Canada's 'housing bubble' deemed close to bursting

[ssiguy]

The funny thing about Metro Vancouver right now is that it is the LOWER priced single family homes that aren't selling.

A few years ago complete 2 bedroom shacks were going for $1.0 to $1.5 million in the suburbs and $2+ in Vancouver. This is because the buyers have completely changed. These shacks were being bought for a quick flip, to launder money, or for a tear down to build a palace with the right Feng Shui. Now those buyers are gone and people are actually having to try to sell their homes to average Vancouverites with average wages and {God forbid} for people to actually live in.

IN 2016 in all of South Surrey/White Rock there were only 2 homes for sale under $1.0 million............955k & 985K and only 12 homes for sale under $1.2. I remember it very well because my brother was in the market and bought the one for $985. He had to buy it the AFTERNOON he saw it because right after viewing the house some Chinese walked in with an interpretor and he knew that by the next day it would be gone.

Today there are 46 homes under $1 million and 130 under $1.2 yet the homes aren't selling. Same thing is going on throughout greater Vancouver and especially the Fraser Valley where people are being forced to sell their homes with prices in line with local incomes and be big & nice enough for them and their families to live in because the quick sale to a flipper is no longer an option.

[whatnext]

Trudeau promises new national Speculation Tax on foreign buyers.

https://www.bnnbloomberg.ca/trudeau-prom...7#_gus&_gucid=&_gup=twitter&_gsc=wE8O9oE

[rbt]

Originally Posted by whatnext

Trudeau promises new national Speculation Tax on foreign buyers.

https://www.bnnbloomberg.ca/trudeau-prom...7#_gus&_gucid=&_gup=twitter&_gsc=wE8O9oE

It'll be interesting to see if the BC/Ontario taxes disappear or supersede this tax, or whether they are stacked.

[misher]

Originally Posted by rbt

It'll be interesting to see if the BC/Ontario taxes disappear or supersede this tax, or whether they are stacked.

Its taking forever to work its way through our courts but its predicted that the FBT and later the Speculation tax will be removed and money refunded. You can ask anyone familiar with Canadian law and they will agree that the government is likely to lose.


[URL="https://www.branchmacmaster.com/class_actions/foreign-nationals-property-tax/[/URL]

Originally Posted by ssiguy

The funny thing about Metro Vancouver right now is that it is the LOWER priced single family homes that aren't selling.

A few years ago complete 2 bedroom shacks were going for $1.0 to $1.5 million in the suburbs and $2+ in Vancouver. This is because the buyers have completely changed. These shacks were being bought for a quick flip, to launder money, or for a tear down to build a palace with the right Feng Shui. Now those buyers are gone and people are actually having to try to sell their homes to average Vancouverites with average wages and {God forbid} for people to actually live in.

IN 2016 in all of South Surrey/White Rock there were only 2 homes for sale under $1.0 million............955k & 985K and only 12 homes for sale under $1.2. I remember it very well because my brother was in the market and bought the one for $985. He had to buy it the AFTERNOON he saw it because right after viewing the house some Chinese walked in with an interpretor and he knew that by the next day it would be gone.

Today there are 46 homes under $1 million and 130 under $1.2 yet the homes aren't selling. Same thing is going on throughout greater Vancouver and especially the Fraser Valley where people are being forced to sell their homes with prices in line with local incomes and be big & nice enough for them and their families to live in because the quick sale to a flipper is no longer an option.

Despite all the spiel about how housing isn't an investment, less locals and less first time buyers are buying housing now that they can't expect to make money on it. Seems like none of the people who were complaining they can't afford are buying now that they can. That expression "practice what you preach" seems to be appropriate here. You also have a bunch of people who are getting sweetheart deals thanks to rent control who refuse to leave despite being able to afford to. The Vancouver City Council has noted that there is now a large problem as many renters are living in "affordable" condos despite making large incomes which leaves those who make minimum unable to move into them. The problem is that when there's rent control renters look at homeowners who are facing rising costs and taxes way above inflation and decide that they rather stay in their rent controlled condo despite their income being more than enough to afford a more expensive rental or purchasing. We even have the mayor who makes well into the 6 figures living in a rent controlled condo.

