Canada's 'housing bubble' deemed close to bursting

[lio45]

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.

I think most levels of government have an incentive to make sure they continue to have no data on the real owners behind the transactions.

In the grand scheme of things, I think it's more good than bad for Canada to be renowned as the one stable, first world country that will accept to let your dirty capital in without too much questioning and scrutiny. It's still a massive injection of external funds in the economy, even if it's less productive than other hypothetical uses (which are wishful thinking, anyway; if we didn't let them buy real estate, they'd go somewhere else, they wouldn't instead try their luck at launching highrisk hightech startups in Canada).

Sure, as with most things in life, there are winners and losers. Vancouverites with deep roots in their neighborhoods who never owned any property are obviously among the main losers, no one is disputing that. 🞵🞵🞵🞵🞵 for you, I guess.

[lio45]

Originally Posted by whatnext

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.

I think it's possible to argue that overall, it's doing more good than bad. (Setting completely aside my personal benefits to having the Chinese bid the Montreal/Quebec City/Sherbrooke markets to stratospheric heights someday.)

Money that is completely foreign in origin is landing in the bank accounts of Canadians who basically "won the lottery", except that the cash is coming from an external source (unlike lottery earnings). It's an infusion of capital into the Canadian economy that has various effects, several of them definitely positive.

[milomilo]

Originally Posted by lio45

I think most levels of government have an incentive to make sure they continue to have no data on the real owners behind the transactions.

In the grand scheme of things, I think it's more good than bad for Canada to be renowned as the one stable, first world country that will accept to let your dirty capital in without too much questioning and scrutiny. It's still a massive injection of external funds in the economy, even if it's less productive than other hypothetical uses (which are wishful thinking, anyway; if we didn't let them buy real estate, they'd go somewhere else, they wouldn't instead try their luck at launching highrisk hightech startups in Canada).

Sure, as with most things in life, there are winners and losers. Vancouverites with deep roots in their neighborhoods who never owned any property are obviously among the main losers, no one is disputing that. 🞵🞵🞵🞵🞵 for you, I guess.

Who are the winners?

As it happens, I just read an article in the Globe which backs what I have thought:

How much real estate do foreigner investors really own? Statscan got it wrong

Originally Posted by Article

When we say that Statistics Canada got it wrong on how much real estate is owned by foreign buyers, we are not pretending that we could come up with a more accurate number.

Anyone who estimates the amount of foreign ownership of real estate in Canada will be wrong. Everyone will be wrong because in Canada, a foreign investor can pour money into Canadian real estate through a Canadian company they set up either federally, provincially or territorially, using a Canadian as a nominee director/shareholder/beneficiary, without disclosing the true beneficial owner.

I don't agree with your assertion that there is more good than bad. Where does this money go? Some homeowners might do very well on paper if they sell their house to one of these 'investors', but they'll only benefit if they cash out of the market and go somewhere else.

[casper]

Originally Posted by whatnext

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.

I was born here (however my parents came from European). I don't work in the property industry or construction. The only property I own is the property I live in.

I dislike silly (unenforceable rules) especially if they have no clear relationship to the outcome they are trying to achieve. I also think immigrants are a positive to Canada. in years past I did a bit of consulting to a project in China (but never lived there). I have a direct but very limited understanding of how business deals work in that country.

Creating complex rules on who can buy a house is unworkable. Vetting all the money coming into and existing Canada on a daily basis against Chinese law is impossible without an army of Canadian accounts traveling around China and other parts of the world. Do you realise how many wire transfers go in and out of this country on any given day.

Affordability is a major problem in Vancouver and it is not going to go away especially because the population of this city is going to continue to grow.

Instead of chasing ghosts I am proposing a permanent solution that creates more affordable homes (outside of government, and done by non-profits or co-ops). The solution is not new, the role of government is to help seed these organisations and projects. After that it is to phase out.

Here is a list of co-ops in BC (many of these were created in the 60s and 70s and some in the 80s or 90s). Government help seeded these organisations and then stepped aside, and guess what they are still in existence today solving this problem with a new generation of Canadians. There is just not in sufficient number.
http://www.chf.bc.ca/what-co-op-housing/find-a-co-op

Here is an example of a housing society (that operates at arms length from government) and is focused on a specific demographic http://vnhs.ca/

[dleung]

Some interesting charts:

Metro Vancouver expects property values to rise at least 30% for 2017 assessments to be revealed Jan 2018, so the entire map could be red by now (note market value is usually higher than assessed value)



Only 1/6th of Metro Vancouver land is open to development, and 99% of it is low rise.




http://www.news1130.com/wp-content/blogs.dir/sites/9/2016/12/21/home.pdf

[dleung]

Red China money!

