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Old 07-09-2013, 07:25 PM   #901
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you;re proving my point with this, right?
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Old 07-09-2013, 08:05 PM   #902
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Interesting article, thanks for the link.
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The average income in Metro Vancouver in 2009, was only $41,176, according to Canada Revenue Agency statistics. In Vancouver proper, we are getting by on $43,911. However, Richmond residents are barely scraping by at $33,350 a year — the lowest average income in the region, followed by Burnaby, with an average of $34,961.
Richmond residents at $33K? It's sort of known that most of the business operate on a cash basis, and many staff are paid under the table. Where is the CRA in all of this. Let's ensure everyone is paying what they are suppose to pay in taxes.

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Judging from all the growth, the payoff should be money flowing into infrastructure, such as new transit and, especially, into job creation.

“It doesn’t make sense when you look at income numbers,” says researcher Andy Yan, who works for Bing Thom Architects. “We are not a wealthy city.”

But are we a poor city? We are a city in debt, and at the top end, money is obviously coming from elsewhere. The wealth is visible, but the means to it isn’t. We simply don’t have the tools to measure the flow of money, either.

Like several other experts, Mr. Yan doesn’t believe we are getting the proper return on the cost of all this growth.

“Isn’t this an opportunity to tap into the fact that we have a certain monopoly on climate, livability and civility, and we can take advantage of that?” he asks. “Yes, their $3-million condo is admission to the club, but shouldn’t we be modifying the locker fees?

“Why should we give that wealth out for free? There is a terrible economic history in this province where we give our wealth away. It’s tragic. Should we not rethink our city, given the economic change that’s going on?”

So far, the growth isn’t paying for itself. We are a city without an economic underpinning. We have no stock market, no head offices, the financial centre is elsewhere.
There's a cost to all this, but cities, newspapers and other parties dont want to point out these issues, as they may affect certain sponsors, advertisers, stop property tax revenue (the cities are in bed with developers), and also parties are afraid to be labelled insensitive or racists if they discuss the source of all this capital.

The locals and young adults cant afford or find decent jobs and must move, while the lucky property owners cash out a once in a lifetime lottery ticket (buying the house for $200-300K 15-30 years ago and now selling it for millions). It basically is wining the lottery for some of these folks.
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Old 07-09-2013, 08:11 PM   #903
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Here are the top two comments from a CNN article that I found hilarious:
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Here in Australia, house prices have tripled in the past decade because of the huge influx of Chinese buyers. However, people are not opposing it since Aussies are actually making heaps from it when they are selling their houses at $600 to $900k when it cost them $200 to $300k a decade ago, and $100k two decades ago. It is making it difficult for young adults to afford their first home, but the ageing population (average age of around 37) here means that many just don't care.
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thats called screwing your future generations for the benefit of the current generation. We Americans invented it.
Chinese buyers bring big money to U.S. housing market - Jul. 8, 2013
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Old 07-09-2013, 08:53 PM   #904
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I saw this pop up on facebook today too:

"The Canada Mortgage and Housing Corp. is forecasting a 5.1% increase in housing starts in B.C. and an 11% increase in existing home sales in 2014."

Just in terms of visuals, I will tell you there are a lot of houses selling right now in New West. Lots of for sale signs, and lots of sold signs.

People are not caring about the prices, and think getting $20k off the price is a bargain.
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Old 07-09-2013, 11:34 PM   #905
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StatsCan on median family incomes for Vancouver metropolitan area: 62,900 (2006), 66,330 (2007), 68,670 (2008), 67,550 (2009), and 67,090 (2010).
http://www.statcan.gc.ca/tables-tabl...il107a-eng.htm