I'm not 100% against rent control, but there needs to be a balance between homeowners and renters and unfortunately that balance has been broken in recent years and is causing issues.

[WarrenC12]

Originally Posted by misher

Its taking forever to work its way through our courts but its predicted that the FBT and later the Speculation tax will be removed and money refunded. You can ask anyone familiar with Canadian law and they will agree that the government is likely to lose.

Care to make a wager on that?

[CanSpice]

Originally Posted by misher

Despite all the spiel about how housing isn't an investment, less locals and less first time buyers are buying housing now that they can't expect to make money on it.

[citation needed]

[jigglysquishy]

I work in property law and this is the first I'm hearing the foreign buyer's tax will be struck down in court.

[whatnext]

Originally Posted by jigglysquishy

I work in property law and this is the first I'm hearing the foreign buyer's tax will be struck down in court.

It's all in Misher's head.

[ssiguy]

Originally Posted by rbt

It'll be interesting to see if the BC/Ontario taxes disappear or supersede this tax, or whether they are stacked.

I don't know about Ontario but in BC it would definitely be stacked. The speculation tax is very popular in BC and by a wide cross section of socio-economic classes and both renters and owners. Despite what developers and real estate agents say, everyone knows that much of the outrageous real estate prices are due to off shore buyers, money launderers, and flippers.

Needless to say renters are very supportive but so are most owners. Even though they have seen the value of their homes drop they too know the damage the speculators have done to the community. From empty neighbourhoods, to having unkept homes next door and/or have squatters living in them, to seeing the young people leave the city or even region including their own.

Businesses are also overwhelmingly supportive. Both the young & educated and working class have fled the area and hence can't find or retain both skilled and unskilled workers. Many small businesses and restaurants have had to close down due to lack of available workers. The city also applies taxes based upon POTENTIAL land values which has caused their property taxes to soar.

Gov't agencies are also supportive because they can't entice and/or retain skilled workers. Recently 8 emergency nurses in Vancouver quit en masse as they can't afford to live in the city. North Van school district is considering building subsidized rentals for their teachers as the commute is hell and no one can afford to live in the area. UBC already offers subsidized rent for it's new profs and are concerned that within 5 to 10 years they may have to begin cutting the number of classes offered or even potentially whole programs because as the baby boomer profs retire they can't find any younger ones to take their place.

[misher]

Originally Posted by jigglysquishy

I work in property law and this is the first I'm hearing the foreign buyer's tax will be struck down in court.

It’s been in the courts for years so the hype from the start of the case has died down. Surprised you didn’t know about it there’s some big names on the plaintiffs side.

This article gives a good overview of some of the arguments https://www.theglobeandmail.com/opinion/...n-nationals-is-unlawful/article31235014/

And if your familiar with the equal investor treatment portion of our trade treaties and how countries with similar treaties had to provide exemptions to their FB ban like NZ to Aus and Singapore that’s also another good argument.

[ssiguy]

If it were somehow struck down then the consequences for off shore buyers would be far worse. The speculation taxes are well received and if they are struck down the government would be pressured to ban all non-resident ownership. This would be constitutional as CMHC bars such individuals and non-Canadians can't vote.

[misher]

Originally Posted by ssiguy

If it were somehow struck down then the consequences for off shore buyers would be far worse. The speculation taxes are well received and if they are struck down the government would be pressured to ban all non-resident ownership. This would be constitutional as CMHC bars such individuals and non-Canadians can't vote.

Such a ban was against the equal investor treaties that New Zealand had with Australia and Singapore. I expect our similar treaties would mean we could only apply this ban to the nations we don't have investment treaties with.

Also the CMHC has generally been against discriminating against foreign buyers:

The head of CMHC has publicly argued that foreign ownership is not the main driver for increasing housing prices. Evan Siddall has previously said that foreign ownership makes up less than five per cent of the housing market.

“Foreign ownership is a thing; it’s not the thing,” Siddall said in an interview earlier this year.

