Canada’s Real Estate Market Is a Giant Pyramid Scheme
survivingtomorrow.org
survivingtomorrow.org
I’m moving to California later this year and decided to sell. Similar properties are going for $1.2 million. Buyers are waving all conditions. My realtor tells me most places have 20+ blind bids and he hasn’t had a buyer add an inspection condition since the pandemic.
If you look at the sales data it makes no sense whatsoever. Sales prices are all over the place. Huge swings of hundreds of thousands of dollars for similar properties.
I’m making more money sitting in this house than I do at my well paid tech job.
I wonder which party is supporting these measures and why.
The foreign money laundering has been known for 20 years and none of the major political parties has done anything to slow it.
What matters is foreign capital flow. Companies and “convenience passport” holders can still purchase on behalf of someone else.
This echoes what I’ve been told. Founders at a startup I spoke to were from Switzerland and Canada. Tried raising capital in Toronto (where Canadian finance is happening) and Vancouver and the response they got was lackluster.
Investors basically wanted to match the returns they would get simply by parking their money in real estate, as well as the (non-existent) risk profile. This was especially true in Vancouver where they actually had someone rescheduling at the last minute because he was involved in a bidding war for some property in partnership with a foreign buyer.
So they ended up coming down to the Bay to get funding. I assume most of the owners are here in America now (they are still quite early stage, at least, the cofounders are and so are most employees).
Tech has always been a uphill battle in Canada.
Very depressing as my family is in Canada and I consider moving back, except my cost of living will be comparable (NYC), and my salary takes a 50% cut and becomes the absolute ceiling (in NYC I can still double up). And aside from downtown Toronto, the GTA is a suburban wasteland.
Why would you do that?
It takes similar logic to claim there's a mass migration away from places with high housing prices.
Prices are high because more people want to live there than want to leave.
If more people wanted to leave, prices would fall.
That's not a pyramid scheme, it's supply and demand.
Or it could be super-low interest rates and banks giving mortgages to every stripper and then flogging them off to clueless investirs as AAA-rated securities like they did before 2008.
Or it could be because we allow foreign 'investors' to launder drug-money, blood-money ads tax-avoidance money by buying luxury apartments by the dozens and leaving them empty and unused.
Or it could be outright collusion and fraud by developers or market makers. Or a hubdred other things economists write papers about - beloved 'free market' is more than one equasion.
While credit cards and credit lines are doing better, mortgages have increased, causing debt to income to be very high.
Wh...what is this? Do strippers not deserve mortgages? What a weirdly specific example.
somewhat NSFW: https://youtu.be/MesrrYyuoa4?t=181
[1] https://news.ycombinator.com/item?id=30208224
[2] https://news.ycombinator.com/item?id=16417623
A nice condo in SF or NYC is also likely to get you that mansion in Georgia.
https://www.zolo.ca/toronto-real-estate/trends
Thank the Federal Gov/BoC for destroying the dream of ownership for millions.
To be fair, you showcase King, but King is a very affluent community and thanks to the 400 running through the middle of King Township, it is a bedroom community even for downtown Toronto. The homes for sale in King tend to be in the 3500 to 5000 sqft range and while they are super expensive, a 5000 sqft house, an hours drive from Manhattan, with a yard would cost as much or more in USD than a house in King for CAD.
You say this is a government / bank problem. Should the Feds (CA and/or USA) have kept interest rates high during COVID to keep house prices low?
Most of Canada is sparsely inhabited or uninhabitable. Unlike the US, there are far fewer places to live besides the major metro areas.
SF and NYC are not good comparisons either. Yes, they are expensive and 90%+ of the country could never afford to live there—that part is the same—but Americans have so many more options. There are small- and medium-sized cities all over the US.
Even small towns are well >$600k for rundown detached houses here.
There's multiple considerations. For example. If you need access to quality healthcare for certain conditions, you'll need be limited in cities you can reside in/near.
Even if someone can survive the isolation living in the north requires (and the $7 heads of lettuce) there often isn't many options for earning an income.
British Columbia is absolutely massive but it's all mountain. The places to build are already built upon.
There is also a knee-jerk reaction across north america to any density beyond single family homes automatically being glass and steel high rises that block the sun. What we really need is missing middle properties, like tri- and quad-plexes. Low and mid rise apartment buildings with plenty of 2, 3 and 4 bedroom units. A lot more density than we have in suburbs now, but not crowded or packed.
