Billions in 'unknown' funds flowing into Canada's housing market [video] | Hacker News Reader

Billions in 'unknown' funds flowing into Canada's housing market [video]

bnnbloomberg.ca

185 pointsmastersip375 comments

New Zealand has a similar housing problem. House prices are skyrocketing and pricing out young people. A 25-30% rise in the past year has meant few people are saving fast enough to get a deposit.

But two or three years ago the govt. banned overseas buyers. There is no reason to suggest the ban is not effective. It even bans non-permanent residents, so plenty of legitimate residents (work visas) can't purchase property.

We also have strong money laundering laws, to the point of making tech innovation difficult (our prediction market run by a university had to move to the USA).

Yet it didn't stop or even dent runaway house prices.

Turns out the overseas investors (and immigrants) were just a good scape goats for lots of other problems.

Edit: People overseas I have mentioned this struggle to belive it and suggest the ban must not be working. Yet nobody here suggests it is not. We have supply issues, transport issues, ridiculous construction and material costs and lots of regulations. Old houses are sold at prices relative to new houses. If new houses cost more and more, old houses also increase in value, especially since they are on the best land (not in new far away outer suburbs).

I don't know anything about the situation over there but did they really ban it? For example this bloomberg report talks about foreign ownership via holding companies. So are foreigners not able to hold stakes in NZ companies or are NZ companies not able to hold realestate (doubtful?).

Yeah all you need now is an IRD number, a NZ bank account or a corporation. All 3 you can setup without setting foot in the country. To those that say that's not possible, it very much is. There's little checks and balances, and COVID's made it even easier.

It's lip service and the government does nothing to help track it. The most investigative journalism that's gone into it was a few years where people tried to look up owners of holding companies and based the research on people's last names. You can imagine how well that last bit went down in the media.

Well, our trust privacy laws are very strict - so it's near impossible to tell who actually owns the companies if it's director is fronted by a corporate holding firm. These are used to protect property in the event of bankruptcies and debts, but can also be used to hide your residency.

Not only that but it is easy to have people who front the purchases on behalf of foreigners. Only have to look at some of the recent OIO cases and news to see that this is exactly what is happening. Govt is a decade behind the ball and not sure they'll ever want to fix it (no matter who you vote for).

There are several factors driving housing prices, it doesn't mean that one vector shouldn't be regulated.

Also, it may be possible for people to side-step regulations as often the reality on the ground tells a different story.

Overseas buyers just get permanent residency and citizenship and buy houses. A few years ago you just needed ~$NZ5m invested in the country and you get permanent residency. There is no way the prices are driven by domestic money.

My factory supervisor brother has a house in Mangere Bridge, a blue-collar suburb, built for ~$100k 20 years ago is now well over $1m. It is batshit crazy. I hear of eye-watering prices in Manurewa, Otahuhu, Papakura.

Edit: https://www.stuff.co.nz/life-style/homed/real-estate/1254756.... Jesus the median is now $1.14m.

You think the price of 500k houses has been driven to 1m thanks to people who can throw around 25m?

Yes. Those people buy multiple properties in an effort to launder their drug money. Just look at the situation in Marbella.

You probably mean this?

https://www.theguardian.com/news/2021/may/20/a-united-nation...

That’s a great read. Thank you. I was in Marbella in the 1990s, in awe of the ostentatious wealth, but had no idea it was from drug trafficking.

Yes. The situation is likely similar all over the world where there is a housing bubble and large markets for drugs.

An unexpected benefit to legalizing and taxes drugs: lower incentive for drug dealers to Jack up the price of houses!

Family just missed out on a $1.6M art-deco 3 BR in Mangere Bridge.

They were sad about it.

It's fucked.

Personal questions and you don't have to answer at all: Did your family really have the money to pay it? Where did your family get it from?

Don't have to answer if you don't want to.

Yes. They sold their last house for $1.4M. They bought it for $400K 12 years ago. They've never had a job that earned them more than $100K. They have just bought something else for $1.5M which needs $200K spent to get it to how they want it (renovating bathrooms, kitchen, etc).

>They have just bought something else for $1.5M which needs $200K spent to get it to how they want it (renovating bathrooms, kitchen, etc).

They are putting $200k into an asset which is already 10x+ their income? Ouch. I can't wrap my head around a financial decision like that.

By "income", parent is referring to employment income. But their true income is the real estate investment of their primary residence, which nearly doubles their income.

They are borrowing $300k I guess (1.5m + 0.2m, less 1.4m), and will likely sell their new house for far more than $1.5m when they sell again in another dozen years.

>and will likely sell their new house for far more than $1.5m when they sell again in another dozen years.

Why do you assume this to be the case? It has been the story of the last 20 years or so, sure. But it could be a complete aberration in the historical timeline of real estate, which for many decades had real rates of return around 1% annually. Houses were not investments.

It's wild that people now assume it's "normal" that you buy a house a triple your money in a decade.

If you look at income and ignore their wealth, maybe it seems strange. But they have > 1.4 million in equity. They're allocating < 15% of their equity.

At the end of the day they'd be sitting on a mortgage that's only 2-3x their annual income, that's very reasonable.

>that's very reasonable.

If you look at current prices, and think that they can only rise, that's very reasonable. Otherwise, that equity can be wiped out pretty quickly.

I suppose what I find strange is killing it on an investment (turning 400k into 1.5M) then turning around and reinvesting in the same inflated asset-class. Hence my comment regarding buying a more expensive home AND dumping money into it.

> A few years ago you just needed ~$NZ5m invested in the country and you get permanent residency. There is no way the prices are driven by domestic money.

In 2019-2020 just 38 of this class of visa was approved, which seems to be about the average per year over the last decade. It was just 16 in 2020-2021.

I don't think these people are buying decrepit Auckland villas, two bedroom semi-detached or tiny one bedroom apartments, given they have $10 million spare to invest.

Prices are also driven by cheaper interest rates domestically.

You may be right for that class of visa, but there are many others: https://www.immigration.govt.nz/new-zealand-visas/options/li....

And yes, the prices can be driven up by cheap loans, but from memory they were already rising steadily before the covid stimulus measures.

I am still unconvinced that there exists in NZ a mechanism that can generate so much money and drive up the prices to these levels. Haven't been back for a while but family and friends back there are just as bewildered as I am with these price rises.

I think what you're seeing is everyone previously investing in stocks, business, etc. are now going all-in on property. Mum and Dad are pulling their supers and investments and gifting it to their kids for their first home.

It is entirely unsustainable. But we've been saying this for 15 years now.

Intersting. In where I live (Singapore), it's very common for young married people to get a loan/etc from their parents to cover the down payment (~25%) for a 20-30 year mortgage.

Also, rent here is so expensive that most Singaporeans still stay with their parents even in their late 20s~30s. (Most people renting a room or apartment are none-Singaporeans (30% of the population).) So buying a house makes perfect economical sense if you are married and can somehow cover the down payment.

I wonder if this is becoming a trend across all first-world countries, as the world gets less predictable and people get more risk-adverse. Esp when rents are driven up by none-citizens so it becomes economical to buy instead of rent.

Singapore incentivizes home ownership through HBDs to such an extent people think you’re nuts if you don’t buy one. Heavily subsidized units (think $500k for something that would sell privately for $800k-$1M). Constrained supply so prices keep climbing (quite intentional by the govt). 5 year MOP means you can rent it out for a 3-5% yield then buy a private condo.

Housing is basically a govt supported investment program in Singapore. Not that different than most Western countries, just different mechanism.

I was talking mostly about none-HDB properties like condominiums and landed though. (The cheapest starts at ~$700k.)

HDB certainly helps to lower the barrier to entry in home ownership. But I don't think most forms of HDB purchases are investment-orientated. ROI for second-hand HDB is not high and buying a good first-hand one is like winning a lucky draw.

I would say HDB is more of the gov's mean to stabilize the housing market and it functions as more like the backbone of the economy. (Or you end up with runaway prices like in Hong Kong.)

Returns on HDBs, especially with “cash over valuation” offer bigger returns than private properties. Rent it out and the ROI is better than private as well.

HDBs are similar to property in most countries. It’s bought primary as a place to live but also as a store of value. The govt will buy out your HDB for cash in order to fund your CPF. The govt also constrains the supply of HDBs which pushes up values.

But you are right about the lucky draw. Someone people win BTO lottery and make out like bandits with new developments in mature estates.

huh? both Mom and Dad - you lost a great number of people right there.. pulling their supers? over-65 wealth is that common? and this one, really interesting.. "gifting" .. what is that ? I see tooth-and-nail fights over any piece of money in sight among otherwise ordinary relatives.. Mostly Los Angeles SoCal but everywhere in California really.. "gifting" ?!?

Really? Because in places like Colorado and Montana the Californians who sold their parents' house to move there and start their 'lifestyle business' is so old it's beyond a cliché. Maybe substitute 'inherit' for 'gifted'?

Just because something happens often enough to become cliché doesn't mean it's common, representative, or sufficient to move markets. And I've never heard of this, so it might be a noisy but localized thing.

Well, according to the loan docs it's a "gift" but to everyone else it's an interest free loan from mom & dad until they sell the place. It's quite common in California, and everywhere else I've lived in the US.

It doesn't take much money at all to drive property markets sky high. All it takes is a tight property market, restricted new supply and a few well capitalised investors.

Say a town has 1,000 houses worth $200k each. The housing stock is worth $200m. If 10 houses sell for $220k, those 10 buyers spent an extra $200k split between them, but the notional value of the housing stock went up by $20m.

There doesn’t actually have to be an extra $20m in the economy if the town. It only takes a few people with money to invest to drive house prices sky high.

A person having $10m spare to invest, and coming to NZ to invest it, is exactly the kind of person who goes and buys properties to flip or sell or hold as renter-subsidized investment properties.

Investment firms like BlackRock ($9 trillion dollars in assets under management) bought up 15% of all houses offered for sale in the US in the first quarter of this year.

Let us assume it is not overseas buyers - what factors are left? Is it just access to cheap credit that drives investment into the housing market all over the globe?

Why not? It seems obvious that cheap credit would drive up prices. For example people could just be bidding up to what they can pay off in about 30 years. If they simply do that, cheaper credit would rise house prices.

I was just wondering. It's hard to understand markets, IMHO, and I have no feeling how a potential balance between cost of money, supply and demand should look like in a sector like housing. Do you have any references or literature that would give me a better understanding?

Originally, I also thought that proper restriction of foreign investment might be a good solution. I agree with you that it must be domestic actors that are to drive prices upwards.

On a social level, this is going to generate a lot of problems, as it locks out people w/o access to credit to take part in the market. It is crazy what happens in cities like Berlin in regard to gentrification. But even other cities that do not have a hype status are affected by this.

>It is crazy what happens in cities like Berlin in regard to gentrification

Can you elaborate on this?

Sure.

In the case of Berlin inner city districts like Kreuzberg, Prenzlauer Berg et cetera have been rapidly changing in the last 10 to 20 years. This is in part because population is dying off/moving away, but also because developers are buying apartments and are actively removing the old inhabitants in order to be able to charge higher rents.

There are laws in Germany that regulate the increase in rental payments. However, with the current price levels in housing, only a new contract with a tenant can give an investor an income that justifies the price payed for a property. The 'historic' population that can not afford the new level of rent is pushed out to the outskirts of the city [1].

Other cities of this tier e.g. London have similar population and price effects.

[1] "Plattenbau" in Berlin - not so trendy. See: https://www.bz-berlin.de/media/plattenbau-sanierung-in-marza...

How does the regulation work for properties after major renovations? Can the rent be increased significantly if it becomes more luxurious? What about when the landlord or close family want to move in, and then after a few years moves on?

> it locks out people w/o access to credit to take part in the market

I think it’s been 40+ years since everyday people without any access to credit had broad practical access to buy housing. (This kind of makes sense. You’re buying something with 50+ years of future utility and probably haven’t saved 25+ years of housing costs to put down in cash.)

But then why not before these low rates? If people were bidding up to maximum lending capacity as a % of total income back when mortgage rates were, say, 6%; and now they do the same but at mortgage rates of 2%; then there is a ceiling to house prices, but we've passed that ceiling a long time ago. So something else must have changed, too. (I did this math some time ago for the Dutch market and our prices were already like 20 or 30% over what you would expect by this logic; and prices have gone up 20% since then, just in the last year. How insane is that?).

Maybe another factor is that people who are not first time buyers now have a lot more money from the sale of their previous house. We always focus on the first time buyers, but those are only a small part of the market, and for couples with two high incomes, houses are affordable still. So maybe higher assortative mating leads to higher spending potential in first time buyers, and the rest of the money just comes from people selling their first houses and upgrading. It's quite hard to model though, I don't really see a way to test this hypothesis in a few spare minutes here or there like many simpler theories are.

It's likely simply scarcity related.

If you can borrow 800k based on your income and you accept 200 square metres for that price, and there is such scarcity (100 viewings per home, 2% success rate) that you're unable to find a home, it may lead you to accept a 190 square metre home at the same 800k price.

If such a trend continuous for a decade, you may see that suddenly people accept to pay 800k for a 100 square metre home (such as happened in Amsterdam, the Netherlands).

The net effect is that housing prices per square metre doubled: a 100 square home went from 400k to 800k, and a 200 square home went from 800k to 1.6m.

No change in financing capacity is necessary for this to occur. Only a shortage of homes creating a cycle where people keep accepting less space at the same price, thereby increasing the prices per square metre throughout the entire market, thereby pushing prices of homes up.

I believe that's what's happening. The media fuels this process by constantly writing articles about shortages (even though objectively speaking, in the past decades home sizes have sharply increased while household size (persons-per-home) has decreased, i.e. there is objectively more housing per person than ever before).

Of course there is a limit to this logic. But in the Netherlands for example, the average space per person is about 50% higher than in Germany (culturally quite similar country). So there seems room for Dutch to accept smaller homes. And there's some examples (e.g. Hong Kong) that show that a high-income country with housing shortages also can push people to accept smaller homes in their budget.

