Garth Turner at greaterfool.ca 3 Jun 2011 eloquently summarizes concerns about the risks that foreign speculative players bring to a market (including the risk of the bottom falling out if/when they desert).
This anecdote from the comment section of that article, chris 3 Jun 2011 9:29pm:
“I live in Vancouver and my friends and relatives who have bought recently (within the last two years) at these unbelievable prices honestly believe that there are thousands of Chinese investors lined up to get into Canada and especially Vancouver (and maybe they are right), so they wanted to get in before being priced out forever. My sister-in-law keeps asking me when I am going to buy because her house has appreciated 30% in the last year. She lives in an area now targeted by mainland Chinese investors. My “bearish” comments fall on deaf ears. My friends show me MLS listings of houses in their neighbourhoods that are now listed at hundreds of thousands more than they paid a year or two ago. It’s seriously delusional here. It’s hard for me to argue with their logic since they have been right for years and I have been wrong for as many. I don’t see Vancouver prices slowing down until the property bubble pops in China…”
Note that this is not an anecdote about foreign buyers. It is the story of breathless local buyers overextending themselves to buy at ‘unbelievable’ prices on the premise that prices will continue to rise. For every one foreign buyer, there are how many local buyers harbouring this belief? – vreaa