“The sources of demand that are pushing prices higher are manyfold and the sources of investment speculation ... in the real estate part of our economy are manyfold and more domestic than foreign.”....
CMHC says that overall, foreign buyers owned less than one per cent of the condo stock in 17 metropolitan areas across the country.

https://www.thestar.com/business/real_es...small-portion-of-toronto-homeowners.html

[whatnext]

Originally Posted by ssiguy

If it were somehow struck down then the consequences for off shore buyers would be far worse. The speculation taxes are well received and if they are struck down the government would be pressured to ban all non-resident ownership. This would be constitutional as CMHC bars such individuals and non-Canadians can't vote.

Yes, one only has to look at Hong Kong to see what happens when young people feel they have no future and are hobbled by crippling real estate prices.

Fortunately we have no trade deal with China and are unlikely to ever have one now, so we can tax them at whatever rate we want!

[milomilo]

Just heard Trudeau say on the radio that he is going to introduce policy that will have the effect of raising house prices, only in our most expensive housing markets though. Idiocy.

[CityTech]

There's an easy fix if nationality is an illegal criterion to use.. Change it to simply be a citizenship-blind vacancy tax. Any residential property whose owner does not have his or her primary residence there, and does not have any tenants, has to pay a tax.

[misher]

Originally Posted by whatnext

Yes, one only has to look at Hong Kong to see what happens when young people feel they have no future and are hobbled by crippling real estate prices.

Fortunately we have no trade deal with China and are unlikely to ever have one now, so we can tax them at whatever rate we want!

We have an investment treaty. https://en.m.wikipedia.org/wiki/Canada–China_Foreign_Investment_Protection_Agreement

Article 5Endnote 3

Most-Favoured-Nation Treatment

1. Each Contracting Party shall accord to investors of the other Contracting Party treatment no less favourable than that it accords, in like circumstances, to investors of a non-Contracting Party with respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of investments in its territory.
2. Each Contracting Party shall accord to covered investments treatment no less favourable than that it accords, in like circumstances, to investments of investors of a non-Contracting Party with respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of investments in its territory.
3. For greater certainty, the “treatment” referred to in paragraphs 1 and 2 of this Article does not encompass the dispute resolution mechanisms, such as those in Part C, in other international investment treaties and other trade agreements.

And citytech’s suggestion would probably work.

[whatnext]

Who wants a Tesla? All you have to do is by a townhouse in South Surrey from a desperate developer:

As sales lag, B.C. developers turn to creative incentives

A developer is taking his marketing approach to an unprecedented level with the offering of a $55,000 Tesla electric car to the buyers of his townhouses.

Sean Hodgins, president of New Westminster based Century Group, came up with the idea to help sell the remaining 10 townhouses at his Viridian project in South Surrey. The promotion begins Sept. 12 and ends Oct. 31 at midnight. The Tesla Model 3 mid-size sedan retails for around $55,000, he says. His company has entered into a deal with Tesla to supply the cars for the promotion, as well as to install charging stations at the 10 townhouses.

Because the townhouses have already been pre-wired for charging stations and electric cars are gaining in mainstream popularity, Mr. Hodgins says the offer makes sense. He says the gambit is not motivated by the slowing hhousing market, although he’s aware that that is how it appears.

“They might say that, and that would be fair comment, because I think some people want to look at it in some ominous way, but we’re really proud to do it," he says. "If it helps us sell one of our townhomes, and it helps people transition from their very expensively run gasoline car, and it helps Tesla promote their brand as well, then that’s a cool thing...

...Since the market slowed, realtor Ian Watt says he’s received many e-mails offering lucrative bonus commissions to bring in buyers on particular projects. He criticizes the approach.

“If it’s priced correctly, it will sell,” says Mr. Watt. “You don’t need to bribe the realtor into duping your client into overpaying. It’s a sign of the times. Either the place is overpriced, or the market is slow, or both. In a hot market, you don’t have to do that.”...

https://www.theglobeandmail.com/real-est...-developers-turn-to-creative-incentives/

[whatnext]

Scary article about Canada's suburban debt bomb and what happens if it goes off. I was shaking my head from the first line - who the hell writes a barber making $30k a $700k mortgage?!

