This entry was posted in Investing In Real Estate, Mortgage Articles, Real Estate Investing and tagged Canadian real estate, Foreign ownership on August 19, 2015 by CR. Investing In Real Estate, Mortgage Articles, Real Estate Investing
With home prices reaching the stratosphere in red-hot markets like Toronto and Vancouver, the single-detached family home is becoming out of reach for a lot of families. The average selling price of a detached homes has surpassed $1 million in Toronto and Vancouver. As an export dependent country I wish to remind Canadians that we live in a global economy and we must accept the good and bad that comes with it.
Foreign investors with deep pockets are taking a lot of the blame from angry residents who can’t seem to afford a home in their own city. With a looming fall election, the federal government has promised to spend $500,000 in 2016 to figure out just how many foreign investors there are in Canada. Foreign investors have drawn the ire of residents for buying condos and houses and leaving them vacant around the year. This is especially prevalent in Vancouver, where Asian investors have purchased a lot of the pricier properties.
Once Prime Minister Stephen Harper knows how many foreign investors there are, depending on the results, it could result in stricter rules about the types of homes (new or resale) foreign investors can own. Although Harper has refused to work with Ontario on its controversial provincial pension plan, foreign ownership is one issue he’s willing to work together with the provinces on. The Prime Minister said his ultimate goal is to ensure that foreign investors only purchase homes that leave the real estate market affordable for average Canadian families.
Having lived and attended school in London, England., and having observed the lives of hundreds of my MBA and other classmates living in major cities around the world – I fundamentally disagree with this position. Many of my friends with Ivy League educations and high paying jobs simply accept the fact that they can’t afford to buy in cities like London, New York, or Hong Kong … because (GASP) those cities are out of their reach.
I am not sure how people lost there way on this, but home ownership is not a right …. its a privilege and if you can’t afford cities like Toronto or Vancouver then (even as uncool as it sounds) you can live in other less expensive markets or (heaven forbid) choose to rent. When your country has a stable social, political, and economic environment then it is bound to attract foreign capital.
Canada wouldn’t be the first country to limit the rules on foreign ownership of real estate. Some countries already have rules in place that only let foreign investors buy properties that are under construction, or restrict home ownership for foreign investors to just the time they live in the country. I will point out that very few of the world’s truly globally respected cities follow this practice.
“There are real concerns that foreign, non-resident real estate speculation is the reason some Canadian families find house prices beyond their budgets,” said Prime Minister Stephen Harper. “If such foreign non-resident buyers are artificially driving up the cost of real estate, and Canadian families are shut out of the market, that is a matter we can and should do something about.”
Although there are no official numbers, roughly 15 percent of condos sit vacant around the year in Vancouver. The condo owners, many of them foreign, are holding onto the properties with the hope of turning a profit if and when real estate prices rise. The problem is that many of the estimates of the concentration of home ownership are just that, estimates, because governments haven’t historically tracked the level of foreign investment in Canadian markets, Harper said.
Harper said he is seriously concerned that foreign investors are making home ownership unattainable for the average Canadian family. The family home is the single biggest investment for many Canadian families. The Conservatives have promised to keep the dream of home ownership alive for most Canadians.
While this may seem like a good idea in the short term… global economic policy would suggest limiting foreign investment in our domestic assets is very much a double edged sword. It a sword that I believe will cut much harder and much deeper when you make our country unfriendly to foreign investment. We live in Canada and we are a world leader and member of the G8. The global free market system has enabled our citizens to enjoy one of the highest standards of living in the world. As I have said before – today more than ever we live in a global economy and we must accept the good and bad that comes with it.