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Baby, we got a bubble!?

Migos

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Vancouver and Toronto economies and frankly our standard of living are under serious threat. We're approaching the point where even a couple on professional salaries can hardly afford to live in the 905. Anywhere within an hour commute of downtown Toronto one-way is unaffordable for the vast majority of Canadians.

Fortunately, this will not continue forever. Eventually there will be the political will to remove the foreign capital that is making these type of price gains possible. When that happens and house prices correct, we are in for a big-time economic meltdown. I've never been more bearish on Canada.
 

TheKingEast

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Vancouver and Toronto economies and frankly our standard of living are under serious threat. We're approaching the point where even a couple on professional salaries can hardly afford to live in the 905. Anywhere within an hour commute of downtown Toronto one-way is unaffordable for the vast majority of Canadians.

Fortunately, this will not continue forever. Eventually there will be the political will to remove the foreign capital that is making these type of price gains possible. When that happens and house prices correct, we are in for a big-time economic meltdown. I've never been more bearish on Canada.
Not happening as long as a) people decide to hold onto their homes to avoid the land transfer tax and other associated costs of buying another property, b) terrible transit situation situation persists c) lack of supply.

But what is creating the lack of supply? Is it people holding onto their homes due to the exorbitantly high costs associated with upsizing to a new property? Or are there really just not enough SFH's?
 

ponyboy

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Eye opening articles. The latter two focus on Vancouver, but I wonder whether the issues are similar for Toronto --

Canada’s tax agency is ‘out for blood’: not from global-income cheats, but from its leaking auditors
http://www.scmp.com/news/world/united-states-canada/article/2008684/canadas-tax-agency-out-blood-not-global-income


Canada tax chiefs knew foreign money’s big role in Vancouver housing market 20 years ago, leaked documents show, but they ‘ignored’ auditors’ warning
http://www.scmp.com/news/world/united-states-canada/article/2005794/canada-tax-chiefs-knew-foreign-moneys-big-role


Leak reveals secret tax crackdown on foreign-money real estate deals in Vancouver
http://www.scmp.com/news/world/united-states-canada/article/1989586/leak-reveals-secret-tax-crackdown-foreign-money-real
 

Southcore

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Does anyone have a sold listings service they could recommend? I was using sold.watch but they have suspended the sold info (but are still giving out active listings). Thanks.
 

cdr108

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the possibility of follow BC's foreign ownership tax. here's guest column from the Star

https://www.thestar.com/opinion/commentary/2016/08/02/foreign-surtax-a-bad-idea-for-toronto-housing.html
self serving article by Julie Di Lorenzo who is the president of Diamante Urban Corp., a real estate development company.
for years, many developers and realtors stated that foreign buyers are minimal in pre-construction sales, i.e. 5 to 10% of sales.

if they were truthful and accurate, then why the huge push back that would only affect a minimal number of units/sales??


Foreign buyers are helping to increase the supply of condominiums because the industry standard requires them to make a 35 per cent down payment, whereas local buyers are allowed to put down as little as 5 per cent. In effect, the investments from foreign buyers are pushing the projects ahead. But if they are faced with a 15 per cent surtax, they may decide to move their money elsewhere.
local buyers are typically required to make a 25 % down payment - 5% in 30 days, 5% in 180 days, 5% in 365 days, 5% in 540 days and 5% on occupancy.

as little as 5 % down payment typically occurs on remaining inventory units when a condominium project is near completion


If affordability of housing is the issue, then the B.C. tax will make the situation worse, not better, by hindering condo developments that provide local buyers with affordable alternatives, priced under $500,000. Even CMHC notes that individual investor condominium purchases have alleviated the pressure on the tight rental market. ‎Arguably, this opens up more locations and unit types as rental inventory than a purpose-built rental would.

current dt residential condominium prices are ~$750+ psf; which is highly over priced

RETAIL cost for hard construction per Insurance Bureau of Canada and Altus Group (for structure and mid-range finishes, which most are) is ~$250-300 psf (excluding land); so it is much cheaper for developers who also have economies of scale. their cost is closer to ~$170-200 psf

land value is not as expensive or large a component of price when many high-rise projects are built at 30x lot area.


There is also a fairness issue involved with the B.C. tax, as it is effectively retroactive. It will be imposed at the time of closing, from Aug. 2 on. In the condo sector, sales agreements are struck well before closing — often two years or more. These deals were entered into in good faith by investors, who are now being told they will have to pay an extra 15 per cent at closing. That is punitive.

hmmm ... funny we don't hear the same type of concern from developers when they pass $10,000+s unexpected costs onto buyers. I've heard story where buyer of 1 bedroom unit received $50,000 bill upon closing for inflated development fees and the developers lawyers' legal fees, etc.


