Market update: Election leads to bad policy
For a decade, the CMHC has made moves to slowly tighten credit and try to edge back from the cliff of irrational exuberance they were on in 2008 when they were insuring 40 year mortgages with zero down. In general this retrenching has been broadly successful. Each tweak was minor enough to cut some risk, without being big enough to cause a shock to the market. Ever since president Evan Siddall took over at the CMHC, that strategy has been even more explicit, with Siddall often prominently rebuking the housing and mortgage industry’s attempts to loosen credit.
Some people thought he had turned around and was stimulating the housing market with the introduction of the First Time Homebuyer Incentive in this year’s budget. However in my analysis I concluded that the measure was likely designed specifically to add essentially no demand to high priced (and thus highly debt fueled) markets like Victoria, while mitigating the negative impact of the country wide mortgage stress test in lower priced markets. Again, it seemed that the policy was consistent with the overall de-risking direction of the CMHC.
Right now, the First Time Home Buyers Incentive could apply to a grand total of 4 houses in the area.
But it’s election season, and governments don’t get elected on sound policy stances, they get elected on throwing goodies around. Trudeau was in town a few days back, and how better to appeal to the crucial youth vote in a city with the lowest millenial homeownership rate than to throw out some free money? So the promise was made to up the maximum purchase price for the First Time Homebuyer Incentive in high cost cities (Victoria, Vancouver, Toronto) to nearly $800,000. Who knows, maybe this time the fuel will put the fire out. Makes you wonder why Vancouver got short-changed by not allowing purchases up to say $1.2M? After all that market is even more expensive and we want to give first-timers a chance, don’t we? Evan Siddall meanwhile, is clearly holding his nose at the modifications to the program, but it appears this decision is being made above his pay grade.
Number of houses falling under the new max purchase price: 167
It’s not to say that the other parties are doing much better. The NDP wants to bring back 30 year mortgages (why not 40?), and the Conservatives are wanting to review the same and tweak (read: weaken) the mortgage stress test. We’re only getting started here, so expect more housing policy to come and I will summarize it once it crystallizes.
Also weekly numbers courtesy of the VREB.
| September 2019 |
Sep
2018
|
||||
|---|---|---|---|---|---|
| Wk 1 | Wk 2 | Wk 3 | Wk 4 | ||
| Sales | 130 | 285 | 533 | ||
| New Listings | 311 | 619 | 1165 | ||
| Active Listings | 2827 | 2860 | 2646 | ||
| Sales to New Listings | 42% | 46% | 46% | ||
| Sales Projection | — | 635 | |||
| Months of Inventory | 5.0 | ||||
Market is continuing much as before. 8% higher sales month to date, same level of new listings, and 10% more inventory on the market. Sales ticking along somewhat faster than this time last year (+5%) and new listings coming onboard at an unchanged pace. Note that this year we have an extra business day in the month, so sales will be higher just due to that. September is when we have a little surge of new listings, and those last until the end of October before people give up for the year.
@adam If your primary heat is wood, I wouldn’t consider a heat pump. Get a whole house energy audit done then you can make a more informed decision.
$1.2K or $3K rebate pending heat pump efficiency.
https://betterhomesbc.ca/rebates/central-system-air-source-heat-pump-rebate/
New post, on the recent padmapper rent report: https://househuntvictoria.ca/2019/09/19/on-clickdata-and-why-i-dont-cover-it/
“Why are you switching over? Have you done an assessment to determine if there are more effective uses of that money (ie, upgraded insulation, windows, etc.)?”
We’re looking at a couple options. Our primary source is wood heat and we’re going to upgrade to a more efficient woodstove but we’d like secondary source that’s cheaper than baseboard. We haven’t looked at insulation/window upgrades but that may be a good thought in the bedrooms, which don’t get a lot of heat from the stove.
“Even after the 3k rebate”
I thought it was a 1k rebate? Or is 3k if converting from oil?
I just looked at https://en.wikipedia.org/wiki/Fuel_tax. The price of fuel in the EU is way higher, and therefore folks tend to drive more fuel efficient cars, use (the better) public transit, bike etc.
Just saying that cranking up the price of fuel would be a big incentive to move away from burning it.
The Yellow Vesters wouldn’t have been protesting gas prices in France if their gas taxes were anything close to ours in Victoria.
I see much higher taxes listed from this site, e.g. the taxes in France to be CAD $1.34/liter (add + $.86 for the before-tax cost of the gas a total price at the pump in France of cad $2.20 / liter.
https://www.euronews.com/2018/11/13/rising-fuel-prices-who-pays-the-most-in-europe
If Victoria taxes are (as you say) cad $0.40, that would put France taxes more than triple at cad $1.34
I chose those countries because they are Western European and use the euro and British pound which I was more familiar with converting to CAD (as opposed to kroner). Britan is a large exporter of crude oil due to North Sea drilling. Netherlands is a large exporter of natural gas and refined petroleum products due to all the refiners they have.
I did look up the exchange rate for Norwegian kroner and they even have a fuel tax of over $0.80 CAD and their sales tax rate is 25% (Norway is a huge oil exporter).
Then they can keep on squabbling and killing people over the unsecured fossil fuel from the ME and Venezuela.
That is not really how trade works. Foreigners will more likely say, if we buy your fossil fuel, you will need to buy manufacturing and agricultural goods from us.
You just named the countries that are net oil importers because they don’t have enough oil locally, hence they must keep the tax high on fossil fuel to have trade balanced between import and export goods.
Countries like Germany, France, Netherlands and Great Britain charge up to and over $1 CAD in fuel tax for gasoline (often lower for diesel). On top of that they charge around 20% VAT on the full fuel price, while BC only has 5% GST
Source: https://en.m.wikipedia.org/wiki/Fuel_tax
Perhaps of the switch to more fuel efficient cars and alternative energy resources kept the oil price lower, but could it be the main driver is the abundance of oil locally due to lack of market share from being land lock, and from our US neighbor fracking technology?
It would be a huge life style altering situation for Canadian if fossil flue companies stop operating in Canada, because Canada main industry is natural resource exploration. And, it would be a very cold day for all Canadian to switch over to alternative industry since we don’t spend any where near in R&D as our competitors.
