4 ms·

This may be a healthy long term outcome but a lot of people have a good portion of their value parked in their home - if there is a sudden oversupply how will y

by munk-a 5y ago

This may be a healthy long term outcome but a lot of people have a good portion of their value parked in their home - if there is a sudden oversupply how will you cousin the economic and social shock as millions of middle-class folks suddenly lose their wealth while upper class folks mainly invested in the stock market come out the far side with even more wealth? This is not an easy problem - and as soon as you try and alert people to the fact that you're going to fix it the market will respond and the problem will occur.

seunosewa 5y ago
So why bother cutting off foreigners if you want your real estate to keep appreciating in value?
- munk-a 5y ago
  To slow the value gain - I think ideally the government would like to sort of stabilize housing prices in BC & ON for a few years then re-start a slower more reliable growth pace... exploding the housing market fully could cause a value loss - so this is like opening one pressure release valve to slow the build up a bit.
  - seunosewa 5y ago
    Liberalizing the housing market is a slow process that will be heavily contested politically and in courts, so it won't lead to an instant explosion of the housing market. The political will to continue liberalizing the housing market will evaporate as soon as housing prices become reasonable as a result of it.
    - munk-a 5y ago
      The market can generally move faster than politics - as soon as it becomes common knowledge that the housing market will be opened up you'll see a modest drop in prices, when some legislation is passed you'll see a larger drop in prices... if and when that legislation survives the court you'll see even more of a drop. This issue isn't that the laws will move too quickly but that the open intent to pass those laws will spook the market and cause a panic - which is actually a lot worse if you want to deflate the market because any aide or support you'd want to provide is going to come in well after the market has already responded. And, to return to my main point above... when that happens people with a lot of free capital sitting around are going to be able to game the system and make a bunch of money off of it. So wealth inequality will increase and it's likely a lot of folks will be in an absolutely terrible spot.
      - seunosewa 5y ago
        Making it easy to construct new buildings - let's call it liberalization - isn't a binary thing. You can do it a little bit, a lot, or anywhere in-between. If you want home prices to go down, you do it a lot. If you want to stabilize things just a little bit, you do it a little. For this reason, "we don't want the prices to fall too much" doesn't work as a reason to choose banning foreigners over liberalization.
megablast 5y ago
People dont lose anything until they sell. Most people aren’t selling. So they haven’t lost. And how would you limit the effect if housing dropped for the many other reasons prices drop?? You don’t.
- worik 5y ago
  > People dont lose anything until they sell. Not quite true. It would be truer if they have no debt. But having a large debt, and negative equity, makes a family very vulnerable economically.
- dmoy 5y ago
  What percentage of pensions and 401ks are tied up in mortgage backed securities, etc?
- jdkenney 5y ago
  Many people would be forced to sell though if there was a price drop, because the high prices necessitated having a very high borrowing rate (95% borrowed), and commonly at renewal (typically 5 years in Canada) mortgage terms require the borrower to pay the difference between the market value and the borrowed amount to ensure they are not more than 95% leveraged still. This is the big problem the government has: it is very difficult to unwind this mess through policy without triggering a cascade. Likely it will come eventually, they just want to ensure it’s not their party in office when the shoe finally drops.
saiya-jin 5y ago
thats a view of an owner who wants to get as rich as his property will allow him, and hopefully even more. fuck everybody else. exactly how we get into this situation. folks who gamble with money have to accept the risk part of the equation, whatever vessel that may be. if somebody invested in tech stocks few months ago they are now probably crying in the corner.
- munk-a 5y ago
  The majority of Canadians are in this situation - you can be extremely unsympathetic towards them and tell them that their investment was unwise - that's perfectly fair... but do realize that the vast majority of Canadians will suddenly find themselves either worth a lot less than they thought they would be or underwater in debt and homeless. And also don't forget that whenever "everybody loses some money" the people at the top are in a great position to grab an even bigger slice of the pie. Whether or not you feel for the pain these people would go through, you're going to feel pain when it ripples out the rest of the economy.

by munk-a 5y ago

seunosewa 5y ago

So why bother cutting off foreigners if you want your real estate to keep appreciating in value?

munk-a 5y ago
To slow the value gain - I think ideally the government would like to sort of stabilize housing prices in BC & ON for a few years then re-start a slower more reliable growth pace... exploding the housing market fully could cause a value loss - so this is like opening one pressure release valve to slow the build up a bit.
- seunosewa 5y ago
  Liberalizing the housing market is a slow process that will be heavily contested politically and in courts, so it won't lead to an instant explosion of the housing market. The political will to continue liberalizing the housing market will evaporate as soon as housing prices become reasonable as a result of it.
  - munk-a 5y ago
    The market can generally move faster than politics - as soon as it becomes common knowledge that the housing market will be opened up you'll see a modest drop in prices, when some legislation is passed you'll see a larger drop in prices... if and when that legislation survives the court you'll see even more of a drop. This issue isn't that the laws will move too quickly but that the open intent to pass those laws will spook the market and cause a panic - which is actually a lot worse if you want to deflate the market because any aide or support you'd want to provide is going to come in well after the market has already responded. And, to return to my main point above... when that happens people with a lot of free capital sitting around are going to be able to game the system and make a bunch of money off of it. So wealth inequality will increase and it's likely a lot of folks will be in an absolutely terrible spot.
    - seunosewa 5y ago
      Making it easy to construct new buildings - let's call it liberalization - isn't a binary thing. You can do it a little bit, a lot, or anywhere in-between. If you want home prices to go down, you do it a lot. If you want to stabilize things just a little bit, you do it a little. For this reason, "we don't want the prices to fall too much" doesn't work as a reason to choose banning foreigners over liberalization.

megablast 5y ago

People dont lose anything until they sell. Most people aren’t selling. So they haven’t lost. And how would you limit the effect if housing dropped for the many other reasons prices drop?? You don’t.

worik 5y ago
> People dont lose anything until they sell. Not quite true. It would be truer if they have no debt. But having a large debt, and negative equity, makes a family very vulnerable economically.
dmoy 5y ago
What percentage of pensions and 401ks are tied up in mortgage backed securities, etc?
jdkenney 5y ago
Many people would be forced to sell though if there was a price drop, because the high prices necessitated having a very high borrowing rate (95% borrowed), and commonly at renewal (typically 5 years in Canada) mortgage terms require the borrower to pay the difference between the market value and the borrowed amount to ensure they are not more than 95% leveraged still. This is the big problem the government has: it is very difficult to unwind this mess through policy without triggering a cascade. Likely it will come eventually, they just want to ensure it’s not their party in office when the shoe finally drops.

saiya-jin 5y ago

thats a view of an owner who wants to get as rich as his property will allow him, and hopefully even more. fuck everybody else. exactly how we get into this situation. folks who gamble with money have to accept the risk part of the equation, whatever vessel that may be. if somebody invested in tech stocks few months ago they are now probably crying in the corner.

munk-a 5y ago
The majority of Canadians are in this situation - you can be extremely unsympathetic towards them and tell them that their investment was unwise - that's perfectly fair... but do realize that the vast majority of Canadians will suddenly find themselves either worth a lot less than they thought they would be or underwater in debt and homeless. And also don't forget that whenever "everybody loses some money" the people at the top are in a great position to grab an even bigger slice of the pie. Whether or not you feel for the pain these people would go through, you're going to feel pain when it ripples out the rest of the economy.