Canada to ban foreigners from buying homes • Hacker News Board

Re: Canada to ban foreigners from buying homes

#521

Post by kazinator » Thu, Apr 07, 2022, 10:44 PM UTC

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.

Probably, less than people think. Sealed bid auctions do not increase revenue to the seller, according to auction theory.

https://en.wikipedia.org/wiki/Revenue_equivalence

> gives all of the information to one side (the sellers)

Well, not all the information; just what other people are bidding. But all that matters to the bidder is that that other bidders do not have access to more information.

The fact that someone's bid is higher than yours, is not caused by its temporary secrecy.

Re: Canada to ban foreigners from buying homes

#522

Post by medvezhenok » Thu, Apr 07, 2022, 10:46 PM UTC

jl2718 wrote: post #410

rekabis wrote: post #320

Focusing on foreign buyers is a distractionary tactic. The primary cause of housing value spiking comes down to investors and speculators. Combat those, and the marketplace will return to sane valuations: • Speculation tax of 50% of the assessed or sold home value (whichever is greater) of any home held for less than two years, decreasing on a daily basis to 0% over years 3 through 8. Exemptions can be had due to ext…

This will just create complicated sales contracts, and advantage bigger landlords. The simple solution is market-valued property tax, because it’s basically unavoidable.

The solution is land value tax. Nobody deserves to own a SFH in a large city when that land could be used for more housing - you want to live in a SFH, move to the countryside (or pay an exorbitant tax rate which will fund other development).

It's also why LA is such a mess.

Re: Canada to ban foreigners from buying homes

#523

Post by wnolens » Thu, Apr 07, 2022, 10:47 PM UTC

Sohcahtoa82 wrote: post #416

wnolens wrote: post #239

Earlier quoted context omitted.

I like the conclusion, but I've created some elaborate financial models to compare buying versus renting (+ investing the difference in S&P500). And so have a few very intelligent friends. It almost NEVER works out in favor of buying except for some crazy flukes like pandemic accelerating prices in Toronto. I think it's largely cultural? Canadian's (more than any of my American friends) are fed the idea that owning a…

> I've created some elaborate financial models to compare buying versus renting (+ investing the difference in S&P500) [...] It almost NEVER works out in favor of buying I can't see how that's possible. Rent is pissing away money, and from the rates I've seen, the monthly rent on a house is often very close to the monthly mortgage payment, so the "investing the difference ins S&P500" ends up being moot. For my house,…

Houses in the GTA are about 1.6M, resulting in about 7k/mo all-in. Chances are you're not paying 7k/mo as a renter, so it's a bit of apples-oranges. The house costs more, but you get more. You'd have to rent out part of your home and be a landlord to trade that extra space for cash flow. I value my time and privacy at a non-zero dollar amount :)

This source [0] states annual appreciation to be about 6.11% for real estate. In my models I use 6.5% as a safe return rate for the S&P500. In the long term, you are no longer leveraged so that's a fair comparison I believe.

anecdote: My parents bought a house 35 years ago in a suburb of the GTA. Purchase price was around 250K I think. It was a lot for the time, too! And now it's probably worth 1.8-2M. Amazing! Except 250k @ 6.5% over 35 years is just over 2.2M.

[0] https://precondo.ca/canada-real-estate-statistics/#:~:text=T...

Re: Canada to ban foreigners from buying homes

#524

Post by medvezhenok » Thu, Apr 07, 2022, 10:50 PM UTC

hello_moto wrote: post #340

rekabis wrote: post #320

Focusing on foreign buyers is a distractionary tactic. The primary cause of housing value spiking comes down to investors and speculators. Combat those, and the marketplace will return to sane valuations: • Speculation tax of 50% of the assessed or sold home value (whichever is greater) of any home held for less than two years, decreasing on a daily basis to 0% over years 3 through 8. Exemptions can be had due to ext…

> Individual non-business landlords cannot derive more than 50% of their income from rental properties Properties are one of the top income generator for (pure) retirees. How would you ensure they can retire and still have income via properties? I guess you can add clausal to exclude {retirement_age} ownership? Hopefully nobody uses them as proxy. Tricky huh?

