Canada's 'housing bubble' deemed close to bursting

[WarrenC12]

Originally Posted by Truenorth00

That is how it is. Not how it should be. I wonder if 100% inclusion on capital gains would curb speculation.

Capital gains is currently preventing me from selling my rental property. The cap rate is pretty garbage in this market, but the gains I'd trigger would be huge.

Now if I could just get an unpaid leave for a year from work...

[kwoldtimer]

Originally Posted by WarrenC12

Capital gains is currently preventing me from selling my rental property. The cap rate is pretty garbage in this market, but the gains I'd trigger would be huge.

Now if I could just get an unpaid leave for a year from work...

Doesn't that stray into "not working overtime 'cause it'll just get taxed" territory?

[WarrenC12]

Originally Posted by CityTech

In Canada you can deduct property taxes, utilities, management costs, and condo fees from the rental income you report on your taxes. So you're not paying taxes on the entire sum of the rent.

Don't forget the almighty mortgage interest!

You can also depreciate capital costs, like the building itself. Though this increases your tax liability later. As always, consult with an accountant.

[CityTech]

Originally Posted by WarrenC12

Don't forget the almighty mortgage interest!

You can also depreciate capital costs, like the building itself. Though this increases your tax liability later. As always, consult with an accountant.

I was under the impression you can't deduct mortgage interest as an expense from rental income in Canada.

[kwoldtimer]

edit

[Truenorth00]

Originally Posted by CityTech

I was under the impression you can't deduct mortgage interest as an expense from rental income in Canada.

Nope. You can.

[WarrenC12]

Originally Posted by kwoldtimer

Doesn't that stray into "not working overtime 'cause it'll just get taxed" territory?

Haha no because I'm still collecting rent.

Those people I mentioned literally thought their paychecks would decrease.

[WarrenC12]

Originally Posted by CityTech

I was under the impression you can't deduct mortgage interest as an expense from rental income in Canada.

Broadly speaking, you can deduct any interest from a loan you've taken out to generate income.

I can take out a giant loan and use that money to invest in the stock market, and deduct the interest. Rates are low and so is the market. Feeling brave?

[Truenorth00]

Now that we're seeing more reports of how irresponsible the banks have been, a pullback is inevitable. And there's no way the government can bail everyone out now. The bubble is just way too big.


This report on the the banks retroactively boosting income to boost their CMBS, shows all the different behind-the-scenes — that has been inflating this market:

https://www.propublica.org/article/whist...idespread-manipulation-of-mortgage-funds

They've learned nothing. We need to start sending bankers to jail for this.

[scryer]

Originally Posted by Truenorth00

Now that we're seeing more reports of how irresponsible the banks have been, a pullback is inevitable. And there's no way the government can bail everyone out now. The bubble is just way too big.


This report on the the banks retroactively boosting income to boost their CMBS, shows all the different behind-the-scenes — that has been inflating this market:

https://www.propublica.org/article/whist...idespread-manipulation-of-mortgage-funds

They've learned nothing. We need to start sending bankers to jail for this.

Lol. The sheeple are way too focused on other things to hold bankers accountable for their crimes. They'll get away with it again .

[lio45]

Originally Posted by WarrenC12

I do agree that typically being a landlord is more of a "buy and hold" strategy.

Especially in Vancouver, the land of cap rates that are approximately the same as they'd be for a stash of gold ingots (0).

[Xelebes]

Originally Posted by kwoldtimer

Doesn't that stray into "not working overtime 'cause it'll just get taxed" territory?

Depends. If you are planning to spend on another like asset, a capital gains tax hit might mean that you have to lower your expectations on the next property you are in. If you are pulling out, then yes your diagnosis is correct.

Originally Posted by Truenorth00

Nope. You can.

Only as under business income.

[lio45]

Originally Posted by Xelebes

If you are planning to spend on another like asset, a capital gains tax hit might mean that you have to lower your expectations on the next property you are in.

Which is precisely why it's so financially interesting to ensure you're making the asset you want to flip "your primary residence".

[lio45]

Originally Posted by Xelebes

If you are pulling out, then yes your diagnosis is correct.

Not really, no. I am pretty sure Warren would be pulling out in order to invest in a different class of asset.

If he could "swap" $1M of Vancouver real estate equity generating a net 2% for $1M of a stock he's bullish on that currently generates 5% in dividends, he'd do it in a heartbeat.

But that $1M would be anywhere close to $1M after this conversion... so it's kinda "frozen" in its current suboptimal form, strictly due to taxation reasons.

(edit - you and I actually agree if you mean "lower your expectations on all assets that give you a ROI" and by "pulling out", burning the money on vacations and YOLO stuff. In other words, lower your expectations on how much stock and how much dividends in absolute amounts you'll get after this asset swap.)

