Canada bans foreign home buyers for two years • Hacker News Board

Re: Canada bans foreign home buyers for two years

#211

Post by TimPC » Tue, Apr 19, 2022, 12:54 PM UTC

boplicity wrote: post #195

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 live in Toronto as well. We make a good income, have large savings for a down payment, and recently thought about buying a house. It's depressing. So, I decided to look at the City Plan -- to see what the actual plan is for addressing the housing cost crisis in Toronto. Not surprisingly, the real problem became very clear to me, almost immediately. The problem is not blind bidding. The problem is not foreign buyers…

Some of it is NIMBY. But the officials can’t change the fact that there is only so much land to go around and a disproportionate number of people strongly desire a detached house.

Building huge quantities of condos may help some with density and may drive prices down slightly but there is little that can be done to have new detached houses on the market.

You could potentially tear down some mansions in rich neighborhoods to build two or three houses and that might help slightly at the margins. There aren’t enough mansions in the city for this to really move the needle though.

The problem is a handful of cities are winners and everywhere else is losing. Toronto is the lifeblood of Canada and many people want to be here for opportunities that are unavailable elsewhere. A large population that grew up here doesn’t want to leave friends and family behind to start a more affordable life elsewhere. As long as we create a society where there are a handful of great places to live those places will be prohibitively expensive.

Being unable to create successful cities in Canada outside of Toronto and Vancouver has been the bigger political failing than NIMBY within those two cities. If Canada had five cities that were as successful as Toronto there would be more opportunity to go around and less pressure on Toronto. Disproportionate amount of both internal and external immigration is to the places with the best jobs and that drives up housing quickly.

Re: Canada bans foreign home buyers for two years

#212

Post by libertine » Tue, Apr 19, 2022, 12:54 PM UTC

fennecfoxen wrote: post #144

libertine wrote: post #62

Earlier quoted context omitted.

This is one of those things that a proper tax structure would do wonders - those who hoard housing should get a kick from a exponential tax. Like, what value are those corporations bringing to people, to the market, and to a country by hoarding houses other than controlling the renting market for some areas? How is that a good thing?

They are translating between a lump sum and an income stream. They are making a six-figure asset available for the low four figures a month, without someone needing to bring six figures of money, or five to six figures of down payment and closing costs and five times as much debt. If the six figure asset actually falls 50% in value, the tenant is not stuck and does not lose a penny. In short, they’re offering homes t…

Yeah, except you have to take into account that "valuable achievement", or let's frame it as a "game" that's played, is being played for a long time without the involvement of massive corporations that hoard houses.

But you might have pinpointed a couple of problems, so either:

- Those corporations are driving the costs of buying homes so high that regular people are being pushed out, because, you know... they are playing with funny money;

- People's income is so crushed, or they are so deprived of access to free/cheap money - like the corporations - that they aren't allowed to play this game.

Both scenarios make it look like the game is rigged.

Why can't people rent to other people like it was done in the past? Why aren't regular people being allowed to play this game? Or is it such a bad game to play that no one wants to play it, except those corporations?

Even if it was a bad game to play, they're still taking houses away from those who want to buy and not rent. So they're ruining two markets: the rent and the buyers market.

Again, I see no add value that couldn't be created by any other player other than big corp.

Else you'll be here in 20 years saying the same thing, with a minor diference: "these corporations are bringing SEVEN FIGURE housing access to FIVE FIGURE renters"

Re: Canada bans foreign home buyers for two years

#213

Post by sbarre » Tue, Apr 19, 2022, 12:54 PM UTC

quickthrowman wrote: post #125

sbarre wrote: post #105

Earlier quoted context omitted.

Because it increases the risk of default. I say "banks hate this" as unsubtle shorthand here. Obviously they don't hate it enough to refuse people additional mortgages (it's all secured by tangible assets at the end of the day) but they certainly aren't as happy about it as if people had a 20% downpayment in cash rather than pulling it from a line of credit.

> Because it increases the risk of default. For who? Banks don’t hold mortgages on their books, they sell them to investors. I don’t think you understand how modern finance works.

Yeah I guess I am not trying to provide a super in-depth explanation of how finance works here, since that's not the topic we're discussing.

I am not a financial expert, but I have been told by professionals, and read in credible publications, that financing entities are not thrilled about the idea that people can effectively 100% finance additional home purchases using HELOCs, rather than having a cash downpayment.

That's the point I was making. My apologies for drawing an incorrect conclusion on the unrelated details.

Re: Canada bans foreign home buyers for two years

#214

Post by usrn » Tue, Apr 19, 2022, 12:55 PM UTC

libertine wrote: post #62

user3939382 wrote: post #53

Related, I’m concerned about the trend of megacorporations gobbling up single-family homes which appears to be happening in the US and Canada. I wonder if it’s possible to construct a law that would limit corporate ability to acquire these assets while making it possible for families to do so. Unfortunately, even if there is, politicians at least in DC seem to have zero motivation to solve political problems unless t…

This is one of those things that a proper tax structure would do wonders - those who hoard housing should get a kick from a exponential tax. Like, what value are those corporations bringing to people, to the market, and to a country by hoarding houses other than controlling the renting market for some areas? How is that a good thing?

They'll just restructure it so each house (or small group of houses) is held by smaller corporations or other entities. In fact even smallish landlords already do that now but I think it's because credit gets cheaper that way rather than for taxes.

Re: Canada bans foreign home buyers for two years

#215

Post by usrn » Tue, Apr 19, 2022, 12:56 PM UTC

refurb wrote: post #122

libertine wrote: post #62

Earlier quoted context omitted.

