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By definition it will. Fewer potential buyers always means lower top prices. Especially in this case, where the whole point is to prevent rich foreigners from o

by db48x 4y ago

By definition it will. Fewer potential buyers always means lower top prices. Especially in this case, where the whole point is to prevent rich foreigners from outbidding poor locals.

BurningFrog 4y ago
No. Owning housing produces a certain income for the owner. Either as the rent you can charge from tenants, or increase in the resale price. Both depend on the local supply/demand situation.
- db48x 4y ago
  Yes, supply and demand. Excluding buyers reduces demand, and thus reduces prices.
  - orwin 4y ago
    But buyers will just become renters then, changing nothing for the prices.
    - db48x 4y ago
      The buyers who are being excluded do not want to rent. They might want a place they can visit for a few weeks, but mostly they want an investment property.
  - BurningFrog 4y ago
    I'm claiming the fundamental underlying demand is for actual housing. Canadian cities are not allowing enough housing to be built for their increasing population, which leads to a price spiral, which in turn attracts savvy investors. Who ultimately owns the properties does not really enter into the price equation. I know the stories of how foreigners are so greedy that they buy houses but decide to forego the income from renting them out. Those anecdotes don't pass my smell test. Greedy people like to have income!
    - fps 4y ago
      You may not believe it, but the situation is very well documented and certainly a thing that is removing housing stock from cities around the world. Housing has a value as an investment, and leaving the housing unoccupied reduces the cost to maintain the investment. Tenants have a lot of protections in many jurisdictions, and an owner is responsible for maintenance, depreciation and damages, while a tenant cannot be evicted by the landlord who wants to sell a unit without a substantial waiting period, if at all. https://bostonagentmagazine.com/2018/09/11/study-bostons-new-luxury-towers-largely-sit-empty/ https://bostonagentmagazine.com/2018/09/11/study-bostons-new... https://nypost.com/2021/08/05/nearly-half-of-luxury-units-empty-in-billionaires-row-buildings/ https://nypost.com/2021/08/05/nearly-half-of-luxury-units-em... https://www.nytimes.com/2017/07/21/upshot/when-the-empty-apartment-next-door-is-owned-by-an-oligarch.html https://www.nytimes.com/2017/07/21/upshot/when-the-empty-apa...
orwin 4y ago
I don't think you understood what GP meant, so i will try to formulate it in another way: A: People who want to live in a city need housing and are ready to either 1: pay X/month (rent) or 2: buy the house. B: This law do not create new unit to be rented or bought, and do not do anything for the cities attractiveness, IE the migratory trend will stay the same C: The renting price is complex and while location and regulation do have an effect, the price is based on supply and demand, not on "how much did you pay for this house" (unless you have rent limits in canada). D: The buying price is complex but also half based on the renting price. I think AirBNB jacked things up, and we now see housing as a commodity so the number could be higher, but when i was a kid the common sense was: monthly rent * 12 * 20 > house price: buy, else don't. If A,B, C and D are all true, then i don't see how this law can change prices. If i'm wrong on any point, it might.
- db48x 4y ago
  But D is not true. If a property costs one million today, but could sell for two million in a few years, then simply buying it and holding it will earn you a reasonable rate of return even if you never rent it out. In fact renting it out is risky simply because it will make the property harder to sell when the time comes. And with a small but significant population of potential buyers excluded, the property prices will not not rise nearly as much and they may even fall. If there are enough rich Canadians in the coming generations then prices may rise again, making the investment worthwhile, but there is significant risk there.
  - orwin 4y ago
    But D is true though. Housing price is mostly based on the price-to-rent ratio when outside a bubble, and the average investors know it way better than the average Canadian [0] [0] https://www.investopedia.com/terms/p/price-to-rent-ratio.asp https://www.investopedia.com/terms/p/price-to-rent-ratio.asp
    - db48x 4y ago
      Only if the buyer intends to rent it out.

by db48x 4y ago

By definition it will. Fewer potential buyers always means lower top prices. Especially in this case, where the whole point is to prevent rich foreigners from outbidding poor locals.

BurningFrog 4y ago

No. Owning housing produces a certain income for the owner. Either as the rent you can charge from tenants, or increase in the resale price. Both depend on the local supply/demand situation.

db48x 4y ago
Yes, supply and demand. Excluding buyers reduces demand, and thus reduces prices.
- orwin 4y ago
  But buyers will just become renters then, changing nothing for the prices.
  - db48x 4y ago
    The buyers who are being excluded do not want to rent. They might want a place they can visit for a few weeks, but mostly they want an investment property.
- BurningFrog 4y ago
  I'm claiming the fundamental underlying demand is for actual housing. Canadian cities are not allowing enough housing to be built for their increasing population, which leads to a price spiral, which in turn attracts savvy investors. Who ultimately owns the properties does not really enter into the price equation. I know the stories of how foreigners are so greedy that they buy houses but decide to forego the income from renting them out. Those anecdotes don't pass my smell test. Greedy people like to have income!
  - fps 4y ago
    You may not believe it, but the situation is very well documented and certainly a thing that is removing housing stock from cities around the world. Housing has a value as an investment, and leaving the housing unoccupied reduces the cost to maintain the investment. Tenants have a lot of protections in many jurisdictions, and an owner is responsible for maintenance, depreciation and damages, while a tenant cannot be evicted by the landlord who wants to sell a unit without a substantial waiting period, if at all. https://bostonagentmagazine.com/2018/09/11/study-bostons-new-luxury-towers-largely-sit-empty/ https://bostonagentmagazine.com/2018/09/11/study-bostons-new... https://nypost.com/2021/08/05/nearly-half-of-luxury-units-empty-in-billionaires-row-buildings/ https://nypost.com/2021/08/05/nearly-half-of-luxury-units-em... https://www.nytimes.com/2017/07/21/upshot/when-the-empty-apartment-next-door-is-owned-by-an-oligarch.html https://www.nytimes.com/2017/07/21/upshot/when-the-empty-apa...

orwin 4y ago

I don't think you understood what GP meant, so i will try to formulate it in another way: A: People who want to live in a city need housing and are ready to either 1: pay X/month (rent) or 2: buy the house. B: This law do not create new unit to be rented or bought, and do not do anything for the cities attractiveness, IE the migratory trend will stay the same C: The renting price is complex and while location and regulation do have an effect, the price is based on supply and demand, not on "how much did you pay for this house" (unless you have rent limits in canada). D: The buying price is complex but also half based on the renting price. I think AirBNB jacked things up, and we now see housing as a commodity so the number could be higher, but when i was a kid the common sense was: monthly rent * 12 * 20 > house price: buy, else don't. If A,B, C and D are all true, then i don't see how this law can change prices. If i'm wrong on any point, it might.

db48x 4y ago
But D is not true. If a property costs one million today, but could sell for two million in a few years, then simply buying it and holding it will earn you a reasonable rate of return even if you never rent it out. In fact renting it out is risky simply because it will make the property harder to sell when the time comes. And with a small but significant population of potential buyers excluded, the property prices will not not rise nearly as much and they may even fall. If there are enough rich Canadians in the coming generations then prices may rise again, making the investment worthwhile, but there is significant risk there.
- orwin 4y ago
  But D is true though. Housing price is mostly based on the price-to-rent ratio when outside a bubble, and the average investors know it way better than the average Canadian [0] [0] https://www.investopedia.com/terms/p/price-to-rent-ratio.asp https://www.investopedia.com/terms/p/price-to-rent-ratio.asp
  - db48x 4y ago
    Only if the buyer intends to rent it out.