There's so many articles about the Canadian property bubble popping that I'm starting to feel like it's some sort of concerted effort by the real estate industry to cool down the market.
It was just about to pop 6 years ago when I bought my condo. It was about to pop when values stopped increasing so dramatically 3 or 4 years ago. It was about to pop when the COVID-19 pandemic halted most sales. It's about to pop now because everyone is leaving the cities because of WFH rule changes.
But it never does. Prices are still high because demand is high and supply isn't keeping up. Demand is high because our financial laws allow criminals to launder money through housing, and because we're a desirable country for wealthy immigrants. Supply is low because cities have too many NIMBY politicians that are against density increases.
I wish it would just pop so we can all get on with fixing the root problems.
As an Australian, every single problem you have, we also have. It sucks.
I'm starting to come to the view that you should only be able to own one house, and you've got to live in it otherwise you pay full market rent on the vacancy.
I think about the housing situation as an almost existential economic threat. With the scale 'money' sitting in housing the banking sector is acting like a parasite starving potential capitol from growth opportunities.
> Demand is high because our financial laws allow criminals to launder money through housing
> too many NIMBY politicians that are against density increases
Now I'm sure you can argue that there's no real contradiction between these two statements, but I can't help but feel that these are one and the same problem, and that we need some idea beyond the supply-demand or nimby-yimby binaries. Do these concepts really model the reality well, or perhaps more importantly lead us towards the reality we want to see? Isn't this high-density housing also just another way for real estate people to speculate?
I think we have to start looking at this problem like we do healthcare: the markets are _the_ problem. Housing should be something more like a right.
Canada seems to perhaps be the #1 place that foreign money wants to own property - a stable, fairly rich country - resource and otherwise. The current measures to counter this are inadequate, along with countering the efforts of the local grown Landlord-Rental complex - which is compounded by foreign investment - and their rent-seeking behaviour.
>There's so many articles about the Canadian property bubble popping that I'm starting to feel like it's some sort of concerted effort by the real estate industry to cool down the market.
Fired immediately because of outrage by the FIRE industries. The problem with Canada is that we taxed all our industries out of existence. We only really have FIRE industries or our economy crashes. There is technically only 1 way for it not to crash. Hyperinflation will fix the problem, though yes grandma and grandpa have to go back to work.
>It was just about to pop 6 years ago when I bought my condo. It was about to pop when values stopped increasing so dramatically 3 or 4 years ago. It was about to pop when the COVID-19 pandemic halted most sales. It's about to pop now because everyone is leaving the cities because of WFH rule changes.
The problem is that interest rates are so tremendously low and in some countries even going negative because it's a bubble that the governments are propping up. They'll risk everything to not be the last guy holding the bubble. It has gotten to the point that Canada's governments are not releasing financial information and even blocking evictions and such. Exacerbating the problem.
>I wish it would just pop so we can all get on with fixing the root problems.
It will continue so long as the government runs deficits. Everyone gave Kathleen Wynne a hard time about deficits but Ontario's deficits are not going to at least 2030. By Ford... the guy most likely to balance the budget. Meanwhile Trudeau's deficit of ~400 billion in a single year is equivalent to about 20 years of government debt.
The deficit problem is so bad that they are planning to simple print money. If your debt is locked in at 6% or so like ours is. If inflation is 50%. The problem goes away quickly. They will do that before letting our last industry fall. Especially given our taxes are so connected to the value of what is on the property.
I make more money alone than both parents did at my age. And I cannot afford even 1/3 of the house they bought when they were my age. And not some Toronto house. Just this thing on the edge of Waterloo. The house is worth 1200% what it was in 1989.
Luckily remote work allowed me to move to rural Ontario but even here prices are exploding. At this point I'm expecting my house to be worth a lot less one of these days, but I think it inevitably will appreciate in value long term.
Living in or near Toronto isn't even a possibility anymore.
Sold my house in Woodbridge, North of Toronto. To a unmarried couple from China studying at University of Waterloo for 1.85M, no home inspection nothing... Paid over ask. It is all about the wealth fleeing from China and nothing else
Ontario isn’t building nearly enough housing for the rate of flux in the economy. We’re 10x behind. KW is a great example, we’re still building too many cul-de-sac subdivisions with 3000sqft houses on 3000sqft lots. We can’t build enough supply that way. It’s also supply geared towards the old university-and-insurance economy not the new tech-priced-out-of-Toronto economy (hello me). This seems sustainable to me, supply isn’t keeping up.
