World real es­tate as in­ter­twined as fi­nan­cial mar­kets

The in­fu­sion of for­eign cap­i­tal into lo­cal hous­ing mar­kets can be ben­e­fi­cial, but can have neg­a­tive ef­fects as well

Vancouver Sun - - BUSINESS - BY DER­RICK PEN­NER de­pen­ner@ van­cou­ver­sun. com

Real es­tate mar­kets have be­come just as in­ter­con­nected as fi­nan­cial mar­kets, so they can be equally vul­ner­a­ble to volatile swings in global for­tunes, ar­gues Michael Gold­berg, dean emer­i­tus at the Sauder School of Busi­ness at the Uni­ver­sity of B. C.

“ Lo­cal hous­ing mar­kets are cer­tainly very open to in­va­sions of cap­i­tal from abroad, and these can be dis­rup­tive,” Gold­berg said in an in­ter­view.

“ When money flows in, peo­ple say, ‘ Great, we’re on the world map, isn’t that ter­rific?’”

How­ever, just as eas­ily as it flows in, Gold­berg noted that cap­i­tal can flow out “ as some­body finds the next hot place where you sim­ply have to have a condo in the global mar­ket­place.”

Gold­berg made his point to The Sun Tues­day ahead of a roundtable dis­cus­sion on glob­al­ism and real es­tate hosted by the Sauder school’s cen­tre for ur­ban eco­nom­ics and real es­tate at the Fair­mont Pa­cific Rim ho­tel.

Dis­cus­sion was guided by the fact that cap­i­tal for all real es­tate is now global, whether it is the bulk pre-sales of Van­cou­ver con­dos over­seas or Cana­dian pen­sion funds buy­ing Brazil­ian shop­ping malls.

Gold­berg said in­ter­na­tional flows of cap­i­tal are im­pos­si­ble to reg­u­late, and can be a good thing as the flow of cap­i­tal cre­ates em­ploy­ment in hous­ing con­struc­tion, new homes add to the tax base and the city be­comes more of a global player.

How­ever, he ar­gued that pub­lic of­fi­cials need to be wary of sit­u­a­tions where in­ter­na­tional flows of for­eign cap­i­tal over­take lo­cal de­mand and cre­ate “ a mar­ket that is overly hot.”

In­stead of try­ing to re­strict for­eign buy­ers, Gold­berg ar­gued that cities need to con­sider “ eas­ing sup­ply.”

“ If you start to see de­mand, the last thing you want to do is start reg­u­lat­ing rents and things like that,” Gold­berg said. “ You want to en­cour­age de­vel­op­ers and cre­ate more sup­ply, which will bring prices down.”

In the case of Metro Van­cou­ver, Gold­berg said he sides with those who do not be­lieve the city is in a bub­ble, and he is doubt­ful that the cap­i­tal flow­ing into B. C. from in­vestors, such as wealthy buy­ers from Main­land China, is cause for con­cern.

“ If it’s at the high end of the mar­ket, where much of this for­eign stuff is, I don’t care,” Gold­berg said. “ That’s not a so­cial is­sue.”

Gold­berg will be one of three speak­ers at the roundtable event. Oth­ers in­clude Li­jian Chen, man­ag­ing di­rec­tor of global real es­tate for Greater China UBS Global As­set Man­age­ment and Robert Edel­stein, from the Haas School of Busi­ness at the Uni­ver­sity of Cal­i­for­nia at Berkeley, where he is the Mau­rice Mann chair in real es­tate and cochair of its Fisher Cen­tre for Real Es­tate and Ur­ban Eco­nom­ics.

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