Foreign property investment needs to be balanced to meet all needs.
It took sometime for Vietnam to open their door to foreign investors. Many cities across the world blamed these purchasers from overseas for rising property values. Pushing up demand, and putting a strain on supply, prices adjusted accordingly.
Vietnam has received a record amount of foreign direct investment. Being pumped into the property sector, there is no escaping how this influx is shaping Vietnam’s skyline. For individual investors, some countries across the world have put restrictions in place to slow down the international interest on their market.
British Columbia in Canada which has one of the quickest increasing property markets, and along with 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 without having seen the property. The viewing was conducted on a smartphone demonstrating the sheer demand on owning property overseas. Due to this increased interest, additional taxes have been introduced in both British Columbia and New South Wales for foreign investors.
Measures like these are already in existence in Singapore and Hong Kong. Both countries have hiked 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 are foreign investors really negatively impacting the market? In British Columbia a 15 percent extra tax was placed upon overseas investors as according to the National Bank of Canada Chinese buyers made up a third of the property value. The government need to be seen to be doing their part in protecting the local residents. But one argument is that any prejudices towards to the Chinese are historic, and not due to the property spending sprees.
In London foreign investors account for a small number of property purchases. But they are believed to be influencing the market in other ways. Due to international interest, a large amount of luxury properties were built and there is now an oversupply. This teamed with a deficit of affordable housing create an imbalance in supply and demand. The introduction of penalties aimed at international investors has hit the luxury market instead, thus impacting local investors too.
Lessons learnt.
Spain, Greece and Portugal were the countries hardest hit by the global financial of 2008. To help inject funds into economies a golden visa was introduced permitting overseas investors to buy property. Those participating could later down the line apply for residency of the country they invested in. Surely local residents could not deter this sort of interest seeing as it boosts economies in dire need. But they have not all paved out as expected. For Portugal there have been numerous stories of corruption scandals so the country has changed course with a new ‘wealth tax’ will be introduced for any property value in excess of EUR 600,000.
These lessons to be learnt will pave the way for other countries planning to introduce similar laws. China is already trying to slowdown outward capital flow by restricting money being sent out of the country. Whilst many are working the loopholes to keep up their overseas purchases, it could still impact markets across the world.
Vietnam’s buoyant market will continue its upwards trend thanks to overseas investment. But governments still need to strike the balance perfectly in order to keep the locals happy in on their own market.