I have a house in Kitchener but also a farm in PEC. The situation in rural Ontario is an order of magnitude worse and certain to crash. I bought farmland (with pretty bad soil) in 2014 for under $2000/acre—basically it’s agricultural value. A one acre lot across the street from me on a similar old farmstead sold for 100x that price this winter. This is not sustainable, I mean our wells go dry all summer. I get high speed internet such as it is through a complex direct LTE setup. This demand won’t last.
This is what doesn't make sense to me. High earners are struggling to buy a place.
It's not sustainable generally and political will for ever growing prices will have to shift as demographics age and non-owners grow relative to population.
And if interest rates start going north in any real way it's going to be severe with some of the debt load you hear about so many people taking on.
Wondering what the total expected cost of buying a house in the 80s was, factoring in much higher expected interest over the mortgage, versus today, with much lower interest. Is it that we are effectively paying up front what previously would have been spread over the term?
Interest rates in the east 80s were in the teens. Today they are around 10x less at 1.5%. Over 25 year amortization that makes a big difference in total interest payments.
There’s an ongoing international failure to protect young people from various investors creating a generation of neoserfdom in the form of REITs, foreign real estate purchases with no intent for the owner to live in the property a minimum of 51-80% of the time to encourage GNI growth, rampant house flipping, the spread of HOAs, and virtually no assistance to first-time prospective home buyers.
In my opinion things are so bad, I don’t know how these politicians aren’t getting killed. Maybe young people are too ignorant to know everyone is screwing them and that’s why we have no civil unrest.
There has always been lots of support out there for 1st time home buyers, some measures have been clawed back on that front because they are obviously ineffective.
Everything else you cite here seems to be random arm waving in the general direction of capitalism.
The thing about the past was that we built a lot of housing, I think creating an environment where politicians can openly support building a lot more housing would actually address the "capitalism" problems.
This is such a great comment. It is partly generational warfare, partly class warfare, and partly institutional-vs-retail warfare.
Now matter how you look at it though, there are winner and losers and policy-makers have chosen those winners and losers by way of policy.
Unfortunately, this is easy which is why it is done -- people feel pain but the network of cause-and-effect is too complex for people to put a finger on the root cause.
The problems Canada is having with real estate values is a good argument for high property taxes on real estate. When home owners have to pay 2-3% the annual property value it creates a strong incentive to use property in the most economically productive way. You don't get stuck in situations like this where homes become like bitcoins for rich chinese who want to park money overseas while buying into a bubble.
High property taxes can then be offset by lower income and sales taxes which only affect people who actually live in these cities. The end result is cheaper housing even after taxes.
That might discourage some of the foreign investor activity, but unfortunately I don't think that will make a significant difference on keeping price increases in line with income.
To give you a real world example, NYC's Long Island suburbs are notorious for having some of the highest property taxes in the nation (mostly the school taxes). Despite this, LI home values continue to go up at a pretty high rate, an average/very basic starter home is around $500-600k.
This is because despite the high property taxes and not great weather, the demand for homes there highly outpaces supply. In the case of Long Island, the demand is due to things like having easy access to NYC's huge job market and NYC itself, the quality of schools, low crime rate, etc.
For you to make property taxes high enough to make a meaningful dent in demand, they'd have to be so high that any decrease in the cost of the home would essentially be cancelled out by the astronomical property taxes.
Time and time again, the root cause of high home values has shown to be that the increase of supply isn't keeping up with increase in demand. To fix that, the factors slowing down new supply need to be removed. These factors vary by location, and include things like a slow/expensive permit process, overly restrictive zoning, allowing NIMBY groups to slow down or block new development with constant town hall meetings, etc.
In the case of the crown jewel of places that are horrible at keeping up with housing demand, California, all 3 of those are at play simultaneously, and the housing costs there show it.
I think a progressive tax like income in total residential property value.
Numbers off the cuff but something like <$1m is zero. $1-3m is 1%... Etc. Make the top rate untenable to own more than say $50m in residential like 10% + top rate for anything held under obscure ownership structure.
This way peeps can own a normal home at no cost, even have an investment property. But the person with 300 apartments who buys another 10 every year is encouraged to move their money to alternate assets.
It appears to me, the rise was almost exclusively artificial overseas (likely from China) investments. Basically, Canada is stable and the wealthy in China need a place to park wealth (in a diversified way). Best option is foreign land purchases. This has been occurring in largely west coast US cities as well.
The solution(s) are pretty straight forward and I believe Vancouver already initiated a tax on not living in a residence. If the goal is affordability, those policies need to be increased as well as new building efforts (aka change zoning).
