5 ms·

So if you're the stereotypical rich foreigner who wants to invest in real estate here, what's the stop them from incorporating a company locally, and then havin

So if you're the stereotypical rich foreigner who wants to invest in real estate here, what's the stop them from incorporating a company locally, and then having that own the house(s)? And that's just one workaround I can think of in the first 30 seconds. As with all well-intentioned simplistic schemes, this will hurt normal folks - immigrants who don't have their paperwork sorted out yet - and do absolutely nothing to the big $$ driving home prices up.

emsixteen 4y ago
Not being able to stop it entirely doesn't mean it's not a good idea. Increasing the hurdles that need to be jumped through will be off-putting to some who would have otherwise went down this road, and provides the state with more avenues to actually have control over foreign buying. Immigrants who don't have their paperwork sorted out yet shouldn't be buying homes imo. Get your ducks in a row.
refurb 4y ago
It's already covered in the law. Most provinces are requiring that "beneficial ownership" of any corporation is reported to the government. https://www.jdsupra.com/legalnews/british-columbia-finalizes-corporate-50138/ https://www.jdsupra.com/legalnews/british-columbia-finalizes... What is more likely is that some foreigner would use a relative in Canada, who has PR or citizenship, to buy the property on their behalf. But foreigners buying home in Canada was never that big of an issue. I think in the hottest areas it was high single digits. It did have an impact no doubt, but it was mostly Canadians running amuck on cheap debt that ran home prices into the stratosphere. But the funny part is that home prices are already dropping fast (due to rising interest rates) so I can't wait until some politician claims this legislation works.
- jleyank 4y ago
  While I didn’t follow the news closely, this seems to have come from the Vancouver and Toronto real estate markets. City level laws might have been tried but they lack teeth. This issue is also leading towards a vacancy survey and tax for vacant houses to provide material to escalate (I feel) if necessary. And worldwide, people might want cheaper housing but they din’t want their own house value to decline. The former occurs in the neocortex while the latter seems to lie deep in the lizard brain.
  - blitzar 4y ago
    > seems to lie deep in the lizard brain Wanting an asset you purchased on 10 times leverage, with a 5% interest rate on the debt to decline in value would be total and utter insanity.
    - jleyank 4y ago
      Yup. You made my implicit contradiction explicit.
    - asdff 4y ago
      I don't think there is much in the literature to suggest that increasing the zoned capacity will lead to significant declines. All I've seen is that such development will instead curtail the significant gains that march past local median wages, which seems like a good thing even if you are a homeowner, unless you identify as a Scrooge McDuck with no empathy for your friends and family or people in your community.
      - blitzar 4y ago
        Given that most developers charge a premium over the local market, modest development increases average prices. The bigger problem is it makes existing property look less shinny and new. New buyers are typically richer, or at least more liquid, to be able to afford to pay upfront for the property growth that the existing properties have achieved.
  - sokoloff 4y ago
    Housing cannot durably be both a good investment and remain affordable.
    - vlovich123 4y ago
      It’s a fine investment in a diversified portfolio because traditionally it was a hedge in both capital and monthly cash flow, and decoupled from other asset classes. It also offered freedom where you can make improvements to the land to increase the rate of growth. There were also non-monetary investments because your lifestyle choices had certain kinds of freedoms it offered (in exchange for giving up others) So it’s definitely a good investment when it’s affordable. In current environments, it’s actually less of a good investment than how it used to be used (stable, inflation-protected hedge) because it’s more in the asset class of stock and intertwined with other asset classes. That’s good for you on the upswing (which is why you think it’s incompatible with affordability) but not so good on the downswing. Also high volatility and even rapid growth isn’t something most people look for in housing and housing-related costs. In other words, people now treat housing stock the same way as company stock which does make it incompatible with affordability but it’s traditional role is a hedge in your portfolio.
