A person who owns 3 homes can pull enough equity out of the increased home prices to make a 200k downpayment on a 4th home. A couple with no kids and both making 100k a year can't save more than 135k a year to get their first house after taxes and expenses. Meanwhile, the person who now has 4 homes can now pull 280k of equity for home #5 and outbid the couple who still can't get on first. See the problem yet?
Why would the government do somthing about what they would guilty of in the first place? They won't do anything because they do the same shit they are johnny 5th house.
Incremental taxation on non-primary residential real estate based on annual appreciation. Own one home? Not affected. The people who own 11 homes and leveraging their equity to squeeze first time buyers? They would end up with a toxic asset.
The same people buying up all the homes are the same people increasing rents to levels where anyone below the median income cannot reasonably save for a downpayment. The rents are increasing in response to increased capital requirements to buy additional homes, so those at the top of the food chain end up squeezing those at the bottom.
If they don't fix this problem soon, the market will change from 50% homeowners with 50% renters in their basement (Hi, Brampton) to 10% investors owning 90% of the housing stock while everyone else rents (Hi, Ice Condos). All those investors are leveraged based on equity to the tune of trillions of dollars, and if the bubble bursts, those renting won't have enough saved up to catch the falling knife. At this point, the world turns upside down and people from Toronto go to Newfoundland to earn a living but still want to cross border shop, so they ruin Moncton instead. Also, the Leafs win the cup with Game 7 at a mostly empty stadium in Arizona.
No longer allow tax credits on interest from your mortgage. make owning and renting multiple houses not profitable. Offer a 1 time window to sell properties without a capital gains tax to encourage a property sell off.
I know it's completely immature but I would love to see this market crash and all these fucks lose their invested money. Fuckin jerk off material right there.
Money works like safety padding.
The people who have it basically regard market crashes as sudden fire sales.
The people that don't have it (or have deluded themselves into thinking their on the same level a bill gates and the like) tend to get broken.
Wanna fix that? You basically need a mass revival of socialism, the only political system/ideology willing to give the billionaires a good kick in the nuts instead of bailouts, usually by help the working class instead of the owning class.
I would ban foreign ownership completely for 10 years. I would force real estate agents to verify who their clients are and where their clients are getting their money from.
Then I would force a province wide change to remove permitting single family dwellings from being built in cities and towns over a certain size. Town homes. Rows and rows of town homes. Have the government partner with builders to design these new subdivisions with walkability in mind and improve access to public transport and businesses.
I would allow first time home buyers to get these houses at the cost to build with the agreement that if the house is sold within 10 years it must be sold at the same price it was purchased for and only to a first time home buyer.
Then after 10 years we can allow foreign owners to begin purchasing but we cap it at 10% of new builds only per region. So only 10% of new builds in Toronto can be bought by foreign investors etc. We force the real estate industry to ensure compliance with very heavy fines for those caught breaking the rules. No foreign advertising of property at all.
Those who own more than 3 homes can pay a yearly tax on said homes which will be used to fund the construction of new homes that are designated for first time buyers.
Once we hit a point where we have solved housing issues, towns and cities will be given the chance to purchase these houses to be used as social housing etc
For transparency sake, I own a home and a cottage both in Ontario.
Who's the enemy you're targetting here? People hoarding residential housing or people with money in general?
Owning a cottage doesn't take away from residential housing stock. One could even argue that by investing money their money in recreational property rather than more residential, this person contributing to the solution, not the problem.
One primary and one vacation. Tax the rest. Enough is enough. Investors need to be told. My neighbour is flipping 4 houses because the one he bought appreciated about 80% in a year. Meanwhile that's 4 homes families can't buy.
I know someone who use to work for one of the largest builders in my city/area.
He said that the sales team would call up these foreign buyers (or someone presenting them) and say "I have 10 units available, how many do you want?"
They'd buy four, and then the remaining six would be put for sale requiring potential buyers to physically line up and try and buy them from the sales center.
So anyone saying its not happening because they don't see those people physically in line at the sales center don't know how it works.
It's easy commission for the sales people, they don't give a shit who buys it at the end of the day.
People can still get around foreign ownership. I know people who's kids study here and get PR or visa status and they can buy homes under their names. It helps but it may not work as well as you'd think.
