Investors account for 30 per cent of home buying in Canada, data show
theglobeandmail.com
theglobeandmail.com
In the US, a lot has been made about large investment companies buying up houses, but this is something different entirely:
> This category represents homebuyers with multiple mortgaged properties. This means investors are homebuyers who either:
> * purchase an investment property while maintaining their primary residence, or
> * purchase a new residence to live in while converting their existing residence into an investment property
Specifically, "investors" excludes anyone who didn't use a mortgage to purchase (e.g., all-cash buyers, any buyer with alternative financing). AFAICT, it would even exclude someone with a paid-off house who bought a new investment property with a mortgage.
[1]: https://www.bankofcanada.ca/2022/01/staff-analytical-note-20...
[0] https://www.nytimes.com/2022/03/27/us/mobile-home-park-owner....
We don’t really need to look for a single cause. All of these things are happening and interacting with each other.
The continued proliferation of cookie-cutter detached single family homes with useless lawns is big part of several problems we currently face as a society.
Incentivizing denser housing is a good idea.
I am in favor of this but it doesn't stick it to who everyone is complaining about here, it benefits them.
The biggest losers of a LVT are SFH owners living in a humble old near worthless house on relatively valuable land.
No, because those folks can sell their property to a developer and earn a nice return while moving to a cheaper area.
The LVT would zero the tax on improvements, and accordingly the tax on land would have to increase to compensate.
A mansion owner for example may have 40% of their bill be related to the expensive mansion building. Some regular humble house owner may only pay 5% of their tax based on the value of the house. So when the portion of the houses are eliminated and the land tax between them normalized, the mansion owner now pays less and the humble house owner pays more.
Listen I like a LVT I'm just pointing out that it's a big time giveaway for the very rich if it's implemented in a very basic way.
The net result is relatively poor homeowners are shoo'd out of their homes and forced to capitulate and move due to high taxes, while mansion owners get a tax cut.
If we want to bring in a LVT then we should also be bringing in some progressive property taxes on the wealthy.
A multitude of entitled opinions that in a democracy hinder the construction of houses for the future generation
To put it another way, it often happens that people will vote for candidates at the provincial/federal level that support increased immigration and/or population growth, and simultaneously vote NIMBY at the local level.
I assume that their politicians were worried about all the people leaving.
It makes sense to set a lot of zoning policy at the state level, where all people are represented, so that incumbent local property owners can't selfishly micromanage everyone else.
Japan is an example of a place that does a great job with this. Housing there is more affordable and convenient. Residential side streets are off-street parking only, and each property can be a triplex, with one unit allowed to be a low-impact business, off-street. These side streets connected to larger roads with denser retail/apartments leading to planned high-rise areas that are allowed to grow when/if the population grows. Industrial areas are separate, on the other side of town.
Also there are situations like, the buyer who buys a run down house to rebuild or do major renovations that would need accounting for in any sort of ban. Or the condo developer who spends millions buying 3-10 houses and turning them into a condo tower for hundreds of people to live in.
That is called an investor, since they purchased an investment.
Those people are not investors by any useful English-language definition, but would be counted as such by this method. This is exactly the situation we were in when we bought our current home, and anecdotally, is not uncommon when people are moving in together from previously separate, owned properties. Sellers prefer zero sales contingencies over one sale contingency and prefer one over two.
The one clear reference in the article strongly suggests they'd be categorized as an investor: "The central bank defines an investor as a buyer who took out a mortgage to buy the property while maintaining a mortgage on another home."
While I can see how the delta in this metric is suggestive, it is not clear how it affects the available housing stock (rent+buy).
What I think people actually care about is unoccupied investment properties, where someone buys and leaves it vacant. Apparently a lot of Chinese capital is parked in this way due to their capital controls preventing cash from being freely moved out of the country, though to be clear it’s not unique to China.
Or if these properties are being flipped, perhaps that has a short-term negative impact on available housing stock as properties are taken off the market while being renovated. (If the marginal second bidder would have moved in to the house as-is, then the winning bid renovating and selling is reducing supply / increasing demand for housing.)
As you note, a whole other kettle of fish around REITs that won’t use mortgages. In the US, REITs are a major contributor to new construction for example.
Of course. The second house is purely an investment to you.
I don’t imagine anybody particularly loves being a landlord. It’s sometimes messy compared to owning a stock. If you could get a better return with less risk from some other investment, you’d put your money in that instead. But residential real estate in cities happens to have an appealing risk/return profile that’s not directly correlated with stocks, so there are good reasons why both small and large investors buy housing.
