China's Millionaire Migration

[peter12]

The democratic pressure is growing as most people are convinced that this is something akin to a criminally run Ponzi scheme. Sooner or later, politicians will be forced to act but I fear that it will be too late. The bubble has enveloped most homeowners in the Lower Mainland. 100s of billions are now tied up in overpriced assets.

[calf]

Originally Posted by GGG

I do think a vacancy tax is a great idea if it can be implemented. It encourages lower rental prices which in turn reduces real estate prices in a functioning market.

I would worry about prices crashing on people who bought and live in their homes during this boom, and lose a massive amount of equity when the market eventually corrects. This problem should have been addressed long ago when it was first identified.

[rd_aaron]

Higher property taxes for foreign owners is an option as well, though this might punish people who aren't abusing the system.

A vacancy tax would encourage foreign owners to rent out their property (which as mentioned would lower rental prices due to more supply), but it would be nice if they could somehow capture that rental income in Canada, rather than it being under the table, which I imagine it would be a lot of the time.

[GirlySports]

i don't know how this problem abusing social assistance is solved legally.

Parents (in their late 40s) send a kid to a Canadian University (pays 3 times tuition)
They send over hundred of thousands of dollars to their kid
Kid buys a house they may or may not live in. If you create a vacancy tax, they'll just live in that house
Kid becomes Canadian Citizen in 5-8 years (through marriage or Working Visa/PR) and sponsors parents over
Parents will be close to 60, have no income and live off social assistance

[Flash Walken]

The thing is, and this is a taste for all you Albertan's who aren't familiar with the BC political environment, this is all traceable to corruption.

This is from an article from last year:

Indeed, it would be hard to name any other country in the world that doesn’t keep detailed data on non-resident ownership. (If readers know of any countries that don’t do so, please let me know.) For what it’s worth, I’ve been urging politicians since February, 2013, to collect data on foreign ownership.

In contrast to laissez-faire Canada, some countries basically don’t allow any foreign ownership at all, except in the most restricted conditions, such as China, Thailand and Switzerland.

Switzerland is one of the countries that allows virtually no foreign ownership of real estate. Thailand and China are also extremely restrictive.

Switzerland won’t allow virtually any foreign ownership of real estate. Thailand and China are similar. Most other countries have restrictions, but they’re less extreme. Canada and B.C., for reasons we can only guess at, don’t even track foreign ownership.
In addition, the majority of the world’s federal governments, unlike Ottawa, have various restrictions on foreign ownership. Those countries include Australia, Denmark, Mexico, Singapore, Hong Kong and a host of nations.

Unlike many Canadian politicians and extraverted real estate developers, the leaders of these countries don’t think it’s “xenophobic” to safeguard national sovereignty. The U.S. is among the nations that institute various kinds of (often-complex) tax restrictions on foreigners buying housing.

Even several Canadian provinces don’t allow all foreign purchases. Manitoba, Quebec, Alberta and Saskatchewan restrict the sale of farmland to non-residents.

Not only are there a variety of means and methods to have corrected this bubble before it threatened to burst the Canadian economy, these variety of means and methods should have been instituted years, decades, ago.

BUT, the province is so corrupted that it's never gotten any serious political traction even though the vast majority of the province is for it.

[nik-]

The foreign property investment bubble is in "Too Big to Fail" territory now.

[Flash Walken]

Originally Posted by nik-

The foreign property investment bubble is in "Too Big to Fail" territory now.

I hate to say it, but Calgarians are going to bear the brunt of this bubble.

Vancouver and Toronto will be saved at the expense of smaller cities.

[Azure]

The vacancy tax could push the market over the edge. Especially if there is a so-called bubble.

But, it will happen at one point anyways.

[Flash Walken]

A vacancy tax does nothing to address the actual issue.

Honestly, for those that don't know, the way houses and condos are being sold in vancouver right now is like this:

A place is listed for an open house. 12-15 buyers + agents show up at the listing WITH OFFERS IN THEIR HANDS, without subjects or clauses, often exceeding the list price of the home by more than 10%.