Montreal is one of the few cities in north america that actually has that missing middle housing. It's also the only metro region in Canada that has both mostly contained sprawl and been relatively unaffected by the housing crisis. This is not a coincidence since people have all sorts of choices about what type of housing to live in that fits their budget and lifestyle instead of ones forced by extremely limited zoning options.
I am sure many others prefer lower rent or not being homeless
From the government's perspective. There are many factors for not building and improving remote towns. Some are: a) climate change (vehicles, heating, trucking and more) b) lack of infrastructure (gas, roads, railroads, healthcare) c) lack of budget (most of Federal revenues go to redistribution payments)
The biggest issue I've noticed in Canada is a lack of will. Ibn Khaldun noticed later in a nation, citizens view the function of government as a means to provide leisure. Western Civilization is obviously going through a time of major upheaval. The 1950s - 1990s were an aberration, I don't think we're going to see those standards of living in the future. We can't expect large scale shipping routes to remote locations, so people can live in detached housing. Future housing will likely be large scale, high density, low sqft apartments designed for maximum efficiency of energy and infrastructure.
My thoughts are the nation technically doesn't need many people living in rural areas. The collective pursuits will win over the individual in the future.
Now, whether we need new cities is a separate question.
In Canada where taxation and housing is expensive, the complaint has been that fertile landed is being used for urban sprawl.
One potential solution, that's rarely discussed, is to build cities in the North adjacent to large bodies of water. With access to shipping routes, lower taxation and superior infrastructure to make up for the adverse affects of weather.
You may argue the economic incentives and capital aren't there. I'd argue there's a massive misallocation of capital and the economy is fundamentally broken, but that'd be a lengthy discussion.
The easy way is to provide dirty water, shabby schools, and expensive food, but we do that already and people aren't exactly flocking north.
Where is this? As an Albertan my experience isn't even that in the city.
There’s this myth that america has all this land and space and that causes this or that, which is partially true, but the reason why Toronto is expensive has nothing to do with the fact that it’s very challenging to live in the northern reaches of the country. Canada has 1/10th the population of the US and fewer people than the single state of California. There’s plenty of space within the few major cities within the country.
For another reference, there are more people living in the New York and LA metro areas than in all of Canada.
It's entirely possible in the US to rise to the top of most industries without moving to NYC, Chicago, or LA. It's not possible to do so in Canada without moving to Toronto, Montreal, or Vancouver (plus Calgary/Edmonton for energy).
This is a story familiar to every Canadian, and to many Australians and Britons:
Mid-career executive accepts job offer in the US in some place like Dallas, Phoenix, Atlanta, Oklahoma City, or Tampa. Is excited about the opportunity and the raise in salary, and curious about living in a different country, but a little nervous about moving to a "right wing Republican" state "without healthcare".
A few months in, the reports back to friends and family change. More and more mention of the "amazing" house they found in the suburbs with an outdoor pool (!) that is so much less expensive than in Toronto or Vancouver, the "fantastic" school the kids attend with sports teams and cheerleading and other afterschool activities, and—especially—how unbelievably cheap everything is at the supermarket, mall, and gas station.
That family is never moving back to Canada. This happens over and over again.
(Also, NYC/Chicago/LA are cheaper than Toronto/Vancouver, anyway. A Canadian expatriate in the US reported recently that her home in Fairfield County, Connecticut (very, very upscale NYC suburb) is cheaper than GTA.)
Also, I remember 2015 Hong Kong and thinking it’s crazy that a small 400 sq ft flat would cost over 1 millions or avg persons income for 18 years. Fast forward now Toronto housing is pretty much at that point. Also keep in mind you get taxed upwards to 56% of your income if you make more than 220k
Hahahaha. Ask how hard it is to integrate in France when you're from Québec, so someone who's not even speaking French natively? Good luck, you'd have better luck moving to Quebec City.
> Location-independent entrepreneur friends can buy a three-story chateau in the French countryside for less than the price of a single-detached house in a steeltown dumping ground like Hamilton.
Good luck maintaining that.
That’s like saying people learn (American) English. At least, from what I was told they don’t differentiate the two at the French schools here in SF.
> Ask how hard it is to integrate in France when you're from Québec, so someone who's not even speaking French natively? Good luck
People from Quebec told me France was a very welcoming place.