- JacobThreeThree 4y ago
  >it was mostly Canadians running amuck on cheap debt that ran home prices into the stratosphere The root causes are thanks to the policies of the Bank of Canada and CMHC.
blitzar 4y ago
> and do absolutely nothing to the big $$ driving home prices up Are the price rises because 1 person bought a penthouse for $100mil or because a million 'normal' people outbid each other for the 100k house in the suburbs?
- feet 4y ago
  Or perhaps because one corporation is outbidding a million normal people for 100k homes?
  - blitzar 4y ago
    Sounds a bit like zillow buying up 100k properties for 200k and then selling them on a few weeks later for 90k. I dont see that as much of a problem personally.
    - feet 4y ago
      Well most of the companies doing this aren't completely harebrained and they actually capture rental markets, Zillow is an outlier
      - housingisntbiz 4y ago
        And this is exactly why the society should not subsidize rental living in any way and heavily make it a priority to help private people to buy and maintain ONE house for themselves. Just taxing rental predators out of the market would be a good start, there's no need to ban or outlaw anything. Then actions like giving huge tax exemptions for both the seller and buyer if it's between private persons and the buyer is going to live there would actually send the good signal for society. However, after all tTis whole thing is just another reason to live in rural areas because rental predators are pretty much non-existent. Of course not everyone is so privileged, but those who are should seriously consider leaving cities for their own good.
  - brailsafe 4y ago
    It's more like corporations and individuals and rich foreigners outbidding a million normal people for the house in worthwhile cities that are $1.5m+
kennend3 4y ago
Well, there are fines for helping bypass the laws. "The Act has a $10,000 fine for any non-Canadian or anyone who knowingly assists a non-Canadian and is convicted of violating the Act. If a court finds that a non-Canadian has done this, they may order the sale of the house." I would assume opening a numbered corp to own the house would fall under this category? Most of the "super-rich" owned houses in Canada are already owned by corporations to leverage the protections corps have.
- cainxinth 4y ago
  Seems like that will just drive the foreign super rich to ‘buy’ citizenships too. With enough money and in-country fixers/ lobbyists, that’s usually not unobtainable in most countries.
  - JCharante 4y ago
    The downside is the requirement to stay in Canada during that time. Plenty of people don't want to do it so they commit fraud https://www.scmp.com/week-asia/society/article/2158716/special-report-how-canadian-immigration-fraud-saw-860-rich-chinese https://www.scmp.com/week-asia/society/article/2158716/speci...
  - asdff 4y ago
    I wonder if you'd eventually get a weird marriage for citizenship market from such legislation. Like say you are a modern millennial couple and both you and your partner don't care about the institution of marriage. Are you going to leave money on the table, or get a huge lump sum for both you and your partner to be legally married to some investors that you might never need to meet in person?
- gruez 4y ago
  Only a $10k fine? On a 1 million dollar house that works out to 1%, and your house doesn't even get seized, it only gets sold so you keep all the appreciation that occurred during that time. Considering that transaction fees (eg. for the agent) are probably more than 1%, this doesn't seem like a huge impediment.
Tiktaalik 4y ago
This sort of loophole is closed in BC where they've created a beneficial owner registry. They will still know who owns the numbered company and their nationality. I believe other provinces are looking into similar things.