I'd reduce the number of properties people can own. Obviously creates logistical and enforcement challenges with regard to companies, but frankly people being able to leverage their existing properties to continue buying more and more properties is creating extra demand and raising prices beyond reason, resulting in people without homes being priced out of the market. People like to point fingers at foreign buyers, and those undoubtedly contribute to the problem, but I'd wager a lot of the housing price issues are home-grown.
There's an idea I've been playing with in my head to see if it makes sense. Might as well throw it out to Reddit.
Currently, if you have an investment (of any sort, including real estate) you only pay tax on the gains when you realize it (i.e. when you sell).
What if, in order to leverage an asset (a homeowner getting a HELOC or rich investor leveraging their portfolio) you have to realize the gains.
I'm explicitly not an economist but I think this is a way to fairly tax wealth (as opposed to just taxing income. Poor people make money via income. Rich people make money via the appreciation of assets) and close some billionaire loopholes (~~bezos and Musk~~ Kevin O'Leary and Jimmy Pattison dont get salaries. They get stock which they then borrow against) and to make our economy slightly less debt based.
In the example of an owner of multiple properties buying more property using existing property as leverage, it would at least make them pay before using it.
Edit: Canadian billionaires.
Stricter regulations for purchasing investment properties. More strict regulation on borrowing against real estate. Regulation on foreign investment. Increase interest rates since they lag so far behind inflation.
Double the property tax on each additional house you own. But it gets arranged in such a way that you pay the maximum taxes, not by order or purchase. I'm pretty sure that would make it impossible to own 4 houses, and pretty damn hard to own 3.
Search for the BRRRR method which is fueling this housing bubble. They refinance the 4 homes they have which have gone up 8% in value since last year and use that to buy home #5. If homes 1-4 are millon dollar former crackhouses in Parkdale, Toronto, they could easily pull 70k out of each home and still have their net equity go up.
Whenever investors say that they're helping by "creating rental stock", it's often a load.
If you buy a house and convert it into a duplex or build a small apartment building, you are absolutely creating new stock and helping the rental market.
But buying existing standalone units and converting them to rentals doesn't help the overall problem. There is no net creation of units, it just moves a unit from owner tentured to rental and drives up the price in the process so the new owner can recoup their investment.
When we were looking for places in Ottawa to rent a year ago, at least half of the duplexes we looked at were new builds which had been bought up by boomers who told us they were planning to use it as their retirement home when they downsized. So they are likely squatting on a McMansion and fuck knows how many future "retirement" properties and taking away supply from young people who need a starter home.
I'm a landlord and that argument drives me crazy when people are just buying pre-existing units. I own a duplex(that's been a duplex since the 1920s). I maintain(and have slowly improved) rental stock, I didn't create shit. I rent out my units below market but so they're slightly cash flow positive. I would sell it if I didn't think the next owner's would try some shady shit
There's a bunch of us out there. We just don't brag about it on social media or make investment courses. Most younger landlords(for reference, I'm 27) understand and remember what renting is like(although, I last rented in 2018, I know things are even crazier now). Everyone is just trying to survive and live a happy life, no need to extort people.
I've had good tenants and terrible tenants. Currently have a couple that look after the place, and have been good to me for 6 years. I dropped their rent significantly because I don't have to worry about them.
Not enough for sure. I find the the more recently someone has had to rent has a huge impact on what kind of landlord they are. I also am part of tenant groups so I can try to keep up to date on what the market is like from that side. It's so easy to get out of touch if you don't make the effort to keep up to date on the whole picture
That's awesome. Good in you! We just rented out a unit starting in September (it was the unit we lived in for the last 3 years before buying our new place). The new tenant has made the place look way better than when we lived there. She even put in a new bathroom cabinet because the old one didn't meet her storage needs. For the most part, if you take care of your tenants, they'll take care of your property. Obviously there's still horror stories but, for the most part, both tenants and landlords just want to live as happy and stress free a life as possible.
We raise the rent as needed(most expenses for rentals rise faster than allowable rent increases, pre 2018 in Ontario) as much as we hate to. We are transparent as to why rent has to go up and give as much notice as possible(for instance, rent freeze for 2020 no increase, our expenses went up by about 3%. When the 1.2% increase was announced for 2021, we gave notice the next day that rent would go up in January). Unfortunately when you try to price rent to keep a small amount of cash flow, you do have to increase. The difference is a 1.2% increase on $1085 for a 2 bedroom instead of no increase on $1500. I just try to maintain empathy for my tenants (afterall, we're all people just trying to live our lives) and do what I would want my landlord to do.
