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What impact would a clampdown on foreign investment have?

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Justin da Rosa | 02 May 2016, 08:15 AM Agree 0
Measures to cut back on financing foreign-purchased real estate will have little impact on market, according to one leading mortgage broker
  • | 02 May 2016, 11:29 AM Agree 0
    Oh those horrible foreign buyers. I wish they'd just send their money, expect nothing in return and then just disappear altogether. Wouldn't that be a perfect solution? In the meanwhile, Canadians should, of course, be permitted to purchase property elsewhere without any restrictions.
  • not buying it | 02 May 2016, 12:01 PM Agree 0
    It's not a matter of holding back financing. Everyone knows they have cash. It's restricting their ability to buy unlimited numbers of properties. There are foreign purchasing restrictions almost everywhere in the world. Why not Canada? Because the politicians and their buddies don't want to stop the flow of money into their greedy little pockets.
  • MFenn | 02 May 2016, 12:13 PM Agree 0
    Oh, so yet more nostalgia for a "clampdown on foreign investment"?

    It would turn the clock back over 50 years to the failed 'foreign investment review' process which manifestly did not work, as promoted by the hapless Walter Gordon, and his sponsor Lester Pearson. Historian Michael Bliss has about Gordon, a nice man and truly disastrous at the financial helm, "bypassed his senior officials to bring in outside consultants (most notably a thirty per cent takeover tax on sales of Canadian companies to outsiders), disregarded clear warnings that his schemes were unworkable, learned from an enraged business community that there really were unworkable, and then bungled their withdrawal. In a few days this deeply foolish finance minister destroyed his own reputation and crippled the government's. .. Pearson's real mistake was in not having accepted Gordon's resignation. Gordon's further mistake was in not having insisted on resigning." Michael Bliss, 'Right Honourable Men', Toronto, ON: HarperCollins, 2004, p. p. 225-226.

    As someone said on another thread, why would my neighbour sell me a house at less that the market rate, just because I was supposedly more "authentically" Canadian than a supposed, foreign "bogeyperson"?

