There are countries which prohibit foreign ownership of real estate. However capital controls typically prevent money from leaving, rather than entering. It will be interesting to see how this trend plays out.
Interesting indeed - to have gone from a capital starved era that led to the fetishisation of direct foreign investment to an era where there's so much capital seeking returns that it gets turned away. A strange inversion if ever there was one.
It fits with the theme of declining globalization and increasing protectionism. Still it seems strange for an allegedly free and open capitalist nation to turn away capital.
I suppose the political alternative would be questioning why the real estate market was managed in such a way to restrict supply, or disincentivize renting some of these foreign owned properties. Always easier politically to point and blame the external actors, the othertribe.
If this latest measure proves ineffective and taking responsibility for domestic mismanagement is off the table, what comes next? Nationalization or a bail-in of foreign held properties seems extreme, but how far can this go?
Yeah - there's a line in the article about an exception for "permanent residents", which makes sense. I don't see how one could defend not allowing workers living in Canada to buy a house.
It could be that there is a sufficient amount of housing (built or being built), but that it is often not occupied on account of just being an asset in a wealthy person’s portfolio. In this case it could be seen as wasteful to build more, and too much of an oversupply could lead to an economic collapse if it’s on a big enough scale.
The other possibility is that they are building more homes, and want them to be purchased by people who will live in them.
Note: not a Canada expert and tbh the “they” in question is a bit undefined here
If the property itself is valuable enough? Renting the property out might not actually be worth the hassle. A single bitter tenant can cost a lot of money, from eviction to repairs/damage.
Because they can make a far greater profit by selling the property at a moment's notice, than say renting it out for an year.
I mean, a place where your rental profit is 3k/month, might sell for 100k more than you bought it for, to the next wealthy person who thinks they can make another 100k profit by holding and selling after an year.
Not really. Rents in my current area are in line with my mortgage. So perhaps they're getting better deals than if they had to sell a house and buy a new one every year, but, it's a much worse deal than if they were able to buy a condo and live in it.
Because, depending on local regulations, it can be a PITA to deal with tenants. Receiving rent can also be considered as income, so now you have to deal with the tax authority.
If the main goal is to park the cash somewhere outside the person's country, they presumably have "enough", so they don't want to deal with all this.
Beats me. But I see it everywhere in my home town. I’m actually vaguely acquainted with the agent responsible for the bulk of it. His specialty is selling homes to absurdly rich Chinese. They typically buy sight unseen, his daughter (friend of mine) arranges for some half livable furnishings to be put in place, and maybe 1 week a year tops they’ll visit.
I believe the people are rich enough that the logistic overhead of even having a property manager rent it out isn’t worth it to them. Better to keep it in pristine condition and flip it however many years down the road.
With a 20% market increase in a year, you don't have to rent it. Renting a property out always comes with hassle. Many countries have tenant's rights that kick in after a period of time.
I live in Barcelona, and the rental market is crazy. Technically I should be allowed to sign a contract for 5 years, but because of the rights that kick in after 12 months, there's a ton of landlords that only want to offer 11 month contracts.
> I live in Barcelona, and the rental market is crazy. Technically I should be allowed to sign a contract for 5 years, but because of the rights that kick in after 12 months, there's a ton of landlords that only want to offer 11 month contracts.
Same situation in India.
The rental yield is low, taxes are high, compliance is time consuming, and there is lack of legal framework in cases of disputes.
A court case will take a decade to resolve if the tenant claims the property.
The only solution I can see is government provide incentives and security against tenant for landlords or government gets into business of renting by building houses.
If market increases 20% a year clearly there isn't enough being build. Housing really shouldn't be appreciating asset, maybe stay in line with inflation and improved quality, but 20% a year is unsustainable.
It could also be because the on paper rental value is higher than the actual market rate of rental. By renting out you decrease the on paper value which limits your ability to use it in collateral for further property loans. It's why in some city's some commercial property will sit vacant for years without the owner decreasing the rate to get tenants in.
A tax on empty homes that started increasing after some grace period (say 3-12 months or whatever) would be amusing because at some point the vacancy owners would start paying people to live in the house so as to avoid the tax.
And if prices were going up enough, it'd be worth it.
Canada has comparable housing supply with many other places that don't have the same skyrocketing unaffordability. Most parties are advocating for increasing supply, but it's definitely not the entirety of the problem (particularly when additional building carries it's own problems like sprawl and destroying farmland / ecological preserves).
Also the federal government doesn't have a ton of jurisdiction into increasing supply, that's largely a provincial concern.
This the answer. The rate of population growth in major cities like Toronto isn't keeping up with the housing supply. Our cities should be building more high- and medium-density housing, and public transit to support this population.
Where? The farmland boom, which began in 2007, has priced residential sprawl out of the market. That's why the urban areas on arable land have been feeling more and more heat in the city limits, not being able to affordably grow like they once were able to.
There are plenty of markets in Canada where the price of homes have been on the decline for the last decade, namely where agriculture is nowhere to be found, but for someone reason people don't want to live in those places.
Toronto and Vancouver (and surrounding cities) do build quite a lot in comparison to other places, but given how much immigration the Feds are allowing they have to be building even more.
The fact that there is so much development and change going on, and that it's still not enough to lower rental vacancy rates (or prices) is something that I think contributes to people feeling like maybe adding supply doesn't help and there's other problems.
From what I've read before, the issue isn't foreigners buying the homes to live in, it's foreigners using it as a way to move cash out of their own country to hedge against devaluation/government blocks. A lot of the houses don't even end up being rented out, they just sit vacant.
This. Too many canadian homes are sitting empty. Those who dont live in the country are less likely to actually live in the homes they buy. It is a hamfisted approach but at least they are trying something direct to address the vacancy issue, something other than moving money around.
Not at all, you can buy property remotely and you can in vest in clmpanies which buy properties on your behalf.
Trouble is that restricting foreign buyers is meaningless unless you also reign in corporate 'investment', as endless shell conpanies obscure the end benefactor
What you have to do is reign in buying houses as an investment by people who have no intention of ever living in them.
This. Root cause is crappy city planning and design; and emphasis on single family housing development. Many cities across North America are designed with urban sprawl and car centric travel in mind. Pedestrian and alternative forms of transportation are a second class citizen despite the ability to move people more efficiently than cars will ever do.
Don’t get me wrong. Cars have their in place in society but their current role is overstated and NA city design shows it (massive parking lots, expensive housing).
This is literally nothing to do with it. It's to do with wealthy foreigners buying properties and leaving them empty basically to use as an 'asset' rather than a home.
London has this problem more than anywhere. Blocks full of purchased and empty while locals can't get a sniff.
That is by no means the entirety of the housing problem in Canada. Foreign ownership is a very small part of the Canadian housing market, and with no other measures, Canadian investors will happily scoop up foreign owned properties. I doubt this by itself will make a significant dent in the market.
What we need is foreign ownership taxes / bans combined with heavy taxes on ownership of multiple single-family dwellings and townhouses.
The root cause is a handful of cities winning and experiencing unreasonable growth they were never designed for. Winners grow at up to 300K people a year while losers shrink. Governments need to do more so that their national economies aren’t centred on a small handful of success stories. If there were twenty good cities in Canada, Toronto would be growing by 30K a year instead of 300K a year (pre-COVID).
Being from Vancouver and having witnessed with my own eyes mainland Chinese investors in suits on one-day visits driving around in tour buses and buying everything in sight - yeah, this clusterfuck is absolutely rooted in a torrent of Chinese money being parked in Canada.
The ban won't do much, obviously, but the cause is the foreign investments. 100%.
The root cause in Canada is that a lot of the older generation, existing home owners, have put their investments in buying second or third homes as income properties, and for a lot of Canadians (I read that 1/3 of Canadian home owners have one or more additional properties) that's the nest egg now.
For years now homeowners have used HELOCs (Home Equity Line of Credit), to effectively 100% finance an additional home purchase by using the HELOC for the downpayment, and a mortgage for the rest.
This puts a lot of people in (very self-inflicted) financially precarious situations where they are counting on interest remaining low and the value of their investments going up in order to stay ahead of the payments.
Regardless of how we got here, due to this situation no government will screw all those people over just to "fix" things for those who haven't been able to get into that market yet.
It's a lose-lose.. Leave things the way they are, and you continue to price out an entire generation, which is a huge problem. Make a large corrective change to address this and you potentially force a huge amount of existing owners to sell investments at a loss and face financial distress, another huge problem.
Some folks say "too bad for them for getting so leveraged" but all they did was follow the advice given to them by the market, and follow the rules that our government put in place.
Anyways, it's a complicated problem. Foreign ownership certainly contributes to the problem but it's not the major factor. This is 100% a "for show" measure.
> For years now homeowners have used HELOCs (Home Equity Line of Credit), to effectively 100% finance an additional home purchase by using the HELOC for the downpayment, and a mortgage for the rest. Banks hate this, but it's legal.
If banks actually hated it, they would simply not write the loan. Why do you think they hate it?
I say "banks hate this" as unsubtle shorthand here. Obviously they don't hate it enough to refuse people additional mortgages (it's all secured by tangible assets at the end of the day) but they certainly aren't as happy about it as if people had a 20% downpayment in cash rather than pulling it from a line of credit.
Yeah I guess I am not trying to provide a super in-depth explanation of how finance works here, since that's not the topic we're discussing.
I am not a financial expert, but I have been told by professionals, and read in credible publications, that financing entities are not thrilled about the idea that people can effectively 100% finance additional home purchases using HELOCs, rather than having a cash downpayment.
That's the point I was making. My apologies for drawing an incorrect conclusion on the unrelated details.
100% financing is problematic mainly because the "owner" has zero incentive to not walk away if the house goes below purchase price even if they could afford to keep up the payments.
This puts the "bank" (read: bank and the investors the bank sold the loans to) in a precarious position, as a slight downturn in the market could result in a large percentage of loans defaulting.
> For years now homeowners have used HELOCs (Home Equity Line of Credit), to effectively 100% finance an additional home purchase by using the HELOC for the downpayment, and a mortgage for the rest. Banks hate this, but it's legal.
Banks don’t care, they just sell the loan. If they cared, they wouldn’t write the loan! Cmon now.
I forget how pedantic HN can be.. You're the third comment to latch onto that one phrase in my overall comment, and it's not even that relevant to the topic being discussed.
My fault, I really should have phrased that differently.
> all they did was follow the advice given to them by the market
The market doesn't give advice, it's risk and return. Don't take more risk than you can handle is investing 101. In any case, if the market is unsustainable (non-productive assets appreciating several times inflation is indeed unsustainable), these people are going to get screwed regardless. Either completely later, or almost completely now.
Maybe in the future, after the smoke settles, governments will be more wary of moral hazard. Probably not, but one can hope.
For the hottest market in Canada, Vancouver, the hottest communities had single digit foreign ownership. That doesn't explain why Halifax, Nova Scotia has double in price.
But regardless, not sure why travel restrictions would matter. You don't need to see a house to buy it.
If any foreign buying stat looked single digit it was only because the metric was so broad so as to include areas where there was zero foreign buying interest.
The week the BC Liberals brought in the foreign buyer tax they had data in hand that showed foreign buying in Richmond and Burnaby was (going from memory here) between 15-20% of sales that period. Worth noting that at the time those areas were building lots of new builds so possible that the trend the government was concerned about was new build condo purchases being dominated by foreign capital. That's my speculation only. CoV proper I think was around 11%.
Globe and Mail articles on this issue from around 2016 call out some of the data and there are some startling numbers that make it clear why the government acted. Perhaps its available on some government website too I dunno.
They never started collecting actual citizenship/residency data on house sales until a year or two ago. I remember one analysis out of UBC that assume foreign owner if they has a "foreign sounding name".
From what I've seen, some neighborhoods are high, but it's at the margin. Canadians snorfing up massive amounts of debt in order to acquire more property is a bigger driver.
Yes around 2016 they finally started gathering real data and it was so remarkably high in certain areas they brought in the foreign buyer tax. It only took like a month of data before the government, which btw long dismissed that there was any problem, was convinced that there was a real problem.
In economics, in general it's usually better to tax than to ban.
In this case, you could just tax foreigners for owning property. Or you could tax non-residents for owning property.
A land value tax would be a good idea in general. But if it's politically necessary to restrict that to people from far away, that's still better than a ban.
The people who buy these properties are often looking to put their money somewhere safe from government seizure (i.e. 100% tax). A tax is not going to be much of a deterrent unless it is really very big.
It can be difficult to disprove residency, especially if you can say you travel a lot for your work. I've uh...heard of people that are residents of Nevada for tax purposes. They have a tiny furnished apartment and their car is registered there, and they're registered to vote there, but let's say they aren't home very often.
Well it will not solve everything, but two things:
- It will make it impossible for people without permanent residency to buy property.
- It will prevent people from owning multiple homes in the country.
You could also define a minimum number of days a year where they had to prove that they occupied the property, maybe at least a quarter of a year.
This is really, really stupid. It reeks of economic illiteracy.
If you think foreign investor cause harm, just estimate how much harm it is, and tax them accordingly. Why would you ban them?
Taxing is almost always more economically efficient than banning.
You can even pay out (part of) the tax take to the people you think are harmed.
(In general, a land value tax for everyone would be a good idea. But if political reasons dictate that only foreigners should be taxed, so be it. Still better than a ban.)
That's why I am suggesting not singling out foreigners in the first place.
Use the tax you collect to finance local goods and services (and to reduce other local taxes).
So local pay the tax and get something in return. Non-residents pay the same tax, but don't get the local goods and services; just because they aren't there. And all without any complicated rules.
BC brought in a speculation tax that was effectively an empty house tax (you avoided the tax if you rented your house). In its first year, beyond whatever monies it made, it also added about 8000+ units to the market. Now you only get that surge one time, but hey that's not nothing, and beyond that the market seems to have reoriented slightly toward less development of apartments for sale, and more purpose built rental apartments.
Exactly, and I honestly wish there were measures to fine owners that have empty homes as well. Many people would disagree with me, but to me it's not about economics. We need a way to fight the idea of hoarding homes, a basic human right, as being an "investment".
If there was enough supply there wouldn't be a problem. No one hoards cars, boats, airplanes or anything else because they think that they can corner the market and raise prices. Housing is only special because not enough is built. It's only possible to "hoard" because every 1 off the market is less for everyone else. A fixed pie. Like bitcoin. If the bitcoin supply was infinite no one would think about collecting them.
It's easier and cheaper to produce more cars. Boats are irrelevant since they're not a necessity, a house is, a car is in certain cities.houses being already scarce, and hoarding them makes it worse, because it makes them even less affordable.
You can't have enough supply of housing, because for housing location matters a lot.
There's only so much room in the center of the capital, and making more costs a titanic amount of effort. Even that runs out eventually, as you can only build so high.
Otherwise, why would we be having a problem? Move to Serbia and buy an apartment for $40K.
Generally location, services and availability of work... Might even have services, but no work... That is for Finland. Like I see 32k€ for 3 bedroom house, with relatively big plot. 2km from "town" center... What explains it is area losing population.
* Speaking the language -- in some places they don't speak much English, and certainly don't do official paperwork in it.
* Local laws
* Safety
* How much stuff you need is going to be nearby
* Internet access
* Local culture
* Employment
* Friends and family
Like, I don't know much about Serbia (just looked up where housing is cheap), but from what I hear I could get a pretty good deal if I moved to Russia -- they're desperate for tech workers and offering some very good perks regarding mortgages and so on. But on the other hand, is living in Russia that good of a deal right now? I don't think so.
They've got a bad government, slow and very restricted internet access, a not terribly pleasant society overall in my impression, and the economy is circling the drain due to all the sanctions.
some nitpicking: internet in Russia is very fast and stable. But you are right when you say "restricted". The retarded government tries to ban some websites.
In Norway a kommune (local authority) can institute a boplikt, a duty of residence. This means that if you purchase a house in that area it must become your principal residence.
I would advise against specifically fining empty homes, because then you have to define what an empty home is; and that will have lots of weird grey areas.
That being said: fining/taxing is still better than banning.
I would not try to immigrate into a country in which I don't have a place to live, so this essentially is an anti-immigration, "Canada for the Canadians, Foreigners out" policy in my book.
Is it really? I would imagine that many immigrants don't buy homes outright before immigrating. Most immigrants I know rent out the first few years and start saving.
Years ago, before BC brought in it's foreign buyer tax it was a problem. Local builders were literally opening up sales offices in Taiwan, Hong Kong and other major cities in Asia.
We know it was a significant issue because the government actually shared the data, and it showed some alarming trends.
What is remarkable here in contrast is that the Federal government hasn't shared any data at all. (Ironically when they were elected in 2015 they promised "evidence based decision making" ..haha)
Would taxing do anything in this specific case? Foreign investors are already willing to pay millions in a single home just for it to lay empty, from what I read in this thread. Why would some fixed (even if progressive) tax on top of that change the demand?
Presumably if it was high enough they would move onto other investments that are comparatively more profitable when accounting for the tax. It would have to be a heck of a tax to keep up with how Canadian house prices have been inflating recently though.
Hypothetical example: Tax it 100,000,000%. Turn a $1 house into a $1,000,000 house. Do you think they'd still want it? That's the power of taxation to change behaviour. (of course a real tax can be whatever is needed to "get the job done", it doesn't need to be ridiculous).
If you don't want empty houses, tax empty houses (though as a distracting aside, the idea that empty houses is a big problem has also been fairly thoroughly debunked, but that's another discussion that it's important rn)
Other than an ideological argument of preferring taxes over outright bans, I feel like the effect is the same. If foreign investors are indeed the ones pushing price up orders of magnitude above inflation, they clearly don't care about prices increasing tenfold. So it seems the tax would have to be insanely huge to actually achieve the same effect.
And honest question: why do we want foreign investors buying homes anyway? I understand buying commercial locations, but not residences.
> Other than an ideological argument of preferring taxes over outright bans, I feel like the effect is the same.
Taxes also provide revenue.
And they allow people to make their own choices.
If you think that having a foreign investor own a house causes Canadians to feel a collective 1 million CAD of pain per year, then it's only fair to give the foreign investor the chance to pay off the Canadian pain.
(Also gray areas around bans are annoying: you have to draw the line of eg who qualifies as a foreigner and what qualifies as owning somewhere. And there's bound to be some weird corner cases and loopholes that people with expensive lawyers can work around.
The reward for finding the loopholes is immense, because there's a discontinuity in the law.
If you have a tax, you have a finer grained instrument. So you can eg charge people in proportion to how much time they spent out of Canada. Instead of going 51% out: you are banned to 49%: everything is fine, the tax can vary gradually.)
It should be possible to make home purchases economically irrational for undesirable purchasers. For example, you could impose a draconian property tax on all non-owner occupied residential properties.
Financial investors and money launderers look at homes as illiquid, stable assets. They expect that they can extract their millions with a few week’s time, perhaps with gains from continued inflation. If they lose a significant portion of that value over the duration they hold the asset, it stops making sense.
A punitive tax like this should be pegged to some other “safe” asset. Perhaps a basket of national bonds from the G20. Ensure that taking residential inventory off the market produces a substantially worse return than those other options.
If you don’t want to kill domestic land lords, make it trivial for a citizen to apply for a waiver. Just know that the investor types will be motivated to subvert this system. Strongly recommend you have real jail time penalties for doing so. Financial folks hate real prison.
The tax could be an "empty house" tax, so there would be an incentive to get a tenant.
Alternatively, the tax could be targeted at negating profit from value increase, so that you pay higher tax on profit from sale of property (possibly with a deduction you can apply when buying another one within some reasonable timeframe, so that normal homeowners aren't affected).
I would advise against 'empty house' taxes. They just create lots and lots of grey areas.
Also don't tax transactions: you don't mind if people are buying and selling property. What you mind is foreigners (or others) _holding_ property. So tax that.
Transaction taxes are economically inefficient, because they impede the re-shuffling of assets to the best use.
First, as you mention, taxing clamps down on demand.
Second, taxes bring revenue.
You are worried that the first effect won't kick in. But that's not a problem at all: just keep jacking up taxes either until it does kick in, or you can afford to make everyone in Canada a billionaire from the second effect.
(Incidentally, this is very similar to worries that a central bank won't be able to create inflation.
That also is a good problem to have: keep purchasing assets with newly printed money until you either have the desired inflation, or you managed to buy the rest of the world for the cost of some ink and paper.)
Explain how would you tax them effectively then, since they are foreign.
Every time I talk about taxing the rich, I'm stormed by people calling me economically illitterate and telling me it's impossible as the rich will always find a loophole.
So if you think they can find loopholes on the ban, why couldn't they find loopholes on new taxes? They do already and very effectively.
A % tax on the cost of the property would be pretty simple. Can't buy without paying the tax up front. It's usually the more complicated taxes that have exceptions to rules that are exploitable. It's hard to find exploits in simple rules.
I mean yes but then you'd also hit your population, unless you restrict the tax to non-citizens, but then foreign investors can still use some sort of a front man or other loopholes.
Btw, I would _not_ charge a transaction tax. Charge them every year for holding the property. (Eg charge whoever holds the property on New Year, the market will do the rest.)
As an aside, bans are also very exploitable. Can't buy cause you're foreign? Put it in your cousin's name. Buy or start a tiny company that will technically own it. Get some kind of visa, maybe one that you can get because you have lots of $. etc.
We have how many foreign investment agreements? Banning foreign investment is not possible at all.
The data is public as well, foreign investors aren't the problem. To say you are doing this would not only be punitively not allowed. So you're literally telegraphing that you intend to do nothing. Or for that matter try to make things worse.
CPTPP ensures that investors from the Asia-Pacific receive fair and non-discriminatory treatment. This means they must receive the same level of treatment as Canadian investors and any third-country investor in similar situations.
I love Canada - but our government has always been idiotic. The ban is against 'foreign investors'. But the thing is, Canada has a corporate designation called CCPC: Canadian Controlled Private Corporation. Directors of said corporation have to be > 50% resident Canadians.
A corporation can be created for the purchase of this property, with a Canadian controlling, and being the director. This will literally do nothing other than add about $300 to the cost of an existing transaction. Shareholders can pre-execute a sale of shares at the existing value - to be executed later. This is completely legal.
Canada would have to reform the various types of corporate entities. That's simply not going to happen.
Technically the ban isn't on foreign home buyers, the ban is on foreign capital coming into Canada to buy homes. This indirection may make enforcement more difficult, but the intent won't be hard to figure out if one is caught.
If the CCPC has >50% resident Canadians as directors, how does that protect the buyer - what prevents the directors from deciding that the assets are to be used for their benefit instead of the foreign investor(s) funding the corp? Can the CPPC have different voting rights, or the ability to remove directors and undo prior actions?
But yes, this does look like a loophole through which one could easily drive a building...
Foreigners, especially the billionaire type, can and have been setting up shell corporations through which to purchase Canadian real estate. The proposed measure will do nothing to stop this practice.
The measures proposed by the Canadian government are likely just political posturing and indented to "pull the wool over the eyes" of Canadian voters because the housing bubble/crisis has reached epic proportions and everyone is talking about it.
Cripes. This is crazy good. I read for about 30 mins. This feels like The Onion from 10 years ago! Example headline: <<Gay teen moves to Toronto, must once again live in closet>> Perfect fit with this discussion!
We don't have implementation of the bill yet, just the budget line. Obviously the government knows about this problem, so if they take measures to prevent it, then we'll know they are actually serious.
Note that a corporation is not consequence free. An owner occupied home pays no tax on capital gains. A corporation owned one is double taxed.
I think if the corporations/foreigners but to rent, this is OK--the house is on the rental market and doesn't sit empty.
The problem arises if ppl park money in the real estate and the units are empty:
- This is often "luxury" housing which prevents a more regular buyer/renter-friendly housing units to be built.
Another problem is that some units are converted to airbnbs, and they start to compete on the hotel/business/vacation short-term rental market instead of being rent out for long term for people who live/work in the area.
I'm based in the EU, and this is what I've seen in some of the cities/neighborhoods here. I know very little about Canada's real estate market.
In Poland another phenomenon (not sure how widespread outside of PL) is that ppl buy large-ish apartments and split them into multiple rooms or studios and rent them out to students or ppl early in their career. This inflates prices (as the capital that would have been invested in the stock market goes to housing), but otherwise the number of units increases, so probably less of an issue in the grand scheme of things.
this statement only matters for the current conversation if taxes raised through this mechanism helped maintain property price levels where the taxes are being raised.
The typical workaround in UK is that instead of selling the house, the corporation that directly or or directly owns it is sold instead, usually on a tax haven.
> The typical workaround in UK is that instead of selling the house, the corporation that directly or or directly owns it is sold instead, usually on a tax haven.
Couldn't that be addressed by regulating based on the beneficiary owners, rather than whatever legal entity is the technical owner, and having onerous penalties (e.g. forfeiture) if the beneficiary owner is misreported or obscured?
The British Columbian government is working on a Beneficial Owners Registry that would attempt to address this issue, though there was a recent article that suggested the registry was struggling to get set up. It's a tough problem.
> government knows about this problem, so if they take measures to prevent it
As a casual watcher of Yes, (Prime) Minister I'm sure they will take measures to get some votes but not solve the problem. The sweet spot is the point where you can gather most vote with a measure that causes as little change to the existing problem as possible.
It's really crazy to me that so many people have apparently come to believe that it is bad for countries to implement measures that protect the interests and well-being of their own citizens above those of foreigners.
Could a better thought out measure achieve the same goals? How would you do it?
I feel a strong tax on houses you don't personally live in (because you rent them or because you're a company) could be efficient, but I'd love to hear other people's take on the subject.
Which is an incentive to not sell and instead take out a low interest loan using the properties as collateral. Many cities do have a Homestead exemption which reduces the real estate tax for primary residences.
Why should investment properties be taxed worse than say, stocks?
If property is expensive, it means there's a demand for it. The price is a good signal that the area needs more properties built. It's only the gov't (local gov't perhaps, or NIMBYs) that are stopping it from happening.
Raising taxes isn't going to fix the problem. It only forces existing investors who are on the margins to get pushed out.
shelter is a fundamental need, not the desire to own an asset. You do not need to purchase, as renting is much cheaper (esp. at current asset prices).
And while you cannot create more land (tho tell the dutch that!), you can build more dense. And in an area of growing population, this might be a good solution, as demonstrated in many other cities. However, people who would prefer a single family home with a backyard must be prepared to pay a premium for this privilege.
And my proposal of more investment will indeed help alleviate the lack of shelter by incentivizing more to be built! Taking away investment money for it will only mean a different group losing out vs the existing group. Policies shouldn't decide winners and losers - policies should be made win-win.
It is not a fundamental human need to live in a super cute townhome in a hot walkable neighborhood near lots of other people you’d like to socialize with. If you want free housing, it’s out there, just not where you want it.
Only 50% of the gain included for taxation. One could include more (say 75%).
They could also bring in additional property transfer taxes for reach home, taxing people more for each additional property they buy. Singapore does this.
I think Switzerland requires some swiss ownership threshold. From the top of my head it's over 50% owned by the end natural/physical persons. Even trough shell corporations.
Otherwise hike the tax on real estate while reducing at the same time taxes on local residents.
> The measures proposed by the Canadian government are likely just political posturing and indented to "pull the wool over the eyes" of Canadian voters because the housing bubble/crisis has reached epic proportions and everyone is talking about it.
Politics, particularly here in the west, is beginning to feel like exclusively this to me.
There is no law yet so no implementation that shell companies can skirt. You are getting ahead of the horse. This is a signal from the Canadian government to foreign investors that Canadian housing could no longer be a safe investment for their money shortly.
That is one part of the problem, the second problem is that foreigners know that once you buy the property the govt is not going to seize it, so if you want to hide your money from the foreign govt, it makes sense to park it in Canada.
Having your housing stock bought up as holdings by nonresidents is not great. It hollows out the communities by having choice housing sit empty and it raises the cost of living for everyone who is actually there.
I'm interested to see how this plays out. It seems pretty heavy handed. Zoning denser housing or placing limited restrictions on square footage may proved smarter in the long term. That said, two years is pretty short term in this context.
Prediction: barely anything happens and problems continue to rise as population numbers have yet to peak and the people who are struggling most with this problem, the working class, continues to lose wealth relatively to the upper classes.
Almost every country with these problems has similar symptoms and the problem could've been seen coming from decades away. Tackling these things requires far, far more input from governing bodies. Input they aren't willing to give.