This effect isn't immediate because prices are sticky. People cannot accept too much change rapidly without believing its overpriced. Over time, these 'overpriced' price levels are normalised and seen as the new normal, accepted, and a new concept of 'high' emerges. But it's not instant. Second, homes are mortgaged and thus must pass an appraisal. Appraisers also don't accept radical changes as they're based on reference objects of a few months ago, so there's a limit to the speed of price change.

Sure but average household income is about 100k, home prices 1 million or 10x that figure. Even with the low interest rates you can't qualify for mortgages much more than 5x your income, even if you wanted to, so it'd mean there's massive amounts of personal wealth (e.g. 500k per home average) flowing into the market, which I doubt is the case. Not sure what factor I'm missing but it doesn't all seem in line with eachother.

Also lack of supply in compelling geographies.

Hard to say... Household income and home prices average about 100k & 1million respectively in NZ. That makes sense at ultra-low interest rates of -1 to 1%, but not at the rates of NZ (>3-5%). Loan-to-income probably averages about 5x, but price-to-income is about 10x so I'm not sure what feeds the difference. Doubt people are sitting on 50% downpayments. But I wouldn't be surprised if there's a ton of generational wealth going from parents to kids.

Averages can be a bit misleading as you'd compare average home-owner prices to average household (owner or renter) income. The incomes of owners are typically above this average, for renters below the average, so the price to income is probably not 10x but a bit lower.

Second, I wouldn't be surprised if a lot of wealth flowing into the market is not sourced from overseas wealth by immigrants. As in, the source of the wealth is foreign, but it's spent by people who have migrated to NZ.

https://en.wikipedia.org/wiki/List_of_countries_by_net_migra...

You can see NZ sits in the top 20 in the world in net migration rate. The net migration rate (net, i.e. with the short-term workforce filtered out) probably consists of relatively high-income and high-wealth expats.

Second it seems like home ownership is decreasing in NZ lately. Perhaps the rental market is becoming bigger and homes get bought up by investors. Means less supply in the home owner market. That typically pushes prices up strongly, too. (good for the rental market, bad for homeowner market).

Lastly there's a slight increase in average home sizes. Naturally that should increase prices without it necessarily meaning certain floor space of housing is more expensive.

Still, these figures are quite crazy. I'd make more sense if they were 30% lower. I'd also be quite concerned as NZ seems to run off of variable or short-term fixed interest contracts... corrections and volatility is much bigger in such markets, and given mortgaged RE is by definition leveraged, it can really wipe out large chunks of wealth.

Thank you for sharing your thoughts. I can't add much to that, unfortunately due to lack of knowledge. Too bad it is not easy to get high fidelity data on these market processes.

> Still, these figures are quite crazy.

Sounds to me like there is something we do not see.

This is speculation on my part, but I think the wealth transfer from the baby boomer generation to their kids is playing a part. I've seen estimates ranging from $30 to $70 trillion to be passed down.

At least anecdotally (in the United States) I have many friends in their 30s-40s that are buying new homes with money from their parents. Or their parents buy the home and they live in it.

It is wealth transfer from Baby Boomers to their kids.

Demographics also plays a role. We saw a massive boom in the 1950s, 1980s, and now in the 2000s. This boom is less sharp, and more spread out then the previous ones.

The war generation all had kids between 1944 and 1950 (5-10 year span). The Boomers all had kids in the mid 70s to mid 80s (10-15 year span). The children of Boomers are now buying houses. So it's a longer cycle, this time around (15-20 year span).

I don't think so, especially with the relative wealth erosion over the last 50 years. This also doesnt explain the timing. We should have seen a more gradual increase, not such a sharp increase. I suspect it's people cashing out of more expensive southern metropolitan areas (semi/coastal cities). These are investments by climate refugees who can work remotely.

mortgages are pretty much where money comes from in the global financial system. that and government debt. (when banks lend they create money).

> There is no way the prices are driven by domestic money.

How can you be so sure? With the way mortgages work, and the way people who bought starter homes ~10 years ago are more than capable of affording a downpayment on a bigger home, you don't actually need a large amount of domestic money for housing prices to be bid up into the stratosphere.

Where I live there are empty houses. Very few locals can buy $1m+ homes and be so lazy to even bother renting them out. I looked up ownership of some I noticed empty for a long long time and the owners appear to be a string of shell companies.

They may be a factor driving the prices up, but the locals being able to keep up through borrowing is why the prices stick.

> Overseas buyers just get permanent residency and citizenship and buy houses.

With birth tourism, just transfer some assets to your nephew, a full born citizen of $country_of_conveinience and have him purchase the property.

May be it is not foreign buyers but instead the new Zealand government that had been printing money over the last year in an attempt to spur economic growth.

https://i.stuff.co.nz/national/politics/300223358/reserve-ba...

So your theory is that the contained, stable number of housing buyers just decided to start paying 30% more?

Why would it be stable? Falling interest rates and rising asset prices in other markets mean that many more people are able to afford higher-priced homes than even a few short years ago. No overseas scapegoats required.

I believe something like a million kiwis live abroad. It strikes me that one mechanism is:

- Kiwis live and work abroad, sometimes earning much more than they would in NZ.

- Those kiwis buy houses.

And with the pandemic:

- More of those kiwis have decided to buy houses in NZ, because it has been very successful at keeping covid and restrictions minimal so far.

>I believe something like a million kiwis live abroad.

For context, New Zealand has 4.9 million people (almost exactly one half that of Los Angeles County). Imagine 60 million Americans living abroad, rather than the actual about 9 million.

Just to add that in Australia the housing market is also going nuts and presumably foreign buyers are suppressed or absent due to Covid.

It is really quite bad, and nobody knows what to do about it. It is lose-lose now because there are the people who can't buy a house, and then there are those who sacrificed everything to buy a house. You can't help one group without really hurting the other. It will really hit home when the people who can't buy a house get older, and stop work.

Two options come to mind:

- Adjust policy to slow the rate of increase such that wages and income will catch up. This will take 20 years or more of course, resulting in an 'unhoused' generation of people.

- Make some kind of large structural change which reduces prices coupled with debt forgiveness. This will still screw a lot of overcapitalised people.

I don't think massively increasing urban density will work in Australia (or NZ, or Canada), which seems to be the Japanese solution.

A third option is to try and reduce concentration in major cities, and attract people to regional areas where housing supply and demand are better matched and prices are much lower. There is actually an opportunity to do this because of Covid - more interest in remove work and less migration. Austrlia, NZ and Canada have a lot space after all.

But the reality is, our listless government won't do anything, and the political pressure from the older well-housed generations protecting their wealth is too great.

> A third option is to try and reduce concentration in major cities, and attract people to regional areas where housing supply and demand are better matched and prices are much lower.

In Canada there is essentially no where that fits this description if you look at price to income ratios. The price increases in tiny towns in the middle of nowhere have increased as dramatically as in major centres, from a lower starting point. The locals earn far less and cannot keep up with the prices.

Why don’t you think increasing supply like the Japanese solution would work?

In Australia anyway, there is a strongly ingrained cultural norm around the backyard.

There is also the NIMBYism in the inner city suburbs which should be densified. These suburbs are filled with wealthy people who will not just acquiesce to high density developments and decades of transport infrastructure revision.

Finally there are heritage listings. These are buildings which are designated as having cultural significance. You can't knock them down, they have to be maintained, often at great expense. Councils are militant about protecting heritage listings. On more than one occasion a stalemate develops and the owner of the property lets it sit for years and years until the heritage building essential falls down by itself. Yet when a new building is built, the council is happy for any sort of ugly box. Go figure.

In BC, I don’t think increasing supply helps to increase ownership. I’ve seen some data from Stats Canada from the housing statistics program that shows the percent of owner occupied apartments is decreasing over time. From 60-70% to somewhere in the 40% range.

I haven’t been able to find reliable numbers on the number of new condos coming in, but looking around the city it’s hard to believe that we would not be increasing supply. For example, I live in a condo / townhouse development that has 450 units; before this was built, there were 4 single family homes on the same land.

Stats Canada is starting to put out information on multiple house owners. The majority of the multiple unit owners own within the same city as their primary residence. People who see the headlines speculate it’s cottage owners, but it’s really not the case.

From anecdotes, the other driver of non-owner occupied apartments are people who live at home but are able to buy an apartment to rent out. They do this because housing keeps going up here and they want to build equity to be able to afford a house once they are married and move out of the family home.

NZ has no capital gains tax, low property taxes and negligible stock market. Its a great way to make money and really the only way to make money.

Denmark also has no capital gains tax and the housing prices has also gone up like crazy over the last year.

I guess the thinking must be that if it were taxed and say you bought a house for 500k and a decade later it is worth 750k and you have to move for another job to a place where a comparable house would also be 750k$, then you can't afford the "same house" any longer because you have to pay tax on the 250k gain. The funny thing is I don't think we would see this kind of increase on the house price if it where taxed, making the point pretty mood.

Does anyone know of a country with tax on capital gains from selling a house and how the prices on houses are there?

Could it be as simple as money being funneled through NZ nationals to buy up houses?

I mean housing prices are up everywhere it seems, one could think there's an evil shadowy cabal of rich investors buying up properties.

But, and I'm not an economist or anything here, on the other hand there's a few forces pushing average people to it; we've recovered from the housing crisis from 2008 onwards. Savings account interests are on the floor, so people are looking to put their money somewhere else - a house is a great long term investment.

another one I heard is that "big" loans from e.g. the European Central Bank are really low interest, pushing banks to lower mortgage rates, which makes people think "now is the time to buy and fix my mortgage rate", which is what I ended up doing a few years ago.

And of course there's the 'rona, which has made a lot of well-off people reconsider their overpriced living conditions in the big cities. They can get a real house outside of the big cities for the money they make, and if they can work remote or limit commuting, it makes sense.

>I mean housing prices are up everywhere it seems, one could think there's an evil shadowy cabal of rich investors buying up properties.

Why would they have to be evil, shadowy or a cabal? All you need is wealth inequality.

> Could it be as simple as money being funneled through NZ nationals to buy up houses?

Yes. OIO appears to have caught some but I suspect a lot gets missed.

I would expect locals can be driving up prices too but more as a reaction to what has been happening for 15 years already.

My first thought. Pay someone else to buy the house for you and hold onto it.

Unless you restrict the number of houses private individuals can own and massively restrict what corporate owners can buy, not much will change.

I don‘t see why foreign investment would be bad for a domestic housing market in the mid/long term. In the end real estate shouldn‘t be bound to a low stock to flow rate, given its (delayed) supply elasticity. Combined with a possible remote working trend this should benefit construction workers etc. a lot medium term.

Two words: planning permission

I’ve talked with a friend in NZ who have recently purchased 5 houses all to rent, all have mortgages, and none in expensive cities (think South Island outside CHCH and Queenstown). They work full time in Auckland in a business they run.

The housing crisis has been this way since at least 2000 or so. It won’t change until:

- Stamp duty for buying rentals / converting to rentals, maybe 10-20%

- Limit the number of existing residential properties a person can own to 5 (no lower than 3). Maybe allow them to buy more than 5 if they pay a high stamp duty (eg 60%).

- No limit to number of new residential properties a person can build (Ie encourage adding new stock to the housing market), so long as it doesn’t involve the demolition of an existing residential property.

- Higher buy to let mortgage deposit requirements on existing properties (maybe 60%?)

- Higher interest on buy to let mortgages (maybe the govt charges an additional 3% on top of the interest as a form of tax)

- Maybe some more draconian stuff like unable to sell a property as a rental if it has been a rental for at least 2 out of the last 10 years. Ie making the only people that could buy it owner-occupiers.

Is there a reason increasing supply wouldn't be an easier solution?

Yes increasing supply will help, and my suggestions encourage increasing supply over turning existing stock into rentals, but if the new supply is all rentals that doesn’t help owner occupiers much.

What needs to happen is owner occupiers are given a competitive edge when bidding for a property over a landlord. Hence more taxes and disincentives for buy to let purchasers.

So for example a property selling for $1m, what would happen if it actually cost a landlord say $1.5m after taxes, higher interest etc, but an owner occupier would still just have to pay $1m. That gives an advantage to someone who actually needs the home.

Edit: Also new supply takes a long time to ramp up, with planning permission, land acquisition, infrastructure, and there are materials shortages (wood especially) and cost overruns rampant at the moment. There is also a potential issue in the quality of supply (see the leaky building crisis in NZ in the 90s, or how small the apartments of the last decade are).

> What needs to happen is owner occupiers are given a competitive edge when bidding for a property over a landlord. Hence more taxes and disincentives for buy to let purchasers.

A vibrant rental market is a great thing for many reasons (e.g. look up any study on labour mobility). Not sure why we should have tax advantages for home owners and tax disadvantages for the rental market. It's certainly not equitable to the renter class. And there's tons of evidence that home owner tax advantages flow mostly to incumbent home owners who gain the proceeds from any tax advantages spent to help new home owners get into the market.

Imagine if it was cheaper to buy a house and service the mortgage on it, than to rent. In such a case, is the rental market still a great thing?

Yes I agree some rentals are necessary given the practical nature of the housing system. But once they become the cause of people being unable to afford to buy their own home it is an issue that needs addressing.

> Imagine if it was cheaper to buy a house and service the mortgage on it, than to rent. In such a case, is the rental market still a great thing?

What I'm trying to say is that if the government is manipulating the market by giving tax advantages to the homeowner market, and tax disadvantages to the rental market, that it's not a good way to spend public funds.

Home ownership is exactly cheaper because it's so subsidised through various ta breaks. That makes renting more expensive vis-a-vis owning, which hurts the class of people who can't rent or has a different preference around life (e.g. more transient, more mobile, less fixed, travel for work, seasonal work etc). Then concluding 'oh owning is cheaper, but it's less accessible, let's give even more tax breaks and stimulus and make renting even more expensive' only exacerbates the problem, it doesn't solve it.

