How are governments dealing with the problem of foreign investors ratcheting up the cost of homes in countries like the USA, Canada, Japan, etc. What have/could countries done policy wise to deal with this? And how successful have their attempts to address the issue been?

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    Note that it shouldn't necessarily be assumed that governments see this as a "problem" that they want to "deal with". That will depend on the government's political leanings as well as their voter base. A significant proportion of the electorate will be home owners who benefit when house prices go up.
    – JBentley
    Aug 29, 2017 at 19:30
  • Ya... but I'm pretty sure most home owners wouldn't want to live in a bubble that could pop at literally an moment.
    – Tirous
    Aug 29, 2017 at 19:34
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    @Tirious Upwards price pressure on the demand side doesn't equal a bubble. That's a fairly major assumption right there. Remember, upwards price pressure from foreign investors (just like all other forms of demand) exists even in a downwards moving market. When a property market has crashed, would you still view foreign investors as a "problem"? On the contrary, the question might then become "what can governments do to attract more foreign investors?".
    – JBentley
    Aug 29, 2017 at 19:53

7 Answers 7


First off your assumption needs to be addressed. Foreign investment does not, in itself, ratchet up the cost of homes. The actual problem is foreign investors who dry up the supply of properties by purchasing real estate abroad for investment purposes and sitting on them without renting them. As long as locals can keep buying or renting the properties owned by foreign investors it's no big deal.

With this in mind, I'm aware of four policy tools:

1) Taxing property ownership. This can be done in various forms, and usually takes the form of a property tax. This is done in varying degrees in many countries. The administration that collects the tax can range from government to local municipality.

Two main issues: you need reasonably good assessment of the property's value and, since it also affects locals, it can be seen as an unfair tax in that it may also affect (not necessarily well off) retirees who purchased their property when prices were much lower.

France has a variation of this, where they tax wealth (i.e. all capital). If memory serves their newly elected president vowed to reform the wealth tax so it only applies to non-productive capital.

2) Tax foreign home buyers as part of the transaction when the buyer does not reside in the country. This was recently tried by British Columbia in an effort to fend off foreign investors who were depleting the Vancouver real estate market.

It seems to have worked somewhat, but it apparently didn't stop the bubble. The more aggressive foreign buyers are still pouring money (though down to 3% of transactions vs 13% at its peak) into the market, at the side of local investors (which, let's get real, might be foreign-owned businesses or trusts set up to avoid the transaction tax).

A variation of this is banning purchases by foreigners altogether, as described in SJuan's answer. The issue with both of these approaches is similar: you can work around the law by e.g. registering a local business and having the business buy the property.

3) Tax unoccupied properties. This is a straight-up tax on real estate investors that doubles as an extra tax on high net worth households that own secondary properties. (The latter obviously don't like it much.)

To implement it, you basically tax properties that aren't occupied most of the time. For residential housing, you can define the latter as being someone's fiscal residence. It's murkier for commercial property.

This is being tried in Victoria in Australia and in Vancouver BC. Amsterdam has an oh so slight variation, in that they're fining secondary owners who don't rent their property.

The UK has a yet another variation of this, in that they tax secondary homes; so does, if memory serves, the Netherlands at large.

4) Protect squatters. This is the most colorful option I'm aware of. Basically, a squatter that finds a property that has been left vacant for more than a certain duration and somehow manages to move in gets the same protection as a paying tenant and can stay until evicted through a court order. This is more or less how things worked in the Netherlands until a recent squatting ban.

As to what works...

Taxing property or net worth has little effect on housing prices if history is any indicator. Plus, it's technically just another tax, that affects the locals too - including retirees.

I do not think taxing foreign buyers can work in the long term, because it's easy to overcome by e.g. creating a local business or colorful paperwork with local family members (e.g. you could give them a "loan" in exchange for pre-selling the property).

Protecting squatters can seem outlandish, but it gives extreme incentives to keep homes bought as investments well maintained and occupied by tenants, all while driving secondary home owners out of hot markets.

