OSFI: How many foreign buyers?

The OSFI is going to try to figure out just how much foreign investment is going into Canadian real estate markets these days.

Canada’s top banking regulator is on a fact-finding mission to gauge the scope of foreign investment in residential real estate.

Industry sources say the Office of the Superintendent of Financial Institutions is sizing up the market, most likely as part of its active campaign to “stress-test” the country’s big banks to measure how they would be affected by volatility in various market segments.

OSFI is taking a broad look at bank exposure to household debt and how the financial institutions are monitoring loan portfolios amid growing concerns over the ability of Canadians to handle their debt load.
In the case of the housing market, sources point to global trends that could affect investment in Canada — such as China’s recent policies to curb speculative real estate investment in that country — as evidence that Canada is operating in a fast-changing market that could be adversely affected by decisions made in other countries.

They suggest OSFI wants to know how big a factor foreign investment in Canada’s housing market is, and how big it is likely to become, so the regulator can measure the potential impact on banks if demand were to dry up.

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jjss
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jjss

first!

patriotz
Member

The FP article is magnifying the mouse and minimizing the elephant.

The reason why RE prices are inflated in almost all major Canadian markets is of course the federal government's overt policies to pump the RE market and offload mortgage risk from the banks to itself. As the bubble was home grown so will be the bust.

The foreign ownership issue is just a sideshow in a few markets.

We shall see which beast OSFI chooses to focus on.

Anonymous
Guest
Anonymous

@patriotz:

I hope they come right out and say that the real estate associations are responsible for creating a frenzy amongst local buyers based on the premise that wealthy foreigners are coming in droves when in reality they only represent a tiny fraction of the market. That's the real fuel feeding the bubble, manipulation of local perception.

jesse
Member

@patriotz: Agreed. Debt loads in certain regions like Vancouver and the discrepancy between insured and uninsured qualification criteria are likely high on OSFI's agenda. Foreign ownership is likely secondary though that's not to say the won't take some response.

The question for me is what's their timeline? Late summer? Fall? 2012?

Anonymous
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Anonymous

the real estate associations are responsible for creating a frenzy amongst local buyers based on the premise that wealthy foreigners are coming in droves when in reality they only represent a tiny fraction of the market. That’s the real fuel feeding the bubble, manipulation of local perception.

The realtors are creating quite a frenzy around here as well. Most of the VCI posters have been sucked in to the mainland Chinese BS. Next VCI will be discussing running out of land. Look no further than the locals for the real estate bubble. No studies required.

Hazuchan
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Hazuchan

With so many realtors and developers marketing and opening sales offices in China, you can bet ther is a large impact of foreign ownership on the margin.

patriotz
Member

@Hazuchan:

The marginal buyer is the one who is least willing and able to buy. Entry of new buyers willing to pay more than the current market price pushes marginal buyers out and the market price up, but the market price is still determined by the least able and willing buyer, no matter how much other buyers are willing to pay.

This means that offshore buyers can't move prices significantly in the broad market unless there are so many of them that they comprise most buyers.

chip
Guest
chip

From the article:

"At the moment, Canada’s real estate market is finding favour among foreign investors because house prices are low compared to international hot spots such as London and New York, industry sources say."

I think we just jumped the shark. Canadian real estate is apparently too cheap compared with our obvious peers in NY and London.

patriotz
Member

@chip:

In fact in terms of prices for comparable properties (dollar to dollar) Vancouver is more expensive than New York. In terms of price/rent and price/income it is much more expensive than New York, and also more expensive than London.

And no Yaletown is not comparable to Central Park West.

Jim
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Jim

Our housing market is inflated right across Canada due to emergency low rates forced upon us by our largest trading partner.

Weatlthy mainland Chinese are a small cohort buying in certain areas and price points. But they are instilling "priced out forever fear" in other qualified buyers who are then also over bidding.

The market will collapse when rates move up even a bit, or when prices are too high for the last paniced buyer.

paradox
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paradox

For once the best place on earth is not the first.
http://ca.news.yahoo.com/blogs/dailybrew/europe-l

Best place on meth
Member
Active Member
Best place on meth

@Anonymous:

>>>The realtors are creating quite a frenzy around here as well. Most of the VCI posters have been sucked in to the mainland Chinese BS. Next VCI will be discussing running out of land. Look no further than the locals for the real estate bubble. No studies required.<<<

While it's true that mainland Chinese money is small relative to the entire market and locals are responsible for the run up in prices, it's getting harder to deny that media and industry manipulation of locals creating a PERCEPTION of massive amounts of Chinese money is messing with peoples minds and creating a sense of urgency and panic.

So yes, locals are driving the market but lies and distortions are driving the locals.

jesse
Member

@patriotz: "offshore buyers can’t move prices significantly in the broad market unless there are so many of them that they comprise most buyers."