So based on a single income earner, I guess the 33k figure for Richmond could very well be realistic.
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Old 07-09-2013, 11:39 PM   #906
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Richmond residents at $33K? It's sort of known that most of the business operate on a cash basis, and many staff are paid under the table. Where is the CRA in all of this. Let's ensure everyone is paying what they are suppose to pay in taxes.
Perhaps it's because many Richmond residents have money made/saved elsewhere and aren't earning an annual income locally within Canada.
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Old 07-10-2013, 06:40 AM   #907
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you;re proving my point with this, right?
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Old 07-10-2013, 08:15 AM   #908
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Old 07-10-2013, 11:17 AM   #909
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Perhaps it's because many Richmond residents have money made/saved elsewhere and aren't earning an annual income locally within Canada.
You can't deny there's a lot of cash and under the table dealings going on as well too, and that goes off income tax free... well in essence you and I and everybody else paying income tax are picking up the tab for those who are going under the table and freeloading off the social services; living in their $1M houses driving MB's and BMW's while collecting welfare cheques and free medical

The gov could lower/eliminate income tax and hike up property tax to make sure people are paying their dues, but then those who are working and renting are also getting off 'free'. One way or another, there will always be a group of people who can and will exploit the system, otherwise accountants and lawyers won't have jobs
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Old 07-10-2013, 11:26 AM   #910
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I think it is a reasonable assumption that a good number of real estate investors driving up home prices are non-permanent residents without Canadian citizenship. For this group of people, wouldn't it be reasonable to slap them with heavy property tax as a deterrent to drive up housing prices?
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Old 07-10-2013, 11:33 AM   #911
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I think it is a reasonable assumption that a good number of real estate investors driving up home prices are non-permanent residents without Canadian citizenship. For this group of people, wouldn't it be reasonable to slap them with heavy property tax as a deterrent to drive up housing prices?
There are 21 municipalities in Metro Vancouver. You would need at least the agreement of the big ones (Vancouver, Richmond, Burnaby, Coquitlam, Surrey) for this to have any measurable impact on the market.

But, property taxes on non-residents is a political decision. Considering that many people work in real estate and in the development industry, it would take immense courage for local politicians to take a stand. Posted via RS Mobile
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I think it is a reasonable assumption that a good number of real estate investors driving up home prices are non-permanent residents without Canadian citizenship. For this group of people, wouldn't it be reasonable to slap them with heavy property tax as a deterrent to drive up housing prices?

So penalize money coming in from outside of the country ? Good luck seeing that law passed.

If it will help politicians get voted, they will do it. More money coming in means a better numbers for economic data, which means these politicians can state that the economy is good (hopefully) under their watch.
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Old 07-10-2013, 11:41 AM   #913
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I think it is a reasonable assumption that a good number of real estate investors driving up home prices are non-permanent residents without Canadian citizenship. For this group of people, wouldn't it be reasonable to slap them with heavy property tax as a deterrent to drive up housing prices?
Also driving up housing prices will increase the property tax for EVERYBODY going back to the municipalities, as well as property transfer tax income when properties change ownership. Is the gov. ready to lose this source of income? Your proposed heavy property tax for non-residents would increase income from that select group, but will result in lower overall tax from everybody else to the gov.
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Old 07-10-2013, 11:47 AM   #914
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^^ The primary goal of a government is to look after the interests and welfare of its own citizens, not cater to the investment needs of foreigners. And right now, we have a problem where local citizens are being driven out of the market due to external investment forces. And when the locals are being driven out of the market, sooner or later they will either just leave the city altogether, or they will vote the politician out of their offices.

Canada isn't China. Politicians don't get promoted strictly based on their GDP numbers. So it is in the politicians' interest to do something about our real estate / housing problem.
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Old 07-10-2013, 12:00 PM   #915
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Also driving up housing prices will increase the property tax for EVERYBODY going back to the municipalities, as well as property transfer tax income when properties change ownership. Is the gov. ready to lose this source of income? Your proposed heavy property tax for non-residents would increase income from that select group, but will result in lower overall tax from everybody else to the gov.
UFO, I am not understanding you here.

Increasing property tax for this selected group of foreign investors should result in some combination of the following 2 outcomes:

1) It becomes a deterrent for these foreign investors to put their money into our real estate market. Demand softens, and prices drops, and the locals are happy.