> Properties are one of the top income generator for (pure) retirees

Yes, and that's part of the problem - holding property shouldn't be a viable retirement plan. If they want retirement income they could sell the houses and buy an annuity or invest in productive enterprises (or buy government bonds back in the day - which is no longer an option, unfortunately).

Extracting surplus income from workers via property rent-seeking should not be a way to fund retirement in the first place.

Re: Canada to ban foreigners from buying homes

#525

Post by bobthepanda » Thu, Apr 07, 2022, 10:51 PM UTC

cameronh90 wrote: post #392

techsupporter wrote: post #309

Earlier quoted context omitted.

No, that's what the person you replied to mean when they wrote: > hitting the limits of sprawl (congested highway commute time) There's only so far you can bus, train, drive, bike, walk, seaplane, helicopter, hyperloop, or transporter in to go to work. Canadian cities are, just like cities in the US, hitting this limit rather aggressively. In cities where sprawl isn't physically prohibitive, like Calgary or Toronto,…

> There's only so far you can bus, train, drive, bike, walk, seaplane, helicopter, hyperloop, or transporter in to go to work. Canadian cities are, just like cities in the US, hitting this limit rather aggressively. Canada's largest urban area is 5.6 million people. London, Paris and Seoul are around double that, NYC is 19 million and Tokyo is 37 million. Why are Canadian cities hitting this limit at such a comparati…

They’re talking about physical size. North American metropolises are a lot less dense than their peers.

The solution is to enable density. Zoning in the US and Canada is done at the local level and zoning codes look like a list of things you can’t do. (You can have a house, but you can’t live with more than X unmarried people, you can have a home office but you can’t do hairdressing out of your home, etc.)

Zoning codes in Japan are a lot more relaxed, in that there are only about a dozen types defined by “maximum nuisance level.” Every additional level of zoning permits all the uses from the previous level as well. Which generally increases building capacity and density and lowers prices by staying ahead of demand.

Re: Canada to ban foreigners from buying homes

#526

Post by graeme » Thu, Apr 07, 2022, 10:53 PM UTC

dsnr wrote: post #25

mperham wrote: post #20

Liberal governments will do everything but the one thing that will solve the problem: make it much, much easier to actually build more housing. Everything else is just pointless busywork.

This is not really guaranteed to solve the problem. It will only be a part of the solution. In many countries, including Europe, new properties are quickly snatched by investment companies that have much easier access to capital than private individuals and can easily afford to pay above market prices. People shouldn’t really have to compete with companies or “investors” on the housing market.

Show me a country you’re talking about, and show me their housing starts per capita relative to Japan, a country which allows building

If well below, you haven’t an argument.

Re: Canada to ban foreigners from buying homes

#527

Post by tomatowurst » Thu, Apr 07, 2022, 10:54 PM UTC

arrosenberg wrote: post #510

tomatowurst wrote: post #491

Earlier quoted context omitted.

when you aren't affected by it, you are more likely to discount it. the people aren't going after iranians or russian foreigners. they are literally singling out one group by race in Vancouver. Again you don't live here and you don't fall in the category so you won't understand how sensitive this issue is here.

I dunno, it kind of seems like I do. My city has the same land use issues, without the alleged xenophobia and we still target foreign wealth way more than domestic. Its just easier.

> I dunno, it kind of seems like I do

how?

Re: Canada to ban foreigners from buying homes

#528

Post by wnolens » Thu, Apr 07, 2022, 10:57 PM UTC

CPLX wrote: post #428

wnolens wrote: post #239

Earlier quoted context omitted.

I like the conclusion, but I've created some elaborate financial models to compare buying versus renting (+ investing the difference in S&P500). And so have a few very intelligent friends. It almost NEVER works out in favor of buying except for some crazy flukes like pandemic accelerating prices in Toronto. I think it's largely cultural? Canadian's (more than any of my American friends) are fed the idea that owning a…

Your models are almost certainly missing something. In a perfect world that would be true but in the actual world where lending is subsidized and tax-preferenced and the supply of housing is artificially constrained buying is just clearly a better scenario if you can do it. Some people do this by comparing a 5:1 leveraged portfolio of the S&P 500 against a home purchase or something but that's not a real comparison t…

I would love to find out what I'm missing (honestly, I spend a lot of time thinking about it). I'm working on publishing it as an interactive page. ETA soon.

