Canada to ban foreigners from buying homes

No, they're fighting market inefficiency. A free market requires accurate and timely information to be efficient. This is literally people putting constraints on the market for what they are selling so the information is not available to one side, and the price is inflated.

A rational actor should walk away from a system like this, but if that's all that's available around you because of scarcity, you're forced to work at a disadvantage.

Banning this is akin to banning other anticomptitive behavior, such as collusion and monopolies. That is, it's up to the government to decide whether the harm outweighs the problems regulation introduces (regulation always introduces some level of friction and problems, you just hope to minimize them and maximize the benefits it brings) and is thus worth pursuing.

I'm all for building more houses in cities/high demand areas, but doesn't Canada only have a population growth rate of around 1%/yr? It seems like you could easily build your way past that without giving up the advantages of immigration and a little population growth.

Likewise if you dont know who you're bidding against, how do you even know the bidder is even real (foreign or not)? Transparency is good thing.

While there may be some "scarcity" not having full transparency and realtors not in alignment with their own clients needs is a step in the right direction.

(I use scare quotes here because while I know we're not building enough but the current market has a fair share of retail speculation, institutional investors inflating prices, and homes held as purely places to mark money(non-owner occupied). Scarcity is real and building does need to happen, but thats slow and expensive. Millions of homes are kept empty or as poor speculative investments and thats a problem)

You could just stop there, it’s clear where your priorities lie. I’m not Canadian (and don’t worry I’m not emigrating), but I welcome a “crazy high” 1% population immigration rate and I don’t see a conflict with that and reasonable housing policy. Many major cities already see this kind of growth regardless of where people are moving from. We should be able to house and sustain that growth.

Limits on immigration don’t slow the growth, they just satisfy anti immigration attitudes for a while.

One of the problems is that once people buy into the system, their entire life's savings (plus often 4x more via leverage) is tied up in the house and the price of the house. At that point, most dont want more development, because they lose their life savings if home prices go down.

Each person entering this horrible system is forced to perpetuate it, or lose it all.

If the country can't figure out how to deal with a population growth of ~1%/year, the problem is not the growth, the problem is somewhere else.

In the last year, we've ended up #2 in 6 bidding wars (as disclosed by the listing agents) in one particular area of the GTA. In each case we reached our absolute max and wouldn't have paid any more.

Several times we lost by $100-200k, and once by $250k. These overpayments set new price benchmarks for the area which became sticky. To continue to be competitive, we had to make hard sacrifices to increase our budget throughout the year.

The fact that houses continued to move at the prices determined by these over-payments indicates there are some buyers at the higher prices. However, the market is very thin and the pace of price growth in this speculative market would've been slowed with open bidding.

Beyond the blind bidding issue, I don't know why people focus on foreign and large corporate buyers. Yes, they're scary because they represent potentially large sources of demand. But are they actually buying a large percentage of the homes? No. It's the smaller investors who speculatively bought 40% of homes last fall.

But we should definitely protect mom and pop investors, such as our housing minister wink

Real solution? Reduce the incentive for speculation among these groups by treating all gains on non-primary residences as income.

But because real estate agents are middlemen in the process, there's an incentive in a hot market to not act as an honest broker.

When the market isn't "hot", a realtor has an interest to move quickly. When the market is hot, they have incentive to move their own listings so they get both sides of the commission. In my case circa 2005, I bid $50k over list via the broker who was managing my home sale. The selling broker "lost" the bid somehow and sold it for $20k over listing price.

7% of 20,000 is close to 3% of 50,000. But... I came to learn later that the selling agent targeted a particular religious community hard, and did a hard sell on insurance, inspection, and even attorneys to buyers, and frequently yielded another 3-5% based on "spiffs" from those providers.

All of these inefficiencies and bad behavior add up and inflate prices.

Where there is money and little oversight there is bound to be fraud. It grinds my gears to think about this because I bought a house and the escalation clause went to the maximum. Now do you think that was purely coincidence?

In such a case, I’d predict a lot of partnerships (or whatever the lowest cost legal structure that isn’t traceable over time if not activated) would be bidding for houses. My bid as “123 Main St Partners” can be as public as you want I suppose.

Almost everything mentioned in the various comments here is a scapegoat. These all might contribute a little to the escalating prices at the margins, but they are not the root cause.