Taxing unoccupied homes has, to a lesser degree, more or less the same effects as protecting squatters. I'm not aware of any place where it's been around long enough to say what the correct tax level should be to keep speculators and secondary home owners out of hot markets. But in my opinion this is the only sane long-term option.

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    I don't think leaving homes unoccupied is the only issue. In my particular locale, the problem is mainly caused by purchasing typical family homes and then converting them to multi-occupancy short-term lets suitable for students (who typically are willing to pay much higher rents per room than somebody looking for a family home), leaving a massive shortage of traditional housing.
    – Jules
    Aug 28, 2017 at 9:40
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    @Jules: agreed it's a major problem too, but OP wasn't asking about it. To me it's an unrelated problem that's straightforward to solve given political will. (Basically by treating it as hostelry, complete with applicable safety rules and permits, and by using heavy handed fishing operations on websites like AirBnB to enforce hospitality laws.) Aug 28, 2017 at 10:31
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    Another approach missing from your list is one that I've seen in the UK, which is when permission to build a new house is granted, the local council can attach a condition that it may only be sold to a resident local to the area. This is commonly used in tourist destinations, but could also be used in this scenario too. See, for example, this discussion of the practice from the Telegraph in 2003.
    – Jules
    Aug 28, 2017 at 11:10
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    @DenisdeBernardy: Ah, technically tricky one that. That's a local tax in some towns (including Amsterdam) and it's effectively a non-resident tax. E.g. you don't pay it if your primary residence is in the same town and you're already paying local taxes that way. Compared to the several billions in subsidies for primary residences, that 28 million tax is rather negligible.
    – MSalters
    Aug 28, 2017 at 11:42
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    Well, even if you take out the Netherlands, you can add Germany (or at least Baden-Württemberg) back in. For a long time we were paying "Zweitwohnsteuer" (literally "Second home tax") on our holiday house (now our home). Aug 28, 2017 at 12:45

I will provide an alternative viewpoint to Denis'.

How are governments dealing with the problem of foreign investors ratcheting up the cost of homes...

This is an interesting question, by the way it is phrased. You seem to imply that government is not at least part the problem. Let's now look at the rest of your question:

...in countries like the USA, Canada, Japan, etc. What have/could countries done policy wise to deal with this? And how successful have their attempts to address the issue been?

First, I agree that "foreign investors ratcheting up the cost of homes" has problematic consequences. So we should look in which countries and cities it happens, where it doesn't happen, so we can understand why it happens.

Thus, I will quote a rather famous study which caused kind of a stir when it came out. This guy did all the work.

13th Annual Demographia International Housing Affordability Survey: "High house prices are not a sign of city's success but a sign of failure...," He also asserts that, without the "slightest doubt, unaffordable housing is almost everywhere and every time caused by the same factor: housing supply restrictions."

I mean, I do real estate investment, I have tenants... and I agree with them 100%. Gimme cheap housing that I can buy and renovate to modern standards and do business and house people in, dammit! But I've stopped buying a while ago, prices are so delirious that I'd need 30-40 years for the rent to pay for the condo...

More quotes:

Germany is probably the country with the most boring housing market in the world. It is a place where nothing ever happens (at least as far as housing is concerned). German house prices remain stable, and if it had not been for the euro crisis and negative interest rates, the Germans would probably still be able to buy houses for the same prices in real terms that they paid twenty or thirty years ago.

The story for other countries like Australia, New Zealand, the United Kingdom and large parts of the United States is a different one. There, house prices have gone through the (now unaffordable) roof. My own housing research focused on this difference: Why did Germany (and similarly Switzerland) provide housing stability where much of the Anglosphere did not?

In a nutshell, the answer to this question has a lot to do with the way councils are funded. In jurisdictions where local decision-makers stand to gain from new development, they will be much more eager to make it happen. In Germany and Switzerland, council budgets largely depend on their ability to attract new residents and taxpayers. This is why both countries are have traditionally had a more responsive and flexible housing supply side. The available financial incentives to planners and councillors made all the difference to house prices in the long run.

