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This is how my sale went a few years ago in Toronto. One contractor, one couple with their realtor, and one realtor on the phone representing a remote client.

• vmception 6y ago
  Not just Canada either
• gamblor956 6y ago
  Those is why China started limiting the outflow of capital several years ago. It has an immediate effect in LA, where a number of buildings under construction were financed by Chinese investors. In one case, the developer itself couldn't get it's own money out, and now they have a giant unfinished hulk right across from Staples Center.
  • tenpies 6y ago
    > Those is why China started limiting the outflow of capital several years ago. On paper, but like all things in China enforcement is a completely different thing. There are many ways around it and it's much easier when Canada's AML and KYC requirements would make a 1980s' Caribbean Banker blush. Even a municipal vacancy tax is just a new cost of doing business. Further, the Canadian Liberals and BoC have both signalled that they intend to devalue the CAD and prop up real-estate. You'd be a fool as a Chinese foreign investor to not dump money into Canadian real estate. It's de-facto government-backed at this point, comes with a Canadian passport, and the Canadian Liberals will never move a finger against you or China.
    • boringg 6y ago
      I don't think you've been reading news over the last year about Canada being considerably unhappy with China these days. I'd disagree with your characterizing the liberals at not doing anything. Also have you been paying attention to the meng wanzhou CTO of Huawei at all? I'm tempted to fact-check the rest of your statements as a function of the complete inaccuracy of the last one but that would take to much time :)
      • ChrisClark 6y ago
        He might be Albertan. I'm in Alberta and a lot of people here are in their own filtered news bubble. They state as fact that Trudeau is working for China directly, or 'worse', is somehow a secret Muslim... It's an alternate reality here, and very sad. :(
      • fakedang 6y ago
• dcolkitt 6y ago
  Question for people more knowledgeable than me? Why doesn't this result in dirt-cheap rents across Canada? Sure a bunch of hot-money can easily bid up asset prices. But at the same time it should also drive down yields on those assets. Like you say, the vast majority of these houses aren't being lived in. Nor are the owners sensitive to returns. Why don't more of them put their dwellings up for rent, flooding the rental market and driving down prices?
  • cam0 6y ago
    Part of the reason why this doesn't happen is because the owner-investors are so wealthy that the 36-72k in rental income would mean nothing to them, and it isn't worth the hassle of being a landlord.
  • mgh2 6y ago
    There are unforeseen costs associated with being a foreign landlord open for local renters: taxes, fixes, complaints, language barriers (even before COVID). The incentive to buy, hold and not rent, even with the speculation tax is higher than having their entire money confiscated by the CCP. The (discounted) money generated by rent does not justify the costs mentioned earlier either.
    • mixmastamyk 6y ago
      A property management company and accountant can solve these issues and pay for themselves.
  • lotsofpulp 6y ago
    Renting property comes with significant liabilities, and may not be worth it if rents aren’t high enough.
  • nacho2sweet 6y ago
    Vancouver where I live had fairly cheap rent compared to ownership for awhile, maybe back in 2010's. Mortgage + maintenance fee back then for a condo could be like $2800/month but would rent for as low as ~$1000-$1500. It is still like this but the spread is a bit less because of cheap money, and weaker condo prices cause of covid. You can get 1.79% 5 year fixed on a 25 year amortized mortgage rn. Our housing market bubble is humming through covid. We have very low to no property taxes. All of our taxes are based on income. So a condo could have annual property taxes of like $1800-$2000... So what is the point of renting it out if it is increasing in value 10% a year and you are going to use it maybe 2 months a year. The west side of Vancouver were all the mansions are, and had a the greatest new concentration of rich foreign buyers actually paid the lowest taxes in the province. We also have very big immigration influx in Canada, foreign student population and a 10 year visa program with China. These all started shooting up rents. But also caused what is known as satellite families which drop of their kids and caretaker, use the public schools, health care etc but make all their money back in their country of origin not claiming income tax here. We had University students with their names on $30million houses. House wife seemed to be the most lucrative job going in real estate. We got a new provincial government a few years ago who brought in the "speculation tax". Basically if you don't pay income tax here but own a house you have to pay a tax of 2% of the properties value. This is compounded on top of an empty homes tax the city put in place of 1% if it is not rented out. There was also some new laws/procedures put in place with data sharing across province/city/real estate board that is helping clearing up some malfeasance as well.
• medium_burrito 6y ago
  Easy fix- have very high property taxes, but they are deductible or waived for locally earned income. If it costs the owner 25% a year to hold the property, won't be nearly as attractive. Unfortunately at this point a large amount of the Canadian and Australian real estate markets (and thus national wealth) are driven by Chinese money, so there's little chance of this happening.
  • mrfusion 6y ago
    Good except for retired folks with less income or investment income. Perhaps just make a homestead exemption.
    • cortesoft 6y ago
      We kind of have that... property taxes are deductible from your federal taxes if the home is your primary residence... although they put a cap on the amount a few years ago, and it isn't nearly as valuable anymore.
    • ska 6y ago
      You can make a homestead exemption. You can also make property taxes lien-able on sale or transfer of the home, which makes some sense in areas where property values are rising quickly. If you are fixed or low income and care more about having a place to live than making money on the property, that works too.
  • conanbatt 6y ago
    You have a seemingly unlimited demand for a good at any price . Produce as much as possible and sell as much as possible is a more sensible approach. Each house sold to a chinese person makes canada as a whole one house-worth richer.
    • foolmeonce 6y ago
      Yeah though when it collapses, i.e. due to foreign policy, local government will likely end up with the costs tearing down abandoned houses and a drop in real estate tax even on everything, I believe they call that phenomenon "Detroit". Attempting to keep a buffer for that away from the various interest groups is impossible even if you defy the physics of money in politics to adequately tax profits that can buy politicians.
