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For the first time ever, Canada's top banking regulator is on a fact-finding mission to gauge the scope of foreign investment in residential real estate.

Sources point to global trends that could affect investment in Canada - like China's recent policies to curb speculative real estate investment in that country - as evidence that Canada is operating in a fast-changing market that could be adversely affected by decisions made in other countries.

They suggest OSFI wants to know how big a factor foreign investment in Canada's housing market is, and how big it is likely to become, so the regulator can measure the potential impact on banks if demand were to dry up.

At the moment, Canada's real estate market is finding favour among foreign investors because house prices are low compared to such international hot spots as London and New York, industry sources say.

Interest in Canada was evident in this week's $28-million purchase of a condominium at the Four Seasons hotel in Toronto. It was a record price for a condo in the country -one still under construction, no less -and the buyer was identified only as foreign.

A recent report from ReMax on the sale of high-end homes said "foreign investment augmented sales activity in several Canadian markets," and the Canadian Real Estate Association had to revise its forecast for sales and prices in April because of unexpected activity in Vancouver. Real estate industry executives suggested Chinese buyers have been driving the market.

If the trend of international investment were to continue indefinitely, it would not be a troubling issue for the country's banks. Problems would come if transient foreign interest were to contribute to formation of a real estate bubble.

Source: Garry Marr, Financial Post.

For the full story, please click on overseas buyers.

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