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"...because foreign home ownership was "only" in the 5-10% range..." Such a weird rationalization. Even very non-economist me "knows" that small changes in su

"...because foreign home ownership was "only" in the 5-10% range..." Such a weird rationalization. Even very non-economist me "knows" that small changes in supply (<1%) leads to big changes in price. Either up or down. More so when factoring demand. Some things add friction to efficient price discovery, like rent control and landlords servicing debts. But the first order factor is supply and demand. Right?

kareemm 6y ago
I agree w/ you. Anecdotally but the most common argument I heard was "5-10% can't drive the huge price increases we're seeing". My counter was always that comps drive market pricing. It doesn't take very many sales well over asking to inflate a market, esp when the supply of capital is large, not local, and being laundered.
- lotsofpulp 6y ago
  It’s more accurate to say it’s the huge supply of capital looking for somewhere to be parked that is driving prices higher. Demand curve is number of houses available for sale, supply curve is people looking to purchase those homes. As the curves shift, if the price goes too high, then the lack of supply of people with sufficient money would cause prices to stall or come down. But it’s apparent that the supply of people with a lot of money (or credit) is a lot higher than the supply of houses. Maybe it’s even more accurate to say that the supply of inflation protected assets in stable societies is in low supply compared to the supply of capital trying to buy those assets.
amscanne 6y ago
Except the reality is that local speculation is also wild and crazy. It's just easier to blame foreigners. I've read stats that indicate that nearly 20% of home owners in the Toronto area own at least one additional "investment" property. This rings true with my own experience, as the cult of home ownership is ridiculously strong in Canada, and many have been betting on and fueling rampant speculation for the past decade -- buying boxes in the sky for hundreds of thousands of dollars under the assumption that real estate just keeps going up. But the anecdotal stories about the occasional foreign buyer is somehow much more satisfying and comforting than the thought that Canadians are also responsible.
- specialist 6y ago
  I'm also offended by the blame of foreigners. Core problem is housing shortage. We need more. I don't care how we get there. So I support upzoning, MIL units, penalizing unused (vacant) units, and any other idea for increasing supply. We just need to figure out what policy mix works. The blame game is just a distraction by the incumbent players.
- dasudasu 6y ago
  The argument being made is that this wild speculation is enabled by the money laundering. If you know laundering will keep happening with impunity and that the whole thing is tacitly approved and backstopped by the Canadian government, then it becomes rational to participate too.
  - amscanne 6y ago
    That may be true, but it doesn’t change the fact that locals share a large portion of responsibility. Money laundering is no doubt happening, but the activity is tiny as a fraction of the market. To give an example of how exaggerated it is: before implementing the empty homes, the city of Vancouver estimated that 25,000 homes were empty. The final result: only 2,500, one tenth what everyone thought.

kareemm 6y ago

I agree w/ you. Anecdotally but the most common argument I heard was "5-10% can't drive the huge price increases we're seeing". My counter was always that comps drive market pricing. It doesn't take very many sales well over asking to inflate a market, esp when the supply of capital is large, not local, and being laundered.

lotsofpulp 6y ago
It’s more accurate to say it’s the huge supply of capital looking for somewhere to be parked that is driving prices higher. Demand curve is number of houses available for sale, supply curve is people looking to purchase those homes. As the curves shift, if the price goes too high, then the lack of supply of people with sufficient money would cause prices to stall or come down. But it’s apparent that the supply of people with a lot of money (or credit) is a lot higher than the supply of houses. Maybe it’s even more accurate to say that the supply of inflation protected assets in stable societies is in low supply compared to the supply of capital trying to buy those assets.

amscanne 6y ago

Except the reality is that local speculation is also wild and crazy. It's just easier to blame foreigners. I've read stats that indicate that nearly 20% of home owners in the Toronto area own at least one additional "investment" property. This rings true with my own experience, as the cult of home ownership is ridiculously strong in Canada, and many have been betting on and fueling rampant speculation for the past decade -- buying boxes in the sky for hundreds of thousands of dollars under the assumption that real estate just keeps going up. But the anecdotal stories about the occasional foreign buyer is somehow much more satisfying and comforting than the thought that Canadians are also responsible.

specialist 6y ago
I'm also offended by the blame of foreigners. Core problem is housing shortage. We need more. I don't care how we get there. So I support upzoning, MIL units, penalizing unused (vacant) units, and any other idea for increasing supply. We just need to figure out what policy mix works. The blame game is just a distraction by the incumbent players.
dasudasu 6y ago
The argument being made is that this wild speculation is enabled by the money laundering. If you know laundering will keep happening with impunity and that the whole thing is tacitly approved and backstopped by the Canadian government, then it becomes rational to participate too.
- amscanne 6y ago
  That may be true, but it doesn’t change the fact that locals share a large portion of responsibility. Money laundering is no doubt happening, but the activity is tiny as a fraction of the market. To give an example of how exaggerated it is: before implementing the empty homes, the city of Vancouver estimated that 25,000 homes were empty. The final result: only 2,500, one tenth what everyone thought.