Canada ban foreign real estate investors

[Loren Pechtel]

They are preventing individuals from purchasing a home because they overpay for the property, they can afford to do that. Multiple properties in a neighborhood at that. The end product is overpriced but the buyers pay it because of limited housing available.

If they were actually overpaying it would be self-correcting as they lost their lunches and were knocked out of the business.

I do have a problem with them but it's a matter of quality of work--flippers don't plan to live there and focus on looks over substance.

 

[Loren Pechtel]

What I'm saying is that low interest loans simply drive up house prices, they don't help the situation.

More houses is a good thing but that's limited by how much space you have to put houses.

Low interest rates don’t drive up home prices. People competing for a limited supply of housing drives up demand. Lower interest rates facilitate the ability to purchase higher priced homes. Higher interest rates keep home prices lower. Which one is best for you depends on whether you are buying or selling. And whether or not you can come up with a down payment and how much.

Facilitating the ability to purchase is a form of increasing demand.

 

[Toni]

What I'm saying is that low interest loans simply drive up house prices, they don't help the situation.

More houses is a good thing but that's limited by how much space you have to put houses.

Low interest rates don’t drive up home prices. People competing for a limited supply of housing drives up demand. Lower interest rates facilitate the ability to purchase higher priced homes. Higher interest rates keep home prices lower. Which one is best for you depends on whether you are buying or selling. And whether or not you can come up with a down payment and how much.

Facilitating the ability to purchase is a form of increasing demand.

Interest rates are a factor influencing both supply and demand.

 

[Jimmy Higgins]

The whole affair was caused by another private institution called the fed.

he Federal Reserve did not cause the home price bubble. Your claim is counterfactual.

A private institution steering government monetary policy.

The Federal Reserve is quasi-public (or quasi-private). Your claim is based on misinformation.

I think that is the very definition of facism.

You may think that is the very definition of fascism, but your definition is not the commonly accepted one.

Typical RVonse post, only blame the government when just about all the top players had large amounts of blame for instigating or being negligent about the bubble.

The Fed most certainly was a substantial instigator to the housing bubble. Congress was negligent, as housing was the only thing driving the economy. The lenders were giving homes to anyone. I remember getting a near 0 down mortgage but only bought about half of what banks would lend me. Then the banks started going ARM which was fraud and negligence. And finally the ratings agencies were either too complicit or too ignorant to manage the ratings of high risk short term mortgages which put industrial level investors at terrible risk.

Yes, lenders reduced their underwriting to absurd levels prior to the 2009 crash. However, ARMs are just a tool. In the right situation, they can be very beneficial. I bought a second home several years ago with ARM that is at 1.79%! At the time, the prevailing rate for a fixed 30-year rate was around 3.5%. But I didn't want a long-term rate. The ARM was good for five years. It's scheduled to rerate in about 4 months. The rate will go up to at least 7% then. No problem. I have the cash set aside. I'll pay off the loan in full and never have consumer debt again.

Yes, the tools can be useful, but we know they were not being used sustainably between 2006 (earlier?) and 2008.

FYI, my parents ran into a problem with that no "consumer debt again", because the rating agencies seems to think that having paid off your house years ago doesn't mean shit when it comes to credit. That made getting the next home a bit harder, ie they rented their old home, and lacked equity to buy outright a second place. Went to bank and they said, but you ain't got credit. Saying that own the house didn't count. Oi!

 

[Jimmy Higgins]

It seems like a short sighted policy. The major cost of buying a house is not the sale price, but the interest on the mortgage. If the Canadian government was truly concerned about Canadians being able to buy a house, a program of low interest guaranteed loans with low down payments, targeted at specific segments of the economy, such as first time home buyers would be much more effective.

But what people can afford is the payment, not the total price. Thus low interest loans just drive up the price. Look at what has happened to US real estate recently--soaring, but now crashing as interest rates go up.

You contradict yourself. If a person can afford the payment, they can afford the price. As I said before, selling price is more important to the seller than the buyer.
It is demand for short supply that drives up prices. If house prices are the problem, more houses is the solution.

What I'm saying is that low interest loans simply drive up house prices, they don't help the situation.

More houses is a good thing but that's limited by how much space you have to put houses.

Low interest rates don’t drive up home prices.

That isn't accurate. Fed and monetary policy indicates that inflation and rising prices is due to supply and demand, but not just with products. Access to money, increasing available supply via low interest rates leads to higher prices, because there is an inflated amount of dollars available to use to buy things, from houses to fake vomit.