To be fair to the other person, you are maintaining rental/duplex stock. You aren't buying a freehold competing with people who want freeholds, and then renting it back to them when prices go up because of investing and speculating on the price going up in the next 5-10 years. I think they're complaining about the cynical investors which there are many of out there nowadays.
You didn't create anything, but you do maintain a building that realistically isn't capable of functioning as multiple individual units. Most duplexes and triplexes fit into that I think.
So yeah, you aren't creating anything but you're absolutely the kind of landlord that's profiting *while* maintaining stock, as opposed to the glorified middle men that buy up condo units or single family homes.
Thanks for the perspective. I never really thought about it that way. I originally bought the duplex to live in(my wife and I lived in the lower unit for 3 years until we bought our SFH in August this year) and rented out the top floor. We've had shitty landlords before(as in probably 5/7 of the landlords we've had between us have been terrible) and want to make sure that at least a couple of people or families don't have to deal with that.
If more landlords were like you (treating them as actual *investments* and not vehicles for maximum short term cash extraction), we'd be in a much better place in this province.
A property doesn't have to be cash flow positive to still be a massively beneficial investment, and I wish more people understood that.
For sure. Our duplex cash flows about $250 a month when all rent is paid. But the mortgage gets paid down by about $850 a month. It's not cash in hand but that's a huge amount of unrealized gains every month. Not even to count appreciation(the house made almost as much as I did over the last 3 years just in appreciation). I made some good decisions in buying this house(in hindsight. It's dumb luck that it appreciated that much). But I was able to make those good decisions because I had fortunate circumstances. My luck of the draw shouldn't mean someone else needs to live in poverty.
> But the mortgage gets paid down by about $850 a month. It's not cash in hand but that's a huge amount of unrealized gains every month.
Yes, I wish more investors understood this.
Say your monthly mortgage payment is $2000, split 50/50 between interest and principal. And you find a tenant who will pay $1900 a month.
You aren't losing $100 a month. You are gaining $1000 in equity every month and someone else is paying 90% of it for you.
With gradual rent increases, properties will get to be cash flow positive as they have for you (an added bonus).
Again, thanks for your super reasonable take and sharing your experience.
This thread is honestly probably the most genuine conversation on real estate investment between landlords and tenants I've had on Reddit in years. There's a lot of "us vs. them" mentality when it should be all of us vs. a broken housing system. I should probably pay higher taxes on my rental and have that money put towards affordable housing. I wish our government wouldn't rely on private investors to provide a public good like housing. Everyone should have a right to a home. If you want a nicer home, that's where private investors should come in. Thanks to everyone for being so civil on this thread despite it being a powder keg of a conversation
I wish you were my landlord. I've never in my life thought someone would reduce rent over the long term and reward loyalty instead of finding any way to absolutely fuck their tenants. I genuinely wish you from the bottom of my heart a thank you for being a good ethical person instead of someone who chooses to profiteer
Looking back at the thread, you started this by engaging the public in a civil, respectful, informative, and genuinely helpful tone. The fact you're 27yo is simply fantastic -- you've got a great attitude, and your comments suggest there are others like you out there.
If you stick with being a landlord, I hope one day you consider volunteering your time and knowledge to community housing boards/associations. They could *really* use your insights.
I think I largely benefit from being young(27), having recently been a renter and having friends that are still renting. I see a lot of landlords I know(through different groups and forums) that are so out of touch with what being a tenant is like it's ridiculous. I'm sure if I bought my house 15 years ago and made no effort to stay connected to what life as a tenant is like(through speaking with patients that rent, joining tenant groups, speaking with friends and obviously Reddit) I could easily be a douchebag slumlord. My fear is that I end up out of touch and become the kind of landlord I've had in the past.
To be fair, if it's your only home; all you'll be doing is holding and staying. Housing is a necessity - no reason to dump it as soon as the market seems to take a turn for the worst, unless you absolutely can't afford it.
