Real estate crisis
The real estate crisis shows no signs of slowing down, and many countries worldwide are grappling with rising property prices or being on alert. This situation is evident in countries like China, France, Japan, South Africa, Belgium, and Argentina. Factors contributing to this challenge include soaring inflation, interest rates that are burdensome for potential buyers, and foreign investments pushing property prices up. In the past months, some nations have introduced laws to either ban or restrict foreign buyers from entering the property market. Meanwhile, others, like Spain and Portugal, are still wondering. Let's take a look at the measures taken by some of the expat hotspots.
Spain and Portugal
According to real estate agents in Spain and Portugal, expats often have the means to purchase properties that are considered ‘almost luxurious' in terms of the local property market. Some Spanish agencies even claim to specialize in catering to French clients, who are the largest group of buyers, second only to the British and Germans. These real estate agencies speak of an ‘unprecedented' situation.
Expatriates are willing to pay more than the market prices to secure their properties, often outbidding local Spaniards. Barcelona, in particular, is suffocating as the housing supply struggles to keep up with the demand. Many locals are leaving major urban centers. Expats are then moving into these areas, including working-class neighborhoods. Spaniards denounce gentrification and the rising cost of living, and are urging the government to consider banning or restricting foreigners' access to property as a solution to the problem.
Portugal is also faced with a similar issue. The country is looking at Canada and New Zealand, for example, which have legislated to prohibit or restrict expatriates from buying property. However, in Portugal, there are two conflicting viewpoints. The first group advocates for following the lead of Canada and New Zealand. They acknowledge that foreign buyers are not solely to blame for the real estate crisis but argue that they do play a part in driving up the cost of living and gentrifying neighborhoods. They believe that the concentration of foreign buyers is negatively altering the character of entire neighborhoods, leading to soaring rents and local businesses raising their prices in response.
However, others argue that restricting expatriates' property purchases is not a solution for Portugal. They fear a negative effect on the economy, believing that what is applicable elsewhere is not necessarily applicable in the country.
Canada
In response to a severe housing shortage, the country has banned foreign investors from owning residential properties, including homes and apartments. This measure, effective since the beginning of the year, is scheduled to last two years. Its primary goals are to contain soaring prices, bring stability to the housing market, promote the construction of new homes, and encourage local residents to enter the property market. There are some exceptions, such as for international students seeking permanent residence and individuals holding work permits.
However, as soon as April rolled around, the government introduced several changes to benefit work permit holders. Balancing the promotion of economic immigration with the desire to allow workers to establish themselves can be challenging. Therefore, Ottawa has made it easier for immigrants classified as ‘eligible' to settle. In April, the former Housing Minister, Ahmed Hussen (now Minister of International Development), supported a measure to fight ‘real estate speculation'.
Although former Immigration Minister Sean Fraser took over his position, the challenge is tough. In September, Canadian Prime Minister Justin Trudeau acknowledged the paradox by stating: "Even those who are well-off are facing difficulties in the housing market." The situation is even more critical in Quebec, the second most populous province in the country. Between 2018 and 2022, the number of homeless individuals in Quebec increased by 44%.
Recognizing that tackling the issue of expatriate real estate investments alone won't fully resolve the problem, the government is pledging to implement additional strategies. In September, Trudeau called for the simplification of local municipal regulations, as excessive bureaucracy was causing delays in construction projects and hindering the progress of housing construction. Despite these efforts, the 2023 report from the Canada Mortgage and Housing Corporation (CMHC) indicates that Canada will require 3.5 million more housing units by 2030 to address the housing crisis effectively.
Mexico
The country imposes limitations on property purchases by expatriates. Before 1973, the ban was total. Since then, foreigners have been allowed to buy property, except in government-regulated areas. In the 1990s, the government again eased these restrictions, permitting property acquisitions in regulated areas, but with certain conditions. Foreigners are required to use a ‘fideicomiso' (trust), a real estate trust backed by a Mexican bank, in which the foreigner is named as the beneficiary. The ‘fideicomiso' serves as an indirect means for foreigners to access and own property.
Thailand
In general, foreigners cannot own residential properties outright in Thailand. They are only allowed to do so through condominiums or long-term rental agreements. However, these processes are often intricate and not particularly advantageous. Thailand is, therefore, reviewing its policies to revive its economy, which was adversely affected by the health crisis, and attract wealthy foreigners. In October, the government proposed a plan to enable eligible foreigners to own homes. This includes wealthy foreigners, high-ranking professionals, and affluent retirees who meet income requirements specified by the government. This initiative is part of the government's strategy to attract more high-net-worth individuals, intending to draw in over a million foreign talents by 2026. Nevertheless, since the announcement, there has been growing discontent among Thais who are blaming the government for ‘‘selling off the country''.
New Zealand
In 2018, the New Zealand government passed a law prohibiting foreigners (except Singaporeans and Australians) from purchasing homes in the country. An exception was also made for expatriates holding permanent residence permits. During that time, New Zealand was facing a severe housing crisis, with house prices increasing by approximately 60% in a decade. The government's target was foreign investors suspected of contributing to the rising prices. Since then, the housing issue has remained a significant challenge for the authorities. Over 20 years (from 2000 to 2021), property prices surged by 256%, leading to what is described as a ‘chronic housing shortage'. As a result, there's no intention of reversing the 2018 law. However, some foreigners are taking advantage of exemptions offered through specific real estate programs to make purchases.
Who are the targeted foreigners?
Are we likely to witness more frequent restrictions on foreigners purchasing property? For some in Spain, it's unthinkable. Oscar Gorgues, a spokesperson for property owners in Barcelona, warns against the risk of heading towards an extreme stance. He believes that the initial step should be to clearly define ‘which category of foreigners we are addressing'. There is a substantial contrast between wealthy retirees, Golden Visa investors, international students, and foreign workers. The debate has only just started.