I’m not sure how charging taxes on landlords is spending public funds that they would have otherwise had if that tax was not present. There’s no loss of public funds here.

I’m also not sure how government policies that deprive people of the ability to own their own home (since they are priced out of the market by landlords, and landlords now own way too much of the housing stock) is a good thing.

Right now in NZ about 1/3 of people rent [1]. It’s an all time high across all age groups.

I’ve got nothing to back this up, but seems reasonable for people given the choice to own their property vs pay someone else, that they would want to own the property. Yes there are some that want to rent but i seriously doubt it’s anywhere near 1/3rd of the population. I also suspect a significant number of people who prefer to rent would not have this opinion anymore if house prices were not so inflated. Maybe 20-25% but no way the 1/3 of all Kiwis that we are seeing now.

Also does 1/6th of all residential property NZ need to be owned by someone with 20+ properties under their belt? [2] Is it good use of public funds to allow such behaviour rather than say encouraging (non residential rental) businesses to grow and expand

I’m not calling for elimination of rental properties, just a fair limit on them. In my opinion it’s more important every person is able to buy a single home than every landlord be able to buy as many homes as they want.

1. https://www.stats.govt.nz/assets/Uploads/Reports/Housing-in-...

2. https://www.newstalkzb.co.nz/news/business/mum-and-dad-landl...

> I’m not sure how charging taxes on landlords is spending public funds that they would have otherwise had if that tax was not present. There’s no loss of public funds here.

It's not, but giving tax breaks to home owners is. Giving tax cuts to home owners and not home renters is by definition not equitable, you'd be favouring one group of people over the other. And if you look at who has it economically better, you'd statistically favour to give tax cuts to the economically better-off group most of the time in almost all countries. If you then, on top of that, tax landlords, it leads to even higher rents and even larger disadvantages for the renter class. That's something you haven't acknowledged, except by saying 'perhaps some of these renters can become owners, too!' -- and that's a fair point, but also wholly insufficient. We know not everyone can, needs or wants to be an owner. We know a rental market is important. Yet the tax manipulation you suggest very much disadvantages the usually poorer-than-average income rental group and favours the richer-than-average owner group.

> I’m also not sure how government policies that deprive people of the ability to own their own home (since they are priced out of the market by landlords, and landlords now own way too much of the housing stock) is a good thing.

What policies are you talking about that would deprive people of the ability to own a home?

> Right now in NZ about 1/3 of people rent [1]. It’s an all time high across all age groups.

Just like in the US. Just like in my country in Western-Europe. I'm not sure how large you think it should be, more, less? Should we strive towards anything at all?

> but seems reasonable for people given the choice to own their property vs pay someone else, that they would want to own the property.

That doesn't seem reasonable at all. Would you say the same for example, in a world with a shrinking population, large amounts of vacant land and cheap technology to mass-construct homes? In such a world, property prices would (ceteris paribus) drop over-time. Most people would be entirely disinterested in owning a home in such a world. Why not simply cheaply rent, wherever you decide to live, move as often as you want, as often as your tastes or moods change. Of course this world is hypothetical, but I use it to show that the choice to own a home isn't natural, it's conditional.

Now I agree that in the current market, it's preferred to own a home, because prices and rents are going up, but a mortgage can be more or less locked in. Of course people prefer a 30y mortgage contract at 2k per month and see their home equity triple in 30y, than to rent at 2k and see their rents triple in 30 years, for example. But the point is that this ownership preference is thereby conditional on what the market does. At the same time, every academic study, every central bank etc in the world is saying that low interest rates and tax breaks are pushing prices up. That means you're doing two things. The very condition you have that says 'owning is preferred' is in fact exacerbated by your policy to subsidise owning (with public funds), which screws over the rental market and everyone unable to own (which has always been 20-30% of the population, typically the poorest one). And second, you're favouring this generation over a future generation. That subsidy isn't sustainable, but creates massive wealth for current owners (who bought into a market at $200k homes) at the expense of future owners who are born into a market where a home costs $1 million. That also is poor public policy.

> Also does 1/6th of all residential property NZ need to be owned by someone with 20+ properties under their belt? [2] Is it good use of public funds to allow such behaviour rather than say encouraging (non residential rental) businesses to grow and expand

I don't really see the big issue with minor property concentration. They all must rent out at market rates. Someone with 20 properties (in a country with a few million properties) is not setting the price levels, but just following them, just like anyone with 1 property would. Would it help if the company or person who owned 20 properties, would instead be 5 companies or persons who owned and rented out 4 properties?

> Is it good use of public funds to allow such behaviour rather than say encouraging (non residential rental) businesses to grow and expand

I don't see what spending of public funds you're referring to, thereby also not sure how that prevents businesses to grow and expand.

I agree with you on this. Though to continue being a socratic a-hole on this thread, I might ask won't subsidizing renters always trickle up? The trickle down seems like a lie.

I'm personally supportive of housing as a human right and think it's worth it and actually stimulating all around, turns out removing stresses of life is good for the economy and people.

I think we did this backwards with stimi. Should have written checks to renters directly. The programs we do have for relief are woefully behind with hundreds of millions outstanding huge red tape.

Giving all renters point blank could maybe help start balancing the scales just a tiny bit.

cant build more land

The stupid thing is there is a lot of land still, just need to look at the space between Albany and Silverdale, all rural, and yet it’s only Silverdale north that is being developed. Likewise inner city suburbs have a NIMBY problem where it’s taken ages to finally change planning permission / zoning rules to build up. For example some areas on the shore only recently allowed 3-6 story multiple occupant dwellings. We need not just more housing, but denser (quality) housing in the inner areas. Doesn’t have to be all high rises either- look at Paris and their 6 story height limit. Can be done properly.

why should there be a building height limit? if there is demand, the market with sane regulation(protection from foreign government interference and hostile manipulation) will provide as much housing as needed with as low prices as possible, driven by investors maximizing their profits from land investments

possible solutions for the inaccessible housing issue:

- make it so the people profit from housing prices rising -> minimize building and housing regulation, forbid foreign ownership of the land(like at least 50% should be owned by a local) and by taxes and loans make it more likely that a lot of people will own some land then small percentage of the people own a lot of land, specify that all those rules are going to apply for 20 years(number of years calculated to the point when the land of the nation is owned by the nation and more or less even), and it will be a completely free market afterwards(so investors are not afraid to invest) — in a society with high income inequality will require either high taxes for landowners and/or long time to achive high level of land ownership

- government built, controlled and owned housing for the people(like singopore), — has a high potential for corruption, any country with weak institutions has a huge risk to end up without housing and with high corruption, income inequality etc

Agree govt controlled and owned housing is not a good idea in general, private home ownership is the way to go. Exceptions are people on benefits.

> and by taxes and loans make it more likely that a lot of people will own some land then small percentage of the people own a lot of land

This is what my original comment is all about. Except no 20yr limit, any investor who is banking on capital gains from house price increases will have no problem waiting 20 years to sell.

Edit: re height limits, they are important to preserve views and ambience of the local area (London has some rules for instance where St Paul’s cathedral must be visible from certain other major landmarks), avoid too dense housing if it will cause undue issues with infrastructure (insufficient sewage capacity in the area for example), transport on an already congested road etc, and preserve the general vibe of the area (to a degree, people accept gradual change a lot better than a Big Bang approach), also sunlight issues for neighbouring properties. Building a 30 story apartment block in a suburb of 2-3 story houses is just out of place. Building slightly up to 6 stories is not so bad.

Under certain conditions, it can be done. Hong Kong, Singapore, Dubai, and even older cities like Boston and New York prove that land reclamation works.

and more vertical space ;0 I love density we need WAY more in the US if we want to tackle climate catastrophe.

Supply is increasing, but if that increased supply gets snatched up by investors then you haven't really increased supply for people who need a place to live.

These investors want tenants. The more supply, the more (ceteris paribus) rents drop. The more rents drop, the lower the rates of return on the home, meaning the asset is worth less and prices drop for those buying homes, too. Supply leads to lower rents and prices.

There's no magic way around these economic laws.

Of course if demand grows faster, then prices still go up. But in absence of supply increases it'd be even worse. Supply definitely helps.

> These investors want tenants

Not necessarily. By the UK Government's own estimate [1], 1-in-20 homes in West and Central London (the more expensive parts) are empty. The story I've heard is owners who use them as a store of wealth safe from their own government's hands (usually Russia, China, or places in the Middle East). They prefer not to have tenants because it adds risk and complexity. I'm not saying this is the true story, but it's what I've heard, and there are definitely lots of expensive, empty apartments.

[1] https://theconversation.com/londons-extraordinary-surplus-of...

I could definitely believe this. Renting something is a hassle and risky. Tenants can easily trash the place requiring expensive repairs. Especially if you don't live close by to have an eye on things.

Also I've heard about apartments and commercial rental space staying empty because people can borrow money against the 'value'. If rents drop that value shrinks. If it sits empty, no such problem. You still borrow against that commercial property that rents for $5000 a month. You were just unlucky finding a tenant the past 5 years.

It's a fair point that there's some buying for store of wealth, but if that's the problem, address it, not something else. Amsterdam (my city) for example fines for homes left empty, either you live there, rent it out, or get fined. It should be quite easy to set penalties such that the incentive flips. There's plenty of property management + insurance products, to make the task of renting out carefree and riskfree compared to leaving it empty and paying fines.

But beyond that I find it's a minor problem that gets broad attention in the media. There've been lots of studies around vacancies, but they usually don't amount to anything close to the media narrative.

For example, most real estate investors discount their expected rental income by 10% for expected vacancy, because they know tenants come and go, it takes time to find/review/place new tenants, some tenants fall through, and sometimes there's a no alignment between a tenant leaving and a tenant being available on short-term. 8 or 10% is a very standard industry figure people often use for quick calculations. In the US I think the average is about 7% for example.

Now if you find that 1 in 20 homes, in a particular high-class area known for vacancy, of a particular city known for this problem discussed intensively in media/politics, are vacant... that's entirely within normal parameters. That's 5%, and supposedly it's the most incendiary piece of data they could find.

In other words, quite normal figures that have a straightforward solution (>3 or >6 month vacancy leads to hefty pentalties/fines/taxes). I'm not saying the problem is completely non-existent, but it's not that big a deal as people often think and repeat.

It's always funny how people come up with increasingly convoluted solutions to a simple problem because they don't want the simple solution. I honestly don't see how this is going to solve the problem. You're just making it harder to express the problem but it is still there.

I’ll bite: what’s the simple solution?

Make housing abundant by building more of it, like we used to.

It’ll be snapped up by all the landlords who have had years of profit taking to build up cash reserves to buy additional stock at a premium. That’s what is happening now.

Let them. This would increase competition and drive down the rent. Making it less lucrative to own property.

I'm from Ontario, Canada. I find that it's average people getting into the real estate game as a way of protecting their wealth against inflation and not wanting to play the stock market.

People blame internation investors, but that is only a small problem.

People say we should build more homes, but Ontario already has 10s of thousands of approved homes to build, that have not yet been started. Lack of skilled trades. Developers that are just sitting on the permits as they finish other projects.

I think the simple solution is an extra tax on people that own more than 2 homes. An even higher tax if you own more than 3 homes, and so on. Keep increasing the tax rate, on each home a person owns.

Ontario grows by more than 100k people per year. 10s of thousands of homes/year is losing ground, not even treading water.

Yeah, there is a pretty well circulated blog post [1] explaining this population growth. Ontario just wasn’t ready to see this many people show up.

If anybody doesn’t make SV money and wants a good tip: Consider an early inheritance of your parent’s home if you can build them an addition. That’s what we are doing. Took out a small mortgage to buy out my sister and we are now raising a family with grandma nice and close. We’ll assist her through old age and the entire thing feels very, I don’t know, European I guess?

[1] https://mikepmoffatt.medium.com/ontarians-on-the-move-2021-e...

I used to blame the FLQ and the 1980 referendum. But Ontario has had 40 years to understand the new reality and Montreal _still_ has more subway than we do.

Good advice on co-housing - intergenerational sharing makes a ton of sense for so many reasons.

I'm also from Ontario.. I dont think this is the issue at all.

These stories are not referring to "growth in Ontario" but unoccupied multi-million dollar homes in Vancouver with questionable ownership, and paid in cash.

What are interest rates on mortgages, and what percent equity are homebuyers expected to have in order to qualify?

I believe foreign buyers is also a scapegoat in Canada. At first I believed it when home prices were only growing at obscene rates in the major cities but now it has spread to every tiny community in the country, literally from Newfoundland to the Yukon. This is a direct consequence of interest rates being too low for too long and capital having run out of good places to go (zero interest rates, equities at peaks, etc).

I agree. This is likely a result of central bank policies pushing rates down for so long. I bought recently because rates are so extremely low and the govt has committed to keeping them low for a long time. Rates went up very slowly after the Great Recession and this time will probably be the same. Add to that a growing population (here in Canada) and housing prices will probably keep going up a lot.

Interest rates are 2-5% right now I think, minimum equity is 20% in most cases.

AU/NZ/DE citizen here. Passed up buying a bit of bush in Northland (NZ's "subtropical" region, if you believe the kiwis) a few years ago, after the real estate agent advised us not to buy there due to the number of nutcases running around shooting pigs with shotguns. Might have made some money, but not 30% in a year like Sydney...

That is exactly why I am against “point based” immigration whatever that means. It essentially translates to saying we only bring in wealthy immigrants. Both Canada and NZ have similar problems, their point based immigration system disproportionately favor more financially well off class of people, in many cases the investor class loophole basically allows to buy citizenship. Add to that the number of immigrants is federally controlled, the government has no say in where the incoming immigrants settle which in many cases end up being big cities such as Toronto or Vancouver.

And then the international student visa scheme. Many universities basically use them as their lifeline. Concordia University in Montreal for example has over 50% of their registered students being international.

