16 new housing measures. [Ontario]

Leveraging, renting vs owning, making an investment or buying a home?
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milo
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16 new housing measures. [Ontario]

Post by milo » 20 Apr 2017 13:09

How would these new measures affect the sizzling GTA market?

http://www.bnn.ca/ontario-s-16-new-hous ... s-1.729339

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Re: 16 new housing measures.

Post by AltaRed » 20 Apr 2017 13:49

A lot of it looks like glossy 'study work' that will incur yet more bureaucracy, resources and time with little effect this year or next. IMO, the single most thing missing is a speculator's flipping tax that would perhaps re-classify cap gains to Other Income for rapid turnovers, e.g. business income not unlike capital market traders. There has to be a formula that can combine ownership duration and vacancy into a punitive tax.

The point on Canadian corporations seems to be a hole so wide that one cannot see the edges. Virtually anyone can set up a shell Cdn corp.
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milo
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Re: 16 new housing measures.

Post by milo » 20 Apr 2017 14:19

Set timelines for elevator repairs to be established in consultation with the sector and the Technical Standards & Safety Authority.

Education for consumers on their rights, particularly on the issue of one real estate professional representing more than one party in a real estate transaction.
Does this help Cool down the sizzling RE market?
Or thats not the goal of the housing measures.

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Re: 16 new housing measures.

Post by Flaccidsteele » 20 Apr 2017 14:36

The government is just pretending to do something by doing things that will have no impact on Toronto housing prices. My friends who are flipping homes aren't concerned.

This is more interesting:
https://www.bloomberg.com/news/articles ... =flipboard
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Re: 16 new housing measures.

Post by ig17 » 20 Apr 2017 14:58

Flaccidsteele wrote:
20 Apr 2017 14:36
The government is just pretending to do something by doing things that will have no impact on Toronto housing prices.
I agree. The foreign buyer's tax is full of loopholes. Why did they find it necessary to exempt international students? What is the social goal here? Seems like an intentional loophole to make sure that wealthy foreigners can continue to buy untaxed via kids studying here.

Ditto the exemption for foreign citizens who work in Ontario. Register a shell Ontario corporation. Hire yourself or a spouse. Ta-da, you are exempt.

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Re: 16 new housing measures.

Post by Koogie » 20 Apr 2017 17:51

Pure policy theatre.

Of course the real source of the majority of the problem, low interest rates, is beyond her control anyway.
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Re: 16 new housing measures.

Post by max88 » 20 Apr 2017 18:31

I'd rather they do nothing, than these funny things that costs time and money of constituents and politicians.
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Re: 16 new housing measures. [Ontario]

Post by Mordko » 20 Apr 2017 20:39

1. Rent control will dramatically cut the investment in construction of condos and other rental units. We know this for a fact because the removal of rent controls resulted in a surge of construction. Right now rents in GTA are effectively subsidized by landlords which is the result of rent controls removal in the 90s.

2. Banning "paper flipping" is possibly even worse. Yes, these people are "speculators". They do what speculators do - provide liquidity to the market. Builders won't start construction until a certain number of units is pre-sold. That's were people who take the risk and provide the funds come in.

3. Tax on foreigners seems rather pointless, particularly so that it excludes "students" and other "residents". If the concern is hot money, all our Chinese nouveau riche has to do is send a child to Canada. Or a wife. Hey, that's exactly what they are doing now anyway. The money comes from the exact same source; certainly not from the student.

The net outcome of these populist measures will be negative but the effects won't be felt until after the election so all is good.

Oh, and by the way... The GTA market is already slowing a little - according to realtors. Have they deliberately timed the "action" to the effect that preceded all this activity?

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Re: 16 new housing measures.

Post by patriot1 » 21 Apr 2017 08:49

AltaRed wrote:
20 Apr 2017 13:49
IMO, the single most thing missing is a speculator's flipping tax that would perhaps re-classify cap gains to Other Income for rapid turnovers, e.g. business income not unlike capital market traders.
CRA considers this business income now.
CRA wrote: The profits from flipping real estate are generally considered to be fully taxable as business income.
http://www.cra-arc.gc.ca/gncy/cmplnc/rl ... u-eng.html

Certainly enforcement is an issue and there's cause for provincial governments and CRA to work more closely. Ontario has in the past imposed its own speculation tax in addition to the usual income tax. Of course we wouldn't want the same outcome today, would we? :wink:

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Re: 16 new housing measures. [Ontario]

Post by patriot1 » 21 Apr 2017 09:21

Mordko wrote:
20 Apr 2017 20:39
1. Rent control will dramatically cut the investment in construction of condos and other rental units. We know this for a fact because the removal of rent controls resulted in a surge of construction.
It resulted in a surge in construction of purpose built rentals at the time - 25 years ago. But in fact few purpose built rentals have been built in Toronto in the last decade. Reason - the sale price of condos is greatly above their rental value, i.e. there's a bubble, so it's more profitable for developers to build condos. Would the imposition of rent controls reduce demand from condo buyers, when they can't recover their costs from market rent anyway? The example of BC, which does not exempt new properties from rent controls, suggests the answer is no.