This is one of those things that a proper tax structure would do wonders - those who hoard housing should get a kick from a exponential tax. Like, what value are those corporations bringing to people, to the market, and to a country by hoarding houses other than controlling the renting market for some areas? How is that a good thing?

Presumably they are buying up houses to rent. If they buy too many they can’t rent them out, they lose money. I’m not convinced it’s a problem. Again, all roads point back to supply. Build enough homes and the issue is moot.

It's both supply and demand. You need construction and limited immigration. That's why for example Tokyo is so cheap.

Re: Canada bans foreign home buyers for two years

#216

Post by sbarre » Tue, Apr 19, 2022, 12:56 PM UTC

quickthrowman wrote: post #124

sbarre wrote: post #56

Earlier quoted context omitted.

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. Banks don’t care, they just sell the loan. If they cared, they wouldn’t write the loan! Cmon now.

I forget how pedantic HN can be.. You're the third comment to latch onto that one phrase in my overall comment, and it's not even that relevant to the topic being discussed.

My fault, I really should have phrased that differently.

Re: Canada bans foreign home buyers for two years

#217

Post by bko » Tue, Apr 19, 2022, 12:57 PM UTC

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…

The question is why does something like blind bidding exist in real estate? It could exist in all sorts of places but doesn't. Imagine blind bidding when interviewing for a job. Write down the number you'd be willing to do the job for. Someone came in with a lower number, please resubmit.

These weird market distortions in real estate have underlying causes. A lot of them are based off patchwork rules and regulations around real estate. Stuff like who you're allowed to sell to, how much you're taxed, the paperwork required etc. Putting more patch work on top of a system that's obviously broken will probably make things worse in the long run.

Re: Canada bans foreign home buyers for two years

#218

Post by mschuster91 » Tue, Apr 19, 2022, 12:57 PM UTC

binibus wrote: post #173

mschuster91 wrote: post #70

Earlier quoted context omitted.

> They need to build more homes. Why build more homes at enormous expense (both financial and environmental), when most countries have way more than enough homes in total? The problem is two-faced: vacant properties sitting around empty because of money laundering and speculative usage on one side, and on the other side the usage disparity because rural areas have been left behind by modern infrastructure - particula…

> vacant properties sitting around empty because of money laundering and speculative usage I don't have the numbers but I find difficult to believe that there's enough properties used for money laundering to move the prices. > usage disparity because rural areas have been left behind by modern infrastructure That's the problem. There are empty houses but too old or in places where people don't want to live. So to low…

> I don't have the numbers but I find difficult to believe that there's enough properties used for money laundering to move the prices.

In London, up to a third of all properties (depending on the area) are left empty. At that point I don't care if it's money laundering or speculative usage, but London's nickname "Londongrad" more than hints that an awful lot of Russian oligarchs used London real estate to launder stolen money [2].

Personally, I'd be fine to ban all foreign investment into real estate in hot housing markets no matter the country, with the sole exception of primary or secondary residence.

[1] https://www.bigissue.com/news/housing/how-many-empty-homes-a...

[2] https://www.deutschlandfunkkultur.de/england-london-oligarch...

Re: Canada bans foreign home buyers for two years

#219

Post by tenpies » Tue, Apr 19, 2022, 12:58 PM UTC

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 don't think this will help.

You are exactly right, but this is by design. You're talking about the Canadian Federal Liberals. The Prime Minister is a trustafarian who got elected because his father was Prime Minister. Every major minister of their party owns several investment properties. The Minister of Housing and Diversity and Inclusion (what a combo!) owns investment properties.

These people have zero interesting in seeing property values go down. It's their own net worth we're talking about, not to mention the net worth of their friends and donors.

The plan is to virtue signal their way to taking the least effective action possible (E.g. "ban foreign buyers", but leave loopholes so they can still buy through corporations), bring in another 500,000 people that will need housing, and then do as little as possible, but as loudly as possible, to "increase to supply". They've been in power 6 years and this has been an issue since day 1. Why anyone would expect them to address this issue on the face of Canadians still voting for them, is a mystery to any rational thinker.

It's a group of people where you have to ignore what they say and focus on their actions. Did the Canadian Federal Budget look at all like a budget passed by someone trying to reduce inflation? Trying to cool down housing markets even a little bit? Of course not. Look at the hand signing the cheques, not the mouth speaking the lies.

Re: Canada bans foreign home buyers for two years

#220

Post by TimPC » Tue, Apr 19, 2022, 12:58 PM UTC

bitshiftfaced wrote: post #176

stevesimmons wrote: post #135

Earlier quoted context omitted.

In Melbourne, this is totally normal. Everyone stands in the street, prospective buyers, neighbours, and people starting their house search. The estate agent stands on the front step, acting as the auctioneer, using the rolled up "Section 32" document like a gavel. Typically the auctioneer draws out bids in $10-20k increments, then knocks it down with a "going once, going twice, going three times..." call. Just befor…

> Sales almost never fall through. If the buyer cannot get financing etc, the seller keeps their 10% deposit. The seller cannot back out. In the states, once the purchase agreement is signed, the home goes through inspection at some point before the sale. The inspector finds a hundred little problems with the house, and the buyer can back out of the sale for any little complaint.

In Canada this is called conditional on inspection and it’s a permitted clause in a sale. The problem is the minute you have multiple buyers there is overwhelming pressure to remove conditions that can make the sale fall through because the seller is more likely to take an offer that gives them a guaranteed sale.