I am in much more favour of the old system where the applicant applies through a provincial (state) immigration and each state gets to set their quota. Once approved the immigrant has to settle in the province they apply for and live there for certain number of years. This allowed even distribution and not put pressure on already tight housing supply in major big cities such as Toronto. But the federal government in Canada in 2015 removed this provincial cap and instead introduced a point based lottery system where both the lottery cap and applicant selection through point score threshold is done by the federal government.

EDIT: Also the point based system allows abuse in countries where we’ll connected people can basically buy “accredited” credentials such as relevant accredited experience in professions. I know someone who doesn’t know a thing about welding, but they moved here with credentials. Government has no way to verify these accreditation in many cases for many countries.

> am in much more favour of the old system where the applicant applies through a provincial (state) immigration and each state gets to set their quota.

Isn't it still like that in Quebec? Incidentally, the party they voted for has almost no support from immigrant communities.

> Also the point based system allows abuse in countries where we’ll connected people can basically buy “accredited” credentials such as relevant accredited experience in professions. I know someone who doesn’t know a thing about welding, but they moved here with credentials. Government has no way to verify these accreditation in many cases for many countries.

I constantly see resumes for Canadian "engineers" with foreign diploma. Not a single position at a Canadian company despite having lived there for 10+ years. Wonder why...

It will take a multi-pronged effort to fix because there are several different pressures. The rate of immigration in Canada has been increased, and will increase again, without any intervention to fix housing regulations and incentivize rate of creating new structures.

Since the demand is growing faster than the supply, you can both a) curb the demand, by lowering the ludicrous immigration rate, b) fix regulations and impose other restrictions on foreign ownership. And if you refuse to do 'a', then you have to double-down on 'b'.

Why 'ludicrous'?

My hunch is that this is true in the US too. There are a few cities where I think foreign buyers may actually be buying condos and leaving them vacant (namely the nice parts of Manhattan and Miami) but it’s a very small portion of the total housing supply.

I think we want to pretend foreign buyers are the problem because it’s much easier to understand and try to stop than wealth/income inequality, access to credit, and low interest rates.

>Old houses are sold at prices relative to new houses. If new houses cost more and more, old houses also increase in value, especially since they are on the best land (not in new far away outer suburbs).

This is basically the reason... it's location right? Older houses may have bigger lots and better offsets etc... Yes you can get newer going further out but you can also remodel.

> House prices are skyrocketing and pricing out young people

Oh I'm already priced out in Europe. I'm not going into debt for 20-50 years just to pay for _one_ thing.

Should housing be a primary vehicle for investment and the de facto way of making money? Or should it serve as a necessity and basic aspect of life?

Shouldn't even need to ask that question but here we are.

I'll support investors snapping up real estate when they let me live in their billion dollar mansions.

In Australia if I recall correctly, foreign buyers are only able to buy newly built homes. Canada would benefit from a similar rule, it would stimulate more housing and not impact the demand for existing homes.

I'm not sure Australia should be held as an example of a healthy housing market.

Definitely not Sydney! We just hit a record median of $1,410,133 AUD https://www.domain.com.au/news/sydney-house-prices-reach-rec...

The apartment I lived in before had a few hundred sold, with most sitting empty. The building managers mentioned most of the owners were Chinese, and would rather not rent it out than drop the rent prices, so they had to constantly carry out inspections on apartments that had never been lived in, for a few years now.

Absolutely depressing. The bit that weirded me out most was the post boxes. They were quite big, but about half of them were overflowing, which had to have been the result of a few years of accumulation at least.

If the buying price was 40-50% lower, I could save up for a deposit in a year or two, but the crazy house prices here in Australia are not getting any better at all. It also feels morally wrong to be investing at the cost of someone being able to afford a roof over their heads, so maybe renting it is for me.

Of course, the city also is going to be hosting the Olympics in a while, so that solidifies my moving away plans!

Move into one of the flats with an overflowing box and get it by adverse possession...

Buying a house and leaving it empty is incredibly common in China and other Asian countries. You’ll see entire developments with nobody living there and most of the units unfinished inside.

The reason I was told was:1) with crappy equity markets property is a safer investment, 2) not many questions about where the money comes from, 3) very low or non-existent property taxes (costs nothing to hold) and 4) as these countries get wealthier demand for housing only goes up.

Isn't the problem in Australia (and New Zealand) mainly caused by first home buyers? They seem to pay the maximum the bank will lend them with no regard for being profitable or a good investment. Just get the best house possible at any cost. Once they own them, they fill them with lower occupancy than investors do, so the supply of housing effectively decreases. I'm one of those people. My house used to be a rental with 5 people in it. Now we have only 3. My neighbor owner has 1 person in a 3 bedroom house.

The prices are not being driven up by buyers with 5% down payments. They are being driven up by 100% cash buyers, people moving cash across national boundaries. Just look at the percentage of "all-cash" offers. That tells the whole story.

Considering that foreigners have to buy new build, how do you reconcile that with your view? What evidence would cause you to think it is not foreigners?

They still heat the resale market

I guess I didn't know that was a law? It's not in the U.S. Foreigners can buy anything they want.

But I don't think the distinction is meaningful, higher new build prices would drag up existing home prices.

The problem is caused by a whole number of factors that incentivise people to buy houses they won’t live in.

Housing in Sydney is becoming a self fulfilling prophecy. The more people spend on it the more it’s value increases hence attracting more investors who drive prices up.

In order for this to stop the majority of the public will need to find this whole situation unacceptable.

I find it absurd that citizens from countries that disallow Australians to buy property can buy residential property here in Sydney. Apparently helping foreign citizens to avoid taxation/capital controls while propping up the construction/banking sector is more important than looking after the average citizens best interests.

And factors that incentivize people to buy houses with rooms they won't live in! I.e. owner-occupiers. I'm trying to say that these people are a major cause of high prices but they're the "us" and the "goodies" and even the "victims" so it's not popular to blame them. Instead, the popular opinion is to blame some outgroup like foreigners, nebulous "rich" people, "evil" investors, etc.

One way for it to stop is for owner-occupiers to stop fetishizing a single family home on a 1/4 acre section and tolerate living in a high density apartment like most people in big cities everywhere else in the world.

They are contributing to the problem no doubt but I doubt they are the major reason. The prices of apartments are also rising. I rented a studio for 10 years in Sydney and the price doubled in that time. I would have purchased it or one similar if not for the lending restrictions that properties had to be over a specific size. So instead of owning my own place I paid off half of the owners investment property while they delayed and refused repairs at every opportunity.

I am not demonising these people. I am just merely saying that the Australian government, the banking industry and Australian society at large believe that it’s more important that a citizen/non-citizen can lease a residential property than it is for an average citizen and wage earner to be able to purchase a property to live in.

I find it funny that at the beginning of the pandemic when people were buying up all the available toilet paper to sell at a markup they were “selfish” but somehow doing the same with shelter is not.

> They seem to pay the maximum the bank will lend them with no regard for being profitable or a good investment. Just get the best house possible at any cost.

Where is the direction of causality? I don’t know any first time home buyer that wants to be paying the maximum they can afford given bank lending standards. They are doing so because otherwise they cannot buy a house.

No. They can always buy a house in some small rural town. They chose to buy in more expensive places up to what they can borrow. Some people will buy a house a 1 hour commute from their work because that's all they can afford while others will be only 30 minutes away. I wanted to live closer to the nearby city but couldn't afford it so I ended up in a more distant poor suburb.

In Indonesia, only citizens or businesses with part ownership by citizens are allowed to own property, and I think this is probably the right way to go for most other countries as well.

Unlike the vast majority of other human endeavors, land actually is a zero sum game, at least until we are a space-faring species.

Even if we become a space faring species, land will still be a zero sum game.

* Within the Solar System the amount of land available on bodies with not-crushing-gravity is limited to a few times the Earth surface. This includes hospitable bodies like Venus, Titan or the Moon. The entire area of Mars is slightly smaller than Earth's land area, with climate conditions significantly worse than Antarctica. Sobering map: https://brilliantmaps.com/solar-system-surface

* Inter-stellar travel is subject to prohibitive time and energy costs. Physically speaking there is no way for Alpha Centaurians to visit their Earth properties on a regular basis, or vice-versa. This renders the whole concept of 'property owned by foreign stellar body inhabitants' moot.

Land will stop being a zero sum game if we can ever figure out how to create pocket spaces. But then again, speculation has hit even virtual real estate before, so what do I know?

Just build orbital colonies.

If it wasn’t for this law Bali would be 100% foreign owned.

> Unlike the vast majority of other human endeavors, land actually is a zero sum game, at least until we are a space-faring species.

Around 17% of the Netherlands is reclaimed from the sea or lakes. The largest project (the Flevopolder [1]) was 240,000 acres, reclaimed in the 1950s and 1960s. Most of the land is still just meadows/grasslands (it has 2 towns with less than 350k inhabitants in total).

Meanwhile, in Amsterdam (less than 30min away by car or train) house prices keep increasing by 10%+ YoY. It seems that lack of physical land is not the main limiting factor.

[1] https://en.wikipedia.org/wiki/Flevopolder

I sincerely hope this is incorrect.

> foreign buyers are only able to buy newly built homes

In theory, yes, in reality the largest single residential purchase in the country was $35m and splashed all over the front page of newspapers.

It took them 5 years later to realise it was an illegal purchase by a foreigner after he had a different dispute with the tax office.

If that sale slips through what hope do you actually have for any others?

For wealthy individuals they can basically buy their residency by operating/investing in an Australian business. After that they apply for a Permanent Residency visa.

Once they are a resident they can purchase whatever property they wish just like an Australian Citizen.

Yes but that's tangential, this person outright bought an existing property as a foreigner knowing full well he's not allowed to. Not a single agent, conveyancer or bureaucrat in the entire process ever tried to stop it from happening. The millions of people who looked at it on the front page of paper didn't think twice.

You can buy citizenship or residency anywhere and get the perks, but that has nothing to do with the point I was making here. The point is that laws are useless until they are enforced.

I agree. I was just adding that even though the laws made to appease the public were created there are still loopholes that invalidate the claim that “only new properties can be sold to foreign citizens.” It’s untrue and even if it was it still ignores the fact that the property market doesn’t distinguish old from new.

That sounds like a recipe for teardowns, which are already a huge problem in vancouver. Incentivizing turning an old lower value house into a new high value house isn’t going to help people.

How does people investing in housing change how much housing is available? They just rent it out.

There will always be a balance of how good a house is an investment and how accessible owning a home is.

Investing in housing can decrease housing availability especially if investors are using it for short term rentals.

> They just rent it out.

This is not the case in some prominent housing markets (London & NYC come to mind). There are owners who purchase the properties as a way to store wealth in the US. These dwellings frequently sit empty most of the time.

The Dutch had a great system where buildings that had been empty for over a year could be squatted.

https://en.wikipedia.org/wiki/Squatting_in_the_Netherlands

I learned about it after a trip to OT301 with some friends from the CouchSurfing meetup in Amsterdam in 2013. Apparently the law has changed though, and now people are being criminally charged for squatting empty buildings.

In California, you can gain possession through adverse possession with about 5 years if lucky. That is, squatters rights exist in theory.

Why yes let's just violate property rights to fix a social problem

What happened to the punitive taxes for unnocupied homes I read about a couple of years ago?

If I recall it was a "tax" 1% of the property value every month after the first 12 of vacancy

I can't imagine that going into effect and rent/house prices _not_ going down

If the problem is caused by too many people wanting to live there, rather than empty houses, it wouldn't help. Nobody likes to blame themselves, but everyone living in a high-priced area is partly to blame for the high prices, not just some faceless evil baddies.

There are more empty homes (or occupied just enough to avoid the tax) in vancouver than there are unhoused people here.

Unhoused people? Homeless people aren't the market for house buying. It's people who aren't even in Vancouver because they can't afford to live there.

But they are in need of a place to live. One of the consequences of the current housing market in vancouver is that housing is unaffordable even as a renter. Those vacant homes, if they were available for rent would drive down rents for everyone and help house some of those unhoused people.

Sure, there will be some downward pressure on rents (not necessarily an actual decrease) but that's not an argument that empty homes are a major contributor to the high prices. It might not even be discernable above the noise. The argument of counting homeless people and empty homes is disingenuous because it seems superficially like that's the whole problem when it's surely not.

Idk, my empathy for middle income people struggling to buy a home is tiny in comparison with the empathy i feel towards people living in their cars or tents. I can’t see a way that we would get to full housing without radical changes to the way land is used and commodified, that would likely have upstream benefits that would help with home affordability

That tax applies to the city of Vancouver. Most houses in Canada are outside of Vancouver.

Did it have any effect? From what I hear, Vancouver has one of the costliest real state markets in Canada

It’s utterly bonkers. The median single family home in Vancouver costs CAD $1.9M (USD $1.5M).

Vancouver is famous all over the world as an attractive city (for example I live in Berlin, Germany, and many people I know would like to visit Vancouver). I've never been there, but I have heard it is next to the sea AND next to the mountains, and it lies in a first world country with a solid economy and good health care. Maybe the prices just reflect demand?

All true, and all were true 20 years ago when prices were not this out of line with local incomes.

And likely it will not be affected much by the climate change.

Hasn't British Columbia where Vancouver is at, had terrible weather this year? Looks like Vancouver is actually more vulnerable to the climate crisis compared to other major Canadian cities; https://www.bbc.com/news/world-us-canada-57654133

Yeah, that’s not playing out well. Vancouver and the surrounding region experienced 800 deaths relating to June’s unprecedented one-in-a-thousand-years heat wave.

Even more bonkers is the average house price in Canada (all of it) is over $700k now.

https://www.cbc.ca/news/canada/photos/canada-real-estate-pri...

It’s half that in the US.

I wonder if thats because most of the Canadian population is localized to their mega cities like Toronto, Vancuver etc while US has a much larger rural population.