So, back to your question: Foreign investors ratchet up the cost of homes because:

  • They expect the prices to keep going up, for irrational reasons (ie, it's a bubble).
  • They expect the prices to keep going up, for rational reasons (ie, they know what they're doing, and are buying in places where housing shortages are created by policies which restrict supply).
  • Indirect economic reasons, ie, money laundering. This is a separate problem and should be fixed by appropriate legal means.

The nice thing is that all three can be addressed by the exact same policy:

Allow the supply to meet the demand by cleaning up and streamlining land-use legislation, and pulling the plug on many useless regulations.

This makes prices stable, affordable, and related to reality (ie, to construction prices), like in Germany for example. It prevents bubbles, and it prevents investors buying housing and keeping it empty of tenants while waiting to flip it... because prices aren't rising, so there will be no flip. Without the hope of a flip, you must either make the housing you own profitable (by renting it) or sell it to someone who will. This means this housing unit serves its purpose, by having people in it.

This would also un-block the market.

Unfortunately, going back to realistic housing prices would mean lots of people would lose lots of money, thus most would prefer the status-quo, even if it is unsustainable.

This will only happen after a robust enough scheme is put in place to ensure all the losses taken by the banksters are promptly siphoned off the taxpayers.

Now, I will trash Denis' proposals a little bit (please don't take offence, I see you criticized them quite a bit to):

Taxing property ownership.

Reasonable if it is used to pay for, e.g. roads. Unreasonable if it is a punishment: it discourages construction, increases the shortage, loots from the locals, and the rich will simply buy elsewhere.

France has a variation of this, where they tax wealth (i.e. all capital).

YES WE CAN! This tax is famous for convincing the rich to go pay their taxes somewhere else, like Switzerland. They usually move their companies and wealth too... like a few buddies of mine did... The result is a net loss of tax money, jobs, and investment. Capital is a very precious thing, because that's what starts businesses and creates jobs. Its growth should be encouraged, not punished for ideological reasons. So, worse than useless.

Tax foreign home buyers as part of the transaction when the buyer does not reside in the country.

Why not, but it is hackable via the use of local strawmen, as you mentioned.

I would suggest a variant: make it well known that money laundering will be suspected if foreign investors are involved, and that everything will be double-checked.

Tax unoccupied properties.

Implies that the Govt has a right to decide what you do with your property, thus immoral.

Also ineffective, because it does not solve the root cause of the problem. In practice, unoccupied properties are either secondary residences (which already pay property tax), or units that are held out of the market for some other reason (legal blockage, inheritance, renovation, etc). Every time I see some real stats about this, the famed "huge number of vacant homes" is actually zilch. This does not stop some fractions of the political spectrum from ranting endlessly about it.

Another reason why some units are vacant is that the legislation about renting is so damn complicated (and very risky) that some people simply won't bother.

For example, I know of several vacant units between me and my other evil landlord family and friends:

  • Two are in renovation, and not finished yet.
  • Three are between tenants, will be occupied shortly. We're at the time of the year where students shuffle around, so naturally, this implies vacant housing.
  • And the last one... oh man... this one belongs to my parents and has been empty for years...

This is because the rent they would get from it would shift them into another fiscal bracket, and the net outcome would be LOWER total post-tax revenue than keeping the unit empty. I regard this as fascinatingly dumb, but what can you do...

Can't let a friend live there for free, because this would be considered a gift to them equal to rent price, so the friend would have to pay tax on this (not kidding!) also our local IRS goons would immediately suspect some cash payments were involved and would come down like the four horsemen.

Also, we can't sell it, because the building is in renovation.

And the Gov't stepped in to "help" by providing "subsidies".

It's been 4 years and the paperwork isn't finished yet.

As a result, the building looks like a war zone, everything is busted, there are live electrical wires hanging in the corridors (but the utility guys were nice enough to provide "DANGER OF DEATH DO NOT TOUCH" stickers). Oh, yeah, this also means all the flats inside the building are "indecent" for not meeting safety standards and thus are illegal to rent...

