If you look around the worldwide real estate market there are very few buoyant markets which have not, if everything is to be believed, been impacted by foreign investors. Market as far apart as the UK, Australia and Canada have seemingly been pushed to unaffordable levels by foreign investors. Politicians find it very easy to pass the buck and while there is no doubt that foreign real estate investment has increased dramatically over the years, is it really fair to blame them for markets which have become unaffordable?
Support in the troubled times
It is quite ironic that politicians and regulators, and those attempting to bash the rich, only focus on foreign investors when markets are riding high. They claim that foreign investors are taking more than their fair share of profit from the market, stopping others climbing aboard the property ladder and generally showing no long-term loyalty to markets which have served them well. However, if we turn this full-circle, who supports worldwide real estate markets when domestic demand disappears?
Forecasting the level of overseas investment in any one real estate market at one moment in time is difficult but not all foreign investors will have banked their profits at market highs and left themselves with no liabilities when the markets turn. If the critics are baying for blood and higher taxes when markets are doing well, where are the support mechanisms when the markets are struggling?
Long-term investors
When we hear the term “foreign investor” mixed with real estate markets around the world this tends to give the impression of short-term investment for maximum profit. The fact is that many of the world’s most successful real estate investors take a long-term view on their real estate investments and often ride out the highs and lows of investment cycles. A recent report in Australia suggested that while critics were demanding higher taxes for foreign investors, and limited access to the marketplace, their impact on prices in the longer term was minimal. How much publicity did this report receive?
If we also look at the UK, previous governments made full use of PFI projects which were effectively public sector new building projects funded by private sector money in exchange for long-term support and maintenance contracts. Where was the criticism when much of the funding came directly or indirectly from overseas investors and overseas companies?
New builds, new builds, new builds
The politicians and critics can throw as much mud as they wish at domestic and overseas investors but the fact is that many real estate markets have been pushed to record highs because of a lack of new build activity. This is an issue which has been ongoing for decades now with many governments around the world running a significant deficit between actual new builds and demand for property. Why?
Simple, the ever increasing price of property goes down very well with voters and for many homeowners this will be their largest individual investment of their lifetime. So, in the good times it seems fair to bash foreign investors while in the difficult times simply ignore their support for local real estate markets. Is that fair?