In our building, we had an original unit sell for $90,000 above list price to purchasers who were viewing the listing from a skype tour on their realtor's phone. This unit was original to the early nineties with no updating.

A small tax is worthless to these buyers, they would happily pay it if it means continuing to shield millions of dollars. It doesn't address affordability for the rest of Vancouver, it simply increases the cost of ownership. It doesn't address the lack of single family dwellings in the city which is driving families out and slowly killing the education board in Vancouver.

It's just a way for the province to add more funds to general revenue to make it look like their tax cuts are working.

This year’s budget included an exemption from the property transfer tax as an incentive for construction of new homes up to $750,000 in value. Plus the government is engaged in another data-gathering exercise on the supply side of the equation.

“We see the record numbers of housing starts,” he said “But how many other units have (been) denied? And how many other housing units are awaiting approval? What would the impact be of thousands upon thousands of units actually coming onto the market? I expect it would relieve some of the pressure.”

The government is pursuing answers to all those questions from local governments in the Metro Vancouver. “I hope I don’t have to FOI it,” joked de Jong, riffing on his recent appointment as minister in charge of freedom of information, or FOI.

Once the sought-after information on supply is in hand, he’ll be in a better position to decide how to proceed on the affordability file. But from what he said this week, there’s no doubt about his preferences.

“I don’t believe the answer is to try and artificially constrain demand whether it is from within the country, within the province or internationally. I think the answer is for us to work together as governments and increase supply.”

Not surprising that the Liberals are reluctant to do anything to reduce the proceeds from property sales. The last budget was in surplus mostly because of an almost $600 million windfall from the property transfer tax. They are budgeting for $3.6 billion in returns from the tax over the next three years.

But in political terms, de Jong is seeking to reframe the housing debate as a debate about economics.

The New Democrats emphasize the need to discourage foreign buyers, the Liberals push to increase the housing stock. The party that would decrease demand versus the one that wants to increase supply.

Did I mention the finance minister happens to have ownership interest in 7 residential properties in the lower mainland...

[Mr.Coffee]

I find it hard to believe that there's "nothing" we can do about this.

Often, Canadians pandering to the wishes of others is to our detriment. All this is doing is making housing and debt levels sky rocket for the average born and bred Canadian. That isn't a good thing.

[CliffFletcher]

Originally Posted by Mr.Coffee

Often, Canadians pandering to the wishes of others is to our detriment. All this is doing is making housing and debt levels sky rocket for the average born and bred Canadian. That isn't a good thing.

It's nothing to do with pandering to the wishes of foreigners. There are some Canadians making piles of money off this. That's why it's been allowed to persist for so long.

[FlamesAddiction]

Originally Posted by Zarley

Foreign investment in general is a good thing. I don't think there is a practical way to limit this type of thing, and even if there was I'm not sure that limits to foreign ownership in real estate would be a good move.

Foreign investment is good when they invest in business, development and pay taxes. Not when it is used as a funnel to move capital out of the country and artificially raises the cost of living for people that have to live here.

[snootchiebootchies]

Originally Posted by GirlySports

i don't know how this problem abusing social assistance is solved legally.

Parents (in their late 40s) send a kid to a Canadian University (pays 3 times tuition)
They send over hundred of thousands of dollars to their kid
Kid buys a house they may or may not live in. If you create a vacancy tax, they'll just live in that house
Kid becomes Canadian Citizen in 5-8 years (through marriage or Working Visa/PR) and sponsors parents over
Parents will be close to 60, have no income and live off social assistance

Just to clarify, in this scenario, the kid would be obligated to financially support the parents for 20 years after they receive their PRs, which means they would not live off social assistance except for public health care. The parents would also have to pass a medical examination to ensure they will not be a drain on public health resources.

I don't doubt there is lots of corruption and speculation going on in the Vancouver real estate market but I also know lots of folks who are playing by the rules (i.e., investing in Canadian businesses and employing Canadians).