The root cause is that many capitalist societies have decided that purchasing a house is the most expensive and important investment most people will make in their lifetime. Therefore these societies gradually shape their policies to ensuring these investments continue to increase or else there are widespread repercussions. The end result is we have collectively refused to build enough housing to keep prices stable or decreasing. The prices need to go up. I don't understand why no one is willing to admit this.

All the other problems originate from this. The reason foreigners want to buy homes as speculation or a place to park their money is because governments are committed to ensuring that housing is a safe and profitable investment. It all comes back to us deciding that a basic human need should also be an investment that always is increasing in value.

Steering is a problem.

Peace-of-mind is worth a lot. Especially if the buyer is sophisticated, I might take a lower offer if it has the right waivers.

I also want to see mandatory home inspection, seems common sense.

It's a very manipulated and manipulable metric.

Just bring your inspector along to a showing or open house, etc. Owners won’t even be there.

In the case of Uber, supply (people who own vehicles) was effectively unlimited and independent.

Why sellers want to pay tens of thousands in commission in a bidding war environment is a mystery to me.

I don’t see how a blind system can take those factors into account to algorithmically select a single winning bid.

There's a theorem an auction design that says that, under some vaguely reasonable assumptions about bidder information, it doesn't matter what form you use for the auction. Open auction, sealed auction, even second price auction should all give the same winner and same final price: https://en.wikipedia.org/wiki/Vickrey_auction#:~:text=Revenu...

Though psychology comes into play in a bidding war, at least it's happening because the asset for sale is highly desired. It's efficient.

Auction theory has so many assumptions that it really can’t be applied to buying a home. The link above assumes the highest bidder knows[1] the highest price the underbidder would pay, which is extremely silly. Apart from the fact that if you know the highest price of another bidder, then the seller also probably knows your highest price, and the seller can just ask for the highest possible price, duhhhh!

Bidding (auction or blind) is used precisely because the prices are not known.

Personally I have been involved with enough home auctions and blind bids to know that there are huge information asymmetries or uncertainties. When you lack information, sometimes you need to make your best bid, and you might value a property a lot higher than the underbidder.

I would like to see more protection against lemon markets, but realistically I can’t think of a fair way to enforce that. Banks and insurance protect some people against doing stupid things.

[1] First price auction: “if each player bids such that they bid the expected value of second highest bid”

There are also tenders, which I don’t know much about.

And I have seen auctions where they set the reserve at a ridiculously high amount, and then negotiate with the highest bidder. A few years ago, one place I was underbidder at $280k (for something that I thought should go for about $250k), final bid was $290k, then vendor negotiated that bidder up to $350k! Another I was underbidder at $190k, final bidder was at $200k, then vendor negotiated them up to $250k.

The dirtiest trick that real estate agents do is to convince/pressure vendors to bring the date of sale forward. Sale goes through at a lower price, agent does less work and turns over their properties more quickly (which vastly enhances the agents yearly profits).

New Zealand restricted sales to foreign buyers in 2018, to prevent ballooning property prices for New Zealanders. Also rich foreigners buying large farms and prime coastal real estate was unpopular with most of the voting public?

Edit: when the real estate market was burning hot, lots of sales were deadline (blind). I think deadline sales mean that the winner often has bid their highest price (I certainly did for my home). In auctions you often pay just a little bit over the underbidder, even if your top dollar might have been potentially a lot higher. When selling you mostly care about that one person who really loves your place and that is willing to, and can afford to, pay well over market price for it. All other potential buyers are just wasting time.

We need to take speculation out of the marketplace.

I'd also like to see a ban on corporations purchasing private homes and significant tax increases on non principle residences.

The issue becomes people with existing outstanding mortgages. If we considerably reduce house values, would outstanding mortgages need to be reduced pro-rata? Who would 'eat' that cost? The government? The bank?

Canadian Real Estate is pretty clearly in bubble territory. Something can happen now or later, but it only gets worse with time.

Let's ignore the property itself, which is a depreciating asset which was built and can be improved through manual labor.

That land is going to stay the same no matter how much you pay. Paying more for the same plot of land doesn't make it better. You don't get a bigger plot or a plot of better quality by spending more on the land. The land isn't wealth, it's the community around the land that gives it value. If you have demographic problems, your land is going to be worthless because the community is too old and shrinking.