I have family in Toronto and I concur that the primary cause of the rise in real estate prices is China. My cousin is an established IP attorney who earns a pretty good salary and this is directly from him...he was looking to move last year into a $1MM house (approx. 4k sqft) in suburbs of Toronto. He had the deal all worked up and ready to close until the real estate agent called him in the 11th hour and said the house was sold. He had been looking for some time and thought he finally found what he liked only to not get it. This really irritated him so he decided to find out what really happened. Well, it turns out that a Chinese foreign student made a $1.25MM all cash offer with contingency to close right away. This is the current state of real estate in Toronto. Imagine someone willing to pay more than the assessed value of the property because they’re not taking NO for an answer. Which seller would not want to make extra profit?
> The solution(s) are pretty straight forward and I believe Vancouver already initiated a tax on not living in a residence. If the goal is affordability, those policies need to be increased as well as new building efforts (aka change zoning).
And there instantly came ads for services to keep appearance of home being occupied on https://www.vansky.com/ =D
Basically, property owners pay those guys to go and live there!
Not sure how this narrative plays out in Canada, but given that it's raised in California but doesn't pass the laugh test I don't have much hope for it. Not only is such foreign ownership rather limited in terms of the % of total units it affects, but this would really only drive up housing prices if not only were these investments being made but that the investors for whatever reasons were leaving the units empty and/or converting them from being residential and thus actually taking them off the market and putting upwards pressure on other units. But this is nonsensical and basically never happens, and I don't think you're seeing skyrocketing vacancy rates in any of these "overheated" housing markets.
>> The solution(s) are pretty straight forward and I believe Vancouver already initiated a tax on not living in a residence. If the goal is affordability, those policies need to be increased as well as new building efforts (aka change zoning).
Wouldn't simply ONLY building new buildings/housing be more effective? This way, the wealthy can continue to purchase, but the investment would become worse and worse in returns and essentially provide subsidized housing to renters. This is somewhat the case in NYC where rents are far lower than ownership carry for identical units because the units are sometimes treated as stores of value.
If you spend Canadian dollars on Chinese products then what will happen to those CAD? There is a 50 billion trade deficit with China. The Chinese keep accumulating more and more CAD and they don't buy anything with it... except housing and companies because Canadians aren't producing anything that the Chinese want to buy. Now the obvious thing would be to just do the same thing the Chinese are doing. We buy Chinese products, they produce them. They buy our houses, we produce them. Turns out, we forgot to do that.
Of course, this isn't the only factor. There are probably dozens of factors that are causing prices to rise but Chinese investors are highly price insensitive because doing anything with the CAD they have is better than letting them sit around. What else are they supposed to put the money into after all?
I wonder why the rise of AirBNB isn’t discussed much more frequently. I’ve lived in pretty desirable areas and found it nearly impossible to find a decent rental because anything good is dedicated to AirBNB during the nice months, so my option is to rent a shitty apartment for 12 months continuously, or a decent apartment for 8 months and then be in disarray for 4 months struggling to find somewhere to live. I think it is complete madness that AirBNB has soaked up so much of the rental and housing stock.
Because places like HN like to celebrate "disruptors" like AirBNB?
I've got no problems if hosts want to put up a guest bedroom to get some side income, but the amount of "furnished apartments" that are converted to basically hotels, without paying taxes as a business, or operate within the regulations is pretty staggering.
When the first lockdown happened, a rash of "furnished apartments" started appearing on rental sites, trying to stay afloat.
But it's far easier to blame foreign ownership alone, and ignore significant parts of the complete problem.
Airbnb didn't create demand for housing that didn't exist. People really want to rent places that aren't hotels for short periods.
Is that madness? Cities trying to clamp down on Airbnb are just shooting themselves in the foot again along with NIMBY housing regulations.
There's incredible demand for housing in cities that isn't being met, and the cities which refuse to allow supply to rise will face the same problems and eventually lose out to more dynamic cities.
On the off chance there are policy makers here, I’m surprised there’s not a bigger focus on land transfer taxes and their impact on home prices.
When you purchase a home in Ontario, as a buyer, you are expected to pay an additional 2-5% of the purchase price in taxes. You need to have this money when you close, in addition to your down payment, and it is remitted immediately to the government.
This can be the equivalent of 5-10 years in property taxes, depending on the purchase price and how your home was assessed. And you pay it every time you move (and buy a new home)!
This pushes the tax burden disproportionately onto new homeowners, and incentivizes folks to stay in their homes for longer (don’t forget the additional 5% paid to agents).
It reminds me of Prop 13 in California, which similarly disproportionately taxes new homeowners and incentivizes people to hold onto property forever.
