How does eliminating a massive portion of the demand not reduce the price?

> How does eliminating a massive portion of the demand not reduce the price?

It reduces the price of owning a home not living in a home. We have this Chinese real estate money 'problem' in Toronto. It makes it so renting a luxury condo is actually cheaper than buying it and paying mortgage interest + property tax + maintenance.

Effectively rich Chinese people subsidize our cost of living in exchange for having a safe place to park their money :)

is that actually true though? in vancouver, we have a similar phenomenon of Chinese real estate investors, except majority of these investors seem content to buy up properties and then choose not to rent them out even if they're not living there. this takes a lot of rental properties out of the market.

If the cost of home ownership has a major decline by blocking foreign investment, then you would actually be able to buy a home for cheaper than renting, which is normal for markets without so much demand. The exorbitant housing prices have just locked out normal people from ever building some sort of equity.

You can "build equity" by doing things like buying, well, equities. Or fixed income, or any of a variety of other investment vehicles.

The only thing special about real estate investment is the massive government subsidies for it. (E.g., owner-equivalent rents are untaxed, mortgage interest is tax deductible, etc.) The best solution to that problem is simply to eliminate those tax subsidies.

The major thing that is special about real estate investment is that you can live in it. If I could live inside of Google stock and it would eliminate my need to pay rent, then sure, equities are just as good.

If you invest in equities and get a revenue stream that pays rent, you can "live in it". The only advantage to real estate is that the revenue stream is tax subsidized.

This is fixable in multiple ways; start taxing imputed rent (tolerable) or stop taxing capital income (far better).

Because returns on equities are stable enough for rent. /s

Have you seen what happened since the year started?

If you're thinking of dividends, just for 1k/mo apt you need to have 400k worth of a 3% yielding stock. 400k in a normal us housing market gets you much better than the 1k rent.

Mortgages also give people access to leverage though, so it's a bit different from other investments most people make.

> If the cost of home ownership has a major decline by blocking foreign investment, then you would actually be able to buy a home for cheaper than renting, which is normal for markets without so much demand.

But then they would stop building them (or stop building such nice, expensive ones). I'm talking about brand-new 35th floor curtain-glass condos bought straight from the developer.

In Manhattan, you can't really do much more development. So what happens is the foreign investments basically buy out a large portion of available apartments and the people have to move elsewhere. To other boroughs mostly.

Sometimes this results in very inefficient transportation/location for actual legitimate companies that operate there and people who live there because of the dead weight real estate.

Sure you can. Lots of Manhattan is only 3-4 stories tall - its just legally impossible to build bigger in many places. (E.g. east village, full of the most entitled activists outside SF.)

Foreign investments in Manhattan are usually rented out and are part of the housing supply.

Close to permanently rented out to foreign/domestic investors not living there.

Also, lots of the medium-height buildings are historic in nature, so demolishing them is not a very good option.

I agree that there could be some further development, but there should be some sort of regulation to avoid ghost-town status.

Had all of the apartments been rented out to actual residents, the picture would have been much better.

Why would an absentee foreigner rent a flat? Unlike buying it, that's not even an investment. It's just throwing money away.

If this is common we should build more and take the money of these stupid foreigners. If we build enough, regulation is unnecessary - why prevent foreigners from giving us their money?

Not sure why they do it myself or how prevalent it is.

Perhaps subletting rent stabilized housing when the price increases further? In this case it wouldn't be much of a problem.

I haven't seen any statistics, just some anecdotal evidence for absentee renters, especially in the past two years.

Regardless, ownership is obviously a bigger problem.

Because in some locations (c.f. London) this makes the asset far more liquid. Having renters requires you to engage a property management company and the presensce of tennants makes it harder to flip the property quickly if you need to get access to your stash of ill-gotten gains.

It is not just stories and anecdote, there are large portions of high-end London real estate sitting empty because foreign buyers often do no want a tennant.

Until you cite some statistics (specifically the residential vacancy rate), you are in fact just repeating stories and anecdotes.

With better materials and improving construction tech there's always an opportunity to demolish and build higher, latest example being https://en.m.wikipedia.org/wiki/432_Park_Avenue

Great example of a building rented out/sold to foreign billionaires who would never actually live there.

As long as their property tax checks arrive on time, the city should do okay.