Beware the Echo Chambers
We’re hearing a lot in the media these days about how Facebook and other platforms have used advanced data analytics to tune what we see online. To show us more of what we agree with, and manufacture more outrage by portraying the other side as atrociously unreasonable. The topic of the day is increasing division in politics, but the same applies to most any issue with two sides, including real estate.
I am currently reading Principles, by Ray Dalio (of Bridgewater fame) and one of the key themes is how a commitment to radical truth and radical transparency can improve your decision making. When you are trying to find the truth and make a decision, find the most believable people you know that disagree with you and try to understand their reasoning. This is often painful, because you must first overcome your natural aversion to listing to people that are telling you things you don’t agree with. It’s initially more pleasant to find people who agree and you will find the Internet adapts itself to steer you in that direction. However in the long run it is much more productive to challenge your own ideas and more satisfying when that makes those ideas more nuanced.
I started researching the real estate market back in 2007 out of a personal motivation to figure out whether it was a good time to buy in or if it was going to crash. I rotated through many sites from those predicting doom to those advocating buying at all costs and slowly learned more about what the market was doing and why. House Hunt Victoria (then operated by John) was one of the most useful sites and although it had a bearish focus, has always had a good balance of viewpoints. However some important insights came from trying to make my arguments on far more hostile sites, where the majority disagreed with me. That forced me to really examine the arguments I was making and exposed the flaws in them so I could learn. Luckily there are more resources available these days so it should be easier to get to the same point now!
Bull or bear, it’s a good idea to seek out the opposite viewpoint from time to time and really stretch to understand not only the reasoning behind it, but what it would mean for you if they are right. In the end the decision to buy or wait will affect no one more than yourself, and at best you will get a probability of what choice will be better and whether you can live with it. There is no such thing as a definitive answer. Do the research, consider the opposite conclusion, then act.
Happy Easter everyone.
Preview of the month’s numbers. Seems like the final tallies won’t be updated until tomorrow: https://househuntvictoria.ca/latest
Good morning Hawk…
If a bagholder is someone who bought right before prices plummet, what do we call someone (like Hawk) who sold real estate thinking prices peaked only to have them shoot up another 40%?
March’s median Sales to Assessment Ratio is down by 3 percent from February for houses in the core.
That’s interesting. Three percent isn’t much it could just be the typical error in the data. But what’s interesting is that its down. I would have anticipated an increase given the months of inventory is still low by historical standards. I would guess the reason for the decline is the New Listings to Sales Ratio spiking up in March to 1.9 new listings for every house that sold.
For those that may have been holding back from listing your house for sale because there is a limited selection this might be the year to start looking again. In my opinion, this could be the beginning of a steady increase in active listings for the next couple of years. The real estate pendulum may be starting on its backward swing.
New bridge is great. Praying for red neck government is hilarious. They racked up our debt bomb and lied their asses off.
Why would millenials want that corrupt stack of shit back in power as they let money launderers rape our province and is why our housing is out of control.
Only a whacko would want to see that again in our lifetime just like Trump and his corrupt clowns.
GWAC:
Higher fees but think of the high paying administrative jobs it can create and then we can build subsidized housing for those administrators. We have to make sure that the administrators can walk to work because the bike licensing fees might be outside their budgets. ( As you can tell I am waiting for the morning dew to disappear before I mow my lawn).
Barrister
Tried that in the 60s/70s did not work. Cost way more to administer it than was brought in.
Any other great suggestions 🙂 Riding my bike is huge $ saver and great stress reliever. Both the ndp dude and his buddy look like they could use a bike.
I am sure if Comrade Horgan can find a way to tax it he will though.
Gwac:
Great point, I guess we need to have license plates for all bikes with an appropriate fee and renewed each year. Glad you suggested the idea even if it was a bit indirect.
Barrister
Go ahead I will just Blanchard or Quadra. 🙂
GWAC:
Maybe we can make the new bridge a toll bridge for the bike lanes in order to eventually pay for the bridge.
https://www.cheknews.ca/nanaimos-mayor-to-ask-for-exemption-from-bc-housing-speculation-tax-434789/
Not going to happen. NDP needs to save face, they are not going to change this bad legislation anymore. Starting to think their days are numbered.
http://business.financialpost.com/news/economy/investment-outflow-from-canada-already-underway-in-real-time-rbc-head
We have had our fun with the left. Play time is over. Time to get the conservatives back in power in Ottawa/Ontario/ Alberta and NDP booted out of BC.
Lets get spending under control and a focus on business and quality jobs. The younger generation will pay for lack of focus on competitiveness.