(Note: my numbers here are fuzzy, and I’m not a real estate expert, so someone here is welcome to correct me if I’ve incorrectly interpreted all this.)
I believe the purpose of this tax is in part to lower demand thus reducing sale prices. Some municipalities have credits for first home owners to offset that. If anything, to increase accessibility for first owners, the taxes (along with the associated credits) could be increased.
There are quite a number of factors which are causing incredible price growth.
These cities are immigration destinations, a large number of Canada’s > 300k annual immigrants becomes residents of these cities every year. These immigrants are educated and quite often asset owners in their own countries. So lots of foreign money flows to these cities through immigrant population. Also culturally immigrants invest more in real estate as countries they have come from don’t have great investment alternatives beside real estate.
Because interests rates have been falling for last 20 years property prices have increased tremendously. This has created tremendous wealth for property owners, who then learned that they can cheaply get money out through home equity line of credit. This money is then invested in other properties which are rented out to pay for mortgage and expenses, creating a loop which further expands the price growth.
At this point property owners are making more money just by living or holding their properties than by working. So its becoming extremely attractive form of investment.
All of this is propped up by lax regulation, low housing starts, green belts, few public housing options. It is a dire situation and now young people are getting frustrated. Because the wages haven’t kept up and savings have been inflated away by a government which loves to print money.
Now this not even a big city phenomenon, the leverage available has caused prices in small cities to rise tremendously as well. Young local population is getting priced out because numbered companies are hoarding up houses and making them rentals.
There are some solutions, like banning non residents to own residential property in Canada. Asking for over 50% downpayment for 2nd residential property, 75% on 3rd. Taxing vacant properties.
In the end government needs to realize that residential properties are social assets not financial assets. The goal should be to create vibrant communities, and that cannot be done if people are unable to own a residence.
“ This has the potential to destroy the livability of every major community, create two classes of citizens, cement a wealth divide, disenfranchise an entire cohort, create structural household debt, make shelter unaffordable and hobble the economy as billions a week flow into vaporous housing equity. In short, it’s an epic policy failure. It’s time those who have greased the wheels – realtors, central bankers, political leaders and our federal housing agency – stand accountable.”
If or when it pops, it will wipe out the savings of most of the country. There are so many folks depending on their house to fund their retirements, that there is no possibility the Government would ever allow a meaningful Interest Rate hike or anything that would adversely affect real estate value. I suspect most Canadians know this and understand it is a sure way to make 20% returns on their money (safer than a Canada Savings Bond). My advice is to borrow as much as you can and buy a house in Toronto. It will double in value in the next 5 years. There is absolutely no possibility the Gov will allow your investment to fail.
For Canadians that can't buy, I suggest you lobby your Gov to force Corporations to implement mandatory WFH for at least 80% of employees (that can). This should allow you to live in rural Canada somewhere and participate in property ownership. The other solution is to sell millions of acres of Crown Land to Canadians who are first time property owners.
what's the second part about - implementing mandatory WFH? how do you mean that translates to rural opportunity? The rural options are always there in a country the size of Canada, but it's the being disconnected from civilizations/culture/community that keeps everyone close to the southern end.
It’s funny that most Canadian software companies don’t even offer salaries that meet the median for a “typical home,” which sounds like a small condo for 1 or 2 people. You have to have a dual income to be able to afford the payments, taxes, insurance, and maintenance... and just get by.
I think with Covid making remote working far far more accessible for a lot of jobs there's going to be a pretty big growth in smaller cities and communities outside of Toronto/Vancouver over the next 10-15 years. My partner and I moved out of Toronto two years ago and bought a detached house for far less than the cheapest tear-down bungalow was being marketed for in the city. In the last year several friends have moved out of the city because house prices are too expensive there and the area we're in has seen house prices go up a lot. This seems to be mainly driven by people in the 25-40 age range moving out from Toronto.
Out of curiosity, where does the 30% of gross income max sunken come from? Considering that other living expenses don't also rise with more expensive homes, I don't understand why we'd use a flat figure. If it costs $40k to live per year, and you make $80k post tax, then you have $40k left over to spend on a home per year. If you make $100k post tax per year, you have $60k left over. That's a 50% increase for a 25% increase in salary. There's no reason it should be flat.
I've seen it often thrown around for housing markets but it seems out of touch, since it doesn't line up with a lot of median incomes of home owners vs median prices in metro areas.
It's not uncommon to see many people putting 50% of their income or more to rent, so why would mortgage be different?
I've been reading about the impending crash for a decade now. The most that's happened is that the market in Vancouver cooled down with new mortgage rules and regulations on empty homes. However average pricing hasn't really gone down.