"Tuesday’s data release shows that for Metro Vancouver, non-residents own condos that are worth on average $161,200 more than those owned by full-time Vancouver residents, while single detached homes owned by non-residents were worth $707,800 more than those owned by residents."

http://www.metronews.ca/news/vancouver/2...als-on-vancouver-property-purchases.html

[lio45]

Originally Posted by milomilo

Who are the winners?

Among others, most obviously, all the middle-class Vancouverites who bought cheap cookie-cutter bungalows in the 1970s and 1980s to raise their families in, and kept them for a couple decades at least.

As it happens, I just read an article in the Globe which backs what I have thought:

How much real estate do foreigner investors really own? Statscan got it wrong

... isn't that the exact article someone123 just shared? Anyway, I'm on record agreeing 100% with him for years: the official data is pretty damn useless because we have no idea who are the real owners.

For years, every time SSPers sounding like realtor shills says something like "fact: only 5% of the market in Van is foreign-owned", I set the record straight by pointing out that the truth is "5% is directly foreign-owned by flesh and bone individuals, the remaining 95% is a mix of Canadian-owned and foreign-owned-but-not-directly-to-their-personal-name".

I don't agree with your assertion that there is more good than bad. Where does this money go? Some homeowners might do very well on paper if they sell their house to one of these 'investors', but they'll only benefit if they cash out of the market and go somewhere else.

No, they can also refinance and do various things with the money, which helps the banks and the Canadian economy in general.

And in the cases where they do go somewhere else, that's awesome for the greater good in Canada - for all the communities in which these people arrive with their fresh capital, ready to spend on a house and goodies, this influx of new millionaires is certainly a positive thing. If the price to pay is that a few Van neighborhoods become quasi-ghost-towns, it seems totally worth it.

[milomilo]

Originally Posted by lio45

Among others, most obviously, all the middle-class Vancouverites who bought cheap cookie-cutter bungalows in the 1970s and 1980s to raise their families in, and kept them for a couple decades at least.




... isn't that the exact article someone123 just shared? Anyway, I'm on record agreeing 100% with him for years: the official data is pretty damn useless because we have no idea who are the real owners.

For years, every time SSPers sounding like realtor shills says something like "fact: only 5% of the market in Van is foreign-owned", I set the record straight by pointing out that the truth is "5% is directly foreign-owned by flesh and bone individuals, the remaining 95% is a mix of Canadian-owned and foreign-owned-but-not-directly-to-their-personal-name".




No, they can also refinance and do various things with the money, which helps the banks and the Canadian economy in general.

And in the cases where they do go somewhere else, that's awesome for the greater good in Canada - for all the communities in which these people arrive with their fresh capital, ready to spend on a house and goodies, this influx of new millionaires is certainly a positive thing. If the price to pay is that a few Van neighborhoods become quasi-ghost-towns, it seems totally worth it.

Yep, same article, didn't see it.

I guess I have a different view of what is positive for the country and what isn't. I don't see the desolation of what could be a great city, something we have a very limited number of in Canada, as an OK price to pay for a little bit of money (in the grand scheme of things, although who knows as we don't have the data).

Would it be OK if our alpha city, Toronto, suffered a similar fate - which is the current path it's going down? How about Montreal?

Those lucky Vancouverites who made like bandits with their cookie cutter bungalows probably aren't going to be in that enviable a position. Many won't want to move anyway, so the paper value is useless, and they probably have children who are now trying to get their own place to live, which can only realistically be financed with their parents' money. I think your theory of inflows of foreign money flowing outwards to the rest of Canada to be fanciful, but even if true, I'd still rather houses were affordable for the average working person, as they will then be able to use the rest of their disposable income on things that benefit the economy.

Just my opinion, but I also have the idealistic idea that creating policy to allow people to live affordably is 'the right thing to do'. But that's just me.

[lio45]

Originally Posted by milomilo

Yep, same article, didn't see it.

I guess I have a different view of what is positive for the country and what isn't. I don't see the desolation of what could be a great city, something we have a very limited number of in Canada, as an OK price to pay for a little bit of money (in the grand scheme of things, although who knows as we don't have the data).

I agree we seem to have somewhat different views (of the same thing). I wouldn't go as far as calling the Vancouver of 2017 totally "desolated" yet, nor would I speak of the massive yearly infusions of foreign cash into the Van (and TO) markets as merely "a little bit" of money.

Vancouver's losses are other Canadian cities' gains in a way that I believe makes it a positive overall for the Canadian economy (while of course being a net negative for the Chinese economy). I mean, at first sight, if you've got tons of money coming in from an external source every year to be injected in your economy, it can't be doing more harm than good even if most of it "sleeps" in relatively unproductive form compared to the scenario where you just don't have that infusion of money at all.

