Canada's 'housing bubble' deemed close to bursting

[someone123]

Originally Posted by GlassCity

The ESL thing is different though. There are many people who have immigrated here and aren't rich but are ESL. Maybe not 49%, but it wouldn't surprise me if a large chunk of domestic students were ESL, like if you come to Canada when you're 5 or 10 or whatever.

The number I posted was only domestic students. Almost all of the foreign students are ESL. If you came to Canada when you were 5-10 and then learned English and went to UBC you'd be in that 49% group. You'd also be in it if your parents are investor-class immigrants and you moved here at 18 to go to university.

I know somebody who was asked to change his tutorial session for a science class once because every other student spoke Mandarin and the TA wanted to conduct instruction in Mandarin. This was at one of the major BC universities, back when we heard that foreign students were 5% or whatever. In the same way Vancouver is supposedly 5% foreign buyers but when I drive to work through an average part of metro Vancouver I see blocks and blocks of "for sale" signs with little or no English on them other than "by appointment only" (which presumably means "not for you"). I wonder how many Vancouver condo pre-sales in China count as domestic purchases. Probably most of them, since the foreign buyer tax provides an incentive to structure purchases in that way, and doing that is not hard.

I don't have a specific proportion in mind for ESL students or foreign vs. domestic students. My point is that for years when questions of post-secondary accessibility for native British Columbians came up the universities and province pointed to the foreign vs. domestic enrollment statistics. I do think those statistics are misleading when the domestic group includes ESL students who moved here 1 year ago. I also think the notion of students from outside of Canada subsidizing everyone else is dubious when most ESL students are paying domestic tuition rates. The story with data collection around housing in Canada is similar. Immigration should be part of that story too, particularly when people are immigrating for the purposes of buying real estate and aren't establishing careers in Canada or paying a lot of taxes here. Political support for immigration, foreign students, etc. are predicated on a certain concept of what those are based on (people building a life here, people paying extra for the privilege or those with special needs or abilities) and I think they have both been somewhat subverted in recent years.

[Pinion]

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[whatnext]

Originally Posted by esquire

All this panic for not even 5% of the local housing market?!

So looks like foreign buyers aren’t the big problem in Canada's housing market

So many holes and loopholes, but if I said "only 5% of Vancouver's housing stock burned down", would you think "Only" was an appropriate adjective?

Numbered companies, permanent residents getting money from relatives overseas, astronauts, all data points representing foreign money that aren't captured in the CMHC figures.

[Acajack]

Originally Posted by someone123

I know somebody who was asked to change his tutorial session for a science class once because every other student spoke Mandarin and the TA wanted to conduct instruction in Mandarin. This was at one of the major BC universities, .

What if the scheduling had been inconvenient for him/her?

[esquire]

Originally Posted by whatnext

So many holes an loopholes, but if I said "only 5% if Vancouver's housing stock burned down", would you think "Only" was an appropriate adjective?

Numbered companies, permanent residents getting money from relatives overseas, astronauts, all data points representing foreign money that aren't captured in the CMHC figures.

Even if you doubled CMHC's numbers, it would still be in the single digits!

[someone123]

Originally Posted by Acajack

What if the scheduling had been inconvenient for him/her?

Yes, it is problematic and violated the rules. I brought it up because it's an example of the reality "on the ground" that is hard to reconcile with the commonly-cited statistics if you take them at face value. I would be really surprised if none of those students who preferred to be taught in Mandarin were considered domestic.

Another common problem is people with poor English skills who get pushed through the system. They might end up in a third year university course and are still writing somewhat incomprehensible stuff. I am not talking about the one exchange student, I am talking about a large portion of each class. Non-ESL students suffer because they may be graded more harshly on the same material, or communication standards may be lowered for everyone and the quality of instruction suffers.

Yet another issue the universities have been dealing with is the proliferation of ethnic or language-based social groups on campuses. This is not like the German club where everyone who learns German or wants to learn is welcomed.

The cheating issue is another one. It is, erm, thought to not be evenly distributed across different student groups. I don't have much firsthand information on that so I will just hope universities are maintaining fairness I guess. There was a cottage industry of professional report writers in Vancouver who would advertise their services in Mandarin a few years ago.

The kids who I know who grew up in Vancouver all left for post-secondary, mostly for Ontario. I don't blame them. It's hard to get into schools here and the quality of undergraduate education doesn't seem great. Meanwhile the graduate faculty I used to work with has been decimated over the past few years because their incomes didn't keep up with the cost of living. Guess how many people in heavy demand with PhDs want to move to a mid-sized city where they'll be renting a crappy apartment or spending half of their income on a Hong Kong sized condo? I sometimes listen to recruitment calls for tech jobs and they are about 50% rationalization of why housing prices in Vancouver aren't so bad. Recruiting people from other cities is really hard here. These are for jobs well into the six figures that would bring vastly more money into provincial coffers than the typical investor class immigrant. If they can't be filled in Vancouver, they go to some other jurisdiction, often another country.

