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Coming from Vancouver I can tell you with certainty that Chinese will gobble up ALL apartment space if it's available and drive their prices to the insane level

by eps 9y ago

Coming from Vancouver I can tell you with certainty that Chinese will gobble up ALL apartment space if it's available and drive their prices to the insane levels too. This will result in a construction boom leaving behind fields of unoccupied residential towers. Apartments are not the remedy and Chinese money is not a scapegoat, it's a hurricane-level force of real-estate.

alkonaut 9y ago
Are they bought as speculation by foreign residents?If that's the case then just fix it by making it less attractive to buy for speculation. For example, a tax on property matched with a deduction on income. If you don't have any income then the property tax would be higher than any expected yearly gain in property prices.
- raquo 9y ago
  The new BC government was planning to implement such a tax. Until they were elected, now no one really knows.
- h0l0cube 9y ago
  > For example, a tax on property matched with a deduction on income. You mean income derived from the property? Seems like that could inflate rental prices, and shift the affordability problem to another set of people. The state government in Victoria (Australia) is planning to tax vacant properties, but it's self reported and seems easy enough to dodge. At first the proposed measuring water usage to determine if the property was vacant, but then you can only tax as much as it would cost to leave a tap on. http://www.sro.vic.gov.au/node/5816 http://www.sro.vic.gov.au/node/5816
  - alkonaut 9y ago
    > You mean income derived from the property? No, a regular property tax based on the value of the property. Such as 1% of the value paid in tax every year. The idea would be that it would be zero net effect if you live in the country (i.e. it's a property tax + income tax deduction that effectively make them together be a "tax on properties owned by foreigners")
    - bdamm 9y ago
      Tempting, but what if I live in the country and own two properties? Then do I get to perform the deduction twice? If not, then am I punished for having two properties? It would be pretty tough to fine tune this.
      - lhopki01 9y ago
        Yes you should be 'punished' for owning two properties. Or more specifically if you are well off enough to own two properties then you are well off enough to pay for them. Property should not be an investment since it is an essential for living.
        bdamm 9y ago
        Yes, but the idea was to boost property tax for the purpose of avoiding foreign investment. I'm saying that this might suppress domestic land ownership as well. Someone is going to be the land-lord, it might as well be domestic.
        lhopki01 9y ago
        Why exactly do we need much private rental accommodation. Singapore seems to be doing very well without a market based approach to housing.
- ericd 9y ago
  I agree with you that tax incentives are the way to tackle it. I think the issue with this specific proposal is for people on low/fixed incomes (typically retirees). I think the normal way to do this is via a high property tax and then a "homestead exemption" that you take if you live in the property.
  - alkonaut 9y ago
    > "homestead exemption" that you take if you live in the property. Exactly. But the idea is that it's very hard to check whether someone lives in a property, so you check for the next best thing: whether you have income in the country. So if you have income tax in the country then you can get exempt from one property tax. Otherwise you end up having things like "self reporting" where you live, or local governments trying to check water/electricity use to see whether buildings are occupied etc, which are obviously both expensive and futile.
    - elyobo 9y ago
      No exemptions, tax them all. Homes will, ironically, be cheaper if they're taxed because it will further drive out speculative money.
      - alkonaut 9y ago
        Yes I'm not saying property taxes are inherently bad, but this would need to be pretty high, such as property taxes of e.g. 5-10% of the market value. Probably a bit hard to swallow for e.g. people who have retired and have bought their homes ages ago for say $100k and it's now worth $1M and the pensions doesn't cover the $50k annual property. Moving would net the couple $900k minus a hefty chunk in profit tax, after which they can't afford buying a new home. We had this situation here and it's not good. You could have a 10% market value property tax, and a deduction of 90% of that amount, for one home, on your income tax, then 75% for a second property etc, to make it both prohibitively expensive for foreigners, and a bit progressive for those owning multiple homes.
        9y ago
akras14 9y ago
Demand for investments from Chinese investors. Edit: See this comment https://news.ycombinator.com/user?id=tmnvix https://news.ycombinator.com/user?id=tmnvix
dis-sys 9y ago
> it's a hurricane-level force of real-estate it is a hurricane-level force for everything. if you think the situation in Vancouver and Sydney are bad, think again, think the situation in Shanghai - a typical recently built 3 bedroom apartment in downtown Shanghai can easily cost you $3m CAD, a typical worker on average Shanghai salary will have to pay no tax, eat nothing, walk to work naked (no $ for cloth) for 300 years to afford that. not talking about luxury apartment with fancy view, just average apartment in an okay area next to busy & noisy roads.
- tptacek 9y ago
  Do workers in Shanghai generally live in 3bdr condominiums downtown? Because a 3bdr condo in downtown Chicago would also be nosebleed expensive (though probably not 2.3MM USD expensive) too.
  - dis-sys 9y ago
    Apartments 8-10km away from central Shanghai costs you $1.7-2m. To get a recently developed unit at $1m price range, you pretty much need to go 20-30km out. It is a cancer.
- conanbatt 9y ago
  Whats the price/rent in Shanghai? If it's so grotesquely overpriced, why aren't investors jitterish about a downturn? Are they ready to bite a 30% bullet on the investment? Genuine questions, I want to understand the chinese money exodus effect.
odammit 9y ago
Same problem in LA. If you’re trying to rent an apartment you’re screwed. If you’re trying to buy a house you’re really screwed. It’s not all Chinese money but it’s a lot of foreign and local investors. I can see investors being important for building or upgrading condos and apartments, but investors being able to buy so many single family homes and “flip” them just makes the whole Norman Rockwell picket fence thing seem pretty unattainable. With the new football stadium going in there are “rundown” areas getting “gentrified” and it’s crazy to see one renovated 2 bedroom house in Baldwin Hills sell for $900k and be on a street with sales from the two years prior in the 200-300k range. [1] [1]: a 200k house in LA is a shithole

by eps 9y ago

alkonaut 9y ago

Are they bought as speculation by foreign residents?If that's the case then just fix it by making it less attractive to buy for speculation. For example, a tax on property matched with a deduction on income. If you don't have any income then the property tax would be higher than any expected yearly gain in property prices.