Part of the money is also "trickling down" to government coffers in both Victoria and Ottawa every year, benefiting everyone. The entity or person who just sold that White Spot restaurant, for example -- I am guessing they probably paid more money in tax right there on that one transaction than the full amount of what their acre should normally be worth.

And all the people who are building these condos -- they're Canadians getting paid in good part with Chinese money but they're doing their spending in Canada and paying income taxes in Canada.

[urbandreamer]

Montreal is now the hot spot to invest, so by 2100 it will be 90% Chinese and 10% French. Won't that be funny watching the locals adjust to their new reality?

[milomilo]

Originally Posted by lio45

I agree we seem to have somewhat different views (of the same thing). I wouldn't go as far as calling the Vancouver of 2017 totally "desolated" yet, nor would I speak of the massive yearly infusions of foreign cash into the Van (and TO) markets as merely "a little bit" of money.

Vancouver's losses are other Canadian cities' gains in a way that I believe makes it a positive overall for the Canadian economy (while of course being a net negative for the Chinese economy). I mean, at first sight, if you've got tons of money coming in from an external source every year to be injected in your economy, it can't be doing more harm than good even if most of it "sleeps" in relatively unproductive form compared to the scenario where you just don't have that infusion of money at all.

Part of the money is also "trickling down" to government coffers in both Victoria and Ottawa every year, benefiting everyone. The entity or person who just sold that White Spot restaurant, for example -- I am guessing they probably paid more money in tax right there on that one transaction than the full amount of what their acre should normally be worth.

And all the people who are building these condos -- they're Canadians getting paid in good part with Chinese money but they're doing their spending in Canada and paying income taxes in Canada.

You have to question whether this is in the long term interests of both BC and Canada though, relying more and more on a precarious industry as your main source of revenue. The same has been said of Alberta and NF's oil industry. Yes, the financial gains can be great, but things really hit the fan when price swings jeopardize the industry, so it's sensible to question whether we should add fuel to the fire.

And there's more to cost/benefits than just economic also, but I'd be dubious that you can even quantify the benefits/disbenefits well enough to even say if the financials work out. OK, you get more money going to developers and construction workers, but what if you're losing out on companies moving to Vancouver because property prices are so insane? How much of this money just circles through properties and stays in the hands of these foreigner? The point is to launder the money after all, not to gift it to Canada.

[Delusio Cogno]

I hope everyone can get out safely before a big earthquake levels everything.
Its nice that they can sell to the foreigners and make some money to relocate before they are forced to evacuate a disaster zone.

[Pinion]

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[geotag277]

Many people in Vancouver don't really care about owning their own home, home ownership is simply not a priority for them, and they can spend their money elsewhere to much greater effect and are happy to rent in the current housing climate.

Some personalities will be driven away, some personalities will continue to do just fine in Vancouver. No different than any other evolving city.

For all concerned it would probably be better to open more pathways to more widespread home ownership, which would help attracting more talent, growing more businesses, keeping more youth there, building a generally stronger city etc. - but rumors of Vancouver's imminent death are being greatly exaggerated.

[whatnext]

Originally Posted by lio45

I agree we seem to have somewhat different views (of the same thing). I wouldn't go as far as calling the Vancouver of 2017 totally "desolated" yet, nor would I speak of the massive yearly infusions of foreign cash into the Van (and TO) markets as merely "a little bit" of money.

Vancouver's losses are other Canadian cities' gains in a way that I believe makes it a positive overall for the Canadian economy (while of course being a net negative for the Chinese economy). I mean, at first sight, if you've got tons of money coming in from an external source every year to be injected in your economy, it can't be doing more harm than good even if most of it "sleeps" in relatively unproductive form compared to the scenario where you just don't have that infusion of money at all.

Part of the money is also "trickling down" to government coffers in both Victoria and Ottawa every year, benefiting everyone. The entity or person who just sold that White Spot restaurant, for example -- I am guessing they probably paid more money in tax right there on that one transaction than the full amount of what their acre should normally be worth.

And all the people who are building these condos -- they're Canadians getting paid in good part with Chinese money but they're doing their spending in Canada and paying income taxes in Canada.

The condos would have been constructed anyway, though at a more measured pace and a lower cost. One aspect not covered is that Chinese money has driven up the cost of land by overbidding for building sites, not just housing costs through speculative flipping.

As to those who say look at all this money Vancouverites get for selling their house, well they still have to buy an overpriced condo to live. And if they have kids they want help out, the contribution now has to be in six figures to be a meaningful help.