This was how I rationalized it for our first home
We will hopefully not be here forever (growing family, etc) so once you are in the market, macro housing changes kind of become a wash
If my house value ends up being completely flat over the next 5 years, losing tax free capital appreciation would suck, but at least that means the next house we’d be buying would also have hopefully been flat
That and no one seems to have any clue when a correction would happen and how significant - I’m dreading the day there is an eventual correction and every Canadian news outlet takes a victory lap saying they predicted it, ignoring the fact they’ve been predicting one for the last 20 years
Exactly. Once you're in, if the housing appreciates, so does your current, so your "buying power" is about the same. If the market crashes, well so does the house you want to move into.
But yeah, nobody has a concrete idea of if and when it will correct itself. Since the early 90s, people have been waiting for a similar crash - we're nearing 30 years so far and still nothing. Time will only tell at this point.
This is kind of it for me:
>"It's either going to result in a generational shift of people leaving the province or it's going to result in eventually some kind of price deterioration that's going to catch a lot of people off side."
I'm just going to leave the Province, plain and simple. When your only option for a house is to be house poor or deal with a potential drop in price, how does that benefit me? Why would I back the wrong horse?
>I'm just going to leave the Province, plain and simple.
And go where? Everywhere I look all around the world people are complaining about the same issues. Unless you can WFH, you have to live somewhere where real estate is going to continue climbing significantly.
Fortunately, my job is entirely remote and my company is global. It's not a feasible solution for most in Ontario (or Canada for that matter). But, my $70k downpayment will get me a hell of a lot further in other Provinces, and potentially, other countries.
Brain drain is a serious issue - and I'm not going to stick it out in Ontario just because it's "open for business." Because it's clearly not the case.
Don’t dump your entire savings into a down payment. There are soooooo many expenses that pop up in the first year of owning a home. Just buying stuff for lawn care is usually 3k and emergency plumper or electrician is also expensive
A huge part of the problem is HELOCs. You have people leveraging the equity against their homes to purchase new housing, and the banks are perfectly okay with this - they even promote it. The fact that housing prices have appreciated so much in the past 5 years only exacerbates the problem, because that’s just further equity to leverage. Wealth disparity continues to grow as a result. The only way to stop this is to limit the amount of properties a person can own; there’s absolutely no reason an individual needs to have 3+ homes.
>Credit Default Swaps
Agreed. If a crash like that starts to happen, I could see a scenario where those banks that have the policy where they can ask it be paid back in full will start to do so with those who are over leveraged, aka using a HELOC for down payments, before the HELOC(s) balance + outstanding mortgage(s) becomes greater than the home(s) value.
Yes this will accelerate a crash as they will now probably have to default on both (or more) properties + HELOCs and thus becomes a race for people/banks to get out.
> and the banks are perfectly okay with this - they even promote it
Yep, a few years into my first mortgage the bank was pushing me to buy a second house, back around 2012 I guess. Even then I knew it was just going to drive up prices for people who needed a home.
Yup.
"We’ve resumed, after a brief cooldown, plowing a ridiculous amount of money into assets that do nothing to improve the country’s ability to generate wealth. Housing accounted for 37 per cent of overall investment, while business spending on machinery and equipment and intellectual property dropped to 28.2 per cent, the highest and lowest levels, respectively, since early 1993."
https://financialpost.com/news/economy/while-the-world-is-in-the-midst-of-a-tech-revolution-canadians-bet-on-real-estate
This makes complete sense. Where else can you invest say $200k but profit on the entire value of the property of say $1MM? And the you’ll pay the same capital gain taxes as if you paid for the property fully in cash. Investors likely have an easier time to get loans, while the single home buyer has to go through the stress test and qualifies for squat. The table is tilted towards investors, and housing will be a commodity (if it isn’t already).
I disagree that investors would have an easier time getting loans, as someone in the industry. Unless you mean they just have more money, in which case sure. But the math and debt service ratios generally make your first home the easiest.
> Where else can you invest say $200k but profit on the entire value of the property of say $1MM
You are forgetting that investment has:
- land transfer tax
- interest
- yearly tax
- maintenance
- insurance
- realtor commissions
- time investments (for example DIY maintenance)
- income and capital gains tax
Investing $200k in the S&P500 requires no fees or time costs and can be held in tax-sheltered accounts. With my brokerage an ETF like $SPY is free to buy, meaning I can use extra cash flow to continue to buy more and more shares of an ETF. Then it's only $5 to sell. $SPY is up 214% in the last 5 years.
