Canada's 'housing bubble' deemed close to bursting

[Al Ski]

Originally Posted by SpongeG

A lot of youtubers make really good money. Just from estimates of what they can make as figured out by what is known for ad revenue some can make $50,000 a month. That is just youtube ad revenue. That doesn't include sponsorship deals. I've watched some explain without giving actual figures have deals with many brands who pay them $1000+ per month just as a sponsor. As well they get free merchandise, Article furniture is constantly giving away free furniture that gets a mention in a video.

The Sorry Girls who are from Toronto are very successful iwth 2.1 million subscribers and both have bought homes and have done extensive renovations. The low estimate is from youtube alone they make $8000 per month. They also have a production staff to pay. As well as multiple sponsorship deals.

These kids these days know how to hustle and make money.

Right, I know that a (very) few people can make money on YouTube by spewing nonsense to vapid dumbasses but..

That doesn't really address the broader issue of housing affordability, does it?

[GeneralLea]

Originally Posted by Al Ski

Anecdotally, I have one friend who owns 6 houses another who owns 5.

They both contributed to society at one time, now they just flip houses.

Neither one of them has any idea what they're doing and I don't know their leverage but they're all in on the FOMO.

This will end and it's not going to be pretty.

I don't understand the whole point of flipping houses and owning multiple properties, considering the drastica effects this behaviour creates on the housing market. Moreso the latter behaviou concerns me...though I understand it's a financially sound means of earning a income, even if it contributes detrimentally to the cost of living and affordability. (speculation, demand, and yes, fear of missing out....on cashing out)

[Al Ski]

Originally Posted by lio45

Exactly. And that so-called "problem" isn't a problem for everyone; in fact, it's a problem for some and a windfall for others.

(That's a common situation: if for example you control oil drilling rights that you bought for cheap a long time ago in an oil-rich region, skyhigh oil prices that make some people who drive a lot feel extreme "pain at the pump" are of course a huge headache for some but they're great for you, etc.)

And way too many Canadians find that "problem" to be awesome for them, especially if you only consider the subset that reliably votes in elections, for it to be meaningfully addressed anytime soon by the people in charge.

It's not a "problem" for innocent homeowners who have suddenly discovered that they're 'paper' millionaires.

It IS a problem for people who don't have mommy and daddy money who can't find a place to live.

It's an entirely fake economy that has been created by trillions of $$ of free money and 0% interest rates.

It's entirely unsustainable and it will inevitably implode.

You really have to wilfully put your brain in park to think otherwise.

And no government has had the balls to do the right thing because that would entail lowering home prices - and the boomers wouldn't vote them.

And so we just continue on this path of ultimate destruction..

[Al Ski]

Originally Posted by GeneralLeeTPHLS

I don't understand the whole point of flipping houses and owning multiple properties, considering the drastica effects this behaviour creates on the housing market. Moreso the latter behaviou concerns me...though I understand it's a financially sound means of earning a income, even if it contributes detrimentally to the cost of living and affordability. (speculation, demand, and yes, fear of missing out....on cashing out)

Well I don't think my mates (both great guys btw) have any societal issues in mind, they just want to make easy money.

This is looking exactly like the lead up to 2008/9 - only broader based because its the Everything bubble.

How quickly we forget.

*And both my mates careers were ruined as a result of the 08/09 crash, hence their willingness to go rogue (I think).

[thebasketballgeek]

Originally Posted by Al Ski

Well yeah, I guess you could theoretically save $3600 per year on a minimum wage job if you are willing to sacrifice your entire young adulthood to the purchase of a commodity. You're going to have to be 100% dependant on your parents until the age of 30, miss the formative years of adulthood but hey - you'll have finally 'succeeded' and be in deep debt for the rest of your life.. bravo! You win!

You'll be a social misfit at parties because you'll have never been to one and will have no idea how to behave but..

This dystopian scenario, this is what we've been conditioned to accept in our bizarre worship of commodified home ownership.

That doesn’t seem right because if you’re completely dependant on your parents you can save much more money then $3600 a year. When I took a gap year in college and worked for 10 months at close to minimum wage I saved close to $20000. So really it can be as simple as two years of being super frugal with your purchases and boom you get a cheap 🞵🞵🞵 house by 21.

Although it would be very interesting if u fully sacrificed your adulthood with that strategy by age 30 you could hypothetically save $240000 by age 30 without doing investment. If you invested all your earnings and got a 10% annual return on the stock market you could be closer to $500k by 30. Of course it comes with massive sacrifices to your social life and mental health but that amount of money by age 30 just working minimum wage is nothing to scoff at. This is not even taking into consideration likely raises for working at a place for 12 years, locating a higher paying job with no experience or going full fomo in crypto and being a millionaire.