IMHO, we should look into the future for our children sake and be less myopic. We should be thankful and embrace our abundance of secure fossil fuel as the Norway does, and wisely use it to develop our infrastructure and economy. We can sell it at higher market price because of secure stock and delivery just as we do with potash. And, we can also give our fossil fuel added value by attaching conditions to it. Such as, in order for foreigners to buy our fossil fuel they must buys our agriculture and manufacture goods, etc…
I just did a super quick search and the taxes in Victoria compared to some of the EU countries seems fairly close (relative to the cost of living). Victoria at ~40 c/L vs EU at 35-70 c/L.
Again – super fast search so could be way off there.
That may happen in the future, but as of today, we are sadly at all-time high and rising uses of fossil fuels.
https://www.forbes.com/sites/jamesconca/2019/07/20/so-you-think-were-reducing-fossil-fuel-think-again/#43365aae52fb
May 2019: “So You Think We’re Reducing Fossil Fuel Use? Think Again.
If you think we’ve been doing a reasonable job of curbing fossil fuel use, you are sadly mistaken. Global energy demand grew yet again in 2018, by 2.3%, its fastest pace in ten years. 70% of that was provided by fossil fuel, and only 30% by renewables and nuclear. Renewables and fully electric vehicles aside, all fossil fuels are increasing worldwide primarily because of economic growth in the developing world. Even coal is increasing worldwide, producing more power than hydro, nuclear and renewables combined.”
Part of the reason for lower oil prices is the switch to more fuel efficient cars and switching to renewables that is already going on. As we switch to alternative energy sources, there should be less and less demand for fossil fuels, so the price should stay low and drop even further. Once it drops below a price at which fossil fuel companies can break even, they will have to switch to a different business model or go bust (although this break even point will be different per company). Carbon taxes will help excelerate this process.
Sorry, Leo, for carrying on off-topic discussions, but Victoria RE is pretty boring these days. We’re at Day Two Million of no price crash and things just keep chugging along.
I did notice that the “junk yard,” as I call it, on Feltham is now FSBO. It was listed in the spring with a realtor for one of the lowest asking prices, at the time, in Gordon Head.
B.C. plates.
The carbon tax and local gas tax are too low, IMO.
Alberta plates?
Gasoline is $1.41 per litre in Victoria right now.
Yesterday afternoon, traveling by bike, I passed by a pickup truck idling on the side of the road; the driver was talking on his phone.
One hour later, on my return trip, I see that he is still in the same spot, still talking on the phone, still idling his truck. I can’t know whether he idled his truck for the entire hour, but my guess is he did.
All this to say, gasoline is evidently still not expensive enough.
The main driver is govt taxes, not the price of oil.
The high fuel costs in Europe don’t come as a result of Shell or Exxon being hassled by people selling their stock, or govt blocking their pipeline projects. Look at the price of oil, it’s LOW by historic standards. Europe’s fuel costs are high because of govt taxes, which the govt has exquisite control over.
Isn’t this alone the main driver? You don’t see jacked up pickup trucks rolling around europe where fuel costs are way higher. Pretty much everything is more fuel-efficient in places with high fuel costs.
Yes, those are well and good, but all those impact costs – making it harder and more expensive to extract the oil and gas, resulting in higher oil/gas prices. Oil prices have been low and range bound for years, so I don’t see an impact on $ prices.
But that’s not an impact on usage and the amount of carbon being pumped into the environment. For that, how about targeting countries that burn the highest amount of gas/km driven, with Canada #1 worst in the world.
One would hope to see your listed “impacts” having a significant effect on global consumption of fossil fuels per year on this graph. Unfortunately, I don’t, it seems to be rising each year. So we’ve just got to assume that, hey maybe they’re having an impact and we can’t see it because they’ve stopped it getting worse. Best I see Canada doing is peaking fossil fuels use, which is something, but not much sign of anything better than that, https://ourworldindata.org/fossil-fuels
If divestment has no impact, I wonder why Shell would call it a “threat to their business”?
There’s no need to be defensive, Marko. I hope you’ll recall that I’ve also complimented your writing in the past. I just call ’em as I see ’em.
Again, I advocate an all-of-the-above approach.
Divestment has an impact. Withdrawing subsidies the oil industry inexplicably continues to receive would have an impact. The federal government not purchasing tar sands pipelines, whose expansion plans would otherwise be dead, would have an impact.
In spite of a few minor drawbacks one has to admit that international money laundering is a very “clean and green” industry. Sorry, could not resist.
Why invest in R&D, we have the strongest money laundering industry helped by one of the highest ranking intelligence officials in the country! Way to go
https://twitter.com/BenRabidoux/status/1174317795699503105
Canada has worst fuel economy (highest CO2 car emissions per km) of any country
https://globalnews.ca/news/5259474/canada-fuel-economy-cars/
We need to stop wasting time and feeling good about do-nothing measures like changing contents of stock portfolios, and actually cleaning up our own backyard. Buy an electric car (or at least a more fuel efficient one), and/or walk/bike to work.
All this fuel chatter begs a few decade predictions… black gold near $300,
Vic median to $3M, and posted rates & inflation to at least triple by 2030 🙂
Teranet House price index for August, Victoria up 0.2%, and now at an all time high https://housepriceindex.ca/2019/09/august2019/
Big oils invest in renewable is away to buy carbon offset credits that is imposed on them by a select few governments, and to ease the noise created by environment activists.
There are still much profit to be made in fossil fuels hence the EU/US are tripping over themselves to get the Middle East sweet crude oil, and they are playing a hate game on Venezuela to curb it from selling sour crude to the Chinese and Russian. Even the little amount of oil in the South China Sea is being fought over at the moment. And, I’m sorry the music isn’t going to stop at anytime soon for fossil fuel, unless humanity suddenly figured how to maintain a fusion reactor with net energy gained, found an abundance source of dilithium crystals, or have a break through for an arc reactor.
Most old houses have poor or no insulation with leaky windows and doors, that would greatly benefit from beefing up on the insulation in the walls and attic, double panels windows upgrade, fresh caulking for windows and door sills, and new door jamb insulation strips.
The insulation and windows/doors maintenance are the most inexpensive way to prevent heat lost and save on energy costs, and often greater saving than converting over to energy efficient heat pump.
Was visiting a friend in Leiden, Netherlands last few days. Nice place, I could live there. Same story as every place I visit where I could live. Real estate is really expensive. I didn’t get a chance to look at prices in Amsterdam but must be nuts.
