors,” said the campaign website of Prime Minister Justin Trudeau’s party this past year. “This is leading to a real problem of underused and vacant housing, rampant speculation, and skyrocketing prices. Homes are for people, not investors.”

News

I think this may be a step in the right direction.

Part of the problem in the US is large investors buying up homes and taking them off the market.

 

[Bronzeage]

It seems like a short sighted policy. The major cost of buying a house is not the sale price, but the interest on the mortgage. If the Canadian government was truly concerned about Canadians being able to buy a house, a program of low interest guaranteed loans with low down payments, targeted at specific segments of the economy, such as first time home buyers would be much more effective.

 

[bilby]

It seems like a short sighted policy.

Policies based on a fear of what foreigners might be doing, generally are.

I am sure that wealthy Canadian citizens are just as capable of causing the exact same problems wealthy foreigners can cause, all the more so now that they don't need to worry about foreign competition.

The idea that total strangers with a completely different lifestyle to mine, are not as big a threat to me if they happen to carry the same passport that I do, is utterly absurd.

Or to put it another way, if something is harmful enough to the community that foreigners should be prohibited from doing it, it's harmful enough that everyone should be prohibited from doing it.

Xenophobia is always shortsighted.

 

[Oleg]

Xenophobia is always shortsighted.

So is okiophobia.

 

[Metaphor]

It seems like a short sighted policy. The major cost of buying a house is not the sale price, but the interest on the mortgage. If the Canadian government was truly concerned about Canadians being able to buy a house, a program of low interest guaranteed loans with low down payments, targeted at specific segments of the economy, such as first time home buyers would be much more effective.

Low interest guaranteed loans with low down payments contributes to higher house prices, not more affordable house prices.

Australia has had various first home buyer grants over the years and our property market is absurdly insanely high, even after recent interest-rate increase driven declines in house prices.

 

[Bronzeage]

It seems like a short sighted policy. The major cost of buying a house is not the sale price, but the interest on the mortgage. If the Canadian government was truly concerned about Canadians being able to buy a house, a program of low interest guaranteed loans with low down payments, targeted at specific segments of the economy, such as first time home buyers would be much more effective.

Low interest guaranteed loans with low down payments contributes to higher house prices, not more affordable house prices.

Australia has had various first home buyer grants over the years and our property market is absurdly insanely high, even after recent interest-rate increase driven declines in house prices.

I'm not sure if I've seen the latest absurdly insanely price index, but what did they think was going to happen when it becomes easier to buy a house?

What costs more, raising the price of a house by $1000, or interest rates by 1%? A house's price matters more to the seller, than the buyer.

Affordable loan programs increase house prices because it releases pent up demand. The point of the loan program would be to put homes in the hands of Canadian residents who would live in the home, instead of foreign real estate conglomerates who depend upon rises in the absurdly insanely index to get return on investment for shareholders. This is a monetary policy with a social policy goal.

If Australia want to reduce it absurdly insanely index, the best method is to increase the supply of houses, not increase the supply of buyers.

 

[TSwizzle]

It seems like a short sighted policy. The major cost of buying a house is not the sale price, but the interest on the mortgage.

One of the major obstacles for people buying a home to live in is absolutely the sale price of the home along with other factors such as closing fees, commissions and property taxes. The sale price also effects the amount a home buyer must put down in order to obtain a mortgage. In the long run, the cost of the mortgage, the interest paid on the loan is of course a major cost so yes, the rate is also a major factor.

If the Canadian government was truly concerned about Canadians being able to buy a house, a program of low interest guaranteed loans with low down payments, targeted at specific segments of the economy, such as first time home buyers would be much more effective.

I think the government should certainly do this also. But eliminating foreign investors from buying up houses is worth consideration.

 

[Jarhyn]

It seems like a short sighted policy. The major cost of buying a house is not the sale price, but the interest on the mortgage. If the Canadian government was truly concerned about Canadians being able to buy a house, a program of low interest guaranteed loans with low down payments, targeted at specific segments of the economy, such as first time home buyers would be much more effective.

The problem is the market being inflated by speculative investment, creating a shortage, and thus inflating the sticker price, thus inflating the interest.

3% of 250k is still a lot less than 3% on 175k.

The major cost of buying a home is a direct function of sale price, and that percentage goes down when the total goes down and down payments are affordable.

 

[Gospel]

Holy shit, I can't believe how many times I've agreed with TSwizzle so far on this topic. I'd better make an appointment with my physician asap.

 

[Jimmy Higgins]

It seems like a short sighted policy. The major cost of buying a house is not the sale price, but the interest on the mortgage. If the Canadian government was truly concerned about Canadians being able to buy a house, a program of low interest guaranteed loans with low down payments, targeted at specific segments of the economy, such as first time home buyers would be much more effective.

I think the problem is too many homes are being bought up by private equity, domestic or abroad. This isn't a good thing.

 

[bilby]

But eliminating foreign investors from buying up houses is worth consideration.

Why are foreign investors to be eliminated, but domestic investors allowed to step into their shoes?

A better solution might be to limit the holdings of any given investor - say to a maximum limit of two, or five, or ten properties per investor, so that nobody can buy up a significant fraction of the market, but anybody can invest in the sector.

I am still not seeing how a person who wants to buy into (eg) the Vancouver market is harmed any more by a lack of options due to some wealthy stranger from having bought up Vancouver real estate as an investment, when that stranger lives in New York, London, or Beijing, than he is if that stranger lives in Toronto or Montreal.