This creates a huge problem. Rental properties have different regulations in different places. My brother-in-law was not given a lease renewal amnd was forced to move (within 30 days) while, where I live, that is illegal unless there is cause for eviction. It creates instability. Also, my rent increased $550/month in just two years. Who can afford that? This creates a tenuous housing issue. Thankfully, I was able to move and buy a very small condo so I have a set monthly payment and no longer need to worry about losing my home every year when my lease ends.
There is a huge difference in how I can plan for the future knowing I am not going to be, potentially, homeless every year.
Outside of capitalism? Many more possibilities.
This sounds interesting. Is this hypothetical? How does that equity get transferred/slowly leaked to the next tenant? How does one liquify it?
Imagine what life would be like if we let billionaires buy up all the lakes, rivers, and other freshwater reservoirs. Water prices would shoot through the roof and we'd all be forced to pay the "water barons" whatever they decide to charge. It would be a dystopian nightmare and absolutely toxic to society. If you're curious, this is the premise of the classic sci-fi book Dune.
Obviously, the housing that short-term rentals use has to come from the housing stock somehow, so it's not interesting to point out that Airbnb's cannibalize the long-term rental market.
(Over the medium-long term this is a problem that'll be solved by a combination of more construction, which is desperately needed anyways, and ordinances regulating Airbnbs, like NYC just passed.)
Clearly yes.
Under-occupation is a separate issue; it's tempting to argue for an unoccupied homes tax, and politically attractive, but it has to be fairly small otherwise at the margin some houses in poor condition get demolished so the land can sit empty and accumulate value.
Which is what lets homeowners buy a second home so much more easily than younger people. The asset price inflation of homes in Canada has been remarkable at concentrating the productive labor of working Canadians into the idle hands of homeowners.
In Canada for decades there has been virtually no construction of purpose built rental housing. The primary new rental housing that is being created is wholly through condos being built and people renting out their condos.
Accordingly the only new product being created for renters is being created by investors buying condos.
Like it's bad that this is the case and this should change, but I'm just pointing out the reality right now of this present environment.
There would need to be enormous systemic changes to the dynamics of the Canadian housing market if we wanted to start banning investors from buying and renting homes. Otherwise rental vacancy will plunge even further and rents will go up.
I'm not convinced that what we need is more of this low-quality "affordable" housing. I think the problem would be solved by cracking down on all the people buying second, third, fourth, ... single family homes and converting them into Airbnb flophouses.
Landlords provide housing in the same way the supermarket provides food. They didn't grow the food, but they did enable it to get to you.
Land value tax would have fixed this decades ago, and it would still work today. I would love to see a single-issue political party push for it at this point.
As to kids, those of us who grew up in suburbia have a fondness for a yard, garden, and air gap between living spaces. Now if only the former owner had not put so many landscaping pebbles and bushes...
There’s no inherent limitation on having a family friendly condo.
In many European countries families live in condos. And they can have great amenities like a swimming pool and a playground. And quite spacious. With highly dense walkable and even car-free neighbourhoods.
Sure you might not have a huge own backyard but there’s probably a park nearby where you can socialize with people.
Most people want to put down roots somewhere; that might be you as well one day. And those people will not want to rent forever, because that puts them at the risk of reno-viction. Imagine having to move every few years, not for a better job, but because your landlord jacked up the rent massively and there aren't any laws preventing them from doing that.
Now that doesn't make me interested in owning a series of investment properties, but I can totally understand a family that wants the security of owning their home in the UK/Australia
That's a double edge sword. Would you rent your place to people knowing they can stop paying and trash your place and you can't get rid of them? I'm not a landlord but this scenario would scare the hell out of me, which is probably why German landlords ask for so may documents(bordering on privacy violation), and are so picky when choosing tenants that apartment hunting is basically a part time job in Germany.
>it's usual for people to choose to rent for life
Most people don't choose the rental life, but they don't have a choice, since property prices in German cities are far out of reach of the middle class who doesn't have inherited wealth or financial assistances from parents.
Renting is fine when you're young and employed, but owning your place of living outright by the time of your retirement, is still better for you financially, than having to pay rent as a retiree, as most likely rental costs will go up faster than inflation and wage growth as per current trajectory, and your pension will be too small to pay for living costs and rent on top of that meaning you'll struggle with poverty like some retirees in Germany today, but on a larger scale. Whereas if you pay off your mortgage until then, your retirement will be much less stressful.