This is how raising the interest rate is very effective in slowing down inflation, as it reduces cash supply.

Lowering an interest rate doesn't lead 1 to 1 to an increase in housing value. But it allows for people to be able to afford to pay more... which means the market will ask for more. We saw this two decades ago... and Millennials are fucked because of it. No, it isn't a blind process and human behavior is involved and greed is involved, but it is predictable and falsifiable to link low interest rates with rising housing costs.

People competing for a limited supply of housing drives up demand.

This is what happened recently due to the pandemic, and it is not exclusive to other housing cost issues.

Lower interest rates facilitate the ability to purchase higher priced homes. Higher interest rates keep home prices lower.

It might be more accurate to say interest rates heavily impact the increase and decrease (depending on their level) the rate of increase of the property value. This is also not exclusive, as other things can and do impact it as well, in some cases, more. But in other cases less.

 

[Gospel]

They are preventing individuals from purchasing a home because they overpay for the property, they can afford to do that. Multiple properties in a neighborhood at that. The end product is overpriced but the buyers pay it because of limited housing available.

If they were actually overpaying it would be self-correcting as they lost their lunches and were knocked out of the business.

I do have a problem with them but it's a matter of quality of work--flippers don't plan to live there and focus on looks over substance.

Is there not different types of flippers? I mean they are all the same but there is an obvious difference between individuals and corporations which is volume no? I think TSwizzle is talking about corporations like Opendoor (for example only not saying they are guilty - but they are!). They can afford to buy at any price then sell above that. Considering there are others like Opendoor competing the net affect is rising prices and non corporate buyers getting out bided or overpaying. If it was not for the dramatic increase in interest rates they wouldn't even be selling any properties at a loss right now. Heck, I wouldn't be surprised if they rent as many as possible out during the down turn and then sell them from under the feet of the renters when the Feds stop the crunch.

Surely what buyers would pay &/or can afford limits their profits but we'd have to wait until a lot of people are fucked first before they face mild losses for tax write offs.

 

[Jimmy Higgins]

Amigo: you are incorrect here. Flippers make their money by buying distressed properties at a lower price (not higher); fixing them up, then selling at the market rate. Any flipper buying a distressed property at a higher than market rate will be out of business tout suite.

I understand what flippers do which is as what we both agree on. However, the difference is that investors/flippers have the capital to pay more than what the typical home buyer has available to purchase these “distressed” properties and therefore keep ordinary home buyers from getting in. The flipper is not competing with potential home buyers, they are competing against fellow speculators. Investors/flippers also have the capital to give the property a makeover and inflate the price. This forces the “retail” buyer to borrow more than the house is really worth which lenders are keen to do, lend more money. It’s a shitty state of affairs in my opinion.

In any event, California is onto the game and have some additional taxes in place. Whether that helps the situation or not, we shall see.

But a place can only being flipped so high, as you can't get mansion price in a neighborhood that looks like trash.

Concentration on flipping seems dubious. People buying homes to rent them to others is a problem for the locals especially if they are detached from the property. We have this issue in my neighborhood where people use it as income, but let the property go way too far, becoming slum-ish lords. In addition, it creates a lack of stability for a neighborhood and people living in it, inhibiting the local communal setting.

Private equity doing so is very problematic as it takes property almost permanently off the board altogether.

 

[Gospel]

Amigo: you are incorrect here. Flippers make their money by buying distressed properties at a lower price (not higher); fixing them up, then selling at the market rate. Any flipper buying a distressed property at a higher than market rate will be out of business tout suite.

I understand what flippers do which is as what we both agree on. However, the difference is that investors/flippers have the capital to pay more than what the typical home buyer has available to purchase these “distressed” properties and therefore keep ordinary home buyers from getting in. The flipper is not competing with potential home buyers, they are competing against fellow speculators. Investors/flippers also have the capital to give the property a makeover and inflate the price. This forces the “retail” buyer to borrow more than the house is really worth which lenders are keen to do, lend more money. It’s a shitty state of affairs in my opinion.

In any event, California is onto the game and have some additional taxes in place. Whether that helps the situation or not, we shall see.

But a place can only being flipped so high, as you can't get mansion price in a neighborhood that looks like trash.

Concentration on flipping seems dubious. People buying homes to rent them to others is a problem for the locals especially if they are detached from the property. We have this issue in my neighborhood where people use it as income, but let the property go way too far, becoming slum-ish lords. In addition, it creates a lack of stability for a neighborhood and people living in it, inhibiting the local communal setting.

