Canada's 'housing bubble' deemed close to bursting

[Pinion]

Definitely looks like prices are going up in my hood again. Not many single family homes exist, but I don't remember ones like this costing $1,200,000 before.


http://www.rew.ca/properties/R2017120/522-e-7th-street-north-vancouver

It's not even one of the "foreign investor" hotspots, mainly just the children of WASP boomers and 1970s Persian immigrants.

[cornholio]

Originally Posted by casper

Foreign ownership controls do not work. In countries where such things are common you simply incorporate a company, and the company owns the property.

For example:
Mrs Jane Joe from London falls in love with the bungalow in Delta.
She goes to here friendly lawyer says I want to incorporate "The Jane Joe Property Company Ltd." or if less creative "323242332312 BC Ltd.".
Lawyer sets up the company with his office In Vancouver as the residency for the company and Jane Joe as the shareholder.
The company now goes and buys the bungalow.

Shell companies are a wonderful thing.

All this is accomplished by doing this is creating work for lawyers.

Anti foreign ownership rules do work. My originally country had to implement them to prevent west Germans and other western Europeans from buying up all the housing and land, and it worked and SAVED the country, though the controls could have been implemented much sooner in the 90's as lots of damage was done before they were properly implemented. I have a beach house I bought in one South America country as my wife is from there and they also have foreign ownership control's to a extent and they also work. And we have many acquaintances that live in Mexico where they alo have foreign ownership controls, for a very good reason, and it works there as well.

There are loopholes that need constant patching but the foreign ownership control rules work, everywhere when implemented properly and honestly by a government that wants them to succeed. Only thing that doesn't work is doing nothing.

[mistercorporate]

Foreign ownership laws do work, recently implemented laws are already making a contribution to Australia's declining real estate prices. Major Chinese investors tried that "registered company" trick and are now finally getting prosecuted for it in Oz as we speak.

[whatnext]

Originally Posted by casper

Foreign ownership controls do not work. In countries where such things are common you simply incorporate a company, and the company owns the property.

For example:
Mrs Jane Joe from London falls in love with the bungalow in Delta.
She goes to here friendly lawyer says I want to incorporate "The Jane Joe Property Company Ltd." or if less creative "323242332312 BC Ltd.".
Lawyer sets up the company with his office In Vancouver as the residency for the company and Jane Joe as the shareholder.
The company now goes and buys the bungalow.

Shell companies are a wonderful thing.

All this is accomplished by doing this is creating work for lawyers.

There's plenty of ways to close that loophole. Prevent incorporated companies from owning residential real estate for one.

[casper]

Originally Posted by whatnext

There's plenty of ways to close that loophole. Prevent incorporated companies from owning residential real estate for one.

The only problem is a significant percentage of residential rental properties are owned by incorporated entities. Limited the ability of incorporated companies to own residential properties removes a significant part of the rental pool from the market.

[rbt]

Originally Posted by Procrastinational

If I had to guess, it will be when the baby boomers start to leave the workforce in significant numbers.

Not sure about that.

Large sum inheritance will rapidly climb at the same time or very shortly afterward. If the next generation spends it on housing (any previously invested assets and money from their parents house sale) then it could continue to climb. It'll probably become more city oriented; perhaps more million dollar downtown condos and fewer million dollar suburban houses?

[whatnext]

Originally Posted by casper

The only problem is a significant percentage of residential rental properties are owned by incorporated entities. Limited the ability of incorporated companies to own residential properties removes a significant part of the rental pool from the market.

Simple, allow corporate ownership only of purpose built rental buildings. That's where investment money should be directed anyway. It would also solve the ongoing conflicts between owner-occupiers and investor owners.

[Stryker]

Originally Posted by Berklon

It's really distorted how back then families had only 1 income, more kids and higher interest rates and yet were able to save money... but today most families have 2 incomes, less kids and historically low interest rates - but they're living paycheque-to-paycheque and are heavily in debt. It's mainly because people like to live beyond their means. Have to have the latest phones, tablets, TVs... want to eat out often, and have bigger houses than they need filled with stainless steel everything.

I find it really funny you bring up the same old same old, if you read above and look below, logic failure occurs.

It totally pays off to live beyond your means, with real estate appreciations. It's the only reason the market is bubbling so high in the first place.

I buy a home on debt, sell for a profit, get more debt and try to keep this pyramid scheme cycle going.

It's pretty much the nature of canadian life for the last 15 years.

Originally Posted by Berklon

Housing is one of the biggest reason why people are so in debt. Both due to the out of wack pricing and the entitlement of buying a house they really can't afford.

[Berklon]

Originally Posted by Stryker

It totally pays off to live beyond your means, with real estate appreciations. It's the only reason the market is bubbling so high in the first place.

I buy a home on debt, sell for a profit, get more debt and try to keep this pyramid scheme cycle going.

It's pretty much the nature of canadian life for the last 15 years.

Hooray, I guess?

Most people don't even realize how much it's costing them to join in on this pyramid scheme. They think it's as simple as buying for 500k and selling for 650k. Nevermind the costs associated with owning the home and financing it... and the fact that they'll now have to buy another home that's also increased in price.