The principal residence sale tax free thing is a huge deal in Canada, so as an individual I can see it in many cases (though you need to sell to access it).

That still doesn't help investors at all - which is confusing to me. It doesn't seem worth it to me to be a landlord of a standard duplex/triplex in Toronto.

The comparison against a leveraged portfolio is only true at day one. You are continually de-leveraging yourself. At the end of the mortgage term, it's comparable 1:1, no?

Re: Canada to ban foreigners from buying homes

#529

Post by lhorie » Thu, Apr 07, 2022, 10:58 PM UTC

citrusybread wrote: post #480

cameronh90 wrote: post #392

Earlier quoted context omitted.

> There's only so far you can bus, train, drive, bike, walk, seaplane, helicopter, hyperloop, or transporter in to go to work. Canadian cities are, just like cities in the US, hitting this limit rather aggressively. Canada's largest urban area is 5.6 million people. London, Paris and Seoul are around double that, NYC is 19 million and Tokyo is 37 million. Why are Canadian cities hitting this limit at such a comparati…

Extreme car dependency. Toronto is suffering from the same problem Dubai has. It suddenly became relevant when sovereignists gained power in Quebec and the business class were worried about Montreal being a liability. So they packed up and went down the 401 to Toronto. It has the infrastructure for a much much smaller city, and one in the North American car-driven style (massive highways, occasional regional rail tha…

Personally, I think the problem is more a question of the sort of business development that happens downtown vs the surrounding areas. If you look, for example, at development on highway 7 over the decades, there's definitely densification going on, e.g. this area[0] used to be farmlands back in the day, but now those red lanes are public transit lines and there are condo buildings sprouting up along that corridor. All in all, though, it's still much sparser than Toronto's downtown core.

If you look around the area, other than campuses like IBM's and CGI's, a very significant percentage of the business development in the area is still big box B2C (walmart/home depot/etc) or small-ish businesses. That's in stark contrast to areas like the financial district where the vast majority of workers are white collar office people. Which is to say, Markham/Vaughan could still stand to become much more metropolitan with the presence of more B2B big corps.

My pet theory is that concentration of white collar work is what drives up home prices. Exhibit A: places like Palo Alto and Mountain View in the San Francisco Bay Area (vs, say, Pacifica or Half Moon Bay) are clearly propped up by the presence of FAANG campuses. I'd bet that if a Google setup a campus in Ajax, you'd see an appreciable increase in demand for housing in surrounding areas even if they are traditionally considered too far from downtown TO (e.g. Whitby)

[0] https://www.google.com/maps/@43.842627,-79.3906732,3a,75y,20...

Re: Canada to ban foreigners from buying homes

#530

Post by arthurofbabylon » Thu, Apr 07, 2022, 11:00 PM UTC

davidw wrote: post #140

VincentEvans wrote: post #7

I don’t know the specifics on Canadian real estate market and the specifics of the problems there, but based on my understanding of the problems facing your neighbors to the south - I feel like it’s almost an attempt to appease citizens by blaming the issue on “foreigners” (always a move that is popular with politicians) to redirect attention from the much more likely cause - massive investments made by hedge funds,…

> massive investments made by hedge funds, private capital, REITs I can't recommend this article enough on that subject: https://www.vox.com/22524829/wall-street-housing-market-blac... "The role of institutional investors is still being studied, but the popularity of the narrative strikes at something dangerous: People want a convenient boogeyman and when they get it, they often ignore the structural problems that ar…

Ironically, that quoted excerpt inserted its own "convenient boogeyman" of housing undersupply caused by local opposition.

Also, institutional investors do have a reputation for inciting bubbles and that possibility absolutely needs to be carefully scrutinized, particularly for something as essential and socially compounding as housing.