Finally, the B.C. tax is likely in violation of our international obligations. “NAFTA and other Canadian trade agreements prohibit governments from imposing discriminatory policies that punish foreigners while exempting locals,” notes Appleton & Associates, a respected Toronto law firm. “Under NAFTA, citizens forced to pay the 15 per cent penalty ... are entitled to obtain direct compensation from an independent tribunal for B. C. s discriminatory tax.”

Considering many of those nations have their own restrictive foreign ownership policies, then we should do the same and forego the tax if it is discriminatory.

http://www.cbc.ca/news/business/real-estate-housing-foreign-buyers-1.3479508

http://www.macleans.ca/economy/economicanalysis/how-the-rest-of-the-world-limits-foreign-home-buyers/

https://betterdwelling.com/city/toronto/7-places-tax-foreign-property-investors/

China
Having a population of over a billion people would put any country in a housing crisis, so it’s no surprise there’s a lot of property rules in China – including ones that target domestic owners. Foreigners are allowed to purchase only one property for their own personal use, after having spent one year in the country. After that, if you become a permanent resident, you’re allowed to purchase one additional property for personal use.

Thinking of skirting the restriction using a shell company? Not so fast, the Chinese government conducts regular audits and foreign companies must use the property they reside in, or risk having it taken away.


Australia
The Australian government recently appointed a Foreign Investment Review Board to review and approve purchases of residential homes in the country, amid growing concerns that non-residents were driving up prices. The criteria for approval of these residential purchases is murky, but the board isn’t just for show. They have forced the sale of 27 homes, investigated the purchase of 1,300 properties to date, with another 800 on the their list to go.


United Kingdom
In 2014 a study revealed that 50,000 homes in London were sitting empty, while Londoners were struggling to find affordable housing. There was a lot of discussion on how to best handle the issue, but it wasn’t until last year that they took the first step in actually aiming to curb it. In April of 2015 they passed a law levying a new tax requiring up to 28% of the sale of the property be paid to the government – in June of 2015 they saw one of the largest declines in UK housing prices in months… I’m sure that’s just a coincidence right?


Switzerland
The Swiss have always had strict rules regarding housing, especially foreign ownership, with each canton (that’s a township if you’re not French-Canadian) assigning annual quotas and requiring approval before being sold to foreign owners. If approved, you can use it as a personal residence only, so forget your dreams of being a landlord in Switzerland.

Fun fact, not even the Swiss are allowed to build homes over 1,000 sq. m. without a special permit – so there aren’t a lot of Bridle Path style houses to choose from. Sad, I know.


Mexico
Mexico established a law in 1917 prohibiting foreign ownership of land within 50 kilometers of the coast or with 100 kilometers of an international border – out of fear that Americans would flood their border (they should have built a wall and made the Americans pay for it). Despite this, a constitutional amendment made in 2013 allows the purchase of land through a legal loop hole called a fideicomisos (trust) ownership, where the bank holds the deed to the property and the foreign owner renews the rights to the land every 50 years.


Hong Kong
Hong Kong’s always been a dense city, but it wasn’t until 2010 that they started to really tackle the problem of foreign ownership. Non-residents pay an ad valorem tax that starts at 1.5% on properties under HK$2,000,000 (CA$300k), up to 8.5% HK$20,000,001 (CA$3.3M). Additionally there’s a 15% “Stamp Duty” on the purchase of land. A tax of 10-20% is also levied on anyone that sells a property less than three years after purchasing, effectively preventing flipping. That’s probably why we’ve never seen Flip or Flop Hong Kong.


Canada
Yes, foreign ownership restrictions exist in Canada already. Well, kind of. In PEI any non-resident (this includes us in Toronto), can’t purchase more than five acres of land, or more than 165 feet of coast land. While not terribly restrictive (unless you want to build a coastal mansion for a retreat), this does serve as an existing framework to look at.

Additionally Alberta, Saskatchewan, Manitoba, and Quebec have restrictions on the purchase of farmland by non-residents.
 
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Migos

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I take a crack at the foreign housing debate in my latest housing market report. I look at the experiences in Australia and New Zealand. Taxes and government actions have yet to cool those markets: https://fortressrealdevelopments.com/news/mm-ben-myers-pulse-edition-fall-2016/
...

In the seven weeks before the tax was introduced (June 10 to Aug. 1) the total value of all residential sales involving foreigners nationals was $2.3 billion.