Private equity doing so is very problematic as it takes property almost permanently off the board altogether.

It's not like their working to counter each other. Bad actors in general, whether they are flipping or renting work in conjunction (deliberately or not) to ill effects on the market.

 

[Toni]

Amigo: you are incorrect here. Flippers make their money by buying distressed properties at a lower price (not higher); fixing them up, then selling at the market rate. Any flipper buying a distressed property at a higher than market rate will be out of business tout suite.

I understand what flippers do which is as what we both agree on. However, the difference is that investors/flippers have the capital to pay more than what the typical home buyer has available to purchase these “distressed” properties and therefore keep ordinary home buyers from getting in. The flipper is not competing with potential home buyers, they are competing against fellow speculators. Investors/flippers also have the capital to give the property a makeover and inflate the price. This forces the “retail” buyer to borrow more than the house is really worth which lenders are keen to do, lend more money. It’s a shitty state of affairs in my opinion.

In any event, California is onto the game and have some additional taxes in place. Whether that helps the situation or not, we shall see.

But a place can only being flipped so high, as you can't get mansion price in a neighborhood that looks like trash.

Concentration on flipping seems dubious. People buying homes to rent them to others is a problem for the locals especially if they are detached from the property. We have this issue in my neighborhood where people use it as income, but let the property go way too far, becoming slum-ish lords. In addition, it creates a lack of stability for a neighborhood and people living in it, inhibiting the local communal setting.

Private equity doing so is very problematic as it takes property almost permanently off the board altogether.

We have that problem in my part of town. Not that houses are 'flipped' so much as they are converted to student housing. As more houses become student rentals, the desirability of the neighborhood for families decreases. Precisely because landlords don't do enough to keep the property maintained and because this neighborhood of mostly larger old houses was not really ever designed for high density population. A family home that used to be home to a family of 6 or 8 (Catholic town) and is converted to a rental property for 16 students (not at all uncommon) places more stresses on the property and on the neighborhood. For one thing, at least 12 of those students will have their own car. Yards are converted to parking lots because of the pressure on the streets for parking.

Increased numbers of student rentals drives down the value of homes that remain single family homes because it makes the neighborhood less desirable. Families seeking rental housing end up in small apartments in apartment buildings that would actually be more suitable for students. It's worse for families without much money and for anyone moving to town from a place too far to commute.

 

[Lumpenproletariat]

But eliminating foreign investors from buying up houses is worth consideration.

Why are foreign investors to be eliminated, but domestic investors allowed to step into their shoes?

Because the number of wealthy strangers within Canada who want to and can afford to buy real estate is smaller than the number within Canada + outside Canada.

What kind of nonsensical answer is this? This essentially condemns all foreigners per se, as enemies of the nation, no matter what they do. The existence of just one foreigner is a threat. How can anything be more xenophobic?

bilby: A better solution might be to limit the holdings of any given investor - say to a maximum limit of two, or five, or ten properties per investor, so that nobody can buy up a significant fraction of the market, but anybody can invest in the sector.

Setting maximum limits on the number of properties one may invest in is not the best kind of solution. Better would be increased property taxes on all, and also a graduated property tax = higher tax based on the total real estate value held by the owner. So those holding huge real estate values pay much higher tax, while other smaller investors pay somewhat less but still higher than those lower down, etc., so there's always some disincentive to over-investing in property, and all those willing to pay higher tax rate can still invest in more properties -- they choose how much investing is still worth it to them.

But also we need a new system of taxing property, where the value assessed truly reflects the market selling value/price of the property. As long as the value of the property owned can be under-assessed, there is no real solution to this.

The tax has to be high enough, on ANY property at all, so that no investors have an incentive to buy residential property and just hold it without renting it out (or keeping it unoccupied). It must be made unprofitable for them to keep units unoccupied as so many are doing currently.

 

[Jimmy Higgins]

But eliminating foreign investors from buying up houses is worth consideration.

Why are foreign investors to be eliminated, but domestic investors allowed to step into their shoes?

Because the number of wealthy strangers within Canada who want to and can afford to buy real estate is smaller than the number within Canada + outside Canada.

What kind of nonsensical answer is this? This essentially condemns all foreigners per se, as enemies of the nation, no matter what they do. The existence of just one foreigner is a threat. How can anything be more xenophobic?

