Canada's 'housing bubble' deemed close to bursting

[dleung]

Just looking at the latest house price numbers for Vancouver and Toronto here:

http://www.rebgv.org/home-price-index?region=all&type=all&date=2017-12-01
http://www.trebhome.com/MARKET_NEWS/home_price_index/pdf/TREB_MLS_HPI_Public_Tables_1217.pdf

What really surprised me is how expensive the 905 is. York region is basically the same as Toronto?! A $1.3M house in lush, skytrain-connected Coquitlam now looks like an amazing deal compared to a $1.2M house in barren asphalt-covered Markham. Or a $1.0M house in Ladner, vs the same price in Vaughan, Aurora or Mississauga. What's going on?

[Docere]

Originally Posted by dleung

Just looking at the latest house price numbers for Vancouver and Toronto here:

http://www.rebgv.org/home-price-index?region=all&type=all&date=2017-12-01
http://www.trebhome.com/MARKET_NEWS/home_price_index/pdf/TREB_MLS_HPI_Public_Tables_1217.pdf

What really surprised me is how expensive the 905 is. York region is basically the same as Toronto?! A $1.3M house in lush, skytrain-connected Coquitlam now looks like an amazing deal compared to a $1.2M house in barren asphalt-covered Markham. Or a $1.0M house in Ladner, vs the same price in Vaughan, Aurora or Mississauga. What's going on?

The City of Toronto is quite big and includes lower-cost, working class Scarborough, York-Weston, Rexdale etc. Mississauga is just as close to City Hall as Scarborough is, and is considered more desirable. York Region is an nouveau riche "county" north of the city with a lot of big houses that really has no Vancouver equivalent.

The most expensive areas of the GTA are in the central ("C") TREB districts of the old city of Toronto and the inner suburb of North York.

[ssiguy]

The average SFH is 60% more expensive in Vancouver than in Toronto. Really shows how completely warped Vancouver real estate is.

[theman23]

Originally Posted by dleung

Just looking at the latest house price numbers for Vancouver and Toronto here:

http://www.rebgv.org/home-price-index?region=all&type=all&date=2017-12-01
http://www.trebhome.com/MARKET_NEWS/home_price_index/pdf/TREB_MLS_HPI_Public_Tables_1217.pdf

What really surprised me is how expensive the 905 is. York region is basically the same as Toronto?! A $1.3M house in lush, skytrain-connected Coquitlam now looks like an amazing deal compared to a $1.2M house in barren asphalt-covered Markham. Or a $1.0M house in Ladner, vs the same price in Vaughan, Aurora or Mississauga. What's going on?

As mentioned, there are large neighborhoods in Toronto that draw down the average price range.

As for the comparison, its not unreasonable:

I grew up in Markham, and there are actually some very nice, picturesque, green neighbourhoods in the town and its generally considered to be fairly desirable. It's obviously not as lush as the GVRD, buit also not all like that aerial people love posting.

You'll also probably get a much better house in Markham for that money than you would in the Coquitlam. Vancouver's housing stock is generally poor and a larger portion of houses seem to need "TLC" before moving in. It probably has a lot to do with people buying homes in the GVRD having no intention of ever living in them.

The public transit connections are probably about equivalent if not swinging in Markham's favour when you factor in the GO (I doubt many SFH owners in Coquitlam are using the Skytrain to do local errands).

Also, Ladner and Coquitlam are among the less desirable GVRD suburbs. A fairer comparison for those large GTA burbs would be Richmond or Burnaby.

[lio45]

Originally Posted by dleung

You want people to pay capital gains taxes on the home they live in... so that if they ever have to sell and move within Vancouver, they'll have to downgrade??

An easy, decently fair way to implement someone123's idea would be that you're only taxed on the amount that isn't reinjected into a personal residence immediately (within a reasonable period of time).