After the tax was introduced, the value of sales over a four-week period (Aug. 2 to 30) plunged to $49 million.

The number of transactions involving foreign buyers also plunged, from 2,034 deals closed in the seven-week period before the tax, to 60 total sales in the four weeks starting Aug. 2.

In the month after the introduction of the new tax, the percentage value of sales involving foreign buyers also fell from 16.5 per cent of all sales to 0.7 per cent, the latest numbers revealed.
A month after the introduction of the tax, the Greater Vancouver Real Estate Board revealed the number of homes being sold had dropped significantly and prices had stalled since it came into effect.

But there has also been a bump in sales outside the Metro Vancouver region, where the tax does not apply, numbers have shown.
http://www.cbc.ca/news/canada/british-columbia/foreign-buyers-tax-data-1.3772158
 

Migos

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BMyers, would love to hear your perspective on the class-action suit commenced against your company Fortress: http://www.macleans.ca/economy/angry-investors-seek-class-action-against-high-profile-seller-of-risky-syndicated-mortgages/

Lawsuit targets Ontario’s $4-billion syndicated mortgage industry

Investors have launched a proposed class action against a high-profile Toronto-area condo development firm, with projects across Canada, that raises millions from mom-and-pop investors through risky pooled mortgage products—many of which are advertised as safe and “secure.”
But the suit doesn’t just allege that Fortress and its partners, including a network of brokers, misrepresented the risks. It claims investors were also kept in the dark about how, exactly, the nearly $17 million raised for the Collier Centre was being used and how much Fortress was keeping for itself. The suit says Fortress’s agreements with developers call for “advance payments to Fortress of ‘anticipated profits’ at the time financing is raised. This results in a substantial portion of an investor’s money (approximately 35 per cent) being retained by Fortress as anticipated profits (before any profits are actually earned),” according to the suit. Some of that money, the suit says, was used to pay broker and agent commissions, which ran as high as 15 per cent. Similarly, the suit alleges additional funds are held back by Fortress so it could be used to pay investors interest on their loans. “They took an interest reserve, so they were basically paying them back with their own money,” says Sherkin, the lawyer.

In the end, the suit alleges, less than 50 per cent of the funds raised from investors actually went toward the development.
The suit also takes issue with the free, independent legal advice that Fortress offered to investors in the Collier Centre, claiming the lawyer in question, Derek Sorrenti, had a conflict of interest since he also acted as a trustee for the syndicate in the project’s loan agreement.
Similarly, the suit alleges Fortress misled investors by artificially inflating the value of the land that their loans were registered against. Rather than using an appraisal, the suit claims, Fortress relied on an opinion of market value that suggested the land was worth nearly $22 million—a figure that assumes the project, which included condos and commercial space, would be fully sold and completed. “The opinion did not disclose that Mady-Collier had purchased the land for $4 million from the City of Barrie approximately two to three weeks earlier,” the lawyers claim.
 
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James

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Post City's latest real estate round table discussion is out:

Real Estate Roundtable: Our fall panel predicts a tamer but still robust market
BY POST CITY STAFF
Published: Wednesday, Sep. 14, 2016, 02:44 PM


L–R: Barry Cohen, Sherry Cooper, Elise Kalles, Brad Lamb and Scott McGillivray

Roundtable Participants:

Scott McGillivray
Star of HGTV’s Moving the McGillivrays, which will premiere Sept. 25 at 9 p.m.
Brad Lamb
President & broker at Brad J. Lamb Realty Inc. and founder of Lamb Development Corporation
Barry Cohen
Canada’s #1 Re/Max agent
Elise Kalles
The #1 broker in Toronto for luxury homes
Dr. Sherry Cooper
Chief economist of Dominion Lending Centres

http://www.postcity.com/Eat-Shop-Do/Shop/September-2016/Real-Estate-Roundtable-Our-fall-roundtable-predicts-a-tamer-but-still-robust-market/
 

ponyboy

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http://www.reuters.com/article/us-canada-china-idUSKCN11U0Q7

Canada, China sign law enforcement agreements during Li visit

excerpt--
"
One agreement concerned the "sharing and return of forfeited assets" and another, cooperation between border agencies, according to the statement posted on Prime Minister Justin Trudeau's website.

A third agreement was a memorandum of understanding on "combating crime" between the Royal Canadian Mounted Police and the Ministry of Public Security of China. The statement offered few other details.
"

Anyone know whether this agreement will make Canadian Real Estate a less attractive destination for HAM (Hot Asian Money)?
 

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