The Canadian Housing Boom Fueled by China’s Billionaires
bloomberg.com
bloomberg.com
I believe that Vancouver has potential to be THE tech hub in Canada. Unfortunately, wages are very low compared to the cost of housing, and so the cost of living is super high. Combine that with extremely low vacancy rates, and it is very hard to attract talent from out of town. In fact, many young, smart and talented people just head south to Seattle or the valley because the wages are so much higher, and the economics of staying in Vancouver just don't make sense.
The other industries that could be thriving and building up a real economy in city are some of the biggest casualties in this whole mess. Unfortunately, all of the politicians from municipal to provincial are in bed with the real estate industry, so nothing truly effective and meaningful will be done.
Your claim is especially true if those people have families. 60% of Families said they planned on leaving the city in the next year due to the problems surrounding housing. Rental rates are also a problem with only a 0.6% vacancy rates and of those available only 16% are 2 bedroom and less than 1% are three bedroom.(1)
(1) http://www.theglobeandmail.com/news/british-columbia/familie...
That's hardly unique to Canada. It's the default human state to prioritise short-term gains. See e.g. the phenomenon of obesity.
I would also like to grab cash and vacation. What's so honourable about working?
FTFY
People would just hire someone or ask a relative to sign a lease and officially be "the resident" without actually having anyone live in the unit.
In BC, it's resources and literally nothing else. In Vancouver, since resources overall are declining, we run the economy via real estate investment. That's moronic.
As you say, we could become a tech hub easily if we leveraged our easy connection to Seattle and the gateway to Asia that we are. We could become a medical tech hub as well. We could be a centre for finance as well if we invested properly, particularly since oil is now on a downslide.
Our local governments simply have no vision. Our residents are too afraid of change to actually do, well anything really, and all our innovators simply move elsewhere.
I had the same problem in Lausanne, though French wasn't required for my job. I just couldn't completely devote myself to my research AND learn another language concurrently.
Is there a government that makes it mandatory? Because otherwise we're not talking about the same thing. I speak 4 languages and I learned each of them for different reasons... None of which was "because otherwise I would be breaking the law".
But then again, most of the law only applies once your business reach a certain number of employees(30 I think)
Anyone can send an anonymous message to this government agency and it will audit your business to make sure you are compliant. Have more than 50 employees? Make sure the copy button on your photocopier says "copiez" or you'll have to put stickers over it (true story, happened at my brother's pharma startup).
The sad thing is that most Montrealers have the attitude that "you're in Montreal, you should learn french." The problem is, this law goes far beyond that, and is a serious impediment for Montreal startups.
Anyways, I don't think it's asking much to have your website/blog/frontend in the language of the province where you operate, but the photocopier business, keyboards in french etc is ridiculous. Also it seems the language police always get more confident whenever a PQ government gets power.
Quebec is a joke, both economically and with respect to liberal democracy.
The company I work for had to put French stickers on every key of every keyboard. They had to put stickers on the microwave oven as well...
Now if you mean that you really hate the layout, it's really anti-programming, and sometimes I wonder why I stick to it. :) It's so easy to use a layout switching keyboard shortcut...
Despite being in Canada, I only buy laptops with US keyboards.
If you speak both languages (or have employees who do), how difficult is it anyway?
As you can imagine, hiring a full time french speaker just doesn't make sense. So, we have to "fire" our Quebec customers and block the province via IP. This is what dozens of startups (and big web companies) are doing now to circumvent the crazy laws.
> As you can imagine, hiring a full time french speaker just doesn't make sense.
So how are you based in Montreal, and why? Why not relocate to the US, or English-speaking Canada?
People speak in english. You can speak english all day if you want. My clients speak in english. We speak in english. We create websites that are 100% english for clients who are based in the USA.
What isn't allowed it having a workplace where the local (who can't speak english) have no chance of being hired because of the language. That is also why the employer must provide all workplace tools with french label. All else is lies, stereotypes and people not understanding the law.
