Housing Bust 2017

Leveraging, renting vs owning, making an investment or buying a home?
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patriot1
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Re: Housing Bust 2017

Post by patriot1 »

Just a Guy wrote: 24 Mar 2017 09:57 Umm patriot1, you do understand math and compound interest right?
I sure do. Borrowing money using an asset as security is not the same thing, at all, as selling the asset. Any investor should understand this.
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Re: Housing Bust 2017

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Getting money against an asset with no intention of ever paying it back, and paying interest on it, is called pawning, not investing. While technically not selling, people who pawn items often wind up losing them to the pawn shop for pennies on the dollar.

Many homeless people learn that.
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Re: Housing Bust 2017

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Article in the G&M today: I won the Toronto real estate lottery, but I'm not celebrating.

Cases like this allow us to put a real price in the option of not moving. The guy bought in 89 for $250K and could probably sell now for $1.5M. Therefore, staying where he is right now is worth more then $1M to him.
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Re: Housing Bust 2017

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He'd be a true millionaire if he decided to cash in and move to Kenora or even Barrie or Windsor. Paper millionaires are worth a dime a dozen.
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Re: Housing Bust 2017

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AltaRed wrote: 24 Mar 2017 12:29 He'd be a true millionaire if he decided to cash in and move to Kenora or even Barrie or Windsor. Paper millionaires are worth a dime a dozen.
and they seem to be doing that more and more in Vancouver:
Heading for the exits in Vancouver
unless you ride a bike to work like Mayor Moonbeam suggests!
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Re: Housing Bust 2017

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Refugees from the lower mainland are becoming the Okanagan's largest group of home buyers/renters causing almost zero vacancy and upward pressure on mid-range home prices. There's also been a surge in IT/Tech company numbers and employees/jobs coming from the GVA The new technology office building is just barely starting to be occupied and there is already almost zero space remaining.

Thank you to greedy governments (property and land transfer taxes) for really f*cking up the GVA housing situation and creating deep chasms between the haves (owners) and have nots. Ontario and GTA seem bent on continuing down the same path.
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Re: Housing Bust 2017

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Just a Guy wrote: 24 Mar 2017 09:59 Ig17,

Yeah, times are tough all over...

http://www.huffingtonpost.ca/2016/03/25 ... 89000.html
I am sorry, but where are those places?
I am cautiously optimistic. When it goes up, I claim I have been optimistic; when it goes down, I claim I have been cautious.
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Re: Housing Bust 2017

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You haven't heard of (or been to) at least of some of those places? I am astonished. :wink:
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Re: Housing Bust 2017

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AltaRed wrote: 24 Mar 2017 15:20 You haven't heard of (or been to) at least of some of those places? I am astonished. :wink:
but where in Toronto are those places? (pulling Just a Guy's leg)
I am cautiously optimistic. When it goes up, I claim I have been optimistic; when it goes down, I claim I have been cautious.
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Re: Housing Bust 2017

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AltaRed wrote: 24 Mar 2017 15:20 You haven't heard of (or been to) at least of some of those places? I am astonished. :wink:
My son lives in The Beach area. That is one. Fortunately he got in early (one house ago). For him, everything is stable until his young boys "need" their own bedroom.

Hopefully his startup will make it big before then...
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Re: Housing Bust 2017

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AltaRed wrote: 24 Mar 2017 14:37Thank you to greedy governments (property and land transfer taxes) for really f*cking up the GVA housing situation
Property and land transfer taxes in GVA are too low. This encourages flipping, under use, and outright leaving properties empty by making it inexpensive to hold property with low or zero yield. City of Vancouver has the lowest property tax rates of any major city in North America. I should also add the provincial property tax deferral which allows anyone 55+, or with kids to defer taxes indefinitely at <1% simple interest without any means test.
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Re: Housing Bust 2017

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What I really meant is gov'ts have a conflict of interest. By doing something to curtail markets, gov'ts, especially provincial wrt land transfer taxes, don't get as much revenue in their coffers. Municipal gov'ts stand to lose less, but still lose in less fee revenue, such as development permits, etc. Kind of incestuous really. IIRC, both Queen's Park and Victoria posted remarkable revenue streams this past year in land transfer taxes.
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Re: Housing Bust 2017

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Is this going to be the start of the crash now that the government is getting strict, and tightening reporting?

