- A decade of near-zero interest rates
- A lack of investment opportunities: real estate usually has a below average ROI but there is nothing else to invest in nowadays (look at startup valuations to understand how desperate investors have become)
- Too much money printed worldwide (again, look at startup valuations)
- The desire to park money earned (or stolen) in developing countries in a Western country that hypocritically turns a blind eye on money origin because banks, construction industry, and legislators (who own real estate en masse) all are interested in heating up the market as much as possible (looking at you, Canada)
What makes it worse, is that all stakeholders are now locked up in this situation. Increasing interest rates is not possible because it will bankrupt millions of families with mortgage. Western countries are in the late industrial cycle, so creating new investment opportunities is problematic until a new industrial cycle begins. In this situation central banks have no choice but to print money and lie about inflation as long as possible because there is no way this whole situation can be resolved without money losing value.
It was disgusting to see. I asked him if this doesn't bother him (he was already wealthy, he didn't need this extra money) and he looked at me as if I had two horns. Most of the projects he was buying and selling, was outside the range of almost the entire local population, except the rich. It was a fun game for him.
I know it is an unpopular opinion around here, but rentiers are a cancer. Housing should be a basic right. Rich people can buy and play in the art market (or super yachts or whatever) for bajillion dollars for all I care, but not basic necessities like land, water etc.
Prices are too high because there aren't enough units being built, not because folks speculate on new developments.
The rentiers are who do nothing yet they earn extra profit due to market failures. (Usually mandated monopolies or emergent oligopoly markets, see ISPs in the US.)
I agree that the end result of only luxury units being built is disgusting. And I think that's absolutely not an unpopular opinion. But it's this way because society, voters, representatives, local governments, etc.. are stuck in a very suboptimal configuration.
I agree that it should be a basic right.
We are way off that good median today, so either prices have to fall or incomes have to go up.
However the causes of this can not be simply explained away by "people buying dozens of apartments and houses just to rent them" the reality is far more complicated than that. even if you put a ban or cap on the number of rentals a person / company could have it would not solve the housing issue, and likely make it worse.
When you consider inflation and interest rate decreases, owning a home today is essentially the same as it was 40 years ago in most markets. There are some outliers but overall the inflation adjusted monthly payment isn’t that different. It’s just that a bigger part of that payment is going to principal rather than interest.
The biggest issue is the outdated idea of putting 20% down. As interest rates fall, down payment percentages should fall. And although you can put less down you end up paying PMI which should be adjusted down too.
Buy up some land in multiple states to build a "campground" that has Yurts for office space (work from home), plenty of places to pitch your own tent, showers, bathrooms, etc... it'd be somewhat less comfortable than 'normal life' but in the end if rental units sit vacant long enough it'll drive prices down, no?
Source? I have heard many boomers talk about how the advice was to pay no more than 4x income. Obviously highly unlikely in this day and age.
I'm the exact opposite. All these emotional people don't make sense.
From my perspective there is a whole bunch of emotional people that wants expensive housing and they complain when someone else i.e. landlords benefit from the thing they wanted. I can't stand the double standard.
The problem has never been properties. Just think about how illogical it is for a house to go up in value even though it is a depreciating asset. It's the land that is going up in value. Expensive land needs expensive rents.
Why is land expensive? Because of all land owners, not just the ones that are renting dozen apartments on land that could at most fit 2 single family homes. Yes, the average home owner is rent seeking just as much as that landlord with 12 apartments is doing.
The worst part is those home owners don't actually want their windfall because they want to live in their home. They do not want the liability of increasing property taxes as their land goes up in value. They'll vote for tax freezes and lower taxes which obviously makes it easier for homeowners and landlords to earn money at the expense of other people.
You know, if there were no owner occupiers and everyone was renting then people would just vote for increased property taxes on landowners to make land a liablity which lowers its value.
We have short circuited the market equilibrium.
The real way to make money here would be in building new houses. It is somewhat odd to me how this point never comes up. At least where I am, there is absolutely no shortage of land that could have new houses built but there is so much red tape it is not a good investment. This is especially true when we juice the stock market constantly to create a much better alternate investment.
