Foreign property investment may not always being wanted but many economies need it.
Foreign investors are often blamed for rising property values. The reason for this argument is that it puts a strain on housing, which pushes prices up. However, is this international capital really that unwelcome?
For Malaysia, it is believed to be a cause for concern. So a minimum price has been put in place, and raised, for overseas investors. This is not something new to the rest of the world. British Columbia in Canada which has one of the quickest increasing markets, and New South Wales in Australia have received unprecedented numbers of foreign investors, namely from Mainland China. In fact one property in Sydney was even bought from an investor in Hong Kong with a viewing conducted on a smartphone. As a result for this heightened interest, additional taxes have been introduced in both British Columbia and New South Wales for foreign investors.
Measures are already in places for Singapore and Hong Kong who ramped up taxes in a bid to deter overseas investors making their mark. Whilst in Switzerland, a ban was implemented not permitting residents from outside of Europe to buy property. For the UK, a melting pot for international investors, extra taxes have been introduced for anyone owning more than one home.
The effect.
But how much do these foreign investors play on the market? For British Columbia a 15 percent extra tax was placed upon overseas investors as Chinese buyers made up a third of the property value. This is according to the National Bank of Canada. The state has experienced unwanted prejudice towards to the Chinese, but could this be down to historic reasons rather than just snapping up property?
But for London, overseas investors only make up a small amount of the purchasers. However they have been cited to having contributed to influencing the market in other ways. There is now a glut of luxury housing in England’s capital built for the international market. This teamed with a deficit of affordable housing create an imbalance in supply and demand. So by introducing penalties for international investors, it has hit the luxury market instead. Naturally impacting local investors too.
Much needed capital.
When the global financial crisis rose its ugly head in 2008, some of the hardest done by countries in Europe were Spain, Greece, and Portugal. In a bid to help their economies a golden visa was introduced permitting overseas investors to buy property. This could eventually lead to residency of that country. A prime example of how international funds can boost economies that are in dire need. But this comes amid speculation since Portugal’s scheme has come to a grinding halt due to fears of the scheme being involved in corruption scandals. Subsequently, they have changed their tactic. A new ‘wealth tax’ will be introduced for any property value in excess of EUR 600,000.
Stories from across the world demonstrate that each case should be examined individually. Some governments need to carefully balance the requirements for funds with the needs of their local population. China itself has even placed restrictions on its residents from moving money out of the country. A move that could have a ripple effect across the rest of the world.
Residents should not be scared of international investors. But this is provided that governments strike the balance perfectly. Either way lessons can be learnt from markets across the world in order to achieve this.