One other thing I’ve noticed that totoro and Marko sometimes do is make a statement but throw a question mark at the end of it:
When you can speak/read/write in two languages fluently without an accent in either let me know 🙂 ?
Not enough space for air circulation of outside unit.
Over sized or under sized heatpump.
Too much or too little refrigerant, too long of a run, too many bends, or too sharp of a bend radius, kinked or dinged tubing, and poor pipe runs.
Most common errors are kinked tubing that go unnoticed under insulation.
Too tight of radius, so tubing is flatten/restrictive bend.
Home owner can do the basic maintenance such as change/wash filters at least twice a year (preferably every 3-4 months, more if have pets that shed hair), and remove built up on the outside unit coils several times a year with gentle running water. Check belt/pulley tension and greased motor bearing if it have grease nipples.
Pressure and electrical checkup should be left to the professionals once a year (but you can take your chances by letting it go till something breaks).
Well we only have about 900 square feet of main floor living space and so we burn just half a tank a year – about $550-$600. Also, not sure if oil prices have gone up a whole lot over the last 10 years.
What kind of things would a bad installer do to shorten the lifespan of the system? Also how important is it to have them serviced? I must admit I have not had my heat pump serviced in 6 years we’ve owned the place.
Gates’ point was that there is no shortage of capital that has no qualms about fossil fuel investments, so pulling out even big funds doesn’t mean those industries are starved for cash. The dip in their share prices will simply shift that less scrupulous capital towards them.
Really? Back when we had oil in an old rental I think I burned through $1000 in just over three months and that was nearly a decade ago (60s place, 1700sqft). Seems like payback should be a lot faster with $10k spent than 20 years.
Don’t quite follow the logic that says divesting from fossil fuel investments does nothing to slow those companies down and yet investing in green tech directly promotes the growth of those green companies.
I’m on oil currently and was quoted 13k to switch to a fully ducted heat pump system (ie no wall heads). Even after the 3k rebate the payback is something like 20 years. As much as I want to switch over, my house being on the small side means we just aren’t burning enough oil to make the numbers work.
This is not uncommon at all. Fossil fuel companies issue new shares all the time, especially smaller exploration companies. The lower value in shares for fossil fuel companies has directly contributed to them not being able to raise as much money as they otherwise would have.
A company like Shell has acknowledged divestment is a threat to their business in their annual report and big oil companies are now also investing in renewables to hedge their bets.
It makes sense from a (low risk) investment standpoint to avoid fossil fuel companies, because most of their value is tied up in their proven reserves. But if it no longer becomes viable to pull that fuel out of the ground either due to regulation or market forces, the value will evaporate. The only reason they are still attractive is because they usually offer great dividends from all the profits they make. But you don’t want to be stuck holding those shares when the music stops.
Well, here’s at least one way divestment has an impact:
https://en.wikipedia.org/wiki/Fossil_fuel_divestment
I agree with James (and Bill Gates) on this one.
When you buy stocks, the money you pay doesn’t go to the company, it goes to the seller of the stock. You’re not sending any money to the company. Same thing with selling, you might sell your Exxon shares to some guy in a Toronto who buys them, which doesn’t hurt the company at all. ( An uncommon exception would be if the company was issuing new stock and you bought some of that). I assume that is what Bill Gates means when he says that people mean well when they divest, but he doesn’t understand the mechanism that it’s supposed to lead to less carbon emissions. You could argue tiny indirect effects of selling fossil fuel stocks, but Bill Gates estimated that nicely as “about 0 tons of carbon”.
The point being, why waste time and money on inefficient efforts that don’t actually directly help with the global warming problem? That prevents legitimate efforts such as directly investing in new shares issued by a green company. If that’s what the University is doing, they should rewrite their PR to say that, and list how much if the $billions divested has gone directly to buying new shares of green companies, not buying shares from other investors selling them, resulting in no net benefit.
Do you know what actually has impact? You biking to work.
Offtopic so I don’t want to go too far down this path, but Bill gates is right. Divesting itself does nothing. However divesting means that the big funds now have a pile of money to invest elsewhere and that elsewhere is necessarily companies that don’t contribute to global warming (as much), and some of those companies are those that are actively working to mitigate global warming. Some of those funds will also specifically invest in green tech with their newly divested funds.
I humbly disagree with Bill Gates. It has impact.
Right, payback at 25 years is beyond life of system so won’t make sense unless you plan to sell the house earlier and then you will get some of it back in resale. Of course as Grant pointed out you get AC and we definitely enjoy our AC the week or two when it gets hot (and climate change will give us more of those weeks).
I think it makes more sense if you are upgrading from oil or natural gas. First of all you get a much bigger rebate, and secondly you remove the hassle and emissions of fossil fuels. Upgrading from baseboards is less clear.
Why are you switching over? Have you done an assessment to determine if there are more effective uses of that money (ie, upgraded insulation, windows, etc.)?
That sounds about right for a ductless split system with 5 heads. However, IMHO you will not get any meaning pay back as a good unit with good installer lifespan is around 20-25 years. Less with a poor installer.
Government lays out fine print of new CMHC program that could contribute 10% to price of first home:
https://www.cbc.ca/news/business/cmhc-first-time-buyer-program-1.5178055
CMHC would get to participate “in the upside and downside of the change in the property value” — which means they would be entitled to any corresponding increase in the value of a home when the buyer eventually sells. On the flip side, the government would also be on the hook for any share of the loss if the property depreciates.
Could it be that the university bean counters think that they can make more money by going after free money/subsidies, therefore they are all in with renewable investment/money grab?
Despite renewables mandate more than 80% of California energy needs met using fossil fuels:
https://wattsupwiththat.com/2019/05/26/despite-renewables-mandate-more-than-80-of-california-energy-needs-met-using-fossil-fuels/
US Still Subsidizing Renewable Energy to the Tune of Nearly $7 Billion:
https://www.insidesources.com/us-still-subsidizing-renewable-energy-to-the-tune-of-nearly-7-billion/
AM I CLAIMING ANYTHING FROM ONTARIO? Low income benefits etc?
Your entirely ignoring what the flaw is and saying “NO FLAW HAHA NO DOUBLE TAX BLAHBLAH”
I remember why it’s a waste of time replying to you.