Of course, any real problem in the world is multivariate but we like to dimensionality reduce everything to a single variable.
Hedge funds buying single family homes is bullshit. Not building enough new homes while giving everyone money borrowed from the future and rules to promote home buying has obvious consequences on price and supply though.
I've been thinking about it ever since, particularly that money usually flows between these 3. The exponential growth required for compound interest to work is only possible in a shortage. Stocks in companies follow a contract-expand business cycle. Governments grow linearly at best. But property has been increasing exponentially due to an increasing population.
I fear the day when companies realise that they'll make more money by starting a war, which would devastate governments and property. Many people of a similar age are getting married and buying houses, but I don't know feel that the future is stable enough to make either of those decisions. The kind of house I'd want now as a single guy is different to a house that would be suitable for kids (in the right school zone), or a house for retirement. I think the only safe investment is philanthropy: give it all away, and if I'm still alive, hope that some of those people I help now will be able to support me in my old age after economic, political, and environmental disasters strike.
Compound interest doesn't need exponential growth. That money is not destroyed when you repay the loan, it's just the profit margin of the banks. If interest rates are above what can be repaid they will have to be lowered until they can be repaid. The 0% lower bound is good enough. It's when people withhold deposits and never use them to pay for anything (you know as dictated by the responsible citizen always earning more than he spends) that you need endless growth because debts must grow fast enough that past debts can be repaid even at 0% interest.
>I fear the day when companies realise that they'll make more money by starting a war, which would devastate governments and property.
Well, the problem is that it's true. The broken window fallacy isn't about doing something smart it's about doing something smarter than what is being done today.
And you can give it away to someone with a promise that they give it back in the future or give you something that they produce, rather than going through philanthropy and hoping things work out. That’s why investments exist.
The stock market (after IPOs and issuances) is all speculation and detached from reality of day to day operations (except for buy backs, dividends, the stock is only worth what someone will pay for it - and some companies don’t pay dividends…).
You don't have to own a house to have housing. Home ownership is, not a basic aspect of human life, sadly for many people.
But there is a limit to this idea, and housing is heavily regulated anywhere. Investment banks buying up houses, built for individuals, are just wrong on so many levels.
If I recall it was a "tax" 1% of the property value every month after the first 12 of vacancy
I can't imagine that going into effect and rent/house prices _not_ going down
https://www2.gov.bc.ca/gov/content/taxes/speculation-vacancy...
Absolutely depressing. The bit that weirded me out most was the post boxes. They were quite big, but about half of them were overflowing, which had to have been the result of a few years of accumulation at least.
If the buying price was 40-50% lower, I could save up for a deposit in a year or two, but the crazy house prices here in Australia are not getting any better at all. It also feels morally wrong to be investing at the cost of someone being able to afford a roof over their heads, so maybe renting it is for me.
Of course, the city also is going to be hosting the Olympics in a while, so that solidifies my moving away plans!
In theory, yes, in reality the largest single residential purchase in the country was $35m and splashed all over the front page of newspapers.
It took them 5 years later to realise it was an illegal purchase by a foreigner after he had a different dispute with the tax office.
If that sale slips through what hope do you actually have for any others?
Once they are a resident they can purchase whatever property they wish just like an Australian Citizen.
Housing in Sydney is becoming a self fulfilling prophecy. The more people spend on it the more it’s value increases hence attracting more investors who drive prices up.
In order for this to stop the majority of the public will need to find this whole situation unacceptable.
I find it absurd that citizens from countries that disallow Australians to buy property can buy residential property here in Sydney. Apparently helping foreign citizens to avoid taxation/capital controls while propping up the construction/banking sector is more important than looking after the average citizens best interests.
Where is the direction of causality? I don’t know any first time home buyer that wants to be paying the maximum they can afford given bank lending standards. They are doing so because otherwise they cannot buy a house.
Unlike the vast majority of other human endeavors, land actually is a zero sum game, at least until we are a space-faring species.
