Canada's 'housing bubble' deemed close to bursting

[hipster duck]

Originally Posted by lio45

We may be at the dawn of a paradigm shift with cryptocurrencies replacing Vancouver real estate as the vehicle of choice for Chinese money launderers.

It would be amusing if the solution came from such a source... Vancouver would have had its few decades of market craziness as the one city on the side of China in a stable country where the Feds are particularly welcoming of questionable foreign capital -- a quite unique position which is what sent the market to such heights.

I've thought about this too.

It's impossible to tell exactly by how much Vancouver's property price gains are influenced by different things, but I think the following variables are significant:

a) For overseas investors, Vancouver real estate is perceived as a competitive, low-risk investment with high rates of return
b) Vancouver real estate is a useful place for overseas criminals to stash money prior to laundering it; Canada is an easy place to launder money.
c) Seasoned local (i.e. not overseas) property investors, who rode a 30 year property appreciation wave, are expanding their portfolio for the same reasons cited in (a).

Cryptocurrencies take some of the wind out of the sails of (a), but I think its real effect is on (b).

[casper]

Originally Posted by whatnext

Or just not let them buy at all.

--- Option 1----

Lets for the sake of argument assume you are correct. All of this money is smuggled out of China, is from illegal activities and being laundered.

Do you think someone or organisation that is that sophisticated is going to be persuaded to go to some other region of the world because we write a law that says only locals are permitted to own property? They are not. They will construct some mechanism around these restrictions.

--- Option 2 ----

China is a big country there are many people and a small percentage of the population of China have wealth (gained through which every means legal or otherwise) and are fearful of their government and would rather have someone it sitting offshore. These same people probably have a desire to immigrate or have their kids immigrate to the country where they are stashing their nest egg.

Why should the government stand in the way of letting these people buy property. Especially if is new built condos. Net new residential property in the lower mainland should be to accommodate population growth. Exactly what we are talking about in this group.

[milomilo]

Originally Posted by casper

--- Option 1----

Lets for the sake of argument assume you are correct. All of this money is smuggled out of China, is from illegal activities and being laundered.

Do you think someone or organisation that is that sophisticated is going to be persuaded to go to some other region of the world because we write a law that says only locals are permitted to own property? They are not. They will construct some mechanism around these restrictions.

--- Option 2 ----

China is a big country there are many people and a small percentage of the population of China have wealth (gained through which every means legal or otherwise) and are fearful of their government and would rather have someone it sitting offshore. These same people probably have a desire to immigrate or have their kids immigrate to the country where they are stashing their nest egg.

Why should the government stand in the way of letting these people buy property. Especially if is new built condos. Net new residential property in the lower mainland should be to accommodate population growth. Exactly what we are talking about in this group.

Option 2 can still live here, they just have to rent. No big deal, it's the same as many Canadians in Van that have been priced out of the market. And once they get PR they'll be able to buy.

Frankly, the 'issue' of unfairness that foreigners might not have the right to buy property in certain situations is not an issue at all. There is no reason to care and our priorities should always go to protecting Canadians rather than foreign citizens.

[Xelebes]

Originally Posted by casper

--- Option 1----

Lets for the sake of argument assume you are correct. All of this money is smuggled out of China, is from illegal activities and being laundered.

That is a gross mischaracterisation of whatnext's argument. It is the fact that the money is leaving China that is what is illegal. The activities to accumulate the money in China may or may not be illegal but the money leaving is certainly illegal. That money has to be hidden so they use some vehicles like cryptocurrencies to get that money out.

On cryptocurrencies, some are using these assets as vehicles for exporting money and others are simply using them to park their cash there. These cryptocurrencies can be sold across a border and find their way to assets such as real estate.

[rousseau]

I wouldn't be surprised if the establishment of cryptocurrencies as a viable value alternative eventually features the phenomenon of island fiefdoms defended by mercenary military forces. Essentially, Lord of the Flies writ large.

[casper]

Originally Posted by Xelebes

That is a gross mischaracterisation of whatnext's argument. It is the fact that the money is leaving China that is what is illegal. The activities to accumulate the money in China may or may not be illegal but the money leaving is certainly illegal. That money has to be hidden so they use some vehicles like cryptocurrencies to get that money out.

On cryptocurrencies, some are using these assets as vehicles for exporting money and others are simply using them to park their cash there. These cryptocurrencies can be sold across a border and find their way to assets such as real estate.