2) Those that continue to invest in the market will generate additional tax revenues for the local governments. This additional revenue can then be used to fund government programs and operations. Local home owners are not affected by higher property prices, so they are happy too.

Since this is an annually recurring tax that applies to foreign investors only, I don't see how it gets rolled into housing prices.

I agree that there will be resistance from those that work in the real estate / construction sector. And it is possible that the overall property tax revenue will drop. But I think the overall benefit (of lower RE prices) would be much stronger, and there would be more support from the general (voting) public.

Would you please tell me what negatives you see with such a proposal?
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Old 07-10-2013, 12:03 PM   #916
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Yes, fair enough. However the bigger cause of home prices being driven up is due to free/cheap credit; I'm not saying foreign investment doesn't play a part, but it is not the driving force causing prices to shoot up in the past (though it makes a fantastic news story). If you want to fix this problem, jack up the property tax on everybody buying property that is not as a primary residence, not just for foreign buyers.

The other side, if cities lose their property tax and property transfer tax income, they operate on a lower budget, can't pay to maintain infrastructure and social services, and locals will still leave. So really, keeping the status quo, at least politicians can claim that the economy is looking 'good'
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Old 07-10-2013, 12:05 PM   #917
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^^ The primary goal of a government is to look after the interests and welfare of its own citizens, not cater to the investment needs of foreigners. And right now, we have a problem where local citizens are being driven out of the market due to external investment forces. And when the locals are being driven out of the market, sooner or later they will either just leave the city altogether, or they will vote the politician out of their offices.

Canada isn't China. Politicians don't get promoted strictly based on their GDP numbers. So it is in the politicians' interest to do something about our real estate / housing problem.
Yes. But let me work this out for you.

You can't.

If you do anything that brings about a decrease in property value, here are the people you help:

1) new buyers(younger people)
2) Investors(richer, older people)

Here are the people you royally screw:

1) anyone that owns a house and lists it as a primary asset

And that is just about anyone. Yes, if you bought 20 years ago and rode the house value up, and then saw it decrease then you gained and lost on paper only and while you were worth more, now you are worth less but you still live in the same house so nothing changed.

That is very few people.

More likely? I bought and sold a few times and maybe bought at the height of the market. Now I'm screwed. I maybe used home equity to renovate said home. Now I'm screwed. Maybe I bought a new car with home equity...way screwed. See the issue?

The mistakes were made in 2002 that no one stopped the housing boom. Why would they? Everyone made a fortune and it covered up some real problems in the US economy and a lot in Canada too. We burned though 30 years in rising value in 8 years. That house I pointed out at UBC gained $1 million in value A YEAR.

We now have a problem in that we can't bring wages up to match house value. We can't bring housing down to match wage. We can have house value plateau to wait it out for 20 years, or it can gradually slide down over time. This is in terms of planning. In reality, it can crash at any time.

I don't actually know if it will or not. Everyone is planning on more housing selling next year than this year. Apparently $20k off is a bargain these days.
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Old 07-10-2013, 12:11 PM   #918
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UFO, I am not understanding you here.

Increasing property tax for this selected group of foreign investors should result in some combination of the following 2 outcomes:

1) It becomes a deterrent for these foreign investors to put their money into our real estate market. Demand softens, and prices drops, and the locals are happy.

2) Those that continue to invest in the market will generate additional tax revenues for the local governments. This additional revenue can then be used to fund government programs and operations. Local home owners are not affected by higher property prices, so they are happy too.

Since this is an annually recurring tax that applies to foreign investors only, I don't see how it gets rolled into housing prices.

Would you please tell me what negatives you see with such a proposal?
No negatives persay. Assessed values and property taxes are based on market values of similar properties in your respective area. If the market softens and prices/values come down, the property tax for all owners will also come down and income to the government will decrease correspondingly. Let's assume that out of 100 properties sold, 5% are sold to foreign investors. You can increase their property tax by 2 or even 3 fold, but that increase to a small number will not overcome the loss that I described at the beginning because everybody is paying a lower amount.