* Within the Solar System the amount of land available on bodies with not-crushing-gravity is limited to a few times the Earth surface. This includes hospitable bodies like Venus, Titan or the Moon. The entire area of Mars is slightly smaller than Earth's land area, with climate conditions significantly worse than Antarctica. Sobering map: https://brilliantmaps.com/solar-system-surface
* Inter-stellar travel is subject to prohibitive time and energy costs. Physically speaking there is no way for Alpha Centaurians to visit their Earth properties on a regular basis, or vice-versa. This renders the whole concept of 'property owned by foreign stellar body inhabitants' moot.
Around 17% of the Netherlands is reclaimed from the sea or lakes. The largest project (the Flevopolder [1]) was 240,000 acres, reclaimed in the 1950s and 1960s. Most of the land is still just meadows/grasslands (it has 2 towns with less than 350k inhabitants in total).
Meanwhile, in Amsterdam (less than 30min away by car or train) house prices keep increasing by 10%+ YoY. It seems that lack of physical land is not the main limiting factor.
Given it's a basic human right, I feel we shouldn't allow housing to be an investment.
I am not sure there should be regulation to prevent people from doing that, as it represents personal choice and preferences.
I don’t know what traditionally means to you, but this is not a historical norm if you went back 50 years.
The obvious answer is to just have 100% capital gains taxes on land and let people deduct inflation.
Do you mean that people are expected to buy additional houses to make money from, after retirement? I don’t think that’s ever been the case.
This is not the case in some prominent housing markets (London & NYC come to mind). There are owners who purchase the properties as a way to store wealth in the US. These dwellings frequently sit empty most of the time.
https://en.wikipedia.org/wiki/Squatting_in_the_Netherlands
I learned about it after a trip to OT301 with some friends from the CouchSurfing meetup in Amsterdam in 2013. Apparently the law has changed though, and now people are being criminally charged for squatting empty buildings.
Investing in housing can decrease housing availability especially if investors are using it for short term rentals.
If investing in housing is a good way to make money, it is an incentive to build more housing.
Even foreign money could be good. If foreigners pour lots of money into your housing market, you could build lots of cheap houses and sell it to them for lots of money, for example. (not saying you should, just saying foreign investment in housing is not automatically a net loss).
But two or three years ago the govt. banned overseas buyers. There is no reason to suggest the ban is not effective. It even bans non-permanent residents, so plenty of legitimate residents (work visas) can't purchase property.
We also have strong money laundering laws, to the point of making tech innovation difficult (our prediction market run by a university had to move to the USA).
Yet it didn't stop or even dent runaway house prices.
Turns out the overseas investors (and immigrants) were just a good scape goats for lots of other problems.
Edit: People overseas I have mentioned this struggle to belive it and suggest the ban must not be working. Yet nobody here suggests it is not. We have supply issues, transport issues, ridiculous construction and material costs and lots of regulations. Old houses are sold at prices relative to new houses. If new houses cost more and more, old houses also increase in value, especially since they are on the best land (not in new far away outer suburbs).
My factory supervisor brother has a house in Mangere Bridge, a blue-collar suburb, built for ~$100k 20 years ago is now well over $1m. It is batshit crazy. I hear of eye-watering prices in Manurewa, Otahuhu, Papakura.
Edit: https://www.stuff.co.nz/life-style/homed/real-estate/1254756.... Jesus the median is now $1.14m.
In 2019-2020 just 38 of this class of visa was approved, which seems to be about the average per year over the last decade. It was just 16 in 2020-2021.
I don't think these people are buying decrepit Auckland villas, two bedroom semi-detached or tiny one bedroom apartments, given they have $10 million spare to invest.
Prices are also driven by cheaper interest rates domestically.
And yes, the prices can be driven up by cheap loans, but from memory they were already rising steadily before the covid stimulus measures.
I am still unconvinced that there exists in NZ a mechanism that can generate so much money and drive up the prices to these levels. Haven't been back for a while but family and friends back there are just as bewildered as I am with these price rises.
They were sad about it.
It's fucked.
Don't have to answer if you don't want to.
How can you be so sure? With the way mortgages work, and the way people who bought starter homes ~10 years ago are more than capable of affording a downpayment on a bigger home, you don't actually need a large amount of domestic money for housing prices to be bid up into the stratosphere.
https://i.stuff.co.nz/national/politics/300223358/reserve-ba...