That is a problem for the government of China. It is not a problem for the government of Canada. In fact the idea that the government can take away peoples freedom to take move legitimately earned money is counter to Canadian values and the values of most free market economies in the world.

[casper]

Originally Posted by milomilo

Option 2 can still live here, they just have to rent. No big deal, it's the same as many Canadians in Van that have been priced out of the market. And once they get PR they'll be able to buy.

Frankly, the 'issue' of unfairness that foreigners might not have the right to buy property in certain situations is not an issue at all. There is no reason to care and our priorities should always go to protecting Canadians rather than foreign citizens.

Except we have a charter of rights that protects Canadians (those born here and those living here) from being discriminated against based on ethnicity or nationality.

If you want to take away the rights of immigrants to own property then you also have to take away the same rights from those born here.

[whatnext]

Originally Posted by casper

--- Option 1----

Lets for the sake of argument assume you are correct. All of this money is smuggled out of China, is from illegal activities and being laundered.

Do you think someone or organisation that is that sophisticated is going to be persuaded to go to some other region of the world because we write a law that says only locals are permitted to own property? They are not. They will construct some mechanism around these restrictions.

--- Option 2 ----

China is a big country there are many people and a small percentage of the population of China have wealth (gained through which every means legal or otherwise) and are fearful of their government and would rather have someone it sitting offshore. These same people probably have a desire to immigrate or have their kids immigrate to the country where they are stashing their nest egg.

Why should the government stand in the way of letting these people buy property. Especially if is new built condos. Net new residential property in the lower mainland should be to accommodate population growth. Exactly what we are talking about in this group.

Why should we stand in the way of foreign money, legal or illegal, have you not been reading this thread at all?! The reason is very clear: affordability for Canadians. Why should buyers that are foreign have rights to anything in Canada?

If people want to legitimately immigrate here (ie not have Daddy still making money while he works in China) then fine, make the leap, buy what you like. If not STFU and deal with the — in the country you choose to make your living in. The social contract Canadian governments have with their citizens should be that playing by the Canadian rules and. regulations and paying your taxes you get a fair shake at your own home (owned or rented).

No Canadian should ever be denied that chance because the government of the day saw the opportunity for political or monetary gain by selling off Canada to foreign buyers!

[whatnext]

Originally Posted by casper

That is a problem for the government of China. It is not a problem for the government of Canada. In fact the idea that the government can take away peoples freedom to take move legitimately earned money is counter to Canadian values and the values of most free market economies in the world.

If you’re a Chinese citizen then you answer to the government of China. Canada should have no say in the matter. We would be rightly angered by other countries helping Canadians thwart Canadian laws.

[milomilo]

Originally Posted by casper

Except we have a charter of rights that protects Canadians (those born here and those living here) from being discriminated against based on ethnicity or nationality.

If you want to take away the rights of immigrants to own property then you also have to take away the same rights from those born here.

They aren't Canadians though, that's the point. Non residents are restricted in other ways, no reason housing can't be restricted.

[casper]

Originally Posted by whatnext

Why should we stand in the way of foreign money, legal or illegal, have you not been reading this thread at all?! The reason is very clear: affordability for Canadians. Why should buyers that are foreign have rights to anything in Canada?

If people want to legitimately immigrate here (ie not have Daddy still making money while he works in China) then fine, make the leaps down buy what you like. If not STFU and deal with the — in the country you choose to make your living in. The social contract Canadian governments have with their citizens should be that playing by the Canadian rules and. regulations and paying your taxes you get a fair shake at your own home (owned or rented).

No Canadian should ever be denied that chance because the government of the day saw the opportunity for political or monetary gain by selling off Canada to foreign buyers!

I am all for addressing the issue of affordability. Build social housing, lots of it. BC has a history of underwriting not-for-profits (housing societies) to buy build and operate housing.

Constructing rules around foreign ownership, will do squat to address affordability. Drive around the city and you see lots of land assemblies where companies are buying up homes on arterials to built multi-family. That is positive, but it is removing single family homes from the market.

The city changing the zoning is also positive. The plot of land my parents purchased in the 1970s with a bungalow on it back then was single family and nothing else was allowed. Today that same plot of land can accommodate three families (primary, secondary suite and a laneway suite). Again that is a positive for affordability. Yes, the value of that land is much greater under the new zoning but it now permits revenue from the two other units. Far more affordable for a family just starting out to have an extra $3k per month in revenue to allocate to their mortgage.

Putting in arbitrary rules on new immigrants or stopping people from brining money into the country is not going to solve the problem. All it is going to do employee lawyers and accountants to come up with ways around the complexity.