How Canada’s suburban dream became a debt-filled nightmare
For decades, families have flocked to the suburbs in search of affordable housing. But increasingly, those neighbourhoods are debt traps. Why Canadian commuters are the economy’s greatest risk

Navin Seepaul is a 29-year-old single dad who makes $30,000 a year as a barber. He owns a $1-million house in Brampton, a sprawling suburb northwest of Toronto. Each month, the payments on his roughly $700,000 mortgage are $4,300. On top of that, he has $24,000 in credit card debt.

“The more you work, the more you spend,” says Mr. Seepaul. “‘What is $1,500? What is $2,000? Let me just run this credit card here.’ A lot of people do it.”

To help pay the bills – even just the monthly interest charges are staggering – he rents out his basement to three or four students, and two truck drivers rent bedrooms on his second floor. At any given time, the young father has six vehicles parked on his property.

Welcome to the Canadian suburbs, circa 2019, where the country’s debt problem is at its worst, and where the dream of owning a home on a leafy street with a garage and a lush yard for the kids is, for many, a long way from reality...

....Canada’s total household debt has hit a record $2.2-trillion. Canadian households are carrying debt equal to 177 per cent of annual disposable income.

But there’s another number that should be more concerning: the debt service ratio. That’s the percentage of after-tax income households must spend to pay the interest on their debts – not just the mortgage, but also car loans, credit cards and lines of credit.

The Globe and Mail asked Environics Analytics to pinpoint the 100 most financially stressed neighbourhoods in the country – census tracts with the highest debt service ratio. Nationwide, it sits at 8.4 per cent, according to Environics (which calculated the figure using data from Statistics Canada, the 2016 census, Equifax and the Bank of Canada, among other sources).

But in the 100 most maxed-out neighbourhoods, homeowners are spending more than 16 per cent of their after-tax income on interest, and an average of 22 per cent....

...Canada’s most financially stressed neighbourhoods are almost exclusively in the suburbs, Environics’ analysis shows.

Fifteen are on the fringes of Vancouver – places like Langley, Surrey, Coquitlam and Richmond. Two are in Calgary’s northern outskirts, and four are in Edmonton, clustered south of the highway that rings the city. (Just two are in a city’s downtown core: one in Montreal and one in Vancouver.)

The rest? Look to the Greater Toronto Area....

....Today, Brampton epitomizes the suburban debt-stress phenomenon by pretty much every measure. Its population has increased twice as fast as Toronto’s over the past decade, to nearly 600,000, making it the fourth-biggest city in Ontario, after Toronto, Ottawa and Mississauga....

https://www.theglobeandmail.com/business...an-dream-became-a-debt-filled-nightmare/

[misher]

Home sales are way up across the nation, with either the Liberals to increase the FTHB program or the Conservatives to modify the stress test it looks like the Canadian real estate industry is back.

Canadian Home Prices See Biggest One-Month Gain in Two Years

Canadian home prices recorded their biggest gain in more than two years, and sales advanced for a sixth straight month in another sign of health in the country’s real estate market.

The number of units sold climbed 1.4% in August from a month earlier, and are now 17% above levels in February, the Canadian Real Estate Association said Monday. Benchmark home prices rose 0.8% in August, the biggest one-month gain since April 2017. Toronto, Vancouver and Montreal -- the three biggest markets -- recorded increases in prices and sales.

https://www.bloomberg.com/news/articles/...th-gain-in-two-years?srnd=premium-canada

[whatnext]

Just not in BC

Not only has Canada's housing market rebounded, it's "basically right back on track," Bank of Montreal's chief economist says.

That's if you leave British Columbia out of the equation, Douglas Porter said in a report titled "Canadian Housing ... It's Baaaack."...

https://www.theglobeandmail.com/business...das-housing-market-minus-bc-its-baaaack/

That said, too much of Canada's real estate is fuelled by excessive debt as outlined in the Globe article posted above. The day of reckoning will come, as it did for Americans in 2008, and it won't be pretty.