5 ms·

The biggest problem with the U.S. economy is housing prices. Why not ban foreign investment in U.S. real estate?

by staunch 11y ago

KannO 11y ago
This is a big issue in Vancouver, British Columbia. http://www.theprovince.com/business/Vancouver+critical+money+laundering+transnational/11015083/story.html http://www.theprovince.com/business/Vancouver+critical+money...
r00fus 11y ago
They did the exact opposite... A recent bill removed a tax on foreign purchases...
yummyfajitas 11y ago
That won't lower the cost of housing (I.e. rent and owner equivalent rent). All it will do is reduce asset prices and investment in real estate. The real solution is to allow development. Asset prices are high because its mostly illegal to build new housing in coastal cities.
- lqdc13 11y ago
  In Manhattan, you can't really do much more development. So what happens is the foreign investments basically buy out a large portion of available apartments and the people have to move elsewhere. To other boroughs mostly. Sometimes this results in very inefficient transportation/location for actual legitimate companies that operate there and people who live there because of the dead weight real estate.
  - prostoalex 11y ago
    With better materials and improving construction tech there's always an opportunity to demolish and build higher, latest example being https://en.m.wikipedia.org/wiki/432_Park_Avenue https://en.m.wikipedia.org/wiki/432_Park_Avenue
    - lqdc13 11y ago
      Great example of a building rented out/sold to foreign billionaires who would never actually live there.
      - prostoalex 11y ago
        As long as their property tax checks arrive on time, the city should do okay.
  - yummyfajitas 11y ago
    Sure you can. Lots of Manhattan is only 3-4 stories tall - its just legally impossible to build bigger in many places. (E.g. east village, full of the most entitled activists outside SF.) Foreign investments in Manhattan are usually rented out and are part of the housing supply.
    - lqdc13 11y ago
      Close to permanently rented out to foreign/domestic investors not living there. Also, lots of the medium-height buildings are historic in nature, so demolishing them is not a very good option. I agree that there could be some further development, but there should be some sort of regulation to avoid ghost-town status. Had all of the apartments been rented out to actual residents, the picture would have been much better.
      - yummyfajitas 11y ago
        Why would an absentee foreigner rent a flat? Unlike buying it, that's not even an investment. It's just throwing money away. If this is common we should build more and take the money of these stupid foreigners. If we build enough, regulation is unnecessary - why prevent foreigners from giving us their money?
        lqdc13 11y ago
        Not sure why they do it myself or how prevalent it is. Perhaps subletting rent stabilized housing when the price increases further? In this case it wouldn't be much of a problem. I haven't seen any statistics, just some anecdotal evidence for absentee renters, especially in the past two years. Regardless, ownership is obviously a bigger problem.
        evgen 11y ago
        Because in some locations (c.f. London) this makes the asset far more liquid. Having renters requires you to engage a property management company and the presensce of tennants makes it harder to flip the property quickly if you need to get access to your stash of ill-gotten gains. It is not just stories and anecdote, there are large portions of high-end London real estate sitting empty because foreign buyers often do no want a tennant.
- hueving 11y ago
  How does eliminating a massive portion of the demand not reduce the price?
  - aianus 11y ago
    > How does eliminating a massive portion of the demand not reduce the price? It reduces the price of owning a home not living in a home. We have this Chinese real estate money 'problem' in Toronto. It makes it so renting a luxury condo is actually cheaper than buying it and paying mortgage interest + property tax + maintenance. Effectively rich Chinese people subsidize our cost of living in exchange for having a safe place to park their money :)
    - gotrecruit 11y ago
      is that actually true though? in vancouver, we have a similar phenomenon of Chinese real estate investors, except majority of these investors seem content to buy up properties and then choose not to rent them out even if they're not living there. this takes a lot of rental properties out of the market.
    - hueving 11y ago
      If the cost of home ownership has a major decline by blocking foreign investment, then you would actually be able to buy a home for cheaper than renting, which is normal for markets without so much demand. The exorbitant housing prices have just locked out normal people from ever building some sort of equity.
      - yummyfajitas 11y ago
        You can "build equity" by doing things like buying, well, equities. Or fixed income, or any of a variety of other investment vehicles. The only thing special about real estate investment is the massive government subsidies for it. (E.g., owner-equivalent rents are untaxed, mortgage interest is tax deductible, etc.) The best solution to that problem is simply to eliminate those tax subsidies.
gozur88 11y ago
Whether or not housing prices are a problem really depends on your own financial situation.
vitriol83 11y ago
couldn't agree more, see e.g. similar restrictions in well-known bastions of socialism singapore, denmark and australia. non-resident investment in manhattan is literally rent-seeking. perhaps if the foreign investment was redirected to regenerating post-industrial cities, or even actual job creation society as a whole would be better off
beachstartup 11y ago
this kind of legislation is difficult to support/pass because everyone who already owns a house is ostensibly getting richer and richer, and has an easy mechanism to liquidate that wealth. why would they vote against their own interests? the only people who are hurt are first-time home buyers who basically lack any power or influence in the economy and legal process.