Love the new bridge. Felt like a king biking across the new dedicated bike area. No waiting forever at the light. Well done Ms Helps and crew.
Irregardless:
My understanding from a friend who is an immigration lawyer in Toronto that spoke to last night is that it works like this. Step one, the family gets landed immigrant status in Canada, usually through the Quebec program and based on the husbands net worth. Family moves to Canada bearing in mind that landed immigrant status is conferred individually upon each family member.
Step 2. Husband (almost always it is the husband) renounces his landed immigrant status (actually the landed immigrant status is legally revoked if you are out of the country for more than 183 days in the previous 365 days). Therefore husband is no longer either a Canadian citizen or landed immigrant or earning income in Canada and therefore we have no tax jurisdiction on him at all. The deemed residency rules do not apply at all.
The wife and children retain their landed status and all rights and benefits. We cannot remove their landed status just because the husband has renounced his status. My friends comment was “Checkmate”; we are idiots.
@Barrister
“To avoid paying tax in Canada on income earned abroad, you have to sever all residential ties. This means you must no longer have a place to live in Canada, must have a residence somewhere else, must have opened financial accounts there, and, if married, must have taken your family with you.
Both countries get to tax your income.
The country in which you earned the money gets to tax you first, after which Canada takes its share, though you get credit for what you’ve already paid.”
https://www.cbc.ca/amp/1.1383215
Until you cash out you haven’t made nothing but paper profits. Looks like smart big money is doing just that. Leaving Canada.
Bearkilla going to be the next 2008 bagholder who wish he sold at the top as banks stocks start to tank already back to last summer levels.
Investment dollars are already flowing out of Canada in ‘real time’, RBC CEO warns
http://business.financialpost.com/news/economy/investment-outflow-from-canada-already-underway-in-real-time-rbc-head
Irregardless:
I dont believe that is how the tax treaties are written but rather it is a matter of producing a tie breaking method of determining a single residency. But perhaps there is an accountant in the blog that can clarify the issue with some certainty.
March numbers should at least be interesting.
Barrister,
I believe deemed residents would get a credit for foreign taxes paid under a tax treaty, not an exemption from Canadian taxes. Hong Kong has a 10% flat tax I think. Not sure about the rest of China.
2008 was honestly the best time of my life. While fools were selling equity I was buying like a madman. I mortgaged myself to the hilt and bought all Canadian banks. There has never been a more obvious sure thing other than real estate on the island.
Your $1500 a month insurance is extreme for ancient people with heart and diabetes probs. Healthy 65 year olds pay $500 range according to RBC. Maybe you can hit up the rest homes for some bizz?
Any out of province people that can afford a second place here can afford the costs down there. There’s only thousands of them that do it all the time.
Last time I looked you can’t get a tan at 10 degrees with a gale blowing and another week of rain on the way.
Maybe you need to troll the Grand Prairie blog for business. Sales are down bigtime here as the Albertans etc revolt over BC’s anti-pipeline and new tax.
@Hawk
Coming from -20 or more to Victoria at 10 above is like hitting a heatwave. What’s so great about Phoenix ? The $US to $Can exchange kills ya and for most seniors it’s $1500 plus for a month of medical insurance.
CS – I agree with your comments. New Zealand is prohibiting the purchase of their “existing” real estate by foreigners. Canada is a target of money laundering and that kind of illegal activity. The drug trade is interwoven through all of this [escalating property prices that don’t reflect incomes and the Casino affairs; you know this money found its way in to funding political campaigns] so when I see the street homeless people, I have a great deal of sympathy that I am ashamed to say I did not have before. Fentanyl is 50 to 100 times more potent that heroin, and the addiction is much more difficult to beat. I mention this because the social cost of these unrealistic housing prices is wider that many appreciate. I am intently awaiting the report of Peter German and hope it is made public.
Further, the unrealistically high RE prices have created another problem mentioned here; namely, the results of insatiable debt. Home equity line of credit – the mother of all time-bombs. The interest on those loans are not fixed like the 5 year mortgage. The monthly interest payments are rising and rising. When folks get under water on the mortgage [house value falls below the mortgage], the banks will cut off the lines of credit and call the loans. Then what? When the mortgage comes due, they have to negotiate a new mortgage and either pay off the LOC or consolidate; but if there is no equity – where does the money come from? Tick-Tock.