People probably don't really understand the magnitude of the issues in Vancouver by reading the few dubious statistics that are available.

[whatnext]

Originally Posted by esquire

Even if you doubled CMHC's numbers, it would still be in the single digits!

You're missing the point. Even just 5% is a significant amount. And we all know that's a low number caused by imperfect measurements. From Doug Porter, Chief Economist at BMO:

...Demand from foreign buyers is also playing a significant role in these two markets, and is also beginning to play a role in Montreal.

“While many downplay this factor ('it’s only X% of the buyers!'), Economics 101 will tell you that the marginal buyer sets the price; and, if you introduce a wave of new buyers on an already tight market, prices will soon reach for the sky as the demand curve shifts even slightly to the right,” Porter and Kavcic write...

https://www.biv.com/article/2016/6/new-government-housing-policy-should-focus-foreign/

[ssiguy]

Can someone please explain to me how Vancouver with supposedly only 5% foreign buyers manages to have a truly staggering 25,000 empty housing units in the most expensive market in NA and one of the most expensive in the world?

I for one just don't anyone who could buy many different houses/apts and afford to leave them empty but that's were the Chinese money launderers come in. Also remember these CHMC "stats" don't include previous passport buyers who may not even live in the country but buy housing en masse with their ill gotten gains and usually with cash and often thru numbered companies.

[giallo]

^A lot of those empty units would be held by Canadian speculators/companies, I imagine. Pension fund groups and the like have been buying houses for a while now, then sitting on them, and waiting for that big payday when some rich foreign "investor" comes in from a country that is politically unstable (ie China), and overpays.

Canadian greed has created far more of Vancouver's real estate woes than China. China is just a symptom of a much bigger issue. And that issue is Canadians treating housing like a commodity.

[ssiguy]

Originally Posted by giallo

^

Canadian greed has created far more of Vancouver's real estate woes than China. China is just a symptom of a much bigger issue. And that issue is Canadians treating housing like a commodity.

That is very true and Vancouver is much worse off because the City has allowed the entire city to be commodified. The province and City has allowed the wholesale destruction of whole neighbourhoods to keep the real estate Ponzi scheme going. Vancouver has become a city that has turned itself into a stock market and when you commodify a city you also commodify the people who live there...........just as the city views it's neighbourhoods as disposable they view it's citizens the same way.

[lio45]

Originally Posted by whatnext

So many holes and loopholes, but if I said "only 5% of Vancouver's housing stock burned down", would you think "Only" was an appropriate adjective?

Numbered companies, permanent residents getting money from relatives overseas, astronauts, all data points representing foreign money that aren't captured in the CMHC figures.

Companies count as local, unless I'm mistaken. So that figure of theirs is totally irrelevant: it only shows real estate owned directly under non-residents' names (the fraction of the iceberg that's readily visible, I'd call that). For the record, using that metric, all my Florida holdings count as "locally owned" by our FL C-Corporation, even though the people investing the money and calling the shots are 100% foreigners (us). And if I moved away and renounced my Canadian citizenship, our buildings here (held by a Quebec chartered corporation) would still count as locally owned as well, even though they wouldn't be anymore.

[osmo]

We have been saying for years that foreign ownership was never more than 5-7%. The truth has always laid bare in Canadian's overindulgence in debt with many people over leveraged and barley just floating above their carrying costs.

This new news will sway few who have an already crystalized idea that some mythical red storm from China is making their cities unaffordable.

We are not building enough units here in many cities and cheap debt has blown up the ability of folks to enter and bid up prices.

[esquire]

Originally Posted by osmo

We are not building enough units here in many cities and cheap debt has blown up the ability of folks to enter and bid up prices.

Winner winner chicken dinner

Whether you shut out Chinese money or not, this problem will continue until supply increases or demand diminishes.

[csbvan]

Originally Posted by esquire

All this panic for not even 5% of the local housing market?!

So looks like foreign buyers aren’t the big problem in Canada's housing market

20% of new stock is going to foreign buyers, a crazy number. So yes, some panic is justified. A huge portion of new supply is being purchased by overseas investors:

http://www.cbc.ca/news/canada/british-co...ents-statistics-canada-figures-1.4456657

[geotag277]

Originally Posted by lio45

Companies count as local, unless I'm mistaken. So that figure of theirs is totally irrelevant: it only shows real estate owned directly under non-residents' names (the fraction of the iceberg that's readily visible, I'd call that).

Not exactly "irrelevant", because related studies have shown that the number of buyers at the top end of the market which is obstinately dominated by foreign buyers, used their legal names in the transactions:

https://www.theglobeandmail.com/news/bri...by-chinese-buyers-study/article27064577/

You could argue after the foreign buyer taxes that numbered companies may be more popular, but the statscan data goes from 2006-2017, in other words, by all accounts a vanishingly small amount of the data would be attributed to numbered companies.

