Canada's 'housing bubble' deemed close to bursting

[WarrenC12]

Originally Posted by theman23

Do real estate investors get away with paying capital gains tax rate? If so, its a bit weird that you can make all your money off real estate and only have to pay the capital gains rate but if make your money off another investment class (say, stocks) you have to pay the personal tax rate.

What? No.

Sell real estate for gain = capital gains tax
Sell stocks for a gain = capital gains tax
Dividends from stocks = personal income tax (huge tax benefit for Canadian stocks though)
Rent payment = personal or corporate income tax

[WarrenC12]

Originally Posted by rbt

Neither of those people would get hit by the proposed wealth tax which has been proposed to begin at $10M of net-worth.

Amazing how many people jump out of the woodwork to defend the 0.01%.

[theman23]

Originally Posted by WarrenC12

What? No.

Sell real estate for gain = capital gains tax
Sell stocks for a gain = capital gains tax
Dividends from stocks = personal income tax (huge tax benefit for Canadian stocks though)
Rent payment = personal or corporate income tax

Uh, yes? If your primary source of uncle is a flipping stocks, it’s business or personal income. Should be the same if your primary source of income is flipping real estate, but I wonder how many people get away with just paying the capital gains tax.

[casper]

Reports out of the US are mortgage rates are starting to go down as inflation comes under control.

Lets hope the Bank of Canada is taking note and exercising caution ....

https://www.bloomberg.com/news/articles/...-the-us-switch-course-decreasing-to-5-13

[Innsertnamehere]

I suspect we'll see another increase next month still, but wouldn't be surprised if that's the last one.

Fixed rates have already started to drop a bit in Canada.

[WarrenC12]

Originally Posted by Innsertnamehere

I suspect we'll see another increase next month still, but wouldn't be surprised if that's the last one.

Fixed rates have already started to drop a bit in Canada.

Yeah I would bet on 0.5 max. We'll have 1 more inflation report out by then in both countries.

[someone123]

Originally Posted by theman23

Uh, yes? If your primary source of uncle is a flipping stocks, it’s business or personal income. Should be the same if your primary source of income is flipping real estate, but I wonder how many people get away with just paying the capital gains tax.

One big difference is that there is a capital gains tax exemption for primary residences. You can have one primary residence while your partner has another, your kid is in another, and they can be worth millions of dollars. You only have to be there for 1 year; flipping a $5M property once per year is capital gains exempt.

There's also the tax evasion aspect. I know a lot of people who were renting houses in Vancouver and would get their landlord's mail including from Revenue Canada. I would guess that in these cases somebody is claiming the rental property as a primary residence and likely not reporting their rental income.

The condo building I'm in is up to ~50% rental units now. From a landlord and tax perspective I bet this is much worse than just having an apartment building run by a company. It is also not great for the owners who want to live in their condo. Vancouver is full of million dollar plus slumlord properties.

[whatnext]

Originally Posted by someone123

One big difference is that there is a capital gains tax exemption for primary residences. You can have one primary residence while your partner has another, your kid is in another, and they can be worth millions of dollars. You only have to be there for 1 year; flipping a $5M property once per year is capital gains exempt.

There's also the tax evasion aspect. I know a lot of people who were renting houses in Vancouver and would get their landlord's mail including from Revenue Canada. I would guess that in these cases somebody is claiming the rental property as a primary residence and likely not reporting their rental income.

The condo building I'm in is up to ~50% rental units now. From a landlord and tax perspective I bet this is much worse than just having an apartment building run by a company. It is also not great for the owners who want to live in their condo. Vancouver is full of million dollar plus slumlord properties.

Yep, the mix of renters and people who are living in "the biggest purchase of their lives" is never good a good one. Gov'ts need to start pushing people away from this model and encouraging purpose-built rental.

[WarrenC12]

Originally Posted by someone123

The condo building I'm in is up to ~50% rental units now. From a landlord and tax perspective I bet this is much worse than just having an apartment building run by a company. It is also not great for the owners who want to live in their condo.

Worse for who, the government? Why?

As far as owners living in the building, why would that be bad? Are you assuming renters make — neighbours?

[lio45]

Originally Posted by WarrenC12

Worse for who, the government? Why?