I can see a resurgence of social democracy coming soon as the problems with things like real estate investment and unrestricted emissions come home to roost. We've already seen a little bit of that with Bernie Sanders.
I can't speak for the US, but here in NL, I don't see things changing very soon for various reasons.
Very few voters actually care to solve the issue. Home owners still far outweigh those who don't. Quite a few of the older generation bank on their property/properties to carry them through retirement. No one wants to see their house go under, even if they can realistically endure it without severe consequences. There's no incentive to increase interest rates, but banks obviously don't want to carry more risks, so individuals aren't getting the same mortgage-to-house price ratio as before.
"Figure it out" mentality. Even if there is a national or even global trend, responsibility to solve the issue is pushed onto the individual. Or worse, global mentality shifts to accept what is going on. "Yeah buying was normal back in the day, now you rent. Get over it."
Grandfathering and "empathy for the fortunate". Yes, I get it, you don't want your lucky uncle who worked a bad job for decades to lose his retirement. You don't want Mr. John in his McMansion on the other side of the road to lose his fortune. Almost no one wants to be the bad guy. Yet special ruling to keep the "haves" in their position continue to be placed at cost of the "have nots". No one wants to hurt anyone. As a result, the solution often seem to be continuing the same fruitless endeavor which changes nothing for the "have nots".
As mentioned before, population has yet to peak. Governments are still incentivizing people to come in or reproduce above replacement rate, despite it becoming evident we're just not capable of handling them. In theory we can handle way higher populations. In practice, there's no incentive to do so without severely punishing the working class further.
We're slowly normalizing a cyberpunk dystopia and most people seem okay with it. "At least you have iphones" is going to define gen Z and gen alpha at this point.
> "Figure it out" mentality. Even if there is a national or even global trend, responsibility to solve the issue is pushed onto the individual. Or worse, global mentality shifts to accept what is going on. "Yeah buying was normal back in the day, now you rent. Get over it."
This is a symptom of neoliberal ideology - the acceptance of any market outcome, no matter how negative, as "natural" and to be accepted or at least left unchanged. That's the predominant narrative, but I think that could change.
The reason I have some hope for a social-democratic turnaround is that the US has cultural hegemony, what happens there is broadcasted across the world through American media and other cultural exports. Currently, younger generations are engaged in a revival of left politics; this will almost definitely influence American politics in the coming years, and I'm hoping us Europeans (I'm from the UK) see some downwind benefit from that. There's already some smatterings of progressive politics in the UK, for instance - probably on a level comparable to 2012-2016 in the US. We even had our own Bernie in the form of Corbyn, and our far right resurgence is running low on steam thankfully.
At some point the market decides this, if inflation persists. BND (NASDAQ) is already down over 9% YTD and that's supposed to be the safe half of split stock/bond investing.
Despite how some people seem to view the Federal Reserve (and whatever the central bank of Canada is) neither country is a full on centrally planned economy, at least not yet.
The problem is selling real estate as "Surefire gains that never go down" and people pinning their entire life to the value of their home.
This leads to people who rabidly defend the systems that increase their property value, and these people also tend to be the local voting majority, so they can shoot down anything that they don't like.
The solution is declaring emergency powers to use eminent domain to seize unused property and build medium to high density housing on it. Yeah we'll have a few 6-fig account managers handcuffing themselves to bulldozers, but eventually it will get through.
Before you do that you better make damned sure you're doing the right thing. You're literally kicking people out of their homes and forcing them to move. We did that to the Indians a couple centuries ago and the consequences for both sides were not great. We did that to Mexican migratory workers last century and the result was the almost complete destruction of a country that shares a large land border with us. We're only beginning to experience the consequences from that.
You're not kicking anyone out of anything. Uninhabited properties are bought by the government. Houses up for sale are gov purchased and turned into mutli-family.
Basically the government is turned into the sole buyer who can also ignore zoning and resident complaints.
Domestic population in developed countries hit their peak a while ago. The demand side here is all immigration and I wish people would talk about that before they talk about bulldozing neighborhoods.
Of course. But realistically, no one wants to deal with the inevitability of ageing populations having to either take the bullet and accept they were sold a bunch of lies, or causing the working class to crumble under the collective weight of all who depend on them. Most immigration and pushing for higher birthrates is just that, an admission by politicians they don't want to deal with the problem and passing it onto the next reigning party.
That said, it's nowhere near the sole contributor. Quite a few countries have very low immigrant numbers along with low birthrates and still face soaring house prices. Rampant individualism doesn't help, either.
> Zoning denser housing or placing limited restrictions on square footage may proved smarter in the long term.
Perhaps, but Canada has no ability to enforce that. That would fall under the purview of the provinces, who have likely passed that down to the municipalities.
Nothing will happen. All it accomplishes is reducing competition for local investors (which is probably why this is the solution they've chosen--local investors vote, contribute to campaigns, and make up something like 2/3 of our politicians). We have more than enough local investors with enough capital and assets to sustain the high prices and continue driving absurd growth.
They've tried similar (but less extreme) solutions in places like Vancouver. Huge taxes on foreign purchasers. Property price growth slowed a couple percent... for about 6 months, by which point it was back to doing what it was before even as the tax was expanded. The only thing driving the slowdown was probably uncertainty.
There is a difference between a foreign investor, and a foreign resident. I would be furious if my right to buy a home in the country of my residence was influenced solely by the fact i'm not a citizen.
Related, I’m concerned about the trend of megacorporations gobbling up single-family homes which appears to be happening in the US and Canada.
I wonder if it’s possible to construct a law that would limit corporate ability to acquire these assets while making it possible for families to do so.
Unfortunately, even if there is, politicians at least in DC seem to have zero motivation to solve political problems unless they belong to megacorps or the 0.01% income class.
Triple or quadruple property taxes after the 10th purchased residence in the state. Encourage tax breaks through high density development of condos with coop property management firms.
Local small-time property ownership encourages land liquidity (that isn't our current issue, but is an issue). That model currently looks good up to a 4plex.
I've been thinking a lot about this, and I think to promote everyone's owning a house, and even small-size investments, but to avoid megacorps the ideal would be something like:
1 house - tax breaks
2 houses - same taxes as currently for 2 houses
3+ houses - incrementally more expensive with each extra house
Also there's a really nice law in Spain, born for the wrong reasons, that makes you pay more taxes if the house is empty vs if someone lives there.
Why should I, a small time REIT holder, pay more proportionately in property taxes than a celebrity in a Beverly Hills mansion, or even my landlord who only rents out a few, million-dollar units for that matter? I think every individual should be entitled to 500k in preferential property tax (1 million for couples), and every dollar above that should be taxed a lot higher. In places where there is high demand, new housing can also be taxed at the preferential rate some number of years to incentivize development.
> Why should I, a small time REIT holder pay more proportionately in property taxes than a celebrity in a Beverly Hills mansion, or even my landlord who only rents a few million-dollae units for that matter?
To decrease the return on holding property indefinitely, which prevents renters from building equity to the benefit of small-time REIT holders. The outcome of this is an increase in home ownership which has a host of benefits to society. It also helps economic benefits to stay in the local area. Basically, Georgism tax policy - https://en.wikipedia.org/wiki/Georgism.
What benefits do you see REITs provide to a community, beyond increasing your personal wealth?
Also, a hard cap of, say, 10 homes without increase would still allow REITs to exist depending on implementation.
What is _not_ desirable is a large financial firm like Blackrock or JPMC siphoning off the liquidity of the housing market.
What's better for the housing market: someone who buys a $10 million home for themselves, or someone who buys 10, $1 million dollar apartments and rents them out? If anything, the former should be paying a higher property tax because they're constraining the supply buyer and renter markets.
Yes, I largely agree with Georgism, but I don't think incentivizing rich people to buy the largest home possible is within the spirit of Georgism. You'd also run into the problem of people pretending their apartment complex is really just a large mansion. They'd likely spend money on renovations that make the units less desirable to make it classify as a single home.
>What benefits do you see REITs provide to a community, beyond increasing your personal wealth?
What benefit does my landlord provide that a REIT doesn't? REITs allow me to be invested in real estate without exposing me to too much risk associated with a single location.
>Also, a hard cap of, say, 10 homes without increase would still allow REITs to exist depending on implementation.
No REIT can exist with 10 homes. That's way too much money proportionally spent on administrating it.
I don't think the pocketbooks of REIT owners justify keeping the status quo housing market. Commercial and industrial REITs can do fine with 10 properties. Residential REITs perhaps shouldn't exist, as residences typically aren't directly economically productive.
Business and investment models can adjust; management companies would fill the investment gap for REITs. So rather than direct ownership, shareholders can instead invest in publicly traded property management firms -- arguably what a REIT should do anyhow.
With fewer units, landlords have more incentive to keep properties in working order to keep up liquidity should they choose to sell. This helps offset the tax incentive to let properties go to ruin.
I don't follow your assertion that increasing taxes on larger ownerships would result in rich people buying the biggest property they could possibly afford. People do that anyway?
>Residential REITs perhaps shouldn't exist, as residences typically aren't directly economically productive.
Residential REITs and other institutional investors finance the construction of new apartment complexes. I don't think a landlord is that much more incentivized to take care of their property any more than a property manager who gets hired by the REIT or institution. Even if small landlords are better than REITs, I don't think that people who own 2-10 homes are necessarily any more productive landowners than institutional investors. There are plenty of people in the former category besides landlords: for example, someone buys a seasonal home that does nothing for most of the year or inherited property and are just letting it sit vacant.
>I don't follow your assertion that increasing taxes on larger ownerships would result in rich people buying the biggest property they could possibly afford. People do that anyway?
The point is to disincentivize this behavior? Same reason why you would increase property taxes/LVT in the first place. I'm not saying that institutional investing in property is great. I'm saying that there are worse behaviors that should also be punished. This is a particularly big problem in vacation destinations where the housing supply gets swallowed by non-residents.
Why should society be subsidizing home ownership more than they already do?
The real estate market already discriminates against people who cannot afford a deposit (an increasing proportion of people, since house prices are increasing so rapidly), and the design of North American cities encourages urban spawl which is unsustainable with current property tax rates. [1]
> and I think to promote everyone's owning a house
Why? Half of German households rent [2] and no one is wringing their hands about how people should be owning their home instead of renting.
As someone who has lived in Europe and North America, there seems to be a borderline obsession with owning a house in anglophone countries, and I don't understand why. If the rental market is sane (e.g. rent is approximately equivalent to a mortgage) then it's up to the individual if they want to purchase a home (e.g. to renovate how they see fit) or is comfortable just renting.
In a partial equilibrium I could see this, due to management company inefficiencies to scale for small clients versus massive corporate clients. But it would likely be offset by general equilibrium factors pushing down housing prices (demand limiting) which translates to decreased rental pricing (as well as potential for limiting rental supply).
I'm not sure how it would qualitatively affect the builder's market.
They think these taxes will simply be passed onto renters just like the nominal taxes landlords already pay now.
The reality is that there is no market for renters that could actually afford these supposed monumental price hikes. So instead landlords would simply be forced to sell their houses, increasing the market supply and decreasing the cost of houses.
This is one of those things that a proper tax structure would do wonders - those who hoard housing should get a kick from a exponential tax.
Like, what value are those corporations bringing to people, to the market, and to a country by hoarding houses other than controlling the renting market for some areas?
Technically you just need construction to outstrip people looking for homes.
One of the problems is people can move quite quickly from one side of a country to another, it's a matter of weeks. But from empty lot to new house is a matter of months at best, years at worst.
Immigration must be limited to the degree that construction can happen. Because it can be raised almost to an arbitrarily high degree it's very easy to overwhelm domestic home production.
> those who hoard housing should get a kick from a exponential tax.
Yes, but at the same time it should not be possible for them to pass those costs on to people renting the house; rents should be fixed, or based on things like floor space and amenities.
But personally I think everyone should have a way in to the housing market. Renting is throwing away money; it goes into someone else's pocket and it's gone. When you buy a house you pay off a mortgage on the one hand, and (in today's economy) your property appreciates in value. Combine that with the issue that over here, a mortgage is cheaper than rent, and you can see how it's a huge issue.
I've spent something like €50.000 in rent before I finally bought a house; part of that was because I didn't want any longer term commitments, part was because I couldn't afford a house because even then the price of housing was going up sharply already. That's a lot of money that I'll never see again.
As you said in your comment there is a market for renting. I think in an ideal world, housing prices would not increase so rapidly. I remember a time where houses went up a lot more from quality renovations than just waiting a few months. A situation like that would increase the demand on rent and make it less appealing for slumlords and give them more incentive to keep quality tenants happy instead of viewing them as a space filler until you can cash out in a year.
Buying is throwing away money too, often just as much as the rent you were paying. Yes some portion of what you pay goes to principle and you eventually own the home but the following amounts are just lost money:
- interest on the loan
- utility bills
- property taxes
You also have to replace anything that breaks and are responsible for all repairs on the property. Many of these replacements and repairs don’t increase the value of the home.
At best buying a home is a forced investment plan. It forces you to take money above and beyond the cost of rent and put it into a savings vehicle that generally generates good returns. But if you’re renting you could just as easily put that excess money into the stock market if you have the discipline to not spend it.
You're missing a big point of buying with a fixed mortgage though -- its partially a hedge against housing cost inflation. Sure, property taxes will go up as property values increase, but taxes aren't really that large of the total housing cost of my home. Taxes could double and it still wouldn't be the majority of the cost of my house. Most of my monthly cost of my house is P&I, values that won't go up.
My mortgage, insurance, taxes, and savings towards repairs is now a good bit less than the current rent at my last apartment just a couple of miles from my house. But my house has over twice the square footage, a private garage, a private yard, etc.
But you’re sacrificing the flexibility of renting. While I agree the benefits of home ownership far outweigh long term renting, there are some trade-offs.
Absolutely. I'm not trying to point to buying a house as the answer for everyone. If you're not planning to stay in the area for at least a few years, chances are you'll be better served by renting. Everyone needs to do their own math on what they're wanting in life, there's no one-size-fits-all when it comes to housing.
> Renting is throwing away money; it goes into someone else's pocket and it's gone.
Holy shit this is insane. Do you actually believe renting has no benefits?
When you purchase a property you’re on the hook for that mortgage payment for the next 30 years. Buyers absorb an enormous amount of risk. Maintenance is time consuming and expensive.
Renters can leave whenever they like and have no long term financial ties to the state of the property.
I guess everyone needs someone to fight against huh?
They didn't say renting has no benefits they said it's expensive and has no ROI.
You position renting as easy and buying as a burden and an "enormous risk" so I assume you will be renting apartments and leasing cars for the rest of your life surely?
They are translating between a lump sum and an income stream. They are making a six-figure asset available for the low four figures a month, without someone needing to bring six figures of money, or five to six figures of down payment and closing costs and five times as much debt. If the six figure asset actually falls 50% in value, the tenant is not stuck and does not lose a penny.
In short, they’re offering homes to rent. You can live in the home without buying the home. That’s the value. It’s kinda huge.
And to some extent it becomes class warfare to deny this to renters.
These investors are betting big on the houses’ value going up, and expect them to go up a fair bit. This is essentially a bet that the housing market will fail to add new supply, and that anyone who does not own a home yet will suffer greatly from increased rent. And if we’re fighting over is rules on specifically who can buy, instead of doing things to actually make new homes, it seems a fairly sure bet to me.
You may notice that the US population has grown, and continues to grow, and the abstract group comprised of "people who rent homes" continue to grow, and to need more to rent. Corporations happen to be the ones filling this need now. Of course there is nothing that says they have to, or that it has to be corporations, nor is there any special noble virtue that we should ascribe to them beyond that of a prudent investment, nor is there some special reward beyond what they can earn in commerce. It is also possible that significant new construction, falling home prices, or general prosperity could make members of the group of renters leave the group, in favor of ownership.
Renting something bought by an individual (or a very small corporation) was possible and remains possible. But if there was enough of this happening, the corporations who rent might have serious difficulty finding a profit.
It is worth noting that, in a major shift, major home builders expect 50% of their business will soon be in built-to-rent neighborhoods, up from something like 6% today. This is an illustration of how prices are a signal used across the economy to determine what gets done. (Taylor Morrison Home's numbers, from this recent article: https://www.wsj.com/articles/built-to-rent-suburbs-are-poise... )
I refer to the US because it is closer to me. I understand that Canada experiences similar trends.
> You may notice that the US population has grown, and continues to grow, and the abstract group comprised of "people who rent homes" continue to grow, and to need more to rent.
"People who rent homes" aren't some special type of consumer that isn't interested in buying a home. While there are situations where renting is preferable even if it's possible to buy, many renters only rent because it's not possible for them to buy a home. Any potential benefits to renting are generally outweighed by the fact that you're not building any equity, and have limited control over the place they live.
Massive corporate landlords aren't providing a service to meet a demand. They're actively creating demand by driving up the cost of home ownership, and limiting the amount of properties available to buy. A potential homeowner has no chance of competing with a massive corporation when buying a home.
Obviously there's a huge amount of factors that got us here. Housing is hugely complicated, and no single group is responsible. But corporate landlords are one of the factors making the North American housing market worse, and are one of the things we need to address if we're ever going to decrease the cost of living in this country.
> Massive corporate landlords aren't providing a service to meet a demand. They're actively creating demand by driving up the cost of home ownership
This accusation would make a lot of sense if the corporations in question are either (a) a monopoly or (b) an illegal trust, colluding with each other, and through (a) or (b) the corporations enjoyed sufficient concentration of the housing sector that they had pricing power — the ability to restrict the supply and raise prices to make money.
This is not the case. The housing market is fairly competitive, and many different buyers, sellers, homeowners, and home-builders participate and compete with each other. Prices are rising for other reasons: a reduced number of homebuilders, in the aftermath of the 2008 crash; various political land-use, zoning, environmental, and similar homebuilding restrictions; a reduction in the overall labor pool, which impacts the labor in new home construction; labor and other supply chain impacts on the availability of components that are used in new home construction; and a significant pandemic-induced shift in real estate usage patterns (almost everyone wants more space now).
Yeah, except you have to take into account that "valuable achievement", or let's frame it as a "game" that's played, is being played for a long time without the involvement of massive corporations that hoard houses.
But you might have pinpointed a couple of problems, so either:
- Those corporations are driving the costs of buying homes so high that regular people are being pushed out, because, you know... they are playing with funny money;
- People's income is so crushed, or they are so deprived of access to free/cheap money - like the corporations - that they aren't allowed to play this game.
Both scenarios make it look like the game is rigged.
Why can't people rent to other people like it was done in the past? Why aren't regular people being allowed to play this game? Or is it such a bad game to play that no one wants to play it, except those corporations?
Even if it was a bad game to play, they're still taking houses away from those who want to buy and not rent. So they're ruining two markets: the rent and the buyers market.
Again, I see no add value that couldn't be created by any other player other than big corp.
Else you'll be here in 20 years saying the same thing, with a minor diference: "these corporations are bringing SEVEN FIGURE housing access to FIVE FIGURE renters"
Why would I model a serious transaction as a "game" with achievements?
> they are playing with funny money
YES YES YES YES! Negative real interest rates are pretty damn funny! We should have ended them long ago. We are now beginning to pay the price. You have identified a key way to help end the trends that you do not want to see.
> People's income is so crushed
They are being crushed by inflation! Another blow against ultra low interest rates! RATE HIKE! RATE HIKE! RATE HIKE!
> Why can't people rent to other people like it was done in the past? Why aren't regular people being allowed to play this game?
You're totally allowed!! Go buy a house, and rent out the house. You will probably need money for a down payment, but you can still get a mortgage at negative real interest rates — and if it is in the US and it is a conforming mortgage (<$647200) you will benefit from an interest rate subsidy from the quasi-public mortgage-buying entities, Fannie Mae and Freddie Mac. It might be a great investment! I am buying a house (for myself) and have locked a rate; with current inflation numbers I can expect $2000/month in return simply from inflation eating away at my debt!
The main contraindication here is that you will experience risk, and you may be intolerant to that risk. Your investment could end up underwater, and it's hard to diversify because it's such a big asset relative to your income. This may explain why corporations are better able to do it these days.
> Even if it was a bad game to play, they're still taking houses away from those who want to buy and not rent.
It's true! Existing home-owners are not required to sell to another aspiring home-owner, and are free to sell their property as they see fit. This means that aspiring home-owners must compete with renters (and the people who renters pay, corporations). The renters (and the corporations they pay) may be willing to offer more! The existing home-owner benefits, while the aspiring home-owner does not!
There are lots of ways to use the law to strongarm people into dealing with a politically favored class, at the expense of a politically disfavored class! Some of them are discussed in these threads! I'm not a fan, myself, and believe it will harm the nation and its economy by distorting the economy into doing different things that make less sense and leave the nation overall poorer as a consequence with less money to spend on things that are more meaningful, but if you would benefit maybe you would be a fan!
This explanation hides the actual problem in a way that almost feels like gaslighting. Yes, their ability to buy homes allows people who don't have money to live in them.
...except that their greediness of wanting to own everything is precisely what made houses explode in price in first place.
Blaming corporations is a cute meme, but it's not the problem. Corporations in this market are NOT monopolistic price-setters, they do not have remarkable market-concentration, and they are not colluding with each other to limit supply. They are competitive price-takers.
If you want to fix housing prices (or if you just want to screw over these corporations for funsies, which is fine) then you want to increase the supply of homes: that is, you want homebuilders to build, build, build, build, build, build, build — and where necessary, you want to drive the political reforms that make this possible. All the evilcorps™ are betting that you won't — and I'd bet that too, given where you're focusing your attention and efforts.
This can improve the situation, but I'm not sure if it would truly solve it. I believe the proper solution is to simply ban buying non-commercial buildings as an investment. If you're not living on it, you can't own it. I can't see why one would be against this aside from greediness.
I guess single-family housing will be a privilege reserved to the people who can afford a down payment! That's a pretty sneaky way to do class warfare: cloaking it in the language of justice. I'm almost impressed!
We have a history of similar measures to draw from. In the 1950s lots of people believed that banning single-room occupancy buildings was the proper solution to a lot of problems - they were small! they were inhumane! they are associated with crime! New York City lost about 100,000 units, mostly converted into two-bedroom apartments, occupied by good people™ who belonged in families. "Consequently," said activist George McDonald in the wake of this policy, "people sleep on grates outside."
Maybe your laws won't quite achieve this! But to the extent they enjoy success in influencing housing prices, they will be harming those who cannot afford homes.
I think grandparent is not quite so cruel! If apartment buildings count as "commercial" (which they would in the industry lingo, which differs from the SimCity lingo) then we can just quarantine the undesirables away into a bad part of town using our Zoning laws!
Stop zoning out multi-family homes and apartment buildings and this wouldn't be a problem. Believe it or not, there are many low-income people living in cities where these things are allowed, and they're not all renting single family homes.
They'll just restructure it so each house (or small group of houses) is held by smaller corporations or other entities. In fact even smallish landlords already do that now but I think it's because credit gets cheaper that way rather than for taxes.
As a renter, I preferred to rent from a corporation with predictable, reliable property management. I preferred living in apartments for exactly this reason. Houses managed by individuals were always way more annoying due to hit-or-miss management issues.
(I agree that corporations hoarding housing is a problem...but they do bring value in some specific areas, even if net value is negative.)
I don't have a problem with corporation managing properties. That's not the problem. For me people could even pay a premium if they want that assurance.
The problem seems to boil down to access to money and the destruction it causes, simply because we play by different sets of rules.
Housing used to be an asset class that was accessible to people, apparently it's a matter of time before it'll be yet another asset limited to a few bunch. They simply have to drive the prices up enough, and outbid people, which is whats happening.
So you have to level the playing field by giving everyone the same type of access to cash, or you make hoarding houses more expensive to the point of being unsustainable.
The vast majority of houses are not going to foreigners or corporations. Some do, but it is only a tiny percentage. We need to build more housing, in the end housing costs are about supply and demand.
What percentage of new developments are going to foreigners?
I looked up some property tax docs of a new luxury apartment building (majority of units go for 2M+) in NYC and I was shocked to see something like 90% of the owners had chinese names.
I'm guessing that the majority of these are foreign buyers. I'm also guessing its unlikely that the NYC new development market is being dominated by asian americans?
But it hasn't always been 40% Additional Buyer’s Stamp Duty (ABSD), the government will ramp it up and down to control the private market.
It hasn't seemed to had that big of an impact. A small, 2bed condo on land with a 99-year lease costs S$1.6M ($1.2M USD) outside the central business district.
But if you really wanted to gain control of home prices and development, just adopt Singapore's 99-year lease policy of land. Once the 99 years is up, it goes back to the government you get $0.
Singapore isn't old enough yet to truly see the ramifications (plenty of people are betting they'll get bought out), but the government has said they will stick to it and have stuck to their word in a recent situation where there were 60 year old leases.
"All 191 units at Geylang Lorong 3 have been vacated and ownership of the 60-year leasehold land has returned to the State, said the Singapore Land Authority (SLA) on Friday (Jan 1)"
That land will be cleared and then auctioned off for another 99-year lease to private investors who will build new housing. It's a semi-Georgian policy where the Singapore government captures all of the increased land value and then turns around and uses it to subsidize new public housing or other public benefits.
The 99 year lease is kinda functionally equivalent to a 1% a year property tax, and somewhat more honest.
If I could deed my land to the local government a hundred years from now in exchange for 0% property tax, I'd very likely do it (but the government would probably be sad because they need the cash flow now not later).
Thats doesn't solve much of the problem tbh. They need to build more homes. Much like the problem in the UK also. But in the UK we need to push back on normal people wanting this property empire and massively over leveraging themselves
> The government will also impose higher taxes on people who sell their home within a year.
Why build more homes at enormous expense (both financial and environmental), when most countries have way more than enough homes in total?
The problem is two-faced: vacant properties sitting around empty because of money laundering and speculative usage on one side, and on the other side the usage disparity because rural areas have been left behind by modern infrastructure - particularly high speed Internet, mobile phone coverage, public transport and services of everyday living (healthcare, basic shopping).
> vacant properties sitting around empty because of money laundering and speculative usage
I don't have the numbers but I find difficult to believe that there's enough properties used for money laundering to move the prices.
> usage disparity because rural areas have been left behind by modern infrastructure
That's the problem. There are empty houses but too old or in places where people don't want to live. So to low the prices more houses need to be built there where people want to stay.
Another solution would be improve the communication channels between cities and rural areas.
> I don't have the numbers but I find difficult to believe that there's enough properties used for money laundering to move the prices.
In London, up to a third of all properties (depending on the area) are left empty. At that point I don't care if it's money laundering or speculative usage, but London's nickname "Londongrad" more than hints that an awful lot of Russian oligarchs used London real estate to launder stolen money [2].
Personally, I'd be fine to ban all foreign investment into real estate in hot housing markets no matter the country, with the sole exception of primary or secondary residence.
I would like governments in countries with housing crisis to do something different - soft limit how many properties can a person own by inducing taxes that drastically increase with each new owned property. Most people just want to own a roof over their head without getting into debt for life, but because some people treat housing as an investment and buy properties in bulk - which results in prices skyrocketing - they become unaffordable for an avarage Joe who has no other choice but to rent forever and just make the landlords richer.
for that you would have to know who (as in a single person) owns everything. Great against corruption, great for democracy. Not so great for our ~oligarchs~ ahem, democrats
public housing will probably have to be the major accomodation provider.
Since the economy is a scam, expecting it to house everybody in a decent and sane way is just utopia, no better than communism.
I heard about Singapore (80%?) and Vienna (65%?, Austria), I am unable to check that or find other places: this information is really tough to get. In my country, it is extremely opaque and _very discret_ (secret?) in the fear of massive abuse from foreigners.
I'm a homeowner in Toronto and I don't think this will help. They've eliminated a small number of buyers from the market but have added other incentives like a first home buyers tax credit that will only fuel the fire - Australia tried this with tragic results.
>> working with provinces and territories to develop and implement a Home Buyers’ Bill of Rights and bring forward a national plan to end blind bidding.
Blind bidding is where multiple parties submit a sealed bid on a property. The realtor and seller review these bids behind close doors and then often request subsequent rounds of bids from the bidders *without telling them the current winning bid, or who's bid is winning*. Bidders end up out-bidding themselves.
IMHO blind bidding is an unethical practice that should be outlawed regardless of its impact on housing prices.
