5 ms·

Canada’s Real Estate Bubble Is So Big Even a Crash Can’t Fix It

30 points by harambae 5y ago

windex 5y ago
The big problem with housing markets is that external/international investors who do not intend to use it to stay are dumping money into the market. They dont care about valuations in the near term. They use houses like currency.
- seanmcdirmid 5y ago
  Speculation from international investors is problem a problem, but not the only problem. In the USA, we have some speculation from abroad, but most of our problem is internal, e.g. from techies with a lot more of buying power than most middle class, coupled with cheap money that lets buyers leverage a lot more than they should. I assume Vancouver and Toronto have similar problems as well. I predict that the bubble won't pop so much as inflation will continue at an increased rate until housing prices look sane again (effectively turning everyone else but home owners into losers, more than a bit unfair).
  - deleted 5y ago
    [deleted]
- imtringued 5y ago
  This is because of liquidity preference. A tenant or a building on a plot of land makes the property less liquid. Almost all property has liquidity preference, however it gets especially bad with money(buy food), land and housing because they are necessary to meet basic human needs. If the return on the property is lower than the owners liquidity preference he will not rent it out and instead keep it liquid (empty). This also applies to people. Training makes an employee less liquid so training will only be done if the return exceeds liquidity preference. This basically means the employee has to carry the cost of liquidity (subsidized through unemployment benefits and paying for your own education).
jitendrac 5y ago
Here in Surat, India same inflated real estate bubble exists. The land which costed 600k INR in 2008, now it is costing 10 million INR. The owners and developers are holding price tightly and no correction can fix it.
PickledHotdog 5y ago
Same problems in Australia and other places
originalvichy 5y ago
This should be one of the bookmarks in the post-modern age’s economic history. I would be eager to see how much this bullshit has decreased and held hostage actual positive economic growth. I’m just in engineering so I’ll be fine. But when nurses can’t live near the hospitals they are needed at or teachers have to commute an hour, that’s when I get angry for them. The system is not working for People, it’s working for Profit. And the longer lawmakers wait for action the more people buy in to this system and become vulnerable to major price corrections that result in losing money. There is no putting this genie into the bottle.
dzonga 5y ago
if canada wants to solve this problem, it can easily do it overnight. Have massive sales taxes, at least 50% of home value or maybe up to 70%. Have rebates / incentives for first time home owners. Track occupancy. Force a sell on auction if a house isn't occupied for 75% of the time in 2 years.
hydrok9 5y ago
makes one wonder if there won't be a spate of "domaterrorism," where radical working-class folk start burning down the homes of the wealthy...(in particular, the unoccupied investment homes)
- tsol 5y ago
  I know this is a popular fantasy, but I don't think this really happens. It's a huge risk, and if you get caught you get thrown in jail without a cell phone or Netflix or any of the other creator comforts we're so accustomed to. Look at corrupt third world countries-- it takes a lot of discomfort for people to start doing those types of things. First worlders would rather just talk about it in the internet. Not saying it should happen, but just that the whole conversation is basically irrelevant
  - hydrok9 5y ago
    Yeah, I was speaking about a hypothetical future where the vast majority of people are priced out of the market for homes by unethical profit-seeking behaviour. I'm sure it will never come to that.../s
- dzhiurgis 5y ago
  Just stop paying rent
  - hydrok9 5y ago
    you mean my roommates were right all along??

30 points by harambae 5y ago

The big problem with housing markets is that external/international investors who do not intend to use it to stay are dumping money into the market. They dont care about valuations in the near term. They use houses like currency.

seanmcdirmid 5y ago
Speculation from international investors is problem a problem, but not the only problem. In the USA, we have some speculation from abroad, but most of our problem is internal, e.g. from techies with a lot more of buying power than most middle class, coupled with cheap money that lets buyers leverage a lot more than they should. I assume Vancouver and Toronto have similar problems as well. I predict that the bubble won't pop so much as inflation will continue at an increased rate until housing prices look sane again (effectively turning everyone else but home owners into losers, more than a bit unfair).
- deleted 5y ago
  [deleted]
imtringued 5y ago
This is because of liquidity preference. A tenant or a building on a plot of land makes the property less liquid. Almost all property has liquidity preference, however it gets especially bad with money(buy food), land and housing because they are necessary to meet basic human needs. If the return on the property is lower than the owners liquidity preference he will not rent it out and instead keep it liquid (empty). This also applies to people. Training makes an employee less liquid so training will only be done if the return exceeds liquidity preference. This basically means the employee has to carry the cost of liquidity (subsidized through unemployment benefits and paying for your own education).

jitendrac 5y ago

Here in Surat, India same inflated real estate bubble exists. The land which costed 600k INR in 2008, now it is costing 10 million INR. The owners and developers are holding price tightly and no correction can fix it.

PickledHotdog 5y ago

Same problems in Australia and other places

originalvichy 5y ago

This should be one of the bookmarks in the post-modern age’s economic history. I would be eager to see how much this bullshit has decreased and held hostage actual positive economic growth. I’m just in engineering so I’ll be fine. But when nurses can’t live near the hospitals they are needed at or teachers have to commute an hour, that’s when I get angry for them. The system is not working for People, it’s working for Profit. And the longer lawmakers wait for action the more people buy in to this system and become vulnerable to major price corrections that result in losing money. There is no putting this genie into the bottle.

dzonga 5y ago

if canada wants to solve this problem, it can easily do it overnight. Have massive sales taxes, at least 50% of home value or maybe up to 70%. Have rebates / incentives for first time home owners. Track occupancy. Force a sell on auction if a house isn't occupied for 75% of the time in 2 years.

hydrok9 5y ago

makes one wonder if there won't be a spate of "domaterrorism," where radical working-class folk start burning down the homes of the wealthy...(in particular, the unoccupied investment homes)

tsol 5y ago
I know this is a popular fantasy, but I don't think this really happens. It's a huge risk, and if you get caught you get thrown in jail without a cell phone or Netflix or any of the other creator comforts we're so accustomed to. Look at corrupt third world countries-- it takes a lot of discomfort for people to start doing those types of things. First worlders would rather just talk about it in the internet. Not saying it should happen, but just that the whole conversation is basically irrelevant
- hydrok9 5y ago
  Yeah, I was speaking about a hypothetical future where the vast majority of people are priced out of the market for homes by unethical profit-seeking behaviour. I'm sure it will never come to that.../s
dzhiurgis 5y ago
Just stop paying rent
- hydrok9 5y ago
  you mean my roommates were right all along??