Oh, and it will get even worse from here as Germany is refusing to build, to reduce CO2 emissions apparently, and increase migration will put additional pressure over existing housing stock. Great for throe who already own, not for those new to the market.
House prices in Germany are 120% of the average for the whole EU and looking at the graph they seem to be slightly higher than the middle of the pack. They certainly don't seem to be outrageously unaffordable, unlike Ireland. (source: https://ec.europa.eu/eurostat/cache/digpub/housing/bloc-2a.h...)
its crazy tho , my friend is looking to buy the same house as mine , same layout etc and its more than double what i paid for mine in the span of 5 years. our kids will never be able to enter the real estate market and will be living with roommates or in dads basement for ever.
In our current high-inflation environment it makes a little more sense than usual to borrow money and sink that money into an appreciating asset, which is why there's still such strong demand for homes despite the higher interest rates. In a high inflation environment, rents go up, home values go up, salaries go up, but mortgage amounts do not.
The advice remains the same. If you know you're going to stay in the same spot for a decade (if you have young children for example) you should probably buy a spot if you can afford it. If you know you're definitely going to move in less than 5 years you should probably rent. If you're somewhere in between, you should make the decision that's best for you. There are non-financial advantages to owning a home and non-financial advantages to renting.
For my own part, I'm going to say that Vienna's approach has not actually solved the key supply problem.
Yes they should force more zones to allow dense housing too.
Woking council managed to make some terrible investments and is now bankrupt: https://www.bbc.co.uk/news/uk-england-surrey-65920223
All that happened is that councils stopped building homes and sold some of the ones they had to current occupants (and councils actually also have control over planning permission, so they did this and blocked anyone from building new houses at all).
There is other stuff going on (it is likely impossible for the UK to build enough housing given demographic trends atm) but this is all caused by not building enough houses (the reason why investors are buying houses in Canada is because there aren't enough of them, it is all the same problem).
https://www.mcsweeneys.net/articles/i-will-do-anything-to-en...
An interesting article about the UK has never really built houses, except for a very short time before the second world war: https://worksinprogress.co/issue/why-britain-doesnt-build If we haven't built sufficient houses for this long it's hard to see what could change to allow us to build more.
You should be able to density.
Everyone knows this, so as long as there's a majority of homeowners who benefit from pushing values up, the problem is going to get worse.
I imagine the person you’re replying to means restrictions more along the lines of limits on one home per person, or increased taxes on secondary or investment homes, or restrictions on who can buy an home, etc.
> Instead, Ottawa has targeted foreign real estate buyers with a ban on purchases until the end of 2024.
Government are some of the largest employers in most areas. You WFH as many employees as possible, and you will see a measurable decrease in traffic, improvement in air quality, and reduction in urban housing competition as WFH employees can move to lower COL areas.
But many of the housing benefits are only possible if it is permanent WFH. The problem during COVID was that employers weren't willing to commit and therefore employees has to maintain the ability to resume commuting.
It is strange to me that WFH isn't brought up relating to housing affordability.
Foreign buyers and such can be problems, but at this point looking at Canada's experience here, it's abundantly clear it's not at all the problem and there are deeper systemic problems that are causing the misery.
What should it be? I'm sure you can push house prices down even more if you bump interest rates to 10% or whatever, but raising interest rates also increases monthly payments that buyers have to make, which ends up making houses less affordable. At the end of the day I care less about the sticker price of the house than the overall cost I have to pay for it.
That isn't how rent works. It is a market and buyers won't just pay any price the landlord sets. If prices went up, it means people were willing to pay those prices.
I wish I could charge $5k per month for a 600 sqft unit, but no one will pay that.
Or equivalently, the price an investor will pay for a house scales with (rent - interest payments). If interest rates go up and housing prices don't fall, then market rents must be rising.
Landlords can continue to increase the rent at the maximum allowed every year and tenants are forced to stick around because where else are they going to go? Move to what apartment? There are none.
So long as there's practically no available apartments landlords will feel free to keep cranking up rent. If we ever get to the point where renters could genuinely have the ability to benefit from moving, then landlords will think twice before raising rents.
