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Canada to ban foreigners from buying homes

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Re: Canada to ban foreigners from buying homes

#281

Post by gregable »

I've been looking at the Toronto real estate prices a bit, and I'm convinced the real issue is primarily interest rates, not immigration, or construction. Don't take my word for it, ofc:

Immigration:

- Rent has not increased like real estate: https://www.zumper.com/rent-research/toronto-on

- In 2020, immigration dropped by half to 184,500. Real Estate prices went up. https://www.canada.ca/en/immigration-refugees-citizenship/ne...

Construction constraints:

- This is probably hyper-local, but in Toronto for example, they are building over 1 new housing start per year for every 100 residents (https://ycharts.com/indicators/toronto_on_housing_starts). That's not bad, it's not the CA Bay Area's situation.

- Anyone in Toronto can tell you there is a lot of home building going on with construction everywhere.

Canadian mortgages don't have the typical 30-year fixed rate that a lot of US mortgages do. Instead, typical mortgages reset every 5 years, and in fact many are month-to-month variable rates. In fact, the percentage of new mortgages originating as these variable rates in Canada has been rising and recently broke 50%. The majority of homes are now financed using a month-to-month variable rate which is set to some profit above Bank of Canada prime rate.

Until March, it was possible to get a mortgage with a 1% or even lower interest rate in Canada. Take a look at the average: https://www.ratehub.ca/5-year-variable-mortgage-rate-history

In Mar 2020, Canada dropped the short term bond rate from 1.75% to 0.25% overnight. In 2008, they did something similar from 4% down to nearly zero, and had only just started raising them back towards 1.75% right before Covid. Only in March 2022 did we see the first rate hike and it was very mild.

Canada Real estate is basically a bubble driven by aggressively low interest rates. The problem now is that inflation is causing the interest rates to rise, and that could pop this bubble, so we might be seeing some of these laws designed to shift the blame.

More sources:

- https://en.m.wikipedia.org/wiki/Canadian_property_bubble

- https://www.bloomberg.com/news/articles/2021-06-15/world-s-m...

- https://betterdwelling.com/the-toronto-real-estate-bubble-no...

- https://seekingalpha.com/article/4477223-canadian-housing-ma...

- https://financialpost.com/executive/executive-summary/postha...

Re: Canada to ban foreigners from buying homes

#282

Post by michael1999 »

ch4s3 wrote: post #261
CountSessine wrote: post #174

Earlier quoted context omitted.

You're fighting scarcity. You still won't win the bidding war - it just won't be as one-sided. Stop championing scarcity by blaming scapegoats. Either we limit Canada's crazy-high immigration rate (1% of population every year) or we build more homes which is mostly gated by illiberal zoning laws passed by municipalities. But both of these policies are very popular so you'll be swimming upstream, politically. While yo…

> Stop championing scarcity by blaming scapegoats. Either we limit Canada's crazy-high immigration rate (1% of population every year) or we build more homes which is mostly gated by illiberal zoning laws passed by municipalities. But both of these policies are very popular so you'll be swimming upstream, politically. I'm all for building more houses in cities/high demand areas, but doesn't Canada only have a populati…

Canada is a big country. But immigration goes where the jobs are, and those are concentrated in 3-5 large cities which are hitting the limits of sprawl (congested highway commute time) and geography (water and mountains).

Densification is unpopular with existing municipal voters, and bankrupting CPP would be unpopular with federal voters.

Re: Canada to ban foreigners from buying homes

#283

Post by francisofascii »

daxfohl wrote: post #63

Why is foreign investment in Canada real estate so big vs the US? Is it just a pyramid scheme or something, or are investors actually making use of the properties?

My guess is the property tax rates are lower. If you have tons of money and want to store it in property, you will naturally pick the place that offers the lowest % fee.

Re: Canada to ban foreigners from buying homes

#284

Post by AzzieElbab »

LimaBearz wrote: post #212
CountSessine wrote: post #174

Earlier quoted context omitted.