With birth tourism, just transfer some assets to your nephew, a full born citizen of $country_of_conveinience and have him purchase the property.
It is really quite bad, and nobody knows what to do about it. It is lose-lose now because there are the people who can't buy a house, and then there are those who sacrificed everything to buy a house. You can't help one group without really hurting the other. It will really hit home when the people who can't buy a house get older, and stop work.
Two options come to mind:
- Adjust policy to slow the rate of increase such that wages and income will catch up. This will take 20 years or more of course, resulting in an 'unhoused' generation of people.
- Make some kind of large structural change which reduces prices coupled with debt forgiveness. This will still screw a lot of overcapitalised people.
I don't think massively increasing urban density will work in Australia (or NZ, or Canada), which seems to be the Japanese solution.
A third option is to try and reduce concentration in major cities, and attract people to regional areas where housing supply and demand are better matched and prices are much lower. There is actually an opportunity to do this because of Covid - more interest in remove work and less migration. Austrlia, NZ and Canada have a lot space after all.
But the reality is, our listless government won't do anything, and the political pressure from the older well-housed generations protecting their wealth is too great.
In Canada there is essentially no where that fits this description if you look at price to income ratios. The price increases in tiny towns in the middle of nowhere have increased as dramatically as in major centres, from a lower starting point. The locals earn far less and cannot keep up with the prices.
The housing crisis has been this way since at least 2000 or so. It won’t change until:
- Stamp duty for buying rentals / converting to rentals, maybe 10-20%
- Limit the number of existing residential properties a person can own to 5 (no lower than 3). Maybe allow them to buy more than 5 if they pay a high stamp duty (eg 60%).
- No limit to number of new residential properties a person can build (Ie encourage adding new stock to the housing market), so long as it doesn’t involve the demolition of an existing residential property.
- Higher buy to let mortgage deposit requirements on existing properties (maybe 60%?)
- Higher interest on buy to let mortgages (maybe the govt charges an additional 3% on top of the interest as a form of tax)
- Maybe some more draconian stuff like unable to sell a property as a rental if it has been a rental for at least 2 out of the last 10 years. Ie making the only people that could buy it owner-occupiers.
People blame internation investors, but that is only a small problem.
People say we should build more homes, but Ontario already has 10s of thousands of approved homes to build, that have not yet been started. Lack of skilled trades. Developers that are just sitting on the permits as they finish other projects.
I think the simple solution is an extra tax on people that own more than 2 homes. An even higher tax if you own more than 3 homes, and so on. Keep increasing the tax rate, on each home a person owns.
These stories are not referring to "growth in Ontario" but unoccupied multi-million dollar homes in Vancouver with questionable ownership, and paid in cash.
It's lip service and the government does nothing to help track it. The most investigative journalism that's gone into it was a few years where people tried to look up owners of holding companies and based the research on people's last names. You can imagine how well that last bit went down in the media.
Well, our trust privacy laws are very strict - so it's near impossible to tell who actually owns the companies if it's director is fronted by a corporate holding firm. These are used to protect property in the event of bankruptcies and debts, but can also be used to hide your residency.
And then the international student visa scheme. Many universities basically use them as their lifeline. Concordia University in Montreal for example has over 50% of their registered students being international.
I am in much more favour of the old system where the applicant applies through a provincial (state) immigration and each state gets to set their quota. Once approved the immigrant has to settle in the province they apply for and live there for certain number of years. This allowed even distribution and not put pressure on already tight housing supply in major big cities such as Toronto. But the federal government in Canada in 2015 removed this provincial cap and instead introduced a point based lottery system where both the lottery cap and applicant selection through point score threshold is done by the federal government.
EDIT: Also the point based system allows abuse in countries where we’ll connected people can basically buy “accredited” credentials such as relevant accredited experience in professions. I know someone who doesn’t know a thing about welding, but they moved here with credentials. Government has no way to verify these accreditation in many cases for many countries.
Isn't it still like that in Quebec? Incidentally, the party they voted for has almost no support from immigrant communities.