[lio45]

Originally Posted by thebasketballgeek

When I took a gap year in college and worked for 10 months at close to minimum wage I saved close to $20000. So really it can be as simple as two years of being super frugal with your purchases and boom you get a cheap 🞵🞵🞵 house by 21.

~15 years ago, I worked for a year while living at my parents and saved enough for the downpayment on a four-story building (3 retail commercial units on the ground floor, 12 little residential units on the three other floors) in the downtown of a midsized Canadian city, and after cleaning it up and refinancing it, used those funds to acquire another mixed use building in the same area, etc.

I think the only things that would be different today are: 1) less choices of cities remaining where that kind of thing can be done and 2) the progression of the portfolio would be slower (smaller buildings).

But it's still doable, IMO. Of course, it requires sacrifices...

I "sacrificed" a chunk of my 20s (still consider I was happy tho) to build what I have, and don't regret it at all.

[ssiguy]

Trudeau's idea of just building subsidized rentals/social housing is a very bad one both socially and from a financial point of view. Unfortunately it fits well into the Liberal answer to everything..............just throw money at it. Yes, we certainly need low cost rentals but even more than that we need low cost real estate which is where Ottawa/Provinces can come forward with donating empty land, offices, and schools. The cities {which usually have far less if any} can donate the their civic run golf courses.

By building TRULY affordable homes for purchase, it frees up rentals in the private sector, gets rid of the stigma of being in social housing, and gets the government off the hook for repairs/upgrades etc which make our government owned rentals financially unsustainable over the long-term as opposed to purchased homes where such upgrades are the responsibility of the owners thru strata fees. Building houses, when the cities wave the development charges, is still remarkably cheap. Again, it's the land costs the money in our most unaffordable cities and not the buildings themselves. Low rise/townhomes with limited parking are especially cheap to build and can EASILY be done for less than $150k per unit.

The advantage of the cities to allocating their golf courses to housing by waving the development fees is multitude as not only do those golf courses no longer need yearly government funding to keep going but they turn that land into revenue generating by property taxes and create more parkland/green space for the community at large.

These homes should NOT be built by cities as the bureaucracy would slow their construction to a crawl, become a political football, and be more expensive to build.

[MolsonExport]

I worked for a year while living at my parents and saved enough for the downpayment on a four-story building

were you making several hundred dollars per hour?

[ssiguy]

Originally Posted by Nite

Your conclusions disagree with all creditable studies done by federal, provincial governments and independent organizations. who all say the root cause is supply.

This is where the cities can crack down. Property taxes are one of the very few places where cities have complete control of revenue outside the domain of Ottawa and the their respective provinces.

Property taxes do not need to rise for the standard owner of their primary residence but should increase substantially after that. One with a second home should pay more but after that the rate should increase dramatically. As an example a house with a $5000 yearly tax bill would not increase but other owned homes by the same person AND/OR immediate family member {assuming the exact same house with the same $5000 tax bill} would increase to $7500 for the second, $50,000 for the third, $100,000 for the forth and grow by $100,000 for every one after that. This would apply to both people and businesses.

The government could give one year for people to sell their properties at a fair price and then kick it in. Tens {or even hundreds} of thousands would flood the market greatly increasing supply, lowering prices, and allow people who are renting to purchase hence freeing up space in the rental market. Of course all foreign ownership should be completely band and any current homes owned by foreigners {save vacation properties outside the major cities} should have one year to sell their properties or forfeit them and ditto for any business that owns any homes at all.

[jigglysquishy]

Originally Posted by ssiguy

This is where the cities can crack down. Property taxes are one of the very few places where cities have complete control of revenue outside the domain of Ottawa and the their respective provinces.

Property taxes do not need to rise for the standard owner of their primary residence but should increase substantially after that. One with a second home should pay more but after that the rate should increase dramatically. As an example a house with a $5000 yearly tax bill would not increase but other owned homes by the same person AND/OR immediate family member {assuming the exact same house with the same $5000 tax bill} would increase to $7500 for the second, $50,000 for the third, $100,000 for the forth and grow by $100,000 for every one after that. This would apply to both people and businesses.

The government could give one year for people to sell their properties at a fair price and then kick it in. Tens {or even hundreds} of thousands would flood the market greatly increasing supply, lowering prices, and allow people who are renting to purchase hence freeing up space in the rental market. Of course all foreign ownership should be completely band and any current homes owned by foreigners {save vacation properties outside the major cities} should have one year to sell their properties or forfeit them and ditto for any business that owns any homes at all.