Also, realistically if you hire many programmers who only speak English, it's simply not realistic to hire a programmer who speaks French exclusively because he can't communicate with the team. Putting "copiez" on your photocopier does not alleviate that.
These laws are discrimination, pure and simple, and have been found as such by the Canadian Supreme Court on many occasions. Most Quebecois just don't care about paltry things like individual rights, where their language is involved.
No. If that was true, Best Buy would have big billboards that say "Meilleur Achat". "Canadian Tire" would be "Pneus Canadiens". They don't. The law don't ask for it.
> Also, realistically if you hire many programmers who only speak English, it's simply not realistic to hire a programmer who speaks French exclusively because he can't communicate with the team.
That's the entire point of the law. It's the very reason it's there. To prevent business from hiring an all english staff which would prevent local people from working there.
Edit: Some of it may not make sense to you because we are working in the tech industry. The abuses those laws are there to protect against happen mostly to minimum wage workers in the industrial sector. Some people could get hurt if the machines are not labelled correctly. I admit that stickers on the photocopying machine is a joke but it could be life and death when we are talking about a big industrial machines filled with saws.
Even more so if you don't plan to use that language for anything else afterwards.
It isn't that hard but isn't that easy either.
There's a big difference between being really proficient and knowing enough to be productive. In any case, like other skills, everyone gets better by actually doing it, but they need to start first.
Especially amongst first generation immigrants like myself.
Any teacher will tell you that parenting is the biggest determining factor in academic achievement, and as a result French immersion is effectively the "academic stream" in the Canadian school system. It also receives additional federal funding which is not available to English programs.
They pretty much learn a second language for free. Why not?
And by extension, English schools that overlap with French immersion schools become biased towards kids with learning difficulties which makes them that much less attractive to high-achieving parents. The TDSB elementary system isn't supposed to be streamed but effectively it is.
(I had two kids in TBSB French immersion until grade 4 when we moved away)
The downstream effects of house prices has to hit entrepreneurship. Previously a bunch of people would be in a good place to take a couple years off to start a business mid-career. Now people have these huge mortgages where your ability to start a business is hampered by your ability to get a financial buffer to take this year or 2 off. And lets not forget most businesses are created form people mid-career, not the TV typical university dropout.
And small community business, how will they exist in the future. If someone wants to set up a local 'physical presence' vet/daycare type business that are typically mixed into residential areas the threshold is now too high to exist let-alone set up a new business. How can a daycare buy a million+ dollar house and expect to make money paying that back on having 30 local kids being looked after.
Also what is going to happen with social services like retirement and periods of higher unemployment. I suspect society will be less stable as either the government has to foot much higher rent costs (unlikely) or we will see increased population movements during retirement, and now the government has to look after older people that before a family who lived nearby could help out with. And during low employment cycles society can no-longer absorb this downturn if people have large income-to-debt loans. Historically people could 'tighten belts' for a year while things improve, harder when you're neck deep in debt. So we will again see more movement of people, debt default etc. It will serve to exacerbate recessions etc.
Also these higher prices skew the economy. When people are tied up in these ever increasing loan/income ratios there will be less spending on dining, holidays, hobbies etc. It will weaken the economy by concentrating the spend in limited areas.
From this I really believe we should be talking seriously about ensuring affordable housing for owner occupiers. Residential investment need to be discouraged (note I'm not saying stopped) as a speculative asset class. I've seen a few suggested methods to achieve this but I feel the simplest is to place a yearly 'asset tax' on non-owner occupied residential property (I would also include farms). Having a % tax would make it easy to adjust to find the right balance given economic cycles change. Also this would encourage property hoarders not in heavy debt to sell for lower taxed asset classes. This I feel is important as most solutions focus on controlling the investment lending side which is limiting in reach. And the 'add supply' will always be a limited case solution.
Good luck. It seems most western governments have stopped caring about looking past the most immediate budgets.
I forgot to mention in my post that not only is the government in bed with the real estate industry (new rumors that the biggest real estate marketer in the city was notified weeks in advance about the new foreign buyer tax), but that they also "unexpectedly" took in 50% more than forecast, to the toon of $500+ million, in extra property transfer tax last year. Good luck getting them to slow down that gravy train.