In other news, Bill Gates says Fossil Fuel Divestment has Zero Impact.
https://www.ft.com/content/21009e1c-d8c9-11e9-8f9b-77216ebe1f17#targetText=Fossil%20fuel%20divestment%20has%20'zero'%20climate%20impact%2C%20says%20Bill%20Gates&targetText=Climate%20activists%20are%20wasting%20their,the%20world's%20most%20prominent%20philanthropists.
BREAKING:
Federal Reserve announces 2nd consecutive rate cut
https://www.axios.com/federal-reserve-rate-cut-77c504c1-1bed-4336-9c37-490a3452a54f.html
It’s painful, and I’m still licking my wounds from the $15,000 I spent, but really it depends on the size of the house and whether you want A/C as well. Payback should also factor in resale appeal of having a heat pump.
I don’t know if they’ll go out there, but Exchange Energy out of Duncan is who I finally settled on. They weren’t the cheapest out of the quotes, but they had the best units (Daikan), best warranty and were the most knowledgeable and helpful. Give them a call and ask for Will.
$16,000 seems insanity. Does not make sense at that point any way you look at it. You’d be probably better off putting solar up to offset the baseboards!
I would definitely investigate just putting a small unit in to the main living areas and then leaving baseboards in the bedrooms (they’ll mostly be off anyway).
Hi all, I was hoping to get some insights and recommendations about heat pumps. I received a quote for $16000, which included the central unit plus 5 indoor units – four for the main house and one for the inlaw suite. It seems high and about a 25-35 year payback. We’re thinking of limiting the indoor units to the main living areas, only having 2 or 3, and keeping the baseboards in the bedrooms. Don’t have a quote for that yet. Does anyone have any insights about their cost savings with heat pumps? Anyone using a heat pump for just the main living areas? Thoughts? Also, any recommendations for an installer who would come to Salt Spring?
Thanks for any insight and advice, and for all the great discussion!
Off-topic good news:
University of California to Dump Fossil Fuel Investments
https://www.nytimes.com/aponline/2019/09/17/us/ap-us-university-of-california-fossil-fuels.html?searchResultPosition=1
Meanwhile, UVic, ever eager to tout its environmental bona fides, still hasn’t divested its endowment of fossil fuels. We wait patiently.
and the govt doesnt pay for upgrades or renos that later boost the value to your home but they get the cut from all the added value
and i assume the seller have to absorb all the fees and cost required for selling the house and govt just get the full % return
For those here who haven’t experienced an earthquake, let me tell you it’s an incredibly disturbing experience and that’s even if the ground just shakes and there is not much damage. I’ve been through 2 smaller (4.5/5.0) quakes when I lived in California, although I was very close to the epicenter in both cases. The first woke me up in the middle of the night and if you didn’t know better, you would have sworn there was a freight train passing right outside your house walls. The incredibly loud banging noise, the frantic up/down shaking – ugh. The other one was a few years later in a different house – on that one it was middle of the day and all of a sudden it seemed like the green giant had lifted up the house and then harshly dropped it back down. In both cases the primal fear that hits you is very unnerving. Your heart rate spikes as though you were instantly running a marathon, you frantically check on everyone and then start checking the house for damage or gas leaks. Then for several hours afterwards you are just waiting for the next shock.
California is more prone to strike-slip and thrust earthquakes whereas out here we have the much more destructive (and thankfully rarer) subduction quakes. Our family has some preparations in place (water, food, flashlights and batteries) and I’ve got dwelling earthquake insurance coverage (no contents, it was just not worth it). Our house is also already bolted to the foundation so it’s about the best I can do. Statistically a big subduction quake isn’t likely to hit in the remainder of my lifetime – I sure hope that’s how things play out because not only would the damage be bad, but getting relief and supplies to us out here on the island would increase the difficulties of the logistics of rebuilding and repairing by an order of magnitude (pardon the pun).
Barrister:
Because the govn’t expects their % of ownership back on the profit of a home sale, I believe they’ll share in the loss as well. They are going to be on title as a % owner not as a $ amount.
So if they lend 20k for a 5% stake in a 400k house that later sells for 500k… The seller owes the feds 25k. If it sells for 300k, the seller owes the feds 15k. If there’s no equity? Feds could get nothing, as they’re behind the mortgage in line.
One of many reasons why I think the program is awful. I’m a first time buyer and could access this program to help me buy a more expensive home… But I’m also a taxpayer and I don’t like us as a whole being on the hook for housing corrections, especially on 800k homes in Toronto, Vancouver and Victoria.
Thanks totoro, will read
Info about history of social housing:
Research shows that adding a subsidized housing unit to the stock decreases displacement twice as fast as a market housing unit.
https://www.sauder.ubc.ca/sites/default/files/2019-02/Sauder%20S3i%20Report%20-%20Investing%20in%20Affordable%20Housing.pdf
https://publicsectordigest.com/article/homelessness-precarious-housing-in-canada-where-we-have-been-where-we-are-going
https://www.theglobeandmail.com/real-estate/vancouver/article-theyve-taken-baby-steps-housing-professor-slams-liberals-approach/
On the new housing first time equity buyers program how are losses handled on the sale of the house? Obviously the mortgage holder has first priority but does the government take second priority over the buyer or are losses divided in proportion to the ownership stake. Put another way if the market drops by fifteen percent does the first time buyer take all the hit on their equity?
I really have a poor handle on this issue actually. How do we know how much to invest in affordable housing and whether the current investment is lacking? How does our current investment compare to previous periods? What measure would we track here? Is the problem getting better or worse?
Caveat: Someone just the other day was mentioning the Victoria has a lot of faults. A quake along one of them would be rather unpleasant. If I was more awake there would be an opportunity for a witty joke here.
Barrister. Switzerland has had damaging quakes too, although more the Alps rather than the area you are talking about. The last earthquake in Switzerland with fatalities was 1946.
…in the 175 years since it’s founding.
The last megaquake in BC was January 26th, 1700. The next one will likely occur sometime between today and 500 years from now. Historical recurrence of these big ones has been 250 to 850 years.
However experts tell us that the most damaging earth quake for Victoria won’t be this deep Magnitude 9 megaquake but rather a shallow magnitude 6.5 to 7.5 quake on one of the faults that run right through Victoria.