 

[Metaphor]

It seems like a short sighted policy. The major cost of buying a house is not the sale price, but the interest on the mortgage. If the Canadian government was truly concerned about Canadians being able to buy a house, a program of low interest guaranteed loans with low down payments, targeted at specific segments of the economy, such as first time home buyers would be much more effective.

Low interest guaranteed loans with low down payments contributes to higher house prices, not more affordable house prices.

Australia has had various first home buyer grants over the years and our property market is absurdly insanely high, even after recent interest-rate increase driven declines in house prices.

I'm not sure if I've seen the latest absurdly insanely price index, but what did they think was going to happen when it becomes easier to buy a house?

What costs more, raising the price of a house by $1000, or interest rates by 1%? A house's price matters more to the seller, than the buyer.

Affordable loan programs increase house prices because it releases pent up demand. The point of the loan program would be to put homes in the hands of Canadian residents who would live in the home, instead of foreign real estate conglomerates who depend upon rises in the absurdly insanely index to get return on investment for shareholders. This is a monetary policy with a social policy goal.

If Australia want to reduce it absurdly insanely index, the best method is to increase the supply of houses, not increase the supply of buyers.

Yes, I agree, which is why your suggestion of low interest loans and/or down payments, even targeted, would not help but in fact continue to drive prices up.

 

[Metaphor]

But eliminating foreign investors from buying up houses is worth consideration.

Why are foreign investors to be eliminated, but domestic investors allowed to step into their shoes?

A better solution might be to limit the holdings of any given investor - say to a maximum limit of two, or five, or ten properties per investor, so that nobody can buy up a significant fraction of the market, but anybody can invest in the sector.

I am still not seeing how a person who wants to buy into (eg) the Vancouver market is harmed any more by a lack of options due to some wealthy stranger from having bought up Vancouver real estate as an investment, when that stranger lives in New York, London, or Beijing, than he is if that stranger lives in Toronto or Montreal.

Because the number of wealthy strangers within Canada who want to and can afford to buy real estate is smaller than the number within Canada + outside Canada.

 

[Oleg]

Why are foreign investors to be eliminated, but domestic investors allowed to step into their shoes?

Why should a country put the interests of its own citizens above those of foreigners? Crazy!

 

[Loren Pechtel]

It seems like a short sighted policy. The major cost of buying a house is not the sale price, but the interest on the mortgage. If the Canadian government was truly concerned about Canadians being able to buy a house, a program of low interest guaranteed loans with low down payments, targeted at specific segments of the economy, such as first time home buyers would be much more effective.

But what people can afford is the payment, not the total price. Thus low interest loans just drive up the price. Look at what has happened to US real estate recently--soaring, but now crashing as interest rates go up.

 

[Loren Pechtel]

But eliminating foreign investors from buying up houses is worth consideration.

Why are foreign investors to be eliminated, but domestic investors allowed to step into their shoes?

A better solution might be to limit the holdings of any given investor - say to a maximum limit of two, or five, or ten properties per investor, so that nobody can buy up a significant fraction of the market, but anybody can invest in the sector.

I am still not seeing how a person who wants to buy into (eg) the Vancouver market is harmed any more by a lack of options due to some wealthy stranger from having bought up Vancouver real estate as an investment, when that stranger lives in New York, London, or Beijing, than he is if that stranger lives in Toronto or Montreal.

Blocking foreign purchases will substantially reduce the demand there. China is a big problem: The culture is real-estate obsessed and there are a lot of people looking for a place to invest money beyond the reach of the CCCP. China has already taken action against the capital outflow but that never works perfectly.

 

[bilby]

China is a big problem: The culture is real-estate obsessed and there are a lot of people looking for a place to invest money beyond the reach of the CCCP

I presume you mean the Chinese Communist Party (CCP), and not the Союз Советских Социалистических Республик (CCCP), which ceased to exist in 1991, and wasn't particularly able to take away Chinese assets even while it existed.

 

[Bronzeage]

It seems like a short sighted policy. The major cost of buying a house is not the sale price, but the interest on the mortgage. If the Canadian government was truly concerned about Canadians being able to buy a house, a program of low interest guaranteed loans with low down payments, targeted at specific segments of the economy, such as first time home buyers would be much more effective.

But what people can afford is the payment, not the total price. Thus low interest loans just drive up the price. Look at what has happened to US real estate recently--soaring, but now crashing as interest rates go up.

You contradict yourself. If a person can afford the payment, they can afford the price. As I said before, selling price is more important to the seller than the buyer.
It is demand for short supply that drives up prices. If house prices are the problem, more houses is the solution.

 

[Toni]

It seems like a short sighted policy. The major cost of buying a house is not the sale price, but the interest on the mortgage. If the Canadian government was truly concerned about Canadians being able to buy a house, a program of low interest guaranteed loans with low down payments, targeted at specific segments of the economy, such as first time home buyers would be much more effective.

There is nothing that prevents Canada from doing this as well. In fact, it's an excellent idea and one that some communities in the US utilize.

I wish that the US would enact similar laws limiting or outright forbidding the ownership of real estate by foreign corporations and severely limit ownership by foreign investors.

Of course the major cost of a home is the mortgage but too many people in the US are locked out of home ownership by the initial price/need to come up with a percentage of that large price as a down payment. This includes people who have been paying rent higher than a mortgage payment for years. It's really hard to come up with a down payment when rents are so high. Rents are so high because of real estate speculation and the desire for profits by corporations.