Offshore buyers can move prices as long as people think they're the other party in a bidding war but then it's not really the offshore buyers who are driving things. People believe what they want to believe and offshore buyers are the nearest excuse to do what their impulses tell them.

We'll find out more if/when OSFI changes its regulations.

An interesting case to watch will be some of the credit unions like Vancity who are heavily invested in Vancouver real estate mortgages. Unlike other banks with national exposure, Vancity could be the most hurt by OSFI and a major market crash.

Anonymous
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Anonymous

"The question for me is what’s their timeline? Late summer? Fall? 2012?"

sometime shortly after it no longer matters. Before that would make too much sense.

pricedoutfornow
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pricedoutfornow

http://ca.finance.yahoo.com/news/Vancouver-home-p

Vancouver home prices poised for correction, could fall 21 per cent: report

What a shock!

"BMO says current prices suggest that even a modest increase in interest rates will slow the market in coming years. Some triggers that could set off a broader collapse include a rapid rise in interest rates, a sharp increase in unemployment or a slowing of foreign investment."

Frank Grimes
Guest
Frank Grimes

Those heretics at BMO. Disgusting!

Vancouver primed for housing correction: BMO

http://www.theglobeandmail.com/report-on-business

It's not quite the ripping I would hope though. Check out this gem from the article:

“if interest rates stay low and wealthy immigrants continue to pour into the city, prices could stabilize sooner than in past downturns.”

Frank Grimes
Guest
Frank Grimes

@pricedoutfornow:

Damn you pricedoutfornow! You stole my thunder. Now I know what it's like to be one of those "First!" posters, and not be first. 🙂

asalvari1
Guest
asalvari1

HOUSING: This Isn't A Double Dip, It's A CATFISH!

http://www.businessinsider.com/altos-research-cat

Aleks
Guest
Aleks

What the hell is a catfish?

I really don't see real estate ever being as volatile as other markets, unless they significantly reduce friction in buying and selling. That not only means virtually eliminating realtor fees and closing costs, it also means decreasing the time it takes to complete a sale. Can anyone who's ever bought a house imagine going through that process multiple times in a month?

kansai92
Guest
kansai92
Regarding the last day's post about the Promontory (should rename it to Purgatory) residents. The quote was "we are not superstitious". I find that utterly hilarious. These are the same folks that pay $320,000 for a license plate in Hong Kong because it has certain numbers in it. http://motoring.asiaone.com/Motoring/Owners/Other… Anyway, the bottom line is you buy a condo with undeveloped land around it, you are taking a risk. As long as the zoning allows it, be prepared for anything and everything to be built next to you. It doesn't matter if it's a hospice or if it's an even taller highrise (blocking your view). The sense of entitlement is ridiculous. Just should just be glad they're not in China where the govt will bulldoze your house, give you pennies on the dollar, so they can put up an Olympics venue.… Read more »
Patiently Waiting
Member
Patiently Waiting

Colliers says Robson St. is a bargain by world standards.

http://www.vancouversun.com/Vancouver+Robson+Stre

If that's the case than why don't all the landlords just raise the rents? Nobody protects commercial tenants from gouging.

Colliers points to the strength of Canada, but ignores the relative weakness in Vancouver. In the last year, the unemployment rate has grown from 7.5% to 8.5%. Maybe Robson St. is what it is, and its not a bargain.

The new American stores moving in will be competing for the same consumers dollars as the current stores. If we can't pull off an economic boom with emergency interest rates, what does the future hold? Don't expect an honest answer from Colliers.

kansai92
Guest
kansai92

@Patiently Waiting:

Time to short Collier's stock.

patriotz
Member

@Patiently Waiting:

“With all these announcements of U.S. retailers making their forays into Canada, you’re going to see a lot more competition for quality retail space,” said Keddy, who is based in Vancouver.

What a clown. Isn't it obvious that these retailers plan (like Walmart) to move more product from given amount of retail space, which will result in less total demand for retail space, given that there are only so many consumers demanding so much product? Has this guy been following US commercial RE?

Anonymous
Guest
Anonymous

@patriotz: …..What a clown…….

Pats: Don't be so hard on these guys, Colliers has a strict minimum: grade 6 education requirement.

Patiently Waiting
Member
Patiently Waiting

No this not a hoax. It is just a super awesome story:

Months after Bank of America wrongly foreclosed on a house Warren and Maureen Nyerges had already paid for, they were still fighting to get reimbursed for the court battle.

So on Friday, their attorney showed up at a branch office in Naples with a moving truck and sheriff's deputies who had a judge's permission to seize the furniture if necessary. An hour later, the bank had written a check for $5,772.88.

"The branch manager was visibly shaken," attorney Todd Allen said Monday, recalling the visit to the bank last week. "At that point I was willing to take the desk and the chair he was sitting in."

http://www.cbc.ca/news/business/story/2011/06/07/

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