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Canada bans foreign home buyers for two years

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Re: Canada bans foreign home buyers for two years

#91

Post by gpderetta »

bryanlarsen wrote: post #46
tici_88 wrote: post #34

Foreigners, especially the billionaire type, can and have been setting up shell corporations through which to purchase Canadian real estate. The proposed measure will do nothing to stop this practice. The measures proposed by the Canadian government are likely just political posturing and indented to "pull the wool over the eyes" of Canadian voters because the housing bubble/crisis has reached epic proportions and ev…

We don't have implementation of the bill yet, just the budget line. Obviously the government knows about this problem, so if they take measures to prevent it, then we'll know they are actually serious. Note that a corporation is not consequence free. An owner occupied home pays no tax on capital gains. A corporation owned one is double taxed.

The typical workaround in UK is that instead of selling the house, the corporation that directly or or directly owns it is sold instead, usually on a tax haven.

Re: Canada bans foreign home buyers for two years

#92

Post by stephencanon »

sbarre wrote: post #56
j7ake wrote: post #8

I would have thought that the pandemic and travel restrictions would have effectively “banned foreigners from buying homes” for 2 years. If home prices haven’t fallen during pandemic, then the reason why prices are high is not because of foreigners. The government is trying to point to a scapegoat rather than trying to get to the root cause.

The root cause in Canada is that a lot of the older generation, existing home owners, have put their investments in buying second or third homes as income properties, and for a lot of Canadians (I read that 1/3 of Canadian home owners have one or more additional properties) that's the nest egg now. For years now homeowners have used HELOCs (Home Equity Line of Credit), to effectively 100% finance an additional home p…

> For years now homeowners have used HELOCs (Home Equity Line of Credit), to effectively 100% finance an additional home purchase by using the HELOC for the downpayment, and a mortgage for the rest. Banks hate this, but it's legal.

If banks actually hated it, they would simply not write the loan. Why do you think they hate it?

Re: Canada bans foreign home buyers for two years

#93

Post by jusssi »

doliveira wrote: post #41
eru wrote: post #24

This is really, really stupid. It reeks of economic illiteracy. If you think foreign investor cause harm, just estimate how much harm it is, and tax them accordingly. Why would you ban them? Taxing is almost always more economically efficient than banning. You can even pay out (part of) the tax take to the people you think are harmed. (In general, a land value tax for everyone would be a good idea. But if political r…

Would taxing do anything in this specific case? Foreign investors are already willing to pay millions in a single home just for it to lay empty, from what I read in this thread. Why would some fixed (even if progressive) tax on top of that change the demand?

The tax could be an "empty house" tax, so there would be an incentive to get a tenant.

Alternatively, the tax could be targeted at negating profit from value increase, so that you pay higher tax on profit from sale of property (possibly with a deduction you can apply when buying another one within some reasonable timeframe, so that normal homeowners aren't affected).

Re: Canada bans foreign home buyers for two years

#94

Post by refurb »

kay_s438 wrote: post #57

Singapore enforces 40 percent tax on any foreigners wanting to buy property. Been that way for quite a few years.

Americans are exempted!

But it hasn't always been 40% Additional Buyer’s Stamp Duty (ABSD), the government will ramp it up and down to control the private market.

It hasn't seemed to had that big of an impact. A small, 2bed condo on land with a 99-year lease costs S$1.6M ($1.2M USD) outside the central business district.

But if you really wanted to gain control of home prices and development, just adopt Singapore's 99-year lease policy of land. Once the 99 years is up, it goes back to the government you get $0.

Singapore isn't old enough yet to truly see the ramifications (plenty of people are betting they'll get bought out), but the government has said they will stick to it and have stuck to their word in a recent situation where there were 60 year old leases.

https://www.straitstimes.com/singapore/all-191-units-at-geyl...

"All 191 units at Geylang Lorong 3 have been vacated and ownership of the 60-year leasehold land has returned to the State, said the Singapore Land Authority (SLA) on Friday (Jan 1)"

That land will be cleared and then auctioned off for another 99-year lease to private investors who will build new housing. It's a semi-Georgian policy where the Singapore government captures all of the increased land value and then turns around and uses it to subsidize new public housing or other public benefits.