As for the money being dirty. Who in Canada knows. I would argue it is not Canada's job to police this. If it is China's laws that are being broken, then it is China's job to figure it out. Canada is not like Switzerland, it actually tries to help other countries sort these things out. If China asks for assistance in a specific case, then Canada should help out. But it should not assume all money from China is dirty and should also not start to investigate business transactions that happen overseas.

[casper]

Originally Posted by whatnext

If you’re a Chinese citizen then you answer to the government of China. Canada should have no say in the matter. We would be rightly angered by other countries helping Canadians thwart Canadian laws.

Canada is not helping people violate Chinese laws. If China cares, it should take the lead.

Canadian authorities do not have the training, or knowledge to enforce Chinese laws. They should not be expect to actively try to investigate things that are not illegal under Canada laws. A Canadian court is not a competent venue to determine if someone has violated the laws of another country.

Kinder surprises (the European candy) is illegal in the US. Something about protecting kids from the hazards of the little toys. They are legal in Canada. Do Canadian authorities setup stings to see who buys the chocolate? No. Grandmothers smuggling the candy over the boarder into the US is a US problem not a Canadian problem.

[someone123]

An article explaining the gaping holes in current attempts to measure the proportion of foreign real estate buyers:

https://www.theglobeandmail.com/opinion/...n-statscan-got-it-wrong/article37439665/

They take 2015 real estate transactions in Vancouver as an example. The true human buyers behind 50% of those transactions are unknown. Canada lags behind most other G20 countries in terms of transparency of real estate transactions, and this lack of transparency makes them a good vehicle for money laundering.

[osmo]

Originally Posted by someone123

An article explaining the gaping holes in current attempts to measure the proportion of foreign real estate buyers:

https://www.theglobeandmail.com/opinion/...n-statscan-got-it-wrong/article37439665/

They take 2015 real estate transactions in Vancouver as an example. The true human buyers behind 50% of those transactions are unknown. Canada lags behind most other G20 countries regarding transparency of real estate transactions, and this lack of transparency makes them a good vehicle for money laundering.

An opinion piece, not an article. This guy is out to lunch; this is the sort of stuff Canada, not perfect, but robust data and trots out a bogus study that only looks at the top 1% of the top of the most expensive real estate in Vancouver.

In Transparency International Canada's 2016 report, "No Reason to Hide: Unmasking the Anonymous Owners of Canadian Companies and Trust," our data revealed that among 2015's 100 most valuable real estate transactions in Vancouver, nearly 50 percent of the beneficial owners are unknown. Twenty-five percent over all are owned by Canadian shell companies, nominees own 11 per cent, and 6 percent are owned through trusts.

*He also does not link to his study, which is quite odd...
www.transparencycanada.ca/wp.../TIC-BeneficialOwnershipReport-Interactive.pdf

Nobody is going to say lots of dirty stuff happens in the markets where homes go for $5 milli+on and whatever other high numbers. The fact is, these numbers, are not in the realm of the everyday market for everyday Canadians. He could not talk about this segement, because when you do, the numbers start to drift towards numbers to what Stats Canada reported. In the high-end market it is the wild wild west, but for average Canadians, they are getting squeezed by lack of supply and cheap debt. In James report, they tie the link between ambagious corporate structures that purchase real estate, okay fine. But no explanation about Alberta that has, per population more corporations registered than B.C. if these structures are only just used to launder money then why isn't Calgary or Edmonton seeing the same issues?

The truth is if you can afford to get real estate in that price range you are going to use the corporate strucutes to attain any tax benefits you can. In saying this, it is not to say that shady stuff does not happen, but there is an overblown assumption of the impact of these mythical Chinese buyers when most Canadians can't afford a $100 increase to their mortgages.

[whatnext]

Originally Posted by casper

I am all for addressing the issue of affordability. Build social housing, lots of it. BC has a history of underwriting not-for-profits (housing societies) to buy build and operate housing.

Constructing rules around foreign ownership, will do squat to address affordability. Drive around the city and you see lots of land assemblies where companies are buying up homes on arterials to built multi-family. That is positive, but it is removing single family homes from the market.

The city changing the zoning is also positive. The plot of land my parents purchased in the 1970s with a bungalow on it back then was single family and nothing else was allowed. Today that same plot of land can accommodate three families (primary, secondary suite and a laneway suite). Again that is a positive for affordability. Yes, the value of that land is much greater under the new zoning but it now permits revenue from the two other units. Far more affordable for a family just starting out to have an extra $3k per month in revenue to allocate to their mortgage.