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Re: 16 new housing measures.

Post by AltaRed » 21 Apr 2017 11:05

patriot1 wrote:
21 Apr 2017 08:49
AltaRed wrote:
20 Apr 2017 13:49
IMO, the single most thing missing is a speculator's flipping tax that would perhaps re-classify cap gains to Other Income for rapid turnovers, e.g. business income not unlike capital market traders.
CRA considers this business income now.
CRA wrote: The profits from flipping real estate are generally considered to be fully taxable as business income.
http://www.cra-arc.gc.ca/gncy/cmplnc/rl ... u-eng.html
First time I've heard of individuals flipping houses declaring the gains as fully taxable business income. It's not what I've picked up in the media, but I may be mistaken.
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Re: 16 new housing measures. [Ontario]

Post by SQRT » 21 Apr 2017 11:42

Will be interesting to see how this effects the market. In my opinion it won't take much to cause it to turn, but I've been thinking this way for years. Agree it's really about interest rates in the long term. Hope whatever happens is orderly.

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Re: 16 new housing measures. [Ontario]

Post by Mordko » 21 Apr 2017 21:17

patriot1 wrote:
21 Apr 2017 09:21
Mordko wrote:
20 Apr 2017 20:39
1. Rent control will dramatically cut the investment in construction of condos and other rental units. We know this for a fact because the removal of rent controls resulted in a surge of construction.
It resulted in a surge in construction of purpose built rentals at the time - 25 years ago. But in fact few purpose built rentals have been built in Toronto in the last decade. Reason - the sale price of condos is greatly above their rental value, i.e. there's a bubble, so it's more profitable for developers to build condos. Would the imposition of rent controls reduce demand from condo buyers, when they can't recover their costs from market rent anyway? The example of BC, which does not exempt new properties from rent controls, suggests the answer is no.
I have no idea about BC but I do know about Toronto. The boom in construction of purpose-built rentals started after cancellation of rent controls and never stopped until recently. Construction of rental units has been held up only by the government bureaucracy but more recently builders stepped back in anticipation of rent controls. Implementation of rent controls will kill construction. Money will go somewhere else with a little less interference. And those who rent will lose out as well as those who let.

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Re: 16 new housing measures. [Ontario]

Post by Mordko » 21 Apr 2017 21:30

It's actually worse than just killing the construction of rental units. The existing landlords will sell up. The new rules are screwing them big time. Not only are they going to introduce rent controls but also the non-occupancy tax and prohibitions on moving in. Meanwhile the housing market is strong. What do they think the landlords are going to do? Bend over or sell up right away and deplete the inventory?

The stunning thing here is that there was no pricing problem to fix in the rental market, except for a few sensational articles. The vast majority of landlords are effectively subsidizing their rentals. The problem isn't with the pricing but with the low rental inventory which is 100% the governments fault to begin with.

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Re: 16 new housing measures.

Post by augustabound » 22 Apr 2017 06:35

max88 wrote:
20 Apr 2017 18:31
I'd rather they do nothing, than these funny things that costs time and money of constituents and politicians.
AM 640 ran a clip after the meeting of John Tory and the two levels of finance ministers that happened the day before this. Essentially the clip they ran was our Ontario finance minister saying what a great meeting this was and they've planned more meetings in the future.

Right, so lets fly in the federal minister every couple of months to meet for a photo op in Forest Hill.

I don't understand why they can't just use a phone or Skype?
............right, you can't get a photo op over the phone. Cheesy, fake smile and handshakes all around for the 3 amigos.
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Re: 16 new housing measures. [Ontario]

Post by patriot1 » 22 Apr 2017 08:13

Mordko wrote:
21 Apr 2017 21:17
Construction of rental units has been held up only by the government bureaucracy but more recently builders stepped back in anticipation of rent controls.
Anyone with functioning eyes can see there's been an explosion of condo construction in Toronto in the last decade. Is condo construction subject to less bureaucracy than purpose built rental construction? Condos are overpriced relative to rental value which is why developers build condos and let amateur landlords supply the rental market.

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Re: 16 new housing measures. [Ontario]

Post by gobsmack » 22 Apr 2017 10:38

SQRT wrote:
21 Apr 2017 11:42
Agree it's really about interest rates in the long term. Hope whatever happens is orderly.
I was somewhat surprised to read this: RBC Seeks to Join Canada Mortgage-Bond Fray on Nonprime Deal. I always assumed the big banks were already doing this in order to mitigate the risk on these mortgages.

I would like to see the government getting out of the business of insuring mortgages, which would result in higher rates. We may also need additional regulation in order to avoid too-big-to-fail scenarios. Weren't these the lessons of 08/09? I would feel much saferbetter if the taxpayer were not on the hook if/when this thing blows up.

