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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

#231

Post by corry »

RocketOne wrote: post #201

Im one of those 'greedy' old farts who owns more than one home. We have one for ourselves and 5 rentals. Im starting to agree with those who are feeling priced out of the market. What would make me stop buying homes? A graduated tax would. If there were no sales tax on the first two, and then 15% tax on the third, 25% tax on the 4th, and going up by 10% for each subsequent house, it would definitely make me quit buyi…

I agree this is closer to the root of the problem. It's not just foreign capital, or faceless corporate ownership (although both are part of it).

IMO it's that every professional / business / owner / wealthy person in Canada can basically easily borrow against their existing home equity, use that to purchase add'l rental units, and claim the mortgage interest as an expense against the rental income (thereby making the loan "free" of cost, although obviously you're still on for the principle). You have the risk of the housing market crashing, but that hasn't seemed realistic for the past 10+ years or so.

I'm not sure what the solution would be. I hesitate to even call it a "loophole" since to me, from a business POV, it makes sense (the cost of the debt is an expense to be put against the income, so you shouldn't have to pay tax on it).

Then, even if you're just breaking even as a landlord after the interest, property tax, maintenance, vacant times, etc - the underlying asset is appreciating as well.

So there needs to be solutions (like graduated tax on subsequent properties, or perhaps changes to being able to claim your mortgage interest as deductible, etc) to change this underlying dynamic.

Yes, dramatically increasing the supply of housing would be a better fix, but that's not likely to change quickly while economically de-incentivizing the real estate investment I described above would change things.

My $0.02, not an expert.

Re: Canada bans foreign home buyers for two years

#232

Post by TimPC »

xyst wrote: post #29
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.

This. Root cause is crappy city planning and design; and emphasis on single family housing development. Many cities across North America are designed with urban sprawl and car centric travel in mind. Pedestrian and alternative forms of transportation are a second class citizen despite the ability to move people more efficiently than cars will ever do. Don’t get me wrong. Cars have their in place in society but their…

The root cause is a handful of cities winning and experiencing unreasonable growth they were never designed for. Winners grow at up to 300K people a year while losers shrink. Governments need to do more so that their national economies aren’t centred on a small handful of success stories. If there were twenty good cities in Canada, Toronto would be growing by 30K a year instead of 300K a year (pre-COVID).

Re: Canada bans foreign home buyers for two years

#233

Post by ejb999 »

RocketOne wrote: post #201

Im one of those 'greedy' old farts who owns more than one home. We have one for ourselves and 5 rentals. Im starting to agree with those who are feeling priced out of the market. What would make me stop buying homes? A graduated tax would. If there were no sales tax on the first two, and then 15% tax on the third, 25% tax on the 4th, and going up by 10% for each subsequent house, it would definitely make me quit buyi…

No post body was provided.

Re: Canada bans foreign home buyers for two years

#234

Post by jejeyyy77 »

TimPC wrote: post #196
jejeyyy77 wrote: post #166

Earlier quoted context omitted.

This is wrong on a few levels. 1) as someone who has been on the ground as well, I’ve lost a few offers because I was worried about over paying. On multiple occasions, after seeing what it sold for we thought “damn, we woulda paid another $25K on top to get it had we known.” 2) Canadian banks has a very conservative “stress test” for securing mortgages. This includes qualifying at much higher rates then is being offe…

It’s still quite possible to stretch yourself. Variable mortgages are common and interest rates are going up at a rapid clip. It’s possible for them to rise further than the stress test numbers. Refinancing in five years may be painful if you got a mortgage at 1.5%, stress tested for 3.5% and refinanced at 5%.

Stress test currently means you need to qualify at 5-6% if you have 20% down.

If you are putting less than 20% then the stress test is even higher.

I doubt we will see 5-6% interest rates in the next 5 years.

Re: Canada bans foreign home buyers for two years

#235

Post by ckdarby »

osigurdson wrote: post #210

I'm surprised people want to move to Canada at all given our low wages, high tax and terrible weather.

