Curbing foreign investment has worked in one market

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The formula for limiting foreign investment may already exist, but is it too late for Vancouver and Toronto?

A commission exists that oversees and regulates foreign investment within Prince Edward Island. Its formula for curbing foreign investment could work in other foreign-influenced markets – with some tweaks – according to one industry veteran.

“The way we have it here was established a long time ago. It was because the foreign [ownership] started to get drastic,” Greg Lipton, a real estate agent with Blue Ocean Real Estate in PEI, told “There were a lot of Americans buying homes along the waterfront. The Island Regulatory Appeals Commission was put in to deal with foreign ownership and possibly deter it a bit.”

In 1975, the PEI government amended its Real Property Act to restrict purchase of land by non-residents.

The Island Regulatory Appeals Commission (IRAC) oversees the Lands Protection Act, which includes application requirements for non-residents who wish to purchase property in the province.

“A non-resident person or corporation, or a resident corporation must make application if the person or corporation will have an aggregate land holding in excess of 5 acres, or having shore frontage in excess of 165 feet,” the IRAC site says.

Those requirements have helped minimize the influence of foreign ownership in the province and dampened price inflation, according to Lipton.

So could it work in some of Canada’s hotter real estate markets?

“I think Vancouver is a different kettle of fish because you’ve already got such a major influx (of foreign investment) that trying to rein that in ... may be a little too late,” Lipton said. “You’ve got an awful lot of people that are buying up homes all over the place. However, it could work. You’d have to take the example here and tweak it a little bit.”

Those tweaks could include requiring applications for additional homes, or for homes in certain areas.

Still, there are many who argue against the need to oversee foreign ownership, believing it's an essential driver of Canada's housing market.
  • Derek Austin on 2016-06-01 11:14:40 AM

    If the Canadian banks stopped financing foreign buyers , it would also make the Canadian average debt ratio look better as we would not have mortgages held by foreign buyers investors which makes our debt ration look bad . The USA does not allow foreign residential buyers to borrow money from US banks to purchase properties in the US why does Canada . A very simple and effective way to slow things down . China did this a number of years ago when there market was being pushed upward because of foreign speculation

  • Norm Carr, realtor on 2016-06-01 12:56:59 PM

    About foreign investment. It is like free trade. It helps grow our economy in Canada. When prices are too high in Vancouver and Toronto, the less than rich, the middle class majority will move to a modest price market like Sarnia, Ontario which has a beautiful lake and river, where the average good single family home is about $250,000. I have been selling homes for 47 years. Sometimes we need to be reminded. If it ain't broke, don't fix it

  • James on 2016-06-01 2:01:33 PM

    @Norm Carr - Actually statistically foreign property ownership is not good for the economy, at least not in the long term. Foreign buyers who leave the property vacant do not contribute to society through active participation in our communities. They do not contribute income tax, attend our schools, buy products or services from local businesses. In fact in most areas with a high concentration of foreign ownership, there are higher instances of tax evasion, welfare claims, and other governmental support claims. This is not good for our economy, but is a drain on it.

    In Vancouver there are neighbourhoods, like Coal Harbour, where there are buildings with an excess of 30% vacancy - you only have to look at the number of empty suites to see proof of it. In the suburbs, like Richmond, there are homes all over that have sat empty for so long that the city has been forced to declare them uninhabitable and they are being torn down with the city doing a forced sale.

    The number one biggest opponents to curbing foreign investment is realtors, with mortgage brokers a very close second place. It's not being opposed because it is better for our economy, country or communities. It is being opposed because it means less commission.

    I would rather see a community that has people who have a vested interest in the community because they live and work there, than one that is just a parking spot for foreign money that is 90% of the time taken out of the home country illegally.

    FYI the Chinese government has very strict rules on how much can be taken out of the country and you better believe that it is not a lot of money here is the proof: “individuals exiting China are required by law to declare amounts of RMB 20,000, or the equivalent of USD 5,000 in foreign currency, to customs. This is the maximum amount of currency any individual is allowed to leave China with. All foreign nationals living in China are allowed to withdraw USD 500 a day without needing to provide documentation, proof of ownership or records of paid taxes. Chinese nationals are able to transfer up to USD 2,000 a day to an overseas bank account, with a maximum of USD 50,000 per person per year”

    So basically… almost 100% of the money that has left China and come to Canada is illegal. In Vancouver alone last year it was 16 Billion dollars.

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