[WarrenC12]

Originally Posted by lio45

Not really, no. I am pretty sure Warren would be pulling out in order to invest in a different class of asset.

If he could "swap" $1M of Vancouver real estate equity generating a net 2% for $1M of a stock he's bullish on that currently generates 5% in dividends, he'd do it in a heartbeat.

But that $1M would be anywhere close to $1M after this conversion... so it's kinda "frozen" in its current suboptimal form, strictly due to taxation reasons.

Yes, this exactly. I'm not arguing for lower capital gains taxes though, I think we need to tax that wealth.

I'd like to see a lifetime exemption for personal residences, similar to what the government does for selling a small business. $1M in 2020 dollars is more than fair IMO.

This would stop the flipper/builders and others who are abusing the system.

[misher]

Originally Posted by lio45

Actually, I believe misher's "capital gains are [only] taxed at 50%" is merely a confusing way of phrasing the very common knowledge that "In Canada, 50% of the value of any capital gains are taxable."

https://www.wealthsimple.com/en-ca/learn/capital-gains-tax-canada

Yep.

And that’s my point, if we want investors to invest to get rentals built we have to make rentals more attractive than stock investments. We tax profits from rents at 100% but capital gains on stocks at 50%. And honestly most wealthy people will own stocks through overseas companies to avoid those taxes.

We got most rentals in Vancouver built when we offered tax incentives and despite having a massive rental crisis we refuse to offer significant incentives for rental.

A 1% vacancy rate is a crisis. Yet most Canadians seem to ignore it. It’s crazy.

[MolsonExport]

the — gas never stops.

[Xelebes]

Originally Posted by misher

Yep.

And that’s my point, if we want investors to invest to get rentals built we have to make rentals more attractive than stock investments. We tax profits from rents at 100% but capital gains on stocks at 50%. And honestly most wealthy people will own stocks through overseas companies to avoid those taxes.

We got most rentals in Vancouver built when we offered tax incentives and despite having a massive rental crisis we refuse to offer significant incentives for rental.

A 1% vacancy rate is a crisis. Yet most Canadians seem to ignore it. It’s crazy.

Isn't this a more general statement on income tax policy moreso than a statement specific to rental? That is, we place tax favourability towards prices over returns and that has very general ramifications?

[misher]

Originally Posted by Xelebes

Isn't this a more general statement on income tax policy moreso than a statement specific to rental? That is, we place tax favourability towards prices over returns and that has very general ramifications?

Yes.

I realize high taxes on investors tends to be popular among those who are not investors but in a globalized economy investors just avoid rather than pay high taxes. So our tax system dictates where people invest.

Someone just pointed out he’s not selling property due to high capital gains taxes. And he’s only being charged 50% of the normal taxes. Our system needs to be based on sound policy that directs investment where we want it and it needs to not be punishing such that people choose to hold off on transactions or avoid Canadian taxes completely. We want people making transactions and boosting economic activity.

And I saw a few comments that taxes should be higher on RE investors. But at a 1% vacancy rate this is a suicidal policy that would greatly hurt renters. Renters end up paying all taxes and costs on homeowners. It’s a shame that most don’t get that.

[theman23]

Originally Posted by misher

Yep.

And that’s my point, if we want investors to invest to get rentals built we have to make rentals more attractive than stock investments. We tax profits from rents at 100% but capital gains on stocks at 50%. And honestly most wealthy people will own stocks through overseas companies to avoid those taxes.

We got most rentals in Vancouver built when we offered tax incentives and despite having a massive rental crisis we refuse to offer significant incentives for rental.

A 1% vacancy rate is a crisis. Yet most Canadians seem to ignore it. It’s crazy.

You don't know what you're talking about. You've already been corrected on this multiple times. Do you even read what people post in response to your —?

Day traders pay personal tax rates, and their profits don't get treated as capital gains. No different than the professional landlord.

For the average joe holding his money in the stock market, again there is no distinction between holding real estate and holding investments in the market. You get taxed the capital gains rate when you flip either. You are exempt from capital gains taxes if it is your primary residence. The corollary would be a TFSA, but of course most people have far more value in their homes than in their TFSA. Clear tax advantage to the property owner.

If you're naive, you might argue that dividends are some sort of corollary to rental income as they have a (sometimes) somewhat favourable tax But this ignores that the money earned through dividends has already had income tax paid on it, and the "favourable" tax rate reflects that.

Finally, not declaring income earned is illegal and is not a tax avoidance strategy for the majority of Canadians. This can also be accomplished with real estate.