I also had to illegally sneak in and fix some leaky windows in the corridors, because since the paperwork isn't finished, no one could actually decide who was going to pay for it, or even if we could mandate a contractor to fix the damn leaky windows.

Protect squatters

Against property rights, thus immoral. Also, affects average/poor people more, since the rich & powerful will always find a way to kick the squatters out.


Unaffordable housing causes tons of problem, and lowers the standard of living in many ways, for example: several children sharing small bedrooms, not being able to move to get a better job, or simply get a job at all, or study, losing hours in transportation everyday, etc. These are some of the visible effects.

Also, being a real estate investor myself, and very much not a leftist, I will offer some insights on the other secondary and less visible effects you might have missed.

First, being riddled with debt makes people slaves. When your boss knows you've got a huge mortgage, you're not gonna resign... he owns you. Also, indebted people who still have hopes of paying back their loans do not tend to rebel or protest against their governments. They shut up and go to work. This is an important point in understanding why Govt's want lots of home owners, preferably in debt. They are easier to control.

Second, on a healthy housing market, using figures from my buddy in the building business:

  • An average, decent housing unit would cost, say X € per m2 (about 1500-2000€ considering construction costs etc).
  • A top-luxury unit would cost 2-3x that per m2 because there are not that many high-rise buildings where to put that penthouse with jacuzzi overlooking the city...
  • And an uninsulated, derelict piece of crap would cost 2-5x LESS, down to the price of land.

This statistical distribution of prices no longer exists in a market where prices have been "compressed" into the unaffordable range.

In that case, the derelict crap reaches insane prices too. This means the average joe is screwed, but the real poor are utterly screwed.

There is also no incentive to add insulation, or renovate, since that does not raise the price much.

I will end on a cold humor note: the law against discrimination.

When 40 people want the flat, I will have to disappoint 39 of them.

They are all entitled to sue me for discrimination. Unless I pick the richest one. If I do, I will automatically win in court, because revenue is pretty much the only criteria by which I am allowed to sort candidates and not go to jail.

Guess what happens ;)


SJuan76 is right, there has indeed been some action on the German market in the last few years, it seems. I was referring to the 3 decades before that, where Germany dodged the bubble:

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    the rent they would get from it would shift them into another fiscal bracket, and the net outcome would be LOWER total post-tax revenue than keeping the unit empty How does that work? AFAIK, tax brackets generally only tax the additional revenue at the higher rate, making that impossible.
    – Andrew
    Aug 28, 2017 at 20:39
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    The answer is that the French tax code makes the impossible possible. Above a certain threshold, which isn't that high btw, you don't just switch brackets, you switch from one fiscal regime into another. Below the threshold, it is simple, with few forms to fill, you pay a certain percentage, and all is well... But above, it is very complex, very time consuming paperwork, and they got the percentages wrong, which creates a gap, a kind of a dead zone where you earn less by cashing in more. If you cash in a lot more, then you can recoup costs and earn more, but that needs 2-3 more rents.
    – bobflux
    Aug 28, 2017 at 20:46
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    Wow, I'm impressed. Wish I could upvote this several times.
    – Wildcard
    Aug 29, 2017 at 2:10
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    100k/1300k is only 7.6%, doesn't strike me as suspicious, for example I often deal with students, so there will usually be one month vacancy in the summer holidays which is 8.3% already. According to this govt paper goo.gl/w3CAEJ permanently vacant units are mostly the derelict ones, and the rest of the stat is made up from intermittent vacancy, between tenants, for sale, etc. The "huge number of vacant lots" is a urban legend, I believe it was started by Abbé Pierre foundation.
    – bobflux
    Aug 29, 2017 at 12:15
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    Also, don't use the word "gift", come on, the % cut is a flat-rate deduction which represents all the expenses that you don't bother to count when in the small business regime. IF you do all the repairs DIY and you know what you're doing the real expenses can be less, which turns it into a tax cut. Also the pro landlord regime gets the RSI on your ass, and if I ever have to see those rats again, I'm off the country.
    – bobflux
    Aug 29, 2017 at 12:23

The obvious solution would seem to be to encourage the building of more housing. Increase the supply side, and the prices/availability could be returned to normal. The "investors" are only jumping onto a situation where the supply of housing is artificially limited, and they see this (rightly) as something they can leverage to make money.