The biggest problem with the U.S. economy is housing prices. Why not ban foreign investment in U.S. real estate?

by staunch 11y ago

The biggest problem with the U.S. economy is housing prices. Why not ban foreign investment in U.S. real estate?

KannO 11y ago

This is a big issue in Vancouver, British Columbia. http://www.theprovince.com/business/Vancouver+critical+money+laundering+transnational/11015083/story.html http://www.theprovince.com/business/Vancouver+critical+money...

r00fus 11y ago

They did the exact opposite... A recent bill removed a tax on foreign purchases...

yummyfajitas 11y ago

That won't lower the cost of housing (I.e. rent and owner equivalent rent). All it will do is reduce asset prices and investment in real estate. The real solution is to allow development. Asset prices are high because its mostly illegal to build new housing in coastal cities.

lqdc13 11y ago
In Manhattan, you can't really do much more development. So what happens is the foreign investments basically buy out a large portion of available apartments and the people have to move elsewhere. To other boroughs mostly. Sometimes this results in very inefficient transportation/location for actual legitimate companies that operate there and people who live there because of the dead weight real estate.
- prostoalex 11y ago
  With better materials and improving construction tech there's always an opportunity to demolish and build higher, latest example being https://en.m.wikipedia.org/wiki/432_Park_Avenue https://en.m.wikipedia.org/wiki/432_Park_Avenue
  - lqdc13 11y ago
    Great example of a building rented out/sold to foreign billionaires who would never actually live there.
    - prostoalex 11y ago
      As long as their property tax checks arrive on time, the city should do okay.
- yummyfajitas 11y ago
  Sure you can. Lots of Manhattan is only 3-4 stories tall - its just legally impossible to build bigger in many places. (E.g. east village, full of the most entitled activists outside SF.) Foreign investments in Manhattan are usually rented out and are part of the housing supply.
  - lqdc13 11y ago
    Close to permanently rented out to foreign/domestic investors not living there. Also, lots of the medium-height buildings are historic in nature, so demolishing them is not a very good option. I agree that there could be some further development, but there should be some sort of regulation to avoid ghost-town status. Had all of the apartments been rented out to actual residents, the picture would have been much better.
    - yummyfajitas 11y ago
      Why would an absentee foreigner rent a flat? Unlike buying it, that's not even an investment. It's just throwing money away. If this is common we should build more and take the money of these stupid foreigners. If we build enough, regulation is unnecessary - why prevent foreigners from giving us their money?
      - lqdc13 11y ago
        Not sure why they do it myself or how prevalent it is. Perhaps subletting rent stabilized housing when the price increases further? In this case it wouldn't be much of a problem. I haven't seen any statistics, just some anecdotal evidence for absentee renters, especially in the past two years. Regardless, ownership is obviously a bigger problem.
      - evgen 11y ago
        Because in some locations (c.f. London) this makes the asset far more liquid. Having renters requires you to engage a property management company and the presensce of tennants makes it harder to flip the property quickly if you need to get access to your stash of ill-gotten gains. It is not just stories and anecdote, there are large portions of high-end London real estate sitting empty because foreign buyers often do no want a tennant.
hueving 11y ago
How does eliminating a massive portion of the demand not reduce the price?
- aianus 11y ago
  > How does eliminating a massive portion of the demand not reduce the price? It reduces the price of owning a home not living in a home. We have this Chinese real estate money 'problem' in Toronto. It makes it so renting a luxury condo is actually cheaper than buying it and paying mortgage interest + property tax + maintenance. Effectively rich Chinese people subsidize our cost of living in exchange for having a safe place to park their money :)
  - gotrecruit 11y ago
    is that actually true though? in vancouver, we have a similar phenomenon of Chinese real estate investors, except majority of these investors seem content to buy up properties and then choose not to rent them out even if they're not living there. this takes a lot of rental properties out of the market.
  - hueving 11y ago
    If the cost of home ownership has a major decline by blocking foreign investment, then you would actually be able to buy a home for cheaper than renting, which is normal for markets without so much demand. The exorbitant housing prices have just locked out normal people from ever building some sort of equity.
    - yummyfajitas 11y ago
      You can "build equity" by doing things like buying, well, equities. Or fixed income, or any of a variety of other investment vehicles. The only thing special about real estate investment is the massive government subsidies for it. (E.g., owner-equivalent rents are untaxed, mortgage interest is tax deductible, etc.) The best solution to that problem is simply to eliminate those tax subsidies.

gozur88 11y ago

Whether or not housing prices are a problem really depends on your own financial situation.

vitriol83 11y ago

couldn't agree more, see e.g. similar restrictions in well-known bastions of socialism singapore, denmark and australia. non-resident investment in manhattan is literally rent-seeking. perhaps if the foreign investment was redirected to regenerating post-industrial cities, or even actual job creation society as a whole would be better off

beachstartup 11y ago

this kind of legislation is difficult to support/pass because everyone who already owns a house is ostensibly getting richer and richer, and has an easy mechanism to liquidate that wealth. why would they vote against their own interests? the only people who are hurt are first-time home buyers who basically lack any power or influence in the economy and legal process.