Briefly ever so briefly at the start of the pandemic when all the students left rents plunged. That shows what needs to happen. Not kicking out all the students of course, but the creation of a huge amount of surplus homes. Only in such a healthy vacancy environment will rent increases go below inflation.
High interest rates can do this once affordability becomes almost impossible that there are no more buyers. Prices fall, lower interest rates to stabilize, just keep adjusting interest rates to keep a level price. Then price and monthly payments will equalize to a reasonable premium on construction costs.
As rental demand spikes as it has been, it makes perfect sense that investor interest and share of the market would also increase.
Now obviously, one can point out "near zero purpose built rental development seems bad!" and many have, but so long as condos dominate what is being built, a relatively high investor share is actually normal and required.
If investors for example were limited or banned at this moment, the most immediate net result would be increased scarcity for renters, and higher rents.
In the long term clearly there needs to be more PBRs, non-profit rental and publicly owned rental housing.
The U.S. housing market vs. the Canadian housing market - https://news.ycombinator.com/item?id=37446790 - Sept 2023 (88 comments)
People need to live near cities, where jobs are. Outside our privileged white collar world where remote work is easy, others need to live in metro areas.
We need to build in and near cities, and improve the transit infrastructure.
If you like cars, you can literally live everywhere else.
I guess the question is if that alone is enough of a selling point to form a city.
And then, the issue is always how you prevent the nimbys from taking over once the first batch of housing has been built.
On the otherhand, it seems like AirBnB's, i.e. short-term rentals, are ripe for some legislation to undo the negative affects they are having on many communities.
Why not? We are making up the rules as we go. The government has the guns, it can do what it wants.
> - a fair amount of the population wants to, or can only afford to, rent
Well a fair amount of the population wants to buy a home remotely close to where their job and family is, but it turns out there's a population representing 30% of all sales that thinks they ought to be landlords.
> - and someone needs to be the landlord.
Doubt.
Landlords are a drain on the economy and there are viable alternative models. We do not need landlords.
In the alternatives I mentioned, co-ops and government, neither of those entities need profit. Co-ops are just owned by the collective of the residents. They would pay their rent in order to pay off taxes and utilities and maintenance expenses.
They also intentionally keep interest rates low so existing house/property owners can leverage their properties to buy more. Never allowing a 1st time house shopper a chance. You can't save enough for a down payment because the rate that housing goes up outpaces the rate of your earnings.
In my opinion any house in the same city other than your primary residence should have property taxes that are significantly higher, perhaps 3-4 x the current rate. Interest rates for any house that is not your primary residence and considered an investment property should also be much higher. The only exception I would make is if you have cottage/recreational property outside of cities, this type of property like a cottage would fall under the Primary residence category.
There is also that fact that the majority of Canadians in the private industry, especially in Tech are severely under payed and underemployed.
I'm not sure of the unintended consequences of my proposals, but they couldn't be worse than what is happening now.
Canadian tech workers make way above median income levels.
https://www.glassdoor.ca/Salaries/toronto-software-developer...
You want median individual income, since median is what was under discussion.
For comparison US GDP per capita is 71k usd and San Francisco salaries are 172k usd. That's a big difference.
Bay area tech salaries are 3x gdp per capita.
Toronto tech salaries are 1.2x gdp per capita.
Funnily enough, the 3x higher salaries in San Francisco actually make it more affordable than working tech in Toronto.
https://www.numbeo.com/cost-of-living/compare_cities.jsp?cou...
If they live in a city they are screwed, unless they are lucky enough to get a really well-paying job.
I wonder how large the percentage of buyers would be who would buy on-behalf of someone -- e.g. person A is an existing homebuyer, their cousin person B is not, and to avoid the prohibitive tax rate, person A gets B to buy it on their behalf so that it is legally not an investment.
This practice is sadly already common in certain circles, and it will surely get a boost should your proposal (which I do like btw) come into effect -- the question is how big of an effect would that be.
B then owns the house. A has to have a pretty strong hold over B given they don't have a legal claim on it.
Adding to that, you have some of the worst zoning and development practices in the modern world. Most of the country is simple a piggy bank for money laundering in the form of empty condo towers.
Where people live are the places where it's reasonable to live. Everywhere else is misery or impossibility.
When folks don't live somewhere, there's usually a reason, and it's usually "the land is terrible" not the government is forcing people to not use it.
I believe Canada, like most central banks since the 90s, uses interest rates primarily for inflation control. https://www.investopedia.com/articles/economics/10/taylor-ru...