Or could it perhaps relate to the Canadian government’s historical support of housing markets through the distortions of the Canada Mortgage and Housing Corporation, which intervenes heavily in the mortgage wholesale market to provide liquidity whenever the economy stumbles…?

There was hints of things maybe cooling off, then covid hit and prices have been spiking since.

Yes; it's caused several people to leave their empty houses in a permanent state of not-fit-for-inhabitance, which allows one to avoid paying the tax.

Does any government official have to inspect and confirm? Building inspector?

Well it does sound like it worked but the problem is that they forgot to apply the tax on all land (even empty land), not just the vacant properties.

There is also a province-wide speculation tax that levies a charge on unoccupied or secondary residences. The rate is 2% for foreign owners and 0.5% for locals.

https://www2.gov.bc.ca/gov/content/taxes/speculation-vacancy...

That tax was for the city of Vancouver. I heard it did help to some degree, and may have caused a shift in foreign buyers from Vancouver to Seattle, which is not too far away.

I heard a message the other day that there's 3 main vehicles of investment: stocks in companies, bonds in governments, and property (owned mostly by banks and a few rich people).

I've been thinking about it ever since, particularly that money usually flows between these 3. The exponential growth required for compound interest to work is only possible in a shortage. Stocks in companies follow a contract-expand business cycle. Governments grow linearly at best. But property has been increasing exponentially due to an increasing population.

I fear the day when companies realise that they'll make more money by starting a war, which would devastate governments and property. Many people of a similar age are getting married and buying houses, but I don't know feel that the future is stable enough to make either of those decisions. The kind of house I'd want now as a single guy is different to a house that would be suitable for kids (in the right school zone), or a house for retirement. I think the only safe investment is philanthropy: give it all away, and if I'm still alive, hope that some of those people I help now will be able to support me in my old age after economic, political, and environmental disasters strike.

Real estate Is growing due to heavily regulation and International Capital. Change these parameters and real estate values Will come back to family purchases

Governments grow in proportion to population (tax base), right?

And you can give it away to someone with a promise that they give it back in the future or give you something that they produce, rather than going through philanthropy and hoping things work out. That’s why investments exist.

The stock market (after IPOs and issuances) is all speculation and detached from reality of day to day operations (except for buy backs, dividends, the stock is only worth what someone will pay for it - and some companies don’t pay dividends…).

>The exponential growth required for compound interest to work is only possible in a shortage.

Compound interest doesn't need exponential growth. That money is not destroyed when you repay the loan, it's just the profit margin of the banks. If interest rates are above what can be repaid they will have to be lowered until they can be repaid. The 0% lower bound is good enough. It's when people withhold deposits and never use them to pay for anything (you know as dictated by the responsible citizen always earning more than he spends) that you need endless growth because debts must grow fast enough that past debts can be repaid even at 0% interest.

>I fear the day when companies realise that they'll make more money by starting a war, which would devastate governments and property.

Well, the problem is that it's true. The broken window fallacy isn't about doing something smart it's about doing something smarter than what is being done today.

Investment is a basic aspect of life; housing has been traditionally an investment to earn a living when you retire, whether individually or as part of a pension funds. The problem appears to be the monetary policies of central banks and rampant public debt, and the low interest rates, inflation, and lack of alternative investments that go with it.

> housing has been traditionally an investment to earn a living when you retire, whether individually …

Do you mean that people are expected to buy additional houses to make money from, after retirement? I don’t think that’s ever been the case.

I think he means rental income.

Yes, but you can’t rent out the house you live in. So that means you need to buy multiple houses…

You can rent out rooms in the house you live in, but that is less of a thing now than in the past. In the 1800s/1900s widows, spinsters, old women, that had property would often get by by renting out rooms/beds, essentially being a "mother" to young men or women. Men/women came to the city to work, or school, or whatever and they would rent a room and the landlady would serve meals, do laundry, etc.

Do any of you have some data to back it up or just some anecdotes and stories? The poster claimed this was a tradition and the goal of owning property, so surely there’s some documentation of this being a global phenomenon?

Recently, in large parts of the Greater Toronto Area, it has not been legal to rent out rooms in your house. It was and is legal in the original city of Toronto and other municipalities that were later incorporated into the megacity. There is a proposal before city council to legalize it across the city, but so far no decision has been made.

Or selling the deeds keeping the rigths to live in

This isn’t true. Investment properties were nowhere near what they are today compared to the 70s in the US.

I don’t know what traditionally means to you, but this is not a historical norm if you went back 50 years.

Treated as an investment, but nothing guaranteed. It’s only beating inflation if the cost of housing is going up. Which it has, but now we’re seeing the problems with that.

You got it exactly backwards. Speculation on housing beats productive work so interest rates have to be dropped lower and lower until productive work beats speculation and then speculation dies instantly in a crash.

The obvious answer is to just have 100% capital gains taxes on land and let people deduct inflation.

Probably a false dichotomy; the ideal is somewhere in the middle. It's reasonable to plan to extract some value back out the commutable, family-size when retiring to somewhere smaller and further out. But it's a problem when this becomes the primary or only available means of funding retirement.

But isn't that also a factor of what people prepared to pay? Like if some people are prepared to pay 50% or more of their income to live in an attractive location, prices will rise so that to live in that location, most people will have to pay almost all of their income for it?

I am not sure there should be regulation to prevent people from doing that, as it represents personal choice and preferences.

Definitely, and also a factor of what people are willing to lend.

In reality, it is both.

You don't have to own a house to have housing. Home ownership is, not a basic aspect of human life, sadly for many people.

But there is a limit to this idea, and housing is heavily regulated anywhere. Investment banks buying up houses, built for individuals, are just wrong on so many levels.

People can only ask for as much money for houses as people are prepared to pay. It isn't true that speculators can simply drive the price up as high as they want.

If investing in housing is a good way to make money, it is an incentive to build more housing.

Even foreign money could be good. If foreigners pour lots of money into your housing market, you could build lots of cheap houses and sell it to them for lots of money, for example. (not saying you should, just saying foreign investment in housing is not automatically a net loss).

I'm disgusted by the whole real estate market, people buying dozens of apartments and houses just to rent them - and hence increasing prices for people who just want something on their own instead of making rich people richer - is destructive for society, especially for young people. Owning a roof over your head shouldn't require an average person to work their ass for half of their lives.

Historically the price of the Average Home should be about 2x average household annual income.

We are way off that good median today, so either prices have to fall or incomes have to go up.

However the causes of this can not be simply explained away by "people buying dozens of apartments and houses just to rent them" the reality is far more complicated than that. even if you put a ban or cap on the number of rentals a person / company could have it would not solve the housing issue, and likely make it worse.

> Historically the price of the Average Home should be about 2x average household annual income.

Source? I have heard many boomers talk about how the advice was to pay no more than 4x income. Obviously highly unlikely in this day and age.

I don't know the original source, but it fairly common financial advice. Here is one source [1] but a simple DuckDuckGo search or Google Search will show many others. Some are starting to recommended 3-4x due to low interest which as I said in other comments I do not agree with.

[1] https://www.investopedia.com/articles/pf/05/030905.asp

Interest rates have steadily fallen for about 40 years. So the 2x income idea is badly outdated as it assume interest rates around 15%.

When you consider inflation and interest rate decreases, owning a home today is essentially the same as it was 40 years ago in most markets. There are some outliers but overall the inflation adjusted monthly payment isn’t that different. It’s just that a bigger part of that payment is going to principal rather than interest.

The biggest issue is the outdated idea of putting 20% down. As interest rates fall, down payment percentages should fall. And although you can put less down you end up paying PMI which should be adjusted down too.

>>So the 2x income idea is badly outdated as it assume interest rates around 15%.

I 100% disagree, what is badly outdated is the idea that someone can actually afford 2x income home at 15% interest. Doing that would mean likely the inability to have an emergency fund, or save for retirement.

The metrics banks use today to determine "affordability" put people in terrible situations. the focus is on the monthly payment level not the over all debt load. Which IMO is a mistake. the classic Mortgage payment of 30% gross income is WAY to high IMO.

I mainly agree with your feelings but it is how it is. People look at what they can “afford” per month and bid houses up to that point. Many people don’t consider what they’ll have left to save/invest, etc and they stretch themselves to be the one who gets the house.

I don’t think this is a recent phenomenon though. I’ve heard stories from my parents from 40 years ago and it’s similar. One that sticks out is when rates fell to 12% they were assured they’d never see rates like that again - time to lock in. And of course the banker was right as rates just slowly made their way down over the following 30 years.

So anyone that says “rates can’t stay this low” are just joining the chorus from way back when.

There is a big difference between saying "Rates can stay this low" when they are 12% during a time when the government was not printing money, nor in the housing market so mortgage has to actually be profitable for the lenders

and a time when the fed is literally printing money and giving it away for 0% interest to institutions with the sole purpose of driving up costs so consumer confidence does not collapse...

I will not say rates cant not stay this low, but doing so is highly irresponsible and will cause massive problems in the 10 year time frame.. The longer the fed keep the money printing brrrrrring the worse off we are all going to be very soon

So I do wonder where the equilibrium is between inflation and raising interest rates. That is, inflation gets to a point where homes double in dollar value over a few years but interest rates go much higher creating a situation where anyone with an existing, low rate mortgage is making pretty easy payments (due to inflation and therefore wage inflation) but the real value of their house hasn't really gone up in value due to that same inflation.

Would end up with a win-win situation for existing and future home buyers as opposed to a situation where rates go up but inflation does not which would crust millions of existing home owners and probably lead to regime change, making it political unviable.

Orchestrating this is the difficult part as it couldn't happen over night. But rather as inflation begins to take hold and we see increases in wages, interest rates rise slowly enough to let the housing market avoid collapse.

> low rate mortgage is making pretty easy payments (due to inflation and therefore wage inflation) but the real value of their house hasn't really gone up in value due to that same inflation.

Situations like this are not always bad... This generally will lead to more Home Improvement, and people investing in their homes making them better then dumping them on the market. I find that personally to be better for society instead of letting whole neighborhoods die due to people letting properties run down then moving when the maintenance gets to expensive.

Also inflation does not always track wages. Especially for the middle class. We are seeing that right now in some sectors, where skilled labor rates are more or less flat for the last few years (when adjusted for current inflation may even be dropping) however unskilled labor has seen pretty significant gains recently.

What if we could stage a rental strike with teeth?

Buy up some land in multiple states to build a "campground" that has Yurts for office space (work from home), plenty of places to pitch your own tent, showers, bathrooms, etc... it'd be somewhat less comfortable than 'normal life' but in the end if rental units sit vacant long enough it'll drive prices down, no?

It wasn't like that. The inflated real estate market is a result of several factors that emerged in the last 15-20 years and combine and reinforce each other:

- A decade of near-zero interest rates

- A lack of investment opportunities: real estate usually has a below average ROI but there is nothing else to invest in nowadays (look at startup valuations to understand how desperate investors have become)

- Too much money printed worldwide (again, look at startup valuations)

- The desire to park money earned (or stolen) in developing countries in a Western country that hypocritically turns a blind eye on money origin because banks, construction industry, and legislators (who own real estate en masse) all are interested in heating up the market as much as possible (looking at you, Canada)

What makes it worse, is that all stakeholders are now locked up in this situation. Increasing interest rates is not possible because it will bankrupt millions of families with mortgage. Western countries are in the late industrial cycle, so creating new investment opportunities is problematic until a new industrial cycle begins. In this situation central banks have no choice but to print money and lie about inflation as long as possible because there is no way this whole situation can be resolved without money losing value.

Without regulation, capital will strangle society and the future to squeeze whatever returns can be juiced from both. This is to be expected with secular stagnation [1].

[1] https://en.wikipedia.org/wiki/Secular_stagnation

Making housing stagnant and expensive is a popular initiative waged against capital.

Ahh, but you can make housing accessible without making it expensive, using policy. People have rights, capital does not.

Aren't you usually the first to point out how people who don't currently own houses somewhere, don't have rights?

I point out the observation of current state, absolutely. I also believe in and contribute to progressive policies and candidates (respectively) who will hopefully improve the situation through policy. Please don’t interpret my analysis and understanding of a system as an endorsement of it. What is the point of property and capital if the outcome is dystopian and feudal?

Both people and systems are complex and not boiled down to binaries. Thanks for getting to know me a bit more!

That’s fair, I apologize for misattributing your position.

I just can’t shake the perception that the more power there is in local, bottoms up, grassroots democracy, the less housing (and transit, and everything else) there will be. Seems like we only got what we have because communities weren’t empowered enough, back then, to hold back capital.

Most financial gurus preach real estate as a way to get rich. They don't care about the next generation, fuck them. I have a colleague who earns in dollars, but he buys real estate in his home country (India). He'd buy a few apartments in a building right when a new project is announced. By the time the project is completed (2-3 years usually) the apartment value has already gone up by 10-15% minimum, sometimes more. He'd sell it and move on to the next project. The closest he has ever been to these apartments is the 15-30 mins he spends looking at the brochure. If you have the cash, this is the easiest and safest way to grow your wealth.

It was disgusting to see. I asked him if this doesn't bother him (he was already wealthy, he didn't need this extra money) and he looked at me as if I had two horns. Most of the projects he was buying and selling, was outside the range of almost the entire local population, except the rich. It was a fun game for him.

I know it is an unpopular opinion around here, but rentiers are a cancer. Housing should be a basic right. Rich people can buy and play in the art market (or super yachts or whatever) for bajillion dollars for all I care, but not basic necessities like land, water etc.

Why do you think it's morally bad what this guy does? Developers make a profit, he basically provides loans to developers, takes on risks.

Prices are too high because there aren't enough units being built, not because folks speculate on new developments.

The rentiers are who do nothing yet they earn extra profit due to market failures. (Usually mandated monopolies or emergent oligopoly markets, see ISPs in the US.)