I saw an Australian sitcom where the house went up for auction. It was a proper live auction where everyone showed up to bid on the house. I was flabbergasted as I had no idea things were done in any other way than blind bidding as that is how it is always done here in the US.
In Melbourne, this is totally normal. Everyone stands in the street, prospective buyers, neighbours, and people starting their house search. The estate agent stands on the front step, acting as the auctioneer, using the rolled up "Section 32" document like a gavel.
Typically the auctioneer draws out bids in $10-20k increments, then knocks it down with a "going once, going twice, going three times..." call.
Just before declaring it sold, the agent normally stops, goes inside to consult with the vendor, and if the price is above their reserve price, goes back outside and says "the house is now on the market".
Now the auction gets serious...
Usually another couple of bidders reveal themselves at this stage. The increments can drop to $1k. If there is a battle between the last two or three bidders, the final price can go up another $50-100k or so. Eventually the final bid is locked in with a final call of "going once, going twice, going three times, to the man in the blue shirt."
The winning bidder goes inside with the estate agent, hands over a cheque for 10% of the purchase price, signs the contract part of the Section 32 statement, and is then committed to pay the balance in 60 or 90 days. Sales almost never fall through. If the buyer cannot get financing etc, the seller keeps their 10% deposit. The seller cannot back out.
I bought my house like this, and sold it again 20 years later the same way.
It's a totally predictable, well regulated, very transparent process. The weekend auction results are all published on Monday morning, both for every house, and the aggregate "clearance rates" for sold versus "passed in".
This is so unlike UK, where each sale has a chain of buyers, all "subject to finance", and no certainty or speed!
> Sales almost never fall through. If the buyer cannot get financing etc, the seller keeps their 10% deposit. The seller cannot back out.
In the states, once the purchase agreement is signed, the home goes through inspection at some point before the sale. The inspector finds a hundred little problems with the house, and the buyer can back out of the sale for any little complaint.
> The inspector finds a hundred little problems with the house, and the buyer can back out of the sale for any little complaint.
But that’s a very well known risk. An agent will have a whole checklist of things to look at before putting a house on the market to minimize that risk. Also, buyers lose at least some money if they back out, there’s a nominal sum put up that you don’t get back if you decide to not buy once the process is started.
In my NY suburb, you do the inspection before the contract is signed. No money has yet changed hands, and it can be a point of negotiation or just walking away.
In Canada this is called conditional on inspection and it’s a permitted clause in a sale. The problem is the minute you have multiple buyers there is overwhelming pressure to remove conditions that can make the sale fall through because the seller is more likely to take an offer that gives them a guaranteed sale.
Right now, in DC metro, all contingencies are being waived, bids are $100k+ over list on moderately priced homes, and the seller is demanding a 2-month free "rent" back from the buyer.
Both my home purchases have waived inspection. The second waived financing contingencies as well. This isn't uncommon, based on what friends and family have done.
You can still back out of the deal but you will typically forfeit your deposit or earnest money (sometimes in the $10’s of thousands). But I hear you with the seller’s market - we just purchased a couple homes in the Austin area, bid significantly over asking price, waived all contingencies, and offered free 2-month rent back.
I discussed this with our realtor: forfeiting your full 3% earnest deposit is apparently rare. It’s not automatic, and when somebody backs out due to a non-contingent reason, it’s usually for a fraction of the full earnest deposit. (At least, that’s for the SF Bay Area.)
in really hot markets the seller often does BETTER if someone backs out and they move on to the next set of buyers. It's not worth the trouble to try and collect, which is not a gimme. The deposit is not a formula but more convention and an amount that demonstrates good faith. You want to get back on the market and not mess around to maybe capture 5 grand gross.
Yeah, I can imagine if it’s for a legit reason (especially in a hot market like the other poster pointed out), the seller would probably try to work something out. I would feel like a jerk if I took someone’s $10K and then turned around and sold my house the next day.
In Canada inspection contingencies only protect the buyer for major problems, and definitely aren't a "get out of jail free" card... I haven't seen anyone be able to back out after inspection in the last handful of years. Hell, we're having trouble even getting an inspection contingency to stick as people are more and more often foregoing that in hopes of getting their bid in.
Only time I ever used this was a wood foundation was found on inspection for a home we conditionally purchased listed as a concrete foundation. There was nothing wrong with it based on the inspection but I wasn't comfortable so we backed out. Every other case we've used the inspection to get concessions on mechanicals and roofs that needed replacing but I don't think we'd get the inspection or price reduction on an offer today.
As a buyer, you can try and write whatever contingencies you want into a purchase contract. In supplier markets like most right now they'll just refuse them. In a slower market where "simple" purchases are not so typical, offers with few or no conditions are often the difference maker, or even worth a slightly lower offer price to the seller. Even with a conditional home inspection "a hundred little things" typically won't disqualify the deal; the inspector will be looking for larger single issues that are up closer to 1% of the price. In reality sales don't often fall through unless something is extremely major or misrepresented; the inspection is used by the buyer to promote price concessions and help them deal with the stress of such a massive purchase. Inspectors miss important stuff all the time, which isn't surprising when they're spending only a few hours for an entire home.
But it's an open process. That it's close to optimal efficiency isn't a bad thing.
Imagine the same level of stress, but you have to guess what the other buyers are bidding. Do you bid low and hope everybody else does? Bid high, but risk overpaying?
There are new systems to bid online, and over the course of a week. Much less stressful, no emotion and heat of the moment bidding. Nothing wrong with open bidding, all about the techniques used in person.
That still suffers from the stress at the end of the week.
Say an auction closes at 5pm Friday... I bod $500k on Wednesday. Somebody bids $501 Friday 4:50. I bid 502... they 503, right up to the last moment.
And if the site is like some online car auctions, any activity in the last 5 minutes extends the auction by another 5 minutes. So, 504... 505... and on up until somebody walks away.
A home purchase is the largest single thing most people will ever buy. It's going to be emotional, even if the buyer manages to stay calm.
In my experience it was less emotional than in person auctions I've attended. I knew my limit and stuck to it, there was no agent talking me into bidding higher.
That's what I was thinking. In theory it should be a better system. Submitting a bid significantly over the asking price and then losing to another higher secret bid is very disheartening.
Can you hire professionals to do the bidding on your behalf? That would be ideal. Get some a wolf in sheep's clothing. Some old gran who is actually a bidding shark.
There's been a bunch of issues, though. When I grew up in Australia, there were regular news/investigative reports of auctioneers pulling bids from trees, etc., to kick the price up a bit. Not without risk, but definitely possible.
> It's a totally predictable, well regulated, very transparent process.
No it's not.
- Ghost bidders and staff posing as buyers on auction day aren't uncommon with smaller outfits.
- They can list the property at a range of say 1-1.2M but the reserve on the property might be 1.5M. They waste everyone's time doing this, and you don't know until auction day - and that's only IF the property meets it.
- They will negotiate with buyers after hammer down, technically the "right to negotiate" goes to the highest bidder - however there's no laws, and I've seen every single agency in Melbourne do this - will go around and gauge what people are willing to go up to. They'll then instruct the vendor to accept/not accept an amount. This is why they have multiple staff on auction day.
It actually does happen in the US, but the only place I've seen it is bank or county/town auctions, where the house was either taken by the bank for non-payment or taken by the town to cover past taxes.
> IMHO blind bidding is an unethical practice that should be outlawed regardless of its impact on housing prices.
Why? There’s no special virtue ascribed to the purchaser v.s. the seller.
Nothing stops the purchasers from standing in front of the property and publicly announcing their bids (outside of game theory). If they’re bidding less than they are willing to pay, then de facto they’re low balling the seller. There’s no gun to their head to purchase a particular house.
I don't know how it works in Canada, but in the UK the incentive is that most estate agents take a % of the sale value. They have every reason to push house prices higher. Cartel or no cartel, it is very harmful.
That's exactly how it works in Canada too. Both estate agents split a % of the sale value. That's fine on the seller's side, IMO. But on the buyer's side, it's a silly conflict of interest.
The buyer's realtor is supposed to be working in the buyer's best interest and getting the lowest price possible. In reality it doesn't often work that way, especially when the buyer and seller realtors know each other.
I just bought a house and both realtors ended up being from the same office, and are good friends. Do I honestly think I got the best price? Not likely.
Maybe it’s different in Canada, but in the US (or at least in Massachusetts and New Hampshire) the agent merely must disclose to whom they owe allegiance. In both of my purchase transactions, the agent I worked most consistently with was legally working for the seller. (I was comfortable with that and acted accordingly, having “my” agent submit bids that I was comfortable with, but not treating/trusting them as if they were my lawyer).
You can have an agent working on behalf of the buyer, but my experience is that’s a minority rather than majority arrangement.
Your experience is not the norm, nor is it one I would recommend in most cases. You should find an agent you trust and can work with well to represent you, and they should be the only agent you ever have to speak to.
Dual representation can work out ok in some scenarios, but the hyper-inflated and super competitive market we're in right now isn't one of them.
Even in a situation where your agent is representing only you, they still have a massive incentive to get you to raise your bid so they get 1/4 of the total commission (and their brokerage house gets 1/4 of it). Their incentive is even stronger than that of the listing agent, because when it comes time to choosing a bid, the listing agent and brokerage is getting their commission one way or another and so a 1% difference in final contract price on a $1M house represents a difference of around $150 pre-tax to the listing agent. A difference of 1% that causes that specific buyer to get the house can represent a $15150 pre-tax difference to the buyer's agent.
If you tell "your" agent that you'd like to bid $1M but are able to and would pay up to $1.2M because you really love the house, you're giving away a lot of information that I decided I wasn't willing to give up and so kept all Realtors at arms-length.
Coming from country(Finland) where the buyer does not employ realtor the whole thing of buyer paying someone to get house feels weird. And seller's realtor really doesn't only care about price, but also about the speed they can sell the property, thus spending less time on it.
The buyer doesn't pay the representative. The seller pays for both agents. Having a buyer represented is generally a good thing even if there are problems. It improves access to the market and helps a person in deciding what houses they can realistically get. A big thing for my wife was that she didn't want to see a house we couldn't afford because of how it would alter her expectations and we couldn't figure out on our own which houses were listing enough below ask that we didn't have a chance at them. Our agent helped us filter houses so that we looked at houses we could end up in.
The issue is that the flat percentage incentive is not a valid one, there was a chapter in Freakonomics about that (I seem to remember it was about Chicago estates, but it could have been another city in the US).
The study determined that when a house was the property of the estate agent sold in a little more time at a noticeably higher price.
The idea if that your house sells (today) for (say) 100,000 units of value (pounds/dollars/whatever) the estate agent will get (still say) 5% of it, i.e. 5,000 "units" (also today).
If in a few more months time you can sell it for 120,000, the agent will get (a few months later) 1,000 "units" more, but he/she will have spent a lot more time visiting the property with prospective buyers, runnning ads on newspapers, whatever, so the incentive for the agent is to conclude the sale as soon as possible, even if at a (reasonably) lower price.
The proposal to correct the incentves was to have a flat percentage (like the mentioned 5%) until a certain amount and a much higher percentage (like - if I recall correctly 15% or maybe 20%) on the excess.
Of course it depends on the local current market, but estate agents have interest to push house price higher only until the property is an "easy sale", the sheer moment the house stays on the market for some time (this highly depends on the local market, it could be weeks or months) they will start saying something "Hmmm, maybe we valued a little too much, we (that means you) should discount it by 10%", this in the same 100,000 unit house means that you will get 10,000 unit less, while the agent would get 4,500 units instead of 5,000.
Farms often are sold in live auction this way with the bidders announcing their bid. Each bidders knows their maximum, but none give that way, all they give away is they are willing to top the previous bid by someone else (even this is a trick - some bidders will pretend to be more/less interested than they really are trying to scare off other bidders)
The auctioneer is typically a licensed real estate agent. The whole farm will be sold that day, sometimes field by field, sometimes as a whole (sometimes both ways - this is complex to understand: they get bids an all fields separately, then for the whole and the larger total wins). Then they sell the equipment and junk. Bankers are on hand to verify financing... For houses most people wouldn't work this way, but for farms it makes sense.
As a farmer in Canada, I haven't seen a farm auction like that since I was a kid. Most farms these days are sold either by someone knocking on a door and making offer that can't be refused or by tender, conducted by law firms. Real estate agents/auctioneers, and the cut they want to take, have largely been taken out of the equation given how easy the farm properties are to sell.
> I have no idea why there are regional differences
I'm sure it is multi-faceted, but supply management is a big difference. Notably, diary farmers in some provinces voted to impose a quota price limit in an attempt to make it affordable for new farmers back in the mid-2000s. This means that the amount that quota sells for is the same now as back then, even though the fair market value has at least doubled in the meantime.
This has created a market aberration where the quota is undervalued and to resolve it farmers have started tacking the difference onto the purchase of land. In other words, on paper I pay you $x for quota and $y for land in order to stay compliant, even though in reality I'm actually paying you $2x for quota and $y-x for the land.
This, of course, has driven up the price of farmland to unreasonable heights as people notice what farmland is selling for on record. $40,000 per acre isn't unheard of these days. I bet you in Iowa, despite having a climate that can easily outgrow us in Canada, won't see anything close to that.
As farmland prices have risen (up ~700% since 2007), residential sprawl out into that farmland has become much more expensive. This has increased the pressure on housing in existing urban areas, pushing prices up there. And, thus, the Canadian housing problem that's being discussed in the larger scope here.
For those who don't know, the best farmland in Iowa can go for just over $20k, and as you say can grow more value than anything in Canada. Iowa should be the most valuable cropland in the world - great soil, good climate, great national economy, and relatively flat land. (there are places better in some of the above, but they are lacking in at least one significant way and so the value of their land should be less today.)
Blind bidding doesnt 'inflate housing prices'. the marketplace competition does. itnis neoyher unethical or the rooy of any problem. its the latest boogeyman in a world that seeks to turn other peoples property into public commodities.
The theory of that, and the reality of it are two different things. As someone who has been on both sides of this in Ontario, I can tell you for a fact that blind bidding results in people over paying, and never knowing by how much. The stress of buying a home in the GTA has lead people to stretch their budgets beyond reasonable limits, and realtors have only made it worse now. In recent years it's started to become normal for the list price to purposefully not reflect reality, causing the true sale price of a house to be left up to the buyers, and after probably losing dozens of bids, people get desperate and throw everything they can, which ends up in homes that regularly go over over $100k over asking.
When I sold my house, I had three bids, and the highest bidder payed over $30k higher than the second place. It was still over $100k over asking, with no conditions. That's just the reality of things right now, and it's not the sign of a healthy market for something as critical as housing. People are desperate, and it's getting worse.
1) as someone who has been on the ground as well, I’ve lost a few offers because I was worried about over paying. On multiple occasions, after seeing what it sold for we thought “damn, we woulda paid another $25K on top to get it had we known.”
2) Canadian banks has a very conservative “stress test” for securing mortgages. This includes qualifying at much higher rates then is being offered. Therefore it isn’t possible to “stretch yourself beyond any reasonable limits”
It’s still quite possible to stretch yourself. Variable mortgages are common and interest rates are going up at a rapid clip. It’s possible for them to rise further than the stress test numbers. Refinancing in five years may be painful if you got a mortgage at 1.5%, stress tested for 3.5% and refinanced at 5%.
Tell that to the 5.1% rate a friend of mine just got on a new home purchase with >20% downpayment. I dunno if rates are a lot better in Canada or something, but we're already in 5-6% range in the US for some properties. They had excellent credit too.
US mortgages are 30yr fixed. In Canada you cannot get a fixed rate for that long and 5 years is the norm - everyone here effectively has an ARM. This is why rates are almost always higher in the US.
What is normal? It's hard for middle class people to afford normal housing stock in highly advanced countries without 30 years of amortizing debt. Yes, I understand that some countries force you to chain bullet mortgages over ~30 years to achieve a similar effect.
I think you're conflating mortgage term (which is typically 5 years fixed or variable in Canada) and amortization. The latter can go up to 25 years for CMHC-insured loans at the time.
In a sense you are both right, you just don't set the threshold at the same place.
The bank will look at how much you earn and how much you owe and say "We can pre-approve you for $X at Y%". They consider that you can pay that rate and they are most likely right.
Now if you do take $X, you have effectively leveraged your entire earnings, which for most people is a pretty bad idea because stuff happens and you can end up with a mortgage you can't pay because turns out you also want a car.
That being said (at least in Canada), your broker won't really let you take the full bank offers, or at least they don't expect you to do it.
In the US, most lenders will do between 36 and 43% of your earnings pre-tax. Assuming you pay another 25 to 30 in taxes, this should be half of your disposable income, leaving 50% or cars food Etc.
For a $5,000 mortgage, that's a $5,000 a month buffer
Um. Look at your numbers again. Assuming your 36-43% is correct (I haven't shopped a mortgage in almost 15 years), that puts the combined total at 61-73%. Also, that combined tax rate feels really low for anyone with the income to effectively bid in this current market. Add up SS and Medicare taxes, federal income taxes, state income taxes, and sales taxes and 30% feels like a floor rather than a ceiling.
You are not going to get an 800,000 loan with a repayment of $4,000/mo on a 120K income. For one, that's in jumbo loan territory with more onerous requirements for DTI above and beyond 20% down payment.
You haven't factored in property taxes, home insurance, or anything. Putting these numbers into a calculator, your monthly loan payment is going to be closer to $5,400 a month.
You're taking home $6,800 a month.
You're not living on $1,400 a month in the Bay Area.
That “damn we would have paid X more” is exactly what it’s designed to encourage - we’re not good at calculating large numbers so once you’ve “made the decision” to pay $500k making a decision to pay $50k more is relatively easy (and seems like nothing).
In a normal Dutch auction style situation you’ll pay $1 more than the second highest bidder, which is a bit more fair.
I think you mean a reverse Dutch action. Which is almost a regular auction.
In a Dutch auction (regular dutch auction. Not reverse.) there is no second bidder. The price starts too high and drops until the first bidder to decide the price is low enough (as it drops) buys.
Seems like you're not talking about over paying, but rather out-bidding someone. It seems like maybe a first offer should establish a baseline price, and everything subsequent should be transparent, or perhaps have a blind expiry on it, so you'd know if your offer was declined before an offer has been accepted
Canadian banks has a very conservative “stress test” for securing mortgages.
... is excellent. More places need it.
Please stop gambling on housing as an asset class.
The middle class doesn't do it in France, Germany, or Japan. In those places, housing prices are kept _fair_ through clear, transparent planning and a blend of free market and regulation. What the hell is wrong with US/UK/AUS/NZ that allows insane leverage to middle class house buyers that drives up the price of houses? It's all silly to me. (I'm less familiar with how much CAN allows middle class people to gamble on housing.)
The question is, would an open auction be any better? The process will just happen at smaller increments. And you will have ghost bids to prop up the prices.
I think the issues with Vickrey auctions for houses is that a lot of buyers really have no idea what price they are willing to pay for a particular property. The open price auction format gives them a (weird and easily manipulated hint) at what price might be sensible for a particular home.
Yes it would be better, because you wouldn't pay your bid (for many it seems to just be max affordable) that was potentially the largest by a long shot.
And I don't see that ghost bids propping it up would be much of a problem, they'd risk winning? You could require registering names, putting a deposit down perhaps, no real need for it to be anonymous even?
This seems intuitive, but it's wrong. As someone who went through the process, I think blind bidding suppresses prices, not inflate them.
When you are making a blind bid, the only information you have is the home itself. The ceiling for your bid is on what you think the house is "worth". You are very conscious about "overpaying" because you have no perspective on what other people are offering.
In open bidding, you are competing against other offers and the ceiling is basically what you can afford to pay.
Can't tell you how many times we lost offers because we didn't want to overpay - when the sold price was revealed we realized we would've paid another $25K on that had we known.
Well I suppose it depends on bidder mentality, sure, but in that case it's still better - you would have seen & bid the extra $25k and got it (maybe).
> In open bidding, you are competing against other offers and the ceiling is basically what you can afford to pay.
Well, what someone else can afford (and is willing) to pay. i.e. you never overpay, pretty much by definition.
(I think there probably exist 'open' auction system where the highest bid (not second) is paid, but the main ones don't work like that, and nobody's suggesting that as far as I've seen.)
Yep, house on my street was listed for $950k a few weeks ago and sold for almost $1.4m. In my area (Kitchener/Waterloo), every house is selling for $250k-$500k above asking.
Houses are listed artificially below market to expand interest and create bidding wars. No one expected to sell for $950k and if that was the only offer they got it would have been rejected. I had this experience on a property in Toronto where they listed at $1.5 million didn’t get a bidding war, rejected our offer, relisted at $1.71 million and eventually sold.
Above asking is a meaningless number because asking isn’t a reflection of what anyone expects a house to go for. It’s a game price designed to attract as many of the right people as possible to the property.
There was a time in the not too distant past where asking was exactly what a house was expected to go for. When I bought my current home in the early 2000s, most homes went for under asking price by a small bit.
I suspect real estate markets are a lot less efficient than we think.
We take people who know nothing about pricing homes, put them in a high stress time sensitive situation, advised by realtors who are incentivized to close deals quickly and at higher prices, and then expect them to make reasonable bids.
In my opinion real estate assets are likely overpriced and inflexible from what they should be due to the current regulatory situation.
The “money on the table” argument is weak, because the first bid is when people are most rational, it’s only after human psychology takes over that they start bidding higher.
1) 'Foreign Buyers' are price insensitive. In a market without much rational pricing, it's the 'confident signals' that set the price.
i.e. 'Foreign Buyer' comes in and buys for 5% 'above asking' on Street A. What happens then, is all the other houses on that Street set their prices a big higher, and hold. Other buyers see that sale, and it 'validates' the price for everyone else. More sales on that street, set the pace for sales in the area. etc..
Everyone is 'following' the confident bidders.
2) 'Blind Bidding' just favours the seller.
Buyers will only ever bid what they are willing to pay - not more.
It's just a form of auction, that's it. It's not unethical.
3) Low interest rates
4) Way too much migration
There is actually already enough construction. The notion that a city should expand it's services and population at break neck pace to accommodate the world's population is crazy. It's a 20th century 'body count' growth delusion strategy.
Australian living in Canada here - unsure what the tragic results were? It’s helped a number of my friends buy their first home - with a small (~$10k) credit /reduced stamp duties and taxes on the first home owned and lived in (ie not an investment). Negative gearing has been far more impactful in increasing the cost of housing, with people buying multiple homes for investment purposes.
Exactly. Which makes the subsidies a funnelling of taxpayer money into the pockets of landowners - obviously this is not good, but if you have a population of majority landowners, then this is a sure-fire way to get votes.
If there are 9 homes and 10 people, the 9th guy is going to bid everything he has, including government subsidies so he doesn't end up as the 10th guy who gets nothing. Those subsidies only work if there are 10 houses and 9 people because then you can choose whatever house you want and sellers must compete with lower and lower prices.
It’s largely understood (I am in a pub halfway across the world and have no specific citation) that the FHBG just bumped the purchase price up by that amount. In Australia, many new buyers’ max purchase prices are dictated by their total borrowing capacity (in that, few limit themselves to less), and many FHBs are competing against each other for a similar cross-section of the market, so grants are easily absorbed by total prices because now FHB B can bid [x] higher and will.
I agree that negative gearing is far more impactful, but I certainly don’t believe my FHB grant helped me enter the market. It just meant I paid that much more to a seller for the same thing.
And then the people who profited in the interim buy up all of the cheap surplus, sit on it for a few years and then trickle it back out as the prices return to normal, making massive returns on their investment, profiting off of the misery they created in the first place.
And you can't even be mad at them for it because there's no collusion, no intent to manufacture the disaster, no single person responsible for it all, this is just the consequence of economic torture by a hundred thousand cuts. Their hands are clean even though the damage is still done.
Well, if only there was a way to let the market say that there is too much financial capital and tell lenders to go away. It's actually quite stupid.
As you said, no single person is responsible. You have this gold standard thing. The reason why it doesn't work is that gold or money is the financial equivalent of real estate. You don't need money in itself for anything. You need money to trade your labor in for products and services, as a medium of exchange.
It's analogous to a bazar except you must go to this specific bazar and there is a limited number of stalls. You only need a stall for 5 minutes to do your transaction, you don't need the stall itself.
We have collectively decided that people have the right to own these stalls. Here is the problem. If you are young and you have to work, you need to go to a stall and do transactions that let you sell your time. However, all the stalls are already taken by older people. They won't let go of their stalls, they want to take them into the grave, because they are scared of not having a stall when they really need it. So instead, they rent out the stall and let you use it for a short amount of time.
Now let's say the interest rate demanded is way too high and you refuse to borrow and fall for the debt trap. What are you going to do? Stay unemployed? Ok, but now you have lots of time to think and organize and a clear group of people that you dislike. This is the perfect growth medium for extremism.
So, we did away with a fixed number of stalls. Instead, we have decided to give everyone a stall. The problem is that those old people are now buying a second, third, hundredth stall. The amount of free stalls remains laughably small, forcing the government to keep increasing the number of stalls exponentially.
When you think about it, those stalls are public property and people who have no business blocking them are wasting everyone else's time. It's like someone is parking in the middle of the road and blocking traffic. Normally you would call the police and they will confirm the traffic violation and then tow the car away and fine the owner.
We don't do this with the stalls. There is no incentive for anyone to get on with their business as quickly as possible, so people grab as many stalls as possible. There is no opportunity cost to them but there is a huge opportunity cost to those who need stalls but can't get them. This is where the exploitation of the have nots by the haves originates. There are enough stalls for everyone but nobody is giving up the extra stalls that they don't need immediately. The wrong/incorrect allocation of stalls toward those who don't need them and away from those who need them is at the root of the problem. In theory, a market would automatically solve this problem. Why doesn't it?
My argument is that we need to introduce a fee on the stalls to punish slowpokes and make sure people keep those stalls free if they don't need them. This means that if people are refusing to rent a stall, the owner of the stall would be left with an asset that is losing them value instead of a tool that can be abused for power.
In short, the problem is that the interest rate must become negative to discourage people from indebting other people against their will when an economy that is no longer growing (for short bursts or maybe even forever) has no need for further debt, debt that can only be paid through inflation.
If I were king of the country, I would institute a federal property tax on single-family homes that is equal to the state property tax times the number of homes that you own for as long as homelessness is over 0.05%. Right now, we're at 0.2%, so homelessness would need to be reduced 75% in order to obviate the tax.
Further, if a non-human, non-bank entity was listed as the owner of the home there would be an automatic additional federal 2x state property tax fee on the property as well. These tax payments would further not qualify to reduce the taxes owed on your other incomes.
Banks and other such lending agencies would only be subject to the property tax penalty if they did not list the home for sale at fair market value within 60 days of acquiring the deed and they would be required to accept an offer that met the fair market value requirement. (i.e., if they only got bids for $50k under fair market value, then they wouldn't be required to accept those bids).
The monies generated would be used to fund anti-homelessness measures across the country. This would make it unbearably onerous to own more than 2 homes for all but the richest Americans, and it would make it so that people who are using real estate ownership as an income producing machine would lose out on that income.
This decree would be set to roll out over a 4 year period to give the mom and pop airbnbers and other non-financially entrenched in the real estate market companies time to liquidate their equity in the housing market. Those companies that are fully dependent on rental income from single-family homes would have no motivation to purchase the newer homes on the market as each additional home would add a federal 1X multiplier to their tax burden, housing would decrease in value, more people would be able to buy in, apartments and multi-family homes would become more readily available and the prices would decrease, more people would be able to afford to rent an apartment, and fewer people would be homeless.
That's a win all around except for any company that fills its pockets by sleeping on its horde of unused homes like ancient dragons and ill-gotten gold.
This is actually a disproven myth. College prices rise because historically high state funding per student has been cut or not kept pace with increasing enrollment. The federal government has capped the amount it loans to $52k for an undergraduate degree for a long time now. Reducing access to federal loans doesn't have anything to do with the cost of providing a college education.
Not every house in the market is going to be a first home either though; especially when such incentives are often limited to a certain (the lower end) range.
I've always wondered whether higher-level "global top-down" market distortions (i.e. ones that use economic statistics as an input) would work here, where these sorts of naive "local bottom-up" manipulations fail.
For example, requiring that home sellers sell their homes with total consideration (incl. any required "side payments" to third parties) matching the mean market value of equivalent homes in other non-manipulated markets.