I bought a town house in 2015, downtown Vancouver. Within a year it went up 50%. For a bit it was even 75% at the peak of the market pre the new regulations. Depending on the time of year it hovers between those two ends. Since it's downtown I'm not worried about a crash affecting it too much. However a crash would benefit us for selling and moving further out to a detached home where prices tend to fluctuate more.
That said, again, it's been a decade of people talking about the bubble bursting but I don't see what would cause it?
* Vancouver, like San Francisco, is limited in growth by the geography of the area. So it's not like new development will lower the market prices.
* We don't have a mortgage issue like the US did for the 2008 recession. In fact mortgage practices have become even stricter.
* The distance from the distant suburbs of Vancouver to downtown is paltry compared to commute in the Bay Area or LA. There's room to grow out in that direction. The public transit system is also much better than most American places I've been to. So living further isn't as much of a burden.
Point being: yes the market sucks. But I don't see what would cause a crash? Yes it's unaffordable for many. But I don't see that as a metric for a crash either, just a metric for growth outside of the core.
I'd like to say that as a rural grain farmer I would like to live in a condo in a dense and walkable neighbourhood with an excellent range of ethnic cuisine expertly prepared by my diverse neighbours.
I consider that desire just as realistic as the desire to live in a fully detached home and work in downtown Toronto.
Life is full of compromises, I'd rather not have a lawn to mow, but thems the brakes!
I live in Toronto and have to say the real estate prices here have been the puzzle of my life. They are going up even now, still under lockdowns and significantly reduced immigration in-flow. Tiny unliveable condos bought to rent out lost a few percents, everything else keeps going up
The crazy thing is that this is no longer a Toronto/Vancouver thing. It is everywhere in Canada now. Every province, every small town. There is literally no escaping this bubble now and I do not believe it is related to foreign money - this one is home grown and resulting from monetary policy mismanagement. We never took our medicine after 2008 and everyone has been loading up on debt - individuals, companies, and governments. It’s madness and no one can afford altars hikes. Just wait until the bond vigilantes come and make us atone.
Meh. 5 years ago my house in Calgary was worth 380k. I just sold it for 385k. It might have gone up to 400k if I had waited a bit.
Its not 'bubbling' everywhere - just the meccas of Toronto and Vancouver and their bedroom communities are going nuts. Move to western Canada and prices are still very reasonable.
[+] [-] mabbo|5 years ago|reply
It was just about to pop 6 years ago when I bought my condo. It was about to pop when values stopped increasing so dramatically 3 or 4 years ago. It was about to pop when the COVID-19 pandemic halted most sales. It's about to pop now because everyone is leaving the cities because of WFH rule changes.
But it never does. Prices are still high because demand is high and supply isn't keeping up. Demand is high because our financial laws allow criminals to launder money through housing, and because we're a desirable country for wealthy immigrants. Supply is low because cities have too many NIMBY politicians that are against density increases.
I wish it would just pop so we can all get on with fixing the root problems.
[+] [-] gonzo41|5 years ago|reply
I'm starting to come to the view that you should only be able to own one house, and you've got to live in it otherwise you pay full market rent on the vacancy.
I think about the housing situation as an almost existential economic threat. With the scale 'money' sitting in housing the banking sector is acting like a parasite starving potential capitol from growth opportunities.
It's really grim.
[+] [-] ewams|5 years ago|reply
[+] [-] samirillian|5 years ago|reply
> too many NIMBY politicians that are against density increases
Now I'm sure you can argue that there's no real contradiction between these two statements, but I can't help but feel that these are one and the same problem, and that we need some idea beyond the supply-demand or nimby-yimby binaries. Do these concepts really model the reality well, or perhaps more importantly lead us towards the reality we want to see? Isn't this high-density housing also just another way for real estate people to speculate?
I think we have to start looking at this problem like we do healthcare: the markets are _the_ problem. Housing should be something more like a right.
[+] [-] chii|5 years ago|reply
not sure how it is in canada, but money laundering is taken fairly seriously in australia.
As for wealthy immigrants, the amount of purchases by foreign investors are few compared to locals purchasing.
> get on with fixing the root problems.
and nobody agrees what the root problem is.
[+] [-] zikzak|5 years ago|reply
[+] [-] loceng|5 years ago|reply
[+] [-] Black101|5 years ago|reply
[+] [-] sleepysysadmin|5 years ago|reply
From my point of view it's the real estate industry that's propping up the bubble. Evan Siddall came out telling the truth. https://www.thestar.com/business/2021/03/02/canadian-press-n...