That said the 'loudest' voices will be the uber wealthy with large property holdings so again...good luck...
"Now people have these huge mortgages where your ability to start a business is hampered by your ability to get a financial buffer to take this year or 2 off."
How will they manage? By learning to adapt, which will be a critical ability in their careers as entrepreneurs. Say, they can start modest, with modest allocation of time instead of lavishing with both time and money to only hit the ground if they fail. Also, they may identify the opportunity of having around them this market of deep pocket potential clients! ...or may not, we'll see. The idea is, wealth is coming in, and people complain instead of finding ways to take advantage of it. I know that this isn't as easy to do in other domains as it is in real estate, but still.
"How can a daycare buy a million+ dollar house and expect to make money paying that back on having 30 local kids being looked after."
By raising the price of the provided services accordingly! The city is getting stuffed by each passing day with rich kids. What are you waiting for?
"When people are tied up in these ever increasing loan/income ratios there will be less spending on dining, holidays, hobbies etc."
I think those people can ask more for their services in order to get in an enjoyable zone or leave the city entirely if they can not. A life of struggle is not one worth living when you have a choice.
My impression is that many of those buyers don't even set foot in Vancouver. It's just an investment for them.
In the eye of a mainland Chinese, an US citizenship is worth significantly less than Canadian citizenship. Take it for what you will, the bottom line is, no one wants to be an US citizen.
The difference in application fee is dramatic, as a Canadian citizenship application fee (to the middleman) costs 3x more than the US counterpart (Green Card).
What this means is that foreigners are not leaving houses that they buy in Vancouver empty. They are being rented out. The rental cost in Vancouver are below Seattle's when you compare it to the median wage so then couver housing as far as rentals is actually more affordable than neighbouring Seattle.
If domestic buyers can't afford SFH's and shift their attention to condos, this increases demand for condos, thus raising the price. It is practically impossible for the two to be "totally uncoupled".
Condos are not supply-constrained. You can tear down like 6 detached houses and build 240 condos in that space.
In Toronto they're making over 100,000 new units a year: http://business.financialpost.com/personal-finance/mortgages...
http://vancouver.ca/news-calendar/city-releases-comprehensiv...
Which is below the average for other major cities.
They point out that non-occupancy in many other housing types is incredibly low (0% - 1%).
They then estimate condo non-occupancy as ~ 12.5% (I'd say that's a big deal, since most new housing stock is in condo form).
And finally point out that short-term-non-occupancy (aka. two months of the 4 they're counting) sits at ~ 10% across all housing types - without breaking out the numbers for condos alone, or clarifying whether this short-term-non-occupancy is on top of the non-occupancy numbers above.
Clarification welcome.
http://council.vancouver.ca/20160308/documents/rr1presentati...
Does not look easily gameable, and the authors don't strike me as being disingenuous.
http://www.theglobeandmail.com/real-estate/vancouver/poking-...
They define a home as "unoccupied for the year" if its electricity usage is low during the non-heating months - aka. summer. This strikes me as flawed: summer is when you're most likely to be in Vancouver!
The provincial government released a study on July 7th, stating that only 3% of real estate transactions across BC were from foreign buyers (2). Nobody believed this number, and plenty of people called foul (3). Every single person I talked to involved in the market laughed at those numbers (it is hard not to know someone involved in the market here). The government used these numbers as proof that foreign buyers were not an issue in BC.
Only 3 weeks later on July 26th, the exact same ministry in the government released new data that said that foreign buyers accounted for more than 10% of the value of real estate transactions in Metro Vancouver, which is by far the largest real estate market in BC (4). They used this as proof that foreign buyers were indeed a problem.
This is a prime example of the ridiculous politics that are at play here.
Also of note, if you look at (4), you will see that foreign buyers aren't just buying houses in the exclusive and expensive West Side Vancouver neighbourhoods. According to the data, Burnaby and Richmond, both had 18% foreign buyers.
