A ubiquitous form of Foreign Direct Investment (FDI) is investment in residential real estate. However, neither trade and investment treaties nor reports on investment reflect this reality. Presumably, investment in housing purchases and construction form part of larger industry categories, e.g. “unspecified” or “business activities”, or is obscured due to the elusive nationality of investors, consequently escaping classification as greenfield, M&A, or portfolio investment. Yet, reports in the public media and experiences in local communities, hosts of such FDI, reflect a different reality.
Interestingly, the two most recent and consecutive semi-annual reports of the Bank of Canada list household indebtedness and house prices as the two most important key risks to the stability of the Canadian financial system. One report identifies “stress emanating from China and other EMEs” as the third most important risk factor, whereas due to the latest governments’ (federal and provincial) intervention in the mortgage and foreign investor driven housing market, the second report relegates “fragile fixed income market liquidity” to third place. However, no authoritative statistics are available to gauge the importance of residential real estate as a portion of total Canadian inward FDI.
 Foreign Direct Investment (FDI) is when a firm registered in country A (“home” country) acquires assets in country B (“host” country) and the acquisition comprises of management rights and control. This is distinguished from Portfolio investment which doesn’t confer control but consists of acquisition of bonds, financial instruments, or stocks for the purpose of financial return. When a certain constellation of investor interests align, a foreign investment activity may consist of both FDI and portfolio investment. Although this applies to some real estate transactions, the subject is beyond the scope of this paper. FDI takes several forms: “Greenfield” investment refers to the establishment of productive assets by the foreign firm in the host country; mergers and acquisitions (M&A) happen when a foreign firm merges with a host country firm and/or acquires it (also referred to as “brownfield” investment where the purpose is to use the existing facility to engage in a new production endeavour); or the purchase by the foreign firm of stocks of a host country firm, which entitles the purchaser with management rights.
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