> Also the point based system allows abuse in countries where we’ll connected people can basically buy “accredited” credentials such as relevant accredited experience in professions. I know someone who doesn’t know a thing about welding, but they moved here with credentials. Government has no way to verify these accreditation in many cases for many countries.
I constantly see resumes for Canadian "engineers" with foreign diploma. Not a single position at a Canadian company despite having lived there for 10+ years. Wonder why...
I guess the thinking must be that if it were taxed and say you bought a house for 500k and a decade later it is worth 750k and you have to move for another job to a place where a comparable house would also be 750k$, then you can't afford the "same house" any longer because you have to pay tax on the 250k gain. The funny thing is I don't think we would see this kind of increase on the house price if it where taxed, making the point pretty mood.
Does anyone know of a country with tax on capital gains from selling a house and how the prices on houses are there?
- Kiwis live and work abroad, sometimes earning much more than they would in NZ.
- Those kiwis buy houses.
And with the pandemic:
- More of those kiwis have decided to buy houses in NZ, because it has been very successful at keeping covid and restrictions minimal so far.
For context, New Zealand has 4.9 million people (almost exactly one half that of Los Angeles County). Imagine 60 million Americans living abroad, rather than the actual about 9 million.
I believe foreign buyers is also a scapegoat in Canada. At first I believed it when home prices were only growing at obscene rates in the major cities but now it has spread to every tiny community in the country, literally from Newfoundland to the Yukon. This is a direct consequence of interest rates being too low for too long and capital having run out of good places to go (zero interest rates, equities at peaks, etc).
Also, it may be possible for people to side-step regulations as often the reality on the ground tells a different story.
Since the demand is growing faster than the supply, you can both a) curb the demand, by lowering the ludicrous immigration rate, b) fix regulations and impose other restrictions on foreign ownership. And if you refuse to do 'a', then you have to double-down on 'b'.
I think we want to pretend foreign buyers are the problem because it’s much easier to understand and try to stop than wealth/income inequality, access to credit, and low interest rates.
This is basically the reason... it's location right? Older houses may have bigger lots and better offsets etc... Yes you can get newer going further out but you can also remodel.
I mean housing prices are up everywhere it seems, one could think there's an evil shadowy cabal of rich investors buying up properties.
But, and I'm not an economist or anything here, on the other hand there's a few forces pushing average people to it; we've recovered from the housing crisis from 2008 onwards. Savings account interests are on the floor, so people are looking to put their money somewhere else - a house is a great long term investment.
another one I heard is that "big" loans from e.g. the European Central Bank are really low interest, pushing banks to lower mortgage rates, which makes people think "now is the time to buy and fix my mortgage rate", which is what I ended up doing a few years ago.
And of course there's the 'rona, which has made a lot of well-off people reconsider their overpriced living conditions in the big cities. They can get a real house outside of the big cities for the money they make, and if they can work remote or limit commuting, it makes sense.
Yes. OIO appears to have caught some but I suspect a lot gets missed.
I would expect locals can be driving up prices too but more as a reaction to what has been happening for 15 years already.
Why would they have to be evil, shadowy or a cabal? All you need is wealth inequality.
Unless you restrict the number of houses private individuals can own and massively restrict what corporate owners can buy, not much will change.
Oh I'm already priced out in Europe. I'm not going into debt for 20-50 years just to pay for _one_ thing.
Why. Because while your home went up, so did everyone else's, you still need a place to live so if you sold your home you could only buy another home that was of equal value to your current home thus making it is net transfer not a gain...
Pretty tempting to do just that when your house value doubles in 5 years and you're left with six figure equity with near zero interest rates, in an investment market that is manipulated to avoid any serious correction or recession.
Personally, I prefer to avoid debt, but the past ~20 years has been a perfect environment to maximize leverage in home equity and invest it into more real estate, or the stock market.
For instance people moving from the Bay Area to Austin, Portland, and Boise.
The market is fantastic for investors though. A property portfolio delivering 30% growth in a couple of years whilst also grabbing sky high rents or AirBnB sure looks tempting. It's a good time to start a disruptive turnkey property management business.
What they don't realize is that the 'step above' them is getting way out their ability to move into, and they're getting stranded in the tranche they are in.
It's a big new problem with globalism that needs to be addressed.