• robbyking 6y ago
  I grew up in an extremely remote part of Southern California and for years there were rumors of "land banking" investments being made by Asian investors. This was back in the 90's, so it was extremely difficult to verify these types of rumors. Fast forward 15 years and an article pops in their local paper (I had long since moved away), and it turns out it was true! From the Daily Press [1]: > Lured by the prospect of massive transportation projects that could skyrocket land values, the Victor Valley has become a jewel for foreign and domestic investors looking to make a fortune in a practice called land banking. In land banking, investors buy raw land and hold onto it until the value goes up because of inflation or development. For those who aren't familiar with the area, it's a remote and extremely low-income, low-education area of California. Anyone making investments in property there is looking for them to pay off a generation or two from now. [1] https://www.vvdailypress.com/article/20121001/BUSINESS/310019997?template=ampart https://www.vvdailypress.com/article/20121001/BUSINESS/31001...
  • AnimalMuppet 6y ago
    I wouldn't call it remote. I know people who live in Victorville and commute over Cajon Pass to Riverside. One hour each way isn't an unthinkable commute in Southern California, and it lets them afford a fairly nice place compared to what they could get in Riverside. I suspect they're not that unusual. In fact I thought of "land banking" there myself a decade or two ago, because I could see that the commute over Cajon would become thinkable.
    • asdff 6y ago
      victorville may very well get a high speed rail station in the coming decades.
• apta 6y ago
  How is the Canadian government allowing this to happen? They should ban Chinese from buying and driving up prices, it's quite obvious what's going on.
  • gruez 6y ago
    Because not everyone's a loser in this case. Homeowners (typically boomers) benefit from this in the form of higher valuations for their home, which means $$$ when the decide to sell, or decide to take out a HELOC.
    • apta 6y ago
      That's a very short sighted approach. They're going to pay for it in the long term.
      • gruez 6y ago
        You're right, it's just that the people who are going to pay for it in the long term is not as politically active/connected as the people who's going to benefit from it in the short term (and possibly will die before the consequences appear).
  • epistasis 6y ago
    This is only a small part of the story. Seattle, San Francisco, and Los Angeles all have housing costs far in excess of local wages, and are pushing poorer people out of the cities. These other cities only have a tiny fraction of external money coming in, yet have very similar problems. One common thing, however: building far less housing than the population is growing in the US. This is the primary effect, decades of downzoning and decreasing housing production, without taking into account the needs of the population, just the desires of landlords and homeowners. What this does is push up what percentile of wealth sets the market price. And if at the top of the wealth percentiles there are 10%-20% foreign money, then it seems like a tiny number of people are having a much bigger effect than they are. Cutting out the purchases of those 10-20% wont have a huge effect on prices, but they make a great scapegoat, and let homeowners and landlords continue their profit-seeking schemes for a few more years. Vancouver has both vacancy taxes and foreign purchase taxes. They do not solve the real problem, but are good window dressing and help a tiny fraction of the population.
• MrBuddyCasino 6y ago
  Millennials are screwed twice: once by having the boomers scoop up all the cheap property decades ago, and then again by unrestricted globalism where foreign people with no stakes whatsoever in the local community use housing to park their money and hide it from the CCP. This isn’t a particularly clever insight, yet many still don’t seem to get it and draw the right conclusions.
• hammock 6y ago
  >everyone from the sales person to the accountant to the factory floor supervisor is on the take. They skim and over time accumulate some serious money. How exactly does this part work?
• mmerlin 6y ago
  Parallels the dodgy wangling going on in Australia for the past decade or more. "Pending" legislation to prevent money laundering via real estate has gathered dust in Canberra for well over a decade! Lawyers, accountants and real estate agents are still exempted from reporting anything suspicious (including briefcases full of cash), providing an easy avenue for foreign buyers to launder funds through property. https://www.macrobusiness.com.au/2017/10/us-expert-slams-australias-non-existent-realty-money-laundering-laws/ https://www.macrobusiness.com.au/2017/10/us-expert-slams-aus... On the surface we are a western nation, but lift the covers and we are enabling money laundering into real estate, to the tune of billions and billions every year. Real estate agents report unprecedented numbers of overseas’ buyers of residential and commercial property in Melbourne and Sydney paying cash… An estimated 70 per cent of Chinese buyers pay in cash
• gww 6y ago
  The real estate market in Canada needs better regulation too. My wife and were trying to buy a home in Toronto. We bid on a home that had no movement all summer and made an offer. Later that evening the selling agent found a mysterious second bidder, who they were also representing and that buyer kept overbidding us. Our agent wasn't privy to the bids we were making but I am sure that agent was sharing them with their buyer. They tried to get us to bid almost 20% over asking but but we walked away after 1%. I don't see how it is ethical for an agent to represent the buyer and seller in a home selling situation but I suppose if they ban it those agents will just get someone else in their company or some sort of friend to do the same thing.
  • throw0101a 6y ago
    IMHO there should be a public auction site where (binding) bid offers are placed (a la eBay). Or if during bidding things are kept secret, then after an offer has been accepted the process is made public to make sure there was no funny business. IMHO more transparency would help.
    • gww 6y ago
      That would be great I can't see why they wouldn't have a process like this.
• 908B64B197 6y ago
  > The average price of a house in Toronto will be in the millions in the next decade. Anyone earning less than 200-300 k a year will not be able to afford one, unless they have a windfall inheritance. Now with a possible Hong Kong exodus, there is no limit to the insanity. Young Canadians in major cities are screwed. Renters for life. Something I'm wondering: Why then are young Canadians overwhelmingly voting for a party that supports these sky high immigration quotas and lax policies around foreign ownership?