    And why contemplate officially starting to portray seniors who have spent a lifetime putting effort and taxes into Canada, as somehow a threat to Canadianism if they spend 4 or 5 or 6 months in the South, by introducing residence criteria for house purchases?
  • MFenn | 02 May 2016, 12:30 PM Agree 0
    Specifically re. "three Australian banks made the move to eliminate financing for foreign buyers", it's not hard to find glaring examples of how "Fortress Australia" policies have not well served Australians; but this is a matter for them. "Fortress Canada-except-Chinese-porperty-owners-in-Vancouver" or "Fortress-Quebec-except-Anglophones-investing-in-Montreal properties" does not serve Canadians well, either.
  • TRZ | 02 May 2016, 06:45 PM Agree 0
    Want to know what Vancouver market will look like years down the road if things are not monitored well and change in some way? Have you been to Hawaii? Many working locals live in tents! because they are priced out of the market by non-residents like Shakeem Oneil former NBA star who spends a few weeks a year vacation there.
    • MFenn | 02 May 2016, 09:10 PM Agree 0
      The answer lies in the direction of the economy and workforce staying competitive and mobile, rather than in expecting the state to insulate less competitive elements of the market from non-residents. Those of us who live in the east of Canada never fail to be surprised at the resentment which sometimes seems to surface in the West against foreigners: the argument seems to run: "We resent non-residents if they are not resident; but we don't want non-residents to become residents; but we want their money and their labour while we still continue to resent them." This resentment seems to be pervasive, whether towards non-resident Tim Horton's workers living in rented accommodation, or towards entrepreneurial property owners with business interests outside, as well as within, Canada. The argument seems to run: "How dare Tim Horton's expect us to work for them! but how dare non-residents work at Tim Horton's when we don't want to! and how dare non-residents use rented accommodation! and how dare entrepreneurial buyers from overseas buy property I can't afford (i.e., at market value); and how dare they prosper partly through business interests outside Canada! and how dare they want to become naturalized Canadians!" While it is rarely stated thus, yet this seems to be an overall thread of argument running through collations of press reports about resentment re. foreigners which sometimes seems to surface in Western Canada. Thankfully it's not the preponderant viewpoint.
  • fed up | 03 May 2016, 01:26 AM Agree 0
    @MFenn Blathering on about unrelated issues to try to make it sound like you have some sort of valid argument doesn't change the facts. Other countries limit foreign ownership for good reasons and we should to. Our tax system and currency leaves honest, hard working residents unable to compete with ill gotten non-taxed Chinese money being funnelled in vast quantities into our country. We are not talking about non-residents taking up jobs or housing or non-residents who desire to become residents. We're talking about foreign owners whose only interest in this country is the amount of money they can hide or gain at the expense of residents. They have no intention of living here except to collect rent money from residents who have been priced out of the market because the govt. has allowed them to bid up the prices against each other. Prices would not be where they are if the govt. limited the number of properties any one foreign owner could possess at any given time.
    • MFenn | 03 May 2016, 12:24 PM Agree 0
      Leaving aside your use of the word 'blathering', and to use another of your terms, 'honest, hard working' Canadians such as seniors who have put a lifetime of effort and taxes into Canada, could find themselves penalized if 1) residence were to become a criterion for buying a house; and 2) they were in the habit of spending 5 or 6 months South of the border. It's not unusual for Canadians with an (unwinterized?) cottage in Canada to retire and spend several months in the South, but imagine then if they suddenly found themselves potentially restricted if they wanted to buy a house or move house in Canada simply because some years they may be 5 or 6 months in the South and their unwinterized cottage in Canada were officially deemed to be "enough" for them. According to this scenario, there would then be people who put a lifetime of effort and taxes into Canada who were being restricted in their property rights simply because some years their residence criteria were in question.
  • MFenn | 03 May 2016, 12:31 PM Agree 0
    PS: I actually know Canadian seniors who would be affected by exactly such a move to restrict their property owning rights.
  • fed up | 04 May 2016, 11:08 AM Agree 0
    I seriously doubt any retired Canadian who has spent a lifetime working and paying taxes in this country will be affected by a rule which prohibits foreigners from buying multiple properties. I am not suggesting a foreigner not be allowed to buy a property in Canada. I'm suggesting that they not be allowed to buy 10, 20 or in some cases upwards of 50 properties here.
    • MFenn | 04 May 2016, 01:36 PM Agree 0
      In the end, the specificity of trying to "ban foreigners" from investing in property does matter. It rather hypothetically could be done by making Canadian residence the criteria for property investment (in which case there would undoubtedly be many Canadians whose property owning rights in Canada would be affected, and might not even survive a challenge under the Charter of Rights and Freedoms). Or it rather hypothetically could be done by making Canadian nationality a prerequisite for property investment (in which case people such as US venture capitalists would be assumed to be wanting to immigrate; which would be a highly unrealistic expectation all round). What drives anti-foreign investor sentiment might well differ in various parts of Canada, but in any case for any nationality-specific sentiment to be discernibly driving any measures introduced would most definitely not survive any challenge under the Charter of Rights and Freedoms. It really boils down to looking at what, historically, has made Vancouver and Toronto consistently attractive property investment environments: a fairly stable long term prospect of reasonable returns; this should ultimately be seen as part of a Canadian solution, rather than part of a Canadian problem. There are no market-bucking short-cuts, and most people on Bay Street would agree. Looking at the bigger picture, it's hard to understand also that those who (rightly) argue that certain, now defunct, companies were in error when their accounts did not clearly distinguish between profits and investment income, will suddenly seem to argue also that property development is supposedly all about the buyer having one property to live in, with little distinction made between owner-residence and property investment income. (But there is nothing new about these arguments.)
  • Samir | 04 May 2016, 03:37 PM Agree 0
    With due respect, we are not talking about commercial property or buying a business. The essence of the the situation is the residential properties. nevermind not financing foreign purchases. we come and buy cash. I did state in an earlier comment. to be fare is to impose a tax or levy of 5% on all residential properties purchased by foreigners. If these feel Canada is a safe and secure heaven to park their money and the canadian dollar is a bargain then they should be willing to pay for this privilege. not to mention these foreign investors in residential property market they do not create a sustainable jobs to help the economy . also we must be sure they pay their fair of taxes on rental income and capital gain tax if they sell. All these taxes and levies should be kept in a separate account to help first time Canadians buying a home. ie, land transfer tax credit or help with the down payment percentage based on family income.These are the young Canadians who are struggling to get into the housing market coming out of university with a hefty student mortgage, trying to find a job and start a family. This what I call a social justice, otherwise these people be a burden on the society and then we all have to pay to support and create more desperate among classes.
    • MFenn | 04 May 2016, 04:47 PM Agree 0
      What you are saying, in effect, with such an expropriative argument, is that (collectively - if not individually) my neighbour ought to sell me a house at below the market price because my Canadianism causes me to "deserve" it. Investors supposedly "owe" it to me to reward me with a less-than-economic sale and in return I'll "let" a foreigner be my neighbour.
      Historically, however, what has has made Vancouver and Toronto consistently attractive property investment environments is a fairly stable long term prospect of reasonable returns; this should ultimately be seen as part of a Canadian solution, rather than part of a Canadian problem. There are no market-bucking short-cuts.
  • Scott | 05 May 2016, 11:07 AM Agree 0
    A question. Could this large amount of foreign investment be a type of economic warfare? Suppose the foreign government directs its agents to sell *all* of these properties at the same time? What effect would that have on the Canadian economy? We already see the effects of foreign countries keeping the price of petrol and oil artifically low.