For example:

You bought a modest 1970s Vancouver bungalow for $100,000. You resell it for $3,000,000 but you buy an equivalent bungalow in another neighborhood for the same price. (Essentially just trading personal residences.) No tax to pay.

You bought a modest 1970s Vancouver bungalow for $100,000. You resell it for $3,000,000 and you buy an equivalent bungalow in a cheaper neighborhood for $2,000,000. You've got a taxable capital gain of ~$1,000,000.

You bought a modest 1970s Vancouver bungalow for $100,000. You resell it for $3,000,000 and you buy a huge mansion in the Maritimes or Quebec for $500,000. You've got a taxable capital gain of ~$2,500,000.

Now, you could certainly reduce those gains by first substracting any spending on improvements you made during ownership, but in many cases that would still leave a good amount of capital as unarguable profit, taxable.

Essentially, your personal residence would function the same way as a deferred tax savings account. You don't pay any capital gains tax..... until you actually want to cash (withdraw) that amount and use it for something.

[Docere]

Taking us back to this thread:

http://forum.skyscraperpage.com/showthread.php?t=221445

Brampton/Surrey seem to be the most obvious "equivalents." But I don't think Van really has an equivalent of Richmond Hill or Vaughan.

[someone123]

Originally Posted by lio45

An easy, decently fair way to implement someone123's idea would be that you're only taxed on the amount that isn't reinjected into a personal residence immediately (within a reasonable period of time).

This is already a part of some tax codes and it has a name: like-kind exchange.

[1overcosc]

Originally Posted by lio45

An easy, decently fair way to implement someone123's idea would be that you're only taxed on the amount that isn't reinjected into a personal residence immediately (within a reasonable period of time).

For example:

You bought a modest 1970s Vancouver bungalow for $100,000. You resell it for $3,000,000 but you buy an equivalent bungalow in another neighborhood for the same price. (Essentially just trading personal residences.) No tax to pay.

You bought a modest 1970s Vancouver bungalow for $100,000. You resell it for $3,000,000 and you buy an equivalent bungalow in a cheaper neighborhood for $2,000,000. You've got a taxable capital gain of ~$1,000,000.

You bought a modest 1970s Vancouver bungalow for $100,000. You resell it for $3,000,000 and you buy a huge mansion in the Maritimes or Quebec for $500,000. You've got a taxable capital gain of ~$2,500,000.

Now, you could certainly reduce those gains by first substracting any spending on improvements you made during ownership, but in many cases that would still leave a good amount of capital as unarguable profit, taxable.

Essentially, your personal residence would function the same way as a deferred tax savings account. You don't pay any capital gains tax..... until you actually want to cash (withdraw) that amount and use it for something.

I like that idea.

[Docere]

Originally Posted by theman23

Also, Ladner and Coquitlam are among the less desirable GVRD suburbs. A fairer comparison for those large GTA burbs would be Richmond or Burnaby.

Though Burnaby at least seems more "416-ish" than "905-ish."

The southern and eastern suburbs of Vancouver are more "working class" than York Region. More akin to Peel and Durham I suppose.

[dleung]

Originally Posted by lio45

An easy, decently fair way to implement someone123's idea would be that you're only taxed on the amount that isn't reinjected into a personal residence immediately (within a reasonable period of time)...

Essentially, your personal residence would function the same way as a deferred tax savings account. You don't pay any capital gains tax..... until you actually want to cash (withdraw) that amount and use it for something.

Basically punish everyone who wants to downsize? This is gonna be just great for urban densification... You're gonna have house-rich, savings-poor 90 year olds struggling to maintain their yard, or breaking their necks falling down the creaky stairs of their $3M bungalow, instead of living comfortably in a townhouse or condo or retirement facility because they'll not be nearly as willing to fork over hundreds of thousands to the Man as the mainland Chinese have been.

[geotag277]

You think people are going to stop selling their homes to fund their retirement just because they have to pay tax? So instead of traveling the world, with copious amounts of disposable income, and having a low maintenance permanent residence, they will simply forego all that to "break their backs maintaining their yard" - all to maintain some paper gains that don't help them at all?

