“One argument I hear a lot is that foreign demand for local real estate has grown substantially in recent years, and that such foreign demand will be supportive of prices in the future.”

We have long suggested that foreign buyers of Vancouver RE are largely unsophisticated momentum driven speculators, who, along with similarly unsophisticated local specs, will be prone to dumping their RE holdings when prices head south. ‘No Money Down’ at vancouvercondo.info 25 Mar 2011 9:09am pointed to a 2006 San Diego Professor Piggington post on the phenomenon; so pertinent to the Vancouver RE market today that we reproduce it here :

The Dumb Money
Rich Toscano December 20, 2006 – 8:45pm piggington.com
One argument I hear a lot is that foreign demand for local real estate has grown substantially in recent years, and that such foreign demand will be supportive of prices in the future.
Unfortunately, this argument puts the cart squarely in front of the horse. Investors from other countries are well known to be the very last participants to arrive at the scene of a financial bubble. They are the last to hear about all the riches to be made, the last to buy in, and the last to realize that the party is over.

4 responses to ““One argument I hear a lot is that foreign demand for local real estate has grown substantially in recent years, and that such foreign demand will be supportive of prices in the future.”

  1. Love these comparison stories! …and from the comments …

    Submitted by guy1 on December 22, 2006 – 4:37pm.
    “Hey,
    Love you guys, still hanging on to the hope of the great decline. Month after month I check in with your chit chat and all I see is all talk and no declines. The math is great, but where are the great declines. Do you honestly believe the fed is going to let the housing market crash to smitherines. Rates are even lower, why, the Fed does not want the resets to kill everyone….”

    • Ornamental Tepee Usury

      hahah i read that last week and i remember thinking, gee it’s too bad that comment is going in the memory hole one day!

      vreaa can you save that comment and put it somewhere special??

      you have to admit, it’s pretty awesome.

  2. Interesting post and contemporary comment.

    What compounds my worry is that if Vancouver RE starts crashing or sliding, the Bank of Canada won’t do much about it. I’ve heard rumblings about Toronto overheating, and the GTA and the rest of the country may or may not be overvalued, but the rest of the country isn’t in a bubble the way Vancouver is. Any blunt policy instruments will be focused on the country as a whole, and isolated Vancouver’s insanity will be left hung out to dry.

  3. Flogging a Dead Horse

    as it should be,

    sometimes the solution to the problem is the correction.

    problems arise when said original problem is papered over, and the can is kicked down the road, as we witnessed a couple of years ago.

    all this does is exacerbate the problem (exponentially?) and when the chickens finally come home to roost, the problem is 10x worse than it had to be – all for short term political gain.

    sick of having my vote bought with my own money, thanks..

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