    Now, I doubt this many people are acting at the direction of a foreign power but it is an interesting thought worthy of a Tom Clancy novel. I'm pretty sure he had a similar idea with stocks and bonds in one book where if memory serves the Japanese government waged economic warfare against USA.
  • fed up | 05 May 2016, 09:04 PM Agree 0
    @MFenn If foreign investment created jobs and actually contributed to our country, then your arguments might hold some water. Look at the neighbourhoods in Vancouver though where foreign 'investment' in our properties is rampant. They are virtually deserted and businesses that once thrived are barely surviving. They are not our 'neighbours'. They are not here and have no intention of ever being here. They just own our land and collect our rent and/or wait until we are desperate enough to pay them more for the chance to own a property of our own - at which point they gleefully take the profits and spend them elsewhere. You seem to know a lot about how markets work. Explain why other countries have policies limiting foreign ownership, why they were imposed and why they are/were wrong to do so?
  • call-a-spade-a-spade | 06 May 2016, 01:20 PM Agree 0
    I think we also need to recognize the danger of "astronaut" families. That is a foreign buyer buys the house, his wife and kids move in, but he still works and pays taxes in his "origin" country. He wires allowances to his wife. On paper, the wife is has little or no income tax to pay because she has no income. The kids go to the schools, use the same roads and services and if sick go to the same hospital as other tax-paying Canadians, except their contribution to the tax revenue is non-existent or significantly disproportional to tax-paying Canadian who work here.
  • fed up | 08 May 2016, 12:35 AM Agree 0
    I totally agree with call-a-spade-a-spade. So MFenn, no opinion on either of these topics?
    • MFenn | 09 May 2016, 02:23 PM Agree 0
      Frankly, running commentaries by way of stirring up hostility to neighbours is not the way markets work, and is not what either realtors or investment analysts ought to be doing. My neighbours would not sell me a house for less than the market price simply because I am supposedly more 'authentically national' (this, collectively, seems to be the basic argument of those who wish to 'punish' foreign investors for being foreign or different from what you and I supposedly are). And we are not like the US where ppl's tax returns are public. It's thoroughly unsound to make sweeping assumptions about ethnic groups or foreign investors, whether Chinese in Vancouver, Jews in Forest Hill, Toronto, etc.
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    • ammythomas95 | 02 Feb 2017, 08:09 AM Agree 0
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