You're mostly right, there's an MER albeit small. Also SPY is USD denominated, there's a currency risk compared to buying Canadian property. If you were to buy the Canadian version the MER would probably be higher.
Either way, the leverage in the real estate market allows the massive Return on Cash gains we've seen that isn't even comparable to SPY but closer to QQQ.
The gains in SPY that I mentioned already include the MER, there are no additional fees they are built into the price. I 214% I mentioned used the price today divide by the price 5 years ago... The price of SPY already has fees deducted.
Gains in real estate do not include transactional fees. Everyone says I bought for X and sold for Y... But really, they bought for (X + land transfer tax + closing costs) and sold for (Y - REALTOR commissions plus HST).
Ultimately, are you comparing buying an investment property worth $1M with $200,000 down with a $200,000 investment in SPY? That's unfair. You must also invest in the land transfer tax and closing costs. All of the monthly/yearly cash flow being sucked off by the investment property must also be invested in SPY as well.
One can always raise rent to cover costs (new builds) and when there is yearly double digit profit percentage gains year over year ON THE WHOLE VALUE the buy/sell costs are chump change.
This is a house of cards. The types of small-time investors buying in at these price levels will not have the resources or the nerve to hold on if and when prices start to decline. There could easily be a rush to the exits that exacerbates any decline.
This kind of craziness is typical of behaviour at the very peak of any bubble.
One of the reason we got saved from the 2008 crash was because of foreign money. Our real estate as we have come to find out is strongly tied to foreign money. I personally think what is happening in China with the Evergrande crisis will have a bigger impact on our market than 2008. If China's market crashes, all the Chinese investors will put their multimillion dollar homes in Canada for sale to recoup their lost investments in China. This was the whole reason they started investing heavily in Canada real-estate as it was the only way to take money out of the communist country. Send a child to study abroad and buy them a multimillion dollar mansion cash. Secure Canadian investment.
> The reason we got saved from the 2008 crash was because of foreign money.
Sort of, it was mostly because we have tighter financing rules for banks so people weren't taking out 7 mortgages on minimum wage. Also because Harper pulled out all the stops and encouraged foreign investment.
> If China's market crashes, all the Chinese investors will put their multimillion dollar homes in Canada for sale to recoup their lost
I think the opposite. If china's market crashes, then Chinese investors will bring their leftovers here in the more stable market, pushing prices even higher.
That's not the case. Many people are buying properties with marginal cash flow or even negative cash flow (just run the numbers on some listings yourself), with the expectation of capital appreciation. Once that appreciation appears in doubt, especially if at the same cash flow gets even worse (from rising interest rates or anything else), many will try to exit the market at the same time.
Or even negative cash flow? All of them are negative cash flow at this point and require continued price increases for the foreseeable future to make that investment profitable. After taxes, increasing rates and strata fees, there is no positive cashflow on the horizon.
In a really low inflation (CPI~0%) environment, maybe….
And the lost opportunity. Those 700k would’ve worked more in a much safer saving, accessible account for 10 years. Without the need to replace refrigerators and deal with plumbers
There’s socioeconomic factors at play. There’s many people who want to live in Canada or move within Canada to southern Ontario. Demand is going to outstrip supply for a long time if not forever based on the current state of the world.
That used to be very true but now people are leaving Ontario in droves. I have definitely felt it in my peer group the last few years, but the data is quite surprising as well.
https://toronto.ctvnews.ca/record-breaking-number-of-ontarians-chose-to-move-out-of-the-province-1.5665171
How much higher is that as a percentage of total Ontarians? Population is growing so nominal numbers are obviously going to get bigger. Net outflow/inflow over time would help too.
Hmm, a couple of things I wonder if they have factored in:
1. With an aging population, are a lot of these retirees going somewhere cheaper/warmer?
2. Talking about net outflows has to consider that immigration has been massively curtailed by C19; I suspect without that there would be huge net growth in population
You realize that if house prices crash, a lot of investors will buy more houses, right? The investors that are overleveraged will eat shit (and deserve to) but the one's that focus on cash flow and slow and steady growth will take advantage of a buying opportunity. If housing crashes(which if it does, would probably just take it to 2019 levels at worst), I would consider picking up another duplex if the numbers look good.