Victoria has never had a big quake.
knocks on wood
The reverse can be said
Maybe we should bring in tourist tax
https://amp.insider.com/countries-that-require-a-tourist-tax-2019-2
@Patrick
You can pull million examples to support your case and we can pull a million more .. but lots of people are voicing their concerns and politicians want to keep their jobs .. a news article a while back even states that some property owners want the price to come back down so their next of kins have a chance to own something ..
Yes. The feds need to contribute more to affordable housing as well through the national housing strategy.
https://www.fin.gc.ca/n19/19-021-eng.asp
I was responding to the discussion re. taxation of foreign property ownership as a method of creating more affordable housing.
If the satellite family is placed in subsidized housing or given the SAFER grant due to their low reported income then I might have similar concerns. Not as much with market rental housing because I don’t see market housing as a solution to affordability, nor do I see an significant unfairness to taxpayers in this situation.
I think putting affordable rentals and affordable ownership in the same discussion doesn’t work because they raise some different issues.
Just curious, since you are very concerned about losses to the BC Treasury from freeloading satellite China families using services but paying no taxes here, does your concern only apply to those who own homes, or are you also concerned with the ones that rent a home (who aren’t liable by the govt rules for any spec taxes)?
Has Victoria actually had a big quake in the last hundred years?
I did not experience any major quakes but my wife lived through a couple of big ones. Bad things happen to plate glass in a big quake. Christ Church in New Zealand is an interesting example of what happens when the soil liquefies. I am hoping that the “Big One” waits until after we move.
But the capital gains tax goes only to the feds in the case of non-residents.
Read Article 21.1 to understand what elimination of double taxation means. It doesn’t mean that someone paying income tax in China doesn’t have to pay income tax in Canada. It means that the income tax paid in China can be deducted from the income tax (which is higher) payable in Canada.
This is also how it works for Canada/USA and any other such agreement I know of. Note that most countries in Europe have higher income taxes than Canada so someone paying income tax there would have no net tax payable in Canada.
I wouldn’t pin this on younger voters.
I would think the bullseye is with anyone looking to buy a home. Many of them are in favour of any kind of tax or obstacle that hurts homeowners, solely for the self-serving goal of possibly lowering their buy-in price point.
Proof of that is :
1. You’ve never heard of anyone calling for a “spec” tax to be applied to someone renting a second home year-round, yet they are taking up one extra dwelling home just the same as an owner.
2. You’ve never heard of anyone calling for satellite family taxes to be applied to some Satellite Family renting a home, yet they are using up BC health/social services and not paying income taxes, just the same as an owner.
Except residents of Ontario have the same rights if they move here – mobility rights protected under the Charter – except for the new spec tax.
It is not a wash with satellite families as I described below as there is no reciprocal agreement with China and Canada with the same cost/benefits.
Agreed, but it probably won’t. I’m just saying it is not really great policy imo. A federal capital gains tax applied to primary residences and funneled directly into subsidized housing makes more sense if you are trying to provide affordable housing.
If you visit Ontario for 5 months a year, but your main residence is BC, you pay income taxes to BC and Federally, but NOTHING to Ontario.
Then you are the “flaw” that you (repeatedly) describe, where you receive Ontario benefits, but pay no income taxes in Ontario.
Just get used to it, there are lots of examples of people living and owning in multiple jurisdictions, and countries and Provinces have agreements/rules on who pays, and Canada and BC are winners and losers depending on if the people are paying in BC/Canada or the other country. It’s all a wash, and it prevents double taxation, so isn’t any kind of flaw.
Truncate it to that and I’ll agree. The spec tax represents an effort by the government to bring prices down, and if you have put yourself in a position where that would be detrimental to you, it’s certainly sensible to oppose it.
Make no mistake, the RE industry isn’t opposing it because they think it’s based on emotion or it’s unfair to foreigners. They don’t care about that. They’re opposing it because they think it may bring down prices.
You can own a nice house in a good suburb of Phoenix for $300K. See why they might not be too concerned about foreigners owning condos?
https://www.zillow.com/homedetails/6345-W-Potter-Dr-Glendale-AZ-85308/7888561_zpid/
There is definitely a sensible argument against the spec tax that is based on economics vs. emotion. Anyhoo, now that it is in place not sure what the point of a debate is. These things are rarely reversed except via litigation.
There is just no sensible argument against the spec tax. Don’t like it? Don’t pay it – by selling. You’ll probably make a pretty penny on the sale and save money going forward by taking advantage of short-term rentals, timeshares and hotels. You know, properties designed for that usage.
Per code:
Fire blocks are not required where any of the following conditions can be achieved :
• The wall space is filled with insulation
• The wall uses noncombustible construction materials and insulation within the wall space
• The exposed materials within the space including insulation have a flame-spread rating of not more than 25 (on any exposed
surface, or on any surface that would be exposed by cutting through the material in any direction) and fire blocks are installed
so that the vertical distance between them is not more than 10 m
• The horizontal dimension of any insulated and concealed air space within the wall is not more than 25 mm
Completely agree. I’m not sold on the mechanics either, but it does seem like they have hit the bullseye in terms of public reception at least amongst younger voters.
Yep. Except that it doesn’t account for the capital gains tax in amount of say, $100k they paid vs. the 0 dollars gained from a primary resident. While I’m sure that this has an emotional appeal re. us vs. the foreigner, not sure it actually makes good tax policy based on the low percentage of foreign owners vs. administrative costs of the spec tax and lack of our own government’s investment in enough affordable housing – which is really where the public eye should be imo.
Or get rid of income tax, and make it entirely residence based.
Clearly this needs to spelled out for you.
They pay no taxes in Canada, and claim Canadian benefits that are designed for people that are low income, when they are not.
The flaw is that they are receiving benefits that they do not deserve.
Another story about American owners leaving due to spec tax. If you read the discussion on reddit (which will skew younger) you see it is 95% of the “good riddance” sort. Is the spec tax good policy? That’s debatable, but it is definitely good politics and the populace is tired of having foreign money pushing up real estate prices here. https://www.reddit.com/r/VictoriaBC/comments/d5ixbm/timescolonist_comment_goodbye_victoria/
It’s just nearly impossible to sympathize with owners that have enjoyed Victoria for 14 years and come away with an extra couple hundred k in profit from appreciation in the meantime.
In this case they “sold it to a Victoria gentleman who is downsizing”. Which is the perfect outcome for the spec tax to be honest. A condo that is empty 10 months out of the year is now used full time and the person who has bought it has added a single family house to inventory which is the most in demand.