(1) - http://www.cbc.ca/news/canada/british-columbia/campaign-dono...
(2) - http://www.theglobeandmail.com/news/bc-government-releases-p...
(3) - https://www.biv.com/article/2016/7/asian-real-estate-confere...
(4) - http://www.cbc.ca/news/canada/british-columbia/vancouver-rea...
*Edit - formatting
First of all, someone buys the below-average homes, right? So it's hardly "closed off" just because someone can't afford the mean (or median?) detached home value. What's the twentieth-percentile home value?
Second of all, what do detached home prices have to do with this? Live in a condo, like reasonable people do.
The minimum down payment for a 2 bedroom 2 bath condo in my East Van building would be around $40k.
The tech industry pays all the state's bills, mostly captured by tenured public sector workers, in true socialist fashion. If there's a tech crash, and a few years pass without IPOs, the state will collapse into bankruptcy, and the impoverished residents will start to eye that empty coastline as their most valuable asset. When the tree-hugging hippies die off, 350km of the world's most valuable real estate will come onto the market.
There's a reason that part of the state is sparsely developed. There's nothing but the mountains and the sea, and constant rockslides make building any transportation infrastructure hellishly expensive. Unlike Norway, there are no fjords to provide easy sea access, and there is no oil. It's a beautiful place to visit, but good luck building anything denser than small towns there.
There are very serious issues in Vancouver, and some suspect Canada is in for a ruder awakening than the US. http://www.vice.com/en_ca/read/meet-the-wall-street-short-se...
1) Canadian Real Estate is being used as a money laundering facility http://www.huffingtonpost.ca/ike-awgu/canadian-real-estate-f... .
2) Canada also has a healthy (well, actually unhealthy) sub-prime lending market http://www.huffingtonpost.ca/2016/05/18/subprime-lending-can...
3) Then there is the issue of occupancy. The reason the 15% tax was brought in is because money was coming in to purchase houses which then sat empty. Many have become derelict. When I lived in Vancouver, Yaletown was full of apartment towers, but where were all the people (I believe occupancy in that area has improved). http://www.theglobeandmail.com/real-estate/vancouver/poking-...
4) Lastly, the shadow flipping, again, mentioned in the article, but didn't get the attention it deserved http://bc.ctvnews.ca/house-flipping-concerns-as-368-vancouve...
Don't worry if you don't want to read the articles, it will be a movie in a few years along the lines of The Big Short.
The author really went out of the way to emphasize the wealth of the investors, describing the buyer wanting a nonexistent car. The only remotely fluffy portion was describing the ecosystem of luxury services associated with the lavish spending. I think the article did a good job of conveying the huge negative effect to the Vancouver economy and way of life.
Rising prices of properties is a real issue, but this particular couple is way above the standards I am used to.
What is the socially accepted minimal living standard for a couple with kids in the US / Canada?
A lot of this comes from the expectation of what you had growing up versus what is available in your current situation, and how much you actually want kids. Do you want to bring up kids from 0 to 18+ in that same 111 sq meter space? The answer can be no for a few people, and people aren't seeing that they can move to something bigger even if it becomes necessary.
It's also not a good idea to compare floor space 1:1 across regions, floor layouts and building structure can have big impacts. 40 sq m used well can have the same level of comfort as 111 sq m used poorly, but because of various property restrictions (since it's not detached) they might not be able to modify the 111 sq m space in a meaningful way.
The main thing here in this case is that the couple represented have the choice of whether or not to have kids and they see the environment as not good for it. This is the sort of thing that happens when educated people sit down and consider whether or not having kids is the right plan for the moment.
You really should include a link to this as well- Real Estate Board of Greater Vancouver MLS Home Price Index http://www.rebgv.org/home-price-index?region=all&type=all&da...
This shows the the price trend of Detached, Townhouse, and Apartment up to the last 11 years, broken by individual cities in Greater Vancouver.
