Housing Bust 2017

Leveraging, renting vs owning, making an investment or buying a home?
ig17
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Re: Housing Bust 2017

Post by ig17 »

JAG, you are just ranting for the sake of ranting. No one suggested that elderly Canadians should be subject to the property surtax. The tax is aimed at foreign investors or/and parachute families who don't pay Canadian income taxes.
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Re: Housing Bust 2017

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JAG, I was never given anything either. Two mortgages and a private loan to get me into my first house. But it was not a 10 fold multiple of my annual salary like it is currently in GTA or GVA. It was more like 4 fold.

As I've said twice already, housing should be for shelter, not taken out of reach by greedy speculation. It is a question of what combination of 'fixes' are necessary to help make that happen. If property surtax is one of those levers, so be it. I will stop my rant now too.... :P
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adrian2
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Re: Housing Bust 2017

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ig17 wrote: 22 Mar 2017 14:25 No one suggested that elderly Canadians should be subject to the property surtax.
AltaRed did just that here.
The tax is aimed at foreign investors or/and parachute families who don't pay Canadian income taxes.
Then why tax early retirees?
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Re: Housing Bust 2017

Post by Peculiar_Investor »

ig17 wrote: 22 Mar 2017 14:25 JAG, you are just ranting for the sake of ranting. No one suggested that elderly Canadians should be subject to the property surtax. The tax is aimed at foreign investors or/and parachute families who don't pay Canadian income taxes.
Many, including myself, are picking up on the wording in the Ryerson CBI Policy Paper that states
Josh Gordon wrote:Progressive property surtax

The rationale for the following proposal is spelled out in greater detail elsewhere, but it can be sketched briefly here. The policy idea was initially developed by Rhys Kesselman, a professor at the School of Public Policy at Simon Fraser University.

The basic idea is to have a progressive property surtax that can be offset by income taxes paid. It would be levied annually on properties above a certain threshold in value (say $800,000), and only apply to the value of the property above that threshold. Seniors who had paid into the Canada Pension Plan at a high rate for 5-10 years would be exempt from the tax.
The last sentence that I've quoted says there is a specific exemption for seniors. Why not just exempt anyone who had paid into the Canada Pension Plan at a high rate for 5-10 years?
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AltaRed
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Re: Housing Bust 2017

Post by AltaRed »

Because there will be those, as already mentioned, e.g. a surviving spouse with no CPP contributions, that wouldn't be covered.

The problem is there is no reasonably simple process to catch/protect all slices of the pie. All programs/taxes have an unfair component to them for certain slices of society.
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Re: Housing Bust 2017

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"The road to hell is paved with good intentions"
AltaRed wrote: 22 Mar 2017 14:38 As I've said twice already, housing should be for shelter, not taken out of reach by greedy speculation. It is a question of what combination of 'fixes' are necessary to help make that happen. If property surtax is one of those levers, so be it. I will stop my rant now too.... :P
I understand you wish to bring house prices down. With no mortgage, it won't have too much of an effect to me. But stop for a moment and think of all recent buyers, who may find themselves underwater at mortgage renewal time. You may say it's their fault they've overextended themselves, and I'll agree up to a certain point, but do we want to use a sledgehammer and force many of them into bankruptcy so others can buy what they dream of?

"The road to hell is paved with good intentions"
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Re: Housing Bust 2017

Post by Just a Guy »

Also, the rental market is not tied to the buying market. There are plenty of places to rent at reasonable (maybe a touch high, but nothing compared to buying) prices. If they want shelter, it's there for them...maybe not with the ocean view that they expect.

Also, there is plenty of more affordable "shelter" across this country, I know since I buy and provide it to others.

I think you're confusing "wants" and "needs" in this arguement...maybe "expectations" and "reality"?
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Re: Housing Bust 2017

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adrian2 wrote: 22 Mar 2017 15:13 You may say it's their fault they've overextended themselves, and I'll agree up to a certain point, but do we want to use a sledgehammer and force many of them into bankruptcy
First of all nobody who can afford the original purchase price will be "forced into bankruptcy" if prices fall. Yes they will lose net worth, but anyone who takes on a leveraged investment without considering the possibility that prices might go down is a fool.