The american family continues to be welcome to visit Victoria and rent a place if they like, which will cost them much less than owning except they won’t be able to take advantage of capital gains.
I’m suggesting that it is not good tax policy to allow part of an economic family that retains citizenship in their birth country gain residency here (or us in the US) and garner benefits and tax preferences as unemployed or low income residents, while the high earner pays tax in another jurisdiction and does not pay taxes in the same jurisdiction in which their family lives.
I’m not suggesting double-taxation for income, I’m suggesting that there ought to be different capital gains taxes and residency benefits applied in this situation no matter whether it is to me in the US or a foreign family in Canada as it is a tax drain on residents unless there is a clear tax treaty that accepts satellite families in this manner and on a reciprocal basis. There is no such reciprocal treatment offered by China (or the US for that matter) as is offered by Canada’s permanent resident program for investors.
See: https://www.immigrationworld.com/china/china-immigration-eligibility-job-opportunities-and-how-to-apply/
https://www.uscis.gov/greencard/eligibility-categories
This could take the form of an additional tax as is being proposed by the federal government and has been instituted on satellite families by the province already.
Sidekick,
My understanding is that the absence of blocking between stories in balloon framing (unless remediated) allows fire to travel unimpeded in the continuous wall space. Fire can travel rapidly from foundation to attic, popping out of the wall anywhere along the way. I don’t think insulation is considered adequate fire-block.
Fort McMurray is equivalent to Victoria. Got it.
You could be right, but Victoria is still the California of an otherwise very cold and desolate country called Canada, so my bet would be that many locals would rebuild and that many newcomers would also come (and build), taking advantage of the situation.
In short, I speculate that there would be speculators!
But they do pay taxes, where they earn the income (in China), and Canada has signed an agreement preventing double taxation on that type of income https://www.fin.gc.ca/treaties-conventions/china_-eng.asp
The “flaw” would be forcing someone to be taxed twice, in China and Canada on the same income.
The part where they pay no taxes and get a bunch of benefits seems flawed.
I like the end part of that article .. need to attract more business .. can’t rely on construction related work .. don’t have capital like China to throw money at construction
If you and your family moved to USA, and then you did the same thing as a satellite family (you moved and worked back in Canada where you could earn more while your family stayed in USA). Are you suggesting that you (not a US citizen) should have to pay income taxes in Canada AND pay income taxes again in USA? Double taxation is prevented with worldwide agreements, so I’m not sure what part of this is “flawed” to you. Seems fair to me that you pay taxes once in the country where you earn the income.
Another point, that scheme you describe above with a family from China doesn’t depend on owning a home, there could equally be “renter” satellite families, and it seems that doesn’t bother anyone. Why doesn’t the Govt tax “renter” satellite families? I think the answer is as I’ve described, you can’t (and shouldn’t) double tax people if you’ve signed double taxation agreements. The govt can’t tax legally their foreign income, so they arbitrarily tax their assets (house).
BCers should add up all the money they’re losing from satellite families doing this in BC, and then subtract all of the benefits BCers get when they do the same thing when living in other countries. And it likely nets out at zero.
quick . buy fort McMurry property .. a fire sale
I doubt property prices will rebound quick in victoria after big one – we are retricted on a island and transport infrastructure will be badly crippled for any major rebuilding
Building Boom: Royal Bay a game-changer in West Shore expansion
https://www.cheknews.ca/building-boom-royal-bay-a-game-changer-in-west-shore-expansion-604861/
I’m not hedging, I use it when I think something may be true but have not fact-checked. If there is no question mark, I’ve usually checked. We all have our quirks.
I personally think that we should welcome Canadian and US owners who don’t get the home-owners grant and purchase all sorts of things while they are here, don’t increase our crime rate, don’t draw on government-funded services, and pay capital gains taxes when they leave. I like the freedom we as Canadians have to do this in the US and other provinces (except PEI), and it seems like it should be reciprocal. The relatively small sector of the market doing this in Victoria seems supportable on a cost benefit basis as cutting this out doesn’t seem to me to bring a big housing affordability boon with it.
What I am strongly against are satellite families. The typical example being a family from China where the wife and kids are brought over, an expensive home purchased and residency obtained for them and then the husband and wife “separate” or the husband remains non-resident. The husband works and pays taxes abroad still, and the wife and kids qualify for low income child tax credits, free education and health care, and the capital gains tax exemption. Kids later go back bilingual to work in their home country. Completely flawed system and it is not illegal.
https://www.vancouverisawesome.com/2019/02/22/widespread-tax-evasion-real-estate-audits-bc/
Our plan in the event of a huge earthquake is also, at this point, to leave if we can after helping out where we are useful. Although, I remember the blizzard of 96, sure brought community and neighbors together.
This may be true of heritage houses which have no insulation since the fire can easily travel between floors via the stud cavity. New construction, or walls that have been retroactively insulated, would not have this issue.
Generally speaking, balloon framing can be superior to platform framing for shear resistance because there is no ‘fulcrum’/pivot point at the floor joins. Most platform framing you see these days has plywood spanning the floors to try and strengthen this area. Depending on the position of the insulation (within the stud cavity vs. the exterior), balloon framing may be better because the rim joist is both thermally weak and hard to air barrier.
Whether a house is balloon framed or platform framed should not be a major factor in any purchase decision.
Yes, I think it will be very bad.
I wonder, though. If RE prices crashed in the aftermath of the Big One, maybe those with cash could pick up some amazing deals.
Think about someone whose house with an ocean view in Ten Mile Point is now a pile of rubble and who wishes to sell and move to a non-earthquake zone elsewhere in Canada. Empty lots (with collapsed or condemned houses on them) might sell for a fraction of their pre-earthquake price.
I’m also drawing on the semirecent history of earthquakes in California: house prices, if they declined after a damaging quake, rebounded fairly quickly to return to nationwide highs.
Yeah, when someone takes out a 35-year mortgage, paying it off in 35 years should be a worst-case scenario, not the objective.
But most people don’t think this way.
I’m not sure.
I hope so, but, judging by the artist’s rendering of the completed sewage treatment plant, it appears the plant wouldn’t withstand even a small sea level rise, which is a bit worrisome. Hopefully I’m wrong about that.