Fired immediately because of outrage by the FIRE industries. The problem with Canada is that we taxed all our industries out of existence. We only really have FIRE industries or our economy crashes. There is technically only 1 way for it not to crash. Hyperinflation will fix the problem, though yes grandma and grandpa have to go back to work.
>It was just about to pop 6 years ago when I bought my condo. It was about to pop when values stopped increasing so dramatically 3 or 4 years ago. It was about to pop when the COVID-19 pandemic halted most sales. It's about to pop now because everyone is leaving the cities because of WFH rule changes.
Technically the bubble has existed since about late 90s and worse yet the federal government(Harper) spent significant tax payer money to keep our housing bubble from popping. https://4.bp.blogspot.com/-T_t1vRHF1Wk/Tl_578DBn3I/AAAAAAAAD...
That graph shows the problem. The USA took the hit in the face but we didn't.
https://tradingeconomics.com/canada/households-debt-to-incom...
The problem is that interest rates are so tremendously low and in some countries even going negative because it's a bubble that the governments are propping up. They'll risk everything to not be the last guy holding the bubble. It has gotten to the point that Canada's governments are not releasing financial information and even blocking evictions and such. Exacerbating the problem.
>I wish it would just pop so we can all get on with fixing the root problems.
It will continue so long as the government runs deficits. Everyone gave Kathleen Wynne a hard time about deficits but Ontario's deficits are not going to at least 2030. By Ford... the guy most likely to balance the budget. Meanwhile Trudeau's deficit of ~400 billion in a single year is equivalent to about 20 years of government debt.
The deficit problem is so bad that they are planning to simple print money. If your debt is locked in at 6% or so like ours is. If inflation is 50%. The problem goes away quickly. They will do that before letting our last industry fall. Especially given our taxes are so connected to the value of what is on the property.
[+] [-] Waterluvian|5 years ago|reply
I make more money alone than both parents did at my age. And I cannot afford even 1/3 of the house they bought when they were my age. And not some Toronto house. Just this thing on the edge of Waterloo. The house is worth 1200% what it was in 1989.
Luckily remote work allowed me to move to rural Ontario but even here prices are exploding. At this point I'm expecting my house to be worth a lot less one of these days, but I think it inevitably will appreciate in value long term.
Living in or near Toronto isn't even a possibility anymore.
[+] [-] fdhfdjkfhdkj|5 years ago|reply
[+] [-] chrisdinn|5 years ago|reply
I have a house in Kitchener but also a farm in PEC. The situation in rural Ontario is an order of magnitude worse and certain to crash. I bought farmland (with pretty bad soil) in 2014 for under $2000/acre—basically it’s agricultural value. A one acre lot across the street from me on a similar old farmstead sold for 100x that price this winter. This is not sustainable, I mean our wells go dry all summer. I get high speed internet such as it is through a complex direct LTE setup. This demand won’t last.
[+] [-] Gustomaximus|5 years ago|reply
It's not sustainable generally and political will for ever growing prices will have to shift as demographics age and non-owners grow relative to population.
And if interest rates start going north in any real way it's going to be severe with some of the debt load you hear about so many people taking on.
[+] [-] voisin|5 years ago|reply
Interest rates in the east 80s were in the teens. Today they are around 10x less at 1.5%. Over 25 year amortization that makes a big difference in total interest payments.
[+] [-] andrewmcwatters|5 years ago|reply
In my opinion things are so bad, I don’t know how these politicians aren’t getting killed. Maybe young people are too ignorant to know everyone is screwing them and that’s why we have no civil unrest.
[+] [-] JamisonM|5 years ago|reply
Everything else you cite here seems to be random arm waving in the general direction of capitalism.
The thing about the past was that we built a lot of housing, I think creating an environment where politicians can openly support building a lot more housing would actually address the "capitalism" problems.
[+] [-] refulgentis|5 years ago|reply
I'm not killing politicians because it's bad
[+] [-] anotherhue|5 years ago|reply
If property wasn't affordable (by whatever definition you choose) a few years ago, then it still won't be.
The interplay of interest rates, QE, life extension, centralisation, and property value amount to generational warfare.
[+] [-] TuringNYC|5 years ago|reply
This is such a great comment. It is partly generational warfare, partly class warfare, and partly institutional-vs-retail warfare.
Now matter how you look at it though, there are winner and losers and policy-makers have chosen those winners and losers by way of policy.
Unfortunately, this is easy which is why it is done -- people feel pain but the network of cause-and-effect is too complex for people to put a finger on the root cause.
[+] [-] mabbo|5 years ago|reply
A 30% crash would be good news.