I agree that the end result of only luxury units being built is disgusting. And I think that's absolutely not an unpopular opinion. But it's this way because society, voters, representatives, local governments, etc.. are stuck in a very suboptimal configuration.

I agree that it should be a basic right.

Not enough units being built is only part of the problem. There are empty apartments in the buildings that he buys. You know why? Because they are owned by people who reside abroad (US, Australia, Canada etc). These people have plenty of cash, so they buy multiple properties and just let it sit there (if they can't sell it for a profit), visiting for a week every 2-3 years. They are simply pricing the locals out. The only reason they buy is to sell it at some point in future, for a profit.

You asked why it is morally bad. It is morally bad because the prices are artificially inflated. This guy I told you about, he can sit on these empty properties for 5, 10, 20 years if he chooses to, because he doesn't need the money.

So not only people like him inflate the prices, they also let properties sit empty.

None of this is illegal, of course. One can argue it is just business, that is also true. But that doesn't make it ethical or moral. Real estate prices in cities like Bangalore are absurd, thanks to people like him. It is happening in Canada, Australia etc too. Chinese people "parking" their money in NYC, Toronto etc housing markets (it is just one example, I am not picking on Chinese, just to be clear)

Why can they sell for a future profit? Because there prices are going up faster than inflation? What does this mean? Demand grows faster than supply. What does this mean? Not enough units are being built.

... it's microeconomics. It's real estate. One of the most liquid of markets, one of the most well studied of economic fields. One of the most common example in microecon. Literally econ 101, no oversimplification, no simplification.

Sure, we can add other aspects, like vacancy. (Just as there's a natural rate of unemployment, there's a natural rate of vacancy. And if property taxes are too low, then this rate is too high.)

Also it's possible to tax vacant units. As some cities in Canada do.

> This guy I told you about, he can sit on these empty properties for 5, 10, 20 years if he chooses to, because he doesn't need the money.

What's the problem with that? He basically subsidized the construction. That's equivalent to a direct zero interest loan to the developers.

-----------

Yes, we all know that since the market has a tendency to remain irrational longer than one anticipates it's rarely a good idea to bet against very visible trends. Especially if those trends directly emerge from very visibly bad politics.

In this sense I think buying real estate and letting it sit empty is questionable. But, like I said, it's still funding development. High prices still incentivize development. We know how these things go. We know how irrational people are. (How we regularly fail to elect competent governments.) At some point it's impossible to paper over this. Like you said, basic housing should be provided, not something to fight tooth and nail for. But for some reason it's not happening. (And it's not like we don't know how. Soviet high-rise blocs are all over Europe and they are pretty okay, yet somehow the 'projects' in the US failed spectacularly. [And of course we know why they failed.]) And it's hard [but not impossible!] to hold people accountable for looking out for themselves in this crazy world (by using their existing capital to invest into housing).

I don't see how buying apartments and renting them out makes housing more expensive.

I'm the exact opposite. All these emotional people don't make sense.

From my perspective there is a whole bunch of emotional people that wants expensive housing and they complain when someone else i.e. landlords benefit from the thing they wanted. I can't stand the double standard.

The problem has never been properties. Just think about how illogical it is for a house to go up in value even though it is a depreciating asset. It's the land that is going up in value. Expensive land needs expensive rents.

Why is land expensive? Because of all land owners, not just the ones that are renting dozen apartments on land that could at most fit 2 single family homes. Yes, the average home owner is rent seeking just as much as that landlord with 12 apartments is doing.

The worst part is those home owners don't actually want their windfall because they want to live in their home. They do not want the liability of increasing property taxes as their land goes up in value. They'll vote for tax freezes and lower taxes which obviously makes it easier for homeowners and landlords to earn money at the expense of other people.

You know, if there were no owner occupiers and everyone was renting then people would just vote for increased property taxes on landowners to make land a liablity which lowers its value.

In America, we have just made it too difficult to build new houses.

We have short circuited the market equilibrium.

The real way to make money here would be in building new houses. It is somewhat odd to me how this point never comes up. At least where I am, there is absolutely no shortage of land that could have new houses built but there is so much red tape it is not a good investment. This is especially true when we juice the stock market constantly to create a much better alternate investment.

Of course, any real problem in the world is multivariate but we like to dimensionality reduce everything to a single variable.

Hedge funds buying single family homes is bullshit. Not building enough new homes while giving everyone money borrowed from the future and rules to promote home buying has obvious consequences on price and supply though.

It is not possible for housing to simultaneously be affordable and a good investment.

Given it's a basic human right, I feel we shouldn't allow housing to be an investment.

As a Canadian I haven’t heard the government declare housing a basic human right, do you have a source?

Who are you willing to have thrown in jail in defense of that right?

To be quite frank, if there's one thing in the world that has the potential of making me a communist, it's the current state of the global real estate market.

This is a cheap sentiment to express. You want righteousness points, specify the system by which you will choose who gets which housing. See if that stands up to scrutiny.

Found the landlord. Also, you have made quite a few assumptions there, friend. There are several good ideas listed here, including raising taxes on unoccupied homes.

This[1] video by ColdFusion talks about a similar problem in the US in which Housing market is now being seen as the next big bet by the Wall Street Firms.

In this scheme, a common man will not be able to buy/own any house but they can only rent it. It will be very similar to SaaS model in which Houses will be provided as a service.

1 - https://www.youtube.com/watch?v=gu4tC3px6mc

Fortunately, this is pretty easy to ban.

How?

Taxes, relax zoning laws, subsidise building of housing.

"Taxes" The classic an all-answer and all-solver of ignorant people. Bigger government is what you are saying.

Every time it only burdens the working class; the poor just want things gifted to them; the rich get richer. A 2v1 game.

Agricultural land is being bought up too. Small farms are being bought up by big agricultural firms.

Bill Gates and Michael Blurry (big short game) are heavy invested in agricultural land.

I don't know about other western countries but in the UK, homeowners are the election-winning group, and are considered a moderating force - being both workers and investors.

Lacking that group is going to have some interesting political consequences.

Those same waters are being tested in Canada too: https://www.cbc.ca/news/business/core-home-ownership-column-...

It's very depressing to see all the ways that society is breaking down.

This isn't new, nor is it only related to China. Mexico, Russia, many middle east countries, and whole slew of other places has poured billions of cash into Canadian real estate. It's done via regulated banks who turn a blind eye because there nothing illegal about how it's being done. The are skyrises being built in every major city in which 95% of the tenants are not Canadian, and they sit practically empty. Some city blocks are a virtual ghost town of empty buildings the most Canadians can't even afford.

Western real estate is the new gold. It's protected by the entrenched lawful property rights of western countries, so money made in countries without those rights are going to flow in.

Think about it. If you had made a few million based on your having positional power in a country where you would be jailed or killed once people found out what you had been doing, you'd get the money out to somewhere your descendants would have safe access to it no matter what happened.

Very few people realize that the western acceptance of blood money actually fuels autocratic regimes around the world and makes them much stronger. For example, Russian power elites have millions and billions in assets in the West. Hence, this new "cold war" with authoritarian Russia and Putin is a total farce. But those blood money will ruin the West, one day or another. Trump was the first major sign of it.

> Western real estate is the new gold.

If you think western real estate is nuts, Chinese real estate is even crazier. Those Wenzhou house wives supposedly got started locally moving onto the rest of China and now the western world. It’s probably way more complex than that, however.

> If you had made a few million based on your having positional power in a country where you would be jailed or killed once people found out what you had been doing, you'd get the money out to somewhere your descendants would have safe access to it no matter what happened.

If that hypothesis were true, then Chinese would be fleeing the Chinese real estate market for the west, which isn’t really happening. It’s more of an expansion (if it is actually happening in significant amounts of money at all, which is not proven).

then Chinese would be fleeing the Chinese real estate market for the west, which isn’t really happening

This is basic diversification. No one would expect them to flee the local market while it's still working, but buying some assets in foreign cities protects against the Chinese government cracking down on people owning multiple homes in the local market. It's quite sensible really.

It's easier to put the blame elsewhere than to look at your own failing systems.

That’s true. There is actually a lot of Chinese buying interest in my own Seattle neighborhood, but then I talk to who are buying…Googlere and Amazonians like me and my Chinese wife, it is the tech money that is driving real estate prices, at least here.

Vancouver might really be (or have been) about overseas money coming in, however. Like what we know happened in Hong Kong. I’m not sure.

I don't think it's trivially easy to get money out of the country, so that might be part of it. Another thing is that for many people, being able to buy any real estate is attractive, even when you don't really get to "own" it in the western sense, it's still a lot like ownership (you own it for some number of years then have to give it back IIRC).

To be sure, much of the money I used for the downpayment on my house in the USA was earned in China, so...there are ways to get it out. Foreigners follow different rules, however, but Chinese citizens still had $50k/year quotas they could use, over a few family members it added up, and that wasn't the only way to get money out.

China practices 99 year leases, although everyone is expecting those leases to be rolled over with minimal amounts of money. When that didn't happen on earlier and shorter 40 or so year leases (made before the current policy was set), the central government had to step in and forced them to be rolled over, otherwise the rest of the country would have panicked.

It might also be from the billions of unemployment and SBA fraud sent overseas during covid.

https://news.ycombinator.com/item?id=23213162 https://news.ycombinator.com/item?id=27480619

I think the housing situation in major Canadian cities is so bad, it is going to have clear detrimental outcomes to society. Starter homes in nice (not posh, subway access, good walk score) neighborhoods in Toronto are going for 2-2.5 million. The math on these are bad even if you made a profit on the condo you bought previously (which many people may not have made). The govt has made a series of very half hearted moves to try to quell the swell, but do they really care? Construction and the general housing sector is a major part of our economy now. This is not going to end well :(

I agree with posters who say that foreign buyers are the scapegoat. We need to start taxing real-estate gains on primary residences above a threshold (I thought the US did that). Also, the govt needs to take serious measures to break the assumption that housing always goes up double digits. Everyone I know thinks housing will go up .. this sounds like a recipe for collapse. People with little means are going all in on the most expensive real-estate they can find. Illegal suites (rooms for rent, basements) are rampant. The sort of side hustle I hear about are insane (someone boasted growing shrimp in their garage to supplement income).

Taxing gains on sales of primary homes just leads to fewer homes for sale and higher prices. The only thing that correlates with the price change is months of available inventory in the market.

There is no physical limit to the amount of houses. The best way to fix this in the long term is to flood the market with new housing inventory.

We need to remove restrictions and make it easy to build new high-density housing anywhere and everywhere.

The wealthy have the capital to find loopholes in any tax that is levied.

We need to punish the housing speculators with a supply surge.

In GTA, there is a limit for single family homes (with yards) that have access to proper public transit. I have no belief an entlightened govt can fix all these factors in my lifetime (wide spread efficient public transit, increased investments in recreational parks, etc.). We have a policy called the greenbelt, which was pitched as an environmental thing but has been at least one factor in this whole mess.

For any other Americans that were confused, GTA here is "Greater Toronto Area" and not "Grand Theft Auto"

Foreign buyers are a scapegoat in Canada. The real issue is that individuals/corporations with large capital bases are buying out many real estate properties, sitting on the properties for a few years for the value to appreciate, and then buying more properties with the additional capital gained by the real estate market going up. Real estate value is going up faster than mortgage rates which means you can expand you property holdings in perpetuity. It is basically a big game of monopoly which is unfolding in slow motion.

I firmly believe that housing is a social good first, and an investment vehicle second and so we should be taxing any property which is not the primary residence of the owner to equalize the playing field between those with a large capital base and middle class families who just want a stable place to live.

When the fed suppresses interest rates and back stops the mortgage market, residential realestate starts to look like risk free treasuries with a ~9% yield.

God forbid we have a housing market correction.

Government forbid we have a housing market correction.

If it looks like either the stock market or the housing market is about to crash, the fed will print unlimited amounts of money to prevent that.

The only problem is that the rational action with that knowledge is to buy in as soon as possible, with all your cash, thereby making the bubble even bigger. It's a death spiral of inflation.

I agree. Also sounds like a great way to transfer more wealth from the poor to the rich considering only the rich have the ability to quickly funnel most of their wealth between different types of investments.

Where can you get 9% yield on housing? Where I live, you can only buy houses at prices that are above what you can get back in rents. You are very lucky if you can get to 1% yields, which is below inflation and not technically a good investment. The only way it still makes "sense" is by speculating on rising prices for real estate. Which is not risk free at all.

If you buy housing all cash the appreciation and rent (net of expenses) could easily hit 9% per year. If you mortgage it you do pay interest which lowers the yield, but also need to factor in the increase in principal, and that the appreciation is net of your down payment + interest, not the entire sticker price (eg a 10% down purchase of a $1m home financed at 3% that appreciates 6% is actually a 30% yield).

No it doesn't. The interest on the mortgage can be as low as 0.5%, so even if you pay in cash, you would only be at 1,5% yields (with my generous example of achieving 1% yields via the rent).

The "appreciation" is not a given and not risk free at all. Certainly not 9% per year - for how many years do you think that would continue?

Yup. Housing is basically being treated as a bond that you can then make additional income off of by having someone live in said bond.

Home owners will be happy to hear this. Not yet home owners like me are screwed because rents to damn high and I can’t afford to save up for a down payment. Sorry bud.

They shouldn't be though.

What they don't realize is that the 'step above' them is getting way out their ability to move into, and they're getting stranded in the tranche they are in.

It's a big new problem with globalism that needs to be addressed.

I like not living in Canada anymore. It's depressing to think about how it got, but I've just stepped aside for a long while now and whenever I visit I'm just kind of shocked at how it doesn't get any better and instead just increasingly worse.

What place could possibly be better?

I've heard a lot of good things about Idaho.

I prefer tropical climes now.

It's good for home owners in the short term. In the long term it means everyone will spend more on housing, which limits the amount they can spend on everything else, which doesn't really help anyone.

Indeed. I had to move, and while I could sell at a high price, I had to buy at a high price in a frenetic market. This screams for regulation.