But it is misleading. If you look at Metro Vancouver's trend, all 3 types of housing have gone up in prices. But if you look at the surrounding cities, only the Detached and Townhouse prices have gone up. Apartment pricing have remain relatively flat until 15 months ago. Since then Apartment price have gone up as well.
This is probably because 15 months ago, the Detached/Apartment pricing have increased to the point where buyers started to consider Apartment as a viable resident.
PS. If you look at the graph, you will notice that the prices have gone up so much it broke the graphing software.
Chinese money is land-banking in Vancouver, US north west, Australia, and Auckland in nz.
and countries don't dear stop it because it will tank the real-estate bubble too quickly (it'll go before the tech bubble anyway). But if it does it will actually be good for the economies because capital tied up in unused land is worthless to the economy.
http://www.acting-man.com/?p=46075
Canada and Australia have been hit hard by the commodity collapse, and their currencies have crashed, so their property has inflated in local nominal prices, as foreigners have bought anything with a roof (or even without). But their internal economies have not reacted to the loss of export business and imported inflation for consumer goods. They keep high-taxes and high-welfare socialist economies which are sleep-walking off a cliff - this will not end well.
NZ is in a slightly better position, because it produces more agricultural commodities than industrial minerals, and it restructured its taxes and regulations to become more friendly to businesses and individuals (no capital gains tax, no inheritance tax). But its real estate market is also in a crazy bubble, which will collapse if the foreign buyers disappear.
https://www.theguardian.com/society/2014/dec/26/londoners-mi...
http://www.straight.com/news/735161/revisiting-real-estate-r...
Study finds foreign buyers impact Vancouver real estate but likely can't account for sky-high prices:
http://www.straight.com/news/720471/study-finds-foreign-buye...
Scenario for you: international student completed UBC and started working full-time on local tech company. After struggle to save, put a deposit on a place after saving from working part-time during later years of degree and about to close deal in a couple weeks (when new place is ready). Now, BAM! Gotta have to pony up 15% on home price agreed upon nearly a year earlier. More than original deposit! Tell me how that encourages qualified tech workers to stick around...
They aimed at a particular kind of "foreign buyers" in a crowd, but used a shotgun...
Even if a crash does happen, the largest crashes to date have only been maybe 30% in '82 (prices recovered in 7 years) and 15% in '08 (prices recovered in 1 year).
What could change the course of the current deluge of chinese capital?
1 Canadian Regulatory change - the federal liberals and the provincial liberals have significant political contributions from real estate agents (look it up). They won't impl any meaningful changes. This new 15% tax will affect few and change little; it is just election season and our Premier, Christi has to look active. 2 Interest rates - The US basically sets our rates and the US is likely going to reduce the rates driving more capital to look for better returns. 3 Chinese cash - are you going to stop buying chinese shit? No, in fact most can only afford chinese made products these days. 4 Chinese Regulatory change - This could happen but most of the cash used to buy homes in BC is likely illegally moved out of china anyhow so...
TL;DR- In the 1-2 year timeframe tho, my advice - mortgage your house and buy as much BC real estate as you can afford. Good luck on finding 25%+ yoy low risk returns anywhere else.
Secondly Chinese cash coming to Vancouver is almost by definition illegal because of the $50k cash limit Chinese can take out of the country.
Of course not, but 5 year-fixed rate mortgages are set according to the bond market, not BoC overnight rates.
If interest rates set by the US Fed are high, then lenders are going to securitize Canadian mortgages with US bonds, due to the higher yields found there.
This is the effect when you have 2 economies that are so closely tied.
I agree most BC residents have dngerously high mortgage payment to income ratios. That's something that the gov should have stopped by slowing foreign ownership but they didn't and now can't.
Now that the gov can't change things for fear of triggering a huge crash, one is inevitable. So now we're in a situation where the bubble will get massive and then explode.
My point is, just try and enjoy it!
Re chinese cash: If I've learnt anything from the big banks or uber it's that if you do something illegal on large scale it's not illegal. ;>
Return is a function of risk. Doesn't a 25% yield imply far more risk than you are implying? Why is anyone selling right now if prices are going to skyrocket like that? What if China institutes tight capital controls? What if oil goes to $20 a barrel?
