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Australia has limits and reporting requirements for foreign ownership of homes. We asked: Is it working?

May 8th, 2015 · 124 Comments

So a little dust storm of media reporting this week, once again, on the foreign ownership issue after UBC geography professor David Ley spoke at a conference last weekend put on by Simon Fraser University’s Urban Studies department.

Ley, who has done extensive research on the impact of Canada’s immigrant-investor program and published a book called Millionaire Migrants, is now doing research in five cities with housing bubbles to look at what, if anything, they are doing to try to get them under control.

His point, at the HOUSE seminar, was that others are moving to try to cool down their markets, while Vancouver — largely through inaction by the province and feds — is being left to fend for itself. The four other cities he is looking at are Sydney, Australia, London, Hong Kong and Singapore

Kerry Gold has a story coming out in the Globe’s Real Estate section tomorrow that details more of what he had to say, so you should read that.

I spent the week calling people in Australia, which seemed like the most comparable place of Ley’s four to me.

Hong Kong and Singapore are city-states with much more ability to move quickly and unilaterally than a triple-level-governed city like Vancouver. And London, as experts have told me in the past, is on a different scale and with a different set of circumstances.

Vancouver and Sydney seemed the most alike to me — cities that are far from global power centres, but where house prices have skyrocketed and where there is a lot of attention focused on foreign investors and/or Asian immigrants buying up houses. (There, as here, people don’t always do a good job of distinguishing between the two.)

Economist Philip Soos seemed to have the most comprehensive research of anyone I’ve talked to there (or here). He’s just co-authored an 810-book on the history of Australia’s housing bubbles, with lots of data looking at housing bubbles around the world. He’s also done the investigation into empty houses in Melbourne (which is being hit by the same housing spirals as Sydney), using water data.

His take on the whole situation is in my Globe story here. To sum up: He says the biggest problem is not Asian offshore investment, which is no greater than what American and British offshore investment used to be. but government policies that encourage average middle-class people to take on debt and speculate in real estate. My story is here.

He was also pretty categorical in saying that there is no evidence that foreign investment, at the levels they are currently, is enough to affect housing prices for a whole region. As he said: “No economist can determine what effect foreign investment has on housing prices. You just can’t sort it out from the domestic investment.”

I doubt Soos’s research will end this debate. But he’s an interesting addition to what is a tough conversation, happening in many places around the world.  And he’s no defender of the real-estate industry in all this, as some local spokespeople are. He says the real-estate, finance, and insurance industries promote a system that encourages domestic real-estate speculation because they’re making a killing from it.

“They leave just enough for the people in the middle to feel like they’re gaining something,” he says, “but really the people at the top gain the most.”

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