In Vancouver, Chinese home-buyers snapped up homes so fast in 2016 that prices escalated at a rate of 30% a month compared with a year earlier. Officials imposed a 15% foreign-buyers tax, and Chinese buyers turned to Toronto, where they soon bid up home prices. Seeking to curb the market surge in the Toronto area, officials in the province of Ontario introduced their own 15% foreign-buyers tax in April last year.
Chinese buyers had by then begun returning to Vancouver, driving prices to fresh highs in mid-2017 and provoking a new round of measures in February. By May, sales numbers had fallen 35% from a year earlier, but prices, on an adjusted basis, still climbed 11.5%, according to the Real Estate Board of Greater Vancouver.
The hot pursuit of places to park money abroad by Chinese investors drove an estimated $100 billion in property purchases outside China in 2016, according to Juwai.com, a Chinese real-estate website. The buying frenzy, which grew from $5 billion in 2010, helped swell prices for housing and commercial real estate in cities on the Pacific Rim and beyond.
Chinese buyers have scooped up condos, apartments and houses from Vancouver to Auckland to Sydney. While foreign capital was welcome in the years following the financial crisis, officials have found that trying to control the flood of foreign money into housing is like squeezing a balloon: Taxes on foreign buyers in one city only divert them to another spot—and sometimes buyers return, taxes or no taxes.
Governments world-wide “are still at the trial-and-error stage,” said Aaron Terrazas, senior economist at Seattle-based Zillow Group, an online real-estate listing service. “They are trying to figure what works and what doesn’t.”
Officials in Canada and Australia, where relatively affordable homes and large Mandarin-speaking populations attract Chinese buyers, worry the price bubbles threaten their regional economies.
Montreal’s housing market has shown no signs of overheating, but after Valerie Plante was sworn in last year as mayor, she asked provincial officials for authority to tax foreigners buying property in Canada’s second-largest city.
After seeing what happened in Vancouver and Toronto, Ms. Plante worried her city was next. “We need to be very cautious,” a spokeswoman for the mayor’s office said.
At the Beijing real-estate expo in April, Bao Yingqi of B.Y. Realty, was, in fact, making a pitch for Montreal, saying the city has yet to impose high taxes on foreign buyers. “This makes Montreal stand out for investors,” she said.
Montreal has new housing and an interesting French-speaking culture, said Ms. Bao, who was wearing a black beret. She sat in a booth decorated with a Canadian flag and described Montreal as the “Paris of the West.”
Zhang Yuxing, a 43-year-old Beijing resident, listened. He had planned on Vancouver, but taxes have gone too high.
Now, he said, his top choice is Montreal.
‘Unstoppable juggernaut’ | 势不行挡
The impact of foreign buyers on home prices isn’t entirely clear, according to analysts and the International Monetary Fund. Low interest rates, liberal immigration policies in Canada and Australia as well as a tight housing supply in some areas also contributed to rising home prices.