Or requiring that homeowners get their home appraised, and then legally mandate that consumers be charged a total compensation of at most the appraised value minus 10% to buy said home; with it being left up to the homeowner how to make that happen. (Where they can apply for their own government grants or whatever else, but they can't do anything that increases the total compensation demanded from the buyer—which would include taking any grants given to the buyer for buying a home.)
The one advantage of blind bidding is the slowness. You’re able to consult with everyone you need to between bids. In a live auction you might not get to call your family before having to decide if you want to go $10k higher. Even if your wife is there you don’t have time for an extended discussion on whether it’s worthwhile.
This makes me wonder why not just use a one-time second price auction? In that case everyone just needs to huddle up with their family once, submit their maximum price for the house, and know that they won't have a risk of over-paying relative to everyone else's valuation.
I have found straight up bidding to be a much slower process. You don't have to immediately respond, if an estate agent is applying pressure you should just ignore them and respond with your bid when you're ready.
On the other side if the sellers aren't happy with the highest bid they can just keep waiting for more people to turn up.
Wouldn’t people set a maximum ceiling beyond which they would not go? Like you make your initial bid, which would not be the maximum and you go up till you win or you hit your max.
If you bade your maximum already then obviously you’re out of contention.
I live in Toronto as well. We make a good income, have large savings for a down payment, and recently thought about buying a house. It's depressing.
So, I decided to look at the City Plan -- to see what the actual plan is for addressing the housing cost crisis in Toronto.
Not surprisingly, the real problem became very clear to me, almost immediately.
The problem is not blind bidding.
The problem is not foreign buyers.
The problem is not low interest rates.
The problem is the official city plan is 100% a NIMBY plan.
From the plan itself:
> While communities experience constant social and demographic change,
the general physical character of Toronto’s residential Neighbourhoods
endures.
In other words, let's not change our back yards.
> Physical changes to our established Neighbourhoods must
be sensitive, gradual and “fit” the existing physical character.
Again -- this means that the large inner-city neighborhoods full of mansions (such as Rosedale and Forest Hill), have to stay full of mansions.
Just to spell it out:
> If, for example, an existing zoning by-law permits only single detached houses in a particular geographic neighbourhood and the prevailing building type in that neighbourhood is single detached dwellings, then the Plan’s policies are to be interpreted to allow only single detached dwellings in order to respect and reinforce the established physical character of the neighbourhood
You see this reflected in the development that does happen. Yonge & Eglinton just gets more dense -- because that's the "character" of the neighborhood. Meanwhile, in "fancy" neighborhoods, housing often gets less dense, because that conforms to the "prevailing" characteristic of the neighborhood.
With the current plan, the city is going to be a city with super high density combined with ultra low density and very little in-between. In other words, it will be full of wonderful enclaves for the wealthy, and sardine-can housing for everyone else.
This, of course, leads to issues such as the lack of schools available in the Yonge & Eglinton area, anod overcrowded transit, not to mention the lack of quality housing for families with two kids. (Try finding a decently sized 3 bedroom unit near playgrounds and schools. Yikes.)
The solution, would be to allow more medium and low rise development throughout neighborhoods. The "character" of the existing neighbourhoods should be allowed to change.
I don't blame Toronto though, this is a problem that is happening in most wealthy cities in North America. Doesn't mean we can't do better. We should.
Some of it is NIMBY. But the officials can’t change the fact that there is only so much land to go around and a disproportionate number of people strongly desire a detached house.
Building huge quantities of condos may help some with density and may drive prices down slightly but there is little that can be done to have new detached houses on the market.
You could potentially tear down some mansions in rich neighborhoods to build two or three houses and that might help slightly at the margins. There aren’t enough mansions in the city for this to really move the needle though.
The problem is a handful of cities are winners and everywhere else is losing. Toronto is the lifeblood of Canada and many people want to be here for opportunities that are unavailable elsewhere. A large population that grew up here doesn’t want to leave friends and family behind to start a more affordable life elsewhere. As long as we create a society where there are a handful of great places to live those places will be prohibitively expensive.
Being unable to create successful cities in Canada outside of Toronto and Vancouver has been the bigger political failing than NIMBY within those two cities. If Canada had five cities that were as successful as Toronto there would be more opportunity to go around and less pressure on Toronto. Disproportionate amount of both internal and external immigration is to the places with the best jobs and that drives up housing quickly.
> But the officials can’t change the fact that there is only so much land to go around and a disproportionate number of people strongly desire a detached house.
That may be true, but the housing cost crisis extends beyond detached houses. We need more apartments, condos, townhouses, etc. Not just nice detached houses. Prices should get lower in all of those categories. Even condos in towers have grown much, much more expensive.
> You could potentially tear down some mansions in rich neighborhoods to build two or three houses and that might help slightly at the margins.
Most of the land in Toronto is tied up with single family detached housing. Why not replace some of these with small apartment buildings, brownstones, and townhouses especially when near transit, or villages? I live in a large house that is a 10 minute walk to transit and two major strips of retail. This neighborhood is mostly detached houses and duplexes. Why not allow for double, triple, or quadruple the density with townhouses or small apartment buildings? If done at scale, across the city, this could absolutely make a huge difference, in terms of the availability of housing.
In terms of mansions, why not spend a few hours walking around Forest Hill. You'll probably need more time, though, if you want to see them all. It's a beautiful neighborhood. And very large.
> The problem is a handful of cities are winners and everywhere else is losing.
There are other nice cities that are growing -- and the housing prices are growing exponentially there as well. (For example, Waterloo and Victoria.) Everywhere else is definitely not losing, though I agree that there should be more thriving cities in Canada, that is also a daunting task. Frankly, it's also a lot more daunting than changing the zoning to allow for medium density in single-family neighborhoods.
The bottom line, though, is that you're right about what officials can't change. They can't change the amount of land available, but they certainly can and should change the amount of development that is allowed on it. The current plan is simply not working. Something needs to change. My proposal is to allow medium density development; I don't see a better alternative.
> If, for example, an existing zoning by-law permits only single detached houses in a particular geographic neighbourhood and the prevailing building type in that neighbourhood is single detached dwellings, then the
Totally agree with you.
I just returned home from a visit to Cape Canaveral, Florida. It has a true mixed residential pattern. Lots of singles, duplexes, and small apartment blocks mixed. Felt "natural", scaled well, etc. I'm sure there are problems, but from a short visit, it looked like a reasonable assortment of housing.
If you’re waiting for a progressive zoning plan which incentivizes enough building to naturally bring down housing prices in Toronto, you will be dead before that reasonably priced home becomes available.
> Our goal is 72,000 new homes across Vancouver in the next 10 years.
Unfortunately, if the Vancouver population continues to grow at an annual 1% rate, that means 275,000 new people to house. 72,000 homes would mean an average of 3.82 people in each of those new houses, which is just not realistic.
In short: Vancouver isn't even planning on building enough to be able to house everyone.
I'm not very familiar with the city, but clearly, their attempts to solve the housing issue are not actually serious if they're not even planning on building enough housing for everyone.
>With the current plan, the city is going to be a city with super high density combined with ultra low density and very little in-between. In other words, it will be full of wonderful enclaves for the wealthy, and sardine-can housing for everyone else.
For ease of searching, this phenomenon is often called the "missing middle" problem. And it sucks, because as the already-high-density areas get more and more dense over time, it just reinforces the fear of density that people in the low-density neighborhoods have, because it confirms their prior belief that density means 50 story condo towers, and only 50 story condo towers.
Chicago is a wonderful counterexample to this - lots of neighborhoods are a mix of SFH, SFH with ADUs, MFH with 2, 3 or 4 units, and small 4 or 5 story apartment buildings, with nary a condo tower in sight.
There's this idea of a "city as a museum", to normalize the balance of power you describe.
In NYC there's a very similar balance of power. On some rarefied streets, it's illegal to change the silhouette or facade of a building, because it's an "historic district".
But if you go 40 minutes outside of lower manhattan, relatively affordable housing abounds and there are essentially no rules. The "museum" core creeps outwards, but with sloth-like predictability.
You're right, these places are not "for you/us". They're for people whose means allow them to make mole hills out of the mountains you describe (access to education, public transit, quality housing), and for the rest of us, who are willing to compromise their ideals and cope with the egregious terms and conditions.
Your solutions make sense in a utilitarian sense, but this is not a sense that appeals homeowners who have already rationalized away the irrational aspects of the status quo. Generations of experience have shown that, absent some highly-destructive disaster, it's cheaper to move to place you perceive to align with your ideals, or to change your own ideals, than it is to change the ideals of zoning policy.
There is a selfish component to this vector of development, but it's reductionist to say it's the only component. At any given point in time, the selfish component is there; but at many points in time it is not the biggest contributor.
The question is why does something like blind bidding exist in real estate? It could exist in all sorts of places but doesn't. Imagine blind bidding when interviewing for a job. Write down the number you'd be willing to do the job for. Someone came in with a lower number, please resubmit.
These weird market distortions in real estate have underlying causes. A lot of them are based off patchwork rules and regulations around real estate. Stuff like who you're allowed to sell to, how much you're taxed, the paperwork required etc. Putting more patch work on top of a system that's obviously broken will probably make things worse in the long run.
Employment, outside a handful of environments where salaries are public, is probably a great example of a market that is indeed blind bid - this is what a recruiter is doing when they ask what your “salary expectations” are.
Not... really? The problem with blind bidding is that it's iterative — that's the "bidding" part. People don't "bid" their own salary expectations down; let alone are they prompted to do so by their potential employer.
The revenue equivalence theorem for auctions suggests it doesn't matter that much. Now, empirical testing has shown violations of this theorem, but the magnitude of the violations are not so huge as to really move the needle. Someone might be paying 10% more in a sealed bid first price auction than they otherwise would, but it's unlikely that it's more than that, and it may be a good deal less or none at all.
No matter how you transact, of the good is too scarce compared to demand, the price is going to be high. We've seen skyrocketing prices in the US too and we don't use a sealed bid first price auction for the transfer of houses.
I would refrain from using the word “obvious” since many things we believe to obvious are non-obvious to others. Better to explain your point clearly and with greater detail.
The point I was making is that it’s too easy for us not to consider the implications to average or poor people of the proposals we make. It’s not that it’s the main point, but we also must not trivialize errors.
a 10% bump over market price quickly adds up to a high rate of price increases simce that bumped price helps form the new, higher market price which is then bumped up by the auction process even higher.
In addition, the process being described is NOT a "sealed bid first price auction" as the seller opens the bids and requests rebids without disclosing the current winner or top bid. The only reason to do this over a normal auction of that type is to trick people into thinking they didn't win, so they bid higher.
>Imagine blind bidding when interviewing for a job. Write down the number you'd be willing to do the job for. Someone came in with a lower number, please resubmit.
This is how it works in the trades, for contractors, and some small company employees. I've Never Been Told what past applicants for a job position asked for salary and were denied
Those are scenarios where the bidders are experts who participate in the market every day, which are very different from the home selling market where the average bidder will have participated never, once, or maybe twice in their lives (and be assisted by an agent who is paid for by the other party).
I'd argue the main cause of this is the REALTORs/real estate boards/MLS system that stonewalls any attempts at making real estate information publicly available precisely because the size of their paycheques relies on this information remaining hidden from the public. The conflict of interest beggars belief, but it's allowed to remain, among other reasons, since it also tends to benefit political parties courting votes from homeowners who see their home values continue to rise.
All of this though (ending blind bidding, making buy and sell data publicly available, etc.) is just using a bucket to bail out the Titanic since the system is designed to have prices continuously rise since Canadians are in house debt up to their eyeballs and have no idea how else to actually save for the long term and any party that actually changed this would likely never get voted into power again, if they even continued to exist.
What's stopping Canada from increasing its housing stock? Surely Canada has plenty of space for its 30M citizens, right? (Yes, I understand that much of the territory is uninhabitable, but even still...).
Increasing housing stock doesn't imply sprawling outwards (e.g., replace a detached house with an apartment/condo complex), and anyway housing stock is probably a negligible contributor to climate change and habitat destruction (presumably forestry, agriculture, heavy industry, fossil fuel energy, etc are far larger culprits).
Nothing is better than sprawling outwards. Most of the white collar jobs can be done remotely , so commute is not needed. Most of groceries and other stuff can be delivered. A truck doing 100 deliveries is surely less traffic than everyone going to the supermarkets. And most importantly with sprawling outwards citizens can enjoy the outdoors and take care of their health. And even more importantly high density of population leads to increased crime , encourage homelessness and provide all sorts of administrative nightmares.I would say we have reached a technological inflection point where we at at last free to spread out and yet stay connected. Let us embrace it. This is the future. This is the way.
Service availability decreases with population density, and relying on subsidized last mile delivery for the economic elite is not a sustainable model for an entire society. The road network alone is a funding quagmire, to say nothing of hiding the infrastructure burdens of servicing sprawl into the eldritch horror that is the municipal bond market.
> Service availability decreases with population density, and relying on subsidized last mile delivery for the economic elite is not a sustainable model for an entire society.
I don't think this is strictly true. I don't like the model, but big box stores seem pretty sustainable (everyone drives to a distribution center for their goods). An actual last mile distribution system (a la Amazon) also appears to work pretty well. Neither of these are exclusively available to the economic elite.
> The road network alone is a funding quagmire, to say nothing of hiding the infrastructure burdens of servicing sprawl into the eldritch horror that is the municipal bond market.
I don't doubt that infrastructure costs decrease with density, but density doesn't keep urban municipalities from building infrastructure that they can't afford to maintain any more than other places. Quality of governance and density are almost certainly independent variables.
Service availability decreasing with population density is still old school thought. Rapid advances in technology over the years enable stretching infrastructure outwards. Who knows someday we may be extending our infrastructures to cover the whole globe and even to outer space. It is not subsidized and it is certainly not for the elite only. It is more about human aspiration. As a species we can look towards piling on top of each other or we can choose to expand and live a quality life according to one’s own aspiration. Look at the big picture.
I too wonder about the sustainability of the Mexico City paradigm. When land becomes precious, we re-pave and re-evaluate. In Japan (On the island of Japan), space is precious, if you are going to build it, it better last, and it better make sense to keep around. Until we reach a limit on land area, it seems that slime-mold-esque endless sprawl is somewhat inevitable. I do wish the opposite, that we would heed the lesson before driving off the proverbial cliff.
> A truck doing 100 deliveries is surely less traffic than everyone going to the supermarkets. And most importantly with sprawling outwards citizens can enjoy the outdoors and take care of their health.
No, the lowest traffic solution is having the smallest number of trucks that are needed to serve local markets that a relatively high volume of people can access via walking, biking or mass transit. All that walking, very healthy.
Further, why should city dwellers subsidize this expansion? Surely these far flung communities won't have sufficient revenue to support the infrastructure needed to make all that work.
City dwellers are not subsidizing anybody. In fact there are certain things the government does for the common good. Like protecting border or extending healthcare. It is the kind of civic planning that determines if a community will be able to support ordinary human aspirations like living a comfortable life in a spread out space or a community is going to pile like ants on top of each other. Of course certain people in the top (elite?) may actually love the second option and would love to see people stuffed in small apartments and live life like mechanical robots so that they can enjoy their life in Malibu beach houses.
City dwellers already subsidize rural living through taxes. On the federal level, more rural states are subsidized by more urban ones, paying more per capita and receiving less per capita. Similar things happen at the state level, but the numbers are a bit harder to track down.
The government pays for those things with money generated in the cities. We need rural communities to grow food, but most rural and suburban communities in the US do not generate enough revenue through taxes to support themselves without federal assistance. Sometimes it is worth doing, but the cities make the money that pay for it. So again, why should we subsidize lower density that requires more subsidy and more energy to support? Our existing cities could be redesigned to be more human friendly and higher capacity - if we are going to spend federal dollars, thats where they need to go.
Entitled, huh? I don’t see what entitles you to any particular mode of living, but its your ethos.
Suburbs may be the majority (I have no idea if thats true), but that doesn’t make them self-sustaining. They only exist because cities paid for highways, water, and power infrastructure to make it all possible (and continue to fund their maintenance) - exponentially moreso the further west you go.
Nope I don’t agree. Cities have morphed into Subarus in the 1950s and since then they have been the source of more influence and revenue generation at least in NA.
The decreased density of sprawl causes the maintenance of infrastructure such as roads, electricity and water to often need to be essentially subsidized by higher density areas. For example, in suburbs with culs-de-sac, taxpayers fund the streets (in perpetuity as they must be maintained) but the vast majority get no utility from them. To your example of a truck doing deliveries, if it did those same deliveries in a more dense area it would obviously travel a smaller distance. IMO sprawl also makes life more difficult and more dangerous for those without cars.
I cannot imagine ordering fruits and vegetables online: how do you assure its quality without actually looking at them? I always prefer picking these myself, so yes, maybe it is a good idea to offer better transportation means to those who prefer to do in person grocery.
There is plenty of housing for plenty of people in most parts of North America. The 'problem' is that what people _want_ is cheap housing in urban centers, a.k.a cool spots. Because that doesn't exist, we claim to have a housing shortage.
I'm not in Canada, but I am in the NYC region, and your comment is absurd. Assuming you want to live in a safe area, but not live inside the 5 city boros, you're looking at 1MM for a house, and an hour+ commute.
There’s certainly an element of ignorance in their comment, but there’s also some truth.
I am originally from a rural area in the Midwest USA. I know a statistically significant number of people from high school and college who purposely moved to bigger cities because of “the culture” or “there’s so much more to do.” They are right. I live in a much bigger city now for those exact reasons, but the demand justifiably has resulted in wildly more expensive houses. I could buy a modest house in my hometown for $85k right now. That same house where I currently live would easily be selling for $300-350k. You make more money here, but not by much.
We need to work on improving our housing density issues, but there’s an undeniable element of “I don’t want to live there” going on.
In Ontario it's not just urban centers. Prices are going up almost everywhere. Towns with a grocery store and Tim Hortons are seeing prices explode.
One problem in Canadian provinces is your taxes remain the same regardless of where you live, but if you need access to healthcare or education, then you have to live near a major city. Particularly if you want quality healthcare.
In fact the cost of living goes up if you're a rural inhabitant in most of Ontario. Electricity is more expensive, heating is expensive, etc.
I don’t know that people want to live where the jobs are necessarily (although it helps for ease of switching jobs). Personally I think the move to remote work was very overhyped during the pandemic, but it is having an impact on the housing market of smaller areas.
People want to live where the amenities are, and all other things being equal more population can support more diverse sets of amenities. E.g. you need enough gay people in a town to support a regularly open gay bar, and generally speaking people want to have a choice of bars for going out.
The trend in the last couple years has been the reverse of that, but it'll be interesting to see if that continues now that the most of the pandemic restrictions are over.
I live in a rural area with a small local town about an hour outside of Ottawa. Lots of rural houses are going up, as the hour drive is okay for the occasional commute. Nothing is being built in the town (which currently has about 350 dwellings). The problem? There is no local water / sewage system, and quite a few of the wells in town get contaminated with e-coli on a regular basis. Nobody wants to build a new subdivision in the town because it doesn't have the basic infrastructure need to support development.
The worst part of this is that the town has the money in the bank to build the water and sewage system. There's upwards of $8 million earmarked for the project. However, each homeowner is going to be responsible for $30k in hookup costs, and the town will have to shell out $500,000 per year to operate the new water system. Since it's a low income area, the >50% property tax increase needed to run the system won't fly, and neither will the hook-up costs. Instead, all the new builds are focused in rural areas where there is no infrastructure needed or in the larger towns / cities where costs are significantly higher but deemed to be an acceptable risk by developers.
I think that used to be the case and I would have argued as such as early as 2018 w.r.t NIMBY and San Francisco but I think it's becoming less true. Now sure you can buy a trailer in the middle of nowhere in the Nevada desert, but what were previously considered "cheap" houses in places like Des Moines are increasing substantially in price, and that's not just the cool spots either. You might say "Well just rent then" but rent is going up too.
With that being said, naturally homes near economic activity should be more expensive. It's more expensive and always will be to live near Google's HQ in Mountain View than it will be to live in Grand Rapids, Michigan or Toledo, Ohio. That's just economic physics. It's ok, normal, natural, acceptable, and economically good. And these homes are only going to get more expensive over time as energy costs increase (EVs won't save us), road maintenance costs increase (already far out of control), and people move to live in more walkable areas. But as these costs increase, people who were expecting that it would be cheap to live in the suburbs are surprised because energy costs and moving far away just won't save them anymore like it did in the past (oh I'll live here and just have a 40 mile commute) - hence it appears that we have a housing shortage when in reality the costs are more reflective of economic reality and were artificially cheap. New housing won't help here because even if we could build more faster we'd still be building it in an economically handicapped way and rely on traveling far distances in cars and on highways, which just will not work when we can't pump cheap oil out of the ground.
You have two options. The first option is dense skyscrapers. But those aren't going to be efficient enough in places unconstrained by geography. They also have maintenance issues and it'll be too expensive to keep them going in the future with much higher energy costs. The second option is medium-density mixed-use development. Think the beautiful streets with brick single family homes next to townhouses and 2 story apartments with a cafe or an office at the bottom, bikes, walking, and street cars or other similar efficient transit. These you can repair yourself and the maintenance is much lower on the long-run and they don't rely on cheap oil to be livable.
But we'll keep building skyscrapers and suburbs (I didn't mention these as an option because they aren't) and the prices will just keep going up.
I don't really disagree with your larger point, but I can't help but explore this nit because it seems interesting. I don't think anyone is arguing that EVs will markedly reduce energy prices; however, there is an argument that renewables will decrease energy prices by virtue of being cheaper per unit power. Of course, it will take at least a decade before renewable energy isn't supply-constrained, so I don't think anyone is expecting this to happen soon, and moreover I've heard counter-arguments that the figures associated with renewable energy aren't including the storage costs which would be required to make renewable energy suitable for base load generation or the costs to decommission/recycle hazardous solar panels and fiberglass wind turbine blades--maybe there will be a ~10 year window during which the supply of renewable energy meets/exceeds demand but before the recycling/decommissioning costs kick in en force? :)
Oh yea I definitely think EVs are the future and to the extent that we have vehicles, in the majority of cases they should be EV. I guess what I'd say here is that even at a reduced cost (which is arguable) for a "commute" (self-driving, etc.) you aren't going to get EVs cheap enough to offset b/c the very act of driving 10, 20, 40, miles to a job or driving a mile down the road to the grocery store is just incomparable to just better design. If your grocery store is within a half mile and you can walk or bike there, EVs could never compete. So it's kind of like we're improving the technology of something we shouldn't be doing, versus just not doing that thing.
If I had to completely armchair it here, if you looked at total impact to society, the environment, car accidents, you name it something like a gallon of gas in the US should really be about $20-$30/gallon but it feels like it's expensive at $5 b/c we're so used to the low prices. We are probably experiencing these costs through inflation and things like housing prices.
Renewables (should) drop overall energy costs by virtue of capturing natural movements (I'd throw nuclear in renewable as well IMO but I understand why you wouldn't) but people are going to focus on kWh being expensive because they're used to extremely cheap gasoline. I guess in other words renewables on paper will be more expensive "at the pump" but externality cost to society will be lower. I wouldn't be surprised if in the future as more EVs come online that energy costs to charge even at home are approximate to gasoline.
> If I had to completely armchair it here, if you looked at total impact to society, the environment, car accidents, you name it something like a gallon of gas in the US should really be about $20-$30/gallon but it feels like it's expensive at $5 b/c we're so used to the low prices
Price per gallon is probably the wrong unit. You probably want $/mile. Car accidents get priced in via insurance. Environment isn't priced in at all in the US, though a carbon tax could change that if there was any political appetite for it. EVs already significantly reduce fuel and maintenance costs even though ICE cars enjoy a "carbon subsidy" (i.e., pollution isn't priced into the cost of gas).
> people are going to focus on kWh being expensive because they're used to extremely cheap gasoline
Electricity is already much less expensive than gasoline. The current US-average gas price is $4.10/gallon and a 30mpg car will cost over $0.13/mile. The current US-average electricity price is $0.14/kwh--with ballpark 85% charge efficiency (not all energy drawn from the grid makes it into the battery) and 300wh/mile, an EV will cost less than $0.05/mile. EV fuel costs are just over a third of those of ICE vehicles.
> Electricity is already much less expensive than gasoline.
How I'd phrase that is: "Electricity is currently much less expensive than gasoline "at the pump". What I think is likely to occur is that as we switch over to EVs (I own one btw if that helps here) there will be continued pure electricity demand which is going to cause prices to go up and up. Everything runs on electricity, and soon cars will too. So I think the kWh price is going to go up, and be measured and scrutinized much more (you can make an app to calculate this, not so much with gasoline easily) and it'll be more measurable. But gasoline costs just aren't "counted" in the same way. So eventually it'll cost, idk, $20 to go 300 miles and people will think that it's expensive because you could do it with gas much cheaper in the past, but the problem with that comparison is you wouldn't have accounted for the externalities so you're not really getting true costs. I hope that makes sense where I was going with that.
I agree $/mile is the right unit, I was just thinking about how to isolate true gas cost versus true kWh rate in some way. I personally pay closer to the $.05 kWh rate at home, but I see peak rates in California hitting $.4/kWh and all I see is the writing on the wall for the rest of the country.
If I had to summarize:
We live in an era of extremely cheap energy. It may go on for another 50-100 years, who knows. Maybe it goes on forever. But it won't be from fossil fuels. And if energy becomes much more expensive and we haven't designed cities and transit for optimizing cheap/efficient energy costs we're beyond screwed. Relating it back to housing, I think it makes sense the housing is getting much more expensive and that this phenomenon is more than just "living somewhere cool" and part of the reason that people want to live in these "cool" places is exactly because the implicit energy costs are less. You don't have to drive to a coffee shop. You walk.
I guess one good thing about America is we have all of these navigable waterways so we won't have big food shortages as distribution costs can remain reasonable, at least in the mid west and the east.
-edit-
One startup idea I have is a way to truly measure your total energy expenditure. Right now I just get a bill in the mail and figure that it makes sense because it's sooooo cheap to run all of this stuff. What happens once energy becomes 5x more expensive? Well, I want to know how much it really costs me to run dual monitors. Maybe it's an extra $50/year I don't want to spend (just a contrived example).
Agreed that increased electrification of previously fossil fueled applications will create upward pressure on prices, as will the decomissioning of fossil fuel power plants. However, this will eventually stabilize as we (1) increase renewable capacity and (2) increase our efficiency (American energy consumption is decreasing gradually as we improve efficiency).
It is worth noting that unlike some other energy sectors, unit costs of storage and renewable continue to trend down aggressively.
It’s still not quite so cheap that recycling it makes no economic sense, so if it is possible a way will be figured out sooner or later. (Metal is recyclable because recycling it requires so much less energy than producing it; plastic is super cheap and so is basically never recycled.)
You portray it as being some capricious choice by entitled brats, but ignore that there's economic and efficiency advantages for society to have more centrally located workforce and services.
Strange argument to switch to. If your day to day life is better because you live near where you eat and work and obtain healthcare and what not, isn't sort of hard to argue against? Where's the downside to this efficiency? It looks to me like an entirely win-win situation for the individual and society. Sometimes efficiency translates directly into resiliency. In your argument, proximity and density makes urban populations easier and cheaper to deliver to.
We do in fact have an affordability crisis in Canada. I bought a home in a small town outside Toronto (too far to be a commuter town) in 2017 for $425000, and sold it in 2020.
We're friends with the people that bought it from us and on the same street in that same small town in Ontario, houses are going for $1M+ now. This is not entitled millenials wanting to live in Vancouver. This is the place where things are supposed to be affordable. This is exactly the sort of place where Boomers love to tell us to go live if we can't afford the city.
Housing is cheaper if you are willing to relocate to e.g. Swift Current, Saskatchewan where a 2-bedroom home with 900 square feet will cost you $175000, but of course there are very few jobs in a small town of 15000 people that's 3 hours away from the nearest big city and the unemployment rate is among the highest in the province.
Just to add to this, we live in a town of ~50k people about 2 hours out of Toronto, and house prices are up 20% yearly since before COVID. 2-3 bedroom houses, are brushing up against $1million this year.
Not as bad as other parts of Canada to be sure, but most people living here have manufacturing jobs or are in the military. I don't see how this is sustainable, since there's nothing for rich people to do here.