In regard to the RE, the present policies are for future purchases. However, there is nothing preventing a retroactive [go back 20 years] investigation. We know that at least 30% of the most expensive real estate in BC [residential] is owned by numbered companies or bare trust relationships – the aim of the current path is to identify the true owners. When that is done, it is fair game to trace back the source of of the funds used to purchase that property – if the source was illegally obtained or illegally brought in to BC – then the BC Civil Forfeiture statue is invoked, the BC government seizes the property as proceeds of crime, sells it and uses all of the proceeds as general revenues [build affordable housing, fund drug treatment centers, pay for that new bridge, etc.]. Under the statute, the owner who bought it with the proceeds of crime gets $0 from the proceeds of the sale.
If you think all of this is fanciful, read Madam Justice Griffin’s recent decision where trust-owned properties became the subject of a dispute between the Chinese owners. Here is a synopsis worth your time:
https://www.straight.com/news/1014966/two-families-feud-over-three-vancouver-houses-and-money-transfers-china-canada
The absent owner who owns one of the largest textile companies in China testified, under oath, that his annual world-wide income was some $97 and change. Yeah, OK, let’s all believe that line. The point is – this is the satellite family in a nut-shell.
@Victoria Born
Right. The Ndips saw foreign investors as a revenue source, rather than the cause of housing stress for British Columbians that they are.
What the provincial government should have done is prohibit purchase of property by any but Canadian citizens or landed immigrants, while treating all obscure ownerships, e.g., in trusts or corporations, as foreign unless proved otherwise.
In addition they should have imposed an escalating tax on current foreign owners: growing by 2% of assessed value a year, indefinitely. That would have transformed foreign ownership into a source of RE supply, not a drain. It would also have been good for local realtors since the international brokers would likely have soon quit the BC market, where they have become dominant players.
Reality is Richard most will want to go to Arizona where its actually really warm and not 10 degrees with a cold 45khm wind. Business must be slow to keep pumping this weather BS. The north pole is pretty cold too.
https://www.theweathernetwork.com/us/weather/arizona/phoenix
Once and Future:
You are correct about the “significant ties” rule but the exception (which is more the general rule) is we have a tax treaty with the country that he is working in and paying his taxes. Then he is exempt. We have tax treaties that include this clause with almost every significant country in the world. Back to being exempt regardless of where the wife and kids are located.
I am not a tax expert but it does appear that most of these cases are playing within the rules.
But I also agree that the situation is a problem. So if someone can think of a solution that does not involve changing all of our international tax treaties I would like to hear it. There probably is some way to the address the problem but it is not coming to mind for me.
“Grande Prairie dropped to -30 C overnight breaking an 83-year-old record. Pincher Creek hit -21 C, edging an 82-year record, and Red Deer hit -22 C, breaking a record low of -19.4 C that was set in 1975.
Fort McMurray and Cold Lake set new low temperature records on Friday with lows of -31.7 C and -21.7 C respectively.”
Is there any wonder Albertans/prairie folk need a vacation home in BC.
Whoo hoo. 10 years being right and the next few of being wrong will make bearpumper a sad slumlord. Escalator up, elevator down.
Americans going down the same road as desperate Canadians maxed out trying to live the good life beyond their means.
So many stats popping up of “Not seen since 2008”. Some slow learners out there.
Homeowners Tapping Equity In Cash-Out Refis, Highest Level Since ’08
https://www.zerohedge.com/news/2018-04-01/homeowners-tapping-equity-cash-out-refis-highest-level-08
Refreshing post Leo – thanks!
I’ve added a new pet-peeve to my ever growing list. The over-emotive dumbing down of messaging/talking points to appeal to the 15 second attention span.
Important and sometimes very complex issues are constantly being hijacked by parties with vested interests. Disturbingly, a common theme of using non-factual or knowingly misleading information to support their key messaging on the issue has emerged as commonplace. It’s not just clearly visible in housing, but just about any other issue in our society – environment, social justice, etc.
The result of which, I believe, is that our social complex comes to the ‘dinner table’ already loaded for bear with a heavily influenced and overly simplistic viewpoints. Reasonable and informed discourse becomes near impossible.
I could name a few recent and examples of this, and yes definitely touchy subjects –
-The Bouchie Case in Saskatchewan – Racist Murderer Farmer OR No Good Drunken Indian
-Pipeline Issues – BC Hippies OR Big Oil Ruining the World
-Fish Farming – Government/Industry Collusion OR Quack Science Funded by Alaska Fishermen
We could all stand to as Leo says,
“seek out the opposite viewpoint from time to time and really stretch to understand not only the reasoning behind it, but what it would mean for you if they are right.”
Happy Easter everyone!
Victoria Born, my first impulse is to disagree, but if you had a decent article link to these arguments, I would read it.
Why would I be nervous bears? I made great money for n0t much work, have no financial problems, have tons of assets and haven’t been wrong about real estate for a decade. Life is good for me.