I looked at the investments my bank made with my savings, and IIRC a chunk of it was invested in real estate companies. So I, a middle-class person who cannot afford a house, am giving money to my bank who is giving it to real estate companies to buy more apartments. And given how much apartment prices have risen, it seems like my bank made the right call for its customers.
In the USA, all it takes to buy a house is money. A wealthy person sitting anywhere can buy a home with a email, and a few clicks, or a phone call. All it takes is money.
If a person can't legally live in the home he bought, why are we selling it to them? I know the answer, but don't like it.
I don't know of any other country that makes buying our land so dam easy.
(I only know U.S.A. realestate, but care about Canadians.)
Now the butcher knows the baker is hungry and has $100, so he ups his prices to get the most value
But the butcher needs knives and the blacksmith knows he can afford more now too
The kings left town but the damage has been done, will probably take some time for things to go sane again
Who should be allowed to buy a house: Markus, Swedish born foreigner who moved to America with his wife to work at an academic research lab or Liang, born in Saipan thanks to birth tourism, using the money his parents managed to get out of China to grab as much real estate as he can.
https://the-peak.ca/2016/05/vancouvers-housing-crisis-caused...
Source: https://www.canada.ca/en/immigration-refugees-citizenship/se...
The only problem is that the rational action with that knowledge is to buy in as soon as possible, with all your cash, thereby making the bubble even bigger. It's a death spiral of inflation.
The "appreciation" is not a given and not risk free at all. Certainly not 9% per year - for how many years do you think that would continue?
Think about it. If you had made a few million based on your having positional power in a country where you would be jailed or killed once people found out what you had been doing, you'd get the money out to somewhere your descendants would have safe access to it no matter what happened.
If you think western real estate is nuts, Chinese real estate is even crazier. Those Wenzhou house wives supposedly got started locally moving onto the rest of China and now the western world. It’s probably way more complex than that, however.
> If you had made a few million based on your having positional power in a country where you would be jailed or killed once people found out what you had been doing, you'd get the money out to somewhere your descendants would have safe access to it no matter what happened.
If that hypothesis were true, then Chinese would be fleeing the Chinese real estate market for the west, which isn’t really happening. It’s more of an expansion (if it is actually happening in significant amounts of money at all, which is not proven).
This is basic diversification. No one would expect them to flee the local market while it's still working, but buying some assets in foreign cities protects against the Chinese government cracking down on people owning multiple homes in the local market. It's quite sensible really.
https://news.ycombinator.com/item?id=23213162 https://news.ycombinator.com/item?id=27480619
In this scheme, a common man will not be able to buy/own any house but they can only rent it. It will be very similar to SaaS model in which Houses will be provided as a service.
Bill Gates and Michael Blurry (big short game) are heavy invested in agricultural land.
Lacking that group is going to have some interesting political consequences.
It's very depressing to see all the ways that society is breaking down.
I agree with posters who say that foreign buyers are the scapegoat. We need to start taxing real-estate gains on primary residences above a threshold (I thought the US did that). Also, the govt needs to take serious measures to break the assumption that housing always goes up double digits. Everyone I know thinks housing will go up .. this sounds like a recipe for collapse. People with little means are going all in on the most expensive real-estate they can find. Illegal suites (rooms for rent, basements) are rampant. The sort of side hustle I hear about are insane (someone boasted growing shrimp in their garage to supplement income).
We need to remove restrictions and make it easy to build new high-density housing anywhere and everywhere.
The wealthy have the capital to find loopholes in any tax that is levied.
We need to punish the housing speculators with a supply surge.
I firmly believe that housing is a social good first, and an investment vehicle second and so we should be taxing any property which is not the primary residence of the owner to equalize the playing field between those with a large capital base and middle class families who just want a stable place to live.
Do you feel that's a bad outcome? The phrasing suggests so, interested in why you feel that way.
Long term it's a good thing for the money to go into western real estate. Its value in the global market is being correctly recognized. Short term it is bad for local home buyers who end up priced out of the market.
Divorced or divorcing men understand how this can happen in the west.