[+] [-] xwdv|5 years ago|reply
[+] [-] barbacoa|5 years ago|reply
High property taxes can then be offset by lower income and sales taxes which only affect people who actually live in these cities. The end result is cheaper housing even after taxes.
[+] [-] KoftaBob|5 years ago|reply
To give you a real world example, NYC's Long Island suburbs are notorious for having some of the highest property taxes in the nation (mostly the school taxes). Despite this, LI home values continue to go up at a pretty high rate, an average/very basic starter home is around $500-600k.
This is because despite the high property taxes and not great weather, the demand for homes there highly outpaces supply. In the case of Long Island, the demand is due to things like having easy access to NYC's huge job market and NYC itself, the quality of schools, low crime rate, etc.
For you to make property taxes high enough to make a meaningful dent in demand, they'd have to be so high that any decrease in the cost of the home would essentially be cancelled out by the astronomical property taxes.
Time and time again, the root cause of high home values has shown to be that the increase of supply isn't keeping up with increase in demand. To fix that, the factors slowing down new supply need to be removed. These factors vary by location, and include things like a slow/expensive permit process, overly restrictive zoning, allowing NIMBY groups to slow down or block new development with constant town hall meetings, etc.
In the case of the crown jewel of places that are horrible at keeping up with housing demand, California, all 3 of those are at play simultaneously, and the housing costs there show it.
[+] [-] Gustomaximus|5 years ago|reply
Numbers off the cuff but something like <$1m is zero. $1-3m is 1%... Etc. Make the top rate untenable to own more than say $50m in residential like 10% + top rate for anything held under obscure ownership structure.
This way peeps can own a normal home at no cost, even have an investment property. But the person with 300 apartments who buys another 10 every year is encouraged to move their money to alternate assets.
[+] [-] lettergram|5 years ago|reply
The solution(s) are pretty straight forward and I believe Vancouver already initiated a tax on not living in a residence. If the goal is affordability, those policies need to be increased as well as new building efforts (aka change zoning).
[+] [-] pupdogg|5 years ago|reply
[+] [-] baybal2|5 years ago|reply
And there instantly came ads for services to keep appearance of home being occupied on https://www.vansky.com/ =D
Basically, property owners pay those guys to go and live there!
[+] [-] yanderekko|5 years ago|reply
[+] [-] TuringNYC|5 years ago|reply
Wouldn't simply ONLY building new buildings/housing be more effective? This way, the wealthy can continue to purchase, but the investment would become worse and worse in returns and essentially provide subsidized housing to renters. This is somewhat the case in NYC where rents are far lower than ownership carry for identical units because the units are sometimes treated as stores of value.
[+] [-] bradleyjg|5 years ago|reply
Why is this the best option? Are wealthy Chinese forbidden from buying foreign stocks?
[+] [-] imtringued|5 years ago|reply
Of course, this isn't the only factor. There are probably dozens of factors that are causing prices to rise but Chinese investors are highly price insensitive because doing anything with the CAD they have is better than letting them sit around. What else are they supposed to put the money into after all?
[+] [-] voisin|5 years ago|reply
[+] [-] calyth2018|5 years ago|reply
I've got no problems if hosts want to put up a guest bedroom to get some side income, but the amount of "furnished apartments" that are converted to basically hotels, without paying taxes as a business, or operate within the regulations is pretty staggering.
When the first lockdown happened, a rash of "furnished apartments" started appearing on rental sites, trying to stay afloat.
But it's far easier to blame foreign ownership alone, and ignore significant parts of the complete problem.
[+] [-] greenonions|5 years ago|reply
Is that madness? Cities trying to clamp down on Airbnb are just shooting themselves in the foot again along with NIMBY housing regulations.
There's incredible demand for housing in cities that isn't being met, and the cities which refuse to allow supply to rise will face the same problems and eventually lose out to more dynamic cities.
[+] [-] bentlegen|5 years ago|reply
When you purchase a home in Ontario, as a buyer, you are expected to pay an additional 2-5% of the purchase price in taxes. You need to have this money when you close, in addition to your down payment, and it is remitted immediately to the government.
This can be the equivalent of 5-10 years in property taxes, depending on the purchase price and how your home was assessed. And you pay it every time you move (and buy a new home)!
This pushes the tax burden disproportionately onto new homeowners, and incentivizes folks to stay in their homes for longer (don’t forget the additional 5% paid to agents).
It reminds me of Prop 13 in California, which similarly disproportionately taxes new homeowners and incentivizes people to hold onto property forever.