Unless you own more than one home, or want to extract your equity as debt then increasing housing prices are paper wealth you will never be able to realize until death.

Why. Because while your home went up, so did everyone else's, you still need a place to live so if you sold your home you could only buy another home that was of equal value to your current home thus making it is net transfer not a gain...

Yeah it’s called “being in the market”. But you do realize it as you downsize one day when you don’t need as much space, etc. you can also move to a new market so maybe you lived in or near a major city at one point and want to move elsewhere - there’s a good chance your gains from one market can cover all costs in another.

For instance people moving from the Bay Area to Austin, Portland, and Boise.

> or want to extract your equity as debt

Pretty tempting to do just that when your house value doubles in 5 years and you're left with six figure equity with near zero interest rates, in an investment market that is manipulated to avoid any serious correction or recession.

Personally, I prefer to avoid debt, but the past ~20 years has been a perfect environment to maximize leverage in home equity and invest it into more real estate, or the stock market.

It's not good for home owners at all. As property prices go up my property taxes also go up, but my salary does not. It's not like I can sell up and make a pile of cash, I'd have nowhere to live or have to buy again in the same market. And worse, if you buy into this hot market and then inflation crushes it with rising interest rates then I risk being underwater and looking at refinancing with numbers that I can barely afford.

The market is fantastic for investors though. A property portfolio delivering 30% growth in a couple of years whilst also grabbing sky high rents or AirBnB sure looks tempting. It's a good time to start a disruptive turnkey property management business.

At least it doesn't put us underwater on our mortgages, though. But yeah, I'm definitely not looking forward for my next property assessment. I expect I'll end up paying at least another 25% on top of my current property taxes, simply because every house around here now goes into bidding wars.

Living in Kitchener-Waterloo (an hour from Toronto), our housing rates have gone through the roof with rich Torontonians buying our stuff for 100-300k over, but who the fuck is buying their extremely overpriced stuff?? That's what we always wonder. Who can afford to live in Toronto or buy anything there? Their jobs don't pay that much more.

There is no "more expensive market" or "secret Ultra-Toronto" that can move downstream into Toronto. Is it just "there are a lot of rich Canadian investors" (seems unlikely) or is it mostly just people overseas buying and leaving places empty and/or hoping to maybe rent it out?

Something doesn't seem to make much sense. What Canadian investor is going to think, hmmm, I'll bid $400k over on a 2.5MM home that no one in my country can afford in the most expensive city and it's not even that nice. Who is going to buy it from them as it goes up? Anyone in Canada who could possibly afford it now, or in the future will already have a nice home, unless are just swapping around for a different location. There has to be some 3rd party upstream they know will buy it out from them, or else they will be the sucker who hit the ceiling with a property they can't sell.

It's almost entirely foreign buyers, as investments or for money laundering.

If Trudeau would rub some brain cells together, we'd get changes to the law that would limit foreign real estate ownership, and close loopholes allowing the banks or other Canadian investment firms to hold real estate on behalf of foreign owners.

> If Trudeau would rub some brain cells together

What about the votes he needs from certain communities?

https://globalnews.ca/news/4853439/karen-wang-liberal-burnab...

Approximate M2 growth since the start of 2020:

USA: 33% Canada: 23% UK: 17% Euro Area: 15% China: 15% Japan: 13%

WhERe iS aLL thE MOney ComInG fRoM guYS?

Let me summarize the next four replies before they are posted:

“Oh but it’s ok because velocity of money plummeted!!!”

Ignoring the fact that there has never been an instance of money supply increase in relation to velocity of money decrease that was reversed once the velocity eventually returned to normal.

Those money supply numbers you posted are the new normal now.

Not only that, but those governments also subsidize things like 30 year fixed rate mortgages with government guarantees.

So not only is there more money burning a hole in people's pockets, the artificially low rates create massive leverage.

I wager that if home buyers had to convince private hard-money lenders to give them 30 year mortgages the rates may increase. (Imagine if houses were denominated in gold)

London has similar problems. Apartment blocks that have a hundred flats, but only 5 are occupied all year round. The new ones at Battersea being a good example. The others owned by shell companies that are speculating and investing, or just plain hiding ownership and tax dodging.

The UK government have made some small steps in trying to associate property with people via proceeds of crime acts, and the financial conduct authority, but it is woeful.

I do not think successive UK governments have had enough of a long term strategy to do this consciously (though I would love to find out it was a deliberate), but I think the Battersea / Nine Elms development is a fantastic way to exploit the surging demand into Western real estate.

Tens of thousands of flats have been built almost entirely funded by foreign investment. If/once the market collapses on whatever time frame, London now has significantly increased housing stock almost entirely on the back of foreign money (whilst providing income for local builders and suppliers). Already foreign owners are taking huge losses on their investment and I expect this to drop even further. If price drop to a reasonable level for your average Londoner, this will be a great win.

On a side note, that entire development is an architectural disgrace and as you note, for the time being a ghost town, parking dodgy money from abroad.

Nine Elms is horrific, isn't it? Designed by supposedly some of the world's best architects. Where the votes were presumably cast by other architects and not the general public.

Also, that development, and others have "poor doors" around the side or back for the non-penthouse owning riff raff to use. Another thing that's completely wrong with these kinds of developments in London.

While using foreign money flowing into Western property to build public housing is a cool strategy, in reality it did result in some controversy: https://www.theguardian.com/artanddesign/2021/feb/02/penthou...

You can always build more houses, start new cities, its not a real problem. But a million dollars brought in, goes directly into the economy from a foreign investor, makes a country rich. Trading something that is low skill to make, into money that can be spent on all kinds of infrastructure and technology. So my only take on this is that how that invest money is spent by that country if its a net positive or negative. If it goes to a corrupt circle at the top, and bankers, then obviously its not benefitting the economy as it should.

That really depends on the net flow of cash and how it is used. Housing is bought specifically because it is a good investment with positive returns. This is money that flows back out.

I agree, municipal budgets should be going way up since they’re all funded by property taxes to varying degrees. That means there will be more money for investing in infrastructure, new projects, etc., that of course benefit every resident.

> You can always build more houses, start new cities, its not a real problem.

Of course, but that would devalue the existing housing stock, which for the vast majority of politicians would mean a loss on their real estate investments.

Why would they give a shit about young and future people being able to afford a place to live, when they can make a mint by denying these people housing?

I don't think you need to look far to figure out that foreign cash purchases are coming from... foreign rich people who realize that housing is the best long-term investment possible.

>Canada’s Business Immigration Program, specifically the investor stream, is a primary cause of the housing crisis, according to Gordon. This “cash for citizenship” program has allowed wealthy individuals (net worth $1.6 million or higher) to come to Canada.

https://the-peak.ca/2016/05/vancouvers-housing-crisis-caused...

My comment is just about how 'unknown' the funds are. I think https://news.ycombinator.com/item?id=28004444 is a better comment thread for criticizing this practice.

That program hasn't existed in years.

Doesn't it still exist in Quebec?

Don't think this program exists anymore, searching around found Business Immigration Program but its for people who want to start startups but they also have to have like a designated VC fund or designated angel investor group or designated incubator.

Source: https://www.canada.ca/en/immigration-refugees-citizenship/se...

Canada, and the USA, need to make buying our land harder, especially for foreigners.

In the USA, all it takes to buy a house is money. A wealthy person sitting anywhere can buy a home with a email, and a few clicks, or a phone call. All it takes is money.

If a person can't legally live in the home he bought, why are we selling it to them? I know the answer, but don't like it.

I don't know of any other country that makes buying our land so dam easy.

(I only know U.S.A. realestate, but care about Canadians.)

New Zealand did that a couple of years ago. House prices continued to skyrocket as if nothing had happened. It's local people who keep buying them and paying through the nose.

Imagine if a rich king comes to a small village and insists on buying a loaf of bread from the baker for $100 rather than a penny

Now the butcher knows the baker is hungry and has $100, so he ups his prices to get the most value

But the butcher needs knives and the blacksmith knows he can afford more now too

The kings left town but the damage has been done, will probably take some time for things to go sane again

they call it inflation...

It’s inflation in part but low interest rates drive it more.

AFAIK they left a huge loophole: an NZ company can buy all the property it wants and foreigners can start or buy stakes in these companies.

> Canada, and the USA, need to make buying our land harder, especially for foreigners.

Who should be allowed to buy a house: Markus, Swedish born foreigner who moved to America with his wife to work at an academic research lab or Liang, born in Saipan thanks to birth tourism, using the money his parents managed to get out of China to grab as much real estate as he can.

It's not just rich people, unless by "rich" you mean "people with savings".

I looked at the investments my bank made with my savings, and IIRC a chunk of it was invested in real estate companies. So I, a middle-class person who cannot afford a house, am giving money to my bank who is giving it to real estate companies to buy more apartments. And given how much apartment prices have risen, it seems like my bank made the right call for its customers.

Note, the post is an interview with the head of Transparency International, who got data from 1.4 million transactions from the main land and mortgate registries in Ontario.

The article isn't just some opinion about "foreign buyers," with racist undertones, there is a real pattern and data.

They found Toronto matches matches markets around the world that real estate is being bought by companies, with cash, and through unregulated lenders. Given their general agenda, they have conflated holding companies with all foreign companies, and they are suspicious of private enterprise in general, but as a stopped clock they appear right on this issue.

Their transparency issue is real money laundering for a change instead of capital flight, and even though I don't care much for their usual agenda, for them to criticize the housing market in Canada is accurate.

Casual BBQ conversations in Toronto are as likely to be about real estate prices as they are to talk about how many of the neighbourhood businesses are foreign money laundering operations. It's an open secret, and most milenials are priced out of the cities they grew up in. Not only are investment banks churing real estate (see Blackrock buying homes search) with Fed driven liquidity, Canada's political parties forfeited their national focus, and instead spend their time courting foreign leaders and their diaspora networks to get dodgy campaign funding sources and voting blocs. The parties realized it's easier to raise money from and pay off constituencies to stay in power in foreign countries to work votes here because there is no transparency once aid, loans, financing, and other money vehicles leave the country.

The logic appears to be, "why should our globally elite and governing classes be subject to the opinions of working class people we disagree with in these mere nations when we can just import people and money dependent on our policies, both from educated and wealthy and poor dependent classes, and then manage them to keep us power." It's post-national policy. The parties run offense by calling everyone they disagree with racists, and the whole thing is absolutely rotten. A big part of that is attracting capital flight from other countries into assets like real estate and lax beneficial owner enforcement and turning a blind eye to it in return for political support.

> The logic appears to be, "why should our globally elite and governing classes be subject to the opinions of working class people we disagree with in these mere nations when we can just import people and money dependent on our policies, both from educated and wealthy and poor dependent classes, and then manage them to keep us power." It's post-national policy. The parties run offense by calling everyone they disagree with racists, and the whole thing is absolutely rotten.

Sounds like you need a new party.

Every year 100s of billions dollars of black money/corruption money goes from the 3rd world countries to the rich countries. Terrorist financing got the west to monitor the movement of black money but they still have left loop holes and were not going after developed countries and other tax haven countries. Panama leaks and other data breaches have started shining a light on this and the developed countries have had to do something.

It's global warming. Same as New Zealand. Money is easy and smart money is flocking to places that will be survivable in a decade or two. This is very easy.

Not really. Sharks are smelling blood in the water everywhere, since nowhere is building enough supply. Guaranteed profit with that sort of regressive housing policy. Prices are rising in Miami almost as fast as the water table.

Siberia is a good place too - right now apartments and houses are very cheap.

They started collecting data on foreign purchasers and it’s maybe a few single percentage points. Canadians are house horny and willing to borrow from parents and absolutely max out payments to own a house.

Does domestic money laundering and illegal money have an impact? Absolutely, but blaming foreigners is laughable considering number of them.

Beijing has the strictest restriction on property purchase in the world. Its property prices had been declining for two years before 2020. It has had no new policies regarding real estate and loans since 2017. Yet its property prices has been rising since 2020, several months after the infinite QE the US starts.

So many saying it's a supply issue...

If it's a supply issue, more people would be homeless and without a place to live.

It's an affordability issue with a small portion of 'housing investors' pricing out renters from ever buying.

Higher supply would mean lower prices. By definition affordability issues and supply issues are the same barring some kind of regulatory capture or abuse of credit.

Credit abuse is subjective - accessibility to credit for all parties equally mean that it will continue to be profitable for property investors to buy up more and more of the housing supply without constraint.

Building 'more' housing is not the answer. Preventing people from holding real estate as assets is the solution. We don't privatise ownership of water or air - two basic resources for humans to survive. Privatisation of basic human necessities is dangerous and we'll see in the future how large scale private property ownership will continue to drive social issues. It's really just the beginning...

Holding realestate as an investment is the incentive for developing land and maintaining buildings.

I'm completing against the idea that 1 person can own 100 houses while the other 99 are forced to rent from that person.

Developing land is a no brainer. No need to keep making the rich richer while pricing out first time buyers from the market.

We can all afford to purchase water and there's no fear of it running out when investment is properly done to manage water as a resource. Surely we can do the same with housing so people can afford to buy.

>Developing land is a no brainer

Yes, because you can proffit by doing it.

I'd like to point out how nutty it is that this is happening all over the world now. I first experienced this in 2017 in Dallas, TX - now it's everywhere.

One thing I worked very consciously with my financial planner about was this sentiment that:

- My job does not facilitate staying in a place long enough to make owning a home a worthwhile investment

- I will probably never own a home because there are enough people that have a lot more liquidity than I do

We have now setup an investment strategy that has become more stable and effective than owning a home. Point being, this is a FP's bread and butter - engage them!

Tax tax tax. Everyone should be able to buy a property but its not fair if you sell for a profit and pay no Canadian tax as non-residents do.

Property taxes should also be extra high for non-residents.