Oil price is an interesting point. Of course the question becomes what would the price of oil do to foreign investment? Not much i'd guess.
If oil goes down the CAD will become cheaper increasing investment. Up and investment may slow but, again, if you're a chinese millionaire looking to get your cash to a safe haven do you actually care how big the house is you are buying? You are just moving the say 2mil out of china. You just care that it keeps the original value.
Great for those who own real estate and sell it.
> Foreign investors will have to pay an additional 15 percent in property-transfer tax as of Aug. 2 and city of Vancouver was given the authority to impose a new tax on empty homes.
The additional tax on foreign investors is a good idea, but I wonder how it will be enforced, especially when ownership is often hidden behind trusts.
For example, it very narrowly targets foreign citizens who are not permanent residents or citizens of Canada, completely missing "investors" who have just bought Canadian permanent residence for cheap, do not earn income in Canada, and are now buying property in their safe haven. This scenario is unfortunately all too common.
About $100K in interest payments via Quebec's investor immigration program, no other requirements.
I wonder how they will actually enforce this. I mean, one can furnish a home, have utilities remain active and leave a few lights on and make it look like someone is actually living there. Add some random noise generation (pretty easy to set up with home automation or other, similar methods) and you can fool basically anyone who isn't actively watching your door 24/7.
How easy is it to fool a surveillance camera pointed at your door 24/7 with an automated system trained to detect human movement watching it?
The foreign investor tax is a low-effort attempt to skate through another election and maybe pick up a few bucks on the other side.
An actual solution to this problem will involve cooperation between the province and the feds at the very least to handle Canada's lax money laundering laws and the Quebec immigrant investor program, as other posters have said. And you are correct in that there have already been realtors caught and censured in BC for offering to help their clients sidestep this new tax using a white proxy buyer or a cut-out trust.
However, an actual solution is likely to also tank real estate values, which is reasonable when you think about how the average single detached home in Van is selling for a huge multiple of average wage.
Technically, it is a British Columbia provincial tax which applies only in the metro Vancouver area. I am curious to see what, if any, affect it has.
Take a look at the cities with populations below 100K. You will find lots of people who live great lives, despite not being rich. For those of us who grew up in these little island towns, living in a place like Vancouver is downright depressing, regardless of the price.
That's maybe the worst excuse I've ever heard.
At least it's the worst for the last... 3 years probably.
Why is it ok for this to not be the norm? Why do people just accept that their kids are growing up in a city where they can't be allowed to explore their environment?
The thread was filled with a ton of programmers that left Toronto / Canada to go to Silicon Valley because the wages are so much higher.
Yeah I'm going to make probably less than half of what someone in Silicon Valley can make but living in a medium sized Canadian city means my cost of living is obviously much lower.
But aside from that, small towns often have a more thorough mixing of zone types; you can often live within walking distance of work or school and a small grocery store.
> Canada
That's great, except for the 7 or so months out of the year when it's not.
If flukus prefers dense areas that's his deal... arguing about preferences is dumb.
Today that's probably still true but add the walkable core areas of a variety of other US mostly coastal cities. The Bay area is something of an exception but housing prices go down a lot as you get an hour away from most of those cities (which isn't exactly the middle of nowhere).
I'll get hammered for saying this, but I feel it's wrong on so many levels.
In fact I think these foreign investors are more being attracted by the already inflating prices than actually the culprit in the inflation.
That's what it looks like for me with the Australian housing market where the Chinese are being blamed for increasing prices. China is the biggest foreign investor in the Australian housing market followed by the US with $12 billion out of $34 billion foreign investment in 2013-14 [1], but it can't be the only explanation.