You're fighting scarcity. You still won't win the bidding war - it just won't be as one-sided. Stop championing scarcity by blaming scapegoats. Either we limit Canada's crazy-high immigration rate (1% of population every year) or we build more homes which is mostly gated by illiberal zoning laws passed by municipalities. But both of these policies are very popular so you'll be swimming upstream, politically. While yo…

Is it so far fetched to assume some realtors may be juicing the bidding to increase their own commission and to make their firm more uhh "prestigious" by being able to drive up the price for their own marketing purposes further down the line. Likewise if you dont know who you're bidding against, how do you even know the bidder is even real (foreign or not)? Transparency is good thing. While there may be some "scarcit…

Lets see. Assume I am a realtor, I earn outrageous commissions of 2.5%. Does it make sense for me to jack up price of 1M condo by say 15% above the market and spend a month trying to sell it or to lower the price by 10% below and possibly sell two similar properties in the same month?

Re: Canada to ban foreigners from buying homes

#285

Post by stjohnswarts »

CountSessine wrote: post #174
boplicity wrote: post #88

> During last year’s election campaign, Trudeau’s party also proposed a ban on “blind bidding” for houses -- the prevailing system by which offers are kept secret when someone is auctioning a home. This is such a huge deal. Anyone who has had to go through the process of buying a home through a bidding war knows how unfair and one-sided this process is. It take a high-pressure emotional situation, and gives all of th…

You're fighting scarcity. You still won't win the bidding war - it just won't be as one-sided. Stop championing scarcity by blaming scapegoats. Either we limit Canada's crazy-high immigration rate (1% of population every year) or we build more homes which is mostly gated by illiberal zoning laws passed by municipalities. But both of these policies are very popular so you'll be swimming upstream, politically. While yo…

If you cut off foreign buyers then you absolutely will have cut out some competition for the purchase so I don'd see how you can possibly say what you're saying? I mean it's a basic economics principle.

Re: Canada to ban foreigners from buying homes

#286

Post by CountSessine »

hello_popppet wrote: post #260
CountSessine wrote: post #237

Earlier quoted context omitted.

Is it so far fetched to assume some realtors may be juicing the bidding to... Of course not, and I didn't say that I'm completely against reforming the real estate industry and the bidding process. But it won't fix expensive housing. It's all bullsh*t if it doesn't address scarcity. In 2016 we had had 10 years of 2% population growth in Vancouver and 1.2% housing stock growth and we wanted to blame foreign investors,…

The people writing the laws are all about the scarcity, and they aren’t on HN and you can’t take any shots at them or tell them to f*ck off. They’ve gotten this far by diligently min maxing and if you think they are going to have a change of heart, you’re way off base.

You've mistaken me for someone who thinks there's a political needle that can be threaded here.

I completely agree with you - housing prices are high, mechanically, because of scarcity. But scarcity exists because voters like high housing prices. The truth is that most Canadians own property and are perfectly happy with their $1-3 million in equity. And regardless of their stated preferences for affordable housing, the revealed preference for scarcity and expensive housing is clear.

All I want is to shut down people looking for someone to validate their cognitive dissonance.

Re: Canada to ban foreigners from buying homes

#287

Post by rsync »

macspoofing wrote: post #163
boplicity wrote: post #88

> During last year’s election campaign, Trudeau’s party also proposed a ban on “blind bidding” for houses -- the prevailing system by which offers are kept secret when someone is auctioning a home. This is such a huge deal. Anyone who has had to go through the process of buying a home through a bidding war knows how unfair and one-sided this process is. It take a high-pressure emotional situation, and gives all of th…

>This is such a huge deal. Is it though? I chatted with someone from Australia which has open bidding and you know what .. houses still went way over reserve. At the end of the day, if you have 20+ offers on a house, you're not getting that house without destroying your budget, no matter how you set up the bid system. The common sense change I wanted to see implemented was to prevent the waiving of a home inspection…

Fun fact: you can waive your inspection contingency … and then still go inspect the house.