Very ordinary detached family homes in decent shape pretty much anywhere in Ontario are near a million dollars or more. If people could buy a family home for vaguely affordable prices in even the most remote parts of the province, people would flock there. There's plenty of land, but getting permission to build anything in much of Canada is a difficult and slow process, even in remote areas.
Regulations...
Most land is off limits. Were I live the land is ’protected’ for agricultural use even though it is marginal at best and most farms doesn’t use the land.
In my case it killed my agribusiness project because the amount of work, the delays and the risks where too much to bear.
We can no longer build what we used to build in the 60’s and 70’s because of the regulations in spite of the technology being much better.
38 million, with an annual immigration target of over 400k, plus foreign students, temporary visas, etc. New construction simply isn't keeping up with demand. Politicians have tried to solve this from the supply side for decades, but many of the issues like zoning are in provincial and municipal jurisdiction, where the incentive is to keep prices high and homeowners happy.
So the federal government refuses to address the demand side of the equation (very high immigration rate) while the the provinces and municipalities block increases in supply. The natural result? Runaway price increases, and the rest of Canada's economy becoming uncompetitive because employees can't find a house within a 2 hour commute for under $1MM in the GTA.
> Imagine blind bidding when interviewing for a job. Write down the number you'd be willing to do the job for.
You've got that relationship backwards. The person doing the job is the seller. They are the ones taking bids.
The employer – the buyer – is indeed blind. They don't know who else you are talking to and how much they are offering. If you can convince the employer that the other employer down the street has given you a better offer, they just might up their offer, and you stand to gain a higher income out of it.
So, yes, employment is a great example of where blind bidding is common.
I'd be very surprised if the average employer doesn't have far more information available to them than the average candidate. Especially given that's at least part of HR's role, knowing market salaries and deciding hiring budgets. They might not know about the hiring candidate directly, but more often than not, there are entire B2Bs dedicated to distributing this information. That's on top of skilled hiring managers and employers having vastly more experience with the whole procedure than the average candidate would.
> They might not know about the hiring candidate directly
That's what we're talking about. It's not hard to understand overall housing market trends as a housing buyer, but you don't know what a specific seller is going to do with the offers they have on the table. That's where you're blind, just as an employer is blind to what else a candidate has on the table.
If there's a difference, it's that the housing market is hotter (in Canada, at least) than the labour market, so you feel more pressure to buy a particular house when it comes up for sale. If you miss it, you might not find another one for a long time. If, on the other hand, you don't get one employee because you didn't offer enough, you can just wait for the next one that comes along the next day and try again. No big deal.
You are exactly right, but this is by design. You're talking about the Canadian Federal Liberals. The Prime Minister is a trustafarian who got elected because his father was Prime Minister. Every major minister of their party owns several investment properties. The Minister of Housing and Diversity and Inclusion (what a combo!) owns investment properties.
These people have zero interesting in seeing property values go down. It's their own net worth we're talking about, not to mention the net worth of their friends and donors.
The plan is to virtue signal their way to taking the least effective action possible (E.g. "ban foreign buyers", but leave loopholes so they can still buy through corporations), bring in another 500,000 people that will need housing, and then do as little as possible, but as loudly as possible, to "increase to supply". They've been in power 6 years and this has been an issue since day 1. Why anyone would expect them to address this issue on the face of Canadians still voting for them, is a mystery to any rational thinker.
It's a group of people where you have to ignore what they say and focus on their actions. Did the Canadian Federal Budget look at all like a budget passed by someone trying to reduce inflation? Trying to cool down housing markets even a little bit? Of course not. Look at the hand signing the cheques, not the mouth speaking the lies.
The rate of income property ownership is the same across all federal caucuses (including the NDP). Singling out one party for the transgressions of all parties does not prove any point other than maybe a personal partisan bias.
The fact is the party political system in Canada is heavily biased towards the wealthy. Heck, in Ontario MPPs don't even get a pension so you you have to not only be wealthy to join the game but already self-supporting into retirement to be willing to consider it. You can only rely on politicians carrying through on their virtue signalling to do the right thing for the rest of us, so I'm not willing to criticize any of them for it.
I disagree. IMO, blind bidding is suppressing prices not inflating them.
Here’s why, as someone who has been on the ground and lost a few offers because we didn’t want to overbid. After the sold price was released, on multiple occasions we thought “damn! we’d have our that and $25K on top to get it had we known”.
In a blind bidding system, you bid what you think the house is worth. In an open bidding system you start to bud as much as you are able to afford.
Except you're rarely sure how much it's worth. The market is fluid, the psychology is working on you, and the feedback takes too long that by the time you know how much you missed it's too late to learn much from it.
That doesn't make sense. If you really bid what it was worth to you, why were you disappointed that the house went for more because you would have paid it (and more)?
You say that, but the fact you didn't bid $25k+ initially tells us otherwise, no?
Here in DC metro, people are massively over-bidding (relative to list price) because they've already bid/lost 5-10 homes in the last few months. So, they go in strong, $100-$150k over on a $600k list price isn't uncommon right now.
In a hot market with little supply, a list price is a marketing tool to get people into the door, and for a selling realtor to be able to brag about how good they are.
That’s it. It has been like that for years. It doesn’t make sense to post a list price that is too high or accurate (unless you don’t want the hassle to deal with multiple bidders.)
1500 sqft houses in my formerly middle class SV neighborhood are listed at $2.5M and sell for $3.5M within a week. Everybody knows that this $2.5M is imaginary. If you want to know what a house will really sell for, just look at the sales of the past 2 months. It’s a much better indicator.
It's just a reference. A bids/closings so far over list is relatively new to this market; the last time we had anything similar was the lead up to the 2008 crash.
More typically, a "$500k" house would list for $480 and close at $520 or maybe $550. Today, that same house is listing for $599 and closing at $700+. Not only have the prices gone up, but they've gone up fast enough that nobody really knows what a home is worth until it closes.
Blind bidding leads to more conservative offers because noone wants to grossly overbid on a house. The ceiling is basically what you think is "fair". The seller will then make a decision with very little back and forth - generally they will give you one chance to "improve" your offer.
Now, in an open bidding system, you are literally in competition for who can/is willing to pay the most for the home. The ceiling is what you can/willing to afford - back and forth with other bidders until literally the highest price is extracted.
That kind of rationality is rarely found in a hot market. You'll essentially be driven to massive overbidding due to the highest bid in the group. In a big enough market with enough demand, you can be sure that high bid will be well beyond a rational amount. Fairness has essentially nothing to do with it.
Once you lose 5-10 bids, you'll either give up on owning a home, move to the country or start upping your bid to suit.
Confirm this is the same in Austin. We moved from a blue state last year and kept losing conservative bids. We decided to go all-in on the next place and got it. What a stressful situation!
> You say that, but the fact you didn't bid $25k+ initially tells us otherwise, no?
That doesn’t follow at all. You are going to bid the minimum amount you think can win the auction, not your max price you are willing to pay.
If you want people to bid the max amount they are willing to pay, you would want a Vickrey auction, where everyone presents a sealed bid, and winner is the top bid… but they pay the price of the second highest bid. That way you can bid your actual max price without worrying about bidding against yourself.
PARTS of blind bidding make sense, from an unfortunate necessity standpoint.
The primary scenario that comes to mind is where the neighborhood finds out Joe Outsider is the leading bidder, and they -really- don't like him for a reason they shouldn't. Blind/sealed bids help prevent Joe from getting specifically targeted for being outbid. (To an extent.)
Do you have data on how often neighborhoods come together as a collective and pool their money to bid on a property, not with the intent of actually purchasing but just to drive up the price because they don’t like the prospective buyer?
I suppose it depends on the jurisdiction, but I would think it makes sense to protect both potential buyers and sellers, that an earnest money deposit would be required for a winning bid subject to forfeiture.
One nuance to this is that the "bid" is much more than just the number of dollars to be exchanged. It's credit quality, cash offer/not, and subjective things ("I want to sell my house to a family with kids, not a real estate developer")
So even if someone is told which bid is currently in the lead, the subjective elements may mean out-bidding that offer would not put them in a winning position.
Not to say eliminating blind bidding wouldn't be a good idea.
That happens, hard to say how often, but it happened to us.
On my current house they said there was another competing offer and it was a close choice, they asked if we wanted to increase our bid to be more competitive. We dropped it by $15k and it turned out the competing offer wasn’t even close to our initial offer. They just wanted to know if we’d throw in $5k or $10k more.
When you're applying to a new job, do you feel it's ok for the hiring company to ask you what exactly you currently make so that they can offer you $1.00 more than what you currently today? If not, how is that not "unethical"? (Also note, in the US at least - you can't ask someone what they currently earn).
I just don't understand why it's unethical.
Maybe the seller way under estimated the value of their home, why shouldn't they be allowed to sell it at the highest price?
EDIT: why the downvote? If you don't agree - why not reply so we can have a healthy dialogue.
>do you feel it's ok for the hiring company to ask you what exactly you currently make so that they can offer you $1.00 more than what you currently today?
Yes but I don't have to accept it and I can then tell them what I want and they're free to turn it down and it's a discussion. The hiring equivalent would be every applicant would write their expected salary down. Then the lowest wins with no negotiation.
Can it hurt though? It's a massive conflict of interest to have foreigners buying your homes without any personal stake in your country. Shouldn't this be the default stance for all nations?
It's not like we haven't seen deleterious consequences already from California allowing the Chinese to buy up homes ad nauseum.
Unethical? Give your honest best price and you're done. Whatever the seller is saying, whatever words come out of their mouth, unless it's "Sold!" you ignore them.
In a perfect world, yes. But that discounts all the psychology of the situation, FOMO, how invested the buyers may be in the property, etc. Its a rather one sided and exploitative situation.
Its actually much more endemic than this. To start off, Canada's service sector dominating economy means jobs are concentrated in cities like Toronto, Vancouver, Montreal etc. So most people want to move and live those places. To make it worse, the government has plans to bring over 1.2M people over next 3-4 years time range as immigrants who again because of the fact that our economy is not diverse enough, tend to settle in those cities. Which makes the already heated housing market worse.
And everyone knows in those cities, local officials and councillors are all in builders' pockets. Large tier builders like Richcraft are routinely raising their prices by 5-10K per every release within last 2-3weeks since last 2020 and still they have all slots closing in 5 min of opening. They are keeping the supply artificially low and I imagine the inflation and supply chain issues are not going to make things any easier.
Bottom line, house prices continue to rise. The only thing that can temporarily put a halt to this is if we end up with rates as high as 10+%. Even then I suspect there are enough people with equities and large cash pool (hell our point based immigration system makes sure this is the case for all incoming immigrants)..
Middle class dream in Canada is over for most people. When you can't afford a decent place in Toronto or Vancouver with a tech salary you know its over.
There's stories of professional couples - both doctors - who can't afford a place in Vancouver. It's completely crazy there. I consider myself lucky to have got a foothold (well) outside the city when I did.
I can't imagine how bad it'd have been with the Liberals (provincial) still in power.
Just throwing my two cents in here from the Bay Area and in a similar market. The things that are wrong with real estate aren't headline producing or interesting.
- Blind bids sound completely unethical. Why are real estate agents enabling this? Are they not bound to a code of ethics?
- Allowing buyers to offer cash on top of the value of a home should be illegal. You should be allowed to sell your home for what it appraises for, no more. Again, why are real estate agents enabling this behavior?
- Requiring buyers to submit letters, photos, and videos in order to buy a home is insane. They did away with this in California, but is it gone everywhere else? Another question of real estate agent ethics.
- Stop allowing companies to acquire residential real estate. This just, doesn't even make sense.
Patch these things up and you'll have major progress in freeing up a lot of real estate transactions and overvaluations.
I appreciate an effort, but how can a student afford a house ? Is it possible that a rich parents can invest in properties through their kids on a student visa?
> Is it possible that a rich parents can invest in properties through their kids on a student visa?
Yes, I’ve met many people who do this. The father works in China and sends money to their kid (and sometimes wife) in Canada to buy real estate. Then since the family in Canada is technically low income (no job) they maximize every possible government benefit as well.
Even before all the housing craziness it was often worth it (if you had the money) to buy a house in a college town for your kid(s) (especially if you had more than one going to the college) and then sell it when they graduate. The cost of ownership over those 4+ years would be cheaper than renting/dorm life, and give more options.
It would become even MORE worth it if you rented the other rooms to other students.
We need this so bad in the Netherlands right now!
Listing price of a house in Amsterdam 525K, bidding price 641K, someone else with 660K comes and takes it away.
Cries in pain after 10th bidding war lost :(
I don't know about the Netherlands, but in Canada, where you see the same scenario play out regularly, it's common to underprice the listing to attract attention (it's an advertisement, after all). The home is selling for fair market value. It's the listing that is misleading.
The country is ruined for non owners and it will never get better. The only options left are moving to the prairies or living in a neo-feudal shithole. This is only being introduced so they can officially give up after pretending to fix anything.
Quality of life has almost nothing to do with income anymore so it’s impossible to work for a better future. Being born 5 years later is the difference between tax free, 6 figure equity gains every year, or renting forever. Boomer janitors are richer than a new Dr. will ever be. The system is broken.
You're spot on about the 5 year difference. I never thought I would see my shit box I bought a few years ago for more than I ever thought it was worth triple in value. It's literally the difference of 5 years as you said. I want to be part of the pray for the collapse team but I know good honest people who would be devastated by it. People who are just victims of the system.
This is well written and is something I noticed too during my own house hunt: houses owned by teachers, plumbers, and car mechanics were getting fought over by engineers, doctors, and lawyers.
A fun thought experiment is trying to imagine what career an 18 year old today should work towards if they want to own one of those homes. VC or Onlyfans? How can anyone plan for the future when prices might double between the start and end of a degree? They did for me…
I think the only option left is moving away. Everyone in tech is already doing it
Moving away is and always HAS been the response; the only reason Seattle is a hotbed of real estate activity is because of the huge influx of people over the last 30 years, escaping rising Californian prices. Currently Arizona and Texas are seeing influxes, and there are other areas, too.
It's not like major cities don't exist except on the coasts.
> It's not like major cities don't exist except on the coasts
Canada is a lot smaller. There are only 2 major English speaking cities, a few smaller cities in the prairies (200k to ~1M ppl) which are still affordable, and some dying rural provinces on the East coast with horrible economies. It’s more like moving to Nebraska when California is unaffordable.
Most people in BC and Ontario have no affordable cities within a few hours drive of their home town. The affordable cities are over a thousand kilometres away. At that point, it’s easier for most people to try moving to a nearby state across the border.
House prices are greatly artificially inflated by zoning restrictions, and this is seriously hurting western people going forward. However, a smart 18 year old can still work towards making $200k/yr compensation as a software engineer within a few years, even remote, where single family homes on an 8k sqft. lot are $400k across the US.
Essentially young people will probably need to migrate and start a fresh in some underdeveloped city. I'm a millennial and this seems like it will be the case for me too. The older generations essentially rode a big wave to prosperity, our generations will essentially be riding the wave as it is collapsing, while not quite as bad as the great depression generation, millenials, gen z, alpha will need to build a new. It is futile to compare our lives to boomers who essentially had it pretty easy.
I often wonder if we could start a movement of young people to start afresh elsewhere. We are the workers and the lifeblood of the cities we can't afford. Could we pick a city and move in on it?
yes as long as you don't need to stay where the old generation is order to access capital. I think in the future people will be able to secure capital even without meeting in person.
A quick look at the data suggests only about 2% of properties in Toronto and Vancouver are owned by overseas investors. Yes, housing is priced at the margin, but this won't do anything at all to prices over the long term.
I'm sure this will be wildly popular politically, because people LOVE the idea that some foreign boogieman is the reason their children can't afford homes anymore.
It's much easier to outsource your problems to some outside "other" then deal with the much harder task of introspection over the poor housing policy that you and your neighbors have voted for over the last 60 years.
Like all cities in areas with heavy-handed zoning regulations, abuse of historic preservation clauses, and filibuster-style city council meetings blocking new construction...the issue is one of supply.
It's the same problem in literally every developed country on earth right now. The industrious, forward-looking people who originally built the cities during the major growth phase died...and then their kids grew up believing that the way things ended up was somehow divinely ordained. Never to be changed or built upon again.
Instead of attacking me personally and appealing to an undisclosed authority, I would love to hear a well-reasoned argument against the idea of it being a supply issue.
Combine this with the backdrop of 40 years of falling interest rates. Do you really think the foreign boogieman is having a larger effect than the simple explanation of restricted supply and falling interest rates?
Prices per sq. foot in Toronto recently surpassed Vancouver. There's no way Toronto has more foreign property investors than Vancouver.
> Like all cities in areas with heavy-handed zoning regulations, abuse of historic preservation clauses, and filibuster-style city council meetings blocking new construction...the issue is one of supply.
> It's the same problem in literally every developed country on earth right now.
The problem with making generalisations is that you're often wrong. The French real estate market has problems, with prices rising in some city cores ( mostly Paris), but it's not nearly as bad as many other places due to a myriad of factor and policies, like decent to good public transit ( which is undergoing massive upgrades) to nearby dense "suburbs", multiple programmes encouraging newbuilt homeownership and buy-to-let (at fixes prices) through lower taxes or cheaper loans. Paris is expensive, but you can get a much cheaper appartement or house within train distance. Of course, for newbuilt waiting lists are at ~2 years due to demand, but there's a lot of supply being built constantly, in Paris and around it - entire neighborhoods or former industrial areas are getting razed to the ground and rebuilt as decently dense (5-6 floor) appartement buildings. And that's just Paris, most other cities are better.
All that while there's very strict zoning, high building standards, lots of protections for tenants and buyers, including rent controls, hard rules around eviction and absolutely crazy preservation rules.
I know people who can't cut the dangerous trees in their yard because their yard is visible ( less than 1km) from the roof of a church which is a national monument, and they need approval from the Architects of France.
I’m not sure that you’ve made the case that they are wrong strongly enough.
Does France have heavy handed zoning and historic preservation policies? Sure.
But you aren’t getting 5-6 story multi family buildings constructed at a face pace in major metro areas. In many places, such construction in prohibited entirely by also how family zoning.
And while France may protect historic monuments like an old church. “Historic preservation” in North America often implies restrictions on building in a single family residential area that was built in the 1920s.
Your post does show, however, that restrictions don’t have to be eased all that much, but unfortunately it’s a lot easier in North America to lay the blame all on foreigner and other greedy people, than regular homeowners who show up to city council and lose it over a multi story senior center from going into their neighborhood.
> But you aren’t getting 5-6 story multi family buildings constructed at a face pace in major metro areas. In many places, such construction in prohibited entirely by also how family zoning.
Of course you are. Tons! They sell like hot bread ( as in within weeks of starting sales all appartements are sold, with 1.5-3 years of waiting for the construction to finish), and cost an arm and a leg in the really fancy parts of the metro area ( the Western suburbs).
I was referring to North America (had a typo in there, should have said “at a France pace”, ie france is building these and NA is not), I get the sense your comment here is in reference to France?
Canadian MLS says 600,000 properties sold each year. Over 5 years that'd be roughly 3,000,000 homes. 1/3rd of that would be 1 million homes sold to foreign investors.
There's only 1 million people globally (including Canadians) with a net worth over $10 million.
That means every single one of them would have bought a Canadian home in the last 5 years.
I mean Canada is nice and all, but does that seem plausible?
Even if 2% of global HNW individuals bought a home in Canada in the last 5 years (and 2% sounds high to me), they'd each have to buy 50 Canadian houses per person to reach that 1,000,000 number.
So 10 houses a year per person of the %2? That still sounds very plausible for high net worth investors, again especially if the purpose is to move/wash/hide cash, which my understanding is, generally is one of those 3 for overseas investments.
If they are washing or hiding, they don't care as much about the profit, so it makes sense they would be buying in larger numbers if they can.
This sounds like trying to measure a stream by sampling a lake.
It’s entirely possible that people with high liquidity were buying and selling multiple properties while people with low liquidity were staying put. That would naturally mean more wealthy people are buying (and selling), and foreign owners are likely much wealthier than the average Canadian home owner.
I'd love to see what the numbers are when you follow the capital and not just 'ownership'. There's a lot of ways around this ban.
I don't think it's a boogieman. But I also don't think it will change much when these cities are primarily 2-story houses.
If this stops some amount of cash offers 20+% over asking by foreign investors who have no intention of living in it - great. There's a hundred factors affecting this real estate crisis, it might need a hundred solutions.
> only about 2% of properties in Toronto and Vancouver are owned by overseas investors. Yes, housing is priced at the margin, but this won't do anything at all to prices over the long term. I'm sure this will be wildly popular politically, because people LOVE the idea that some foreign boogieman is the reason their children can't afford homes anymore.
Overseas investors may own only 2%, but Canada has 23% foreign-born population. That's a lot of demand. Granted this law does nothing to address that, but it plays perfectly into the foreign boogieman you dismiss.
this is textbook xenophobia and you should be ashamed. Implying that the foreign born population in Canada are somehow less canadian or more foreign is not what anyone should be saying.
Yes yes xenophobia - but is it true? Did Canada's past immigration policy contribute to current home prices? And more importantly - will the current immigration policy contribute to future high prices?
If the goal is affordable housing, why is immigration the one policy that must not be adjusted to meet that goal?
Population cannot grow without limit, no matter what "everything" Canadians have to pay for. Sooner or later, we will have to learn to live with a stable population. Many industrialized countries have already done so - Japan, China, South Korea, eastern Europe.. By any sane environmental standard, there is already too many of us*, so sooner would be better.
*Yes, if we changed our lifestyles to reduce consumption, we could fit more people in - but until we do so, we should stop adding to the population.
It's a major component of the supply side of the equation, and one which is controlled by policies. And it's not like you proposed "close borders completely!" or "send people back". There's a limit as it is. How is changing that limit going forward any more xenophobic than blocking foreign investors?
"this is textbook xenophobia and you should be ashamed."
Keep things civil, I dont want HN to evolve into reddit.
car_analogy comment was benign, but honestly as a Canadian living abroad I am different than the other people I live around. I would not call myself X country adjective here (e.g. Swiss). That is not saying I'm not trying my best to integrate.
I don't know a ton about Canadian immigration, but while raw net immigration volume is likely important in pricing a relatively inelastic good like housing, I think the details of who the immigrants are is too often overlooked in this kind of conversation.
In the US our largest immigrant group (Mexicans), and more recently Guatemalans and Salvadorans, are disproportionately the ones building new houses. Without them I have a hard time believing we'd be able to build the volume of houses we do. Does a parallel group exist in Canada? Are immigrants likely to work in construction?
The parent you're responding to is saying that Vancouver has a massive supply issue caused by zoning, and these measures are targeting a relatively small source of demand.
I know, but this 1) is a moratorium across all of Canada and 2) places with better ROI like those with more limited supply are more attractive to foreign investors and will cause the median price to increase to an even greater degree.
It depends on what value you assign to owning instead of renting. No landlord to deal with and being certain you don’t have to move for as long as you want are benefits to owning that are worth a premium over renting.
> No landlord to deal with and being certain you don’t have to move for as long as you want are benefits to owning that are worth a premium over renting.
The premiums you listed have always existed, there's no reason for them to grow now.
What's grown now is that, because home prices are rising, people look at the rising prices and want to take advantage of it. And the primary residence in Canada has infinite tax-free gains - so as long as prices rise, it seems like it makes total sense to pour as much as possible into housing. This is a bubble. Canadians think of housing as the best possible investment because housing prices are going up and its a tax-advantaged vehicle. Once prices start falling, we'll see this leveraged investment unravel quickly
Better Dwelling paints a bleaker picture when you isolate certain relevant categories of homes
For example, in BC (as of 2020), 9% of new condos (built after 2016) were owned by foreign interests, which is down from 2019, but probably holds steady for a number of years.
Pales in comparison to amateur domestic investors (25% in Ontario 2021) [0], "mom and pop" landlords that the federal government have chosen to protect.
This is mostly for show, it won't do much at all. Nimbyism is Canada's only true national ideology and is strongly supported by all major parties across all levels.
Here the feds want to be seen as doing something, but have little actual power so this is a good way to say the did something. Ontario is ruled by a conservative government that's up for reelection this summer. There was a big housing affordability task force that recommended building more houses (shocking!). The government will not be implementing any of its substantial recommendations, but will fiddle around and say they're "cutting red tape". Municipal governments like Toronto are obsessed with controlling development, from suburban conservative councillors trying to outlaw rooming houses, to downtown progressives decrying gentrification. Any correction will come despite all these efforts.
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[ 0.24 ms ] story [ 333 ms ] thread"imposing a two-year ban on foreign capital coming into Canada to buy residential real estate".
I suppose the political alternative would be questioning why the real estate market was managed in such a way to restrict supply, or disincentivize renting some of these foreign owned properties. Always easier politically to point and blame the external actors, the other tribe.
If this latest measure proves ineffective and taking responsibility for domestic mismanagement is off the table, what comes next? Nationalization or a bail-in of foreign held properties seems extreme, but how far can this go?
The other possibility is that they are building more homes, and want them to be purchased by people who will live in them.
Note: not a Canada expert and tbh the “they” in question is a bit undefined here
Why wouldn't that wealthy person rent the property out and get better ROI? Keeping it empty does not make sense to me.
I mean, a place where your rental profit is 3k/month, might sell for 100k more than you bought it for, to the next wealthy person who thinks they can make another 100k profit by holding and selling after an year.
Is that something you want to change with governmental policy?
If the main goal is to park the cash somewhere outside the person's country, they presumably have "enough", so they don't want to deal with all this.
I believe the people are rich enough that the logistic overhead of even having a property manager rent it out isn’t worth it to them. Better to keep it in pristine condition and flip it however many years down the road.
I live in Barcelona, and the rental market is crazy. Technically I should be allowed to sign a contract for 5 years, but because of the rights that kick in after 12 months, there's a ton of landlords that only want to offer 11 month contracts.
Same situation in India.
The rental yield is low, taxes are high, compliance is time consuming, and there is lack of legal framework in cases of disputes.
A court case will take a decade to resolve if the tenant claims the property.
The only solution I can see is government provide incentives and security against tenant for landlords or government gets into business of renting by building houses.
No need to ban those 'evil' foreigners, just tax them so they can pay for what the locals want.
I suspect the real problem is low supply high demand + domestic speculation, which is why none of the blame the foreigner solutions work
And if prices were going up enough, it'd be worth it.
Also the federal government doesn't have a ton of jurisdiction into increasing supply, that's largely a provincial concern.
We have single family homes in ton of places where there should be low rises but zoning doesn't allow for it.
Indeed, the solution would be to take away zoning power from the city into provincial or even federal hands and let housing be more dense where the taxpayers already paid for rapid transit. Look: https://en.wikipedia.org/wiki/Edmonds_station_(SkyTrain) this is not even a particularly busy station and it has 4M passengers and these two https://en.wikipedia.org/wiki/Rupert_station https://en.wikipedia.org/wiki/Renfrew_station together has barely more than half of that.
We need them to be orange in a block or two radius around all Canada Line and SkyTrain stops. There's a smattering of that but not much.
There are plenty of markets in Canada where the price of homes have been on the decline for the last decade, namely where agriculture is nowhere to be found, but for someone reason people don't want to live in those places.
The fact that there is so much development and change going on, and that it's still not enough to lower rental vacancy rates (or prices) is something that I think contributes to people feeling like maybe adding supply doesn't help and there's other problems.
https://apnews.com/article/business-chrystia-freeland-justin...
If home prices haven’t fallen during pandemic, then the reason why prices are high is not because of foreigners.
The government is trying to point to a scapegoat rather than trying to get to the root cause.
Trouble is that restricting foreign buyers is meaningless unless you also reign in corporate 'investment', as endless shell conpanies obscure the end benefactor
What you have to do is reign in buying houses as an investment by people who have no intention of ever living in them.
Don’t get me wrong. Cars have their in place in society but their current role is overstated and NA city design shows it (massive parking lots, expensive housing).
London has this problem more than anywhere. Blocks full of purchased and empty while locals can't get a sniff.
What we need is foreign ownership taxes / bans combined with heavy taxes on ownership of multiple single-family dwellings and townhouses.
The ban won't do much, obviously, but the cause is the foreign investments. 100%.
For years now homeowners have used HELOCs (Home Equity Line of Credit), to effectively 100% finance an additional home purchase by using the HELOC for the downpayment, and a mortgage for the rest.
