That's been a common theme among people talking about the rising house prices in Australia as well. That Chinese people just buy property to park their money overseas.
But when someone looked at the numbers the number of houses that were bought by Chinese people were in the low single digit percentages.
While this could create some upward pressure on prices it cannot be the only factor. For instance in Australia most of the blame lies of negative gearing (where any money paid in interest on a property can be claimed against all income).
A single digit percentage of actors in the market with the objective of not losing 100% of their capital by turning it into a hard asset in another country is sufficient to move the market.
In Australia it is the combination of negative gearing AND the 50% capital gains tax concession on investment properties. Average rental losses per negative gearer were reasonably constant and small up until 2001 when the 'sound economic manager' Costello introduced the CGT discount, intially for a limited time only to make up for the introduction of the GST. From 2001 onwards, claimed net rental losses have blown out significantly, such that the annual forgone tax is greater than what the federal government spends on universities. This is because the gains permitted with such generous CGT concessions more than make up for year-on-year rental losses. This strategy only makes sense when house prices are rising, which has been the case for ~20 years in Australia. Given that Australians are at, or close to the limit of their ability to take on more credit, real standards of living (real net disposable income per capita) have been falling for the last five years, it seems that the bubble may not be sustainable. Unless you internationalise the housing market and make it a place for turning cash into hard assests, like London.
The data has been notoriously unavailable - when did someone figure out the numbers?
But yeah as siblings said, even a small minority can move the market like that. Just hearing of these huge (successful) prices makes people list higher, etc.
Yeah, funnily enough that's where I used to live, although in an old block of apartments, and I believe I know which place you are talking about. Granted the single family houses around those streets are not exactly 'low density' as they are packed in quite a bit.
HAM is not the only reason. Canadian banks are lending insane amounts. People always say Canada's banks are "sound". Every bank is sound until land prices go into reverse.
>Every bank is sound until land prices go into reverse.
Generalize that to building prices, and if true, that's going to make it very difficult to use construction to lower housing prices. Banks aren't going to lend for construction if they think making loans is going to threaten the bank's own soundness.
Or to put it another way, if falling housing prices add unacceptable risk to construction loans, then the banks efforts to mitigate that risk might include not lending if housing prices are in decline. Which means you could sweep away all zoning and NIMBY impediments, and you still wouldn't be able to use construction as a way to lower housing costs, because the banks wouldn't let that happen.
You are treating it as a big brain. It's split many ways. There are many banks, they don't behave as a mass. Some will lend because they want / need the income.
Secondly most lending decisions are made by employees. Their interests are not aligned with the long-term health of the bank. They want their bonus. Who cares if it blows up in 10 years time?
We've seen this in 2008. Banks behaved insanely.
Finally if banks were playing the long game together why pump up land prices until they are backed into a corner? Better to drip to maintain throughput.
It's not 2008 anymore. Things have changed substantially. Banks became much more risk-adverse in the wake of the burst of the housing bubble and subsequent economic crisis. The era in which loan officers are incentivized to skip risk evaluation has passed.
My point was not that there's some grand conspiracy among banks. Merely that any loan that uses real estate as collateral will be riskier if real estate prices are declining, than if real estate prices are increasing. That means that construction loans are going to be harder to get when prices are decreasing. Which suggests that the ability to use construction loans to lower the absolute price of housing is self-limiting.
Hence people paying millions of dollars for a house that's falling apart
But I'm glad to hear about Victoria.