Explosive growth in foreign investors, says report

by Jordan Maxwell10 Aug 2015
A research paper analyzing the need for more data on foreign investors has surfaced, suggesting real estate investment by Chinese nationals has increased more than 200 per cent since 2008.

“Chinese outward real estate investment has increased more than 200-fold, to approximately US$33.7 billion by mid-2014,” Kerry Sun, a research associate at the China Institute, an Edmonton-based think tank, part of the University of Alberta, said in the research report.

“Since 2008, median house prices in the city have risen from approximately eight-times the median household income to 10.6 times in 2014.

“In Vancouver, rising housing prices, uncertainties about the extent of foreign ownership of residential property, and concerns about the legality of foreign capital have prompted calls for greater regulation of foreign acquisitions of real estate, especially residential property.”

He argues that perception has become reality and, without concrete data, it’s hard to extrapolate the effect of foreign investment on the market. The report follows a story from CREW highlighting the impact of money laundering by international investors.

Lenient border laws, permissive property rules and loose regulations have led to the current situation; however, the British Columbia Real Estate Association has consistently maintained that foreign investors make up only five per cent of the market. But others don’t feel that number is accurate.

Calvin Lindberg, a real estate agent in Vancouver, told CREW: “Saying that only five per cent of the market is made up of foreigners is disingenuous.”

The same is true in Toronto, where a recent study from the CMHC suggested that about 2.4 per cent of the local market is owned by foreign residents. However, in a  recent statement to BNN.ca, Phil Soper, president and CEO of Royal LePage, said that he believes nearly a third of condos in Toronto could be owned by foreign buyers.

In the China Institute report, Sun said that foreign investors are encouraging developers to build. He also took a look at other jurisdictions, such as Australia, where a government body must approve all foreign acquisitions of real estate.

Even in China, foreign individuals can only purchase one residence on the mainland for personal use and face a 1.2 per cent tax on the sale while paying 18 per cent on rental income.

“Recognizing that this investment can have both beneficial and detrimental consequences, any prospective policy response would benefit from improved data and analyses on this subject," Sun's report reads.

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