[mistercorporate]

https://www.theglobeandmail.com/real-est...oronto-region-after-tax/article37451779/

"The data, obtained by The Globe and Mail through a Freedom of Information request, bolster concerns that international investors drive up housing prices, the most contentious issue in the debate over the effects of foreign capital on real estate.

In the four months after the Ontario government began charging a 15-per-cent tax on residential purchases by foreign buyers in the Toronto region, non-citizens paid on average $977,611 for homes compared with $659,470 for Canadians and permanent residents – or 48.2-per-cent higher.

The Globe also obtained government statistics on the citizenship of foreign buyers in the same period, showing 70.6 per cent were from China. Trailing in second place were Americans, at 4.6 per cent, followed by buyers from India, at 3.6 per cent.

As the Ontario government's average price data suggest, analysts and real estate agents say foreign home buying is largely concentrated at the high end of the market.

Despite this, international investors create "potent ripple effects" which push up prices for buyers at all rungs of the property ladder, Prof. Gordon said. This occurs, he says, because wealthy foreign buyers tend to price local affluent residents out of high-end neighbourhoods, pushing them to second-tier areas. The effect repeats itself in lower-priced categories, edging locals who would have bought in secondary neighbourhoods into other, less desirable areas, and so on. At the same time, demand is higher because of an influx of non-residents.

"Ultimately, it will drive up prices rapidly and intensify the competition for housing," he said. "It starts in the high end, but then it spreads in its effect in the whole area."

In addition, Prof. Gordon said that when foreign buyers win bidding wars with outsized offers, they set benchmark comparable prices that real estate agents rely on for future transactions, which also increases costs."

[ssiguy]

It has had devastating effects on the BC economy. The economy has become addicted to housing for it's strength. Real estate now makes up more than oil, natural gas, and forestry............combined! At 19% of GDP BC's economy is more reliant on real estate than Alberta is on oil.

It's a very non-productive use of capitol creating little and really little different than money changing like stocks. They require no more job skills than they did in 1950 and the soaring land values have meant that companies that actually produce something or provide an economic benefit cannot expand as they cannot afford the expensive space to do it. The effect it has had on real estate and rentals has led to the crisis BC has in finding skilled labour, they can't entice enough workers to move to take the jobs. UBC is so concerned that it will not be able to replace it's quickly retiring profs that they offer subsidized rent on campus to lure prospective employees. When you have to start subsidizing profs then you know you are in real trouble.

[casper]

Originally Posted by ssiguy

It has had devastating effects on the BC economy. The economy has become addicted to housing for it's strength. Real estate now makes up more than oil, natural gas, and forestry............combined! At 19% of GDP BC's economy is more reliant on real estate than Alberta is on oil.

It's a very non-productive use of capitol creating little and really little different than money changing like stocks. They require no more job skills than they did in 1950 and the soaring land values have meant that companies that actually produce something or provide an economic benefit cannot expand as they cannot afford the expensive space to do it. The effect it has had on real estate and rentals has led to the crisis BC has in finding skilled labour, they can't entice enough workers to move to take the jobs. UBC is so concerned that it will not be able to replace it's quickly retiring profs that they offer subsidized rent on campus to lure prospective employees. When you have to start subsidizing profs then you know you are in real trouble.

First off UBC has been offering "social housing" to employees for decades. Over the last decade they did build some pretty nice buildings to add to their inventory.

Where are you getting your GDP numbers from. This is the ones the BC government has up on their web site and it paints a different picture.

https://www2.gov.bc.ca/gov/content/data/statistics/economy/bc-economic-accounts-gdp

It lists residential building construction at 4% in 2016. Oil and Gas in BC is also at 4%.

[lio45]

Originally Posted by ssiguy

It has had devastating effects on the BC economy. The economy has become addicted to housing for it's strength.

I am assuming you're similarly thinking that oil has had devastating effects on the Alberta economy, and that they were generally better off economically in their ranching and farming days, back when Alberta had even lower population than SK and MB.

They got rich off oil, and got addicted to it for its strength. That's apparently bad, in the grand scheme of things.

Real estate now makes up more than oil, natural gas, and forestry............combined! At 19% of GDP BC's economy is more reliant on real estate than Alberta is on oil.

So you'd rather have that 19% disappear? It's not like you have the option of keeping that chunk of the GDP if you don't want it to be generated by real estate. That would be pure magical thinking.

It's like saying AB should completely get rid of oil and instead conjure up lasting, economically-diversified activities to immediately and fully replace oil's share of AB's GDP. It's pure fiction. In the real world the choice is much more like oil or no oil; if Alberta gets rid of oil, their GDP will fall off a cliff.

[Pinion]

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