Chinese Investors Driving Up Metro Housing Prices

[retro_orange]

Originally Posted by Jebby

Totally agree with this guy.

Haha, this guy (Jebby) is the epitome of a disconnected entitled elitist and frankly very outdated views on economic policies. It's like he learned from a textbook from 1985.

[Jebby]

Originally Posted by retro_orange

Haha, this guy (Jebby) is the epitome of a disconnected entitled elitist and frankly very outdated views on economic policies. It's like he learned from a textbook from 1985.

So because I agreed with a guy who said he find it unfair that the tax applies to people who already have a purchasing agreement but haven't yet taken ownership and that they should be exempt from the tax, that means I'm an "entitled elitist"?

And my economic argument for affordability is outdated because I believe that price is set by supply and demand? Relax zoning and build more so prices will come down. I guess even Paul Krugman has very outdated views on this topic as well.

[retro_orange]

Originally Posted by Jebby

So because I agreed with a guy who said he find it unfair that the tax applies to people who already have a purchasing agreement but haven't yet taken ownership and that they should be exempt from the tax, that means I'm an "entitled elitist"?

And my economic argument for affordability is outdated because I believe that price is set by supply and demand? Relax zoning and build more so prices will come down. I guess even Paul Krugman has very outdated views on this topic as well.

The summary of your posts on all threads brought me to that conclusion before this argument took place.

[Jebby]

Originally Posted by retro_orange

The summary of your posts on all threads brought me to that conclusion before this argument took place.

You're entitled to your opinion, but history has shown that the free market is much more effective than central planning, that price controls inevitably fail, and that when supply is constrained prices go up. It's all pretty basic economics.

[Alex Mackinnon]

Originally Posted by Jebby

You're entitled to your opinion, but history has shown that the free market is much more effective than central planning, that price controls inevitably fail, and that when supply is constrained prices go up. It's all pretty basic economics.

Pretending this market is free is just plain stupid. The government backs mortgages, provides services and utilities, sets controlling interest rates, controls zoning, allows people to remove money from RRSPs for down-payments, sets building codes, provides stimulus, provides below-cost housing to people to prevent social unrest, etc...

The government provides all sorts of assurances that have produced this stupid price bubble. Only favouring one type of regulation is typical right-wing two-faced bs I've come to expect recently.

Housing isn't just some stupid commodity like gold or silver most people can escape being affected by market whims if they want to. The government is entirely correct to step in to things to bring costs back down to from the stupid levels they've reach recently. In my opinion they're about 5 years late.

[Jebby]

Originally Posted by Alex Mackinnon

Pretending this market is free is just plain stupid. The government backs mortgages, provides services and utilities, sets controlling interest rates, controls zoning, allows people to remove money from RRSPs for down-payments, sets building codes, provides stimulus, provides below-cost housing to people to prevent social unrest, etc...

The government provides all sorts of assurances that have produced this stupid price bubble.

I never claimed there's a free market in real estate. As you correctly point out, there's a lot of government intervention from the price of money down to building codes. I agree that it would be stupid to pretend there's a free market in real estate.

Originally Posted by Alex Mackinnon

Only favouring one type of regulation is typical right-wing two-faced bs I've come to expect recently.

I'm not sure what you mean here.

Originally Posted by Alex Mackinnon

Housing isn't just some stupid commodity like gold or silver most people can escape being affect by market whims if they want to. The government is entirely correct to step in to things to bring costs back down to from the stupid levels they've reach recently. In my opinion they're about 5 years late.

They're more than 5 years too late. If they wanted to do something meaningful they'd allow interest rates to rise or at least allow for a more market-oriented pricing mechanism for interest rates to be set (yes, I realize that's a BoC thing, not a BC Legislature/federal Parliament matter)

[Caliplanner1]

Originally Posted by Jebby

You're entitled to your opinion, but history has shown that the free market is much more effective than central planning, that price controls inevitably fail, and that when supply is constrained prices go up. It's all pretty basic economics.

.....well, that depends on how one defines "more effective" Jebby. The market certainly MORE EFFECTIVELY precipitates growing income inequality and attendant debt to eventually crash the housing market (via bubbles) if not cooled by government intervention. Many buyers and sellers acting randomly (via multiple/dynamic diverging and converging interests) cannot produce sane/equitable/stable macro economic outcomes Jebby,...that's plumb crazy thinking man!

