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4 Reasons Why Chinese Investment in the Lower Mainland is a Good Thing

March 24th, 2016

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Vancouver

4 Reasons Why Chinese Investment in the Lower Mainland is a Good Thing

There’s a lot of debate on the airwaves regarding investment in Vancouver these days, and rightfully so. Whenever the conversation surrounds money and investment, people are naturally going to be passionate about their opinion.

“The notion that foreign capital, especially absentee foreign capital, is to blame for Vancouver’s high house prices is by now established popular wisdom.”

That’s Andrew Coyne in an article for the Vancouver Sun written in January of 2016.

While Coyne acknowledges the conditions that have fed this belief - soaring house prices that see the average value of a detached home in Vancouver exceed $1.2 million - he believes offshore investment truly only affects homes in the supreme high end of the value spectrum, and not the entire market.

With that in mind, here’s four reasons why we believe in the benefits of foreign investment in the lower mainland.

 

1. The Cycle of the Economy

The reality is that while it might be expensive to buy a home, this means it’s lucrative to sell a home. Money brought into the local economy ultimately gets spread around. This is the primary function of a growing economy. If you own a property and it’s purchased by someone offshore, that new money isn’t being extracted from elsewhere in the local market, it’s brand new, unspoken for.

 

2. Local vs Global Economies

There’s a distinction to be made between local and global economies. The revenue generated by home sales is usually redistributed locally. Our basic needs are served from a local perspective - the cars we buy to drive to work, the furniture we buy for our homes, the food we buy to feed our families - these are all purchased locally. It’s rare that new money being brought in is reinvested in a separate market.

 

3. The Positive Displacement Factor

While it’s true that new people moving into the area means there’s less physical space, it’s also true that selling a home to a foreign buyer also creates a sale for a local seller. People aren’t displaced in this scenario, they’re not forced to move to another market, and in reality they now possess the capital to purchase from someone else in the market.

 

4. Bonus Sales

The investment doesn’t stop with houses. Foreign buyers moving from a new country are often starting from scratch. While they may own plenty of possessions in their native country, it’s difficult and often not worth the hassle to bring those things to Canada. This means that they’re buying cars, boats, furniture, and renovation materials. They’re also contributing to their local communities and therefore the economy by attending schools, paying for youth sports, and being active in the local market.

The lower mainland is an expensive corner of the country, of that there’s no doubt. But the reality is that foreign investment contributes to the economy, rather than detracting from it.

 

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