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I like your logic, but I feel a few things don't add up for me. 1. What are the benefits to a city and its local inhabitants of a foreigner buying an existing

I like your logic, but I feel a few things don't add up for me. 1. What are the benefits to a city and its local inhabitants of a foreigner buying an existing residential home that it will not inhabit? It seems there are none to me, unless the city taxes that home way way more. 2. Why would foreigners invest in the construction of new rental homes or apartment buildings if the rental price wasn't high enough to profit from? In that I mean, I feel you'll only get foreign investment to grow your city once its already too expensive to live in. As they build more and it becomes affordable again, they'd stop investing, and it will become unaffordable again. Keeping the city in a perpetual state of unaffordability.

toyg 9y ago
The advantage of course is capital flowing to the country: someone sold that house and now owns currency that was introduced from outside the system, which will now be spent or invested in the country. And housebuilding is not linked only to rent, but rather to sale prices: if homeowning is culturally valued, people will pay to buy at higher prices.
- lhopki01 9y ago
  Housing isn't like every other good that you can sell. It sits on land which is extremely scarce. At what point does selling housing abroad become a bad thing? When 5% of homes are empty? When 10% of homes are empty? 50%?
  - conanbatt 9y ago
    Land is not scarce at all. Its virtually unlimited. You can find and buy land for dirt cheap, sometimes even free. The value of land is proportional to the income you can get from using it, so the forces that regulate land value and rent are irrelevant to the amount of land, but with what you can get from them. If tomorrow Auckland duplicated wages, rentals would skyrocket there, without changing demographics or land.
- RobertoG 9y ago
  "[..] now owns currency that was introduced from outside the system, which will now be spent or invested in the country." With the current (in most countries) banking system, the money available for investing is not limited by the quantity of money in the system, but by the availability of projects with a good return. A commercial bank can create money if they think that they will have a good return (risk wise). Banks don't lean reserves. An investor can borrow money from a bank if it has a good project. Interest rates are decided by the Central Bank depending of the goals for the country economy. So, the idea of "money available for investing" doesn't make sense in the current fiat economies.
  - toyg 9y ago
    Creating money by borrowing has a cost (interest rates for the bank and for the developer, plus a loss in credibility of the currency value); attracting foreign investment does not. Otherwise all countries would simply close their borders to capital, and they don't - they are actually desperate to attract foreign capital. The most dynamic economies, like China, hoover foreign investment which they then keep in the system, growing internal liquidity and reserves at no cost and strengthening the currency credibility.
- didibus 9y ago
  The advantage of course is capital flowing to the country: someone sold that house and now owns currency that was introduced from outside the system Assuming it was true that this is such a net positive benefit to a city, it sounds like it stops working very quickly. The second sell on the property is now a foreigner to either a city local, which would siphon the money out of the city, or from a foreigner to another. So this would only work to increase the city's cash flow temporarily, or in the case where the property depreciate and the foreigner incurs a less.
  - toyg 9y ago
    If the problem is (reportedly) that foreigners hold too much property, it means the money entered the system and remained there, so the bonus has become permanent (one-off, yes, but permanent). You also assume a foreigner selling property will move the money out of the country, which is actually unlikely - if he's done good business, chances are that he'll reinvest in the same market, so the money again stays in the system; and if he's done bad business then the locals effectively skinned him, which is again a bonus. Plus, every transaction is typically taxed, so even just an increased amount of activity is a bonus for the system. As long as authorities crack down on loopholes (like foreigners buying property through a fake company, and then selling the company to avoid real estate tax over property sales; or keeping properties empty for an unreasonable amount of time in the face of housing shortages), it's a net positive.
barrkel 9y ago
What are the benefits to a city and its local inhabitants of a foreigner buying an existing residential home that it will not inhabit? It supplies a property for rent (i.e. it's not like the property disappears), and the extra demand increases the value of properties the locals own. I think it's only really problematic if capital is cheaper for foreigners than locals. In that I mean, I feel you'll only get foreign investment to grow your city once its already too expensive to live in. As they build more and it becomes affordable again, they'd stop investing, and it will become unaffordable again. Keeping the city in a perpetual state of unaffordability. I don't see how this logic is restricted to foreigners. The argument seems to be universally applicable, which makes me suspicious: why wouldn't investment grow the city until rent falls to the cost of capital + maintenance etc.? (I think the argument doesn't actually work because of the nature of property: location, amenities, services, community; things whose supply isn't easily increased simply by capital. But if it did work to some extent, it would still apply to nationals just as well.)
- ksec 9y ago
  The problem? They don’t really rent them out. Even if they do, they are highly unlikely to rent it for a below or market price. Basically many of these investment aren’t really asking or looking for return. They are like buying a brand new car and let it Stay there until you use it. Which rarely happens.
  - barrkel 9y ago
    There was talk that that was the case in London, but it's not really true when you look at the statistics; it turns out that no more than 1% or so (usually ultra-high-end properties) are bought by foreign investors and not let out. And I think London has this problem far worse than most other places.
    - ksec 9y ago
      London, Vancouver and Hong Kong as well which is far worst then any place on earth.
- 9y ago
conanbatt 9y ago
> What are the benefits to a city and its local inhabitants of a foreigner buying an existing residential home that it will not inhabit? What are the benefits of exporting any work whatsoever? > Why would foreigners invest in the construction of new rental homes or apartment buildings if the rental price wasn't high enough to profit from? This is a good question. There is an expectation that rents will rise in the next decade, so that could explain a healthy market reaction. An unhealthy one might be capital flight from China, so investors are willing to take a loss becaue its lower than the taxes/restrictions china has on that money. Housing has exploded globally, its not a local nz problem.