Betting on ever growing populations is a pyramid scheme by the way.

Just in case, I do own the house.

If you view housing and ownership of your domicile as something that should be accessible to people, then housing necessarily cannot be viewed as an investment vehicle and large corporations, REITs, wallstreet, etc. need to be excluded so that more supply can be available to "correct" buyers.

Limiting these groups does help on the supply-side. While it may not be the root cause, it's far better than showering the demand-side with cash like tax breaks for first-time home buyers.

Perfect is the enemy of good.

Also, institutional investors do have a reputation for inciting bubbles and that possibility absolutely needs to be carefully scrutinized, particularly for something as essential and socially compounding as housing.

The really affluent immigrant groups aren't buying multiple properties, they already have a great deal of income, and their properties are well outside most of what HN can afford and do not impact the condo market which is the most competitive, accessible and volatile.

They already taxed and stopped foreign buyers but the home prices in Vancouver keep going up as sales amongst local Canadians make up most of the volume.

Now they announce this virtue signaling to appease the other Canadians who can't afford homes but the problem will not change.

In fact, without outside capital constantly coming in, the Vancouver real estate market is not sustainable. It literally is just another game of musical chairs, it is the news of some Chinese communist elite member buying a mansion in West Vancouver that gets local Canadians eager to own properties.

I'm no stranger to the anti-asian sentiments in Vancouver, just head over to r/vancouver to see people regularly blame Asians for the fact that they can't afford to live there. In fact in the 80s, they blamed Japanese, 90s they blamed Hong Kongers, 2000s they blame Taiwan, Mainlanders.

It's really disgusting to see the blatant racism against one group that is normalized but not for others. It literally is the same attitude that people with anti-semitic views constantly deride Jews of their financial success that largely came out of merit.

I don’t really know whether you have read the rest of what I wrote or just got triggered by me seemingly defending “foreigners” and hit the Reply button.

I don’t mean to single you out specifically, there other posts that seem oddly similar.

Anyway, I think there’s a big distinction between immigrants (who cease to be immigrants at some point, how many years does it take in your opinion by the way? Who is more worthy of being helped to buy a home - a immigrant who came to the country 30 years ago, or a natural-born 25 year-old citizen?… but I digress.) and investment real estate that requires an intervention.

Let’s say we put a huge tax on all real estate that isn’t a primary residence, I am all for making it super unprofitable to hold so that rents cannot cover the expense - to force all these REITs having to fire-sale their holdings to people who want to live in them.

Also for real how can the voters (ie the average citizen) be the problem? The average citizen has no money and no political or regulatory power. The average citizen just exists in a system they have no control over and responds to incentives. Hoping that en mass people won’t do that is like politely asking a river to move.

> Yeah the Right loves to blame poor foreigners while the Left prefers to blame rich foreigners but at the end of the day they at least agree that it is never the voters themselves who are to blame.

Generally speaking I think you're mostly correct, but there are exceptions, and nuances.

I am one of the odd outliers who believes that much of the blame lies with voters, but at the same time it is a bit of a chicken and egg problem. It's ~true that voters "should" "vote for better politicians", but consider:

- what if the particular flavour of democracy that we practice does not make this possible?

- what if the public's ability to make optimal decisions is a function of the quality of education they received, which is largely a consequence of government policy (and other things, like culture)?

Take HN for example: observe how many comments there are in this subthread (or the overall thread) asserting that "The problem is X", as if the causality behind the situation is due to a single variable. Might this error be to some degree (perhaps even a large degree) a consequence of causality (philosophy, epistemology, logic, etc) not being first class subjects in school (and culture/society), on par with science, math, and language?

And if one's answer to this question is something along the lines of "Oh, they didn't mean that literally, they were just speaking loosely, or expressing their opinion, etc", then I ask: why is it that we have ~culturally normalized (if not worse) speaking (and I would say: thinking) so inaccurately and imprecisely about so many matters that are extremely important, be it housing prices, immigration, war, politics, you name it? Might it be possible that we (~everyone) are "doing it wrong", at massive scale?