Notice that there is no comparable craze on the stock market. P/E has gone somewhat up sure but it's just out of anticipation of record corporate profits in the coming quarters - which is not unjustified given rampant inflation and deficit of everything which everyone is now making tons of money trying to fill.
Because smart people never invest in real estate (at least not in residential real estate, especially not in single family, detached houses).
In Russia, we have a proverb - "best thing to do about fools is not trying to stop them".
Because everything you said is completely wrong and it takes the already extremely tight housing market to an absurd extreme where no ordinary person can purchase lodging to own. It would take a lot more than a monetary policy tightening to crash Vancouver or Toronto housing markets given how many people are moving in every year. Probably something quite cataclysmic
If anything, it's a source of free money for the residents: sell your current house for millions and move out somewhere cheaper, maybe retiring early as a result.
If you don't want to people to move, analyse the reasons that push them to move and see what can be done about it. Real estate prices are just an indicator. It's stupid to "tackle" indicator rather than underlying reason.
Yes commercial real estate is a good thing. There are good rental yields on it. It's not generally a gamble. But entry ticket is high there and every decision is important unless you are billionaire, and even then it looks too similar to stock picking, even worse than that. You need to really understand shit about real estate and research a particular place you want to buy and it's surroundings very well, too easy to make a stupid mistake.
Also residential real estate might make sense but not when you buy a house for yourself. Crappy cheap 1-2 bdr apartments to rent out work OK, and they are a lot more liquid too. But it looks too much like "job".
Single family house you'd want to live in, clearly "no". It's almost always a bad investment decision.
> Single family house you'd want to live in, clearly "no". It's almost always a bad investment decision.
Is this still true, though? Asset management companies - most famously Blackrock - are now pouring billions into acquiring exactly that: single family homes. And with prices growing in the double digit percentages every year across North America, it seems almost guaranteed in every metropolitan area.
I can be convinced otherwise, but I'm worried we are returning to a time of renters and land-owners, and I'm not sure I want to be a renter for the rest of my life.
The UK government have made some small steps in trying to associate property with people via proceeds of crime acts, and the financial conduct authority, but it is woeful.
Tens of thousands of flats have been built almost entirely funded by foreign investment. If/once the market collapses on whatever time frame, London now has significantly increased housing stock almost entirely on the back of foreign money (whilst providing income for local builders and suppliers). Already foreign owners are taking huge losses on their investment and I expect this to drop even further. If price drop to a reasonable level for your average Londoner, this will be a great win.
On a side note, that entire development is an architectural disgrace and as you note, for the time being a ghost town, parking dodgy money from abroad.
Also, that development, and others have "poor doors" around the side or back for the non-penthouse owning riff raff to use. Another thing that's completely wrong with these kinds of developments in London.
Of course, but that would devalue the existing housing stock, which for the vast majority of politicians would mean a loss on their real estate investments.
Why would they give a shit about young and future people being able to afford a place to live, when they can make a mint by denying these people housing?
If it's a supply issue, more people would be homeless and without a place to live.
It's an affordability issue with a small portion of 'housing investors' pricing out renters from ever buying.
Building 'more' housing is not the answer. Preventing people from holding real estate as assets is the solution. We don't privatise ownership of water or air - two basic resources for humans to survive. Privatisation of basic human necessities is dangerous and we'll see in the future how large scale private property ownership will continue to drive social issues. It's really just the beginning...
There is no "more expensive market" or "secret Ultra-Toronto" that can move downstream into Toronto. Is it just "there are a lot of rich Canadian investors" (seems unlikely) or is it mostly just people overseas buying and leaving places empty and/or hoping to maybe rent it out?
Something doesn't seem to make much sense. What Canadian investor is going to think, hmmm, I'll bid $400k over on a 2.5MM home that no one in my country can afford in the most expensive city and it's not even that nice. Who is going to buy it from them as it goes up? Anyone in Canada who could possibly afford it now, or in the future will already have a nice home, unless are just swapping around for a different location. There has to be some 3rd party upstream they know will buy it out from them, or else they will be the sucker who hit the ceiling with a property they can't sell.
If Trudeau would rub some brain cells together, we'd get changes to the law that would limit foreign real estate ownership, and close loopholes allowing the banks or other Canadian investment firms to hold real estate on behalf of foreign owners.
