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People in Canada blame foreigners too for house prices in Vancouver and Toronto but recent surveys show that foreigners only make up about 10% of purchasers. We

by msie 9y ago

People in Canada blame foreigners too for house prices in Vancouver and Toronto but recent surveys show that foreigners only make up about 10% of purchasers. We've had low interest rates too and a vibrant economy. The federal government raised interest rates, changed mortgage terms and increased fitness requirements to stop people acquiring mortgages they can't afford.

soperj 9y ago
yeah but 10% is huge when you consider that's all inflow, not people selling one house to purchase another, not to mention historically low vacancy rates in both cities.
- dzhiurgis 9y ago
  You might be right. Parent OP doesn't specify if it's 10% per year. Compound growth would be huge over several years. Also, Auckland has had probably more immigration than Australia, at least for the last few years. That said, dropping prices by 10-20% would mean absolutely nothing for an average labourer.
  - soperj 9y ago
    It's per year. Before the foreign buyer tax in Vancouver, there were parts of the city where 20% of purchases were made by foreigners (Burnaby and Richmond).
Spooky23 9y ago
10% is a lot for driving market prices.
- vidarh 9y ago
  10% is a lot for driving market prices only if they live in those houses or leave them empty or massively overpay. But most foreign buyers in these markets are buying to profit, and rent out the properties, and so only really contribute to balancing rental and sale prices.
  - c-smile 9y ago
    Not sure I understand what you said. Example: I want to hire 10 developers. There are no places to live with price tags less than 1.5 mln in 1 hour commute radii from here. What would be my options? To pay them enough salary so they can afford mortgages? Cheaper to move the whole business to Eastern Europe / Russia then.
    - vidarh 9y ago
      I don't understand what you think the relevance of that is to the effect foreign buyers have on house prices. The house market is split between people buying and renting. When people buy as an investment, it does drive up purchase prices, but unless they leave it empty rather than rent out, it drives down rental prices by increasing supply. Rental properties also tends to provide more density, as they are more likely to be occupied by sharers, and so increasing the rental supply is likely to soak up more demand than the reduction in purchase opportunities. Eventually the prices reach some degree of equilibrium, because bidding up the purchase prices much quickly becomes unprofitable as rental prices are pushed down. Ultimately what is driving the cost up is mainly down to more people with enough money who wants to live in a given location, not investors, as if there wasn't demand to live there it'd quickly prove a bad investment.
  - seanmcdirmid 9y ago
    A lot of them are not buying to rent out, especially if they are Chinese where in china renting out doesn't make sense. They sit on the properties empty as pure speculative plays.
    - vidarh 9y ago
      I don't know Australia or New Zealand, but in London that is demonstrably not true: The proportion of empty properties in the areas that are attractive for investment is the same as elsewhere, and the proportion of empty council housing is pretty much the same as empty luxury housing. As it happens, most long term empty properties are empty for other reasons, such as waiting for re-development of the property, or large scale renovations and the like, or issues with sorting out ownership following death etc.. Sure, a few are left empty by owners who just don't care, but there's very little indication this number is high. Especially as in most countries there are rental management companies that makes it trivial to rent out a property even if you're an absentee landlord.
- c-smile 9y ago
  That's true. Yet I've heard from one realtor that in some suburbs of Great Vancouver 15% of properties stay empty - pure investment. Vancouver is not the city to live in anymore. Problem is that it is not the city to work in too. Too long commutes - 2 hours to spend on road. That means work day is not 8 hours but effectively 10. That means people asking and company offering higher salaries. That housing situation hurts all other businesses except of real estate quite a lot.
Element_ 9y ago
The 10% figure that is constantly tossed around is garbage, it was calculated by counting number of owners that voluntarily declared they were foreigners. Many new condo developments in Vancouver and Toronto are offered for sale in Asian countries exclusively before Canadian citizens can even make an offer on them. If you drive around Toronto there are real estate signs openly advertising areas that don't have a 15% foreign buyer tax. The RCMP recently busted an elaborate Chinese money laundering ring in Vancouver that was processing $500 million/year in foreign cash alone. Much of it was being used to purchase real estate in Canada. The last article I read mentioned Canadas laws are so lax the authorities couldn't even seize the real estate directly involved in the scam because it was owned by Chinese citizens through shell corps.