If I was forced to nominate a single variable that lies behind not just this problem, but perhaps ~all problems (mostly excluding natural disasters), it would be the inability of the population of this planet to think and speak/listen/conceptualize/understand at a level that is adequate to rise above the local optima we find ourselves stuck in (note: there's substantial unaddressed complexity here: some things are improving on a relative basis, etc - I am speaking in an absolute sense, which includes that which is beyond our current knowledge, or ability to know).

You can, and I specifically pointed out that I generally agree with what is being proposed, and certainly hope that it isn’t an attempt at diversion by throwing out the usual scapegoat.

I am sure banning that wealthy family from China will do “something” to help alleviate the crisis, but I think putting restrictions on capital being used to buy up homes that aren’t primary-residence should be a priority and will have much larger effect.

And to be clear - as it stands with the situation in real estate being what it is right now, I am in favor of massive taxes on real estate investments that are to be used to finance affordable housing to be made available exclusively to first-time buyers and primary residents.

I hear about people pulling out equity in the form of HELOC's to put a downpayment on another home. That's a pretty big chunk of Canadian "investors". And that should scare the shit out of anyone considering that was a major problem in 2008 in the US. People vastly over-leveraging themselves under the assumption that housing only goes up.

I wouldn’t call it a paradise but it’s definitely communist

- OR - at least one of

* First time home buyer

* Total homes owned plus being purchased will remain at one after the transaction is completed, and net-worth is under 20% the cost of a median home within the home's metro area.

* Qualified for a federal benefits program excluded from the upper 60% of society

The phrasing on the last one is specific, it's the wording required to select for economically disadvantaged individuals in a mechanically testable way. The exact number might be tweaked, this is just a back of the napkin ballpark. Other entry qualifiers can be added to the list. The second allows someone to move homes and if they need the benefit, not be locked out of assistance moving to an economically 'hotter' area that might have better jobs.

This is just pandering to young people in Vancouver & Toronto.

Any tax savings will be passed on to owners in the form of higher prices.

The only thing you'll do is pay higher property taxes and insurance.

It also doesn't have to be your first one. If you had a house than sold it and lived in an apartment for 4 years you are eligible again. If you own your house but your spouse doesn't they can use this for your next house.

I realize that people also leave the system, so maybe my logic is flawed.

LISA specifically mentions that it has to be your first house anywhere in the world, so it is targeted at home ownership. People speculating shouldn't be able to take advantage of this.

Though LISA is pretty much useless in London. Good luck finding even a good 1 BHK under 450k inside Zone 4

Dallas seems to be doing it by organically creating a multi-core urban metropolis. Infinite suburbia only fails if you assume that each metropolitan area can only have a single urban core.

No commuting for work = much less need for roads. If commuting and working in a centralized location is viewed as exceptional rather than normal, society could easily switch to lower density living, which is highly beneficial to most mammalian species (reduced stress, reduced aggression).

If the most lucrative information-age jobs (tech, finance) become remote-first (or better, remote-only) and dominated by shape rotators, people will be able to move away from cities (and take the money with them). Only wordcels, who grift on social interactions, really need high density humanity to thrive.

There are two implications of this: 1) NIMBYs need to realize that allowing more housing isn't going to tank prices; if you're worried about prices tanking, you need not be; 2) YIMBYs need to realize that NIMBYs aren't exclusively motivated by greed. When they tell you that they don't want their neighborhood to densify they actually mean it. It's not covering for racism or greed. People genuinely don't want their neighborhoods to change.

There's hope in this. If the state forces upzoning, then people are going to grumble about it. And some of them won't be happy no matter what. But the average homeowner isn't going to be that upset about it once they realize there's money to be made.

Also, if you look at the 5% in different ways, it becomes more significant. In your neighbourhood across Canada, 1 in 20 of the houses is owned by a foreigner. Now if you concentrate that in to Vancouver and Toronto... lets say 1 in 10 is owned by a foreigner... really starting to have an impact.

Also, "only" 20%? That's a massive number for housing.

If nobody is around to buy that mansion, it would eventually be sold to a developer who either turns it into apartments, or tears it down and builds an apartment building there. I've seen this happen numerous times in my neighborhood.

Also 20% is huge.

It looks like more in the "hundreds" given that it's 3%/year of the assessed value. But still, a good start I'd say.