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Canada to ban foreigners from buying homes

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Re: Canada to ban foreigners from buying homes

#681

Post by kelnos »

TuringNYC wrote: post #589
FredPret wrote: post #584

Earlier quoted context omitted.

All this is true and bad but the Canadian market is primarily driven by supply issues, not red tape. There just aren’t enough houses/condos. The resulting price boom isn’t a mere 5-10% increase, but hundreds of percent over the course of only 5-10 years. I’ve seen condo prices double three times in five years in places.

>> All this is true and bad but the Canadian market is primarily driven by supply issues, not red tape. My point is that if you reduce the red tape (and deadweight loss) there are actually people who want to sell, but wont sell if they are losing a ton of money on the sale. Reduce the loss and more supply appears. In the US this is a huge issue. If you switch cities twice and sell each time, your entire downpayment h…

Unless potential sellers are leaving the country or are choosing to rent after they sell, wouldn't more sellers also increase the number of buyers (because those sellers have to live somewhere else after they sell), and it all will end up being a wash?

(And if they are choosing to rent after they sell, that just shifts unaffordable home prices to unaffordable rents, as rental demand increases without a corresponding increase in supply.)

Re: Canada to ban foreigners from buying homes

#682

Post by jimmydeans »

slothtrop wrote: post #167
jimmydeans wrote: post #120

No one wants to talk about the elephant in the room. Canada has 'housing' but no one wants to live in anything other than a detached house close to the city. Lots of condos, semi-detached, and townhouse, however no one wants them because you have to have a detached home to have made it in life. I can't remember in my twenties obsessively wanting a detached house. GenX is buying up all the houses after selling their c…

> however no one wants them This is completely made up. Look at the prices they fetch. If you build it, they will come; zoning heavily restricts the level of mixed development, hence you mostly see detached homes or very large condo buildings with little in between like triplexes. There's a reason Montreal has generally been more affordable for years than other large Canadian cities (population notwithstanding).

No post body was provided.

Re: Canada to ban foreigners from buying homes

#683

Post by leetcrew »

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,…

> 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.

this varies a lot locale to locale. in some places the rent is very close to the monthly mortgage payment. in some places, the mortgage is much higher.

https://www.investopedia.com/terms/p/price-to-rent-ratio.asp

if you're damn sure you want to live somewhere long enough to pay off a 15 year mortgage, then yeah, odds are it's better than renting. most people can't be 100% sure of that, so to make it a fair calculation you also have to include the costs of buying and selling. in theory, you should also have to price in the risk of having so much money concentrated in a single asset, but it seems to be a matter of policy that housing prices are never allowed to go down.

Re: Canada to ban foreigners from buying homes

#684

Post by leetcrew »

Sohcahtoa82 wrote: post #537
wnolens wrote: post #523

Earlier quoted context omitted.

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 es…

> 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. Right...but if you're using that to compare it to renting, the renter still comes out behind. WAYYYY behind. The buyer (using your example) : Spends $250K on a house. After 35…

you're missing the part where the renter is continually investing the difference between their current rent and the mortgage they would be paying. but yeah, if you're prescient enough to know ahead of time that you're going to live in the same building for 35 years, you'd be foolish to rent.

Re: Canada to ban foreigners from buying homes

#685

Post by earleybird »

Ensorceled wrote: post #352
manbackharry wrote: post #325

Earlier quoted context omitted.

Your last line is pretty much my exact opinion. I'm an idiot, but I struggle to see how significant taxes (and I mean SIGNIFICANT - something like having all rental income and cap gains on secondary residences taxed at the highest rate ~54%) in these cases wouldn't have extremely broad appeal. Make the sector unappealing as an investment class and you should stop seeing unfettered speculation. The idea of housing bei…

> I'm an idiot, but I struggle to see how significant taxes in these cases wouldn't have extremely broad appeal. It would have broad appeal, but not to the developers etc. that are buying 10K plates at fundraising dinners ... > The principal residence tax exemption is also a joke The problem is that without that exemption, you literally can't afford to move. The 6% "tax" for real estate fees are already painful if yo…

The CRA is fairly particular[0] about income from the sale of a property. They want to know, for example, how long it has been your primary residence and if it was rented before then, what was the appraised value. You will end up paying capital gains on the delta. So, if you've been renting out a property, move in to it for 6 months and then sell you'll be paying capital gains on everything but the last 6 months. The only time that works out is with a sudden spike in values.