http://www.theprovince.com/news/local+n ... story.html
The landmark B.C. decision requires notary public Tony Liu to pay his client more than $600,000 because Liu failed to adequately determine whether the Vancouver house his client was buying for $5.5 million had been owned by a tax resident of Canada.
Also:

http://www.cra-arc.gc.ca/gncy/bdgt/2016/qa11-eng.html
Starting with the 2016 tax year, individuals who sell their principal residence will have to report the sale on Schedule 3, Capital Gains of the T1 Income Tax and Benefit Return. Reporting will be required for sales that occur on or after January 1, 2016.
edit: CRA is just now starting to get all this raw data that they can cross reference with land title reports. The RE bubble will now be a bubble for CRA auditors.
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Re: Housing Bust 2017

Post by ig17 »

Interview with the author of the policy paper that proposed a property wealth surtax:

Q&A: Josh Gordon, the researcher who blames buyers for rising home prices in Toronto
How exactly does demand for housing get so out of control?

I believe that public authorities have underestimated the role of foreign capital. The key thing is that it’s not all about the citizenship of the buyer. It’s about where the money was accumulated. There is a ton of money that is flowing into the Toronto market from overseas, both through foreign buyers, and through people who are now permanent residents or citizens, who have access to capital from overseas. The market surged in 2015 and 2016 because you had people moving money out of China. That spurred a spike in purchasing from overseas, which drove sales up. As soon as prices start to increase, you get the local buyers jumping on the bandwagon, because they’re fearful that prices are always going to go up. That creates these scorching demand conditions.

TREB has released data suggesting that the number of foreign buyers is very low. Why believe you instead of them?

Realtors have resisted efforts to get the government to collect data about this. In Vancouver, real estate representatives said foreign buyers were five per cent of the market. When the government went out and collected the data, it was closer to 13 per cent of buyers. So we have seen that real estate representatives are not exactly being open and candid when it comes to their estimates of foreign buyers.

What do you think would happen to the Toronto market if we had accurate data about foreign buyers?

People would not ignore it. I think that’s another one of the lessons from Vancouver. In the five-week period when the BC government was collecting foreign buyer data, over a billion dollars was spent on Vancouver real estate by foreign citizens. The pressure mounted pretty quickly on the government to address that, especially in the context of a housing crisis. People don’t ignore it. That, in my view, is part of the reason the Ontario government has delayed collecting data for so long. If this was a government that was serious about tackling this problem, they would have been gathering data a long, long time ago.
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Re: Housing Bust 2017

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^ Exactly. Not only that, even if foreign money is, say, 15%, it is playing an outsized role.

All the properties which are bought $500K over price are bought with Chinese money. When it goes to multiple bids and Chinese money is on the table, Chinese "win" every single time. All they seem to care about is to get the money out of motherland.

Then the next time realtors check out comparable for pricing a sale, they have a new benchmark. Then all the people who were told 3 years ago that the market peaked and was about to drop go: "shit; I will never be able to buy a house if I don't do it now!" And the circus starts again.

Here is the question. If China slows down or tightens the screws... If the real owners of these yuans all of sudden discover that they need them in liquid form... Will a large number of properties hit the market all at the same time?
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Re: Housing Bust 2017

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Mordko wrote: 26 Mar 2017 15:56 Here is the question. If China slows down or tightens the screws... If the real owners of these yuans all of sudden discover that they need them in liquid form... Will a large number of properties hit the market all at the same time?
Here's some food for thought.

2014 article:

Half of China's millionaires 'plan to leave country within five years'
Around half of China's rich aim to move to another country within the next five years, according to a Barclays Wealth report.

Yesterday's report questioned more than 2,000 individuals from 17 countries, all of whom had more than US$1.5 million in total net worth, and 200 with more than US$15 million.

...

Respondents from the mainland were the most eager to move, with 47 per cent saying they planned to do just that in the next five years, compared with just 16 per cent of Hongkongers.

...

Around 30 per cent of Chinese respondents listed Hong Kong as their top destination, followed by Canada at 23 per cent.

2015 article:

Millions of millionaires: China will be a top 10 nation for uber-rich by 2020
The mainland will be one of the top 10 economies for US dollar millionaires in 2020, when it will be home to 2.3 million, compared to 1.3 million now, Credit Suisse forecasts.
2015: 1.3M
2020: 2.3M

We are at a mid-point, so let's take the average:

2017: 1.8M of USD millionaires

That's your pool of potential buyers. ~47% of them want to leave, ~23% picked Canada as their top destination.