What about the votes he needs from certain communities?
https://globalnews.ca/news/4853439/karen-wang-liberal-burnab...
USA: 33% Canada: 23% UK: 17% Euro Area: 15% China: 15% Japan: 13%
WhERe iS aLL thE MOney ComInG fRoM guYS?
“Oh but it’s ok because velocity of money plummeted!!!”
Ignoring the fact that there has never been an instance of money supply increase in relation to velocity of money decrease that was reversed once the velocity eventually returned to normal.
Those money supply numbers you posted are the new normal now.
So not only is there more money burning a hole in people's pockets, the artificially low rates create massive leverage.
I wager that if home buyers had to convince private hard-money lenders to give them 30 year mortgages the rates may increase. (Imagine if houses were denominated in gold)
The article isn't just some opinion about "foreign buyers," with racist undertones, there is a real pattern and data.
They found Toronto matches matches markets around the world that real estate is being bought by companies, with cash, and through unregulated lenders. Given their general agenda, they have conflated holding companies with all foreign companies, and they are suspicious of private enterprise in general, but as a stopped clock they appear right on this issue.
Their transparency issue is real money laundering for a change instead of capital flight, and even though I don't care much for their usual agenda, for them to criticize the housing market in Canada is accurate.
Casual BBQ conversations in Toronto are as likely to be about real estate prices as they are to talk about how many of the neighbourhood businesses are foreign money laundering operations. It's an open secret, and most milenials are priced out of the cities they grew up in. Not only are investment banks churing real estate (see Blackrock buying homes search) with Fed driven liquidity, Canada's political parties forfeited their national focus, and instead spend their time courting foreign leaders and their diaspora networks to get dodgy campaign funding sources and voting blocs. The parties realized it's easier to raise money from and pay off constituencies to stay in power in foreign countries to work votes here because there is no transparency once aid, loans, financing, and other money vehicles leave the country.
The logic appears to be, "why should our globally elite and governing classes be subject to the opinions of working class people we disagree with in these mere nations when we can just import people and money dependent on our policies, both from educated and wealthy and poor dependent classes, and then manage them to keep us power." It's post-national policy. The parties run offense by calling everyone they disagree with racists, and the whole thing is absolutely rotten. A big part of that is attracting capital flight from other countries into assets like real estate and lax beneficial owner enforcement and turning a blind eye to it in return for political support.
Sounds like you need a new party.
Property taxes should also be extra high for non-residents.
Apologies for all the residence/residents.
I live in HK and receive brochures every few days for foreign property in Canada, the UK and Australia. If you have the cash, you can pretty much visit the agent and buy the place on the spot.
Does domestic money laundering and illegal money have an impact? Absolutely, but blaming foreigners is laughable considering number of them.
One thing I worked very consciously with my financial planner about was this sentiment that:
- My job does not facilitate staying in a place long enough to make owning a home a worthwhile investment
- I will probably never own a home because there are enough people that have a lot more liquidity than I do
We have now setup an investment strategy that has become more stable and effective than owning a home. Point being, this is a FP's bread and butter - engage them!
World war 3 won’t be fought over natural resources. It’ll be the rent slaves class fighting against the upper classes “right” to keep them in indebted servitude.
We need some policies preventing rent seeking on peoples primary residents.
In real life, you go to Toronto, or London, or any number of capital cities.
Realestate and banks are the biggest fraud ever.
I think the inflow is fine, but there should be hefty taxes associated with the fact that the property is made valuable by the civic infrastructure in place in the country which only citizens are paying for.
One thing they could do is build apartment buildings in less sensitive areas, and designate them as 'foreign ownership allowed'.
Literally buildings would get built and remain largely empty, as a form of 'investment' (this happens in China) and so long as it wasn't affecting local prices too much, it'd be fine.
I wonder if they should pick a spot in Southern Ontario and declare it such a 'zone' where they only build 30 story buildings for this purpose.
Of course, the nature of the economic waste is laid bare.
It might be more appropriate for the local governments to be selling a special kind of bond or some other financial instrument designed for this purpose.
