The Canada Pension Plan Investment Board (CPPIB) announced on January 29th; it will invest $800 million in two new property developments in China by developer Longfor Properties.
The projects include a 740,000 square metre residential and commercial development in Western Chinese city Chengdu. The town has a population of 16 million.
The other is a 340,000 square metre development in South Minhang, which is a suburb of financial capital Shanghai.
The developments will both include a shopping mall.
This choice of investment is fascinating.
Why is the Canadian pension plan investing the hard savings of millions of Canadians into a foreign country like China?
Better yet, why are they investing in the foreign real estate when over 30,000 Canadians are homeless every night, and 200,000 experience it every year?
Rising Costs & Foreign Buyers
Some individuals have attacked foreign buyers as the cause of Canada’s growing home costs.
The view that wealthy foreign buyers and new super-wealthy citizens are the cause of our economic problems could have some merit as 46,000 individuals have used Quebec Immigrant Investor Program (QIIP) to bypass Canada’s strict immigration system.
Established in 1986, it offers permanent residency to international business people with net assets of at least $1.6 million, who make an interest-free investment of $800,000 in Quebec, with the funds being returned after 5 years.
The data, which includes both primary and secondary applicants, showed that 57,935 investor immigrants who came through Quebec were living in Canada as of 2016.
Nearly 28,000 of them (48.3 percent) were living in B.C., while almost 22,000 (37.9 percent) were in Ontario.
While some organisations continue to attack foreign buyers as the cause of high home prices, they miss the real reason, a lack of supply of housing in a rapidly expanding population pool.
Shaun Hildebrand, senior vice-president of the real estate research firm Urbanation, explained the problem well in an interview with the CBC:
“Now that tenants are guaranteed their rent won’t be hiked more than 2.5 percent, under the new Ontario rules, “There’s a very strong incentive not to move. The units aren’t turning over.”
While units are not moving developers are also not developing fast enough, as some developers say they were having trouble keeping up with demand before last spring, and the new legislation only made it worse.
“It took away an incentive to build badly needed rental units,” Jim Murphy, CEO of the Federation of Rental Housing Providers of Ontario, said in an interview with the CBC.
Outside of regional players even the authors of the federal government’s Homelessness Partnering Strategy, agree that the current program although helpful is missing a significant and crucial part, affordable housing.
Canada’s rising home prices and homelessness is a problem that can only be fixed by investing more and building more efficiently to meet the realities of rapidly increasing land costs.
The pension plan could have been an ally in solving this problem, but instead, it chose to invest Canadian savings into foreign homes.
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