From the WaPo:
The globalization of real estate upends some of our basic assumptions about housing prices. We expect them to reflect local fundamentals — above all, how much people earn.
In a truly global market, that may not be the case. If there are enough rich people in China who want property in Vancouver, prices can float out of reach of the people who actually live and work there.
So just because prices look out of whack doesn’t necessarily mean there’s a bubble. Instead, wealthy foreigners are rationally overpaying, in order to protect themselves against risk at home. And the possibility of losing a little money if prices subside won’t deter them.
In effect, this means that absentee homeowners can price out people who are actually living in the area.
It means that empty housing can drive up the cost of occupied housing (this parallels a concern about investors who would buy up housing to turn it into short-term rentals on platforms like Airbnb).
It means that cities may be short on housing that locals can afford even as a non-trivial share of their housing sits vacant. From there, the economic consequences ripple out: Empty homes are good business for security firms; they’re bad business for nearby retailers who rely on actual people to buy their goods and services.
So, what’s the solution to this new reality, if we want to keep neighborhoods occupied and cities affordable for the people who have jobs there? Writer Kyle Chayka at Pacific Standard has proposed an updated take on rent control: residency requirements. Make people occupy (or rent out) the housing they own.
Urban Planner Andy Yan suggests to Surowiecki a less draconian idea: Make foreigners pay a premium to buy up local housing.
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