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Comment by BurningFrog | Hacker News Reader

The value of housing comes from how much you can charge people who want to live in them.

That number doesn't change because foreigners can't buy.

By definition it will. Fewer potential buyers always means lower top prices. Especially in this case, where the whole point is to prevent rich foreigners from outbidding poor locals.

No.

Owning housing produces a certain income for the owner. Either as the rent you can charge from tenants, or increase in the resale price. Both depend on the local supply/demand situation.

Yes, supply and demand. Excluding buyers reduces demand, and thus reduces prices.

But buyers will just become renters then, changing nothing for the prices.

The buyers who are being excluded do not want to rent. They might want a place they can visit for a few weeks, but mostly they want an investment property.

I'm claiming the fundamental underlying demand is for actual housing. Canadian cities are not allowing enough housing to be built for their increasing population, which leads to a price spiral, which in turn attracts savvy investors.

Who ultimately owns the properties does not really enter into the price equation.

I know the stories of how foreigners are so greedy that they buy houses but decide to forego the income from renting them out. Those anecdotes don't pass my smell test. Greedy people like to have income!

You may not believe it, but the situation is very well documented and certainly a thing that is removing housing stock from cities around the world.

Housing has a value as an investment, and leaving the housing unoccupied reduces the cost to maintain the investment. Tenants have a lot of protections in many jurisdictions, and an owner is responsible for maintenance, depreciation and damages, while a tenant cannot be evicted by the landlord who wants to sell a unit without a substantial waiting period, if at all.

https://bostonagentmagazine.com/2018/09/11/study-bostons-new...

https://nypost.com/2021/08/05/nearly-half-of-luxury-units-em...

https://www.nytimes.com/2017/07/21/upshot/when-the-empty-apa...

I don't think you understood what GP meant, so i will try to formulate it in another way:

A: People who want to live in a city need housing and are ready to either 1: pay X/month (rent) or 2: buy the house.

B: This law do not create new unit to be rented or bought, and do not do anything for the cities attractiveness, IE the migratory trend will stay the same

C: The renting price is complex and while location and regulation do have an effect, the price is based on supply and demand, not on "how much did you pay for this house" (unless you have rent limits in canada).

D: The buying price is complex but also half based on the renting price. I think AirBNB jacked things up, and we now see housing as a commodity so the number could be higher, but when i was a kid the common sense was: monthly rent * 12 * 20 > house price: buy, else don't.

If A,B, C and D are all true, then i don't see how this law can change prices. If i'm wrong on any point, it might.

But D is not true. If a property costs one million today, but could sell for two million in a few years, then simply buying it and holding it will earn you a reasonable rate of return even if you never rent it out. In fact renting it out is risky simply because it will make the property harder to sell when the time comes.

And with a small but significant population of potential buyers excluded, the property prices will not not rise nearly as much and they may even fall. If there are enough rich Canadians in the coming generations then prices may rise again, making the investment worthwhile, but there is significant risk there.

But D is true though. Housing price is mostly based on the price-to-rent ratio when outside a bubble, and the average investors know it way better than the average Canadian [0]

[0] https://www.investopedia.com/terms/p/price-to-rent-ratio.asp

Only if the buyer intends to rent it out.

Isn't the price-to-rent ratio in the us around 16? And from what i just researched, it's like 18 in Canada, so not "Only if the buyer intends to rent it out". The price-to-rent ratio is 18 in Canada, hence it's not yet a bubble, hence housing as an investment is related to renting prices more than just something to happen in a bubble.

What do you mean? Foreigners can't buy therefore it will decrease the number of people trying to buy there

But it won't decrease the number of people competing to live in the units, which is what determines the value of the housing units.

it largely does not. in the high-dollar markets like vancouver and toronto the cost to purchase has little to no relation to the actual houses-to-live-in market, and the cost to own is many times higher than the cost to rent because the housing market is purely a speculative financial market.

many of the properties are left empty for extended periods of time because the owners value liquidity over rental income, and having a renter makes it more difficult to sell quickly when market conditions change (or if you simply want to shift your portfolio).

A lot of these properties apparently are bought by wealthy foreigners purely speculatively, and sit vacant. If they were buying them to rent them out, I'd agree with you, but as it is, they end up reducing the housing stock that's available to be lived in while the number of people stays the same, so they do drive up price.

It's well known that wealthy overseas Chinese park their money in Canadian real estate.

Many of the purchases remaining as rentals or unoccupied

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