[retro_orange]

Originally Posted by Caliplanner1

.....well, that depends on how one defines "more effective" Jebby. The market certainly MORE EFFECTIVELY precipitates growing income inequality and attendant debt to eventually crash the housing market (via bubbles) if not cooled by government intervention. Many buyers and sellers acting randomly (via multiple/dynamic diverging and converging interests) cannot produce sane/equitable/stable macro economic outcomes Jebby,...that's plump crazy thinking man!

Exactly, we're still dealing with the fallout of right wing policies and economic and social standards that were set in the 80's. Conveniently Trump is maintaining that status quo.

[whatnext]

Originally Posted by Jebby

So because I agreed with a guy who said he find it unfair that the tax applies to people who already have a purchasing agreement but haven't yet taken ownership and that they should be exempt from the tax, that means I'm an "entitled elitist"?

And my economic argument for affordability is outdated because I believe that price is set by supply and demand? Relax zoning and build more so prices will come down. I guess even Paul Krugman has very outdated views on this topic as well.

Build more? And yet we have Cressey bitching and moaning that the new tax will cause half of their buyers (who happen to be foreign) to bail out. So building more obviously just provides more units to stoke the fire of speculation and foreign buying. It's been apparent for years that local incomes are not driving the market. Building more as an affordability strategy would only work if all foreign money was wrung out of the system.

[retro_orange]

Originally Posted by whatnext

Build more? And yet we have Cressey bitching and moaning that the new tax will cause half of their buyers (who happen to be foreign) to bail out. So building more obviously just provides more units to stoke the fire of speculation and foreign buying. It's been apparent for years that local incomes are not driving the market. Building more as an affordability strategy would only work if all foreign money was wrung out of the system.

Yeah, i have my own qualms with Cressey, donating a fair bit to the Vision platform. Nacel is the name of their apartment management company and it's a slumlord operation. I live in one of these buildings simply because it was the only thing affordable, thankfully it's not one of the worst. Google Nacel and you will get a taste of how the Cressey family operates.

[jlousa]

Guys Jebby is absolutely correct from an economic standpoint. You have two buyers today, one buys a completed unit and removes a units from the market place and pays no tax. You have a second buyer that bought a presale last week, they aren't removings a unit from the market place, they are creating a unit, yet the second buyer gets dinged with a 15% after the fact. How can anyone argue that makes sense? Sure if they bought after the tax is implemented it would be one thing but doing it retroactive is bad policy.

This is going to cause a reduction in future supply. And although it will make a slight dent in prices, it won't do much, if you can't afford anything today would you be able to afford if prices fall 10-15% or even 20% from the recent highs? What I expect to see is the reduced new supply create upward pressure on rents hurting the very people that need the most help. The proper solution was not to have kept interest rates so low for so long, but raising them would hurt too many voters so it wasn't done. Short shortsightedness.

[WarrenC12]

Originally Posted by jlousa

Guys Jebby is absolutely correct from an economic standpoint. You have two buyers today, one buys a completed unit and removes a units from the market place and pays no tax. You have a second buyer that bought a presale last week, they aren't removings a unit from the market place, they are creating a unit, yet the second buyer gets dinged with a 15% after the fact. How can anyone argue that makes sense? Sure if they bought after the tax is implemented it would be one thing but doing it retroactive is bad policy.

This is going to cause a reduction in future supply. And although it will make a slight dent in prices, it won't do much, if you can't afford anything today would you be able to afford if prices fall 10-15% or even 20% from the recent highs? What I expect to see is the reduced new supply create upward pressure on rents hurting the very people that need the most help. The proper solution was not to have kept interest rates so low for so long, but raising them would hurt too many voters so it wasn't done. Short shortsightedness.

Ok, a few comments on this whole situation:

1. Nobody knows the true goal of this tax, but according to the government, they want to tax foreigners who are driving up prices, and use that money to pay for low income rentals and other housing options for local citizens. This is exactly what the public has been clamoring for.

2. The result of this tax is either a windfall of money (to be directed towards rentals for locals) or a big correction in real estate. Again, this is exactly what the public has been complaining about.

3. Rules have to come into effect at some date. I personally have an outstanding pre-sale contract, and I benefited substantially from the changes in PTT earlier this year. Pre-sale contracts are nothing more than pieces of paper. The taxation and all other legal impacts have always happened at the stage when the land is transferred. Those who don't get to vote are getting screwed, what a shocker.

4. Mortgage interest rates are driven by the bond market, full stop. There is literally nothing that local jurisdictions can do to impact these rates. Even the federal government has little control as bond returns are linked to the risk factors of the country's entire economy. The federal government has a huge debt and no desire to pay more interest than absolutely necessary on the money they are borrowing.