I don't know, seems similar to me to saying people will choose to be homeless and eat out of garbage cans instead of working a steady job earning money because they will refuse to pay any taxes to "the Man".

[lio45]

I had no idea you (dleung) seriously had such a "Taxation is theft" 🞵🞵🞵🞵🞵🞵🞵🞵 view!

I usually lean towards lower taxes, ideologically, yet I think it's important to use taxation as a behavioral tool. Don't punish success. If you're taking risks and are creating jobs, you deserve breaks. On the other hand, if you're doing nothing but speculating on real estate values, it makes no sense at all that you'd be in a special category shielded from taxation. I can't possibly conceive of any justification such a windfall, almost akin to winning the lottery, shouldn't be taxed.

[dleung]

I'm all for using taxes to modify behaviour, but I don't think this idea will work. I don't care about rich people speculating on real estate as long as the end result is more development, ultimately leading to affordability when the bubble pops. We know how old people are like. It's not analogous to the homeless scenario. If not acting leaves them paper-rich and acting makes them pay taxes, they'll rather not act. Heck, my parents insist I max out my RRSP contribution just to defer the taxes, even though I'm nowhere near my peak salary, have no plans to retire, and could've done something more productive with the extra cash rather than park it in a ETF.

Edit: actually I thought about it, and am probably wrong. A homeowner would more likely sit on his/her property in anticipation for future appreciation if the gains aren't taxed, which means more land could be opened up for densification if the gains are taxed.

[dleung]

Originally Posted by theman23

As mentioned, there are large neighborhoods in Toronto that draw down the average price range.

As for the comparison, its not unreasonable:

I grew up in Markham, and there are actually some very nice, picturesque, green neighbourhoods in the town and its generally considered to be fairly desirable. It's obviously not as lush as the GVRD, buit also not all like that aerial people love posting.

You'll also probably get a much better house in Markham for that money than you would in the Coquitlam. Vancouver's housing stock is generally poor and a larger portion of houses seem to need "TLC" before moving in. It probably has a lot to do with people buying homes in the GVRD having no intention of ever living in them.

The public transit connections are probably about equivalent if not swinging in Markham's favour when you factor in the GO (I doubt many SFH owners in Coquitlam are using the Skytrain to do local errands).

Also, Ladner and Coquitlam are among the less desirable GVRD suburbs. A fairer comparison for those large GTA burbs would be Richmond or Burnaby.

Burnaby and Richmond are generally compared to North York in its urban character and connectedness to downtown (20-25 min by transit vs 1hr+ from the 905). Burnaby is almost all grid. Coquitlam is the only 905-style suburb in Metro Vancouver, though the road network is contoured to the terrain similar to Orange County. It also has commuter rail, but that's pales next to 7-minute headways on skytrain.

The housing stock is mostly monster homes from the early 90's and 00's, so not unlike the 905. The rotting bungalows are in the older suburbs. Vancouver gets a bad rap for that but it doesn't reflect the reality of a massive custom home market, in which those bungalows are replaced at breakneck pace. It's mostly because people love posting pics of them to exaggerate the housing market because a $3M property with a $10k rotting bungalow looks like a worse deal than a $3.3M property with a $300k 90's monster home sitting on it.

[Docere]

Originally Posted by dleung

Burnaby and Richmond are generally compared to North York in its urban character and connectedness to downtown (20-25 min by transit vs 1hr+ from the 905). Burnaby is almost all grid. Coquitlam is the only 905-style suburb in Metro Vancouver, though the road network is contoured to the terrain similar to Orange County. The housing stock is mostly monster homes from the early 90's and 00's, so not unlike the 905. It also has commuter rail, but that's pales next to 7-minute headways on skytrain.

The "North York" comparison seems more or less apt for Burnaby and Richmond.

