The question is how many sales will it actually forbid? If the sales (or bids) that push the prices up are coming from people who will be banned, maybe prices will be depressed a lot. If they’re coming from Canadians who have good jobs and a bunch of cash and won’t be forbidden then maybe prices won’t be affected much.
By definition it will. Fewer potential buyers always means lower top prices. Especially in this case, where the whole point is to prevent rich foreigners from outbidding poor locals.
I don't think you understood what GP meant, so i will try to formulate it in another way:
A: People who want to live in a city need housing and are ready to either 1: pay X/month (rent) or 2: buy the house.
B: This law do not create new unit to be rented or bought, and do not do anything for the cities attractiveness, IE the migratory trend will stay the same
C: The renting price is complex and while location and regulation do have an effect, the price is based on supply and demand, not on "how much did you pay for this house" (unless you have rent limits in canada).
D: The buying price is complex but also half based on the renting price. I think AirBNB jacked things up, and we now see housing as a commodity so the number could be higher, but when i was a kid the common sense was: monthly rent * 12 * 20 > house price: buy, else don't.
If A,B, C and D are all true, then i don't see how this law can change prices. If i'm wrong on any point, it might.
But D is not true. If a property costs one million today, but could sell for two million in a few years, then simply buying it and holding it will earn you a reasonable rate of return even if you never rent it out. In fact renting it out is risky simply because it will make the property harder to sell when the time comes.
And with a small but significant population of potential buyers excluded, the property prices will not not rise nearly as much and they may even fall. If there are enough rich Canadians in the coming generations then prices may rise again, making the investment worthwhile, but there is significant risk there.
But D is true though. Housing price is mostly based on the price-to-rent ratio when outside a bubble, and the average investors know it way better than the average Canadian [0]
Isn't the price-to-rent ratio in the us around 16? And from what i just researched, it's like 18 in Canada, so not "Only if the buyer intends to rent it out". The price-to-rent ratio is 18 in Canada, hence it's not yet a bubble, hence housing as an investment is related to renting prices more than just something to happen in a bubble.
Owning housing produces a certain income for the owner. Either as the rent you can charge from tenants, or increase in the resale price. Both depend on the local supply/demand situation.
I'm claiming the fundamental underlying demand is for actual housing. Canadian cities are not allowing enough housing to be built for their increasing population, which leads to a price spiral, which in turn attracts savvy investors.
Who ultimately owns the properties does not really enter into the price equation.
I know the stories of how foreigners are so greedy that they buy houses but decide to forego the income from renting them out. Those anecdotes don't pass my smell test. Greedy people like to have income!
You may not believe it, but the situation is very well documented and certainly a thing that is removing housing stock from cities around the world.
Housing has a value as an investment, and leaving the housing unoccupied reduces the cost to maintain the investment. Tenants have a lot of protections in many jurisdictions, and an owner is responsible for maintenance, depreciation and damages, while a tenant cannot be evicted by the landlord who wants to sell a unit without a substantial waiting period, if at all.
The buyers who are being excluded do not want to rent. They might want a place they can visit for a few weeks, but mostly they want an investment property.
A lot of these properties apparently are bought by wealthy foreigners purely speculatively, and sit vacant. If they were buying them to rent them out, I'd agree with you, but as it is, they end up reducing the housing stock that's available to be lived in while the number of people stays the same, so they do drive up price.
it largely does not. in the high-dollar markets like vancouver and toronto the cost to purchase has little to no relation to the actual houses-to-live-in market, and the cost to own is many times higher than the cost to rent because the housing market is purely a speculative financial market.
many of the properties are left empty for extended periods of time because the owners value liquidity over rental income, and having a renter makes it more difficult to sell quickly when market conditions change (or if you simply want to shift your portfolio).