As a non-permanent resident you can only buy from the plan, no 'used' houses at all: 'If the FIRB feels that the residential real estate in question is only being purchased by a foreign citizen or company just for the purpose of renting it out, or because the purchaser wants to speculate on the property’s future value, permission to purchase will be refused.' [2]
The reasons for the extreme prices are more complex and subsequent Australian governments refuse to change this: banks have been giving out record-low mortgages leading to massive debt and rising houseprices [3], and there's negative gearing, which allows people to overinvest because they can claim later and causes people to hold onto their property, thereby inflating prices [4]. Changing this broken system is detrimental to the parties parties as it would directly cut into income for the rich and the old, and so many blue-collar jobs in Australia depend on building houses. It will only change after the whole bubble implodes.
[1] http://www.globalpropertyguide.com/Pacific/Australia/Price-H...
[2] http://www.australia-migration.com/page/Foreign_Investors_Bu...
[3] http://www.abc.net.au/news/2016-02-29/verrender-housing-bubb...
[4] https://en.wikipedia.org/wiki/Negative_gearing#Australia
All I could find is the 2014 report on the FIRB which said they would never initiate court proceedings; http://www.abc.net.au/news/2014-11-27/foreign-buyer-rule-enf...
I have no clue how much has changed there since then, and I don't assume anything will change. This still doesn't mean that any of my original points are wrong, the entire system is bad and IMHO Chinese foreign investment is just a scapegoat (if you look at the report, at that time Chinese investment was already the highest but back then very close ($5.9 billion) to US ($4.4 billion) and Canadian ($4.9 billion) investment: Why did no-one complain about either?)
The government held an inquiry into it, and this is the first key thing in the report:
"First, there is no accurate or timely data that tracks foreign investment in residential real estate. No-one really knows how much foreign investment there is in residential real estate, nor where that investment comes from."
See http://www.aph.gov.au/Parliamentary_Business/Committees/Hous... http://www.rba.gov.au/publications/submissions/housing-and-h... http://www.canberratimes.com.au/federal-politics/political-n... http://theconversation.com/little-hard-data-in-the-hard-area...
Secondly 4 Corners did an investigation into it http://www.abc.net.au/4corners/stories/2015/10/12/4327525.ht... and https://www.crikey.com.au/2015/10/14/why-are-chinese-buyers-...
What upsets me here more than anything else is that no one mentioned the CMHC. I suppose people would be more willing to believe that aliens are using mind control on people to drive a real estate frenzy rather than believe that there are institutions creating moral hazard within Canada.
They insure the banks against mortgage default. People pay a small premium on their monthly mortgage payments so that if they default, the bank is insured for the cash difference of the outstanding amount on the mortgage.
As a result, banks in Canada face no risks from mortgage default so there's no reason to deny a mortgage. Over 90% of mortgages made in the past decade are CMHC-insured.
By 2010 CMHC had an annual financial surplus of more than $2 billion.[6] CMHC is the largest Crown Corporation in terms of assets with some $26 billion in holdings as of 2008-2009.
If you think this insurance can cause Canadian banks to be more risky in their lending - I don't think that is currently the case.
You would prefer if there was not such an insurance system required for home owners putting less than 20% down?
I know I would. It would be like the 90's again where banks had to only loan out to people who they thought wouldn't default.
This is 100% exactly how the US crash happened through Fannie Mae and Freddie Mac.
I'm sure that a price increase in land results in a "rising tide" effect for all homes, but because someone is willing to spend 64M on a mansion, does it mean condo's should be worth more too?
The city is pretty, but there aren't exactly a massive pile of high paying jobs, nor do we have much of an economy beyond resource extraction, satellite offices, etc.
What gets under-reported is:
-the non-foreigner/non-Chinese/locals that are hanging on to 2-3 properties -the person who can now afford that $1 million condo because they just sold their smaller condo for $500,000 and netted $250,000. -the fact that interest rates are at the lowest ever and some years ago amortization periods were pushed up to 40 years and down payments of 0-5% were allowed.
But on the other hand, they give renters a good deal. Buying at a high price:rent ratio means a low cap rate, which makes for a bad investment. So the landlord is essentially giving ownership returns to the renter, while keeping price risk themselves.
To the extent that rents are also high, this shows that the problem is not, in fact, investors but instead a limited supply of housing.