toyg 9y ago

The advantage of course is capital flowing to the country: someone sold that house and now owns currency that was introduced from outside the system, which will now be spent or invested in the country. And housebuilding is not linked only to rent, but rather to sale prices: if homeowning is culturally valued, people will pay to buy at higher prices.

lhopki01 9y ago
Housing isn't like every other good that you can sell. It sits on land which is extremely scarce. At what point does selling housing abroad become a bad thing? When 5% of homes are empty? When 10% of homes are empty? 50%?
- conanbatt 9y ago
  Land is not scarce at all. Its virtually unlimited. You can find and buy land for dirt cheap, sometimes even free. The value of land is proportional to the income you can get from using it, so the forces that regulate land value and rent are irrelevant to the amount of land, but with what you can get from them. If tomorrow Auckland duplicated wages, rentals would skyrocket there, without changing demographics or land.
RobertoG 9y ago
"[..] now owns currency that was introduced from outside the system, which will now be spent or invested in the country." With the current (in most countries) banking system, the money available for investing is not limited by the quantity of money in the system, but by the availability of projects with a good return. A commercial bank can create money if they think that they will have a good return (risk wise). Banks don't lean reserves. An investor can borrow money from a bank if it has a good project. Interest rates are decided by the Central Bank depending of the goals for the country economy. So, the idea of "money available for investing" doesn't make sense in the current fiat economies.
- toyg 9y ago
  Creating money by borrowing has a cost (interest rates for the bank and for the developer, plus a loss in credibility of the currency value); attracting foreign investment does not. Otherwise all countries would simply close their borders to capital, and they don't - they are actually desperate to attract foreign capital. The most dynamic economies, like China, hoover foreign investment which they then keep in the system, growing internal liquidity and reserves at no cost and strengthening the currency credibility.
didibus 9y ago
The advantage of course is capital flowing to the country: someone sold that house and now owns currency that was introduced from outside the system Assuming it was true that this is such a net positive benefit to a city, it sounds like it stops working very quickly. The second sell on the property is now a foreigner to either a city local, which would siphon the money out of the city, or from a foreigner to another. So this would only work to increase the city's cash flow temporarily, or in the case where the property depreciate and the foreigner incurs a less.
- toyg 9y ago
  If the problem is (reportedly) that foreigners hold too much property, it means the money entered the system and remained there, so the bonus has become permanent (one-off, yes, but permanent). You also assume a foreigner selling property will move the money out of the country, which is actually unlikely - if he's done good business, chances are that he'll reinvest in the same market, so the money again stays in the system; and if he's done bad business then the locals effectively skinned him, which is again a bonus. Plus, every transaction is typically taxed, so even just an increased amount of activity is a bonus for the system. As long as authorities crack down on loopholes (like foreigners buying property through a fake company, and then selling the company to avoid real estate tax over property sales; or keeping properties empty for an unreasonable amount of time in the face of housing shortages), it's a net positive.

barrkel 9y ago

What are the benefits to a city and its local inhabitants of a foreigner buying an existing residential home that it will not inhabit? It supplies a property for rent (i.e. it's not like the property disappears), and the extra demand increases the value of properties the locals own. I think it's only really problematic if capital is cheaper for foreigners than locals. In that I mean, I feel you'll only get foreign investment to grow your city once its already too expensive to live in. As they build more and it becomes affordable again, they'd stop investing, and it will become unaffordable again. Keeping the city in a perpetual state of unaffordability. I don't see how this logic is restricted to foreigners. The argument seems to be universally applicable, which makes me suspicious: why wouldn't investment grow the city until rent falls to the cost of capital + maintenance etc.? (I think the argument doesn't actually work because of the nature of property: location, amenities, services, community; things whose supply isn't easily increased simply by capital. But if it did work to some extent, it would still apply to nationals just as well.)

ksec 9y ago
The problem? They don’t really rent them out. Even if they do, they are highly unlikely to rent it for a below or market price. Basically many of these investment aren’t really asking or looking for return. They are like buying a brand new car and let it Stay there until you use it. Which rarely happens.
- barrkel 9y ago
  There was talk that that was the case in London, but it's not really true when you look at the statistics; it turns out that no more than 1% or so (usually ultra-high-end properties) are bought by foreign investors and not let out. And I think London has this problem far worse than most other places.
  - ksec 9y ago
    London, Vancouver and Hong Kong as well which is far worst then any place on earth.
9y ago

conanbatt 9y ago

> What are the benefits to a city and its local inhabitants of a foreigner buying an existing residential home that it will not inhabit? What are the benefits of exporting any work whatsoever? > Why would foreigners invest in the construction of new rental homes or apartment buildings if the rental price wasn't high enough to profit from? This is a good question. There is an expectation that rents will rise in the next decade, so that could explain a healthy market reaction. An unhealthy one might be capital flight from China, so investors are willing to take a loss becaue its lower than the taxes/restrictions china has on that money. Housing has exploded globally, its not a local nz problem.