This puts a lot of people in (very self-inflicted) financially precarious situations where they are counting on interest remaining low and the value of their investments going up in order to stay ahead of the payments.
Regardless of how we got here, due to this situation no government will screw all those people over just to "fix" things for those who haven't been able to get into that market yet.
It's a lose-lose.. Leave things the way they are, and you continue to price out an entire generation, which is a huge problem. Make a large corrective change to address this and you potentially force a huge amount of existing owners to sell investments at a loss and face financial distress, another huge problem.
Some folks say "too bad for them for getting so leveraged" but all they did was follow the advice given to them by the market, and follow the rules that our government put in place.
Anyways, it's a complicated problem. Foreign ownership certainly contributes to the problem but it's not the major factor. This is 100% a "for show" measure.
If banks actually hated it, they would simply not write the loan. Why do you think they hate it?
I say "banks hate this" as unsubtle shorthand here. Obviously they don't hate it enough to refuse people additional mortgages (it's all secured by tangible assets at the end of the day) but they certainly aren't as happy about it as if people had a 20% downpayment in cash rather than pulling it from a line of credit.
For who? Banks don’t hold mortgages on their books, they sell them to investors. I don’t think you understand how modern finance works.
I am not a financial expert, but I have been told by professionals, and read in credible publications, that financing entities are not thrilled about the idea that people can effectively 100% finance additional home purchases using HELOCs, rather than having a cash downpayment.
That's the point I was making. My apologies for drawing an incorrect conclusion on the unrelated details.
This puts the "bank" (read: bank and the investors the bank sold the loans to) in a precarious position, as a slight downturn in the market could result in a large percentage of loans defaulting.
Banks don’t care, they just sell the loan. If they cared, they wouldn’t write the loan! Cmon now.
My fault, I really should have phrased that differently.
The market doesn't give advice, it's risk and return. Don't take more risk than you can handle is investing 101. In any case, if the market is unsustainable (non-productive assets appreciating several times inflation is indeed unsustainable), these people are going to get screwed regardless. Either completely later, or almost completely now.
Maybe in the future, after the smoke settles, governments will be more wary of moral hazard. Probably not, but one can hope.
It was shorthand for "everyone else is doing it and having success, so lots of people jumped into the same boat to also make money"..
Advice was the wrong word, maybe "signal" or "momentum" would have been a better shorthand.
But regardless, not sure why travel restrictions would matter. You don't need to see a house to buy it.
If any foreign buying stat looked single digit it was only because the metric was so broad so as to include areas where there was zero foreign buying interest.
The week the BC Liberals brought in the foreign buyer tax they had data in hand that showed foreign buying in Richmond and Burnaby was (going from memory here) between 15-20% of sales that period. Worth noting that at the time those areas were building lots of new builds so possible that the trend the government was concerned about was new build condo purchases being dominated by foreign capital. That's my speculation only. CoV proper I think was around 11%.
Globe and Mail articles on this issue from around 2016 call out some of the data and there are some startling numbers that make it clear why the government acted. Perhaps its available on some government website too I dunno.
From what I've seen, some neighborhoods are high, but it's at the margin. Canadians snorfing up massive amounts of debt in order to acquire more property is a bigger driver.
In this case, you could just tax foreigners for owning property. Or you could tax non-residents for owning property.
A land value tax would be a good idea in general. But if it's politically necessary to restrict that to people from far away, that's still better than a ban.
Taxes give you a behaviour change and revenue. If the behaviour doesn't change, you can jack them up to get more revenue.
- It will make it impossible for people without permanent residency to buy property. - It will prevent people from owning multiple homes in the country.
You could also define a minimum number of days a year where they had to prove that they occupied the property, maybe at least a quarter of a year.
It's actually a moderately complicated thing to prove, even though it seems it should be simple.
https://news.ycombinator.com/item?id=30945444
If you think foreign investor cause harm, just estimate how much harm it is, and tax them accordingly. Why would you ban them?
Taxing is almost always more economically efficient than banning.
You can even pay out (part of) the tax take to the people you think are harmed.
(In general, a land value tax for everyone would be a good idea. But if political reasons dictate that only foreigners should be taxed, so be it. Still better than a ban.)
Even if it is not the best solution, is there any huge downside to that ban?
You're gonna penalize the local market as well.
Also if a company owns a house then make it pay the maximum penalty rate when it's empty. Subsidiary problem solved.
Use the tax you collect to finance local goods and services (and to reduce other local taxes).
So local pay the tax and get something in return. Non-residents pay the same tax, but don't get the local goods and services; just because they aren't there. And all without any complicated rules.
https://bc.ctvnews.ca/11-000-condos-added-to-metro-vancouver...
There's only so much room in the center of the capital, and making more costs a titanic amount of effort. Even that runs out eventually, as you can only build so high.
Otherwise, why would we be having a problem? Move to Serbia and buy an apartment for $40K.
* Speaking the language -- in some places they don't speak much English, and certainly don't do official paperwork in it.
* Local laws
* Safety
* How much stuff you need is going to be nearby
* Internet access
* Local culture
* Employment
* Friends and family
Like, I don't know much about Serbia (just looked up where housing is cheap), but from what I hear I could get a pretty good deal if I moved to Russia -- they're desperate for tech workers and offering some very good perks regarding mortgages and so on. But on the other hand, is living in Russia that good of a deal right now? I don't think so.
They've got a bad government, slow and very restricted internet access, a not terribly pleasant society overall in my impression, and the economy is circling the drain due to all the sanctions.
I'm on 1Gbps fiber, and can get 10G/10G fiber for cheap at my home right now, and just finished with the preparations.
Until we develop Star Trek teleportation I cannot replace my apartment with a cheaper one 1000km away.
That's why hoarding real estate is exploitation of people's basic needs.
I would advise against specifically fining empty homes, because then you have to define what an empty home is; and that will have lots of weird grey areas.
That being said: fining/taxing is still better than banning.
How much is this a problem?
Further, this does not (IIRC) apply to folks to have permanent residence status or folks here on things like student visas.
So how many never-set-foot-in-Canada people are buying properties?
Plenty of Canadian-born people rent.
We know it was a significant issue because the government actually shared the data, and it showed some alarming trends.
What is remarkable here in contrast is that the Federal government hasn't shared any data at all. (Ironically when they were elected in 2015 they promised "evidence based decision making" ..haha)
And honest question: why do we want foreign investors buying homes anyway? I understand buying commercial locations, but not residences.
Taxes also provide revenue.
And they allow people to make their own choices.
If you think that having a foreign investor own a house causes Canadians to feel a collective 1 million CAD of pain per year, then it's only fair to give the foreign investor the chance to pay off the Canadian pain.
(Also gray areas around bans are annoying: you have to draw the line of eg who qualifies as a foreigner and what qualifies as owning somewhere. And there's bound to be some weird corner cases and loopholes that people with expensive lawyers can work around.
The reward for finding the loopholes is immense, because there's a discontinuity in the law.
If you have a tax, you have a finer grained instrument. So you can eg charge people in proportion to how much time they spent out of Canada. Instead of going 51% out: you are banned to 49%: everything is fine, the tax can vary gradually.)
Financial investors and money launderers look at homes as illiquid, stable assets. They expect that they can extract their millions with a few week’s time, perhaps with gains from continued inflation. If they lose a significant portion of that value over the duration they hold the asset, it stops making sense.
A punitive tax like this should be pegged to some other “safe” asset. Perhaps a basket of national bonds from the G20. Ensure that taking residential inventory off the market produces a substantially worse return than those other options.
If you don’t want to kill domestic land lords, make it trivial for a citizen to apply for a waiver. Just know that the investor types will be motivated to subvert this system. Strongly recommend you have real jail time penalties for doing so. Financial folks hate real prison.
Alternatively, the tax could be targeted at negating profit from value increase, so that you pay higher tax on profit from sale of property (possibly with a deduction you can apply when buying another one within some reasonable timeframe, so that normal homeowners aren't affected).
Also don't tax transactions: you don't mind if people are buying and selling property. What you mind is foreigners (or others) _holding_ property. So tax that.
Transaction taxes are economically inefficient, because they impede the re-shuffling of assets to the best use.
Look into 'land value tax' for more detail.
First, as you mention, taxing clamps down on demand.
Second, taxes bring revenue.
You are worried that the first effect won't kick in. But that's not a problem at all: just keep jacking up taxes either until it does kick in, or you can afford to make everyone in Canada a billionaire from the second effect.
(Incidentally, this is very similar to worries that a central bank won't be able to create inflation.
That also is a good problem to have: keep purchasing assets with newly printed money until you either have the desired inflation, or you managed to buy the rest of the world for the cost of some ink and paper.)
Every time I talk about taxing the rich, I'm stormed by people calling me economically illitterate and telling me it's impossible as the rich will always find a loophole.
So if you think they can find loopholes on the ban, why couldn't they find loopholes on new taxes? They do already and very effectively.
Just use the tax take to finance local goods and service and to lower other local taxes.
Btw, I would _not_ charge a transaction tax. Charge them every year for holding the property. (Eg charge whoever holds the property on New Year, the market will do the rest.)
That way you don't impede transactions.
And it's easy to implement: tax houses not owner-occupied very heavily.
The data is public as well, foreign investors aren't the problem. To say you are doing this would not only be punitively not allowed. So you're literally telegraphing that you intend to do nothing. Or for that matter try to make things worse.
Do these agreements say that foreigners have a right to buy houses in Canada?
For sure.
https://www.international.gc.ca/trade-commerce/trade-agreeme...
CPTPP ensures that investors from the Asia-Pacific receive fair and non-discriminatory treatment. This means they must receive the same level of treatment as Canadian investors and any third-country investor in similar situations.
A corporation can be created for the purchase of this property, with a Canadian controlling, and being the director. This will literally do nothing other than add about $300 to the cost of an existing transaction. Shareholders can pre-execute a sale of shares at the existing value - to be executed later. This is completely legal.
Canada would have to reform the various types of corporate entities. That's simply not going to happen.
But yes, this does look like a loophole through which one could easily drive a building...
No, the Canadian people are stupid, as are people elsewhere.
The measures proposed by the Canadian government are likely just political posturing and indented to "pull the wool over the eyes" of Canadian voters because the housing bubble/crisis has reached epic proportions and everyone is talking about it.
https://www.thebeaverton.com/2022/04/canada-to-ban-foreign-h...
Note that a corporation is not consequence free. An owner occupied home pays no tax on capital gains. A corporation owned one is double taxed.
Are the corporations buying for capital gain or for rental income?
The problem arises if ppl park money in the real estate and the units are empty: - This is often "luxury" housing which prevents a more regular buyer/renter-friendly housing units to be built.
Another problem is that some units are converted to airbnbs, and they start to compete on the hotel/business/vacation short-term rental market instead of being rent out for long term for people who live/work in the area.
I'm based in the EU, and this is what I've seen in some of the cities/neighborhoods here. I know very little about Canada's real estate market.
In Poland another phenomenon (not sure how widespread outside of PL) is that ppl buy large-ish apartments and split them into multiple rooms or studios and rent them out to students or ppl early in their career. This inflates prices (as the capital that would have been invested in the stock market goes to housing), but otherwise the number of units increases, so probably less of an issue in the grand scheme of things.
this statement only matters for the current conversation if taxes raised through this mechanism helped maintain property price levels where the taxes are being raised.
they tried doing this with wind turbines and it was shelved the next day because nimby’s didn’t want wind turbines.
Couldn't that be addressed by regulating based on the beneficiary owners, rather than whatever legal entity is the technical owner, and having onerous penalties (e.g. forfeiture) if the beneficiary owner is misreported or obscured?
As a casual watcher of Yes, (Prime) Minister I'm sure they will take measures to get some votes but not solve the problem. The sweet spot is the point where you can gather most vote with a measure that causes as little change to the existing problem as possible.
I feel a strong tax on houses you don't personally live in (because you rent them or because you're a company) could be efficient, but I'd love to hear other people's take on the subject.
If property is expensive, it means there's a demand for it. The price is a good signal that the area needs more properties built. It's only the gov't (local gov't perhaps, or NIMBYs) that are stopping it from happening.
Raising taxes isn't going to fix the problem. It only forces existing investors who are on the margins to get pushed out.
Because they are a fundamental human need, and in limited supply. Good land is fundamentally limited. You can't build more of it.
shelter is a fundamental need, not the desire to own an asset. You do not need to purchase, as renting is much cheaper (esp. at current asset prices).
And while you cannot create more land (tho tell the dutch that!), you can build more dense. And in an area of growing population, this might be a good solution, as demonstrated in many other cities. However, people who would prefer a single family home with a backyard must be prepared to pay a premium for this privilege.
And my proposal of more investment will indeed help alleviate the lack of shelter by incentivizing more to be built! Taking away investment money for it will only mean a different group losing out vs the existing group. Policies shouldn't decide winners and losers - policies should be made win-win.
All the places I’ve lived with growing populations recently have taught me they will probably do the opposite.
They could also bring in additional property transfer taxes for reach home, taxing people more for each additional property they buy. Singapore does this.
Otherwise hike the tax on real estate while reducing at the same time taxes on local residents.
It's a problem that needs to be solved on the supply side. Trying to solve it on the demand side is like trying to damn a river with a sieve.
Politics, particularly here in the west, is beginning to feel like exclusively this to me.
https://pm.gc.ca/en/news/news-releases/2022/04/13/helping-yo...
I'm interested to see how this plays out. It seems pretty heavy handed. Zoning denser housing or placing limited restrictions on square footage may proved smarter in the long term. That said, two years is pretty short term in this context.
Almost every country with these problems has similar symptoms and the problem could've been seen coming from decades away. Tackling these things requires far, far more input from governing bodies. Input they aren't willing to give.
Very few voters actually care to solve the issue. Home owners still far outweigh those who don't. Quite a few of the older generation bank on their property/properties to carry them through retirement. No one wants to see their house go under, even if they can realistically endure it without severe consequences. There's no incentive to increase interest rates, but banks obviously don't want to carry more risks, so individuals aren't getting the same mortgage-to-house price ratio as before.
"Figure it out" mentality. Even if there is a national or even global trend, responsibility to solve the issue is pushed onto the individual. Or worse, global mentality shifts to accept what is going on. "Yeah buying was normal back in the day, now you rent. Get over it."
Grandfathering and "empathy for the fortunate". Yes, I get it, you don't want your lucky uncle who worked a bad job for decades to lose his retirement. You don't want Mr. John in his McMansion on the other side of the road to lose his fortune. Almost no one wants to be the bad guy. Yet special ruling to keep the "haves" in their position continue to be placed at cost of the "have nots". No one wants to hurt anyone. As a result, the solution often seem to be continuing the same fruitless endeavor which changes nothing for the "have nots".
As mentioned before, population has yet to peak. Governments are still incentivizing people to come in or reproduce above replacement rate, despite it becoming evident we're just not capable of handling them. In theory we can handle way higher populations. In practice, there's no incentive to do so without severely punishing the working class further.
We're slowly normalizing a cyberpunk dystopia and most people seem okay with it. "At least you have iphones" is going to define gen Z and gen alpha at this point.
This is a symptom of neoliberal ideology - the acceptance of any market outcome, no matter how negative, as "natural" and to be accepted or at least left unchanged. That's the predominant narrative, but I think that could change. The reason I have some hope for a social-democratic turnaround is that the US has cultural hegemony, what happens there is broadcasted across the world through American media and other cultural exports. Currently, younger generations are engaged in a revival of left politics; this will almost definitely influence American politics in the coming years, and I'm hoping us Europeans (I'm from the UK) see some downwind benefit from that. There's already some smatterings of progressive politics in the UK, for instance - probably on a level comparable to 2012-2016 in the US. We even had our own Bernie in the form of Corbyn, and our far right resurgence is running low on steam thankfully.
At some point the market decides this, if inflation persists. BND (NASDAQ) is already down over 9% YTD and that's supposed to be the safe half of split stock/bond investing.
Despite how some people seem to view the Federal Reserve (and whatever the central bank of Canada is) neither country is a full on centrally planned economy, at least not yet.
This leads to people who rabidly defend the systems that increase their property value, and these people also tend to be the local voting majority, so they can shoot down anything that they don't like.
The solution is declaring emergency powers to use eminent domain to seize unused property and build medium to high density housing on it. Yeah we'll have a few 6-fig account managers handcuffing themselves to bulldozers, but eventually it will get through.
Basically the government is turned into the sole buyer who can also ignore zoning and resident complaints.
That said, it's nowhere near the sole contributor. Quite a few countries have very low immigrant numbers along with low birthrates and still face soaring house prices. Rampant individualism doesn't help, either.
Perhaps, but Canada has no ability to enforce that. That would fall under the purview of the provinces, who have likely passed that down to the municipalities.
Nothing will happen. All it accomplishes is reducing competition for local investors (which is probably why this is the solution they've chosen--local investors vote, contribute to campaigns, and make up something like 2/3 of our politicians). We have more than enough local investors with enough capital and assets to sustain the high prices and continue driving absurd growth.
They've tried similar (but less extreme) solutions in places like Vancouver. Huge taxes on foreign purchasers. Property price growth slowed a couple percent... for about 6 months, by which point it was back to doing what it was before even as the tax was expanded. The only thing driving the slowdown was probably uncertainty.
I wonder if it’s possible to construct a law that would limit corporate ability to acquire these assets while making it possible for families to do so.
Unfortunately, even if there is, politicians at least in DC seem to have zero motivation to solve political problems unless they belong to megacorps or the 0.01% income class.
Nah, I was looking for a simple, reasonable bound was all.
1 house - tax breaks
2 houses - same taxes as currently for 2 houses
3+ houses - incrementally more expensive with each extra house
Also there's a really nice law in Spain, born for the wrong reasons, that makes you pay more taxes if the house is empty vs if someone lives there.
To decrease the return on holding property indefinitely, which prevents renters from building equity to the benefit of small-time REIT holders. The outcome of this is an increase in home ownership which has a host of benefits to society. It also helps economic benefits to stay in the local area. Basically, Georgism tax policy - https://en.wikipedia.org/wiki/Georgism.
What benefits do you see REITs provide to a community, beyond increasing your personal wealth?
Also, a hard cap of, say, 10 homes without increase would still allow REITs to exist depending on implementation.
What is _not_ desirable is a large financial firm like Blackrock or JPMC siphoning off the liquidity of the housing market.
>Basically, Georgism tax policy - https://en.wikipedia.org/wiki/Georgism.
Yes, I largely agree with Georgism, but I don't think incentivizing rich people to buy the largest home possible is within the spirit of Georgism. You'd also run into the problem of people pretending their apartment complex is really just a large mansion. They'd likely spend money on renovations that make the units less desirable to make it classify as a single home.
>What benefits do you see REITs provide to a community, beyond increasing your personal wealth?
What benefit does my landlord provide that a REIT doesn't? REITs allow me to be invested in real estate without exposing me to too much risk associated with a single location.
>Also, a hard cap of, say, 10 homes without increase would still allow REITs to exist depending on implementation.
No REIT can exist with 10 homes. That's way too much money proportionally spent on administrating it.
Business and investment models can adjust; management companies would fill the investment gap for REITs. So rather than direct ownership, shareholders can instead invest in publicly traded property management firms -- arguably what a REIT should do anyhow.
With fewer units, landlords have more incentive to keep properties in working order to keep up liquidity should they choose to sell. This helps offset the tax incentive to let properties go to ruin.
I don't follow your assertion that increasing taxes on larger ownerships would result in rich people buying the biggest property they could possibly afford. People do that anyway?
Residential REITs and other institutional investors finance the construction of new apartment complexes. I don't think a landlord is that much more incentivized to take care of their property any more than a property manager who gets hired by the REIT or institution. Even if small landlords are better than REITs, I don't think that people who own 2-10 homes are necessarily any more productive landowners than institutional investors. There are plenty of people in the former category besides landlords: for example, someone buys a seasonal home that does nothing for most of the year or inherited property and are just letting it sit vacant.
>I don't follow your assertion that increasing taxes on larger ownerships would result in rich people buying the biggest property they could possibly afford. People do that anyway?
The point is to disincentivize this behavior? Same reason why you would increase property taxes/LVT in the first place. I'm not saying that institutional investing in property is great. I'm saying that there are worse behaviors that should also be punished. This is a particularly big problem in vacation destinations where the housing supply gets swallowed by non-residents.
Why should society be subsidizing home ownership more than they already do?
The real estate market already discriminates against people who cannot afford a deposit (an increasing proportion of people, since house prices are increasing so rapidly), and the design of North American cities encourages urban spawl which is unsustainable with current property tax rates. [1]
> and I think to promote everyone's owning a house
Why? Half of German households rent [2] and no one is wringing their hands about how people should be owning their home instead of renting.
As someone who has lived in Europe and North America, there seems to be a borderline obsession with owning a house in anglophone countries, and I don't understand why. If the rental market is sane (e.g. rent is approximately equivalent to a mortgage) then it's up to the individual if they want to purchase a home (e.g. to renovate how they see fit) or is comfortable just renting.
[1] https://www.youtube.com/watch?v=7Nw6qyyrTeI
[2] https://www.weforum.org/agenda/2021/04/global-percentage-ren...
Amusingly enough we have rent inversions in many markets right now, rental costs are below mortgage carrying costs.
Rent is gone to the owner, in exchange for one more month/two weeks/year/whatever frequency the payment is paid to the owner.
The opportunity cost between a mortgage and rent is not dollar for dollar (euro for euro, or whatever).
Because it's good for society if a large % of the population owns a home. I'm not advocating for more urban sprawl.
> "no one is wringing their hands about how people should be owning their home instead of renting"
What do you mean? People are desperate in e.g. Berlin, that they don't come here to HN and write in German about it doesn't mean that it's all rosy.
> "there seems to be a borderline obsession with owning a house in anglophone countries"
I'm a Spaniard living in Japan, not American, so not sure what you mean.
I'm not sure how it would qualitatively affect the builder's market.
The reality is that there is no market for renters that could actually afford these supposed monumental price hikes. So instead landlords would simply be forced to sell their houses, increasing the market supply and decreasing the cost of houses.
Like, what value are those corporations bringing to people, to the market, and to a country by hoarding houses other than controlling the renting market for some areas?
How is that a good thing?
I’m not convinced it’s a problem.
Again, all roads point back to supply. Build enough homes and the issue is moot.
One of the problems is people can move quite quickly from one side of a country to another, it's a matter of weeks. But from empty lot to new house is a matter of months at best, years at worst.
Yes, but at the same time it should not be possible for them to pass those costs on to people renting the house; rents should be fixed, or based on things like floor space and amenities.
But personally I think everyone should have a way in to the housing market. Renting is throwing away money; it goes into someone else's pocket and it's gone. When you buy a house you pay off a mortgage on the one hand, and (in today's economy) your property appreciates in value. Combine that with the issue that over here, a mortgage is cheaper than rent, and you can see how it's a huge issue.
I've spent something like €50.000 in rent before I finally bought a house; part of that was because I didn't want any longer term commitments, part was because I couldn't afford a house because even then the price of housing was going up sharply already. That's a lot of money that I'll never see again.
You also have to replace anything that breaks and are responsible for all repairs on the property. Many of these replacements and repairs don’t increase the value of the home.
At best buying a home is a forced investment plan. It forces you to take money above and beyond the cost of rent and put it into a savings vehicle that generally generates good returns. But if you’re renting you could just as easily put that excess money into the stock market if you have the discipline to not spend it.
My mortgage, insurance, taxes, and savings towards repairs is now a good bit less than the current rent at my last apartment just a couple of miles from my house. But my house has over twice the square footage, a private garage, a private yard, etc.
Holy shit this is insane. Do you actually believe renting has no benefits?
When you purchase a property you’re on the hook for that mortgage payment for the next 30 years. Buyers absorb an enormous amount of risk. Maintenance is time consuming and expensive.
Renters can leave whenever they like and have no long term financial ties to the state of the property.
I guess everyone needs someone to fight against huh?
You position renting as easy and buying as a burden and an "enormous risk" so I assume you will be renting apartments and leasing cars for the rest of your life surely?
> I assume you will be renting apartments and leasing cars for the rest of your life surely?
No. I will consider my current financial and life circumstances like a rational human being. Do you understand how the world works?
In short, they’re offering homes to rent. You can live in the home without buying the home. That’s the value. It’s kinda huge.
And to some extent it becomes class warfare to deny this to renters. These investors are betting big on the houses’ value going up, and expect them to go up a fair bit. This is essentially a bet that the housing market will fail to add new supply, and that anyone who does not own a home yet will suffer greatly from increased rent. And if we’re fighting over is rules on specifically who can buy, instead of doing things to actually make new homes, it seems a fairly sure bet to me.
Renting something bought by an individual (or a very small corporation) was possible and remains possible. But if there was enough of this happening, the corporations who rent might have serious difficulty finding a profit.
It is worth noting that, in a major shift, major home builders expect 50% of their business will soon be in built-to-rent neighborhoods, up from something like 6% today. This is an illustration of how prices are a signal used across the economy to determine what gets done. (Taylor Morrison Home's numbers, from this recent article: https://www.wsj.com/articles/built-to-rent-suburbs-are-poise... )
I refer to the US because it is closer to me. I understand that Canada experiences similar trends.
"People who rent homes" aren't some special type of consumer that isn't interested in buying a home. While there are situations where renting is preferable even if it's possible to buy, many renters only rent because it's not possible for them to buy a home. Any potential benefits to renting are generally outweighed by the fact that you're not building any equity, and have limited control over the place they live.
Massive corporate landlords aren't providing a service to meet a demand. They're actively creating demand by driving up the cost of home ownership, and limiting the amount of properties available to buy. A potential homeowner has no chance of competing with a massive corporation when buying a home.
Obviously there's a huge amount of factors that got us here. Housing is hugely complicated, and no single group is responsible. But corporate landlords are one of the factors making the North American housing market worse, and are one of the things we need to address if we're ever going to decrease the cost of living in this country.
This accusation would make a lot of sense if the corporations in question are either (a) a monopoly or (b) an illegal trust, colluding with each other, and through (a) or (b) the corporations enjoyed sufficient concentration of the housing sector that they had pricing power — the ability to restrict the supply and raise prices to make money.
This is not the case. The housing market is fairly competitive, and many different buyers, sellers, homeowners, and home-builders participate and compete with each other. Prices are rising for other reasons: a reduced number of homebuilders, in the aftermath of the 2008 crash; various political land-use, zoning, environmental, and similar homebuilding restrictions; a reduction in the overall labor pool, which impacts the labor in new home construction; labor and other supply chain impacts on the availability of components that are used in new home construction; and a significant pandemic-induced shift in real estate usage patterns (almost everyone wants more space now).
But you might have pinpointed a couple of problems, so either:
- Those corporations are driving the costs of buying homes so high that regular people are being pushed out, because, you know... they are playing with funny money;
- People's income is so crushed, or they are so deprived of access to free/cheap money - like the corporations - that they aren't allowed to play this game.
Both scenarios make it look like the game is rigged.
Why can't people rent to other people like it was done in the past? Why aren't regular people being allowed to play this game? Or is it such a bad game to play that no one wants to play it, except those corporations?
Even if it was a bad game to play, they're still taking houses away from those who want to buy and not rent. So they're ruining two markets: the rent and the buyers market.
Again, I see no add value that couldn't be created by any other player other than big corp.
Else you'll be here in 20 years saying the same thing, with a minor diference: "these corporations are bringing SEVEN FIGURE housing access to FIVE FIGURE renters"
> they are playing with funny money
YES YES YES YES! Negative real interest rates are pretty damn funny! We should have ended them long ago. We are now beginning to pay the price. You have identified a key way to help end the trends that you do not want to see.
> People's income is so crushed
They are being crushed by inflation! Another blow against ultra low interest rates! RATE HIKE! RATE HIKE! RATE HIKE!
> Why can't people rent to other people like it was done in the past? Why aren't regular people being allowed to play this game?
You're totally allowed!! Go buy a house, and rent out the house. You will probably need money for a down payment, but you can still get a mortgage at negative real interest rates — and if it is in the US and it is a conforming mortgage (<$647200) you will benefit from an interest rate subsidy from the quasi-public mortgage-buying entities, Fannie Mae and Freddie Mac. It might be a great investment! I am buying a house (for myself) and have locked a rate; with current inflation numbers I can expect $2000/month in return simply from inflation eating away at my debt!
