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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

#51

Post by sumedh »

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.

> A corporation owned one is double taxed.

Are the corporations buying for capital gain or for rental income?

Re: Canada bans foreign home buyers for two years

#52

Post by hrdwdmrbl »

krageon wrote: post #40
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…

It's not about the "economy", it's about people being able to buy a roof over their head. Foreign investors simply don't belong in that space at all.

"People being able to buy a roof over their head" is the economics of housing

Re: Canada bans foreign home buyers for two years

#53

Post by user3939382 »

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 they belong to megacorps or the 0.01% income class.

Re: Canada bans foreign home buyers for two years

#54

Post by pastacacioepepe »

Dylan16807 wrote: post #47
it_citizen wrote: post #31

Earlier quoted context omitted.

I am not super familiar with real estate markets. Has the empty house tax helped in any way? Even if it is not the best solution, is there any huge downside to that ban?

Are there any empty house taxes that charge a significant amount of money? 5% would barely get you into the same range as price growth.

How do you tax foreign investors only, if they can set up subsidiaries and use dirty tricks anyway?

You're gonna penalize the local market as well.

Re: Canada bans foreign home buyers for two years

#55

Post by searchableguy »

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…

> 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 contracts.

Same situation in India.

The rental yield is low, taxes are high, compliance is time consuming, and there is lack of legal framework in cases of disputes.

A court case will take a decade to resolve if the tenant claims the property.

The only solution I can see is government provide incentives and security against tenant for landlords or government gets into business of renting by building houses.

Re: Canada bans foreign home buyers for two years

#56

Post by sbarre »

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 purchase by using the HELOC for the downpayment, and a mortgage for the rest.

This puts a lot of people in (very self-inflicted) financially precarious situations where they are counting on interest remaining low and the value of their investments going up in order to stay ahead of the payments.

Regardless of how we got here, due to this situation no government will screw all those people over just to "fix" things for those who haven't been able to get into that market yet.

It's a lose-lose.. Leave things the way they are, and you continue to price out an entire generation, which is a huge problem. Make a large corrective change to address this and you potentially force a huge amount of existing owners to sell investments at a loss and face financial distress, another huge problem.

Some folks say "too bad for them for getting so leveraged" but all they did was follow the advice given to them by the market, and follow the rules that our government put in place.

Anyways, it's a complicated problem. Foreign ownership certainly contributes to the problem but it's not the major factor. This is 100% a "for show" measure.

Re: Canada bans foreign home buyers for two years

#58

Post by saos »

Thats doesn't solve much of the problem tbh. They need to build more homes. Much like the problem in the UK also. But in the UK we need to push back on normal people wanting this property empire and massively over leveraging themselves

> The government will also impose higher taxes on people who sell their home within a year.

Nice!

Re: Canada bans foreign home buyers for two years

#59

Post by msh »

yeetsfromhellL2 wrote: post #23
msh wrote: post #14

I wonder if the simpler solution would not be to require residence, for homes in popular locations.

It can be difficult to disprove residency, especially if you can say you travel a lot for your work. I've uh...heard of people that are residents of Nevada for tax purposes. They have a tiny furnished apartment and their car is registered there, and they're registered to vote there, but let's say they aren't home very often.

Well it will not solve everything, but two things:

- It will make it impossible for people without permanent residency to buy property. - It will prevent people from owning multiple homes in the country.

You could also define a minimum number of days a year where they had to prove that they occupied the property, maybe at least a quarter of a year.

Re: Canada bans foreign home buyers for two years

#60

Post by Bilal_io »

krageon wrote: post #40
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…

It's not about the "economy", it's about people being able to buy a roof over their head. Foreign investors simply don't belong in that space at all.

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".
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