Surrey is analogous to Brampton - very similar in terms of population, ethnic composition, socioeconomics, era of development etc.

Coquitlam is harder to compare to a GTA suburb specifically.

[Pinion]

.

[dreambrother808]

Originally Posted by whatnext

Another piece from the Vancouver Sun outlining how immigration fraud is used to purchase real estate:
http://vancouversun.com/opinion/columnis...court-case-details-seven-migration-scams

Some people believe that cheating the system makes you intelligent and only a fool wouldn’t do that. If you come from a country where corruption, especially governmental, is all around you then why wouldn’t you feel that way? This is contrary to Canadian norms but if our governments are so weak that they won’t investigate rampant crimes, enforce our laws, or properly punish corruption then what recourse do we have as citizens other than to vote them out?

One month until the BC NDP decide their fate...

[kwoldtimer]

Originally Posted by dreambrother808

Some people believe that cheating the system makes you intelligent and only a fool wouldn’t do that. If you come from a country where corruption, especially governmental, is all around you then why wouldn’t you feel that way? This is contrary to Canadian norms but if our governments are so weak that they won’t investigate rampant crimes, enforce our laws, or properly punish corruption then what recourse do we have as citizens other than to vote them out?

One month until the BC NDP decide their fate...

How so?

[lio45]

Originally Posted by dleung

I'm all for using taxes to modify behaviour, but I don't think this idea will work. I don't care about rich people speculating on real estate as long as the end result is more development, ultimately leading to affordability when the bubble pops. We know how old people are like. It's not analogous to the homeless scenario. If not acting leaves them paper-rich and acting makes them pay taxes, they'll rather not act. Heck, my parents insist I max out my RRSP contribution just to defer the taxes, even though I'm nowhere near my peak salary, have no plans to retire, and could've done something more productive with the extra cash rather than park it in a ETF.

Edit: actually I thought about it, and am probably wrong. A homeowner would more likely sit on his/her property in anticipation for future appreciation if the gains aren't taxed, which means more land could be opened up for densification if the gains are taxed.

Exactly: your edit is what I had in mind too.

Generally, if a given method or field of investing is granted special reduced taxation, the result is to push people towards it. (Dividends not taxed, etc.)

By allowing people to make capital gains without taxes on their primary residence, we're inciting people who are millionaires to continue to "invest" by occupying a SFH too big for them in a prime area where appreciation has generally been pretty high and, even if it starts to get lower per year as the market cools off, the appreciation is still entirely tax-free -- unlike all other possible forms of investment available to them. So it's hard to beat as a risk-reward combo when looking at after-tax rewards (which is what matters) i.e. "net gains expected vs risk" is at its highest for the investment form "all my millions invested in a single well-located Vancouver SFH I'm claiming as my primary residence" compared to all possible alternatives.

So, as a result, this policy helps keep the market inflated, incites owners to continue to hug real estate unproductively, and greatly reduces investment in other sectors that have a better average impact on the economy.

[ssiguy]

The Greens see blood on this issue and know that with more revelations about corruption, passport selling, multi-millionaires receiving gov't benefits due to undeclared income, not paying their share of income taxes, and money laundering in the housing market, the more infuriated BCers are becoming. The Greens know that unless the NDP takes DRASTIC measures to get rid of this illegal activity and give back the province to the people that live here, a lot of disenchanted voters who voted NDP to kick the Liberals out {myself included} will gladly see the government fall and a new election held and the Greens would make huge gains and become a real political force in the province.

Horgan is just about to leave on his Asian trip and has said that a ban on foreign ownership would "send the wrong message that BC is open to business" which is another way of stating to these Chinese crooks that "BC is open to money laundering, tax avoidance, and real estate speculation just like the previous administrations so don't let the name change in gov't effect your decision, it's business as ussual."

I hope to hell the Greens topple this government if very strong legislation is not brought forward and with the Liberals without a leader, they would make nothing but gains in another election.