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Baby, we got a bubble!?

Migos said:
Affordability will always factor into housing because it is a driver of demand. If people can't afford something, it drives down demand. I really want a Mercedes G-Wagon but I can't afford it so demand is one less person than if it was cheaper. If Canadians can't afford housing in Toronto or Vancouver, they can't/won't buy it.

What evidence do you have that there is a shortage of housing? It may be the case, but I haven't seen anything that shows that household formation is running way ahead of housing starts. I would be interested in what you have seen in this regard.

You're also making the assumption that people will always want to move to Toronto and Vancouver. That may not be the case. There was a time when people thought the same thing about the U.S. and in 2008 we saw how that ended.

How can "society/the government" raise wages? Odd comment. If the government could just snap their fingers and raise real wages, of course they would do it.
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Agreed and what Howl also overlooks is how speculation affects demand. Alot of demand in Toronto and Vancouver (and in any bubble) is from investors and speculators who are trying to make money on the market. The idea that the government can just randomly raise wages and that doesn't intefere with the market is absurd. Remember when that happened in the 70s?
 
There are many factors at play here...foreign investment is just one of the factors.... Either there's not enough data or we can't trust the limited data that's available.
 
Canadian citizenships for sale!

http://bc.ctvnews.ca/is-quebec-s-ca...urting-housing-affordability-in-b-c-1.2854984

An immigration backdoor that’s helping thousands of millionaires move into Quebec is also costing taxpayers in B.C. and exacerbating the housing affordability crisis in Metro Vancouver, according to critics.
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Quebec’s popular Immigrant Investor Program gives wealthy foreigners a fast-track to life in Canada provided they fork over an interest-free loan of $800,000 to the province. Nineteen-hundred well-off individuals and their families are expected to get permanent residency through the program this year.

But data collected by lawyer Richard Kurland shows the vast majority of those immigrants – including a whopping 94 per cent of the 2,600 who came through in 2008 – end up living elsewhere, mainly in Metro Vancouver.
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“That’s not income earned here, it’s not taxable here,” he said. “So the family that has that income stream legally is entitled to pay no or low taxes and get all our social entitlements… even though they’re living in a million dollar home with multiple fancy cars.”
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When will Canadians wake up? I think this situation will hit a tipping point before the next Federal election. Immigration is going to be a ballot box issue like never before. It's already a huge issue in the U.S. and EU. We're next.
 
nrb said:
Agreed and what Howl also overlooks is how speculation affects demand. Alot of demand in Toronto and Vancouver (and in any bubble) is from investors and speculators who are trying to make money on the market. The idea that the government can just randomly raise wages and that doesn't intefere with the market is absurd. Remember when that happened in the 70s?
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The point is they are trying to solve a problem that is fundamentally about wages not keeping up with inflation by artificially driving prices down.

This is not a problem that is unique to Toronto and Vancouver. Every major city, New York, London, Singapore, Tokyo etc. has the same problem. Toronto and Vancouver have made it onto the international scene and this is the result. Toronto and Vancouver are no longer Canadian cities they are international cities. Interfering with foreign investors ability to invest in these cities will work to negate that status.

The only reason the government is considering getting involved is because some middle-class Canadians are saying "Twenty years ago we could have bought a house in High Park and paid it off in less than thirty years, now we can't. Do something about it." The government has three choices: leave everything alone and let the market figure itself out; increase wages so they match in relative terms what they were twenty years ago, or; make Toronto and Vancouver less attractive. Going with Option 1 means if typical middle-class Canadians want to own their own detached home in a desirable neighbourhood they have to look outside of the the Toronto and Vancouver markets. If they want to live in the Toronto or Vancouver markets they need to downsize or look to less desirable neighbourhoods. While it may make individual home buyers unhappy - from a societal point-of-view I don't think either of those are a necessarily bad things.
 
howl said:
The point is they are trying to solve a problem that is fundamentally about wages not keeping up with inflation by artificially driving prices down.
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Bank of Canada Total CPI: +1.5% y/y
Bank of Canada Core CPI: +2.1% y/y

Statistics Canada Average Hourly Wages (Full-time employment): +1.8% y/y

Teranet National Composite (11) House Price Index: +8.98% y/y
Teranet National Composite (6) House Price Index: +10.05% y/y

Full time wage increases in Canada match the rate of inflation within Canada, ~1.8%. According to Teranet, housing prices are up 9-10%.