Low levels of corruptions, relatively progressive views, golden passport for travel and generally a good global reputation.

> low wages Work remotely for US company or the 1% of Canadian companies that pay competitive to the US market

> high tax Social programs. The taxes get curbed through corp taxes if you're in the .1% - 0.01%. Can always earn and then move elsewhere.

> Terrible weather True, but can just escape if the other situations are solved.

Re: Canada bans foreign home buyers for two years

#236

Post by justaman »

pembrook wrote: post #130

A quick look at the data suggests only about 2% of properties in Toronto and Vancouver are owned by overseas investors. Yes, housing is priced at the margin, but this won't do anything at all to prices over the long term. I'm sure this will be wildly popular politically, because people LOVE the idea that some foreign boogieman is the reason their children can't afford homes anymore. It's much easier to outsource your…

2%. But how much of that 2% has been in the last 5 years? I heard it was up to 1/3rd of all properties sold.

Re: Canada bans foreign home buyers for two years

#237

Post by ranit »

jejeyyy77 wrote: post #166
foldor wrote: post #131

Earlier quoted context omitted.

The theory of that, and the reality of it are two different things. As someone who has been on both sides of this in Ontario, I can tell you for a fact that blind bidding results in people over paying, and never knowing by how much. The stress of buying a home in the GTA has lead people to stretch their budgets beyond reasonable limits, and realtors have only made it worse now. In recent years it's started to become…

This is wrong on a few levels. 1) as someone who has been on the ground as well, I’ve lost a few offers because I was worried about over paying. On multiple occasions, after seeing what it sold for we thought “damn, we woulda paid another $25K on top to get it had we known.” 2) Canadian banks has a very conservative “stress test” for securing mortgages. This includes qualifying at much higher rates then is being offe…

> Canadian banks has a very conservative “stress test” ... Therefore it isn’t possible to “stretch yourself beyond any reasonable limits”

“stretch yourself beyond any reasonable limits” means that you may not be able to pay your mortgage, it doesn't mean the bank won't offer it to you.

Re: Canada bans foreign home buyers for two years

#238

Post by jejeyyy77 »

pards wrote: post #98

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…

I disagree. IMO, blind bidding is suppressing prices not inflating them.

Here’s why, as someone who has been on the ground and lost a few offers because we didn’t want to overbid. After the sold price was released, on multiple occasions we thought “damn! we’d have our that and $25K on top to get it had we known”.

In a blind bidding system, you bid what you think the house is worth. In an open bidding system you start to bud as much as you are able to afford.

Re: Canada bans foreign home buyers for two years

#239

Post by bombcar »

jejeyyy77 wrote: post #166
foldor wrote: post #131

Earlier quoted context omitted.

The theory of that, and the reality of it are two different things. As someone who has been on both sides of this in Ontario, I can tell you for a fact that blind bidding results in people over paying, and never knowing by how much. The stress of buying a home in the GTA has lead people to stretch their budgets beyond reasonable limits, and realtors have only made it worse now. In recent years it's started to become…

This is wrong on a few levels. 1) as someone who has been on the ground as well, I’ve lost a few offers because I was worried about over paying. On multiple occasions, after seeing what it sold for we thought “damn, we woulda paid another $25K on top to get it had we known.” 2) Canadian banks has a very conservative “stress test” for securing mortgages. This includes qualifying at much higher rates then is being offe…

That “damn we would have paid X more” is exactly what it’s designed to encourage - we’re not good at calculating large numbers so once you’ve “made the decision” to pay $500k making a decision to pay $50k more is relatively easy (and seems like nothing).

In a normal Dutch auction style situation you’ll pay $1 more than the second highest bidder, which is a bit more fair.

Re: Canada bans foreign home buyers for two years

#240

Post by tomrod »

hotpotamus wrote: post #140
rch wrote: post #72

Earlier quoted context omitted.

Why not progressively increment after the second? (not mutually exclusive with other measures)

I would guess that tomrod owns 9 houses.

LOL!

Nah, I was looking for a simple, reasonable bound was all.

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