Brokers may not want foreign investment controlled

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Any government intervention aimed at stemming foreign buyers may not deter such investment -- but it could impact Canadians, according to one leading economist.

The Bank of Canada said Wednesday it’s concerned about inflated housing markets, and one leading economist believes a policy response is imminent. 

“The policy response is likely to come, not so much from the Bank of Canada; the policy response will be in terms of enforcing money laundering regulations,” Dr. Sherry Cooper, chief economist with Dominion Lending Centres, told REP. “But I don’t think that’s going to have a big effect.”

The reason any policy change won’t have an impact, according to Cooper, is because the foreign money flooding markets such as Toronto and Vancouver isn’t being laundered.

“The definition of money laundering is money earned through illegal activity or money to support fund terrorism,” Cooper said. “I would guess that the bulk of Chinese investment in Canadian real estate is not garnered from illegal activity and it’s certainly not an effort to finance terrorism, so that’s not going to do it.”

Cooper said she hopes the government avoids policy meant to curb foreign investment.

“We know the government is supporting the gathering of data so we learn more about the size of foreign inflow is, but that doesn’t change anything either,” Cooper said. “I’m hoping the government tiptoes around this because we don’t want to curb the inflow of money entirely because it would lead to a collapse in house prices. Or it could at least lead to it.”

Cooling the housing market by minimizing foreign investment would result in lower prices, according to Cooper, who argues that would be a negative due to the fact that 70% of Canadians own homes and the vast majority of those rely on home ownership as their largest portion of personal wealth.
  • Christina on 2016-05-27 9:06:29 AM

    What does that leave the next generation of Canadians? Will home ownership become something only the rich can afford?

  • Wolfram on 2016-05-27 9:18:15 AM

    The government must step in. If it doesn't you can rest assured that it is in the pocket of Developers and other selfish interests getting richer and richer off the current bubble.

  • Spencer Ennis on 2016-05-27 3:47:14 PM

    Regardless of whether foreign investment into our residential housing sector is from dubious sources or not, it is creating a catastrophe of displaced citizens and must be curbed. There is no question about that and the solution is to creatively adapt to these current conditions and not continue on the same path as we are now.

    The government has proven time and again that it can slow Canadian ownership of property in their own country through regulation changes to lending criteria. Thus, they can loosen those same restrictions to help offset the initial shock to the market that the absence of foreign money will create. Once implemented, the Mortgage Professionals will have the tools they need to get Canadian families into home ownership in what would be a more easily attainable and affordable lending environment while maintaining equity wealth.

    Let's get the data we need about the sources and levels of foreign investment, create policies to target that foreign investment, make the market easier for Canadians to buy and maintain their homes at current prices levels and then let market forces find their natural boundaries without any artificial inflationary pressures from outside sources.

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