Irregardless, that is interesting. The province would certainly have to enlist the CRA in that kind of crackdown. Other than flagging potential cases, I don’t know what jurisdiction that province would have.
The impression I get is that the CRA is more interested in catching ordinary people for minor miscalculations on their tax forms. Does anyone know if their enforcement efforts toward recent immigrants has actually stepped up?
Happy Easter to All;
Some excellent points being raised here. Leo, I like your invitation to everyone to widen the gaze and listen to opposing views to test your own views. Blinders do just that – they blind you to fruitful ideas. So, here are some.
First, and I expect this to be unpopular. Leading economists appear to agree that our policies are lop-sided. We tax incomes far too much and real estate far too little. By doing so, we encourage unproductive property ownership and provide a disincentive to work. The thrust of the argument is to lower income taxes [this will encourage productive activity and encourage people to work – studies show that this actually increases total tax revenues]. The Federal Liberals favour raising taxes and spending more – they will never balance the budget and the debt continues to soar. I would favour raising property taxes and significantly lowering personal income tax rates. As an aside, the Trudeau attack on small business [via the Morneau tax plan that discourages investment of retained earnings in CCPCs] is a disgrace. Trudeau and Morneay hide their money in off shore trusts and avoid paying income tax – are they really any better than the sham being uncovered as the rich foreigners hiding their money here?
Second, Mark Carney warned Canadians over and over and over to not take on excess debt. But almost free money is like dangling heroin in front of an addict. So, we have a generation of debt ridden folks who are primed for bankruptcy and foreclosure. Mr. Poloz has no choice – his press conference where he said that there appears to be more labour slack than previously thought, was desperation. He can maintain the status quo, but let’s be realistic: prime rates and mortgage rates are fixed in the bond market [which is much, much larger than the stock market] – as QE is fazed out and the US Fed tightens, bond yields rise as bond prices fall [there is an inverse relationship because the price of the bond is the present value of the future stream of coupon payments and the discount rate is the higher and higher rate of interest]. The effect is rising retail interest rates, regardless of what Poloz does. As rates rise, the interest to be paid on the National Debt rises [thanks Trudeau and Morneau]. There is a crowding out effect which causes yields to rise. Poloz will raise rates, likely twice, this year.
Third, the German report on the Casino Money Laundering was due yesterday – so Eby likely has it. German will now move on to the investigation of illicit funds pumping up the Vancouver / Victoria [and other areas] RE. Don’t think Victoria is immune, please. We know from the Sun reporting that the money laundered through the Casinos eventually found its way in to the RE markets in Vancouver – likely Victoria too. Once these reports are digested and made public, expect some high profile prosecutions, audits and further adjustments to the NDP 30 point affordable housing plan. It is about time. Housing prices should be based on household incomes, not the price of street grade Fentanyl.
Fourth, I agree with the inescapable conclusion that the Provincial and Federal Liberals [no association between them] sold out the citizens of Canada by allowing foreign money to dominate and enter unchecked. Be it from China, Russia, or wherever – local Canadians (of whatever ethnic background) who work here, paid taxes here, raised families here, contributed to our communities and build this country [including our imperfect health care and education system] are now second-class to wealthy foreigners who shove our rules and laws aside. I am all in favour of immigration – peace-loving people who want to work hard and build a better life for themselves and their families – come and be my neighbor. However, buying a $4M west van or Uplands home with cash and then not paying a dime of income tax here, earnings millions elsewhere, while accessing our health and education system, simply is unlawful.
A home is a place to live and raise a family. It is not an investment where one hides the proceeds of crime. Our values are being challenged by this. I am not a fan of the NDP but I think they are on the right path. i don’t agree with what they are doing with ICBC or Site-C, but they are getting to the heart of the RE excesses.
I was trying to find historical average/median sales prices to see if Mill Bay has undergone the same run-up as Victoria has, but I didn’t immediately find much. During our week here on the island, of all the neighbourhoods we’ve seen (Oak Bay, Gordon Head, Saanich, Brentwood Bay, Langford, Colwood, Shawnigan Lake) Mill Bay hits the spot for beauty, housing quality and bang for the buck. Of course it’s drawback is distance from Victoria and dealing with Malahat, but that’s not as big an issue for us.
What’s the opinion here on the market in Mill Bay?
“Purchased for 370k……there can only be so much of a run up.”
Probably on one of those insider buddy deals. Bottom line is there are many condos city wide getting slashed the last few weeks. Listings up 35% the last few weeks as well and buyers have gone AWOL. No where else for this to go but down bigtime with 7 US interest rate hikes coming.