Are we going to argue next that not allowing foreigners to vote is xenophobic. The issue here regards real estate and who owns it. Typically, this isn't too big of an issue until too many from outside (local area) start acquiring properties on large enough scale, that it inhibits the ability of locals to buy into the local property market.

A better solution might be to limit the holdings of any given investor - say to a maximum limit of two, or five, or ten properties per investor, so that nobody can buy up a significant fraction of the market, but anybody can invest in the sector.

Setting maximum limits on the number of properties one may invest in is not the best kind of solution. Better would be increased property taxes on all, and also a graduated property tax = higher tax based on the total real estate value held by the owner.

Seriously? Tax the locals is part of the solution? It'd be much much easier to increase the tax rate... but provide homestead exemptions back to the normal rate for people that live on the property.

But also we need a new system of taxing property, where the value assessed truly reflects the market selling value/price of the property. As long as the value of the property owned can be under-assessed, there is no real solution to this.

Yes, the ultra-right wing solution... tax the proles out of their homes.

 

[Lumpenproletariat]

I remember seeing last year localities are instituting ordinances that residences must be occupied within a short period of time after the sale to discourage investors from buying property and just sitting on it waiting for the values to increase.

How do you prove that a residence is "occupied" or not? The absentee owner could claim they were just gone on a long vacation. Or they could hire a "resident" to occupy it for one day when the inspections are happening. Etc. There are ways to get around any vague law, play games with whoever monitors the property to see who's there.

Rather, what is needed is a high-enough tax on the property so that the owner loses money rather than making a profit by holding those extra investment properties and not renting them out.

 

[Lumpenproletariat]

A better solution might be to limit the holdings of any given investor - say to a maximum limit of two, or five, or ten properties per investor, so that nobody can buy up a significant fraction of the market, but anybody can invest in the sector.

Setting maximum limits on the number of properties one may invest in is not the best kind of solution. Better would be increased property taxes on all, and also a graduated property tax = higher tax based on the total real estate value held by the owner.

Seriously? Tax the locals is part of the solution? It'd be much much easier to increase the tax rate... but provide homestead exemptions back to the normal rate for people that live on the property.

That's still a higher tax on "the locals" who own property but don't live on it, plus also exemptions to the damn foreigners who invade and homestead.

But also we need a new system of taxing property, where the value assessed truly reflects the market selling value/price of the property. As long as the value of the property owned can be under-assessed, there is no real solution to this.

Yes, the ultra-right wing solution... tax the proles out of their homes.

No, what I proposed above could be done so that the lowest-value properties would pay no tax at all. Zero property tax below a certain level of total property value possessed by the owner. So it could be graduated to the point that there would even be zero rates for those at the bottom, and this "bottom" set at whatever point society chooses.

 

[TV and credit cards]

I remember seeing last year localities are instituting ordinances that residences must be occupied within a short period of time after the sale to discourage investors from buying property and just sitting on it waiting for the values to increase.

How do you prove that a residence is "occupied" or not? The absentee owner could claim they were just gone on a long vacation. Or they could hire a "resident" to occupy it for one day when the inspections are happening. Etc. There are ways to get around any vague law, play games with whoever monitors the property to see who's there.

Rather, what is needed is a high-enough tax on the property so that the owner loses money rather than making a profit by holding those extra investment properties and not renting them out.

How long? Utility bills tell the story.

 

[Jimmy Higgins]

Today on Goalpost Shifting:

Better would be increased property taxes on all, and also a graduated property tax = higher tax based on the total real estate value held by the owner.

No, what I proposed above could be done so that the lowest-value properties would pay no tax at all.

Remember to lift those goalposts using your knees, not your back, and be certain to ask for help.

 

[bilby]

Are we going to argue next that not allowing foreigners to vote is xenophobic

Not allowing residents of an area to vote because they're not citizens, while allowing citizens now resident overseas to vote, is xenophobic.

Before the Great War, it was common to allow people to vote only if they owned real estate in the district. What passports (if any) they could qualify to obtain wasn't a consideration.

The debate about who should or shouldn't be allowed to vote certainly deserves its own thread though.

 

[Lumpenproletariat]

Today on Goalpost Shifting:

Better would be increased property taxes on all, and also a graduated property tax = higher tax based on the total real estate value held by the owner.

No, what I proposed above could be done so that the lowest-value properties would pay no tax at all.

Remember to lift those goalposts using your knees, not your back, and be certain to ask for help.