Did a quick search in Port Coquitlam, I see house prices coming out at sub 700k.. condo prices at sub 500k.. not sure why to investor want to invest here for equivalent pricing and value
If I owned a vacation condo and the local jurisdiction felt I should pay more taxes, I would either pay the taxes or sell the condo. I wouldn’t go complaining about it because I’d feel it is their right to prioritize local residents over vacationers.
In some ways we have the luxury to be a bit hard nosed about this because as the housing bulls say, everyone wants to live here. If we were a town in the middle of nowhere we would have to bend over backwards for everyone that might bring a couple toonies to us, but we aren’t. Will they find the right balance on this policy? Who knows, but hard to argue we aren’t negotiating from a position of strength.
Barrister, did you experience any significant quakes while you were in LA?
Sold Out:
Maybe because we moved from LA, I actually looked carefully at the seismic maps before buying in Victoria. I also have stockpiled two months of food and water in more than one location. In a major quake parts of the city may be in real trouble. I doubt if many who buy factor this into in their buying decisions.
Cadboro: I dont like personalized examples but since you brought it up. Your argument, and I hope I am putting it fairly, is that you pay the same amount in taxes (give or take) as that American couple but you are of more value to the community because you work and reside here. There is a certain amount of truth in that.
Lets work on the assumption that both you and the Americans do pay the same amount in taxes overall. But in fairness we then have to look at the other side of the ledger as well, The two big items, and there are others, is that the community has to pay for your health care and, if you have children, there are all the education costs as well.
Sometimes it is easier to visual these matters on a national level. For the sake of argument lets say that a bunch of Americans leave Victoria and sell their condos and repatriate their money to the US. There is going to be a one time hit on foreign currency as the capital moves south and a much smaller annual hit on foreign currency . To maintain the wealth of the country we will have to export more stuff to pay for everything we import. Obviously the calculation is more complicated because we have to subtract the cost of services that we provide to those Americans while they are here but in essence they are just long term tourists and are a net positive for the economy.
Will we get more from the remaining Americans that dont leave than what we lose from the ones that do leave may be the real question. It may be a matter of not butchering the cow that gives the milk. My concern is that these policies are being made with no calculation as to any cost benefit calculation.There is a certain Donald Trump effect here. It is easy to see the empty extra condo but it is less apparent that the the national wallet might also be a little more empty as well.
Canada is a land of great wealth and prosperity but assuming that we have some God granted right to prosperity is foolish at best and dangerous at worst. But I am sure that we can depend on the wisdom of our politicians to make the right choices.
Sidekick
I may be off-side on my opinion of the seismic resistance of balloon framing, as I can find no citation to support it. It appears that both platform and balloon framing are vulnerable to the same hazards of shear and foundation hopping, though balloon framing is more vulnerable to the fires that typically follow big quakes.
Those Florida laws don’t violate NAFTA. Under NAFTA, the US state (or Canadian province) is allowed to treat out of staters (e.g. NYers) differently than in-staters (Floridians), as long as they treat Canadians like out-of-staters too, and not worse as a separate class of foreigners.
So if Florida taxes (for example) NY residents higher on their Florida condos, they can also charge Canadians higher, but no higher than they charge NYers. Similarity, BC with the spec tax, charges ROC (e.g. Albertans) 0.5%/year, so that should be the most (under NAFTA) that they could charge Americans for spec tax, yet BC is charging them 2.0% (hence the court challenge class action as a violation of NAFTA).
btw, IANAL, I’m just telling you what Canadian lawyers who are experts on NAFTA report when interviewed in the media on the topic. And they quote the relevant sections on NAFTA which seem quite clear on the topic.
“If you owned a $300k vacation condo in Phoenix and they suddenly want you to pay 4% per year ($12k per year) like Vancouverites will if Trudeau’s 1% affects foreigners (on top of province 2% and city 1%)… yes I’d feel for you then.”
What about Florida where most Canadians buy property. Under the Save our Homes amendment a Florida residents property tax assessment cannot increase by more than 3% yearly. During real estate bubbles vacation home owners can see their tax bills spike while locals will see little change. Florida also has the property tax homestead exemption for locals which reduces the value of a home for assessment of property taxes by $50,000, so a home that was actually worth $100,000 would be taxed as though it was worth only $50,000. The state of Florida are trying to protect local residents who live and work there in part from the effects of property speculation just like the province of BC with the speculation tax.
“If you live in the state of Florida, you pay taxes on your home according to a dual-class tax system. There’s one type of tax system for those who live in Florida as their primary residence and another for those who live there part-time or own vacation property.
The dual-tax system became law after a constitutional amendment called “Save Our Homes” passed in 1992 and took effect in 1995.
The way this tax system works is that if you own a home in Florida and claim a homestead exemption, which means you declare the home as your primary residence, your annual property tax assessment cannot increase by more than 3 percent. If your neighbor next door is a snowbird (lives there in winter to avoid cold weather), his property appraisal can go up at the same rate as the housing market.
During the boom years, that created differences of $100,000 or more in market value, because long-term residents with homestead exemptions saw only 3 percent raises each year, while their neighbors could see increases of 10 percent more as the housing bubble inflated. Tax bills based on those property appraisals varied greatly, with part-time Florida residents and vacation homeowners getting tax bills that increased by $500 to $1,000 each year.”
https://www.aol.com/2010/06/15/florida-real-estate-taxes-retain-dual-class-system/
It is? Reference please.
Isn’t Saanich replacing much of the sewage system? I assume that the new system and treatment system is built to modern seismic standards
Also best case scenario is likely months without running water. Best to leave town because if the big one hits it will be years and years before the city is back to normal.
Haha yeah I catch myself doing the same thing and trying to avoid it. Definitely incorrect but I am drawn to the “statement with an escape hatch”
Same. Extended amorts are great if they’re not taken advantage of. Unfortunately I think as a whole they lead to net negatives and over leveraging
5% after 5 years. A cash grab in disguise.
@Patrick
unfortunately .. this is a democracy and there are more people voicing there concerns then the fortunate vacation retirees here .. and if you are concerned about the 99% .. then do some thing about it .. dont give advice that you cant stand by … me .. i dont care about people in the rest of the world because i dont have the power to extend that far
That’s a great idea. Finally a tax idea that actually targets speculators. And taxes them at the right time, when they sell. Not when they’re doing nothing but enjoying their property.