The consumer is getting tapped out which only compounds the situation. Sell now or be a bagholder.
Almost new condo at 4000 Shelbourne St , #205 slashed $21K in prime Golden Head is an indicator the condos best days are behind them. Sad… sniff.
Purchased for 370k……there can only be so much of a run up.
From Steve Saretsky:
Sales in the Uplands are down 83% YOY….which sounds bad; however, the cheapest home on a real Uplands lots right now is $2.3 million. A few short years ago a 4,300 sq/ft custom built (by Mike Knight) 1 year old home on a 1/2 acre south facing lot sold for $2.1 million…that is is a $3.5+ million home now.
I just looked up the area where I rented for a year in Burnaby and no wonder things are slow…even with a 30% drop prices would still be crazy. Have to love the green bathrooms in this one for a cool $1.6 million ->
https://www.realtor.ca/Residential/Single-Family/19240405/248-N-GAMMA-AVENUE-Burnaby-British-Columbia-V5C1X9#v=dir
Stephen Poloz’s job is about to get harder: How an interest rate gap could bite consumers, housing and the loonie
An interesting article – with the United States aggressively pursuing inflationary policies and hiking rates at a quick clip, should Poloz hike interest rates?
If he does, our record indebtedness we’ve piled on will become progressively harder to pay, at a time when our economy, including our housing market, is faltering.
If he doesn’t, it could give a boost to exports, which have been struggling and will likely struggle more given more intensive competition with US policies. But staying firm will also increase inflationary pressures, rising the prices of goods and services at a time when Canadians have racked up one of the largest personal debt levels on Earth.
In both cases, it comes back to our excessive levels of debt and the problems it causes. Regardless, it would seem that either way, the forces of change are growing. And if history is any guide, Poloz will eventually follow Uncle Sam one way or another.
http://www.macleans.ca/economy/economicanalysis/stephen-polozs-job-is-about-to-get-harder/
The “overseas breadwinner” cares not one whit about taxes. There is no need for that person to be a Canadian citizen, ergo no need for him or her to pay even 1$ in Canadian tax. He or she may have made $50,000,000 last year yet flit in and out of Vancouver at will while the spouse lives in a $4,000,000 West Van home and declares taxable income of $700 from their paper route.
@Barrister
I think I read the satellite family catch is the overseas breadwinner can’t claim to a be a non-resident for tax purposes if they have significant ties to Canada, including spouse/kids living here. Therefore taxable on world-wide income. Tee up sham divorces..
The more Bearpumper posts as of late the more nervous he must be getting as the slashes gradually increase by the day.
59 Howe St slashed $100K to $1.29 mill. When Fairfield is under the axe with rates going up 7 more times you know the party is over. Even the Vancouver people with buckets of cash think these prices are ridiculous.
Almost new condo at 4000 Shelbourne St , #205 slashed $21K in prime Golden Head is an indicator the condos best days are behind them. Sad… sniff. 😉
I don’t think posting incessant predictions of doom counts as insightful. It’s the same thing every time. Bears bleat on and on and on and on and on about the impending crash that’s right around the corner and the market always confounds them. Sad.
Yeah Vancouver seems to be a bit ahead on the softening front. I suppose their single family market was already thrown off from the foreign buyers tax so it was weaker to start with.
From Steve Saretsky:
Vancouver Real Estate detached sales hit a 20 year low in the first quarter of 2018. As of today there were a total of 1685 sales in the first quarter of 2018, that came in lower than 2009 when we registered 1700 sales.
Speculation has also dried up, with home flipping activity registering a 10 year low for this segment of the market. Monthly home flips haven’t been this low since November 2008.
The detached market will be important to watch with anemic sales, rising interest rates and the BC NDP Government holding firm on increased taxation.
While condo sales also traded lower in Q1, inventory remains tight and hence we are still seeing multiple offers. In Vancouver, 49% of condos sold over the asking price for the month of March. There remains upwards price pressures.
Speaking of the new bridge, did anyone else notice how the boondoggle design seems to allow drivers to ‘accidentally’ drive off the bridge approach into the water below whenever the bridge is in the raised position? The old blue bridge pivoted at road level so it was impossible to accidentally drive into the Gorge.
When they raised the new bridge today after the bridge party, there was no visible barrier to stop vehicles from accidently driving over the edge into the water below. I hope I missed something because it would be insanity to not anticipate the obvious during the bridge design.
That was nicely played…
Last year it was later in April, like the 17th
Leo….it wasnt Easter at this time last year?