raquo 9y ago
The new BC government was planning to implement such a tax. Until they were elected, now no one really knows.
h0l0cube 9y ago
> For example, a tax on property matched with a deduction on income. You mean income derived from the property? Seems like that could inflate rental prices, and shift the affordability problem to another set of people. The state government in Victoria (Australia) is planning to tax vacant properties, but it's self reported and seems easy enough to dodge. At first the proposed measuring water usage to determine if the property was vacant, but then you can only tax as much as it would cost to leave a tap on. http://www.sro.vic.gov.au/node/5816 http://www.sro.vic.gov.au/node/5816
- alkonaut 9y ago
  > You mean income derived from the property? No, a regular property tax based on the value of the property. Such as 1% of the value paid in tax every year. The idea would be that it would be zero net effect if you live in the country (i.e. it's a property tax + income tax deduction that effectively make them together be a "tax on properties owned by foreigners")
  - bdamm 9y ago
    Tempting, but what if I live in the country and own two properties? Then do I get to perform the deduction twice? If not, then am I punished for having two properties? It would be pretty tough to fine tune this.
    - lhopki01 9y ago
      Yes you should be 'punished' for owning two properties. Or more specifically if you are well off enough to own two properties then you are well off enough to pay for them. Property should not be an investment since it is an essential for living.
      - bdamm 9y ago
        Yes, but the idea was to boost property tax for the purpose of avoiding foreign investment. I'm saying that this might suppress domestic land ownership as well. Someone is going to be the land-lord, it might as well be domestic.
        lhopki01 9y ago
        Why exactly do we need much private rental accommodation. Singapore seems to be doing very well without a market based approach to housing.
ericd 9y ago
I agree with you that tax incentives are the way to tackle it. I think the issue with this specific proposal is for people on low/fixed incomes (typically retirees). I think the normal way to do this is via a high property tax and then a "homestead exemption" that you take if you live in the property.
- alkonaut 9y ago
  > "homestead exemption" that you take if you live in the property. Exactly. But the idea is that it's very hard to check whether someone lives in a property, so you check for the next best thing: whether you have income in the country. So if you have income tax in the country then you can get exempt from one property tax. Otherwise you end up having things like "self reporting" where you live, or local governments trying to check water/electricity use to see whether buildings are occupied etc, which are obviously both expensive and futile.
  - elyobo 9y ago
    No exemptions, tax them all. Homes will, ironically, be cheaper if they're taxed because it will further drive out speculative money.
    - alkonaut 9y ago
      Yes I'm not saying property taxes are inherently bad, but this would need to be pretty high, such as property taxes of e.g. 5-10% of the market value. Probably a bit hard to swallow for e.g. people who have retired and have bought their homes ages ago for say $100k and it's now worth $1M and the pensions doesn't cover the $50k annual property. Moving would net the couple $900k minus a hefty chunk in profit tax, after which they can't afford buying a new home. We had this situation here and it's not good. You could have a 10% market value property tax, and a deduction of 90% of that amount, for one home, on your income tax, then 75% for a second property etc, to make it both prohibitively expensive for foreigners, and a bit progressive for those owning multiple homes.
      - 9y ago

akras14 9y ago

Demand for investments from Chinese investors. Edit: See this comment https://news.ycombinator.com/user?id=tmnvix https://news.ycombinator.com/user?id=tmnvix

dis-sys 9y ago

> it's a hurricane-level force of real-estate it is a hurricane-level force for everything. if you think the situation in Vancouver and Sydney are bad, think again, think the situation in Shanghai - a typical recently built 3 bedroom apartment in downtown Shanghai can easily cost you $3m CAD, a typical worker on average Shanghai salary will have to pay no tax, eat nothing, walk to work naked (no $ for cloth) for 300 years to afford that. not talking about luxury apartment with fancy view, just average apartment in an okay area next to busy & noisy roads.

tptacek 9y ago
Do workers in Shanghai generally live in 3bdr condominiums downtown? Because a 3bdr condo in downtown Chicago would also be nosebleed expensive (though probably not 2.3MM USD expensive) too.
- dis-sys 9y ago
  Apartments 8-10km away from central Shanghai costs you $1.7-2m. To get a recently developed unit at $1m price range, you pretty much need to go 20-30km out. It is a cancer.
conanbatt 9y ago
Whats the price/rent in Shanghai? If it's so grotesquely overpriced, why aren't investors jitterish about a downturn? Are they ready to bite a 30% bullet on the investment? Genuine questions, I want to understand the chinese money exodus effect.

odammit 9y ago

Same problem in LA. If you’re trying to rent an apartment you’re screwed. If you’re trying to buy a house you’re really screwed. It’s not all Chinese money but it’s a lot of foreign and local investors. I can see investors being important for building or upgrading condos and apartments, but investors being able to buy so many single family homes and “flip” them just makes the whole Norman Rockwell picket fence thing seem pretty unattainable. With the new football stadium going in there are “rundown” areas getting “gentrified” and it’s crazy to see one renovated 2 bedroom house in Baldwin Hills sell for $900k and be on a street with sales from the two years prior in the 200-300k range. [1] [1]: a 200k house in LA is a shithole