Danger here is that we have 3 levels of govt (fed, prov, muni) all believing that they should solve the housing problem, and think up new taxes with no consideration of the other govt levels have done already. And so we risk double and triple taxing of the same thing.
Jamal,
Do you earn more than $43k CAD per year? If so, and you referencing yourself with your “have-nots” comment, then shame on you for passing yourself off as a have-not. Because that $43k CAD puts you in the top 1% of worldwide income. https://www.investopedia.com/articles/personal-finance/050615/are-you-top-one-percent-world.asp
Instead you should acknowledge your privilege, and decide how best to share that income with the 99% genuine have-nots worldwide that don’t have the income that you do. Don’t waste time being jealous and resentful of what place you are within the 1%. Take ks112’s good advice and “go out and make more money instead of hoping for a crash.”
Conservatives tweeted that the Liberals have a policy paper that talks about 50% tax on principal residences in a CTV article. The article reads, in part:
“Attached to the tweet is a Liberal-branded policy proposal handout dated November 2018.
A highlighted section titled “Campaign Platform 2019” reads, “Another idea that has emerged from housing town halls is a sliding scale on the Capital Gains Tax on the sale of principal residences. A 50 per cent tax after one year of ownership, 25 per cent after two years, 15 per cent after three years, 10 per cent after four years, 5 per cent after five.”
The document continues, “the idea would be to hit speculators who quickly flip houses in hot markets.”
May or may not be a policy but the Conservative party is leveraging it anyway.
then the Have-nots dont feel sorry for them 😛
The American couple pays income tax somewhere, likely in America, just like when you go to US for a vacation, you don’t get charged income taxes in California for income earned in Canada , just sales taxes on what you buy. Expecting people to pay income taxes in BC when they haven’t earned income here, are paying it elsewhere, and aren’t required to by law is absurd. There are double taxation treaties covering that. So, no I don’t feel sorry for you because you aren’t the victim here. If you owned a $300k vacation condo in Phoenix and they suddenly want you to pay 4% per year ($12k per year) like Vancouverites will if Trudeau’s 1% affects foreigners (on top of province 2% and city 1%)… yes I’d feel for you then.
Patrick, from the last thread… Fantasy American couple with strong ties here, pinned with a 40k spec tax on a 1m condo they live in p/t
My family pays roughly the same amount of tax via income tax, GST, service taxes, ICBC, and we rent and my landlord pays property taxes with that money.
The big differences between your couple and my fam.. 1 we don’t own a home and 2 we work, live and play here year round.
Just wondering if you feel just as bad for us? I would argue even at the same amount of taxes paid overall… We contribute more to this community than the reverse snowbirds do.
Being a safety nerd, I made sure to check the tsunami inundation map before we bought our place. I’m glad we resisted the urge to buy a heritage house; the old style of balloon framing is much more vulnerable in a seismic event than newer, platform style of framing. Ditto on the emergency kit, and I keep the gas tank over 1/2 full for the same reason.
First excerpt doesn’t exactly leave me sad…
We have a self-made earthquake kit with enough food and water for two weeks. I also want to get my house bolted to its foundation someday (~$3,500).
I think the article is absolutely right that it’s going to be a real shit show in Victoria after an earthquake. Some preparation is a good thing.
The good news is, buyers don’t care!
Art will suffer:
Lovely:
Ah, yes:
In this particular case both. I’ve always worked with trades that own their own business (usually just them). How much an employee of a trade would make I have no idea.
Um, this might be the most disturbing article I’ve ever read on the topic of the “Big One” happening in Victoria:
The Most Doomed City in Canada
http://capnews.ca/canada-earthquake-victoria-big-one/
A few excerpts:
Sidekick
Are those numbers you cite = “invoiced @” or = paid @?
Introvert has a point, at least I think so?
400 now vs 937 after.
Well the old program didn’t allow someone to buy more house than they could without it in fact usually they could buy more house without the program. So it likely would have limited impact. It just saved them some money on interest.
The new program doesn’t have that penalty and on the high end allows people to buy more than without the program.
Superintendent/Carpenter 34 hrs. @ $50 /hr
Carpenter One $45 /hr
Carpenter Two $45 /hr
Carpenter’s Apprentice 1 $40 /hr
Labourer $28 /hr
Plumbers/Electricians under $60/hr would be rare.
There is a reason new builds are >=300/sq ft these days.
You are saying 4 houses (SFH) under the current homebuyers plan and 167 under the new proposed 800k limit. If you were to include condos and town houses what would those numbers be? A large chunk of first time homebuyers are simply interested in getting on the property ladder and not getting a single family home. It seems to me that this program, especially if brought up to 800k, has the potential to have a much larger impact then you are suggesting.
For sure, everyone understands what you mean, so of course there’s no reason to change.
However, to my mind, your intention is more to make a statement. But you wish to hedge it a bit, so you throw a question mark in at the end. I just find it awkward, and the pedant in me would rather read:
I don’t think we have a shortage of 700k condos, do we?
or
Do we have a shortage of 700k condos? I don’t think so.
It’s like if you’re 90% sure that your favourite colour is blue and you write:
My favourite colour is blue?
Adding the question mark turns a statement into a question. Might technically need a tag for formal writing, but makes sense to me and I don’t have to write out the negative or positive tag.
No it’s not. The 6% figure is for one metric (hotel nights) and one month (June 2019). Tourism is down slightly from last year but still close to all time highs. We’ll know in early 2020 what the actual year over year comparison is.
Tourism is very cyclical. Even a small weakening in the Canadian or US economies will show up in tourism numbers.
I have a 35-year mortgage from back when they were still giving those out.
It’s been great for us, but we’re paying off the mortgage like it’s a 20-year (through extra payments) and I’m guessing most other people with a 35-year don’t do that. So I can certainly see why offering a 35- or 40-year mortgage is questionable policy.
For us, the long amortization is an insurance policy against personal financial difficulty. If we ever get into money trouble, we could stop our extra payments and just pay our regular payments (which are lower than most people’s because most people have a 25-year amortization).
I hear ya, Local Fool.
Another thing I’ve heard more a more people saying, on TV and in real life: “fustrated” instead of “frustrated.” That first “r” just disappeared!
One other thing I’ve noticed that totoro and Marko sometimes do is make a statement but throw a question mark at the end of it:
BTW, my writing isn’t perfect either, so no need to flame me, people.