emsixteen 4y ago

Not being able to stop it entirely doesn't mean it's not a good idea. Increasing the hurdles that need to be jumped through will be off-putting to some who would have otherwise went down this road, and provides the state with more avenues to actually have control over foreign buying. Immigrants who don't have their paperwork sorted out yet shouldn't be buying homes imo. Get your ducks in a row.

refurb 4y ago

It's already covered in the law. Most provinces are requiring that "beneficial ownership" of any corporation is reported to the government. https://www.jdsupra.com/legalnews/british-columbia-finalizes-corporate-50138/ https://www.jdsupra.com/legalnews/british-columbia-finalizes... What is more likely is that some foreigner would use a relative in Canada, who has PR or citizenship, to buy the property on their behalf. But foreigners buying home in Canada was never that big of an issue. I think in the hottest areas it was high single digits. It did have an impact no doubt, but it was mostly Canadians running amuck on cheap debt that ran home prices into the stratosphere. But the funny part is that home prices are already dropping fast (due to rising interest rates) so I can't wait until some politician claims this legislation works.

jleyank 4y ago
While I didn’t follow the news closely, this seems to have come from the Vancouver and Toronto real estate markets. City level laws might have been tried but they lack teeth. This issue is also leading towards a vacancy survey and tax for vacant houses to provide material to escalate (I feel) if necessary. And worldwide, people might want cheaper housing but they din’t want their own house value to decline. The former occurs in the neocortex while the latter seems to lie deep in the lizard brain.
- blitzar 4y ago
  > seems to lie deep in the lizard brain Wanting an asset you purchased on 10 times leverage, with a 5% interest rate on the debt to decline in value would be total and utter insanity.
  - jleyank 4y ago
    Yup. You made my implicit contradiction explicit.
  - asdff 4y ago
    I don't think there is much in the literature to suggest that increasing the zoned capacity will lead to significant declines. All I've seen is that such development will instead curtail the significant gains that march past local median wages, which seems like a good thing even if you are a homeowner, unless you identify as a Scrooge McDuck with no empathy for your friends and family or people in your community.
    - blitzar 4y ago
      Given that most developers charge a premium over the local market, modest development increases average prices. The bigger problem is it makes existing property look less shinny and new. New buyers are typically richer, or at least more liquid, to be able to afford to pay upfront for the property growth that the existing properties have achieved.
- sokoloff 4y ago
  Housing cannot durably be both a good investment and remain affordable.
  - vlovich123 4y ago
    It’s a fine investment in a diversified portfolio because traditionally it was a hedge in both capital and monthly cash flow, and decoupled from other asset classes. It also offered freedom where you can make improvements to the land to increase the rate of growth. There were also non-monetary investments because your lifestyle choices had certain kinds of freedoms it offered (in exchange for giving up others) So it’s definitely a good investment when it’s affordable. In current environments, it’s actually less of a good investment than how it used to be used (stable, inflation-protected hedge) because it’s more in the asset class of stock and intertwined with other asset classes. That’s good for you on the upswing (which is why you think it’s incompatible with affordability) but not so good on the downswing. Also high volatility and even rapid growth isn’t something most people look for in housing and housing-related costs. In other words, people now treat housing stock the same way as company stock which does make it incompatible with affordability but it’s traditional role is a hedge in your portfolio.
JacobThreeThree 4y ago
>it was mostly Canadians running amuck on cheap debt that ran home prices into the stratosphere The root causes are thanks to the policies of the Bank of Canada and CMHC.

blitzar 4y ago

> and do absolutely nothing to the big $$ driving home prices up Are the price rises because 1 person bought a penthouse for $100mil or because a million 'normal' people outbid each other for the 100k house in the suburbs?

feet 4y ago
Or perhaps because one corporation is outbidding a million normal people for 100k homes?
- blitzar 4y ago
  Sounds a bit like zillow buying up 100k properties for 200k and then selling them on a few weeks later for 90k. I dont see that as much of a problem personally.
  - feet 4y ago
    Well most of the companies doing this aren't completely harebrained and they actually capture rental markets, Zillow is an outlier
    - housingisntbiz 4y ago
      And this is exactly why the society should not subsidize rental living in any way and heavily make it a priority to help private people to buy and maintain ONE house for themselves. Just taxing rental predators out of the market would be a good start, there's no need to ban or outlaw anything. Then actions like giving huge tax exemptions for both the seller and buyer if it's between private persons and the buyer is going to live there would actually send the good signal for society. However, after all tTis whole thing is just another reason to live in rural areas because rental predators are pretty much non-existent. Of course not everyone is so privileged, but those who are should seriously consider leaving cities for their own good.
- brailsafe 4y ago
  It's more like corporations and individuals and rich foreigners outbidding a million normal people for the house in worthwhile cities that are $1.5m+

kennend3 4y ago

Well, there are fines for helping bypass the laws. "The Act has a $10,000 fine for any non-Canadian or anyone who knowingly assists a non-Canadian and is convicted of violating the Act. If a court finds that a non-Canadian has done this, they may order the sale of the house." I would assume opening a numbered corp to own the house would fall under this category? Most of the "super-rich" owned houses in Canada are already owned by corporations to leverage the protections corps have.

cainxinth 4y ago
Seems like that will just drive the foreign super rich to ‘buy’ citizenships too. With enough money and in-country fixers/ lobbyists, that’s usually not unobtainable in most countries.
- JCharante 4y ago
  The downside is the requirement to stay in Canada during that time. Plenty of people don't want to do it so they commit fraud https://www.scmp.com/week-asia/society/article/2158716/special-report-how-canadian-immigration-fraud-saw-860-rich-chinese https://www.scmp.com/week-asia/society/article/2158716/speci...
- asdff 4y ago
  I wonder if you'd eventually get a weird marriage for citizenship market from such legislation. Like say you are a modern millennial couple and both you and your partner don't care about the institution of marriage. Are you going to leave money on the table, or get a huge lump sum for both you and your partner to be legally married to some investors that you might never need to meet in person?
gruez 4y ago
Only a $10k fine? On a 1 million dollar house that works out to 1%, and your house doesn't even get seized, it only gets sold so you keep all the appreciation that occurred during that time. Considering that transaction fees (eg. for the agent) are probably more than 1%, this doesn't seem like a huge impediment.

Tiktaalik 4y ago

This sort of loophole is closed in BC where they've created a beneficial owner registry. They will still know who owns the numbered company and their nationality. I believe other provinces are looking into similar things.