[0] source: an accountant I know that wants to stay in good standing with the CRA :-)

Re: Canada to ban foreigners from buying homes

#686

Post by seanmcdirmid »

BurningFrog wrote: post #611
seanmcdirmid wrote: post #581

Earlier quoted context omitted.

Bottom living standards were a lot lower back then: people could live in shacks without plumbing, flop houses were plentiful. These days none of that is legally allowed, so people would have fallen into that housing 50-80 years ago are homeless today. That being said, poverty reductions between then and now are real, it’s only that our standards keep getting higher (as they should).

I would 100% bring back flop houses. They're much better than sleeping in the street. The insanity of "we can't let you have a bad X, so you get no X!" is one of my least favorite things in this era...

I agree. I remember the flop house my grandpa ran in Spokane fondly. We cousins called it the empty arms.

On the other hand, flop houses aren’t economical to run anymore, and the drug problems (especially with decriminalization) have gotten much worse. It’s not clear they can work like they did in the past.

Re: Canada to ban foreigners from buying homes

#687

Post by seanmcdirmid »

leetcrew wrote: post #679
dionidium wrote: post #455

Earlier quoted context omitted.

> they just don't want the traffic and (perhaps) crime that goes along with density. Something I've been trying to think through recently is that people clearly have some kind of proximity theory of crime. If there is a murder in the building next door to me, then that's going to make me uncomfortable, whether there is one family living in that building or 10. The obvious urbanist (or generic intellectual) response t…

in general, per capita crime is higher in cities though. some of that is misleading: truly random murders are rare pretty much everywhere. but you're a lot more likely to be the victim of crimes of opportunity (armed robbery, car/home break-ins, etc) when you live in a dense area.

Rural areas can have horrible crime, like rural New Mexico or the Mississippi delta. It is all very region specific. Alaska is one big example of a state where rural crime is greater than urban crime on a per capita basis.

Re: Canada to ban foreigners from buying homes

#688

Post by dragonwriter »

leetcrew wrote: post #683
Sohcahtoa82 wrote: post #416

Earlier quoted context omitted.

> 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,…

> 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. this varies a lot locale to locale. in some places the rent is very close to the monthly mortgage payment. in some places, the mortgage is much higher. https://www.investopedia.com/terms/p/price-to-rent-ratio.asp i…

> in theory, you should also have to price in the risk of having so much money concentrated in a single asset, but it seems to be a matter of policy that housing prices are never allowed to go down.

And the benefits of having it tied up in an asset covered by things like, in certain jurisdictions, generous bankruptcy homestead exemptions and, in certain jurisdictions, financed by a mortgage in a no-recourse jurisdiction; there are downside risk protections attached to owner-occupied housing that aren't available elsewhere.

Re: Canada to ban foreigners from buying homes

#689

Post by refurb »

qball wrote: post #330
edgyquant wrote: post #295

Earlier quoted context omitted.

Can they not move to nearby cities and commute?

Well, they thought of that; it's just as expensive out there too. If you want a house and a job in this country, you have to go to Alberta, Saskatchewan, or Manitoba. BC has no land and is either mountain or agricultural land reserve (the second-largest city in the province has massive fields in the middle of it; average single family home price $1M). ON and QC are similarly boxed in for land (the Canadian Shield is…

All of those provinces have vast swathes of undeveloped land. The Canadian Shield is not hard to build on, plenty of cities are built directly on bedrock.

You can go to BC and see massive valleys of farmland (maybe used for grazing) that could easily be built on.

90% of Canadians live within 100 miles of the US border because: 1) the weather is better and 2) transportation options 150 years ago drove settlement (transCanadian railway and access to waterways) and 3) development begets more development, so established communities tend to grow rather than new one sprouting up.

Re: Canada to ban foreigners from buying homes

#690

Post by peeters »

bennysomething wrote: post #136
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 an interesting question, what is worse for buyers, blind or open bids? Blinds bids prevent bidding wars. They use them in Scotland. Not sure if buyer or seller is better off using them.

Blind bids prevent bidding wars, but from an idealistic standpoint they don't find the true price of a home. Particularly when you have buying agents routinely advising their clients to bid 50k over what turns out to be the next highest bid.

Though psychology comes into play in a bidding war, at least it's happening because the asset for sale is highly desired. It's efficient.

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