5. I know Mike Stewart, I've been to a few of his open houses and he has been a buyer's agent for me. He's a character to be sure, but he knows a ton about the local market and works hard for his clients. He has their best interests in mind (because they pay his salary), and his suggestions are merely tax avoidance, the same thing you'd expect from your accountant or your lawyer. If the government wanted to make what he's suggesting illegal, they should have written it into the legislation.

[jlousa]

The bond market is controlled by expected inflation, which is controlled by government set short term interest rates, the feds ultimately control to a significant degree what the bond rates are, lets not kid ourselves. The feds (previous and current governments) had the ability to quash this the proper way but didn't because they feared raising rates without the US raising theirs lockstep would've caused the cdn dollar to skyrocket and that would've had significant negative effects on the economy, not to mention the higher interest rates would've hurt those stretched to the limit with mortgage payments. Instead they chose to wait for the market to correct itself which it would eventually, problem is the public got restless so they needed to act. Creating policy that acts retroactively is bad governance, we can either agree on that point or agree to disagree. Sure a pre-sale is a contract, but it's one that the buyer would've done significant research before entering into good faith. It's no secret I don't like governments meddling any more then needed in the economy but if you're going to do it... it needs to be better thought out and this reeks of poorly planning and rushed.

[Tfreder]

Originally Posted by WarrenC12

5. I know Mike Stewart, I've been to a few of his open houses and he has been a buyer's agent for me. He's a character to be sure, but he knows a ton about the local market and works hard for his clients. He has their best interests in mind (because they pay his salary), and his suggestions are merely tax avoidance, the same thing you'd expect from your accountant or your lawyer. If the government wanted to make what he's suggesting illegal, they should have written it into the legislation.

Taken directly from the government news release:

Tax Avoidance

Anti-avoidance provisions exist and will be enforced to ensure all foreign entities report
and pay the additional tax as required, including examining circumstances where
Canadians hold property in trust for a foreign entity or are trustees where a beneficiary
may be a foreign entity.

Failure to pay the additional tax as required or purposely completing the general or
additional property transfer tax return with incorrect or misleading information may
result in a penalty of the unpaid tax plus interest and a fine of $200,000 for corporations
or $100,000 for individuals and/or up to two years in prison. The penalties apply to
anyone who participates in tax avoidance.

Property transfers will be monitored for compliance and the province will follow up
with those businesses or individuals filing incomplete or incorrect general or additional
property transfer tax returns

[WarrenC12]

Originally Posted by jlousa

The bond market is controlled by expected inflation, which is controlled by government set short term interest rates, the feds ultimately control to a significant degree what the bond rates are, lets not kid ourselves. The feds (previous and current governments) had the ability to quash this the proper way but didn't because they feared raising rates without the US raising theirs lockstep would've caused the cdn dollar to skyrocket and that would've had significant negative effects on the economy, not to mention the higher interest rates would've hurt those stretched to the limit with mortgage payments. Instead they chose to wait for the market to correct itself which it would eventually, problem is the public got restless so they needed to act. Creating policy that acts retroactively is bad governance, we can either agree on that point or agree to disagree. Sure a pre-sale is a contract, but it's one that the buyer would've done significant research before entering into good faith. It's no secret I don't like governments meddling any more then needed in the economy but if you're going to do it... it needs to be better thought out and this reeks of poorly planning and rushed.

On the bond market, I agree that inflation plays a part, and the federal government can manipulate it, but ultimately these are all investments sold on the open market. There is a significant impact to the entire economy from small changes in these rates. But to push monetary policy in a certain direction in an effort to impact real estate in one moderately sized market in Canada would be silly and irresponsible.

I agree this particular change could have been brought in with more notice, and perhaps in 5% increments. But pre-sale contracts can easily stretch 2-3 years, and grandfathering all of them would have been too long IMO.

[Infrequent Poster]

I apologize if this has already been discussed (I read back through the last 4 pages and didnt see anything) but, does this mean we will start to see alot more foreign investment (and a more rapid rise in priceas) in areas such as Victoria, Nanaimo, Sunshine coast, Squamish, fraser valley etc.

[Jebby]

Originally Posted by Caliplanner1

.....well, that depends on how one defines "more effective" Jebby.

The market is more effective at alleviating poverty and increasing wealth than central government planning.

Originally Posted by Caliplanner1

The market certainly MORE EFFECTIVELY precipitates growing income inequality and attendant debt to eventually crash the housing market (via bubbles) if not cooled by government intervention.

The housing bubble is a direct result of government intervention into the housing market.