This isn't really true.

Provinces regulate how and what you can tax. Want to tax a vacant lot downtown more? That's illegal in Saskatchewan.

Want to add a surcharge for lots over one acre in size? Again, illegal in Saskatchewan.

[rofina]

Originally Posted by MolsonExport

were you making several hundred dollars per hour?

This is definitely a hindsight 20/20 situation.

But Canada had 0%down/40 year mortgages for a minute.

We also had no mortgage stress test.

We also had no income testing lending to self employed.

No idea if Leo used any of those.

But with the benefit of hindsight, there was a may to make billions on Canadian RE while using alarmingly little of ones own money.

Also - I bought my first Vancouver condo in my early twenties in the same way, I imagine Leo paid for his building similar what I paid for a Vancouver condo.
Worked 14-16hr days between two jobs for about a year, while living rent free at folks. That enabled me to save my first DP. Equity gains were life changing from there, rolled into subsequent properties.

[rofina]

Originally Posted by ssiguy

This is where the cities can crack down. Property taxes are one of the very few places where cities have complete control of revenue outside the domain of Ottawa and the their respective provinces.

Property taxes do not need to rise for the standard owner of their primary residence but should increase substantially after that. One with a second home should pay more but after that the rate should increase dramatically. As an example a house with a $5000 yearly tax bill would not increase but other owned homes by the same person AND/OR immediate family member {assuming the exact same house with the same $5000 tax bill} would increase to $7500 for the second, $50,000 for the third, $100,000 for the forth and grow by $100,000 for every one after that. This would apply to both people and businesses.

The government could give one year for people to sell their properties at a fair price and then kick it in. Tens {or even hundreds} of thousands would flood the market greatly increasing supply, lowering prices, and allow people who are renting to purchase hence freeing up space in the rental market. Of course all foreign ownership should be completely band and any current homes owned by foreigners {save vacation properties outside the major cities} should have one year to sell their properties or forfeit them and ditto for any business that owns any homes at all.

All these ideas are not wrong, but can be achieved much more easily and much more practical way.

2 classes of land.

Freehold - this is what we have today. Subject to zoning, etc, but otherwise yours to build and take risks with. Up zone, rezone, do whatever

Freehold 2.0 - Land that contains housing for income verified locals only. These units are for local housing only. The units appreciation is linked to the cost of building the unit at time of delivery, and the appreciation on the unit is capped to inflation rate only.

This land would be released for free by Cities, Provinces, Feds, to the bidder than can propose the best value project. So for example, if Westbank wants to promise delivering 300 units and a community center for $400 million great. But Concord says it can deliver 350 units and a community center for $380 million. Deliver that.

This housing remains in the local alternate stock for its lifespan. Cannot be rezoned. Cannot be flipped. Cannot be used for profit otherwise.

Then open the gates for foreign investment, let it run wild. Tax the living 🞵🞵🞵🞵 out of it and fund the above scheme.

Who cares if foreign money want to spend $3000 a sq/ft on condos? We can build an infinite amount of condos. Sell them and reap profit.

[FarmerHaight]

Originally Posted by ssiguy

By building TRULY affordable homes for purchase, it frees up rentals in the private sector, gets rid of the stigma of being in social housing, and gets the government off the hook for repairs/upgrades etc which make our government owned rentals financially unsustainable over the long-term as opposed to purchased homes where such upgrades are the responsibility of the owners thru strata fees.

If these homes were to be built and put up for sale, and the sale price is well below market value, how exactly will you decide who gets to purchase them? There would certainly be more demand than supply for affordable homes on prime real estate. If you restrict purchasers based on income level, what happens when there income increases? Are they allowed to sell the home they purchased? How do you control the resale value? How do you prevent these people from speculating on their affordable homes?

The government has no mandate to turn a profit, which means government rentals can offer truly affordable rents that only increase because of inflation. When a tenant no longer qualifies for the affordable home, the government can make sure the good is available for the next person who needs it.

Originally Posted by ssiguy

...they turn that land into revenue generating by property taxes and create more parkland/green space for the community at large.

How would turning golf courses into houses create more green space?

Originally Posted by ssiguy

Property taxes do not need to rise for the standard owner of their primary residence but should increase substantially after that. One with a second home should pay more but after that the rate should increase dramatically. As an example a house with a $5000 yearly tax bill would not increase but other owned homes by the same person AND/OR immediate family member {assuming the exact same house with the same $5000 tax bill} would increase to $7500 for the second, $50,000 for the third, $100,000 for the forth and grow by $100,000 for every one after that. This would apply to both people and businesses.