But hey, let's keep this scheme going. It's amazing isn't it?
Let's just hope oil prices can remain high since Canada is so dependant on it and people can have jobs to pay into this increasing debt... oh wait...

[jigglysquishy]

People ignoring HOA/condo fees, property taxes, and maintenance is a huge problem. A $500,000 SFH in Saskatoon will run you $4500 a year in property taxes. You should be putting $10,000 a year into maintenance. You might luck out and have no HOA or condo fees.

But that's still ~$14,500 a year above a mortgage payment. While you can't avoid taxes, most people neglect to do proper maintenance on their homes. Its only a matter of time before that bites you in the ass.

[Stryker]

Originally Posted by Berklon

Hooray, I guess?

Most people don't even realize how much it's costing them to join in on this pyramid scheme. They think it's as simple as buying for 500k and selling for 650k. Nevermind the costs associated with owning the home and financing it... and the fact that they'll now have to buy another home that's also increased in price.

But hey, let's keep this scheme going. It's amazing isn't it?
Let's just hope oil prices can remain high since Canada is so dependant on it and people can have jobs to pay into this increasing debt... oh wait...

My point is there is no way to truly win either than master the market timing.

There are few and far sound options.

[kwoldtimer]

Fresh from the Mop & Pail:

The Liberal government is raising the minimum down payment for new insured mortgages to 10 per cent from 5 per cent for the portion of house prices above $500,000.

Finance Minister Bill Morneau, who announced the change in Ottawa Friday, said the new rules will take effect on Feb. 15, 2016. Down payment rules for mortgages for properties below $500,000 will be unchanged.

http://www.theglobeandmail.com/news/poli...for-houses-above-500000/article27711582/

[travis3000]

As a real estate agent I can say it's probably a good thing. A few less people will be able to qualify for mortgages, but it's better they take an extra year or two to save more. Just adds an extra layer of protection.

[flar]

This new rule will protect a few people from buying a home they can't afford. But won't it just make things easier for foreign buyers with lots of cash? That will have the consequence of making it even harder for younger people to get into the housing market.

[kwoldtimer]

Originally Posted by flar

This new rule will protect a few people from buying a home they can't afford. But won't it just make things easier for foreign buyers with lots of cash? That will have the consequence of making it even harder for younger people to get into the housing market.

Yes and no. The issue seems to me to be the risk that people are in the housing market who just shouldn't be. Meanwhile the banks are insured against loss, something that also needs more scrutiny, imho.

[geotag277]

Originally Posted by flar

This new rule will protect a few people from buying a home they can't afford. But won't it just make things easier for foreign buyers with lots of cash? That will have the consequence of making it even harder for younger people to get into the housing market.

We shouldn't optimize our housing market for protecting against foreign investors at the expense of putting domestic mortgages at risk. By all accounts foreign investors are a tiny to medium contributor to a couple isolated markets in Canada.

It is far more important to ensure the financial wherewithal of domestic individuals who are jumping into 500k+ properties with 400k+ mortgages.

If you can't scrap up the money to put 10% down on a 500k+ property, it stands to reason you probably shouldn't be buying that place in the first place.

I wonder if travis can share some realtor stories of individuals he sold to that he absolutely knew in the back of his mind should definitely not be buying. I know local agents in Calgary can rattle off several without much thought.

[WhipperSnapper]

Tiny to medium contributors in a couple isolated markets?

[geotag277]

Originally Posted by WhipperSnapper

Tiny to medium contributors in a couple isolated markets?

To clarify, tiny in markets like Ottawa, Quebec City, Winnipeg, Calgary, Victoria and Edmonton, medium in markets like Vancouver and Toronto and perhaps Montreal, and a total non factor virtually everywhere else. Or do you honestly believe foreign investment is propping up the Brandon, Winnipeg housing market?

We shouldn't be relaxing down payment rules to promote fiscally irresponsible domestic mortgage sales, and especially not optimizing our domestic mortgage sales policies for solving or compensating for the influence of foreign investment.

[WhipperSnapper]

Tiny in Calgary?!? Where do you think all the developers are from in Calgary? Where do you think they get the hundreds of millions to have multiple projects on the go in numerous cities and for each one they grossly overpaid? Who is dominating the national rental market right now? You think this about some end users. There's nothing shocking or to be proudful about all the development in Calgary during 35 dollar oil. Back to end user, what may shock you are the dozens of rental listings that come up when those "sold out in a day" Calgary buildings get their occupancy permits.

It's far from being just Chinese as well.

[Pinus]

Originally Posted by geotag277

Or do you honestly believe foreign investment is propping up the Brandon, Winnipeg housing market?

It may not be at Hongcouveresque levels and not contributing anything significant at the moment, but there is a growing amount of foreign investment occurring in the Winnipeg market now, especially with the exponentially growing immigrant population we have occurring in and around the city; especially with the new condominium towers under construction in the downtown area where a good chunk of the units are expected to become rental income properties.