The main contraindication here is that you will experience risk, and you may be intolerant to that risk. Your investment could end up underwater, and it's hard to diversify because it's such a big asset relative to your income. This may explain why corporations are better able to do it these days.
> Even if it was a bad game to play, they're still taking houses away from those who want to buy and not rent.
It's true! Existing home-owners are not required to sell to another aspiring home-owner, and are free to sell their property as they see fit. This means that aspiring home-owners must compete with renters (and the people who renters pay, corporations). The renters (and the corporations they pay) may be willing to offer more! The existing home-owner benefits, while the aspiring home-owner does not!
There are lots of ways to use the law to strongarm people into dealing with a politically favored class, at the expense of a politically disfavored class! Some of them are discussed in these threads! I'm not a fan, myself, and believe it will harm the nation and its economy by distorting the economy into doing different things that make less sense and leave the nation overall poorer as a consequence with less money to spend on things that are more meaningful, but if you would benefit maybe you would be a fan!
...except that their greediness of wanting to own everything is precisely what made houses explode in price in first place.
If you want to fix housing prices (or if you just want to screw over these corporations for funsies, which is fine) then you want to increase the supply of homes: that is, you want homebuilders to build, build, build, build, build, build, build — and where necessary, you want to drive the political reforms that make this possible. All the evilcorps™ are betting that you won't — and I'd bet that too, given where you're focusing your attention and efforts.
We have a history of similar measures to draw from. In the 1950s lots of people believed that banning single-room occupancy buildings was the proper solution to a lot of problems - they were small! they were inhumane! they are associated with crime! New York City lost about 100,000 units, mostly converted into two-bedroom apartments, occupied by good people™ who belonged in families. "Consequently," said activist George McDonald in the wake of this policy, "people sleep on grates outside."
Maybe your laws won't quite achieve this! But to the extent they enjoy success in influencing housing prices, they will be harming those who cannot afford homes.
Try to dodge some IRS stuff and you'll see how efficient the government is.
(I agree that corporations hoarding housing is a problem...but they do bring value in some specific areas, even if net value is negative.)
The problem seems to boil down to access to money and the destruction it causes, simply because we play by different sets of rules.
Housing used to be an asset class that was accessible to people, apparently it's a matter of time before it'll be yet another asset limited to a few bunch. They simply have to drive the prices up enough, and outbid people, which is whats happening.
So you have to level the playing field by giving everyone the same type of access to cash, or you make hoarding houses more expensive to the point of being unsustainable.
There's also the matter of new developments.
I looked up some property tax docs of a new luxury apartment building (majority of units go for 2M+) in NYC and I was shocked to see something like 90% of the owners had chinese names.
I'm guessing that the majority of these are foreign buyers. I'm also guessing its unlikely that the NYC new development market is being dominated by asian americans?
But it hasn't always been 40% Additional Buyer’s Stamp Duty (ABSD), the government will ramp it up and down to control the private market.
It hasn't seemed to had that big of an impact. A small, 2bed condo on land with a 99-year lease costs S$1.6M ($1.2M USD) outside the central business district.
But if you really wanted to gain control of home prices and development, just adopt Singapore's 99-year lease policy of land. Once the 99 years is up, it goes back to the government you get $0.
Singapore isn't old enough yet to truly see the ramifications (plenty of people are betting they'll get bought out), but the government has said they will stick to it and have stuck to their word in a recent situation where there were 60 year old leases.
https://www.straitstimes.com/singapore/all-191-units-at-geyl...
"All 191 units at Geylang Lorong 3 have been vacated and ownership of the 60-year leasehold land has returned to the State, said the Singapore Land Authority (SLA) on Friday (Jan 1)"
That land will be cleared and then auctioned off for another 99-year lease to private investors who will build new housing. It's a semi-Georgian policy where the Singapore government captures all of the increased land value and then turns around and uses it to subsidize new public housing or other public benefits.
If I could deed my land to the local government a hundred years from now in exchange for 0% property tax, I'd very likely do it (but the government would probably be sad because they need the cash flow now not later).
> The government will also impose higher taxes on people who sell their home within a year.
Nice!
Why build more homes at enormous expense (both financial and environmental), when most countries have way more than enough homes in total?
The problem is two-faced: vacant properties sitting around empty because of money laundering and speculative usage on one side, and on the other side the usage disparity because rural areas have been left behind by modern infrastructure - particularly high speed Internet, mobile phone coverage, public transport and services of everyday living (healthcare, basic shopping).
I don't have the numbers but I find difficult to believe that there's enough properties used for money laundering to move the prices.
> usage disparity because rural areas have been left behind by modern infrastructure
That's the problem. There are empty houses but too old or in places where people don't want to live. So to low the prices more houses need to be built there where people want to stay.
Another solution would be improve the communication channels between cities and rural areas.
In London, up to a third of all properties (depending on the area) are left empty. At that point I don't care if it's money laundering or speculative usage, but London's nickname "Londongrad" more than hints that an awful lot of Russian oligarchs used London real estate to launder stolen money [2].
Personally, I'd be fine to ban all foreign investment into real estate in hot housing markets no matter the country, with the sole exception of primary or secondary residence.
[1] https://www.bigissue.com/news/housing/how-many-empty-homes-a...
[2] https://www.deutschlandfunkkultur.de/england-london-oligarch...
For comparison, England apparently has 24.7 million "dwelling units" so that's about 1% sitting empty for more than six months.
Since the economy is a scam, expecting it to house everybody in a decent and sane way is just utopia, no better than communism.
I heard about Singapore (80%?) and Vienna (65%?, Austria), I am unable to check that or find other places: this information is really tough to get. In my country, it is extremely opaque and _very discret_ (secret?) in the fear of massive abuse from foreigners.
>> working with provinces and territories to develop and implement a Home Buyers’ Bill of Rights and bring forward a national plan to end blind bidding.
Blind bidding is where multiple parties submit a sealed bid on a property. The realtor and seller review these bids behind close doors and then often request subsequent rounds of bids from the bidders *without telling them the current winning bid, or who's bid is winning*. Bidders end up out-bidding themselves.
IMHO blind bidding is an unethical practice that should be outlawed regardless of its impact on housing prices.
Typically the auctioneer draws out bids in $10-20k increments, then knocks it down with a "going once, going twice, going three times..." call.
Just before declaring it sold, the agent normally stops, goes inside to consult with the vendor, and if the price is above their reserve price, goes back outside and says "the house is now on the market".
Now the auction gets serious...
Usually another couple of bidders reveal themselves at this stage. The increments can drop to $1k. If there is a battle between the last two or three bidders, the final price can go up another $50-100k or so. Eventually the final bid is locked in with a final call of "going once, going twice, going three times, to the man in the blue shirt."
The winning bidder goes inside with the estate agent, hands over a cheque for 10% of the purchase price, signs the contract part of the Section 32 statement, and is then committed to pay the balance in 60 or 90 days. Sales almost never fall through. If the buyer cannot get financing etc, the seller keeps their 10% deposit. The seller cannot back out.
I bought my house like this, and sold it again 20 years later the same way.
It's a totally predictable, well regulated, very transparent process. The weekend auction results are all published on Monday morning, both for every house, and the aggregate "clearance rates" for sold versus "passed in".
This is so unlike UK, where each sale has a chain of buyers, all "subject to finance", and no certainty or speed!
In the states, once the purchase agreement is signed, the home goes through inspection at some point before the sale. The inspector finds a hundred little problems with the house, and the buyer can back out of the sale for any little complaint.
But that’s a very well known risk. An agent will have a whole checklist of things to look at before putting a house on the market to minimize that risk. Also, buyers lose at least some money if they back out, there’s a nominal sum put up that you don’t get back if you decide to not buy once the process is started.
Right now, in DC metro, all contingencies are being waived, bids are $100k+ over list on moderately priced homes, and the seller is demanding a 2-month free "rent" back from the buyer.
Both my home purchases have waived inspection. The second waived financing contingencies as well. This isn't uncommon, based on what friends and family have done.
Imagine the same level of stress, but you have to guess what the other buyers are bidding. Do you bid low and hope everybody else does? Bid high, but risk overpaying?
Say an auction closes at 5pm Friday... I bod $500k on Wednesday. Somebody bids $501 Friday 4:50. I bid 502... they 503, right up to the last moment.
And if the site is like some online car auctions, any activity in the last 5 minutes extends the auction by another 5 minutes. So, 504... 505... and on up until somebody walks away.
A home purchase is the largest single thing most people will ever buy. It's going to be emotional, even if the buyer manages to stay calm.
No it's not.
- Ghost bidders and staff posing as buyers on auction day aren't uncommon with smaller outfits.
- They can list the property at a range of say 1-1.2M but the reserve on the property might be 1.5M. They waste everyone's time doing this, and you don't know until auction day - and that's only IF the property meets it.
- They will negotiate with buyers after hammer down, technically the "right to negotiate" goes to the highest bidder - however there's no laws, and I've seen every single agency in Melbourne do this - will go around and gauge what people are willing to go up to. They'll then instruct the vendor to accept/not accept an amount. This is why they have multiple staff on auction day.
Why? There’s no special virtue ascribed to the purchaser v.s. the seller.
Nothing stops the purchasers from standing in front of the property and publicly announcing their bids (outside of game theory). If they’re bidding less than they are willing to pay, then de facto they’re low balling the seller. There’s no gun to their head to purchase a particular house.
It's certainly the case that the agent who knows that a particular bidder is the highest/most attractive offer is working for the seller.
You can have an agent working on behalf of the buyer, but my experience is that’s a minority rather than majority arrangement.
Dual representation can work out ok in some scenarios, but the hyper-inflated and super competitive market we're in right now isn't one of them.
If you tell "your" agent that you'd like to bid $1M but are able to and would pay up to $1.2M because you really love the house, you're giving away a lot of information that I decided I wasn't willing to give up and so kept all Realtors at arms-length.
The study determined that when a house was the property of the estate agent sold in a little more time at a noticeably higher price.
The idea if that your house sells (today) for (say) 100,000 units of value (pounds/dollars/whatever) the estate agent will get (still say) 5% of it, i.e. 5,000 "units" (also today).
If in a few more months time you can sell it for 120,000, the agent will get (a few months later) 1,000 "units" more, but he/she will have spent a lot more time visiting the property with prospective buyers, runnning ads on newspapers, whatever, so the incentive for the agent is to conclude the sale as soon as possible, even if at a (reasonably) lower price.
The proposal to correct the incentves was to have a flat percentage (like the mentioned 5%) until a certain amount and a much higher percentage (like - if I recall correctly 15% or maybe 20%) on the excess.
Of course it depends on the local current market, but estate agents have interest to push house price higher only until the property is an "easy sale", the sheer moment the house stays on the market for some time (this highly depends on the local market, it could be weeks or months) they will start saying something "Hmmm, maybe we valued a little too much, we (that means you) should discount it by 10%", this in the same 100,000 unit house means that you will get 10,000 unit less, while the agent would get 4,500 units instead of 5,000.
The auctioneer is typically a licensed real estate agent. The whole farm will be sold that day, sometimes field by field, sometimes as a whole (sometimes both ways - this is complex to understand: they get bids an all fields separately, then for the whole and the larger total wins). Then they sell the equipment and junk. Bankers are on hand to verify financing... For houses most people wouldn't work this way, but for farms it makes sense.
I have no idea why there are regional differences, but I'm not really surprised they exist.
I'm sure it is multi-faceted, but supply management is a big difference. Notably, diary farmers in some provinces voted to impose a quota price limit in an attempt to make it affordable for new farmers back in the mid-2000s. This means that the amount that quota sells for is the same now as back then, even though the fair market value has at least doubled in the meantime.
This has created a market aberration where the quota is undervalued and to resolve it farmers have started tacking the difference onto the purchase of land. In other words, on paper I pay you $x for quota and $y for land in order to stay compliant, even though in reality I'm actually paying you $2x for quota and $y-x for the land.
This, of course, has driven up the price of farmland to unreasonable heights as people notice what farmland is selling for on record. $40,000 per acre isn't unheard of these days. I bet you in Iowa, despite having a climate that can easily outgrow us in Canada, won't see anything close to that.
As farmland prices have risen (up ~700% since 2007), residential sprawl out into that farmland has become much more expensive. This has increased the pressure on housing in existing urban areas, pushing prices up there. And, thus, the Canadian housing problem that's being discussed in the larger scope here.
For those who don't know, the best farmland in Iowa can go for just over $20k, and as you say can grow more value than anything in Canada. Iowa should be the most valuable cropland in the world - great soil, good climate, great national economy, and relatively flat land. (there are places better in some of the above, but they are lacking in at least one significant way and so the value of their land should be less today.)
When I sold my house, I had three bids, and the highest bidder payed over $30k higher than the second place. It was still over $100k over asking, with no conditions. That's just the reality of things right now, and it's not the sign of a healthy market for something as critical as housing. People are desperate, and it's getting worse.
1) as someone who has been on the ground as well, I’ve lost a few offers because I was worried about over paying. On multiple occasions, after seeing what it sold for we thought “damn, we woulda paid another $25K on top to get it had we known.”
2) Canadian banks has a very conservative “stress test” for securing mortgages. This includes qualifying at much higher rates then is being offered. Therefore it isn’t possible to “stretch yourself beyond any reasonable limits”
If you are putting less than 20% then the stress test is even higher.
I doubt we will see 5-6% interest rates in the next 5 years.
“stretch yourself beyond any reasonable limits” means that you may not be able to pay your mortgage, it doesn't mean the bank won't offer it to you.
The bank will look at how much you earn and how much you owe and say "We can pre-approve you for $X at Y%". They consider that you can pay that rate and they are most likely right.
Now if you do take $X, you have effectively leveraged your entire earnings, which for most people is a pretty bad idea because stuff happens and you can end up with a mortgage you can't pay because turns out you also want a car.
That being said (at least in Canada), your broker won't really let you take the full bank offers, or at least they don't expect you to do it.
For a $5,000 mortgage, that's a $5,000 a month buffer
Federal actual rate 16.5% (24% marginal)
CA State actual rate 6.4% (9.3% marginal)
Medicare rate 1.45%
OSDI rate 6.2 %
CA SDI rate 1.0%
Total:31.55% total before tax deductions and tax shelters
If your mortgage is ~40%, you have ~30% left over.
Per month, this is 4,000 for a mortgage, 3,000 taxes, and 3,000 remainder.
A 4,000/month mortgage covers a 800k loan on $1 million dollar home.
You don't get a lot of house in the bay area for 1 million, So if you are single earning this much, you are looking at condos.
If have two similar earners, you just double everything. E.g. 2 million dollar house with $6,000 per month remaining income.
You haven't factored in property taxes, home insurance, or anything. Putting these numbers into a calculator, your monthly loan payment is going to be closer to $5,400 a month.
You're taking home $6,800 a month.
You're not living on $1,400 a month in the Bay Area.
No bank is giving you this loan.
In a normal Dutch auction style situation you’ll pay $1 more than the second highest bidder, which is a bit more fair.
In a Dutch auction (regular dutch auction. Not reverse.) there is no second bidder. The price starts too high and drops until the first bidder to decide the price is low enough (as it drops) buys.
Please stop gambling on housing as an asset class.
The middle class doesn't do it in France, Germany, or Japan. In those places, housing prices are kept _fair_ through clear, transparent planning and a blend of free market and regulation. What the hell is wrong with US/UK/AUS/NZ that allows insane leverage to middle class house buyers that drives up the price of houses? It's all silly to me. (I'm less familiar with how much CAN allows middle class people to gamble on housing.)
https://en.wikipedia.org/wiki/Vickrey_auction
And I don't see that ghost bids propping it up would be much of a problem, they'd risk winning? You could require registering names, putting a deposit down perhaps, no real need for it to be anonymous even?
When you are making a blind bid, the only information you have is the home itself. The ceiling for your bid is on what you think the house is "worth". You are very conscious about "overpaying" because you have no perspective on what other people are offering.
In open bidding, you are competing against other offers and the ceiling is basically what you can afford to pay.
Can't tell you how many times we lost offers because we didn't want to overpay - when the sold price was revealed we realized we would've paid another $25K on that had we known.
> In open bidding, you are competing against other offers and the ceiling is basically what you can afford to pay.
Well, what someone else can afford (and is willing) to pay. i.e. you never overpay, pretty much by definition.
(I think there probably exist 'open' auction system where the highest bid (not second) is paid, but the main ones don't work like that, and nobody's suggesting that as far as I've seen.)
Above asking is a meaningless number because asking isn’t a reflection of what anyone expects a house to go for. It’s a game price designed to attract as many of the right people as possible to the property.
We take people who know nothing about pricing homes, put them in a high stress time sensitive situation, advised by realtors who are incentivized to close deals quickly and at higher prices, and then expect them to make reasonable bids.
In my opinion real estate assets are likely overpriced and inflexible from what they should be due to the current regulatory situation.
The “money on the table” argument is weak, because the first bid is when people are most rational, it’s only after human psychology takes over that they start bidding higher.
Inability to coordinate due to lack of information allows the seller to maintain full control of the process.
1) 'Foreign Buyers' are price insensitive. In a market without much rational pricing, it's the 'confident signals' that set the price.
i.e. 'Foreign Buyer' comes in and buys for 5% 'above asking' on Street A. What happens then, is all the other houses on that Street set their prices a big higher, and hold. Other buyers see that sale, and it 'validates' the price for everyone else. More sales on that street, set the pace for sales in the area. etc..
Everyone is 'following' the confident bidders.
2) 'Blind Bidding' just favours the seller.
Buyers will only ever bid what they are willing to pay - not more.
It's just a form of auction, that's it. It's not unethical.
3) Low interest rates
4) Way too much migration
There is actually already enough construction. The notion that a city should expand it's services and population at break neck pace to accommodate the world's population is crazy. It's a 20th century 'body count' growth delusion strategy.
Australian living in Canada here - unsure what the tragic results were? It’s helped a number of my friends buy their first home - with a small (~$10k) credit /reduced stamp duties and taxes on the first home owned and lived in (ie not an investment). Negative gearing has been far more impactful in increasing the cost of housing, with people buying multiple homes for investment purposes.
I agree that negative gearing is far more impactful, but I certainly don’t believe my FHB grant helped me enter the market. It just meant I paid that much more to a seller for the same thing.
That's the wonderful part about lending - it's an arms race, where the lender always wins.
And you can't even be mad at them for it because there's no collusion, no intent to manufacture the disaster, no single person responsible for it all, this is just the consequence of economic torture by a hundred thousand cuts. Their hands are clean even though the damage is still done.
It's analogous to a bazar except you must go to this specific bazar and there is a limited number of stalls. You only need a stall for 5 minutes to do your transaction, you don't need the stall itself. We have collectively decided that people have the right to own these stalls. Here is the problem. If you are young and you have to work, you need to go to a stall and do transactions that let you sell your time. However, all the stalls are already taken by older people. They won't let go of their stalls, they want to take them into the grave, because they are scared of not having a stall when they really need it. So instead, they rent out the stall and let you use it for a short amount of time.
Now let's say the interest rate demanded is way too high and you refuse to borrow and fall for the debt trap. What are you going to do? Stay unemployed? Ok, but now you have lots of time to think and organize and a clear group of people that you dislike. This is the perfect growth medium for extremism.
So, we did away with a fixed number of stalls. Instead, we have decided to give everyone a stall. The problem is that those old people are now buying a second, third, hundredth stall. The amount of free stalls remains laughably small, forcing the government to keep increasing the number of stalls exponentially.
When you think about it, those stalls are public property and people who have no business blocking them are wasting everyone else's time. It's like someone is parking in the middle of the road and blocking traffic. Normally you would call the police and they will confirm the traffic violation and then tow the car away and fine the owner.
We don't do this with the stalls. There is no incentive for anyone to get on with their business as quickly as possible, so people grab as many stalls as possible. There is no opportunity cost to them but there is a huge opportunity cost to those who need stalls but can't get them. This is where the exploitation of the have nots by the haves originates. There are enough stalls for everyone but nobody is giving up the extra stalls that they don't need immediately. The wrong/incorrect allocation of stalls toward those who don't need them and away from those who need them is at the root of the problem. In theory, a market would automatically solve this problem. Why doesn't it?
My argument is that we need to introduce a fee on the stalls to punish slowpokes and make sure people keep those stalls free if they don't need them. This means that if people are refusing to rent a stall, the owner of the stall would be left with an asset that is losing them value instead of a tool that can be abused for power.
In short, the problem is that the interest rate must become negative to discourage people from indebting other people against their will when an economy that is no longer growing (for short bursts or maybe even forever) has no need for further debt, debt that can only be paid through inflation.
Further, if a non-human, non-bank entity was listed as the owner of the home there would be an automatic additional federal 2x state property tax fee on the property as well. These tax payments would further not qualify to reduce the taxes owed on your other incomes.
Banks and other such lending agencies would only be subject to the property tax penalty if they did not list the home for sale at fair market value within 60 days of acquiring the deed and they would be required to accept an offer that met the fair market value requirement. (i.e., if they only got bids for $50k under fair market value, then they wouldn't be required to accept those bids).
The monies generated would be used to fund anti-homelessness measures across the country. This would make it unbearably onerous to own more than 2 homes for all but the richest Americans, and it would make it so that people who are using real estate ownership as an income producing machine would lose out on that income.
This decree would be set to roll out over a 4 year period to give the mom and pop airbnbers and other non-financially entrenched in the real estate market companies time to liquidate their equity in the housing market. Those companies that are fully dependent on rental income from single-family homes would have no motivation to purchase the newer homes on the market as each additional home would add a federal 1X multiplier to their tax burden, housing would decrease in value, more people would be able to buy in, apartments and multi-family homes would become more readily available and the prices would decrease, more people would be able to afford to rent an apartment, and fewer people would be homeless.
That's a win all around except for any company that fills its pockets by sleeping on its horde of unused homes like ancient dragons and ill-gotten gold.
For example, requiring that home sellers sell their homes with total consideration (incl. any required "side payments" to third parties) matching the mean market value of equivalent homes in other non-manipulated markets.
Or requiring that homeowners get their home appraised, and then legally mandate that consumers be charged a total compensation of at most the appraised value minus 10% to buy said home; with it being left up to the homeowner how to make that happen. (Where they can apply for their own government grants or whatever else, but they can't do anything that increases the total compensation demanded from the buyer—which would include taking any grants given to the buyer for buying a home.)
Find it hard to believe anyone could say such a thing with a straight face. Every time these subsidies are announced the median price rises.
Negative gearing is a distraction that completely skirts the real issues regarding supply, density and infrastructure.
https://en.wikipedia.org/wiki/Vickrey_auction
On the other side if the sellers aren't happy with the highest bid they can just keep waiting for more people to turn up.
If you bade your maximum already then obviously you’re out of contention.
So, I decided to look at the City Plan -- to see what the actual plan is for addressing the housing cost crisis in Toronto.
Not surprisingly, the real problem became very clear to me, almost immediately.
The problem is not blind bidding.
The problem is not foreign buyers.
The problem is not low interest rates.
The problem is the official city plan is 100% a NIMBY plan.
From the plan itself:
> While communities experience constant social and demographic change, the general physical character of Toronto’s residential Neighbourhoods endures.
In other words, let's not change our back yards.
> Physical changes to our established Neighbourhoods must be sensitive, gradual and “fit” the existing physical character.
Again -- this means that the large inner-city neighborhoods full of mansions (such as Rosedale and Forest Hill), have to stay full of mansions.
Just to spell it out:
> If, for example, an existing zoning by-law permits only single detached houses in a particular geographic neighbourhood and the prevailing building type in that neighbourhood is single detached dwellings, then the Plan’s policies are to be interpreted to allow only single detached dwellings in order to respect and reinforce the established physical character of the neighbourhood
You see this reflected in the development that does happen. Yonge & Eglinton just gets more dense -- because that's the "character" of the neighborhood. Meanwhile, in "fancy" neighborhoods, housing often gets less dense, because that conforms to the "prevailing" characteristic of the neighborhood.
With the current plan, the city is going to be a city with super high density combined with ultra low density and very little in-between. In other words, it will be full of wonderful enclaves for the wealthy, and sardine-can housing for everyone else.
This, of course, leads to issues such as the lack of schools available in the Yonge & Eglinton area, anod overcrowded transit, not to mention the lack of quality housing for families with two kids. (Try finding a decently sized 3 bedroom unit near playgrounds and schools. Yikes.)
The solution, would be to allow more medium and low rise development throughout neighborhoods. The "character" of the existing neighbourhoods should be allowed to change.
I don't blame Toronto though, this is a problem that is happening in most wealthy cities in North America. Doesn't mean we can't do better. We should.
https://www.toronto.ca/wp-content/uploads/2017/11/97dd-cp-of...
Building huge quantities of condos may help some with density and may drive prices down slightly but there is little that can be done to have new detached houses on the market.
You could potentially tear down some mansions in rich neighborhoods to build two or three houses and that might help slightly at the margins. There aren’t enough mansions in the city for this to really move the needle though.
The problem is a handful of cities are winners and everywhere else is losing. Toronto is the lifeblood of Canada and many people want to be here for opportunities that are unavailable elsewhere. A large population that grew up here doesn’t want to leave friends and family behind to start a more affordable life elsewhere. As long as we create a society where there are a handful of great places to live those places will be prohibitively expensive.
Being unable to create successful cities in Canada outside of Toronto and Vancouver has been the bigger political failing than NIMBY within those two cities. If Canada had five cities that were as successful as Toronto there would be more opportunity to go around and less pressure on Toronto. Disproportionate amount of both internal and external immigration is to the places with the best jobs and that drives up housing quickly.
That may be true, but the housing cost crisis extends beyond detached houses. We need more apartments, condos, townhouses, etc. Not just nice detached houses. Prices should get lower in all of those categories. Even condos in towers have grown much, much more expensive.
> You could potentially tear down some mansions in rich neighborhoods to build two or three houses and that might help slightly at the margins.
Most of the land in Toronto is tied up with single family detached housing. Why not replace some of these with small apartment buildings, brownstones, and townhouses especially when near transit, or villages? I live in a large house that is a 10 minute walk to transit and two major strips of retail. This neighborhood is mostly detached houses and duplexes. Why not allow for double, triple, or quadruple the density with townhouses or small apartment buildings? If done at scale, across the city, this could absolutely make a huge difference, in terms of the availability of housing.
In terms of mansions, why not spend a few hours walking around Forest Hill. You'll probably need more time, though, if you want to see them all. It's a beautiful neighborhood. And very large.
> The problem is a handful of cities are winners and everywhere else is losing.
There are other nice cities that are growing -- and the housing prices are growing exponentially there as well. (For example, Waterloo and Victoria.) Everywhere else is definitely not losing, though I agree that there should be more thriving cities in Canada, that is also a daunting task. Frankly, it's also a lot more daunting than changing the zoning to allow for medium density in single-family neighborhoods.
The bottom line, though, is that you're right about what officials can't change. They can't change the amount of land available, but they certainly can and should change the amount of development that is allowed on it. The current plan is simply not working. Something needs to change. My proposal is to allow medium density development; I don't see a better alternative.
Totally agree with you.
I just returned home from a visit to Cape Canaveral, Florida. It has a true mixed residential pattern. Lots of singles, duplexes, and small apartment blocks mixed. Felt "natural", scaled well, etc. I'm sure there are problems, but from a short visit, it looked like a reasonable assortment of housing.
Hopefully this link works... https://www.google.com/maps/@28.3905172,-80.6008949,3a,75y,3...
That's a small single, with a small apartment block next door, with a slightly larger block two down.
https://www.google.com/maps/@28.3905172,-80.6008949,3a,75y,1...
Same spot, looking to other side of street, mostly duplexes, with a few singles.
According to their plan:
> Our goal is 72,000 new homes across Vancouver in the next 10 years.
Unfortunately, if the Vancouver population continues to grow at an annual 1% rate, that means 275,000 new people to house. 72,000 homes would mean an average of 3.82 people in each of those new houses, which is just not realistic.
In short: Vancouver isn't even planning on building enough to be able to house everyone.
I'm not very familiar with the city, but clearly, their attempts to solve the housing issue are not actually serious if they're not even planning on building enough housing for everyone.
For ease of searching, this phenomenon is often called the "missing middle" problem. And it sucks, because as the already-high-density areas get more and more dense over time, it just reinforces the fear of density that people in the low-density neighborhoods have, because it confirms their prior belief that density means 50 story condo towers, and only 50 story condo towers.