• Artificially low interest rates set by the Fed
• The Community Reinvestment Act which not only encouraged, but mandated banks lower their lending standards, so banks lent to people with bad credit scores and no way of paying back the loans
• Freddie and Fannie buying up all those bad loans
• A pro-ownership tax code thereby channeling more artificial demand into the housing sector
• A "too big to fail" mentality which gave give banks an implicit promise from the government that they'd be bailed out

I don't see how you can seriously call the housing bubble a failure of the free market when it was directly caused and exacerbated by government intervention.

Originally Posted by Caliplanner1

Many buyers and sellers acting randomly (via multiple/dynamic diverging and converging interests) cannot produce sane/equitable/stable macro economic outcomes Jebby,...that's plumb crazy thinking man!

And a small group of central planners somehow can...?

[Caliplanner1]

Originally Posted by Jebby

The market is more effective at alleviating poverty and increasing wealth than central government planning.



The housing bubble is a direct result of government intervention into the housing market.

• Artificially low interest rates set by the Fed
• The Community Reinvestment Act which not only encouraged, but mandated banks lower their lending standards, so banks lent to people with bad credit scores and no way of paying back the loans
• Freddie and Fannie buying up all those bad loans
• A pro-ownership tax code thereby channeling more artificial demand into the housing sector
• A "too big to fail" mentality which gave give banks an implicit promise from the government that they'd be bailed out

I don't see how you can seriously call the housing bubble a failure of the free market when it was directly caused and exacerbated by government intervention.



And a small group of central planners somehow can...?

In response to your NYC anti rent control assertion on the Burnaby construction page let me say that new apartment developments or renovations does not mean that low income workers will be able to afford said apartments....hence your reasoning is faulty that housing rent control limits supply based affordability. For anecdotal evidence please see the recent Burnaby squatter incident where low wage residents revolted the imposition of high priced/unaffordable apartment construction.

As per your assertions above I'll say this....list the multiple/interconnected causes of the Great Depression (e.g. unemployment and underemployment driven by over supply/falling prices as a result of the application of advanced production technologies, capitalist investors buying stocks on margin, easy money supply/loans to boost PRIVATE SECTOR banking activity/profits etc.) and you'll get a clearer understanding of why your general arguments above are shallow at best towards a comprehensive understanding of the structural limitations/contradictions of ("free") market based capitalism and what the New Deal (and similar government interventions-including communism) is have been trying to achieve and why.

Keep in mind that wealth is created by restrictive market regulation (e.g. via legal/technological-based market barriers that precipitates higher profits when effective supply is below effective demand given the first axiom of economics that all things are relatively scarce) in contrast with open/unrestricted free market access (where effective supply outstrips effective demand thus lowering profits/effective wealth creation etc.).

You clearly don't believe that capitalism's Achilles heel/dark side is its tendency to precipitate RELATIVE poverty via growing income inequality and attendant debt EVEN given increased levels of production of material stuff/wealth on store shelves and in your private possession.

[Vin]

Originally Posted by Infrequent Poster

I apologize if this has already been discussed (I read back through the last 4 pages and didnt see anything) but, does this mean we will start to see alot more foreign investment (and a more rapid rise in priceas) in areas such as Victoria, Nanaimo, Sunshine coast, Squamish, fraser valley etc.

I would say more like Toronto, but yeah to a certain extent those smaller cities and towns would gain more investments.

[cornholio]

Originally Posted by Infrequent Poster

I apologize if this has already been discussed (I read back through the last 4 pages and didnt see anything) but, does this mean we will start to see alot more foreign investment (and a more rapid rise in priceas) in areas such as Victoria, Nanaimo, Sunshine coast, Squamish, fraser valley etc.

The province with this act has mechanisms in place to expand it to other areas of the province. They said they will monitor the data on a ongoing basis and see what the effects are and expand this tax if need be. That means today there can be no tax in Victoria and next week it can be in place. Foreign speculators will be playing with fire by speculating anywhere in BC at this point, the market dynamics have changed province wide, and to a extent Canada wide as this sets a precedent of what sort of action can be taken anywhere. Foreign speculators stay away is the message Canada wide, we can and will make you pay/lose. Its not worth it.

Does that answer your question?

https://www.leg.bc.ca/parliamentary-...edings/v160728

http://vancouversun.com/news/local-n...r-tax-into-law

The housing law also gives cabinet the ability to change the foreign tax to between 10 and 20 per cent with the stroke of a pen, as well as to expand the tax outside Metro Vancouver if government sees foreign investors driving up prices in other B.C. communities.