Should Canada restrict foreigners from buying its real estate?
I’ve been at this job here at MSN Money for a little more than three years, and I can recall quite clearly the patter of financial headlines back in early 2009, when I started.
But then … it didn’t come then, and hasn’t come yet. In between has been the same discourse, a similar kind of rationale you’d imagine applied to Apple stock the last few years, too: now this has got to be the peak. Buy now and lose your shirt.
Though what if a burst in Toronto’s housing market, as well as that other Canadian city where real estate prices are even higher, never comes?
That’s the assertion of the Financial Post’s Diane Francis, at least, who notes that in spite of hand-wringing from TV talking heads, columnists and Jim Flaherty, there is one reliable source in key Canadian markets that won’t allow them to collapse. There is, in effect, too much foreign money keeping – and lifting – real estate prices high.
According to Bloomberg News, there are nearly three times more condo high-rises being built right now in Toronto than New York City, and nearly seven times more than in Chicago. Vancouver, too, is seeing the same boom propped up largely by foreign capital, turning its and Toronto’s crane-littered skylines in Dubai West nos. 1 and 2.
A perfect illustration lies here, Francis points, in the sale of a “modest” Toronto bungalow last month. The asking price, which is already nauseating, was $759,000, though a bidder swooped in and levelled the competition, dumping $1.18 million into the property. Simultaneously, this pissed off other buyers while also artificially propping up the home’s value, as well as what others in the neighbourhood might think their houses should now be worth.
That bidder? The Chinese parents of a university student, who have a business in the United States but live in China.
Here, the Kevin O’Leary in us wants to scream, “This is the market being the market! Let it work on its own!” But is that the best approach, given we’ve seen just how a housing bubble burst can affect an entire nation?
In summation of a complex argument, there is plenty of support behind initiatives that echo what countries like Australia, Thailand, Switzerland and, ironically, China do: restrict foreign buying. In Thailand, for instance, foreigners cannot buy land but can buy condos, though only up to 49 per cent of each building. Australians recently imposed a ban preventing foreign non-residents from buying homes or investment properties, and while temporary residents can buy, they have to sell when their residency ends.
Do you think Canada, in a bid to reign in real estate prices, should restrict foreign buyers? By contrast, is foreign capital a good thing for the country and should homes sell for the highest price they can fetch?
By Jason Buckland, MSN Money