The most expensive housing market in North America is now Vancouver. Single-family houses sell for close to a million dollars and ordinary condos go for five or six hundred thousand dollars. The city has found itself submerged in the rise of a truly global market in real estate.
A recent report by Sotheby’s International Realty Canada found that sales for luxury-homes in Vancouver were accounted for by foreign buyers during the first half of 2013 and that they accounted for nearly half of all the sales.
What makes Vancouver so special that it attracts all of this foreign money? Vancouver consists of comfort and security, providing social and political stability. The city offers a safe place for people to invest some of their money and insure against uncertainty.
Wealthy foreigners are rationally overpaying for property in Vancouver to protect themselves from risk at home. The possibility of losing ten to twenty percent in Vancouver versus a potential hundred percent in their home country if prices subside will not be as great of a loss, so people will still be buying in Vancouver.
Foreign investment may benefit existing homeowners who see the value of their homes rise. But it also poses a great challenge for the rest of the city’s population who want to own a home. Many foreign buyers tend not to inhabit their investment properties, which Andy Yan calls the “zombie neighborhoods”.
Perhaps it would make more sense if Vancouver, and other cities alike, simply charge foreign buyers a premium for the privilege of owning there. As Yan suggests, “[Vancouver] is one of the places where people seem to want to park their cash […] so let’s raise the parking fees”.
For more details, you can check the full article here. http://www.newyorker.com/talk/financial/2014/05/26/140526ta_talk_surowiecki?mobify=0
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