Worse from a taxation perspective: half of someone123's building can be flipped with the profits thoroughly untaxed (assuming the landlords get their personal mail sent to their units for 366 days before flipping; "standard best Van practices" )

If it were a rental building owned by a corporation, the govt would at least capture a small part of the gain in value, when it gets sold.

From a management point of view, it's also sub-optimal: one building, many individual uncoordinated amateur landlords.


(I thought all of the above was pretty clear in his post.)

[lio45]

Originally Posted by WarrenC12

Are you assuming renters make — neighbours?

"Shittier" than owner-occupiers, that's unarguable.

They have a much lower stake in the longer-term future of the neighborhood or the building. They have on average less $ to invest in beautifying, and less incentive to do it, etc.

[whatnext]

Originally Posted by casper

Reports out of the US are mortgage rates are starting to go down as inflation comes under control.

Lets hope the Bank of Canada is taking note and exercising caution ....

https://www.bloomberg.com/news/articles/...-the-us-switch-course-decreasing-to-5-13

As inflation comes under control? What a crock. Inflation is far from under control, it’s just the elites and their bankers who want the workers to buy into that narrative.

[casper]

Originally Posted by whatnext

As inflation comes under control? What a crock. Inflation is far from under control, it’s just the elites and their bankers who want the workers to buy into that narrative.

Have a look at the price of lumber or steel or crude over the past year. Things are heading down.

[whatnext]

Originally Posted by casper

Have a look at the price of lumber or steel or crude over the past year. Things are heading down.

Cars? Appliances?

[casper]

Originally Posted by whatnext

Cars? Appliances?

Steel, Aluminum, lumber, crude oil, etc. are all major inputs into houses, consumer goods, cars and appliances. It may take some months for things to work their way through the supply chain.

In the case of cars, experts in that industry are saying the limited supply of chips should become less of a problem by the summer of 2023. However if the cost of steel, aluminum and plastic are heading down that should help drive down input costs.

What I would be worried about is ECL electronics. ECL chips are not used that commonly but they do show up in military applications and fibre optic circuits.

[Innsertnamehere]

Originally Posted by whatnext

Cars? Appliances?

Used car prices have been dropping since April.

[casper]

Originally Posted by whatnext

As inflation comes under control? What a crock. Inflation is far from under control, it’s just the elites and their bankers who want the workers to buy into that narrative.

Looks like one of the chief strategists with Societe Generale (large European banking group) agrees with you. He views this recession and price reductions that are slowing making their way through the global economy as only temporary. He predicts a multi-decade period of global inflation and rate rises from central banks.

https://markets.businessinsider.com/news...-recession-stock-market-deflation-2022-8

[swimmer_spe]

One housing issue that is also bubbling up that is not really being talked about is the LTC for the baby boomer generation. There isn't enough space now, and it only will get worse. Keeping them in their big houses is part of the housing problem too.

[casper]

Originally Posted by swimmer_spe

One housing issue that is also bubbling up that is not really being talked about is the LTC for the baby boomer generation. There isn't enough space now, and it only will get worse. Keeping them in their big houses is part of the housing problem too.

Strategy in BC is to keep senior in their home as long as possible. Providing a strong home care program is part of that strategy.

Here in BC there are three types of LTC homes in the public system:
1. Facilities run by the health region
2. Facilities run by not-for-profits (e.g., service organizations, ethnic groups, the church etc.)
3. Facilities run by private corporations.

Recently we looking for how to handle my parents who needed to go into LTC. I found the non-for-profit ones the best option in the area we were looking.

The fee structure is the same for all three types. The cost for seniors were actually reasonable. It is basically 80% of your income with the senior getting to keep at least $325 per month in spending money. The maximum fee is $3,575.00/month.

Would be good if the federal government were to provide low interest loans to service organizations, ethnic groups and even churches who wanted to build such facilities.

[WarrenC12]

Originally Posted by lio45

Worse from a taxation perspective: half of someone123's building can be flipped with the profits thoroughly untaxed (assuming the landlords get their personal mail sent to their units for 366 days before flipping; "standard best Van practices" )

If it were a rental building owned by a corporation, the govt would at least capture a small part of the gain in value, when it gets sold.

From a management point of view, it's also sub-optimal: one building, many individual uncoordinated amateur landlords.


(I thought all of the above was pretty clear in his post.)

He was talking about condo rentals by owner vs apartments owned by corporations, not flippers.