The problem is not wage increases. Artificially increasing wages would cause further inflation and nobody would be better off. There are external factors that are pushing real estate up beyond the rate of inflation. Some of them are low interest rates, lack of availability, and foreign capital.

Changing interest rates affects a lot more than just housing and would make it harder for local buyers to afford a house. When a large quantity of foreign capital is sent to Canada, it's usually enough to purchase outright. Increased interest rates would essentially make it harder for locals to buy and easier for foreign entities.

Increasing the supply of housing can only be done so fast and should be done responsibly. It takes years for housing to become available for end use and developers have a limited amount of resources/financing. They aren't going to build to the point where they know there is oversupply, as this would bankrupt them.

If measures were taken to control foreign capital, it would directly target areas where prices are being pushed up by foreign capital. This means Vancouver and Toronto, in addition to many other areas. It would help to alleviate upward pricing pressures.

I don't think people still expect the same housing dynamics as their parents had, but at this point it's getting difficult for an average earner to afford even a 1 bedroom condo (without any help from relatives or the lottery). Quality of life is now decreasing substantially as local buyers have had to stretch themselves incredibly thin to afford even the smallest of condos, let alone houses. These come with useless kitchens, bad layouts, and space that is insufficient to raise a family. Some people move farther out of the city to afford a house and they spend a huge amount of time commuting to/from work.

I'm all for foreign investment, but it should be productive. Money should come here to buy businesses and invest in R&D. It should be used to purchase residential housing for those who come here to study, then work, pay taxes, and produce for the economy. Right now, a lot of it is coming here in a flight to safety and landing in the real estate market.
 
Interesting U.S. article on the subject of skyrocketing real estate. Despite clear differences behind market forces in the U.S., we are not alone as we watch real estate continue to climb out of reach, particularly in the major cities. This article provides a perspective from an owner/investor and a renter's point of view.

Decade after housing peaked: Owners richer, renters hurting

http://finance.yahoo.com/news/decade-housing-peaked-owners-richer-072017428.html
 
howl said:
This is not a problem that is unique to Toronto and Vancouver. Every major city, New York, London, Singapore, Tokyo etc. has the same problem. Toronto and Vancouver have made it onto the international scene and this is the result. Toronto and Vancouver are no longer Canadian cities they are international cities. Interfering with foreign investors ability to invest in these cities will work to negate that status.
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Nah, I think it has more to do with a simple means to an end. For example, I don't think this rush into RE by foreign capital has much to do with weather (hah!), schools, safety, or any of the other factors that are often touted as the driving motivation. Yes, our cities (and our country) are desirable, but they always have been.

I think it has to do with one simple fact -- we are a safe haven for foreign "flight" capital, with a government that doesn't look too closely at what you are doing. Watch what happens when that changes.

Yes, TO and Vancouver are great cities, with a growing international presence. But it's not necessarily for the right reasons.
 
NorthYorkEd said:
Nah, I think it has more to do with a simple means to an end. For example, I don't think this rush into RE by foreign capital has much to do with weather (hah!), schools, safety, or any of the other factors that are often touted as the driving motivation. Yes, our cities (and our country) are desirable, but they always have been.

I think it has to do with one simple fact -- we are a safe haven for foreign "flight" capital, with a government that doesn't look too closely at what you are doing. Watch what happens when that changes.

Yes, TO and Vancouver are great cities, with a growing international presence. But it's not necessarily for the right reasons.
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Bingo. Canada is one of the best places in the world to launder money.

Saying that Vancouver belongs in the same sentence as New York or London is a laughable. Vancouver is a complete non-factor economically.
 
^ The empty home tax is a total waste of government paperwork. It is a political tool implemented to give the impression that they are taking action on behalf of the general public. Unless the tax is 50% of the purchase price, it will likely be inconsequential. The loopholes that will undoubtedly be taken advantage of are also obvious. What constitutes an "empty" or "vacant" resident? How long does somebody have to be occupying the property for it to be "lived in"? Are there processes in place to monitor this? Who will assess whether the property is being rented out? How long does a tenant need to live in said house? Etcetera.
 
http://www.theglobeandmail.com/real...ach-to-assess-housing-market/article30571383/

"Mr. Morneau reiterated that it’s “critical” to complete a thorough analysis of the housing issue before detemining possible policy actions, and declined to discuss what policy options are being considered."

There is currently no political will to do anything. It will be interesting to see how out of hand this gets before people demand change.
 
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