Going to be interesting to see sales data for March in Tdot Van and Vic.
Single family sales in the last two weeks down nearly 40%. Condos down about 30% from same weeks last year.
Granted it is Easter.
Yeah that particular theory from better dwelling made no sense to me either. I doubt the advertising of offshore real estate was the issue.
Anyone check out the new bridge yet?
Just saw this ad http://www.usedvictoria.com/classified-ad/Want-to-buy-a-bridge-BridgeforSale_31504875.lite
As per Steve Saretsky, Vancouver’s SFH’s are down biggest since 2008. Look out below pumpers.
“Vancouver Real Estate detached sales hit a 20 year low in the first quarter of 2018. As of today there were a total of 1685 sales in the first quarter of 2018, that came in lower than 2009 when we registered 1700 sales.
Speculation has also dried up, with home flipping activity registering a 10 year low for this segment of the market. Monthly home flips haven’t been this low since November 2008. “
Thanks for your thoughts, Average Commenter.
I guess I may be missing the definition of “satellite family.” In my head it is a family who has gained Canadian citizenship, or permanent residency, but the husband continues to live abroad to make money. The wife and/or kid(s) have the house(s) in their name to take advantage of the primary residence capital gains exemption for future sale.
I agree that enforcement of the spec tax could be automated, as far as the rules have been set so far. However, I am not sure how they will come up with a legal definition to outlaw this other scenario? Maybe I have gotten my details wrong and everyone is chasing some other kind of “satellite family.”
It would really suck if they make it onerous for regular Canadians to leave a home to their kids.
Edit: Partially Ninja’d by Barrister.
Fb-
Bah, whatev. Don’t post anything online that you don’t want eventually linked to you, period. Fb, google, blogs, Amazon searches, airline destinations – yes, all are being tracked anytime you ‘login’ to a site.
I get tons of great info from my friends’ fb posts. Foreign media stories that don’t make the Reuters/AP cut, science findings, music happenings, etc.
It is a good question as to what impact blogs and discussion boards actually have, in terms of influence. I suspect the data and discussions here are somewhat influential, actually. Hundreds of replies to each post means thousands of views. In a small community like Vic, that’s a lot of eyeballs.
Average:
The problem is the legal owner lives there. It is either the wife or an adult child who is on title. The funds being used are often legitimate inheritance by way of gift or legitimate matrimonial capital.
I am not sure that either spousal support or gift taxes apply. But i am not a tax expert. The issue is whether the money paying for the house legally belongs to the spouse or the child. I am not sure how you identify that with causing a huge backlog of contested legal cases.
@ Local Fool – Thanks for the perspective on the Juwai article. What was interesting on the same HuffPost page was a little clip about 100 sq. ft. micro homes being made out of large pipes as a solution to Hong Kong’s housing problems. It was a reminder that there are a lot of people to whom our prices and space still look pretty attractive.
“I still can’t see how they are going to stop people from owning land just because they are a student or a housewife? While it makes for great news sound-bites, I think they are going to have a hard time legally defining the “satellite family” problem.”
Over the last 18 months income taxation, rural property tax, and property transfer tax have all transferred from separate computer systems from the 80s into an integrated software system where information is shared. The spec tax development is on the same platform.
I am completely unrelated to the spec tax/new databases but I don’t imagine it’s impossible to just audit every home worth over two million dollars that reported no or low income. Just do a quick address check and if the owner doesn’t live there then send the owner a bill. It shouldn’t take more then a few minutes per house AND each ‘few minutes per house’ is a $40k bill issued when that property is worth $2m.
Compared to hunting down beneficial ownership for the foreign buyers tax this sounds pretty straight forward.
Fight is on in California rezoning.
“In education and healthcare, the state sets basic standards, and local control exists within those standards. Only in housing has the state abdicated its role. But housing is a statewide issue, and the approach of pure local control has driven us into the ditch.”
http://www.latimes.com/business/hiltzik/la-fi-hiltzik-housing-crisis-20180330-story.html?outputType=amp&__twitter_impression=true
When were searching for our Victoria home we considered buying a condo for about ten seconds and then ruled it out entirely and forever. That decision was merely intuition and the reasons were unarticulated at the time but have a read of Garth today if you think you want a condo. He sets out the contrary case very tidily.
Rook,
Another Juwai article, with their ever-breathless CEO again asserting how we’re just seeing the start of Chinese buying. Juwai can do whatever the heck it wants, and attempt to pump their business to anyone who will listen. It won’t make any difference. China’s latest FOREX numbers as well as international RE markets in previous target hotspots are contradicting Juwai’s fanciful visions.