(Note: my numbers here are fuzzy, and I’m not a real estate expert, so someone here is welcome to correct me if I’ve incorrectly interpreted all this.)
https://www.ratehub.ca/land-transfer-tax
[+] [-] jpambrun|5 years ago|reply
[+] [-] dataminer|5 years ago|reply
These cities are immigration destinations, a large number of Canada’s > 300k annual immigrants becomes residents of these cities every year. These immigrants are educated and quite often asset owners in their own countries. So lots of foreign money flows to these cities through immigrant population. Also culturally immigrants invest more in real estate as countries they have come from don’t have great investment alternatives beside real estate.
Because interests rates have been falling for last 20 years property prices have increased tremendously. This has created tremendous wealth for property owners, who then learned that they can cheaply get money out through home equity line of credit. This money is then invested in other properties which are rented out to pay for mortgage and expenses, creating a loop which further expands the price growth.
At this point property owners are making more money just by living or holding their properties than by working. So its becoming extremely attractive form of investment.
All of this is propped up by lax regulation, low housing starts, green belts, few public housing options. It is a dire situation and now young people are getting frustrated. Because the wages haven’t kept up and savings have been inflated away by a government which loves to print money.
Now this not even a big city phenomenon, the leverage available has caused prices in small cities to rise tremendously as well. Young local population is getting priced out because numbered companies are hoarding up houses and making them rentals.
There are some solutions, like banning non residents to own residential property in Canada. Asking for over 50% downpayment for 2nd residential property, 75% on 3rd. Taxing vacant properties.
In the end government needs to realize that residential properties are social assets not financial assets. The goal should be to create vibrant communities, and that cannot be done if people are unable to own a residence.
[+] [-] voisin|5 years ago|reply
“ This has the potential to destroy the livability of every major community, create two classes of citizens, cement a wealth divide, disenfranchise an entire cohort, create structural household debt, make shelter unaffordable and hobble the economy as billions a week flow into vaporous housing equity. In short, it’s an epic policy failure. It’s time those who have greased the wheels – realtors, central bankers, political leaders and our federal housing agency – stand accountable.”
https://www.greaterfool.ca/2021/03/26/we-are-watching/
[+] [-] hourislate|5 years ago|reply
For Canadians that can't buy, I suggest you lobby your Gov to force Corporations to implement mandatory WFH for at least 80% of employees (that can). This should allow you to live in rural Canada somewhere and participate in property ownership. The other solution is to sell millions of acres of Crown Land to Canadians who are first time property owners.
[+] [-] ChrisArchitect|5 years ago|reply
[+] [-] agentultra|5 years ago|reply
[+] [-] Haegin|5 years ago|reply
[+] [-] renewiltord|5 years ago|reply
[+] [-] dagmx|5 years ago|reply
I've seen it often thrown around for housing markets but it seems out of touch, since it doesn't line up with a lot of median incomes of home owners vs median prices in metro areas.
It's not uncommon to see many people putting 50% of their income or more to rent, so why would mortgage be different?
[+] [-] dagmx|5 years ago|reply
I bought a town house in 2015, downtown Vancouver. Within a year it went up 50%. For a bit it was even 75% at the peak of the market pre the new regulations. Depending on the time of year it hovers between those two ends. Since it's downtown I'm not worried about a crash affecting it too much. However a crash would benefit us for selling and moving further out to a detached home where prices tend to fluctuate more.
That said, again, it's been a decade of people talking about the bubble bursting but I don't see what would cause it?
* Vancouver, like San Francisco, is limited in growth by the geography of the area. So it's not like new development will lower the market prices.
* We don't have a mortgage issue like the US did for the 2008 recession. In fact mortgage practices have become even stricter.
* The distance from the distant suburbs of Vancouver to downtown is paltry compared to commute in the Bay Area or LA. There's room to grow out in that direction. The public transit system is also much better than most American places I've been to. So living further isn't as much of a burden.
Point being: yes the market sucks. But I don't see what would cause a crash? Yes it's unaffordable for many. But I don't see that as a metric for a crash either, just a metric for growth outside of the core.
[+] [-] JamisonM|5 years ago|reply
I consider that desire just as realistic as the desire to live in a fully detached home and work in downtown Toronto.
Life is full of compromises, I'd rather not have a lawn to mow, but thems the brakes!
[+] [-] christkv|5 years ago|reply
[+] [-] AzzieElbab|5 years ago|reply
[+] [-] voisin|5 years ago|reply
[+] [-] RocketOne|5 years ago|reply
Its not 'bubbling' everywhere - just the meccas of Toronto and Vancouver and their bedroom communities are going nuts. Move to western Canada and prices are still very reasonable.