The biggest issue with this in the USA tends to be zoning. High-density housing has a very bad reputation here, to the point where zoning laws in most cities are specifically written to discourage it.

The problem in politics is that there's physically possible, and then there's politically possible. Right now in most such places (San Francisco is the stereotypical example), being for mass cheap housing is a good way for a politician to lose their job. The public's attitude toward high-density housing will have to change before any politician will be allowed to change zoning strategies.

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    I will upvote all answers which mention "increase supply" on the grounds of them being the only right answers ;)
    – bobflux
    Aug 28, 2017 at 21:30
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    The problem is,there are many parts of the country where there's almost no undeveloped "greenfield" land LEFT to develop (New York, San Francisco, South Florida, etc). Redeveloping land is expensive, because whatever replaces it has to cover the cost of buying and demolishing whatever was previously there IN ADDITION to the cost of whatever gets newly-built there. At best, you might get 3-6 expensive new homes for every somewhat-affordable old one that was destroyed, with the primary beneficiaries being... those same foreign investors.
    – Bitbang3r
    Aug 29, 2017 at 1:33
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    As a broad rule of thumb, the most cost-effective form of housing (from a developer's point of view) is a 3-story single-family townhome, built on a vacant greenfield lot that's 10-20 feet wide and 100-150 feet deep. Go taller, and your construction costs increase exponentially (skyscrapers are REALLY expensive). Go multifamily, and you need lots of parking (and elevators, if it's more than 2 stories). That's why townhomes and 2-story apartments are the first higher-density homes you find in suburbs... they're the densest housing you can build CHEAPLY & foist the externality costs on others.
    – Bitbang3r
    Aug 29, 2017 at 2:10
  • China is a slight exception... the economics of skyscrapers there are slightly skewed by gov't. policy that facilitates their construction (partly for national pride, partly because the nearby subway station is already built and has to be paid for, and partly because the gov't doesn't want to spend more money rebuilding the city's roads another 2 or 3 times over the next 50 years). Hong Kong is an interesting edge case -- the government of HK gets almost 100% of its revenue by selling government-owned land, so it HAS to keep land expensive & perpetually in high demand to remain solvent.
    – Bitbang3r
    Aug 29, 2017 at 2:22
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    The single most important factor in most cities for having affordable housing is... lots and lots of transportation infrastructure that enables people to work in the city and live within a 30-60 minute commute on (comparatively) cheap land. New York's brownstones and London's Edwardian terrace homes weren't built on the sites of demolished village hovels with straw roofs... they were built across open countryside after new 19th-century railroads & subways made vast tracts of cheap rural land easily accessible for the first time. Ditto, for freeways across the US & elsewhere.
    – Bitbang3r
    Aug 29, 2017 at 2:40

In addition to Dennis answer, there are even more restrictive measures, up to the point of directly forbidding foreigner from buying houses. A couple of examples:

It is worth commenting that even with laws that these, prices may be affected by foreign factors. E.g. if there is a global economic crisis then unemployment will go up, banks will aprove less mortgages, and prices will go down; conversely once economy recovers the prices will raise.