Just bring your inspector along to a showing or open house, etc. Owners won’t even be there.

Re: Canada to ban foreigners from buying homes

#288

Post by gretch »

ch4s3 wrote: post #261
CountSessine wrote: post #174

Earlier quoted context omitted.

You're fighting scarcity. You still won't win the bidding war - it just won't be as one-sided. Stop championing scarcity by blaming scapegoats. Either we limit Canada's crazy-high immigration rate (1% of population every year) or we build more homes which is mostly gated by illiberal zoning laws passed by municipalities. But both of these policies are very popular so you'll be swimming upstream, politically. While yo…

> Stop championing scarcity by blaming scapegoats. Either we limit Canada's crazy-high immigration rate (1% of population every year) or we build more homes which is mostly gated by illiberal zoning laws passed by municipalities. But both of these policies are very popular so you'll be swimming upstream, politically. I'm all for building more houses in cities/high demand areas, but doesn't Canada only have a populati…

Probably

Parent post’s point is that there are many levers that can be pulled to alleviate the problem, but that zero of the options are being acted on.

Maybe it’s trivial to stack wood together, but apparently you can’t “easily build your way past” given the political climate.

Re: Canada to ban foreigners from buying homes

#289

Post by mjevans »

kache_ wrote: post #250
paulgb wrote: post #86

> Freeland will introduce legislation that allows Canadians under the age of 40 to save as much as C$40,000 ($31,900) for a home downpayment within a new tax-exempt vehicle, the person said. I'm not an economist but this seems pretty dumb? To the extent that it helps someone afford a home that they can save tax-free for it, the same is true of some of the people they're bidding against, driving up the price they ulti…

Ridiculous ageist policy. If you don't have a home and you're above 40, I'd argue you need the benefit even more.

Agreed, this should be a tax code line with a small number of ORed entry conditions.

- OR - at least one of

* First time home buyer

* Total homes owned plus being purchased will remain at one after the transaction is completed, and net-worth is under 20% the cost of a median home within the home's metro area.

* Qualified for a federal benefits program excluded from the upper 60% of society

The phrasing on the last one is specific, it's the wording required to select for economically disadvantaged individuals in a mechanically testable way. The exact number might be tweaked, this is just a back of the napkin ballpark. Other entry qualifiers can be added to the list. The second allows someone to move homes and if they need the benefit, not be locked out of assistance moving to an economically 'hotter' area that might have better jobs.

Re: Canada to ban foreigners from buying homes

#290

Post by dane-pgp »

loceng wrote: post #125
eudoxus wrote: post #13

Earlier quoted context omitted.

We just had a Federal election though? :/ Unless you are referring to this toothless promise made prior to the election in question, and now they're happy to follow that as it won't actually change anything.

Only 20% of Canadians voted for Trudeau, and the majority of Canadians are being misled by our mass media channels - CBC which got $1.2 billion of government funding last year, and they are now being rewarded with an additional $100 million per year for the next 4 years. E.g. our electoral system is designed to be unfairly balanced towards the duopoly, so we've been stuck in a cycle of voting for the lesser of two ev…

I agree with you that the voting system is letting down Canadians, but I also think you are using an unfair framing with your "20%" figure which risks undermining the legitimacy of coalition governments (and thus efforts to introduce a more representative voting system where coalitions between smaller parties might become more common).

In particular, I want to point out that the NDP have agreed to help the Liberal government to pass its legislative agenda, which presumably includes this ban, as the NDP had pushed for a tax for non-resident home purchases, which is a similar policy.[0]

Considering the government as a two party coalition, therefore, and with the NDP getting close to half the number of votes as the Liberals, that would mean that 30% of Canadians voted for the current government. That's somewhere between Biden's numbers[1] and Boris Johnson's[2], to compare it to other major recent Western FPTP elections.

[0] https://www.theglobeandmail.com/business/article-ottawa-face...

[1] 34% = 81m / (158m / 66.2%)

[2] 29% = 14.0m / 47.6m

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