1.8M * 47% * 23% = 195K

Spread over 5 years: 39K potential bidders per year

Even if you cut that number in half, that's still leaves you with 19.5K wealthy bidders. They are quite insensitive to the price they pay. Chances are that insane bidding will continue unabated, unless our three levels of governments decide to interfere.
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Re: Housing Bust 2017

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Seems like an awesome opportunity to sell high (if one is able to correctly time the approximate peak the market), rent while the market settles down (or crashes), then buy low when prices reach the approximate floor.

There's only a small problem: with market timing schemes, one needs to be correct twice.

There might be another small problem: your spouse might not take it lightly if you sell the family home... 🤦
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Re: Housing Bust 2017

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Interesting thought, when someone does well, society always seems to want to take it away from them. Yet, if the market corrects, it's their fault and they shouldn't be compensated for their losses...
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Re: Housing Bust 2017

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longinvest wrote: 26 Mar 2017 17:12 Seems like an awesome opportunity to sell high (if one is able to correctly time the approximate peak the market), rent while the market settles down (or crashes), then buy low when prices reach the approximate floor.

There's only a small problem: with market timing schemes, one needs to be correct twice.

There might be another small problem: your spouse might not take it lightly if you sell the family home... 🤦
Alternatively one could "rebalance". Sell the house, buy a smaller one or outside GTA and invest the (tax-free) gain. Saves the trouble of trying to time the market.
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Re: Housing Bust 2017

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The fairest way to deal with this mess would be by removing the capital gains exemption on primary residencies. There is no logical long-term reason why the government should be positively discriminating between different asset types and inducing people to borrow more and spend faster.
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Re: Housing Bust 2017

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Mordko wrote: 26 Mar 2017 23:08 The fairest way to deal with this mess would be by removing the capital gains exemption on primary residencies. There is no logical long-term reason why the government should be positively discriminating between different asset types and inducing people to borrow more and spend faster.
What politician would want to alienate up to 10 million voters?

Try increasing the tax on beer instead. It would likely have less of a backlash.

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Re: Housing Bust 2017

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Mordko wrote: 26 Mar 2017 23:02 Alternatively one could "rebalance". Sell the house, buy a smaller one or outside GTA and invest the (tax-free) gain. Saves the trouble of trying to time the market.
:thumbsup: I hope to follow in your footsteps sooner rather than later....
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Re: Housing Bust 2017

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ghariton wrote: 27 Mar 2017 02:27
Mordko wrote: 26 Mar 2017 23:08 The fairest way to deal with this mess would be by removing the capital gains exemption on primary residencies. There is no logical long-term reason why the government should be positively discriminating between different asset types and inducing people to borrow more and spend faster.
What politician would want to alienate up to 10 million voters?
George makes a good point. But Ghariton is on to something. Given the liberals are trying to appease the "middle class and those trying hard to join", perhaps only target the "rich"? For example capital gains only apply on homes values in excess of X, where X can be a number which only impacts the rich? Homes sold for more than, say $2 or $3 Million, wouldn't impact as many voters but would allow for some additional tax revenue
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Re: Housing Bust 2017

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Mordko wrote: 26 Mar 2017 23:08 The fairest way to deal with this mess would be by removing the capital gains exemption on primary residencies. There is no logical long-term reason why the government should be positively discriminating between different asset types and inducing people to borrow more and spend faster.
The chances of this happening are NIL.

A good half-way measure would be to target the capital gains taxes on non-principal residencies. CRA made a recent rule change requiring that every home sale be reported. It appears that CRA is getting more serious about combating tax evasion by serial builders, serial flippers, foreign owners who leave their properties vacant, etc. It remains to be seen how far CRA is willing to go to enforce compliance.
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Re: Housing Bust 2017

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fundamental wrote: 28 Mar 2017 08:15For example capital gains only apply on homes values in excess of X, where X can be a number which only impacts the rich? Homes sold for more than, say $2 or $3 Million, wouldn't impact as many voters but would allow for some additional tax revenue
The problem is that there may not be a lot of houses worth this much today, but there are lot of homeowners who expect their houses to be worth this much eventually. People know how much prices have gone up in the last 10 years and a lot of them expect this to continue.
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