Second is if we don't use available tools (sledgehammers if you will) to at least slow down this madness forces beyond our control will eventually come down a lot harder than any tool we can wield. Toronto has seen this much more recently than a Stanley Cup victory.
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Re: Housing Bust 2017

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patriot1 wrote: 22 Mar 2017 17:12
adrian2 wrote: 22 Mar 2017 15:13 You may say it's their fault they've overextended themselves, and I'll agree up to a certain point, but do we want to use a sledgehammer and force many of them into bankruptcy
First of all nobody who can afford the original purchase price will be "forced into bankruptcy" if prices fall.
Bankruptcy is a distinct possibility if the banks would not renew the mortgage after a significant fall in prices.
Even if they get an offer to renew, there will be a very bitter pill to continue payments on a million dollar mortgage outstanding on a house worth, say, $600k.
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Re: Housing Bust 2017

Post by Mordko »

AltaRed wrote: 21 Mar 2017 20:48
If one is truly a believer in housing being for shelter, and thus affordability, then whatever it takes (in my mind) to make that happen. Take the incentive/ability for greed out of the equation.
Easy peasy. Bio-engineer a new species of humanoids who do not suffer from greed. Something tells me their shelter will start resembling caves in no time at all.
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Re: Housing Bust 2017

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patriot1 wrote: 22 Mar 2017 17:12 First of all nobody who can afford the original purchase price will be "forced into bankruptcy" if prices fall. Yes they will lose net worth, but anyone who takes on a leveraged investment without considering the possibility that prices might go down is a fool.
Seems like a silly assumption. Many people buy "affordable payments" not purchase prices these days.

What is affordable at less than 3% may not be affordable when interest rates rise. For example, for each 1% interest rate increase, it costs an extra $50/month for each $100k you borrowed. Most Canadians have locked in 5 year mortgages. If interest rates rise, many people are in for an unexpected shock at renewal time when they get their renewals.

Interest rates used to fluctuate .25% per quarter. Even a half point a year can be devastating to the affordability of mortgages.
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Re: Housing Bust 2017

Post by newin96 »

Cut & paste (from mobile)...
"Two mortgages and a private loan to get me into my first house. But it was not a 10 fold multiple of my annual salary like it is currently in GTA or GVA. It was more like 4 fold."

Hopefully this doesn't sound too controversial...
In 1991 when we purchased our Toronto home, it was a 10 fold multiple of my annual salary AND interest rates were much higher than current rates.
Initially, we were looking outside of the GTA because the GTA was too expensive prior to the 90/91 market adjustment.
We still could only manage a 1 1/2 story "fixer-upper" which took us 18 months to renovate (we did all the work ourselves at night and on the weekend in order to make the finances work). We lived on plywood floors for several years (paying down debt) before we could manage carpeting. It was a different time - but those were our expectations. It was hard, but we still have great memories about the journey.
As current pricing is ~15x their salary, my recommendation for my kids is to keep renting until there is an opportunity to buy what you need (and yes it isn't easy for them to save, but when rates change hopefully they will have an opportunity).
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Re: Housing Bust 2017

Post by doom_diver »

Better idea than we should uproot seniors and sell their houses at a discount because the young want to live in Vancouver...the young have their whole lives ahead of them to earn something better if they want.
Yeah but I do not think you are realizing the cascade effect. As a young twenty two year old Vancouver kid who was born and raised here. Ninety percent of my friends have moved out of Vancouver. That is exactly what has happened. It is very rare for me to see somebody my age around the city.
It is a question of what combination of 'fixes' are necessary to help make that happen.
I was reading a book the other day, *(Similar style to Black Swan by Taleb just a better book) I am pretty sure with the advances in automotives and the potential of self driving cars that I could see a day within my lifetime where roads in cities are reclaimed for buildings. If that were to occur the price of housing would drop.
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Re: Housing Bust 2017

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So it's come to this. God help us.
A couple hundred people came, mostly looking to buy with friends or family. However, Gaynor imagines herself as a housing matchmaker of sorts, who will eventually help bring together complete strangers.

"People go on the dating websites and you meet with a total stranger and supposedly those are very successful and people do end up marrying or being partnered with them. So could we do that with housing?" Gaynor wondered.
Can't afford a home? Buy with a friend, or maybe even a stranger
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Re: Housing Bust 2017

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Just a Guy wrote: 22 Mar 2017 14:10Why do young people deserve anything? At least the seniors worked for what they have but, because they had success, you now want to take it from them and give it to the young?
OK then I would guess that a reverse mortgage would suit them just fine?
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Re: Housing Bust 2017

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newin96 wrote: 23 Mar 2017 08:41We lived on plywood floors for several years (paying down debt) before we could manage carpeting. It was a different time - but those were our expectations. It was hard, but we still have great memories about the journey.
We had cardboard boxes for tables and a used kitchen suite that we picked up for $60 with 6 chairs. Empty dining room because there was no need with small children. We entertained in the kitchen and the backyard. We had a set of TV trays too.
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Re: Housing Bust 2017