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Re: 16 new housing measures. [Ontario]

Post by SQRT » 22 Apr 2017 11:13

gobsmack wrote:
22 Apr 2017 10:38
SQRT wrote:
21 Apr 2017 11:42
Agree it's really about interest rates in the long term. Hope whatever happens is orderly.
I was somewhat surprised to read this: RBC Seeks to Join Canada Mortgage-Bond Fray on Nonprime Deal. I always assumed the big banks were already doing this in order to mitigate the risk on these mortgages.

I would like to see the government getting out of the business of insuring mortgages, which would result in higher rates. We may also need additional regulation in order to avoid too-big-to-fail scenarios. Weren't these the lessons of 08/09? I would feel much saferbetter if the taxpayer were not on the hook if/when this thing blows up.
Agree with your sentiment. However, there has been a fairly substantive move re "too big to fail" with the contingent pref share requirement. If you wanted a very sharp, perhaps destructive real estate correction, CMHC getting out of the mortgage insurance business might cause it. I think, the co-insurance proposals make more sense and would be more gradual. Canadian banks have securitized insured mortgages for years. These new securitizations are for uninsured mortgages. Hasn't been too much demand for these until recently, apparently.

Finally, don't forget that the Canadian Banks did not require a bailout in 2008/2009 like American banks. So our system worked pretty well.

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Re: 16 new housing measures. [Ontario]

Post by nisser » 22 Apr 2017 12:19

"A 15-per-cent non-resident speculation tax to be imposed on buyers in the Greater Golden Horseshoe area who are not citizens, permanent residents or Canadian corporations"

What I don't understand is why is this ONLY 15% and why does it even exempt corporations given how easy it is for any Asian student to bypass this with daddy's mainland money? What a joke.

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Re: 16 new housing measures. [Ontario]

Post by kcowan » 22 Apr 2017 16:39

SQRT wrote:
22 Apr 2017 11:13
Finally, don't forget that the Canadian Banks did not require a bailout in 2008/2009 like American banks. So our system worked pretty well.
Yes it seems they wanted it called a liquidity injection:
$75 Billion injection between "friends" who claimed they did not need it!
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Re: 16 new housing measures. [Ontario]

Post by SQRT » 22 Apr 2017 20:31

kcowan wrote:
22 Apr 2017 16:39
SQRT wrote:
22 Apr 2017 11:13
Finally, don't forget that the Canadian Banks did not require a bailout in 2008/2009 like American banks. So our system worked pretty well.
Yes it seems they wanted it called a liquidity injection:
$75 Billion injection between "friends" who claimed they did not need it!
It was done to provide liquidity to a market. The assets pledged were already guaranteed by CMHC. It was not a bailout in the normal sense. We have had this debate here before and I believe the "No bailout" side won.

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Re: 16 new housing measures. [Ontario]

Post by patriot1 » 23 Apr 2017 08:31

The comparison is bogus to start with, since Canada circa 2005 did not have a nationwide housing bubble on the scale of the US which could collapse over next few years.

One could say that Canada is in the same position today as the US in 2005, but likely things are even worse.

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Re: 16 new housing measures. [Ontario]

Post by SQRT » 23 Apr 2017 10:07

patriot1 wrote:
23 Apr 2017 08:31
The comparison is bogus to start with, since Canada circa 2005 did not have a nationwide housing bubble on the scale of the US which could collapse over next few years.

One could say that Canada is in the same position today as the US in 2005, but likely things are even worse.
Perhaps, but many banks in many jurisdictions around the world needed "bailouts". For whatever reasons Canada's Banks ended up being the strongest in the world. If you really believe we are at the edge of disaster, I presume you have taken a defensive, all cash/gold? investment stance?

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Re: 16 new housing measures. [Ontario]

Post by AltaRed » 23 Apr 2017 10:18

I don't think it would be a major crisis for the major banks (especially since they've had to shore up their Tier 1 capital and go to NVCC compliant debt) but it would be a major crisis for GDP since so much of our GDP is tied up in the housing sector. Provincial coffers would go deep in the red with a major downturn in land transfer taxes, etc. It would have ramifcations all the way down the line into consumer spending activity when home owners are having to pay mortgage payments on underwater mortgages, etc. The multiplier effect would definitely cause a recession.
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Re: 16 new housing measures. [Ontario]

Post by patriot1 » 23 Apr 2017 10:32

SQRT wrote:
23 Apr 2017 10:07
If you really believe we are at the edge of disaster, I presume you have taken a defensive, all cash/gold?
First I don't think the Canadian financial sector, with a few obvious exceptions like HCG, is highly exposed to a housing downturn in the way that US financials were. As posters have already noted their high ratio lending is insured by the taxpayer and other Canadian consumer lending is not a big part of their balance sheet. The rest of the TSX is mostly resources which have no exposure. As for stock markets outside Canada, no exposure. So I don't think there's much to defend against as far as the stock market is concerned.

Just read AltaRed's post previous and I agree. Note in particular the province of BC is exposed to deferred property taxes and the recently introduced interest-free second mortgages.

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