In SF, they certainly teach Standard French. FWIW, I think that the differences are simply that Quebec uses a lot of old (like 17th Century) pronunciations, and a lot of distinct vocabulary, along with its own regional variations.
Consider learning Quebec French equivalent to teaching English exclusively by reading works from around the time of Shakespeare. You could probably get by but you need to adapt if you step out of that world. Walking around saying “thou” would get you strange looks for sure. We would read Quebec literature at school, but there was often new vocabulary.
If you go from North America to the UK you’ll run into plenty of new vocabulary there too.
I know enough French to hold basic conversations and other than a different accent I didn’t notice anything that different. I mean, not more pronounced than English from the UK or Texas. The French Canadians sounds a little bit like Swiss to me. They told me it should be impossible to disambiguate in writing (except when one uses Euros!).
Doesnt make sense does it? But what if the underlying problem throughout the article? The overall PRICE of housing.
What if housing is only just a metric of the problem? Debt is money. Debt is generally speaking housing and transport. They will show the problem quickly.
What if it's the currency that's collapsing? https://tradingeconomics.com/canada/central-bank-balance-she...
https://tradingeconomics.com/canada/money-supply-m0
https://tradingeconomics.com/canada/money-supply-m3
These are often disregarded as not showing the whole story, but what if they are showing the whole story?
https://tradingeconomics.com/canada/private-debt-to-gdp
Canadians are 304% in private debt to gdp.
https://tradingeconomics.com/canada/government-debt-to-gdp
Canadian government debt has jumped remarkably, but they also haven't been tabling any budget and reporting on this debt anymore.
https://tradingeconomics.com/canada/government-debt
Yes you see that right, the basic income the Canadian government over covid basically increased debt by 50% in a single year?
Balance of trade has been negative since the financial crisis: https://tradingeconomics.com/canada/balance-of-trade
Lets not forget our subnational governments are also not reporting on their debt anymore.
https://en.wikipedia.org/wiki/Ontario_government_debt
What if the currency is in collapse? The governments would know it and their immediate action would be to stop reporting their financials? Obviously tremendous debt held by everyone and government is the cause.
Here's the playbook: https://theeconreview.com/2018/10/16/how-soros-broke-the-bri...
Good luck.
Soros paired the GBP with USD because the bank of England was having a difficult time defending the pound. The USD was not also at risk. It was completely unrelated to the situation happening in England. But if both the GBP and USD fell, Soros would not have made a profit.
You're right, Soros borrowed pounds and sold them for dollars because he wanted more dollars. If you think CAD and USD are both going to collapse, then maybe think about the joys of your day-to-day life (coffee, heat, clean water) and use that as the other side.
It is very unlikely that USD collapses on a human life-scale without major disruptions in those supply chains.
But as always this is not investment advice, because I disagree with the premise.
On the other hand, it's easy to bet on hard assets (like real estate) and taking on debt when inflation is so high and rates are so low. It has the added benefit of not being sophisticated, requiring neither a finance nor an accounting degree.
If you think that interest rates are low and housing has a lot of reasons to inflate going forward, then I think we agree you're acting rationally, but that has almost nothing to do with 'currency collapse.'
All I can do is point to the failed mandate.
Literally everyone I know is doing this. Crazy mortgages and all money into inflationary resistant assets. Gold, Crypto, etc.
i think, what we're seeing here is housing has been made nearly impossible to build by regulation and zoning. Also, large imbalances between where jobs are and where places to live are, exacerbate the issue immensely.
Over the course of the last decade, I've come to accept that things are the way they are because many many people want it that way. There is large scale support for ever increasing housing costs among the voting population. this is because most voters own real estate and they simply want to those values to go up and up forever, regardless of the consequences to the next generations and the future of humanity. I had noticed this taking place in the US but I've been seeing this phenomonen happening all over the world in the so called "first world".
can you imagine the long term ramifications of such a taxation policy? the guy who made 2 million $ in equity gains over the last 20 years is paying 5 times less property taxes than the poor schmuck with 0 equity gain who just bought the same exact house at 4 times the cost. sure they're both paying a lot of property taxes but the one who just bought into the system, is paying a lot lot more.
It's still a very bad thing property values have gone up so much. This isn't free money; the cost is being extracted from young people and new immigrants trying to enter the market and it's turning our economy into a giant real estate shell game.
People complain about black rock buying everything up but guess what, regular homeowners are in it for the speculation as well and they vote in a way that gives black rock outsized power because they want their own slice.