Putting in arbitrary rules on new immigrants or stopping people from brining money into the country is not going to solve the problem. All it is going to do employee lawyers and accountants to come up with ways around the complexity.

As for the money being dirty. Who in Canada knows. I would argue it is not Canada's job to police this. If it is China's laws that are being broken, then it is China's job to figure it out. Canada is not like Switzerland, it actually tries to help other countries sort these things out. If China asks for assistance in a specific case, then Canada should help out. But it should not assume all money from China is dirty and should also not start to investigate business transactions that happen overseas.

And we’re back to the old myth of building your way to affordability which ain’t going to work with foreign buyers skimming a conservative 20% right off the top of any new multi family supply.

And your solution of having taxpayers be on the hook for more social housing just so rich foreign buyers can snap up property is laughable. It’s a lose-lose for Canadians.

[milomilo]

I still find it amazing that there is still a debate over whether foreign ownership is a problem, because the data isn't available to even know for sure. How on earth do we not know this? It's hard to build a policy because one side says there is a problem and the other side says there isn't, both with incomplete evidence.

[Pinion]

.

[whatnext]

Originally Posted by milomilo

I still find it amazing that there is still a debate over whether foreign ownership is a problem, because the data isn't available to even know for sure. How on earth do we not know this? It's hard to build a policy because one side says there is a problem and the other side says there isn't, both with incomplete evidence.

The BC govt offered fairly robust data when they brought in the Foreign Buyers Tax, showing close to 25% if purchased in Richmond were to foreign buyers.

[casper]

Originally Posted by Pinion

You don't see a problem with forcing Canadian doctors and lawyers to live in social housing apartments so that Chinese multi-millionaires can own all property in Vancouver? It is not just the poor who are priced out here, it's getting close to being everyone who doesn't import millions from outside the country.

No I don't. Anyone who has the money or leverage can buy whatever home on the open market.

You are working on the assumption that "social housing" means housing for the poor.

I am not proposing subsidised housing. I proposing the government off financial guarantees to non-profits (who operate outside of government) to borrow money to buy build and operate housing.

How is this different than say "VanCity". VanCity is a non-profit co-op that provides banking to a large percentage of local Vancouver residents. I am certain there are some lawyer and doctors in Vancouver that bank at a non-profit instead of banking at BMO, RBC or TD.

How is this different than Mountain Equipment Co-op. They are a sporting goods retailer that happens to be a Non-Profit. How is shopping at MEC different than Cabela's.

Best Western hotels or Home Hardware are also co-ops. Would you be offended if a Doctor or Lawyer shopped at Home Hardware vrs Home Depot.

If the problem is affordable "market" housing, then the solution is to go create it and stop worry about stopping this person or that person from buying a house on the open market or imposing taxes on an empty house.

Create a bunch of housing societies all indecently managed and they will all end up with different approaches and focuses. What I am proposing is government kick start that initial housing stock.

[whatnext]

Originally Posted by casper

No I don't. Anyone who has the money or leverage can buy whatever home on the open market.

You are working on the assumption that "social housing" means housing for the poor.

I am not proposing subsidised housing. I proposing the government off financial guarantees to non-profits (who operate outside of government) to borrow money to buy build and operate housing.

How is this different than say "VanCity". VanCity is a non-profit co-op that provides banking to a large percentage of local Vancouver residents. I am certain there are some lawyer and doctors in Vancouver that bank at a non-profit instead of banking at BMO, RBC or TD.

How is this different than Mountain Equipment Co-op. They are a sporting goods retailer that happens to be a Non-Profit. How is shopping at MEC different than Cabela's.

Best Western hotels or Home Hardware are also co-ops. Would you be offended if a Doctor or Lawyer shopped at Home Hardware vrs Home Depot.

If the problem is affordable "market" housing, then the solution is to go create it and stop worry about stopping this person or that person from buying a house on the open market or imposing taxes on an empty house.

Create a bunch of housing societies all indecently managed and they will all end up with different approaches and focuses. What I am proposing is government kick start that initial housing stock.

Again your argument is full of holes and basically boils down to one thing: The government should get more involved in housing so we can sell of more of it to Foreign Buyers.

That’s stupid.

I’m curious why any Canadian would argue so vociferously in favour of letting Foreign Buyers take their pick of Canadian real estate? Seems odd.