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kcowan wrote: 23 Mar 2017 15:47 OK then I would guess that a reverse mortgage would suit them just fine?
So, sell it back to the bank for 40% of its value? Did you really just seriously suggest that?
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Re: Housing Bust 2017

Post by ig17 »

kcowan wrote: 23 Mar 2017 15:56
newin96 wrote: 23 Mar 2017 08:41We lived on plywood floors for several years (paying down debt) before we could manage carpeting. It was a different time - but those were our expectations. It was hard, but we still have great memories about the journey.
We had cardboard boxes for tables and a used kitchen suite that we picked up for $60 with 6 chairs. Empty dining room because there was no need with small children. We entertained in the kitchen and the backyard. We had a set of TV trays too.
Great stories, guys. Plywood floors, no carpeting, cardboard boxes, empty dining room. What a tough generation.

Young people today are spoiled snowflakes. Want a place of your own? Buy a semi like the one below. Put some elbow grease into it! Get off your damn iPhones.

Sold for? Pfffttt... a mere $1.06M. With interest rates this low, they can't afford not to buy.

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Re: Housing Bust 2017

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ig17 wrote: 24 Mar 2017 07:52 Sold for? Pfffttt... a mere $1.06M. With interest rates this low, they can't afford not to buy.
What's the problem with not buying something when the price is too high?
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Re: Housing Bust 2017

Post by ig17 »

longinvest wrote: 24 Mar 2017 08:22
ig17 wrote: 24 Mar 2017 07:52 Sold for? Pfffttt... a mere $1.06M. With interest rates this low, they can't afford not to buy.
What's the problem with not buying something when the price is too high?
There is no problem with not buying. There is a huge problem with our governments not doing anything to cool down the insanity.

BTW, Toronto average one-bedroom rent was $1778 in Q4 2016, up 7.4% from a year ago (TREB stats). Vacancy rate was less than 1%.
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Re: Housing Bust 2017

Post by gobsmack »

longinvest wrote: 24 Mar 2017 08:22
ig17 wrote: 24 Mar 2017 07:52 Sold for? Pfffttt... a mere $1.06M. With interest rates this low, they can't afford not to buy.
What's the problem with not buying something when the price is too high?
I think young families start to feel squeezed because they are forced to rent bigger spaces (i.e., pay more in rent).

My suggestion would be to move away from the GTA/GVA though. I have refused job offers in Vancouver because of real estate prices. Canada is a big country and, for most people, there will be employment opportunities elsewhere.
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Re: Housing Bust 2017

Post by patriot1 »

Just a Guy wrote: 24 Mar 2017 02:16
kcowan wrote: 23 Mar 2017 15:47 OK then I would guess that a reverse mortgage would suit them just fine?
So, sell it back to the bank for 40% of its value? Did you really just seriously suggest that?
That's not the way reverse mortgages work. The bank does not take an ownership position in the house, but a debt position like any other mortgage. It just gets bigger rather than smaller. Upon sale the owner gets the proceeds minus the debt as usual.

That said I think most people getting them would be better off selling or downsizing and putting the proceeds in safe dividend payers, rather than taking on compounding non-deductible interest.
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Re: Housing Bust 2017

Post by longinvest »

ig17 wrote: 24 Mar 2017 08:34 There is a huge problem with our governments not doing anything to cool down the insanity.
I think that the government of Ontario and the local Toronto authorities are responsible to deal with their local problem. I see no reason to punish home owners and buyers in other regions across Canada.

On the political level, one could question whether it is right for the federal and provincial governments to put so many incentives in place to promote home ownership: no capital gain tax on principal residence, eliminating risk for banks through CHMC insurance, home buyer plan, etc. But, this is a political topic best left for the water cooler.

I think that before putting punitive measures in place, governments should eliminate the incentives which might have contributed to creating the problem in the first place.
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Re: Housing Bust 2017

Post by Just a Guy »

patriot1 wrote: 24 Mar 2017 09:08 That's not the way reverse mortgages work. The bank does not take an ownership position in the house, but a debt position like any other mortgage. It just gets bigger rather than smaller. Upon sale the owner gets the proceeds minus the debt as usual.
Umm patriot1, you do understand math and compound interest right? Yes, the bank only "lends" you 40%, but compound interest lets them quickly gain the remaining equity. (Reference the rule of 72 to find out how quick). True, you don't technically give up ownership, just most of your equity if you live for a couple of years.
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Re: Housing Bust 2017

Post by Just a Guy »

Ig17,

Yeah, times are tough all over...

http://www.huffingtonpost.ca/2016/03/25 ... 89000.html
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