The drop off in Chinese buying was never because they somehow had trouble accessing listings on the internet, any more than adding cars to Amazon would suddenly cause people to buy more cars.
And indeed, China is relaxing a component of its capital controls, but that’s to do with allowing their citizens to purchase foreign mutual funds from Chinese hedge fund managers authorized by the PRC to do so. The outbound caps and banning of foreign RE purchasing, as well as the 400,000 auditors ensuring compliance are still in full force.
I do agree with their CEO on the principle cause of house price increases being interest rates, though. Even they admit Vancouver just isn’t attractive from a price standpoint anymore.
https://www.huffingtonpost.ca/2018/03/31/canadian-houses-for-sale-jd-com_a_23399934/
Friggin Juwai.
The thing about FB, is that the time you fritter away getting likes by a million people you will never meet, with pictures of kittens or puppy dogs or futile expressions of opinion that will change no minds, could have been spent here or on a million other blogs where people talk about substantive issues and inform one another and engage in constructive discussion leading sometimes to new insight.
I think the point that most people miss is that Facebook is using your data to manipulate everyone you interact with. Everyone feels like they are immune to manipulation and that it only happens to someone else. The aggregate effect says otherwise.
Short of auditing every student home-owner’s income, I wonder how they will force such people to show whether they are a front for someone else?
I am not saying that they can’t figure it out, just that I can’t see an obvious way to catch “satellite families” if the home owner is a Canadian citizen or resident. I would be happy to be proven wrong, as long as it doesn’t make everyone else’s tax compliance burden worse at the same time.
“Did we see the report on the first phase?”
“German’s full report is due at the end of March”
http://www.cbc.ca/news/canada/british-columbia/bc-ottawa-eby-trip-march-2018-1.4593444
Which is today. Probably in already.
They’re not of course. What they want to do is stop beneficial owners from hiding behind such people as fronts.
I also think the identifying of “satellite families” for the purpose of paying the 2% regardless of principal residence is related as part of the bigger picture.
Leo,
I don’t have the report on hand, but I did post Eby’s speech he made in response to it a few months ago:
https://househuntvictoria.ca/2018/01/08/jan-8-market-update/#comment-36270
Did we see the report on the first phase?
Unfortunately not.
Sometimes we’re too polite though. I’ve learned a lot from people calling me a moron. 🙂
The good thing is you can just choose to seek out alternative viewpoints while still using Facebook. That said i am getting less and less value out of it these days so I wouldn’t lose much if i wasn’t on it.
Thanks for the article, LF.
I still can’t see how they are going to stop people from owning land just because they are a student or a housewife? While it makes for great news sound-bites, I think they are going to have a hard time legally defining the “satellite family” problem.
If I took all of this to be true, wouldn’t it be better to sell now when no one else is, than wait until everyone else is also trying to unload?
Money laundering review to tackle Vancouver real estate next
Soon after putting casinos under the microscope to expose evidence of criminal behaviour, BC’s Attorney General is ready to do the same thing with high-priced housing.
David Eby says it’s part of an ongoing push to kill Vancouver’s reputation as a haven for money laundering. “The fact that we don’t know who owns almost half of the most valuable properties in Vancouver, and we don’t know where the money came from, is really disturbing.”
He now wants former RCMP Deputy Commissioner Peter German to review suspicious activity in real estate. “With alleged proceeds of crime, we’ve got some work to do and that’s why I’m asking Peter German to do a second phase of his review and we’ve not yet set out the terms of reference yet, but we’re very aware this issue needs to be addressed.”
“The bottom line for British Columbians is they want to know who’s owning the property and they want to know where the money’s coming from.”
http://www.news1130.com/2018/03/28/money-laundering-review-vancouver-real-estate/
Well said Leo. The mix of perspectives here is why it is so useful and has proven useful to me in my personal RE dealings. Thanks for keeping it alive and I hope you can monetize the great data viz you do!
@Nick
Don’t expect a “flood” of listings from out of town owners. Most of these people will take time to consider their options. This year the tax is .5% so that’s $5K on a 1M property. Next year it will double. 2019 will likely be more active. People need to plan selling an asset as most of these will be Capital Gains and the owners will want to minimize their federal tax implications and strategize taking any profits.
Question for the Realtors: is there any way to determine the percentage of out of province owners in a given area (eg by postal code) from the MLS database? That would be an interesting stat for anyone looking to buy in the near future to judge if there will be a flood of listings in an area of interest as people realize spec tax v2 is likely what will be passed onto law.
Leo S, we seem to be successfully avoiding talking about the topic in your article. I think you raise a lot of good points. It is one reason that I have steadfastly refused to join sites like facebook.