Re: Canada bans foreign home buyers for two years

#95

Post by Bilal_io »

hrdwdmrbl wrote: post #90
Bilal_io wrote: post #60

Earlier quoted context omitted.

Exactly, and I honestly wish there were measures to fine owners that have empty homes as well. Many people would disagree with me, but to me it's not about economics. We need a way to fight the idea of hoarding homes, a basic human right, as being an "investment".

If there was enough supply there wouldn't be a problem. No one hoards cars, boats, airplanes or anything else because they think that they can corner the market and raise prices. Housing is only special because not enough is built. It's only possible to "hoard" because every 1 off the market is less for everyone else. A fixed pie. Like bitcoin. If the bitcoin supply was infinite no one would think about collecting th…

It's easier and cheaper to produce more cars. Boats are irrelevant since they're not a necessity, a house is, a car is in certain cities.houses being already scarce, and hoarding them makes it worse, because it makes them even less affordable.

Re: Canada bans foreign home buyers for two years

#96

Post by malka »

hoseja wrote: post #83
doliveira wrote: post #41

Earlier quoted context omitted.

Would taxing do anything in this specific case? Foreign investors are already willing to pay millions in a single home just for it to lay empty, from what I read in this thread. Why would some fixed (even if progressive) tax on top of that change the demand?

If you tax them 100% you can take that money and build equivalent government housing on the next lot over.

Lots take up physical space. This space is not infinitely extensible. The next lot over will be farther from the city center.

Re: Canada bans foreign home buyers for two years

#97

Post by joelthelion »

tici_88 wrote: post #34

Foreigners, especially the billionaire type, can and have been setting up shell corporations through which to purchase Canadian real estate. The proposed measure will do nothing to stop this practice. The measures proposed by the Canadian government are likely just political posturing and indented to "pull the wool over the eyes" of Canadian voters because the housing bubble/crisis has reached epic proportions and ev…

Could a better thought out measure achieve the same goals? How would you do it?

I feel a strong tax on houses you don't personally live in (because you rent them or because you're a company) could be efficient, but I'd love to hear other people's take on the subject.

Re: Canada bans foreign home buyers for two years

#98

Post by pards »

I'm a homeowner in Toronto and I don't think this will help. They've eliminated a small number of buyers from the market but have added other incentives like a first home buyers tax credit that will only fuel the fire - Australia tried this with tragic results.

>> working with provinces and territories to develop and implement a Home Buyers’ Bill of Rights and bring forward a national plan to end blind bidding.

Blind bidding is where multiple parties submit a sealed bid on a property. The realtor and seller review these bids behind close doors and then often request subsequent rounds of bids from the bidders *without telling them the current winning bid, or who's bid is winning*. Bidders end up out-bidding themselves.

IMHO blind bidding is an unethical practice that should be outlawed regardless of its impact on housing prices.

Re: Canada bans foreign home buyers for two years

#99

Post by Ekaros »

algesten wrote: post #39
988747 wrote: post #16

Earlier quoted context omitted.

>> being an asset in a wealthy person’s portfolio Why wouldn't that wealthy person rent the property out and get better ROI? Keeping it empty does not make sense to me.

With a 20% market increase in a year, you don't have to rent it. Renting a property out always comes with hassle. Many countries have tenant's rights that kick in after a period of time. I live in Barcelona, and the rental market is crazy. Technically I should be allowed to sign a contract for 5 years, but because of the rights that kick in after 12 months, there's a ton of landlords that only want to offer 11 month…

If market increases 20% a year clearly there isn't enough being build. Housing really shouldn't be appreciating asset, maybe stay in line with inflation and improved quality, but 20% a year is unsustainable.

Re: Canada bans foreign home buyers for two years

#100

Post by pards »

joelthelion wrote: post #97
tici_88 wrote: post #34

Foreigners, especially the billionaire type, can and have been setting up shell corporations through which to purchase Canadian real estate. The proposed measure will do nothing to stop this practice. The measures proposed by the Canadian government are likely just political posturing and indented to "pull the wool over the eyes" of Canadian voters because the housing bubble/crisis has reached epic proportions and ev…

Could a better thought out measure achieve the same goals? How would you do it? I feel a strong tax on houses you don't personally live in (because you rent them or because you're a company) could be efficient, but I'd love to hear other people's take on the subject.

The sale of investment properties is already subject to capital gains tax.
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