I think the fundamental issue is you think that foreign investment is the main contributor to increase in housing prices, whereas in reality I don't believe that to be the case (though I am just a casual observer and no expert in this area). If out of every 100 homes sold, 50 are being sold to foreign investors, then your model could work out assuming those 50 foreign investors want to continue investing given the crazy property tax; if they walk away and leave, then the gov loses out on the income source.
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Old 07-10-2013, 12:33 PM   #919
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Yes. But let me work this out for you.

You can't.

If you do anything that brings about a decrease in property value, here are the people you help:

1) new buyers(younger people)
2) Investors(richer, older people)

Here are the people you royally screw:

1) anyone that owns a house and lists it as a primary asset

And that is just about anyone. Yes, if you bought 20 years ago and rode the house value up, and then saw it decrease then you gained and lost on paper only and while you were worth more, now you are worth less but you still live in the same house so nothing changed.

That is very few people.

More likely? I bought and sold a few times and maybe bought at the height of the market. Now I'm screwed. I maybe used home equity to renovate said home. Now I'm screwed. Maybe I bought a new car with home equity...way screwed. See the issue?

The mistakes were made in 2002 that no one stopped the housing boom. Why would they? Everyone made a fortune and it covered up some real problems in the US economy and a lot in Canada too. We burned though 30 years in rising value in 8 years. That house I pointed out at UBC gained $1 million in value A YEAR.

We now have a problem in that we can't bring wages up to match house value. We can't bring housing down to match wage. We can have house value plateau to wait it out for 20 years, or it can gradually slide down over time. This is in terms of planning. In reality, it can crash at any time.

I don't actually know if it will or not. Everyone is planning on more housing selling next year than this year. Apparently $20k off is a bargain these days.
I'm sorry, but to say that you can't decrease property values because it'll screw over people that got into housing market at the wrong time or went in too deep is not a good idea. You're basically saying that we should eliminate any risk with owning real estate as your majority asset or flipping it as an investment.

The big issue is that many people overused their LOC/Home equity loans (cheap debt) to fund vacations, reno's, and other depreciating assets like cars and recreational vehicles. Now if their inflated house prices drop back down to reality, they will owe more on their houses than what it's worth.

The gov't is already well aware of the dangerously high debt-loads that Canadians carry, with the majority of it in housing (mortgages). We've seen them make stricter rules on mortgages last year to try to correct the housing market, and there's another set of changes coming this year.

Stricter Debt Ratio Standards on the Way

You're right that we should've stopped the housing boom a lot sooner to avoid our precarious situation that we're in now, but it's in our culture to think home ownership as sacred and untouchable. Plus, we really love HGTV.
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Old 07-10-2013, 12:44 PM   #920
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I think the fundamental issue is you think that foreign investment is the main contributor to increase in housing prices, whereas in reality I don't believe that to be the case (though I am just a casual observer and no expert in this area). If out of every 100 homes sold, 50 are being sold to foreign investors, then your model could work out assuming those 50 foreign investors want to continue investing given the crazy property tax; if they walk away and leave, then the gov loses out on the income source.
I do not think that foreign investment is the main contributor to our elevated housing prices. Rather, I brought up the higher property tax suggestion for this group because it is a more easily addressable problem. This group's interests should not be the primary concern of local governments, so politicians can choose to ignore their complains without serious consequences. I don't think it would dramatically affect the market, although I do hope the effects will be noticeable.

Re Gridlock:
Short of policies that are really, really stupid, I don't think the government can dramatically alter real estate prices. Market conditions can pop the real estate bubble, but generally speaking, governments can't. So that means whatever policies the government end up adopting, it will only result in gradual/gentle reductions in housing prices -- ie. soft landing instead of bubble popping. People don't get royally screwed in this case; they just bxtch and whine about how they (think they) are royally screwed, and I am quite ok with that.
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Old 07-10-2013, 01:29 PM   #921
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I do not think that foreign investment is the main contributor to our elevated housing prices.