I was tech-savvy enough from their beginnings to understand the data mining process going on in the background, and its potential for large-scale manipulation. The unfortunate thing is that people will go right back to their waiting arms once the media gets tired of the current scandal.
Although it wouldn’t completely solve the echo-chamber, the service facebook offers (and that people obviously value) really needs to be replaced with a non-profit service. Too bad it will never happen.
Good points, patriotz.
Maybe it would stimulate people doing repairs and renovations, though!
Right, my point exactly. Adding one tax will generally reduce another. Just like when MSP goes away that missing revenue will be collected in other ways.
We sort of do. Due to low interest rates lower than inflation savings will lose value every year. In this case it’s the bank collecting the difference not the government
Does anyone on this blog know of anyone who has built or is building a “garden suite”? Would like to get fed back on any issues.
Well it ought to be, but in the short term it’s clearly more influenced by other factors, such as expectations of future prices, i.e. speculation. That’s why bubbles happen.
But given the property tax system is based on relative rather than absolute valuations, property taxes relate fairly well to rental value, except for underutilized properties.
Imputed rent is simply what a property would rent for if not owner occupied. But the other side of the coin is that a landlord gets to apply expenses such as interest, property taxes and maintenance against rent when computing taxable income. If you made imputed rent taxable without allowing these expenses you’d get a situation where it’s cheaper for everyone to rent houses to each other instead of living in their own, which doesn’t make a lot of sense.
And if you did allow these expenses it’s unlikely much revenue would be generated, particularly since a lot of homeowners run up more expenses than the imputed rent. So it’s not that great an idea either way.
Sorry Rick but a few hardcores playing golf the past couple weeks on the odd good day isn’t reality. Let us know when the doctor has 5 buddies playing in February monsoons. Thats been the norm the last 5 months. Nice salesman fail job.
Dasmo, inflation is the tax on savings!
(And it is a benefit to govt since it “helpfully” lowers the burden of debt.)
Leo S, both your examples are worth debating. You are right that taxing gasoline has side effects because many communities don’t have viable transportation options.
As for income, that is a long discussion. I think the common argument is that income represents the generation of new wealth. Taking some of it still leaves the earner with more than they had in the first place. Conversely, you cannot avoid imputed rent, so if you are out of work or retired there is no escape.
Essentially, our current property tax system already captures this, since it is based on market value. Market value is closely related to what a property would rent for. Personally, although I don’t like how it attacks static ownership, I support municipal property taxes since they are the way that local towns and cities get their operating budget. Those are the tax dollars I see working directly for me.
Finding the balance of any tax is difficult. It is the rationale of imputed rent that scares me, since it justifies the tax based on something you are not doing.
We need doctors too! He can move here and let friends use his place in Winnipeg instead 🙂
“Not sure how the doctor played golf the last 5 months of rain or shitty weather”
Hey Hawk you need to get out! I’ve been here for 4 weeks now and everytime I drive by the golf course there are people playing. If you call this shitty weather you seriously don’t know what “shitty weather” is!
Rents will be heading down. Gouge time is over for the property kings.
Landlords expect more rentals on market after new tax hits
http://www.timescolonist.com/business/landlords-expect-more-rentals-on-market-after-new-tax-hits-1.23245915
“I’ll say! I was at Thrifty’s a couple of weeks ago and overheard two guys talking, at least one of whom was a construction worker. He said they are pulling people off the street to do construction. They are hiring from temp services and the guys work a day or two to get enough money to buy “whatever”, then they disappear. How good can the quality be with workers like that?”
Exactly why this bubble will burst. When the Albertan workers and out of province doctors have to be the backbone of BC’s economy you just know this won’t end well. The workers will load up the trucks and head home, and the doctor will buy a new place in Arizona.
Not sure how the doctor played golf the last 5 months of rain or shitty weather so how he’s supposed to bring in this massive windfall the Alberta agent is claiming ? Sounds like bullshit to me.
Great post Leo!
“I would suspect that a full time resident has a greater economic impact than a part time vacationer though.”
That would be interesting to find out. I forgot to mention that he let’s other people use his condo when he is not there, that’s how I got to know about him as a friend of my wife’s from Winnipeg was staying there. He doesn’t rent it out.
“When you are trying to find the truth and make a decision, find the most believable people you know that disagree with you and try to understand their reasoning. This is often painful, because you must first overcome your natural aversion to listing to people that are telling you things you don’t agree with.”
AMEN BROTHER..!!!
I would suspect that a full time resident has a greater economic impact than a part time vacationer though.