The government could give one year for people to sell their properties at a fair price and then kick it in. Tens {or even hundreds} of thousands would flood the market greatly increasing supply, lowering prices, and allow people who are renting to purchase hence freeing up space in the rental market. Of course all foreign ownership should be completely band and any current homes owned by foreigners {save vacation properties outside the major cities} should have one year to sell their properties or forfeit them and ditto for any business that owns any homes at all.

How would this address homes owned in multiple cities? Or how would a landlord who owns two or three properties keep rents low with an exorbitant property tax bill? There would be no shortage of loopholes in this property tax system. Do you think Canadian cities have the resources to investigate a web of related persons and holding companies to ensure this system is fairly applied?

Originally Posted by ssiguy

Of course all foreign ownership should be completely band and any current homes owned by foreigners {save vacation properties outside the major cities} should have one year to sell their properties or forfeit them and ditto for any business that owns any homes at all.

What do you mean by "foreign ownership"? Non-residents? Foreign-born citizens? Ex-pats? Could a Canadian retiree who spends six months in Arizona still own a property in Canada? Could a family from Taiwan own an apartment for their son to live in while attending university (and paying 3x or more what a Canadian pays for tuition)? Could a Canadian corporation with foreign ownership own property in Canada? Why in the world would vacation properties be exempt? Everyone knows how hard it is for year-round residents of Tofino, or Banff, or Whistler who work in the service industry to afford rent let alone purchase property.

Banning foreigners sounds nice, but it would lead to all sorts of administrative headaches.

[travis3000]

Originally Posted by ssiguy

This is where the cities can crack down. Property taxes are one of the very few places where cities have complete control of revenue outside the domain of Ottawa and the their respective provinces.

Property taxes do not need to rise for the standard owner of their primary residence but should increase substantially after that. One with a second home should pay more but after that the rate should increase dramatically. As an example a house with a $5000 yearly tax bill would not increase but other owned homes by the same person AND/OR immediate family member {assuming the exact same house with the same $5000 tax bill} would increase to $7500 for the second, $50,000 for the third, $100,000 for the forth and grow by $100,000 for every one after that. This would apply to both people and businesses.

The government could give one year for people to sell their properties at a fair price and then kick it in. Tens {or even hundreds} of thousands would flood the market greatly increasing supply, lowering prices, and allow people who are renting to purchase hence freeing up space in the rental market. Of course all foreign ownership should be completely band and any current homes owned by foreigners {save vacation properties outside the major cities} should have one year to sell their properties or forfeit them and ditto for any business that owns any homes at all.

$100,000 per year for property taxes? Um that's not even anywhere near realistic. Canada is a capitalistic society. Punishing landlords who provide housing to people is a horrible idea.

[whatnext]

Originally Posted by FarmerHaight

...What do you mean by "foreign ownership"? Non-residents? Foreign-born citizens? Ex-pats? Could a Canadian retiree who spends six months in Arizona still own a property in Canada? Could a family from Taiwan own an apartment for their son to live in while attending university (and paying 3x or more what a Canadian pays for tuition)? Could a Canadian corporation with foreign ownership own property in Canada? Why in the world would vacation properties be exempt? Everyone knows how hard it is for year-round residents of Tofino, or Banff, or Whistler who work in the service industry to afford rent let alone purchase property.

Banning foreigners sounds nice, but it would lead to all sorts of administrative headaches.

What is meant by "foreign ownership"? Let's start with Meng Wanzhou shall we. Why does someone need to own not one, but two Vancouver mansions with some substantial land when they live in China and have never had any intent to relocate to Canada as a citizen or permanent resident.

As to you mythical Taiwanese student, why can't they rent an apartment for their son when he goes to school?

[FarmerHaight]

Originally Posted by whatnext

What is meant by "foreign ownership"? Let's start with Meng Wanzhou shall we. Why does someone need to own not one, but two Vancouver mansions with some substantial land when they live in China and have never had any intent to relocate to Canada as a citizen or permanent resident.

As to you mythical Taiwanese student, why can't they rent an apartment for their son when he goes to school?

The government does not have the resources to vet tens of thousands of property purchases by foreigners every year. If you ban all purchases in order to keep Meng from buying a home, you may inadvertently keep a family relocating from India to Calgary from doing the same. If you allow some purchases based on intent to relocate to Canada, you better be prepared for a lot of lengthy and expensive appeals. Does that sound like its streamlining the purchasing process and making it more affordable for buyers?