I don't think it would dramatically affect the market, although I do hope the effects will be noticeable.
I think I see what you're saying. You may not think foreign investment is the main contributor, but a significant one. I don't believe foreign investment is significant, it marks only a small percentage, but has been overplayed and sensationalized by the media.

If your end goal here is to discourage foreign investment by driving their tax up to the point where the market will lower to 'affordable' levels for locals, then yes it has to dramatically affect the market, otherwise it will not be noticeable. Anything that is noticeable will dramatically affect the market, as well as the tax income implications to the gov. Remember locals are not being priced out because they can afford 750k but not 800k. Locals are being priced out because what should cost them 500k is now costing them 800k for no real apparent reason

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The big issue is that many people overused their LOC/Home equity loans (cheap debt) to fund vacations, reno's, and other depreciating assets like cars and recreational vehicles. Now if their inflated house prices drop back down to reality, they will owe more on their houses than what it's worth.
Cheap debt was also used to fund appreciating assets like second homes, condos, rented out to cover mortgage payments. Those who did and cashed out early got rich. The greedy ones who are holding out for even more return have seen their gains decrease, and maybe even turn into a depreciating asset in the future.
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Old 07-10-2013, 03:48 PM   #922
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wonder what happens if mortgage rate were up to the rates back in the early 1990s (over 10% I think). That would surely crash the market LOL.

And yes those rate are very real back in 1990s.
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Old 07-10-2013, 06:13 PM   #923
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I think my parents bought our house back east for like 14,000 or something at 19% interest.

Mind you, it had a toilet in the living room, so it was a bit of a fixer.
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Old 07-10-2013, 06:59 PM   #924
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I've been watching the prices in NVan forever, def have came down a bit in the last year.. I hope thats a trend which continues for a while.

... and then stops immediately after I buy
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Old 07-10-2013, 07:49 PM   #925
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wonder what happens if mortgage rate were up to the rates back in the early 1990s (over 10% I think). That would surely crash the market LOL.

And yes those rate are very real back in 1990s.
It's all simple economics, rates will go up to the per crash rates of 5-6%, affordability will, thus, go down, prices will compensate accordingly, at this time I will likely buy with a 30% downpayment, perhaps more (depends on returns on a diversified investment portfolio at this time, should be 8-10%)

Now, people think, blindly that rates are here to stay - how? Interest rates are a monetary tool to speed up or slow down the economy when need be. If rates are at, effectively 0%, what happens if our economy starts stalling - we NEED rates to normalize so that the next time things f up, rates can be brought back down to allow for easier lending

Now, all of this is overly simplified - but the point remains. The US worked it quite well. Emergency low rates, the economy has turned around GDP per capita is stronger, employment improving, rates are thus increasing (due to fed action), will slow down the growth, but that's necessary as otherwise we'll just bubble again

Unfortunately for Canada, we didn't crash when we should have, due to commodities - the strong dollar has fucked us over - export businesses hurt beyond belief, consumers are loving it, but that's no good for our economy, we're spending money outside of Canada.

What has happened since 2008 in Canada doesn't bode too well for the next 5 years. Sell Canada, buy US is still the right move - not as good as it was 6 months ago (the latter part), I'm just glad the majority of my net worth is in the US and denominated in US $, beyond the increase in asset values in the US, with up coming tapering of QE, the US $ will continue to strengthen, which will continue to hurt commodities above and beyond the china story.

All in all, none of these things bode well for joe public home owner who has entered the market since about 2005, 2006 (let's not forget, house prices in Vancouver and Canada were low up to 2003... What happened then, lending regulators got lax, rates went down, real estate started a stupid rise which has now entirely decoupled from fundamentals (price to income, price to rent) - we WILL return to these fundamentals within the next 5 years, I'd guess nearer 3.

We're fucked, be liquid, earn income from your assets, and never take on 'cheap' money - rates and prices are, generally, inversely related (there are studies that disclaim this, but they're weak and have too many things over simplified to make the point)
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