Even if this is "Goalpost Shifting" (which it probably is not), there actually is nothing wrong with shifting the goalpost. (Maybe this goes into the "philosophy" department rather than politics.) You undermine your point when you resort to the "goalpost shifting" argument. At worst, the goal-post shifter only did a modification, to correct a minor error or overlooking of a nitpicking detail.

bottom line: Most property owners probably should pay a higher property tax, but the higher tax should be paid mostly by the high-investment owners, and maybe the lowest-down owners should not pay higher. The tax should be high enough or designed so that owners have little or no incentive to keep residential properties unoccupied.

Theoretically this could mean some low-income property-owners would pay a higher tax, i.e., those ones who have residential property investments and are keeping them unoccupied in order to make more profit. Are there such poor property owners? If so, they must pay some property tax, and that tax would increase if they add more properties to keep unoccupied. So it's a tax that theoretically applies to them (a tax "on all") but in practice would be irrelevant to their category. It's a tax on anyone if and when they become that kind of property owner. And the super-rich who don't own real estate would be unaffected.

If this is goalpost-shifting, even so it's the truth. So goalpost-shifting which results in the truth being arrived at is good, and we need more goalposts to be shifted.

Also, a better form of tax-relief for the poor would be that of lower income tax and lower sales tax, not lower property tax.

 

[TV and credit cards]

I checked out one of these nationally recognized purchasers of homes just because. It's worth it to check out comments people make about them. I take comments with a grain of salt untill they are overwhelmingly bad. It seems they will entice you with a strong estimate online of what your property is worth. Quote you a good offer pending inspection. Then give you a laundry lists of items, their condition, and why they are lowering their offer by umpteen thousand dollars. None of which they are actually going to fix. They are going to do what most any flipper is going to do.
If we can assume a flipper's first priority is to make money, and unless we are extremely naive, I think we can, a flipper is going to come in and put lipstick on whatever pig they purchase. They are not going to replace any of the unseens unless absolutely necessary. That is, if that 25 year old water heater is still making hot water, they are not going to replace it. Same goes for the furnace, roof, etc.
A flipper is more than likely going to redo the kitchen with the cheapest particle board cabinets available, appliances, and laminate countertop. Same goes for the bathrooms. You're not going to see $600 Toto toilets. You're going to see low end stuff for $120 from the local home store. Same goes for the flooring. Then spray paint it all and get it on the market.

There are huge tax advantages to owning rentals, at least in the US. This could be rectified. I would not touch a primary residence though. Property taxes and monthly mortgage should be relatively steady, particularly for seniors as their income is often steady and may not even be keeping up with inflation. Limits on property tax increases like in CA and fixed rate mortgages should be available for primary residences. After that, the tax advantages should decrease with the number of properties owned.

 

[Gospel]

Yeah well, I bet if you check the purchase history on the properties you'd find that after purchase they are listed at substantially more (presumably for far more) than they put into it. Only recently you may see them selling at a loss because HeRp DeRp ThE FeDz! I admit, I don't have aggregated data and only check out houses I've been interested in purchasing. I did notice a trend especially with Opendoor. This is not to say what they are doing is wrong, but it definitely isn't right for the affordable housing issue in Orlando.

By the way this issue was around pre pandemic and subsequent inflation with rent going through the roof everywhere due to multiple companies buying up single family homes to sell at a higher price. Pricing people out of the housing market and forcing them to rent. Then the landlords start rubbing there hands together because WOW there is no end to tenants that will pay whatever I ask.

Edit: You also have some home owners that get their appraisals in. Based on equivalent properties in the area it's bang you have prices going up on houses nobody did a damn thing with.

 

[TSwizzle]

An interesting article in Teh Gruaniad from 2021;

Zillow was running a side-business, separate from its property searching website, in which it deployed algorithms to help it buy houses themselves and then flip them. It did a lot of buying, but hasn’t been so great at the selling. This week the company announced that its home-buying division, Offers, had lost more than $300m over the last few months. Offers will now be shut down and about 2,000 people laid off. Zillow reportedly has about 7,000 homes that it now needs to unload; many for prices lower than it originally paid. A recent report from Zillow found that the four largest iBuyers – Zillow Offers, RedfinNow, Offerpad and Opendoor – were responsible for just 1% of all US home purchases in the second quarter of 2021. (Although that number goes up to 5% in certain fast-growing markets like Phoenix.)

Teh Gruaniad