Should Countries Restrict Foreign Real Estate Investment?

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Andrew Gordon

Andrew Gordon is a Baker student at Cornell University. His coverage area is Real Estate Finance, Investment and Technology. He can be reached for comment at

Foreign real estate investment in major cities throughout the world has increased rapidly in recent years.  Investors from the U.S., China, and the Middle East have turned to foreign real estate markets to capitalize on tax advantages, stable growth prospects, and political security (French, 2015).  Investing in foreign markets has also provided portfolio diversification benefits for investors as real estate returns have had relatively low correlations with other asset classes such as stocks and bonds.  While foreign investment in real estate has been a significant driver of the growth and development of many local economies, the influx of foreign capital and investment may have far-reaching negative implications for recipient countries.  As a result, real estate investment by foreign investors has been subjected to much scrutiny and debate, as foreign investors have been blamed for distorting real estate markets by inflating housing prices and consequently pricing out locals.

Implications on Real Estate Markets

Source: Phillip Capper

New Zealand’s liberal immigration policy and lenient regulation of foreign property purchases have made it an attractive destination for overseas investors and capital (Taylor & Glynn, 2018).  Foreign investment has stimulated new development projects in New Zealand improving the existing housing stock, but the flood of foreign investment has also driven housing prices to unprecedented levels.  According to the Real Estate Institute of New Zealand, median home prices increased 57% nationally between July 2010 and July 2018 (Taylor & Glynn, 2018).  Whether there is a causal relationship between the rise in housing cost and foreign investment has yet to be determined.  Nevertheless, many hold the opinion that foreign investment is to blame for the recent surge in housing prices. Critics contend that foreign investors have also exacerbated the affordability crisis in New Zealand, as there has been an increase in homelessness rates (Greenfield & Tait, 2018).  The government believes that overseas investment has overheated the property market. In response, New Zealand has decided to intervene by banning foreign investors from buying residential property.

Ontario, Canada has faced similar concerns as New Zealand, as foreign buyers have been blamed for inflating housing prices in this Canadian province.  Demand for housing in Ontario has outpaced supply, which has led to a significant increase in prices. In 2017, the average price of a home in the Greater Toronto Area rose 33% (Kassam, 2017).  In an effort to temper the heated market and regulate housing cost, the Ontario provincial government imposed a 15% homebuyers tax, applicable to both foreign individuals and corporations.  The adopted legislation hopes to deter foreign investors and alleviate affordability concerns in the market.

Stark Opposition

The efforts in New Zealand and Ontario have been met with a great deal of opposition.  In New Zealand, many believe that the government’s efforts will reduce broader foreign investment in the economy and damage New Zealand’s reputation in the global market.  Former New Zealand Prime Minister John Key echoed this sentiment, stating that foreign investors add value through their international connections and that New Zealand needed to be open for business in the global marketplace (Withers, 2018).  Some opponents contend that these measures exhibit a xenophobic intolerance that will discourage foreign direct investment that is necessary to build new homes and stimulate economic growth (Shrubsole, 2018).

Ontario’s imposed tax is certainly less controversial and onerous than New Zealand’s ban on foreign buyers, but its intentions are the same — to discourage foreign investment.  Actions taken to curtail foreign investment in Ontario have already created a spillover effect into other Canadian real estate markets.  Many believe that Quebec is poised to become the new target for foreign capital investing in Canadian residential real estate (Chipman, 2017).  In September, residential sales in Montreal, the largest city in the province of Quebec, rose 8% compared to the same month last year, and the growth is believed to come almost exclusively from non-resident buyers from China (Reynolds, 2018).  Debate among policymakers in Quebec has already emerged as to whether a foreign buyers tax should be implemented.

Future Outlook

Foreign real estate investment has played a major role in the development of economies and real estate markets.  While there is no concrete evidence that foreign investment has directly contributed to inflating housing prices, foreign investors have been central to the debate.  It will be interesting to see how the global marketplace responds to the measures adopted by New Zealand and Ontario.


Works Cited

Chipman, K. (2017, June 01). Montreal real estate basks in ‘Goldilocks’ status as Toronto housing cools. Retrieved November 14, 2018, from

French, L. (2015, April 24). Foreign property investment: What does it mean for economies? Retrieved November 9, 2018, from

Greenfield, C. (2018, August 15). New Zealand passes ban on foreign homebuyers into law (P. Tait, Ed.). Retrieved November 9, 2018, from

Kassam, A. (2017, April 20). Toronto to impose 15% tax on foreign home buyers to regulate housing costs. Retrieved November 9, 2018, from

Marowits, R. (2018, August 12). Bidding wars expected to come to Montreal’s real estate market. Retrieved November 14, 2018, from

Satherley, D. (2018, June 07). Govt’s foreign buyer ban will ‘destroy’ the housing market – Collins. Retrieved November 9, 2018, from

Reynolds, C. (2018, October 05). Montreal real estate sales hit 9-year high for September, extending hot streak. Retrieved November 14, 2018, from

Taylor, R., & Glynn, J. (2018, August 16). Locked Out: New Zealand Bans Foreigners From Buying Existing Homes. Retrieved November 9, 2018, from

Tencer, D. (2018, November 06). Montreal Targets Foreign Buyers As Housing Market Beats Toronto, Vancouver. Retrieved November 14, 2018, from




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