I don’t disagree about using taxes to deal with this (though noncompliance and loopholes are a problem), but to clarify, non-residents pay tax on the sale of Canadian real estate. This is written into all reciprocal tax treaties. The only way out of this would be if the house was a principal residence, which is the same rule as applies to residents selling their principal residence.

Apologies for all the residence/residents.

Low rates allow high ratio mortgages(5% or less down) so all the rent needs to cover is 1-2% of that down payment to break even. After that the tenant works to feed the mortgage and gets zero equity. Fix? If you buy to reside in it = normal realty taxes. If you buy to rent, it is a business and needs to be taxed as such. Extracting money from the current positive feed back loop changes the equation and could eliminate this sort of rent seeking behaviors.

It says something about the state of the world that the instant that “state guaranteed wealth increase” became invalidated, the entire worlds elites united to purchase every single residential unit they could to keep profiting of the working class.

World war 3 won’t be fought over natural resources. It’ll be the rent slaves class fighting against the upper classes “right” to keep them in indebted servitude.

We need some policies preventing rent seeking on peoples primary residents.

An irrelevant sideshow. If they made housing plentiful and cheap then nobody would buy it for any reason other than shelter.

> If they made housing plentiful and cheap then nobody would buy it for any reason other than shelter

Do you feel that's a bad outcome? The phrasing suggests so, interested in why you feel that way.

No, it's the ideal outcome. Housing should not be an investment. You should just live in it and it depreciates. People should be able to make normal profits by building new ones. Nobody should profit from buying and selling old ones.

There wash a time that home ownership was considered a liability, not an asset (source: “Rich Dad, Poor Dad”.

That's a terrible source.

Why?

The whole book is self-help boilerplate wrapped around the advice to get rich by flipping real estate.

I’m not sure why that invalidates the point.

Not realistic. There will always be a constraint on the best locations and zoning laws, typically reinforced by the self-interest of landowners in those locations, apply a further constraint on the density of dwellings in these locations.

It's the zoning laws that aren't realistic.

In Breaking Bad, you go to Los Pollos Hermanos ...

In real life, you go to Toronto, or London, or any number of capital cities.

In my country, there are cheap houses in the countryside, and housing in attractive locations is very expensive. Perhaps the factor of demand is underrated in the discussion of housing prices.

Which country?

Germany

They say in the video that the report is based on 2008-2018 data. Do we know how the situation unfolded since covid started?

I mean all the farmable land will be up there in a few decades. Seems like a good investment.

Yeah foreign, untaxed, gray or black money is a very good source to buy houses. Meanwhile, as a resident and citizen, you're taxes 40+% and every coin is turned upside down because of "anti money laundering".

Realestate and banks are the biggest fraud ever.

$1.53T was born from nothing and the should go to somewhere

I honestly don't see a way out until boomers start dying. The 2030s will probably see a large decline in the housing market

How will that solve it?

I thought that the baby boomer population was significantly larger than their inheritants, however, it seems GenX is only slighter lower in population size. So my theory doesn't hold.

That will always just be a slow bleed. Some are already selling and moving to warmer climates. https://en.m.wikipedia.org/wiki/The_Villages,_Florida

There should be a global rule that non-residents can't buy property. Homes should be prioritised for living not investments. It's a drag on the global economy with so much money being tied up in unproductive assets which in turn soak up even more money through rent seeking.

Nah, let them invest. What we need is adding vacancies to the social housing pool.

There is no space for that without radical rezoning and densification. The alternative is every city turning into massive urban sprawl which is entirely undesirable. If you are suggesting forcing private investors to make their properties available to public housing stock then I’m not sure why that would be an improvement without serious rent caps in place.

A colleague told me about the setup in their home country some weeks ago, I _think_ that was the Dutch one, excuse my fuzzy memory... Once your €1500 tenant leaves, you have 3 or 6 months to find the next one. If not, the city will offer your place in parallel as social housing and you'll get €400 (flat rate for the whole municipality per size band) if that gets filled first. On a three year contract. Makes for a very good incentive to meet the market.

It's good and I wouldn't complain if this was an outcome however better yet would be a system that allows people to buy their own homes. One of the major pitfalls and imo systemic national security risks in Europe are the high income tax rates. This coupled with foreign investment in the property market means that regular Europeans are effectively priced out of the market with no way back in. Long term this is a crazy risk to run for the sake of maintaining inefficient bureaucracies that don't remotely cater to the pressing needs of citizens.

I'm afraid that even without the foreign investment one can't win this. Europe still sees a minor population growth. More importantly, there are large migration flows between countries, regions and to cities in general. This means that even in places with no/very low foreign ownership and virtually no vacancies, you still have runaway markets. Dublin is a good example of that. Same stands for almost every place where I lived. With the exception of the French Riviera, where the runaway market is indeed fuelled by vacancies, likely foreign-owned.

I'm from Dublin and Dublin's problem is two fold. First of all, many of the politicians are landlords so have a massive conflict of interest. Second is zoning laws are outrageously bad. Urban sprawl is the name of the game.

That's totally nuts and it's not the Dutch system.

That's not what rent seeking means

Chinese money, I guess.

Meanwhile, 3 provinces in China keep facing unexpected power shortages from their hydroelectric dams, but the airport keeps landing 747s full of GPUs.

Why the downvotes? This is old, well reported news: https://www.cnbc.com/2021/06/21/bitcoin-btc-price-drops-on-c....

It's unrelated to the article, and is likely to spur even less related comments.

It is related to the article. Where do you think these mystery billions are coming from?

Surely a role played by Chinese Govt. Why no one talks about that?

Actually CCP is doing everything they can to stop the outflow of money. CCP wants to keep the money inside of China but not very successful. There is no rule of law in China and people with money in China want to put money in place where government can not take it away from them. As CCP tighten control, money will keep flowing out by any mean possible.

This. China has no safe place for people to save the money that they have made, by whatever means. Anywhere you put it in there, it can go away in an instant if the government wants to take it away from you. We don't understand this in the west, but whatever you have, in some countries, is fair game for people with friends in high places. It's not just China, but Russia and many other countries are like this. If you make enough money to pique the jealousy of the wrong person, You will end up in jail and your savings grabbed.

Long term it's a good thing for the money to go into western real estate. Its value in the global market is being correctly recognized. Short term it is bad for local home buyers who end up priced out of the market.

> Anywhere you put it in there, it can go away in an instant if the government wants to take it away from you. We don't understand this in the west

Divorced or divorcing men understand how this can happen in the west.

As far as I know this applies to anyone divorcing; divorce laws apply equally to spouses these days, not just to men.

That may be how the laws are written, but that isn't how they're enforced in practice.

Divorces are initiated about 70-90% by women (I've seen numbers quoted throughout the range depending on the time period and the demographics being looked at), women end up with the kids 80-90% of the time, and so on. Almost all spousal support is awarded to women. And so on.

The usual argument about the kids ending up with the mother because the father doesn't want more time with them is often offered without much questioning, but the same people that argue this would not so easily accept similar arguments to explain differences in incarceration rates between people of different ethnic backgrounds, for example.

There are severe and onerous asset forfeiture laws in many Western countries, not to mention the catch-all magic phrase of "eminent domain". If any government anywhere wants something from you, it will take it. You will not be able to outlast via the courts or whatever legal means you think are available, rather you'll likely burn all your available finances fighting it.

False comparison.

Eminent domain requires compensation.

In some of these countries your asset will be take from you and you have no remedies.

Ironically it's people trying to get money away from the CCP etc. that is driving this.

House prices were soaring in Canada during the pandemic and the media couldn’t blame foreigners for once because of travel restrictions. Also the news reported on the rise of anti-asian racism. They should look in the mirror for blaming high r.e. prices on foreigners when it was proven that they only made up a small percentage of the market.

Most overseas buyers don't actually visit the property before buying it. In fact, it's pretty common to buy a property before it's even built.

I live in HK and receive brochures every few days for foreign property in Canada, the UK and Australia. If you have the cash, you can pretty much visit the agent and buy the place on the spot.

This has to stop, unfortunately a lot of people like the money coming in, and politicians often don't have the most effective policies.

I think the inflow is fine, but there should be hefty taxes associated with the fact that the property is made valuable by the civic infrastructure in place in the country which only citizens are paying for.

One thing they could do is build apartment buildings in less sensitive areas, and designate them as 'foreign ownership allowed'.

Literally buildings would get built and remain largely empty, as a form of 'investment' (this happens in China) and so long as it wasn't affecting local prices too much, it'd be fine.

I wonder if they should pick a spot in Southern Ontario and declare it such a 'zone' where they only build 30 story buildings for this purpose.

Of course, the nature of the economic waste is laid bare.

It might be more appropriate for the local governments to be selling a special kind of bond or some other financial instrument designed for this purpose.

If idiots want to pour their millions into worthless concrete to inevitably lose everything when the wave of free money from central banks recedes, leaving innumerous almost free homes in the market for everyone to buy - why any sane person should object?

Notice that there is no comparable craze on the stock market. P/E has gone somewhat up sure but it's just out of anticipation of record corporate profits in the coming quarters - which is not unjustified given rampant inflation and deficit of everything which everyone is now making tons of money trying to fill.

Because smart people never invest in real estate (at least not in residential real estate, especially not in single family, detached houses).

In Russia, we have a proverb - "best thing to do about fools is not trying to stop them".

> If idiots want to pour their millions into worthless concrete to inevitably lose everything when the wave of free money from central banks recedes, leaving innumerous almost free homes in the market for everyone to buy - why any sane person should object?

Because everything you said is completely wrong and it takes the already extremely tight housing market to an absurd extreme where no ordinary person can purchase lodging to own. It would take a lot more than a monetary policy tightening to crash Vancouver or Toronto housing markets given how many people are moving in every year. Probably something quite cataclysmic

Then again - if people are moving in to already tight place, who is to blame? What are the probable ways of "tackling" it you suggest? Soviet-style "closing" of a place where the Party will decide if you are eligible to buy? This is how they prevented Moscow from overpopulating in the Soviet Union, resulting in doubling the population in the decade once barrier fell with the end of Communism.

If anything, it's a source of free money for the residents: sell your current house for millions and move out somewhere cheaper, maybe retiring early as a result.

If you don't want to people to move, analyse the reasons that push them to move and see what can be done about it. Real estate prices are just an indicator. It's stupid to "tackle" indicator rather than underlying reason.

What are your primary investments? Do you own any real estate?

I pour pretty much everything into S&P 500 plus have some cash for balancing. Yes i bought a few apartments when i was basically a kid in my early 20s but not in the last 15 years and not planning to ever buy any real estate unless i'll come to be able to do it on a proportion of my income that lets me completely ignore "investment" consequences of such a decision (say <6 months income).

Yes commercial real estate is a good thing. There are good rental yields on it. It's not generally a gamble. But entry ticket is high there and every decision is important unless you are billionaire, and even then it looks too similar to stock picking, even worse than that. You need to really understand shit about real estate and research a particular place you want to buy and it's surroundings very well, too easy to make a stupid mistake.

Also residential real estate might make sense but not when you buy a house for yourself. Crappy cheap 1-2 bdr apartments to rent out work OK, and they are a lot more liquid too. But it looks too much like "job".

Single family house you'd want to live in, clearly "no". It's almost always a bad investment decision.

Thanks for your insight!

> Single family house you'd want to live in, clearly "no". It's almost always a bad investment decision.

Is this still true, though? Asset management companies - most famously Blackrock - are now pouring billions into acquiring exactly that: single family homes. And with prices growing in the double digit percentages every year across North America, it seems almost guaranteed in every metropolitan area.

I can be convinced otherwise, but I'm worried we are returning to a time of renters and land-owners, and I'm not sure I want to be a renter for the rest of my life.

But we've been there so many times already. People complained on precisely the same 15 years ago, then prices crashed. There can't possibly be a way that (cyclically adjusted, long term) mortgage payment vs income will sustainably rise.

Just hang in there and in 3 years we will hear complains about "millions of people who bought houses are now with underwater mortgages because Fed rates are up and thus prices are down, and are being massively foreclosed". Because people are negative. No one will ever complain that "you can make millions by selling your house you bought on the cheap 20 years ago" or that "houses are easy to buy" (10 years ago or will be again 5 year from now). You will only hear complains from gamblers who lost the gamble - bought at the wrong moment of failed to buy at the right moment. But, in the end of the day, both are just gamblers.

We have reliable data on inflation-adjusted home prices since 1953. In 1953, median home price was $18K which is $180K inflation adjusted, now it is $314K (https://dqydj.com/historical-home-prices/). Mortgage rate in 1953 was 5% (https://www.jstor.org/stable/41833636), now it is 3.01%. Which results in 30-year payment being $1325 vs $966.28 per month or only 37% higher.

Now remember that median home size in 1953 was 917 sq ft and it is and it is 2333 sq ft. now., a 2.54x growth, and that real per capita GDP has grown 3.44x since 153, and feels like entire hysteria is completely made up. Which means, average productivity of US worker now buys more than 6x floor space (with mortgage) or about 5x (without mortgage), compared to 1953 which wasn't a time of housing shortage either.

We can't be "back to times of renters and landowners" because if that is the case - people can't buy places and have to rent - it would mean that landowners are not making a good return on their investment. Why would they continue to do the same thing? But as for me, i'm fine renting my whole life. A mediocre place is no better than a rental - a nice place takes a fortune to maintain and i'd much rather retire 5 years earlier than do that. Uber rich mostly live in rental condos and penthouses these days (while they may own lots of real estate, just not the kind of it they'd be ok living in).

To put things further in perspective, if you put same $18K into S&P 500 in 1953, assuming 30% dividends tax and dividends reinvestment, now you'd have $13.3M, or $23700 per month after-tax dividend income (averaged), which is more than enough to rent any place, in any location. People who are saying that something was wrong with housing prices really need a reality check.

(caveat is that ETFs did not exist till 1975 so it wasn't as easy for a small-time retail investor to put $18K into S&P 500 in 1953, so this is not entirely apples to apples comparison).

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