It has a cascade effect - if a person who can afford a $2M house is forced into buying a smaller property because $2M doesn't go as far, that displaces the guy who could afford $1M, who displaces the guy who can afford $750K and so forth. Further down the line it hits people who can't afford to buy at all, people whose rent becomes unaffordable on their income, and so forth.
A useful overview map: http://40.media.tumblr.com/2410fe72393357ea0b00f50272065562/...
Also the idea that people in Yaletown/Gastown should go live in old factories and warehouses seems to have just fine.
But that's not how jokes work I guess!
And so FreedomToCreate's joke should still be about Vancouver, not BC.
The money spilling in from Asia has been going on for a long time. 16+ years.
I'm not trying to prove you wrong, I'm genuinely curious. My impression has been that inflation has been relatively low, with the exception of housing. Though housing has gone up much faster in large metros than the rest of the country
If the true rate of inflation were admitted, then cost of living increases for social security, etc. would be more expensive, right?
Care to explain?
They can't afford kids? I have lived in 83-square-meter apartment with my wife and two kids and a I had a friggin' separate home office room to work from home. It wasn't ideal (we have moved when the youngest turned 5, so we wanted to give them separate bedrooms), but it worked pretty well. Granted, it was in Norway, not US, but one can't help thinking that people just don't know how to use the space they have.
If you can't afford to live in a city because you're priced out, and you want a different lifestyle as well (signalled by the stated desire for children), why wouldn't you move?
On a broader scale, I don't understand why (other than politics and legal) this massive multi nationwide demand for housing hasn't created opportunities in the construction industry: building out with existing technologies as well as incentives to produce more efficient methods and tech. Whatever happened to big problems leading to big opportunities? I mean we're talking about a multi-trillion dollar industry begging to be disrupted. I can't name a single unicorn company that's involved in this right now.
Source: I was just reno-victed I had a front row seat. My new apartment had been available for 30 minutes when I put the deposit down. It was pure luck that I found somewhere to live . It's not sustainable.
(1) at least supports local economy while (2) supports limited number of middle men.
I'm not saying (2) is bad, but if it's only wealthy people spending their money only on imported goods then it is not good.
Nouveau: head to the nearest Louis Vuitton or Goyard boutique and choose the bag with the most logos.
Old money: handmade artisan bag with no labels.
There are new apartment buildings going up by Chinese property developers aimed squarely at the growing Chinese population.
As a matter of fact, construction management university students are told to study Chinese language and culture to help them get jobs after uni
Australia is nowhere near as bad as Canada. I'm amazed this article glanced over the issues Vancouver is really struggling with.
I believe the housing market in Sydney will come into trouble, but Canada is in for a very rude awakening.
I'll post another comment re:these serious issues canada faces.
The difference now is that this class of person is not just coming from the oil-baron gravy train and political kleptocracy. But is also coming from the booming business-class that is China
So many of those new rich who make it big certainly want their families and especially their children to the chance to live and be educated in a free and democratic society.
[1] https://www.bloomberg.com/news/articles/2016-07-26/end-of-an...
Or a city of 500,000. It is part of the GVRD.
So if most houses are a million you only need 4 years salary for the downpayment.
Ouch.
Not all people have the same mobility that you do. This is a situation that many people need to stand and address, not vote with their feet.
Your family loves you and based on that I can securely tell you that if you have to leave they will continue to love you. And if they truly are dependent on your support, they will follow.
Assuming you're not literally 100% broke (like $0 in the bank, $0 credit) you have the ability to travel somewhere close to make a less expensive life. Maybe Kamloops or more central like prince George?
Some make a fortune during the turbulence, others suffer poverty or virtual slavery. The peaks become higher and the troughs lower.
I have trouble believing that this is the world foreseen by the original proponents of neoliberalism. Freedom is a wonderful thing, but not when it facilitates and entrenches unfairness.
My grandfather, who lived through a similar period of financial disparity in the 1930s refers to it as "wild capitalism". No need for a crystal ball to predict what may happen next.