A former girlfriend's family farmed in Southern Saskatchewan. They purchased a Saskatoon home for her and her brother to live in while they attended university. The parents rarely stayed in the home because they either lived at the farm or vacationed in Arizona and Hawaii in the winter. Why couldn't they just rent an apartment for their kids?

Another friend's family lives in Edmonton, but they own vacation properties in Victoria, Jasper, and abroad. Why can't they just rent when they go to the mountains? Why shouldn't their property in Victoria be stripped from them and sold to someone who lives there year-round?

For that matter, why does anyone purchase a home? Locked-in mortgage payments instead of rents being raised every year, decisions on maintenance or renovations, capital investment, etc... The same rationale applies to the foreign-born as it does Canadians.

[someone123]

Originally Posted by FarmerHaight

The government does not have the resources to vet tens of thousands of property purchases by foreigners every year.

This is trivially easy with titles. I don't know what the government has the resources to do if it can't monitor the titles of high value real estate.

With the Meng Wanzhou property transactions the problem wasn't the buying or really her behaviour, it was the easy PR and ridiculously favourable tax possibilities. If she were a bit older we would have been giving her subsidized deferred property taxes too (Vancouver basement dweller tenants subsidize poor Huawei CFO property tax bills). It does not make sense that if you make $30k a year in Canada you have to pay income taxes but if you make $10M in capital gains on your mansion you owe $0. If the overall regime were less favourable there would be less money parked in real estate. I don't think fixing that alone would make Vancouver affordable but it's one of 6 or 7 major issues that make the difference between pricey and stratospheric housing.

[ssiguy]

First of all, all these homes would be available only to Canadian citizens not students, temp-workers, or landed immigrants.

Second, it would get rid of "businesses" owning any home type which also helps get rid of money laundering as most are done thru number companies which is widespread in Vancouver. No business needs to own housing. Full stop.

There should not be a means test in terms of income but still only available to first time buyers like CMHC rules for 5% down. As far as flipping, as I stated earlier there are examples of where the home is bought but cannot be sold for 5 years without EXTREMELY heavy fees making flipping highly unprofitable. When the home is purchase, when sold it can only be sold at a price increase at the rate of inflation. As I used as an example earlier, the $150k home could only be sold at $180k after 5 years with inflation at 4%. They can also bring in a age minimum of, for example, 25 years for the purchaser to inhibit students from buying them courtesy of M&D.

Not only does this make both real estate and rentals more affordable but also helps get rid of generational income equality. Low cost rentals only reinforce inequality due to renting being money out the window while buying for roughly the same amount per month helps create wealth for these buyers.

[FarmerHaight]

Originally Posted by someone123

This is trivially easy with titles. I don't know what the government has the resources to do if it can't monitor the titles of high value real estate.

With the Meng Wanzhou property transactions the problem wasn't the buying or really her behaviour, it was the easy PR and ridiculously favourable tax possibilities. If she were a bit older we would have been giving her subsidized deferred property taxes too (Vancouver basement dweller tenants subsidize poor Huawei CFO property tax bills). It does not make sense that if you make $30k a year in Canada you have to pay incomes taxes but if you make $10M in capital gains on your mansion you owe $0. If the overall regime were less favourable there would be less money parked in real estate. I don't think fixing that alone would make Vancouver affordable but it's one of 6 or 7 major issues that make the difference between pricey and stratospheric housing.

There are so many ways to be deceptive with titles. Pay a Canadian to buy it for you, use a Canadian holding company as a shield, etc. I will also repeat the issues with defining "foreigners". Is it only foreign-born? What about ex-pats? What about someone who is a Canadian citizen who is a deemed non-resident for income tax purposes?

Can you explain paying no tax on capital gains if this foreigner doesn't live in Canada? I find a hard time the CRA would allow them to designate the property as their principal residence if they spend as little time here as you say. I also didn't know people who rented basement suites pay property tax.

[someone123]

Originally Posted by ssiguy

No business needs to own housing. Full stop.

There are lots of apartment management companies in Canada and they offer some of the best rental housing out there (better prices, more professionally managed). The amateur landlord condo and house owners are often the worst. Furthermore property developers purchase houses to turn them into other buildings.

I think if the market were regulated and taxed appropriately there would be less need to worry so much about trying to keep businesses out. But we have so much baggage in terms of sweetheart tax deals, NIMBY bylaws, etc. that it's the government regulation itself that encourages money to flood into land speculation.