[Mr.Coffee]

Originally Posted by CliffFletcher

It's nothing to do with pandering to the wishes of foreigners. There are some Canadians making piles of money off this. That's why it's been allowed to persist for so long.

I think it has some to do with pandering to foreigners otherwise Canada would block foreign investment altogether for protectionist measures to help all Canadians, not just a few or some that get the inherent benefit from higher property value.

And remember, debt is at record highs.

[Zarley]

Originally Posted by FlamesAddiction

Foreign investment is good when they invest in business, development and pay taxes. Not when it is used as a funnel to move capital out of the country and artificially raises the cost of living for people that have to live here.

The economic boom in BC right now is essentially based on this real estate bubble. Foreign investment is fueling the real estate development, consulting, and construction sectors in the lower mainland at the moment. Presumably these people are paying property taxes, real estate transfer taxes, and corporate income tax if they choose to rent their property.

This isn't necessarily a bad thing. Perhaps it's just the new reality that Vancouver will be an ultra expensive property market akin to London or Sydney. Rental rates remain affordable and people may be forced to rent and put their savings into equities rather than real estate, which is a better strategy in my opinion.

[Flash Walken]

Originally Posted by Zarley

The economic boom in BC right now is essentially based on this real estate bubble. Foreign investment is fueling the real estate development, consulting, and construction sectors in the lower mainland at the moment. Presumably these people are paying property taxes, real estate transfer taxes, and corporate income tax if they choose to rent their property.

This isn't necessarily a bad thing. Perhaps it's just the new reality that Vancouver will be an ultra expensive property market akin to London or Sydney. Rental rates remain affordable and people may be forced to rent and put their savings into equities rather than real estate, which is a better strategy in my opinion.

The rental market is no longer affordable when people have to justify massive mortgages that sustain the purchase price. That cost is simply transferred to the rental market.

508 sq/ft for $1925 a month:

https://vancouver.craigslist.ca/van/apa/5632032026.html

[wooohooo]

It's crazy a crazy market, my cousin who works at VGH bought literally a shack near there for over $1 mill and had to put in another quarter million to make it habitable. In Calgary you could get a freaking nice house. A million in vancouver gets you nothing. Vancouver is nice place to live and all, but not for that price.

[MelBridgeman]

Actually good news for Calgary, there are some Vancouver tech companies moving their Dev teams to Calgary because they can't get anyone to move there because of the cost of living without paying a pretty penny. I know of one who has 12 people in Calgary......and looking for more

[EldrickOnIce]

The only problem is, when the market corrects or the bubble breaks, every market is affected, including ones that didn't see prices rise 2-300% in the last little while. So Calgary home owners could get hit way harder than Vancouver or Toronto, for example.
Or so is the theory anyway

[squiggs96]

Originally Posted by Flash Walken

The rental market is no longer affordable when people have to justify massive mortgages that sustain the purchase price. That cost is simply transferred to the rental market.

508 sq/ft for $1925 a month:

https://vancouver.craigslist.ca/van/apa/5632032026.html

A big problem with the rental market here is airbnb. Units that could go towards long term rentals, are being used as short term rental, further diluting the supply from the open market. Airbnb is basically illegal in Vancouver, unless you have a hotel and/or bed and breakfast license. Many stratas are redundantly prohibiting short term rentals in their bylaws. Unfortunately, these aren't being policed very well.

Another problem is the NIMBY crowd. The solution to cheaper housing and rentals, is to increase density, and thus the supply of both. Too many times in Vancouver people are crying over the prices of houses. These are the same people that don't want to live in a condo/townhome, and don't want towers in their neighborhood. There have been many towers that have been delayed, or outright cancelled, because residents in the neighbourhoods stop them. Then they go to the papers and say how they can't afford to live here. You can't have it both ways, people.

I would like to see more houses both up, and replaced with increased density. When this happens, there will also need to be increased infrastructure and transit to get the people around. People need to travel on transit, cycle, or walk more than they drive. This will reduce traffic, and make it more efficient.