by msie 9y ago

soperj 9y ago

yeah but 10% is huge when you consider that's all inflow, not people selling one house to purchase another, not to mention historically low vacancy rates in both cities.

dzhiurgis 9y ago
You might be right. Parent OP doesn't specify if it's 10% per year. Compound growth would be huge over several years. Also, Auckland has had probably more immigration than Australia, at least for the last few years. That said, dropping prices by 10-20% would mean absolutely nothing for an average labourer.
- soperj 9y ago
  It's per year. Before the foreign buyer tax in Vancouver, there were parts of the city where 20% of purchases were made by foreigners (Burnaby and Richmond).

Spooky23 9y ago

10% is a lot for driving market prices.

vidarh 9y ago
10% is a lot for driving market prices only if they live in those houses or leave them empty or massively overpay. But most foreign buyers in these markets are buying to profit, and rent out the properties, and so only really contribute to balancing rental and sale prices.
- c-smile 9y ago
  Not sure I understand what you said. Example: I want to hire 10 developers. There are no places to live with price tags less than 1.5 mln in 1 hour commute radii from here. What would be my options? To pay them enough salary so they can afford mortgages? Cheaper to move the whole business to Eastern Europe / Russia then.
  - vidarh 9y ago
    I don't understand what you think the relevance of that is to the effect foreign buyers have on house prices. The house market is split between people buying and renting. When people buy as an investment, it does drive up purchase prices, but unless they leave it empty rather than rent out, it drives down rental prices by increasing supply. Rental properties also tends to provide more density, as they are more likely to be occupied by sharers, and so increasing the rental supply is likely to soak up more demand than the reduction in purchase opportunities. Eventually the prices reach some degree of equilibrium, because bidding up the purchase prices much quickly becomes unprofitable as rental prices are pushed down. Ultimately what is driving the cost up is mainly down to more people with enough money who wants to live in a given location, not investors, as if there wasn't demand to live there it'd quickly prove a bad investment.
- seanmcdirmid 9y ago
  A lot of them are not buying to rent out, especially if they are Chinese where in china renting out doesn't make sense. They sit on the properties empty as pure speculative plays.
  - vidarh 9y ago
    I don't know Australia or New Zealand, but in London that is demonstrably not true: The proportion of empty properties in the areas that are attractive for investment is the same as elsewhere, and the proportion of empty council housing is pretty much the same as empty luxury housing. As it happens, most long term empty properties are empty for other reasons, such as waiting for re-development of the property, or large scale renovations and the like, or issues with sorting out ownership following death etc.. Sure, a few are left empty by owners who just don't care, but there's very little indication this number is high. Especially as in most countries there are rental management companies that makes it trivial to rent out a property even if you're an absentee landlord.
c-smile 9y ago
That's true. Yet I've heard from one realtor that in some suburbs of Great Vancouver 15% of properties stay empty - pure investment. Vancouver is not the city to live in anymore. Problem is that it is not the city to work in too. Too long commutes - 2 hours to spend on road. That means work day is not 8 hours but effectively 10. That means people asking and company offering higher salaries. That housing situation hurts all other businesses except of real estate quite a lot.

Element_ 9y ago

The 10% figure that is constantly tossed around is garbage, it was calculated by counting number of owners that voluntarily declared they were foreigners. Many new condo developments in Vancouver and Toronto are offered for sale in Asian countries exclusively before Canadian citizens can even make an offer on them. If you drive around Toronto there are real estate signs openly advertising areas that don't have a 15% foreign buyer tax. The RCMP recently busted an elaborate Chinese money laundering ring in Vancouver that was processing $500 million/year in foreign cash alone. Much of it was being used to purchase real estate in Canada. The last article I read mentioned Canadas laws are so lax the authorities couldn't even seize the real estate directly involved in the scam because it was owned by Chinese citizens through shell corps.