  • AFAIK Thailand restrict property ownership to locals too.
    – user14448
    Aug 28, 2017 at 9:15
  • ... and certain Swiss cantons. Aug 28, 2017 at 12:46
  • only if they can proof that Denmark is the "center of your life". I'm pretty sure any rich buisnessman can "buy" this proof at the local municipal authorities wherever he wants to build a house...
    – Bregalad
    Aug 28, 2017 at 19:32
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    @Bregalad "This permit is not just a formality and you need to document, that you are taking up permanent residence in Denmark." The simplest way to do this would be to require documentation that you've been primarily living in the country for the last X months; a requirement that would block any would be overseas absentee owners. Aug 29, 2017 at 20:29
  • @DanNeely Any rich / influential enough person can get such a document without actually being there all the time - since to proof that he really lived here we'd basically need to spy that person 24/7 which is illegal.
    – Bregalad
    Aug 30, 2017 at 6:12

While @Denis de Bernardy and @SJuan76 have concentrated into policies that would tackle the problem by restricting the foreign investors, another angle to would be policies that would aim to increase supply of houses in the area. Especially when prices are high the incentives for additional construction should already exist. Cities and municipalities can use zoning to promote new areas as areas to build new houses. If the price is high in certain kinds types of houses they can regulate other kinds or give tax breaks into companies that build the needed types.

  • This only works if local investors have enough capital to bid against foreign investors. Otherwise the foreign investors will just be happy about getting more real estate for less money.
    – Philipp
    Aug 28, 2017 at 14:44
  • @Philipp your criticism is invalid. As prices go down with more supply the problem 'too high prices' is overcome. With lower prices local investors can buy houses too.
    – Communisty
    Aug 29, 2017 at 7:43
  • True story: interest rates historically high, with the arrival of the Euro they become considerably lower. People sees houses more affordable, demand increases. Increased demand means that land, worker and material prices go up (no, land lots with good services and communications do not appear overnight, qualified workers don't, neither). As housing prices rise, speculative capital gets in, leading to a higher increase in prices and a bigger attraction of speculative capital.
    – SJuan76
    Aug 29, 2017 at 22:46
  • I do not know much about economics, but of the few things that I know is that there is no assurance that the equilibrium price will be reached, specially if elasticity of supply and demand is low.
    – SJuan76
    Aug 29, 2017 at 22:49

I would just point out that taxing property doesn't necessarily affect locals as much as it affects foreigners. If the property tax displaces other taxes on income, sales, or whatever, then the foreigner doesn't receive the benefits from the tax reductions but still has to pay the property tax. Of course, many places do the exact opposite. Instead of shifting the burden from other taxes to property taxes, they pass laws limiting property taxes in favor of sales or income taxes.

A city can also provide services that reduce the costs of inhabitants but don't help people who don't live there. For example, schools, garbage collection, sewage, and water are common services that only provide benefits to residents.

It is also possible to separate the taxes upon land and buildings. This helps because the foreign investors are more likely to buy land without buildings or with lousy buildings that they don't improve. So shifting the burden from buildings to land will shift it from everyone towards speculators. But this also shifts taxation from high-rises to single family homes, which many cities oppose.

Special tax breaks for local citizens/residents can exempt a certain amount of property from taxation. This can shift the burden away from single families and towards high-rises. And since foreign speculators can't claim local citizenship and residence, they don't benefit from this while the local middle class potentially can. While the local rich benefit as well, they do so as a smaller portion of their overall holdings.

Territorial taxation, where capital gains are taxed for all local properties regardless of where the owner is, can help ensure that foreign speculators receive less benefit when they sell. Since local owners already pay capital gains taxes, this shifts the burden.

It's worth noting that zoning tends to benefit the rich at the cost of the middle class and poor. It allows rich people to own single family homes in the middle of urban centers while poorer people can't find a place to rent. Areas with weaker zoning laws tend to have more affordable housing as compared to more restrictive places.


I believe these points could help,
1: Identify the region where supply had depleted and help increase it.
Example, in certain area 400k to 700k houses are all sold out, so they prices have jumped by 20k in just 2017 alone.
2: Hold various online real-estate website accountable when they support an inflated price (just because some rich or foreign or frustrated person over paid for a house, all the house in neighborhood goes up)
3: Enforcing from the financial side, Investigate the bank randomly when they appreciate a house and the inspector. Kind of throttling.

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