Hacker News Reader

Comment by incomingpain | Hacker News Reader

The data is public, less than 5% of homes are going to foreigners. Don't see how they even accomplish banning foreigners when there are free trade and free investment agreements. The problem is that bonds have negative yields. Retirement funds are forced into buying real estate, because housing is a safe investment right?

The federal government knows this and knows they can't do anything. If they targeted retirement funds like they should... what happens? Housing bubble pops, retirement funds lose tons of money. They are busy attacking the oil industry because they know they cant extract anything out of Finance, Real Estate, or insurance.

View on HN

Price is set at the margin, especially in such an inelastic market as housing.

"supply 100, demand 99, price goes down. Supply 100, deman 101, price goes up."

5% isn't a lot, but it could have a disproportionate impact.

Housing isn't a federal responsibility, so the provinces are more to blame for the crisis. Ontario just totally whiffed implementing a report on how to reduce housing costs, so I expect the problem to continue.

I was about to post the same comment: price is set at the margin.

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.

The bigger issue is the multitude of exceptions. A ban on foreign buyers except for permanent residents, students, and recreational properties isn't much of a ban at all. Canadian permanent residency is incredibly easy to obtain, and students are frequently used as straw purchasers for their foreign parents (just look at the number of UBC students who own multimillion dollar homes despite having zero income). It also doesn't address foreign citizens buying through Canadian shell companies, a strategy used in Vancouver to avoid their foreign buyer tax.

The loopholes are well known, so we'll see the sincerity of the government by looking into the details of the implementation, which we might not get today.

> Canadian permanent residency is incredibly easy to obtain

I don’t feel this is broadly true. I just watched a friend jump though ridiculous hoops and inefficient bureaucracies to get her PR. Is there a particular method for getting a PR that you feel is too easy?

It is not easy. But it is varying levels of hard depending on your background. You are also required to spend over half the year every year in Canada and it expires every five years. I'm not sure why permanent residents shouldn't be exempt when they are literally mandated to be permanently based out of Canada.

Just visit any forum or discussion board related to immigration and you will see Canada mentioned as the fallback for people who can't get into the US.

In particular, there has been pretty widespread abuse of investor visas, region-specific incentives, and student work visas. Investor visas have an extremely poor economic return, and most of the people who benefit from regional programs immediately move to the GTA. There are also a plethora of degree mill community colleges that count as "Canadian postsecondary institutions" for immigration purposes. In reality, their students do a few hours of academic work a week to keep their student work visa and moonlight as a trucker or in some other blue-collar field.

Canada's approach to immigration, with over 400k people last year, is to take whoever as long as it keeps wages down and property prices up.

The demand for the housing drives the price, modulo short-term speculation. The investor buys it with an eye towards the cash-flow from renting, and by definition, it's rented to someone living there.

I don't know how real estate market works in Canada, but I can totally see how 5% of buyers could mess up the market in the U.S..

House pricing is set based on 'comps' (comparable homes and the price they sold for). That means that a small percentage of buyers can essentially bump (initial) pricing for all homes.

The problems of the housing market is the exact same as any other expensive city in the US or anywhere else. Home-owners with local power messing with zoning laws to limit supply and boost the price of their homes. It's always a supply issue.

https://www.youtube.com/watch?v=6OZJClSdZ28

The fundamental issue is the incentives. When someone who owns a home says no to increasing zoning, their net worth goes up. It's verrry hard to go upstream and fight that. I'm for those changes, and would vote for them, but the people incentivized to fight will gish gallop till the cows come home. If you shut down one, they will invent some other reason that zoning should not be increased.

The only way to fix this is to tax the land equal to what it's worth - occupying or not, foreign owned or not - such that the sale price of the home is equal to the cost to build the housing on top of it. Once that's true, and saying no means they pay more, they will only actually say no to things that actually make them happier, and I'm all for that if they are willing to pay for it. But the most likely cause is that they would suddenly vote to up-zone and would allow for denser housing, and over time the tax would drop.

Interestingly, I'm seeing a lack of zoning enforcement drive up prices locally.

Small-time investors are buying homes in residential zones to put on short-term rental sites, and because they generate revenue from the house, are able to offer a much higher amount and have it still make financial sense.

>I don't know how real estate market works in Canada, but I can totally see how 5% of buyers could mess up the market in the U.S..

5% foreigner owned is not big enough to have an appreciable difference. How about funds buying real estate? What used to be around 10% went to 20% in 2020 and then went to 40% in 2021. Nobody will buy negative yielding bonds. It only leaves a couple other options.

> 5% foreigner owned is not big enough to have an appreciable difference

I doubt it makes zero difference, but like you, it's just my feeling.

Real estate investing could be a price driver, certainly. I don't know what it's like in Canada, but I know that in my location even individuals are buying second and third homes and renting them out as short-term rentals. Doesn't seem to be sustainable to me, and certainly is affecting local housing prices.

One way I'd combat this is to ban short-term rental outside of hospitality zoned areas.

It's amazing to me how some people are so entrenched in believing that foreigners are to blame that they will perform such mental gymnastics.

The Myth of 1.3 Million Vacant Investor Homes in Canada:

https://www.youtube.com/watch?v=evYOhpjMql0&t=6s

Another great video, with a quick reference to Oh The Urbanity

https://youtu.be/6OZJClSdZ28

That's a great video, and I agree with the points made - essentially that affordability is mostly a supply problem. That said, I don't think your parent was blaming foreigners, but just noting that even if foreign buyers made up a small percentage of the total, reducing that demand could still impact prices.

>It's amazing to me how some people are so entrenched in believing that foreigners are to blame that they will perform such mental gymnastics.

Imagine you're a boomer who is about to retire. You told your advisor to go into safe investments but you're not going into savings accounts, money market, or bonds. Maybe you pick up some corporate bonds? But that's higher risk. Once you eliminate all these negative yielding options... you're really just left with real estate.

Then you look at Canada's economic breakdown. Oil/Gas industry is under constant attack by the federal government. Manufacturing in quebec and ontario has practically died.

The only things holding Canada together economically is Finance, Insurance, and Real Estate. FIRE. The only thing holding Canada's economy from being in a depression is banks and insurance on over priced real estate.

As a politician, you dont dare touch the housing market. If that explodes, you take the blame AND you have to actually fix the economy? lol!

I wonder how many homes are bought and sold through shell companies, family members, etc?

5% can do a lot of damage considering how prices are set based on "comps", and the fact that a lot of this foreign capital comes from illicit sources, and they are more than willing to pay above market rate to secure the purchase.

Canada has always been a paradise for rich crooks worldwide, and government has always chosen to turn a blind eye.

As far as I know, that oft-cited 5% number does not include "students" whose parents abroad suddenly gift them > $1 million in cash to buy one, two, or more properties.

Does the 5% stat include those kinds of situations, in which on paper it's not a "foreign investor" buying the property, but in reality it's just that?

In a real estate market (ie slow moving, most inventory turns over after several years) changing the demand of 5% of the buyers could have a massive impact.

> They are busy attacking the oil industry

What attack? Have they rolled back any of the billions of subsidies?

Reply on news.ycombinator.com