Chicago is a wonderful counterexample to this - lots of neighborhoods are a mix of SFH, SFH with ADUs, MFH with 2, 3 or 4 units, and small 4 or 5 story apartment buildings, with nary a condo tower in sight.
In NYC there's a very similar balance of power. On some rarefied streets, it's illegal to change the silhouette or facade of a building, because it's an "historic district".
But if you go 40 minutes outside of lower manhattan, relatively affordable housing abounds and there are essentially no rules. The "museum" core creeps outwards, but with sloth-like predictability.
You're right, these places are not "for you/us". They're for people whose means allow them to make mole hills out of the mountains you describe (access to education, public transit, quality housing), and for the rest of us, who are willing to compromise their ideals and cope with the egregious terms and conditions.
Your solutions make sense in a utilitarian sense, but this is not a sense that appeals homeowners who have already rationalized away the irrational aspects of the status quo. Generations of experience have shown that, absent some highly-destructive disaster, it's cheaper to move to place you perceive to align with your ideals, or to change your own ideals, than it is to change the ideals of zoning policy.
There is a selfish component to this vector of development, but it's reductionist to say it's the only component. At any given point in time, the selfish component is there; but at many points in time it is not the biggest contributor.
These weird market distortions in real estate have underlying causes. A lot of them are based off patchwork rules and regulations around real estate. Stuff like who you're allowed to sell to, how much you're taxed, the paperwork required etc. Putting more patch work on top of a system that's obviously broken will probably make things worse in the long run.
No matter how you transact, of the good is too scarce compared to demand, the price is going to be high. We've seen skyrocketing prices in the US too and we don't use a sealed bid first price auction for the transfer of houses.
The point I was making is that it’s too easy for us not to consider the implications to average or poor people of the proposals we make. It’s not that it’s the main point, but we also must not trivialize errors.
In addition, the process being described is NOT a "sealed bid first price auction" as the seller opens the bids and requests rebids without disclosing the current winner or top bid. The only reason to do this over a normal auction of that type is to trick people into thinking they didn't win, so they bid higher.
This is how it works in the trades, for contractors, and some small company employees. I've Never Been Told what past applicants for a job position asked for salary and were denied
All of this though (ending blind bidding, making buy and sell data publicly available, etc.) is just using a bucket to bail out the Titanic since the system is designed to have prices continuously rise since Canadians are in house debt up to their eyeballs and have no idea how else to actually save for the long term and any party that actually changed this would likely never get voted into power again, if they even continued to exist.
I don't think this is strictly true. I don't like the model, but big box stores seem pretty sustainable (everyone drives to a distribution center for their goods). An actual last mile distribution system (a la Amazon) also appears to work pretty well. Neither of these are exclusively available to the economic elite.
> The road network alone is a funding quagmire, to say nothing of hiding the infrastructure burdens of servicing sprawl into the eldritch horror that is the municipal bond market.
I don't doubt that infrastructure costs decrease with density, but density doesn't keep urban municipalities from building infrastructure that they can't afford to maintain any more than other places. Quality of governance and density are almost certainly independent variables.
No, the lowest traffic solution is having the smallest number of trucks that are needed to serve local markets that a relatively high volume of people can access via walking, biking or mass transit. All that walking, very healthy.
Further, why should city dwellers subsidize this expansion? Surely these far flung communities won't have sufficient revenue to support the infrastructure needed to make all that work.
City dwellers already subsidize rural living through taxes. On the federal level, more rural states are subsidized by more urban ones, paying more per capita and receiving less per capita. Similar things happen at the state level, but the numbers are a bit harder to track down.
Suburbs are also the source of majority of tax revenue.
Suburbs may be the majority (I have no idea if thats true), but that doesn’t make them self-sustaining. They only exist because cities paid for highways, water, and power infrastructure to make it all possible (and continue to fund their maintenance) - exponentially moreso the further west you go.
But yeah, "cool spots". /s
I am originally from a rural area in the Midwest USA. I know a statistically significant number of people from high school and college who purposely moved to bigger cities because of “the culture” or “there’s so much more to do.” They are right. I live in a much bigger city now for those exact reasons, but the demand justifiably has resulted in wildly more expensive houses. I could buy a modest house in my hometown for $85k right now. That same house where I currently live would easily be selling for $300-350k. You make more money here, but not by much.
We need to work on improving our housing density issues, but there’s an undeniable element of “I don’t want to live there” going on.
One problem in Canadian provinces is your taxes remain the same regardless of where you live, but if you need access to healthcare or education, then you have to live near a major city. Particularly if you want quality healthcare.
In fact the cost of living goes up if you're a rural inhabitant in most of Ontario. Electricity is more expensive, heating is expensive, etc.
People want to live where the amenities are, and all other things being equal more population can support more diverse sets of amenities. E.g. you need enough gay people in a town to support a regularly open gay bar, and generally speaking people want to have a choice of bars for going out.
The worst part of this is that the town has the money in the bank to build the water and sewage system. There's upwards of $8 million earmarked for the project. However, each homeowner is going to be responsible for $30k in hookup costs, and the town will have to shell out $500,000 per year to operate the new water system. Since it's a low income area, the >50% property tax increase needed to run the system won't fly, and neither will the hook-up costs. Instead, all the new builds are focused in rural areas where there is no infrastructure needed or in the larger towns / cities where costs are significantly higher but deemed to be an acceptable risk by developers.
With that being said, naturally homes near economic activity should be more expensive. It's more expensive and always will be to live near Google's HQ in Mountain View than it will be to live in Grand Rapids, Michigan or Toledo, Ohio. That's just economic physics. It's ok, normal, natural, acceptable, and economically good. And these homes are only going to get more expensive over time as energy costs increase (EVs won't save us), road maintenance costs increase (already far out of control), and people move to live in more walkable areas. But as these costs increase, people who were expecting that it would be cheap to live in the suburbs are surprised because energy costs and moving far away just won't save them anymore like it did in the past (oh I'll live here and just have a 40 mile commute) - hence it appears that we have a housing shortage when in reality the costs are more reflective of economic reality and were artificially cheap. New housing won't help here because even if we could build more faster we'd still be building it in an economically handicapped way and rely on traveling far distances in cars and on highways, which just will not work when we can't pump cheap oil out of the ground.
You have two options. The first option is dense skyscrapers. But those aren't going to be efficient enough in places unconstrained by geography. They also have maintenance issues and it'll be too expensive to keep them going in the future with much higher energy costs. The second option is medium-density mixed-use development. Think the beautiful streets with brick single family homes next to townhouses and 2 story apartments with a cafe or an office at the bottom, bikes, walking, and street cars or other similar efficient transit. These you can repair yourself and the maintenance is much lower on the long-run and they don't rely on cheap oil to be livable.
But we'll keep building skyscrapers and suburbs (I didn't mention these as an option because they aren't) and the prices will just keep going up.
I don't really disagree with your larger point, but I can't help but explore this nit because it seems interesting. I don't think anyone is arguing that EVs will markedly reduce energy prices; however, there is an argument that renewables will decrease energy prices by virtue of being cheaper per unit power. Of course, it will take at least a decade before renewable energy isn't supply-constrained, so I don't think anyone is expecting this to happen soon, and moreover I've heard counter-arguments that the figures associated with renewable energy aren't including the storage costs which would be required to make renewable energy suitable for base load generation or the costs to decommission/recycle hazardous solar panels and fiberglass wind turbine blades--maybe there will be a ~10 year window during which the supply of renewable energy meets/exceeds demand but before the recycling/decommissioning costs kick in en force? :)
If I had to completely armchair it here, if you looked at total impact to society, the environment, car accidents, you name it something like a gallon of gas in the US should really be about $20-$30/gallon but it feels like it's expensive at $5 b/c we're so used to the low prices. We are probably experiencing these costs through inflation and things like housing prices.
Renewables (should) drop overall energy costs by virtue of capturing natural movements (I'd throw nuclear in renewable as well IMO but I understand why you wouldn't) but people are going to focus on kWh being expensive because they're used to extremely cheap gasoline. I guess in other words renewables on paper will be more expensive "at the pump" but externality cost to society will be lower. I wouldn't be surprised if in the future as more EVs come online that energy costs to charge even at home are approximate to gasoline.
Price per gallon is probably the wrong unit. You probably want $/mile. Car accidents get priced in via insurance. Environment isn't priced in at all in the US, though a carbon tax could change that if there was any political appetite for it. EVs already significantly reduce fuel and maintenance costs even though ICE cars enjoy a "carbon subsidy" (i.e., pollution isn't priced into the cost of gas).
> people are going to focus on kWh being expensive because they're used to extremely cheap gasoline
Electricity is already much less expensive than gasoline. The current US-average gas price is $4.10/gallon and a 30mpg car will cost over $0.13/mile. The current US-average electricity price is $0.14/kwh--with ballpark 85% charge efficiency (not all energy drawn from the grid makes it into the battery) and 300wh/mile, an EV will cost less than $0.05/mile. EV fuel costs are just over a third of those of ICE vehicles.
How I'd phrase that is: "Electricity is currently much less expensive than gasoline "at the pump". What I think is likely to occur is that as we switch over to EVs (I own one btw if that helps here) there will be continued pure electricity demand which is going to cause prices to go up and up. Everything runs on electricity, and soon cars will too. So I think the kWh price is going to go up, and be measured and scrutinized much more (you can make an app to calculate this, not so much with gasoline easily) and it'll be more measurable. But gasoline costs just aren't "counted" in the same way. So eventually it'll cost, idk, $20 to go 300 miles and people will think that it's expensive because you could do it with gas much cheaper in the past, but the problem with that comparison is you wouldn't have accounted for the externalities so you're not really getting true costs. I hope that makes sense where I was going with that.
I agree $/mile is the right unit, I was just thinking about how to isolate true gas cost versus true kWh rate in some way. I personally pay closer to the $.05 kWh rate at home, but I see peak rates in California hitting $.4/kWh and all I see is the writing on the wall for the rest of the country.
If I had to summarize:
We live in an era of extremely cheap energy. It may go on for another 50-100 years, who knows. Maybe it goes on forever. But it won't be from fossil fuels. And if energy becomes much more expensive and we haven't designed cities and transit for optimizing cheap/efficient energy costs we're beyond screwed. Relating it back to housing, I think it makes sense the housing is getting much more expensive and that this phenomenon is more than just "living somewhere cool" and part of the reason that people want to live in these "cool" places is exactly because the implicit energy costs are less. You don't have to drive to a coffee shop. You walk.
I guess one good thing about America is we have all of these navigable waterways so we won't have big food shortages as distribution costs can remain reasonable, at least in the mid west and the east.
-edit-
One startup idea I have is a way to truly measure your total energy expenditure. Right now I just get a bill in the mail and figure that it makes sense because it's sooooo cheap to run all of this stuff. What happens once energy becomes 5x more expensive? Well, I want to know how much it really costs me to run dual monitors. Maybe it's an extra $50/year I don't want to spend (just a contrived example).
It’s still not quite so cheap that recycling it makes no economic sense, so if it is possible a way will be figured out sooner or later. (Metal is recyclable because recycling it requires so much less energy than producing it; plastic is super cheap and so is basically never recycled.)
Since agriculture industrialized, rural Canada has no work.
We're friends with the people that bought it from us and on the same street in that same small town in Ontario, houses are going for $1M+ now. This is not entitled millenials wanting to live in Vancouver. This is the place where things are supposed to be affordable. This is exactly the sort of place where Boomers love to tell us to go live if we can't afford the city.
Housing is cheaper if you are willing to relocate to e.g. Swift Current, Saskatchewan where a 2-bedroom home with 900 square feet will cost you $175000, but of course there are very few jobs in a small town of 15000 people that's 3 hours away from the nearest big city and the unemployment rate is among the highest in the province.
Not as bad as other parts of Canada to be sure, but most people living here have manufacturing jobs or are in the military. I don't see how this is sustainable, since there's nothing for rich people to do here.
Between them and the banks that own all of those 30 year mortgages, that's all the political pressure you need.
In my case it killed my agribusiness project because the amount of work, the delays and the risks where too much to bear.
We can no longer build what we used to build in the 60’s and 70’s because of the regulations in spite of the technology being much better.
So the federal government refuses to address the demand side of the equation (very high immigration rate) while the the provinces and municipalities block increases in supply. The natural result? Runaway price increases, and the rest of Canada's economy becoming uncompetitive because employees can't find a house within a 2 hour commute for under $1MM in the GTA.
You've got that relationship backwards. The person doing the job is the seller. They are the ones taking bids.
The employer – the buyer – is indeed blind. They don't know who else you are talking to and how much they are offering. If you can convince the employer that the other employer down the street has given you a better offer, they just might up their offer, and you stand to gain a higher income out of it.
So, yes, employment is a great example of where blind bidding is common.
I'd be very surprised if the average employer doesn't have far more information available to them than the average candidate. Especially given that's at least part of HR's role, knowing market salaries and deciding hiring budgets. They might not know about the hiring candidate directly, but more often than not, there are entire B2Bs dedicated to distributing this information. That's on top of skilled hiring managers and employers having vastly more experience with the whole procedure than the average candidate would.
That's what we're talking about. It's not hard to understand overall housing market trends as a housing buyer, but you don't know what a specific seller is going to do with the offers they have on the table. That's where you're blind, just as an employer is blind to what else a candidate has on the table.
If there's a difference, it's that the housing market is hotter (in Canada, at least) than the labour market, so you feel more pressure to buy a particular house when it comes up for sale. If you miss it, you might not find another one for a long time. If, on the other hand, you don't get one employee because you didn't offer enough, you can just wait for the next one that comes along the next day and try again. No big deal.
But that's unlikely. A tiny blog post about this: https://blogs.cornell.edu/info2040/2019/10/22/why-arent-home...
You are exactly right, but this is by design. You're talking about the Canadian Federal Liberals. The Prime Minister is a trustafarian who got elected because his father was Prime Minister. Every major minister of their party owns several investment properties. The Minister of Housing and Diversity and Inclusion (what a combo!) owns investment properties.
These people have zero interesting in seeing property values go down. It's their own net worth we're talking about, not to mention the net worth of their friends and donors.
The plan is to virtue signal their way to taking the least effective action possible (E.g. "ban foreign buyers", but leave loopholes so they can still buy through corporations), bring in another 500,000 people that will need housing, and then do as little as possible, but as loudly as possible, to "increase to supply". They've been in power 6 years and this has been an issue since day 1. Why anyone would expect them to address this issue on the face of Canadians still voting for them, is a mystery to any rational thinker.
It's a group of people where you have to ignore what they say and focus on their actions. Did the Canadian Federal Budget look at all like a budget passed by someone trying to reduce inflation? Trying to cool down housing markets even a little bit? Of course not. Look at the hand signing the cheques, not the mouth speaking the lies.
Trust only that they are a politician.
The fact is the party political system in Canada is heavily biased towards the wealthy. Heck, in Ontario MPPs don't even get a pension so you you have to not only be wealthy to join the game but already self-supporting into retirement to be willing to consider it. You can only rely on politicians carrying through on their virtue signalling to do the right thing for the rest of us, so I'm not willing to criticize any of them for it.
Here’s why, as someone who has been on the ground and lost a few offers because we didn’t want to overbid. After the sold price was released, on multiple occasions we thought “damn! we’d have our that and $25K on top to get it had we known”.
In a blind bidding system, you bid what you think the house is worth. In an open bidding system you start to bud as much as you are able to afford.
Except you're rarely sure how much it's worth. The market is fluid, the psychology is working on you, and the feedback takes too long that by the time you know how much you missed it's too late to learn much from it.
Here in DC metro, people are massively over-bidding (relative to list price) because they've already bid/lost 5-10 homes in the last few months. So, they go in strong, $100-$150k over on a $600k list price isn't uncommon right now.
In a hot market with little supply, a list price is a marketing tool to get people into the door, and for a selling realtor to be able to brag about how good they are.
That’s it. It has been like that for years. It doesn’t make sense to post a list price that is too high or accurate (unless you don’t want the hassle to deal with multiple bidders.)
1500 sqft houses in my formerly middle class SV neighborhood are listed at $2.5M and sell for $3.5M within a week. Everybody knows that this $2.5M is imaginary. If you want to know what a house will really sell for, just look at the sales of the past 2 months. It’s a much better indicator.
More typically, a "$500k" house would list for $480 and close at $520 or maybe $550. Today, that same house is listing for $599 and closing at $700+. Not only have the prices gone up, but they've gone up fast enough that nobody really knows what a home is worth until it closes.
Now, in an open bidding system, you are literally in competition for who can/is willing to pay the most for the home. The ceiling is what you can/willing to afford - back and forth with other bidders until literally the highest price is extracted.
Once you lose 5-10 bids, you'll either give up on owning a home, move to the country or start upping your bid to suit.
> generally they will give you one chance to "improve" your offer
Of course, you have no idea what you're competing against, or if there even is a higher offer.
> in an open bidding system, you are literally in competition for who can/is willing to pay the most for the home.
This is true for blind auctions too.
> The ceiling is basically what you think is "fair". > in an open bidding system ... The ceiling is what you can/willing to afford
I don't see any reason why you couldn't set the ceiling to what you think is "fair" at an open auction.
That doesn’t follow at all. You are going to bid the minimum amount you think can win the auction, not your max price you are willing to pay.
If you want people to bid the max amount they are willing to pay, you would want a Vickrey auction, where everyone presents a sealed bid, and winner is the top bid… but they pay the price of the second highest bid. That way you can bid your actual max price without worrying about bidding against yourself.
https://en.wikipedia.org/wiki/Vickrey_auction
The primary scenario that comes to mind is where the neighborhood finds out Joe Outsider is the leading bidder, and they -really- don't like him for a reason they shouldn't. Blind/sealed bids help prevent Joe from getting specifically targeted for being outbid. (To an extent.)
I'd love for a better solution to exist though.
"Hey, we banned those darned foreigners just for you, can we get some love now at the ballot box?
xoxo"
“If you like laws and sausages, you should never watch either one being made.”
So even if someone is told which bid is currently in the lead, the subjective elements may mean out-bidding that offer would not put them in a winning position.
Not to say eliminating blind bidding wouldn't be a good idea.
That is messed up…
On my current house they said there was another competing offer and it was a close choice, they asked if we wanted to increase our bid to be more competitive. We dropped it by $15k and it turned out the competing offer wasn’t even close to our initial offer. They just wanted to know if we’d throw in $5k or $10k more.
When you're applying to a new job, do you feel it's ok for the hiring company to ask you what exactly you currently make so that they can offer you $1.00 more than what you currently today? If not, how is that not "unethical"? (Also note, in the US at least - you can't ask someone what they currently earn).
I just don't understand why it's unethical.
Maybe the seller way under estimated the value of their home, why shouldn't they be allowed to sell it at the highest price?
EDIT: why the downvote? If you don't agree - why not reply so we can have a healthy dialogue.
Yes but I don't have to accept it and I can then tell them what I want and they're free to turn it down and it's a discussion. The hiring equivalent would be every applicant would write their expected salary down. Then the lowest wins with no negotiation.
But they sure do like to tell you.
Can it hurt though? It's a massive conflict of interest to have foreigners buying your homes without any personal stake in your country. Shouldn't this be the default stance for all nations?
It's not like we haven't seen deleterious consequences already from California allowing the Chinese to buy up homes ad nauseum.
It's the opposite, worked like charm. Your main voting base, powerful people, developers, banks want price of properties to increase.
Depends on what they hope to accomplish.
And everyone knows in those cities, local officials and councillors are all in builders' pockets. Large tier builders like Richcraft are routinely raising their prices by 5-10K per every release within last 2-3weeks since last 2020 and still they have all slots closing in 5 min of opening. They are keeping the supply artificially low and I imagine the inflation and supply chain issues are not going to make things any easier.
Bottom line, house prices continue to rise. The only thing that can temporarily put a halt to this is if we end up with rates as high as 10+%. Even then I suspect there are enough people with equities and large cash pool (hell our point based immigration system makes sure this is the case for all incoming immigrants)..
Middle class dream in Canada is over for most people. When you can't afford a decent place in Toronto or Vancouver with a tech salary you know its over.
I can't imagine how bad it'd have been with the Liberals (provincial) still in power.
- Blind bids sound completely unethical. Why are real estate agents enabling this? Are they not bound to a code of ethics?
- Allowing buyers to offer cash on top of the value of a home should be illegal. You should be allowed to sell your home for what it appraises for, no more. Again, why are real estate agents enabling this behavior?
- Requiring buyers to submit letters, photos, and videos in order to buy a home is insane. They did away with this in California, but is it gone everywhere else? Another question of real estate agent ethics.
- Stop allowing companies to acquire residential real estate. This just, doesn't even make sense.
Patch these things up and you'll have major progress in freeing up a lot of real estate transactions and overvaluations.
Yes, I’ve met many people who do this. The father works in China and sends money to their kid (and sometimes wife) in Canada to buy real estate. Then since the family in Canada is technically low income (no job) they maximize every possible government benefit as well.
It would become even MORE worth it if you rented the other rooms to other students.
what actually needs to happen is to change planning laws in order to tackle the massive Nimby-ism holding down society.
good luck with that! every time a government proposes taking away some of those Nimby rights there is a massive backlash across the country.
so no politician will dare approach this issue because they’ll be out of a job.
Quality of life has almost nothing to do with income anymore so it’s impossible to work for a better future. Being born 5 years later is the difference between tax free, 6 figure equity gains every year, or renting forever. Boomer janitors are richer than a new Dr. will ever be. The system is broken.
Pray for the collapse
I think the only option left is moving away. Everyone in tech is already doing it
It's not like major cities don't exist except on the coasts.
Canada is a lot smaller. There are only 2 major English speaking cities, a few smaller cities in the prairies (200k to ~1M ppl) which are still affordable, and some dying rural provinces on the East coast with horrible economies. It’s more like moving to Nebraska when California is unaffordable.
Most people in BC and Ontario have no affordable cities within a few hours drive of their home town. The affordable cities are over a thousand kilometres away. At that point, it’s easier for most people to try moving to a nearby state across the border.
Well for men that's usually an easier decision
I'm sure this will be wildly popular politically, because people LOVE the idea that some foreign boogieman is the reason their children can't afford homes anymore.
It's much easier to outsource your problems to some outside "other" then deal with the much harder task of introspection over the poor housing policy that you and your neighbors have voted for over the last 60 years.
Like all cities in areas with heavy-handed zoning regulations, abuse of historic preservation clauses, and filibuster-style city council meetings blocking new construction...the issue is one of supply.
It's the same problem in literally every developed country on earth right now. The industrious, forward-looking people who originally built the cities during the major growth phase died...and then their kids grew up believing that the way things ended up was somehow divinely ordained. Never to be changed or built upon again.
The foreign boogiemen help deflect attention from this element of the argument.
Combine this with the backdrop of 40 years of falling interest rates. Do you really think the foreign boogieman is having a larger effect than the simple explanation of restricted supply and falling interest rates?
Prices per sq. foot in Toronto recently surpassed Vancouver. There's no way Toronto has more foreign property investors than Vancouver.
> It's the same problem in literally every developed country on earth right now.
The problem with making generalisations is that you're often wrong. The French real estate market has problems, with prices rising in some city cores ( mostly Paris), but it's not nearly as bad as many other places due to a myriad of factor and policies, like decent to good public transit ( which is undergoing massive upgrades) to nearby dense "suburbs", multiple programmes encouraging newbuilt homeownership and buy-to-let (at fixes prices) through lower taxes or cheaper loans. Paris is expensive, but you can get a much cheaper appartement or house within train distance. Of course, for newbuilt waiting lists are at ~2 years due to demand, but there's a lot of supply being built constantly, in Paris and around it - entire neighborhoods or former industrial areas are getting razed to the ground and rebuilt as decently dense (5-6 floor) appartement buildings. And that's just Paris, most other cities are better.
All that while there's very strict zoning, high building standards, lots of protections for tenants and buyers, including rent controls, hard rules around eviction and absolutely crazy preservation rules.
I know people who can't cut the dangerous trees in their yard because their yard is visible ( less than 1km) from the roof of a church which is a national monument, and they need approval from the Architects of France.
Toronto's population is growing at double the rate of Paris. And London, Stockholm, and Sydney's populations are growing even faster than Toronto.
No surprise that faster growing populations lead to worse housing supply issues.
Does France have heavy handed zoning and historic preservation policies? Sure.
But you aren’t getting 5-6 story multi family buildings constructed at a face pace in major metro areas. In many places, such construction in prohibited entirely by also how family zoning.
And while France may protect historic monuments like an old church. “Historic preservation” in North America often implies restrictions on building in a single family residential area that was built in the 1920s.
Your post does show, however, that restrictions don’t have to be eased all that much, but unfortunately it’s a lot easier in North America to lay the blame all on foreigner and other greedy people, than regular homeowners who show up to city council and lose it over a multi story senior center from going into their neighborhood.
Of course you are. Tons! They sell like hot bread ( as in within weeks of starting sales all appartements are sold, with 1.5-3 years of waiting for the construction to finish), and cost an arm and a leg in the really fancy parts of the metro area ( the Western suburbs).
Merci pour partager votre perspective!
Generalisations are like models. They're not necessarily 100% correct or applicable but they can still be useful.
There's only 1 million people globally (including Canadians) with a net worth over $10 million.
That means every single one of them would have bought a Canadian home in the last 5 years.
I mean Canada is nice and all, but does that seem plausible?
If they are washing or hiding, they don't care as much about the profit, so it makes sense they would be buying in larger numbers if they can.
It’s entirely possible that people with high liquidity were buying and selling multiple properties while people with low liquidity were staying put. That would naturally mean more wealthy people are buying (and selling), and foreign owners are likely much wealthier than the average Canadian home owner.
I don't think it's a boogieman. But I also don't think it will change much when these cities are primarily 2-story houses.
If this stops some amount of cash offers 20+% over asking by foreign investors who have no intention of living in it - great. There's a hundred factors affecting this real estate crisis, it might need a hundred solutions.
Overseas investors may own only 2%, but Canada has 23% foreign-born population. That's a lot of demand. Granted this law does nothing to address that, but it plays perfectly into the foreign boogieman you dismiss.
Source: https://www.statcan.gc.ca/en/dai/btd/othervisuals/other006
If the goal is affordable housing, why is immigration the one policy that must not be adjusted to meet that goal?
If Canada cut it’s immigration targets, it would have to somehow produce a lot more babies to pay for everything. More houses needed either way.
*Yes, if we changed our lifestyles to reduce consumption, we could fit more people in - but until we do so, we should stop adding to the population.
It's a major component of the supply side of the equation, and one which is controlled by policies. And it's not like you proposed "close borders completely!" or "send people back". There's a limit as it is. How is changing that limit going forward any more xenophobic than blocking foreign investors?
car_analogy comment was benign, but honestly as a Canadian living abroad I am different than the other people I live around. I would not call myself X country adjective here (e.g. Swiss). That is not saying I'm not trying my best to integrate.
In the US our largest immigrant group (Mexicans), and more recently Guatemalans and Salvadorans, are disproportionately the ones building new houses. Without them I have a hard time believing we'd be able to build the volume of houses we do. Does a parallel group exist in Canada? Are immigrants likely to work in construction?
The premiums you listed have always existed, there's no reason for them to grow now.
What's grown now is that, because home prices are rising, people look at the rising prices and want to take advantage of it. And the primary residence in Canada has infinite tax-free gains - so as long as prices rise, it seems like it makes total sense to pour as much as possible into housing. This is a bubble. Canadians think of housing as the best possible investment because housing prices are going up and its a tax-advantaged vehicle. Once prices start falling, we'll see this leveraged investment unravel quickly
For example, in BC (as of 2020), 9% of new condos (built after 2016) were owned by foreign interests, which is down from 2019, but probably holds steady for a number of years.
https://betterdwelling.com/foreign-buyers-own-1-in-10-recent...
[0] - https://betterdwelling.com/over-a-quarter-of-toronto-real-es...
Here the feds want to be seen as doing something, but have little actual power so this is a good way to say the did something. Ontario is ruled by a conservative government that's up for reelection this summer. There was a big housing affordability task force that recommended building more houses (shocking!). The government will not be implementing any of its substantial recommendations, but will fiddle around and say they're "cutting red tape". Municipal governments like Toronto are obsessed with controlling development, from suburban conservative councillors trying to outlaw rooming houses, to downtown progressives decrying gentrification. Any correction will come despite all these efforts.