[geotag277]

Originally Posted by csbvan

20% of new stock is going to foreign buyers, a crazy number. So yes, some panic is justified. A huge portion of new supply is being purchased by overseas investors:

http://www.cbc.ca/news/canada/british-co...ents-statistics-canada-figures-1.4456657

Agreed, 20% of new condos being bought by foreign buyers is a huge problem, especially in the city of Vancouver itself (Richmond and Coquitlam I don't find as big of a deal, especially since every other neighbourhood is single digits).

I do think the City of Vancouver should absolutely be on the ball restricting foreign ownership of new development to temper demand, but there may be a few consequences of this.

First, we should understand that "non-resident" does include potentially a large number of Canadians. From the article:

"Non-residents" are defined by Statistics Canada as either a Canadian citizen who no longer lives in the country (but still owns real estate) or a non-citizen who owns property in Canada without using it as a primary residence.

Second, is that condos all over the world are seen as a low cost avenue to real estate ownership and property management. Toronto also has several neighbourhoods with double digit foreign buyer investment, including the City of Toronto and Markham.

Although these properties are foreign owned, they are typically rented as an investment vehicle, and as such add much needed rental stock to the housing market, especially in places where developers shy away from buying rental units (definitely true of Toronto and Vancouver, and until recently, Calgary as well).

How many rental units are Toronto and Vancouver building these days?

In a very real sense, foreign buyers spurring the development of more and more condominiums helps to increase the supply side dynamics of the market and moderate prices as these units come online. By entirely cutting out foreign buyers, you may cut off the condo market at the knees and exacerbate already precarious supply side shortages. What is the rental vacancy rate in Vancouver again?

The answer would be to force rental stock to be added to the market, but as I've been told, Vancouver currently has zero zoning or legislative powers to do that. That needs to be fixed, IMO, before you can start cutting off foreign investment in properties.

[GreaterMontréal]

Greater Vancouver , more than 3 out of 4 homes sold below asking in November.

[csbvan]

Originally Posted by GreaterMontréal

Greater Vancouver , more than 3 out of 4 homes sold below asking in November.

You can follow along in real time if you'd like:

https://www.myrealtycheck.ca/

[GlassCity]

Originally Posted by osmo

We have been saying for years that foreign ownership was never more than 5-7%. The truth has always laid bare in Canadian's overindulgence in debt with many people over leveraged and barley just floating above their carrying costs.

This new news will sway few who have an already crystalized idea that some mythical red storm from China is making their cities unaffordable.

We are not building enough units here in many cities and cheap debt has blown up the ability of folks to enter and bid up prices.

We are building absolutely plenty of units, and we upzoned the entire city to build more, all we'd be doing is providing more stock for investors to buy. Building more supply only for investors holds very little logic to me. I don't think there's an end to this demand through supply. Kill the demand. We shouldn't be going out of our way to produce housing for investors, whether they're from Beijing or from Toronto.

Giallo's right, this has everything to do with housing being a commodity. But Someone's right too - stats tell one side of the story, but being on the ground, it tells another.

There's tons of professional and academic literature arguing from both sides of the issue, so nobody will be convincing anybody else of their views here. I'm just saying that for me, demand arguments are much more convincing than supply, and for me, trying to drastically increase supply in our cities seems like we're just selling them out to capitalist interests rather than actually being concerned with what happens to the people who live in them. Lots of fun ahead I guess. We'll see what happens.

[GlassCity]

Originally Posted by geotag277

Agreed, 20% of new condos being bought by foreign buyers is a huge problem, especially in the city of Vancouver itself (Richmond and Coquitlam I don't find as big of a deal, especially since every other neighbourhood is single digits).

I do think the City of Vancouver should absolutely be on the ball restricting foreign ownership of new development to temper demand, but there may be a few consequences of this.

First, we should understand that "non-resident" does include potentially a large number of Canadians. From the article:



Second, is that condos all over the world are seen as a low cost avenue to real estate ownership and property management. Toronto also has several neighbourhoods with double digit foreign buyer investment, including the City of Toronto and Markham.

Although these properties are foreign owned, they are typically rented as an investment vehicle, and as such add much needed rental stock to the housing market, especially in places where developers shy away from buying rental units (definitely true of Toronto and Vancouver, and until recently, Calgary as well).

How many rental units are Toronto and Vancouver building these days?

In a very real sense, foreign buyers spurring the development of more and more condominiums helps to increase the supply side dynamics of the market and moderate prices as these units come online. By entirely cutting out foreign buyers, you may cut off the condo market at the knees and exacerbate already precarious supply side shortages. What is the rental vacancy rate in Vancouver again?

The answer would be to force rental stock to be added to the market, but as I've been told, Vancouver currently has zero zoning or legislative powers to do that. That needs to be fixed, IMO, before you can start cutting off foreign investment in properties.

I disagree that this is only a City of Vancouer problem. Investors are buying properties in the whole region, and even if they are concentrated in Vancouver, that has reverberations through the rest of the metro area. Such large problems don't end at arbitrary, meaningless municipal borders.