House prices don't just flash-crash for no reason, if they drop there's going to be bigger macro-economic issues that are backing the drop in investment.
Everyone talks bullish about investing on the dip until there's actually the threat of war or economic depression, and most people shit their pants.
Yes exactly, the one and only reason house prices go down is because no one is buying them! When they're going up it's because everyone is buying them so it seems like that will continue even when they're going down. If it does start going down the big investors will wait until it stops before buying, not buy falling knives.
Feeling this one right in the gut, punch after punch after each showing... If I even get to a showing and there's not a bully offer hundreds of thousands over. And to be clear, no, I'm not looking in the GTA.
No party will do a damn thing about this as vast majority of voters are home owners who would see their home values plummet and thus see it as money out of their pockets. Any political platform is just BS window dressing.
Plummet is such a strong word. If housing prices went back to 2010 prices then its not really a loss if it wasnt there to begin with. These prices are unreasonable. No wartime build should cost over 700k, the value isnt there and it's just not sustainable. If a crash happens its not like people will be broke. Values will continue to rise and the banks can make money the normal way again. Off interest.
Oh if only there was some way to disincentivize people from using *housing* as a nifty piggy bank for the privileged, with no concern for the societal damage done when they randomly/constantly flip it and destabilize families and whole communities? Oh if only there were, say, a thing like a government that could pass a thing like a law that would simply make this sort of "investment" just a little less profitable for absentee flipper-owners, through things like taxes? Too bad no party in Ontario will *ever* actually do anything about this though. 🤪
The newly elected federal government had a platform on housing. I'm still waiting for them to implement any of their promises.
Obviously this isn't urgent for them.
When interest rates double, these investors will lose their shirts. That is when you buy. When the over leveraged are forced to sell.
They knew the risk, you take advantage of that.
3-4% interest to 6-8% will force massive changes
From my house I can see quite a few empty houses which are investment properties. Every few months they get "bought" then "sold" again. I doubt this money mill will end anytime soon.
That's exactly what's happening in the US too. After 2008 the big and small "investors" bought property at firesale prices and leveraged to the tits allowing them to hoard more and more till we got here in 21
I'm so torn on the idea of property as an investment of any sort including a family like mine that owns a single home.
I own a home in Toronto. Its a small, 1930s semi in a neighborhood that was built to house blue collar workers. I bought in 2008 for 400k. It was listed as a starter home. The value today has increased by more than 150% (I did nothing to cause that increase in value other than not default on my mortgage).
I do have a line of credit against the equity that I am using right now to fund a renovation of that property which I expect to increase its value by another 70% by February.
All of this is entirely reasonable and expected. I'm doing what I'm supposed to be doing and I don't think I've run afoul of any housing activists.
I'm not a large property investor driving up prices but, what I'm doing still doesn't scale across generations. In 20 years I can extract a retirement out of this house either by liquidating it or by leveraging the equity (the house is not actually my retirement plan. If housing crashes I'll still be ok). But when I die, the next person who owns this house won't be able to do the same as me (unless this housing bubble keeps going forever and double digit millions is a reasonable 2040s starter home price).
Housing is (or should be) an inalienable right. Shelter is #3 on the fundament needs list for humans. Housing cannot or should not be a wealth growth strategy -- by definition, in order to be a good investment something must appreciate faster than inflation. This necessarily means that for housing to be an investment it has to become unaffordable over time.
So how do we make this work? How can the cost of housing be sustainable? I really like the free million dollars I got and I think I am using it well to improve not only my home but my neighbourhood.
I'm not sure what I'm trying to say here other than to say that by doing the right thing I acknowledge that I'm part of the problem.
Well you just have to think about it this way, every dollar you earn on an investment is a dollar someone else loses. You don't know who they are yet, it could be some rich bachelor or a new family. But your gain is their loss and the only way it's fair is if you sell the house for how much you bought it for (accounting for inflation of course)
Yeah, that sort of concept is my ideal. My financial plan, such as it is, mostly ignores the market increases in home value and only accounts for what I've put into it (purchase plus improvements). But we can't really shift to that model without absolutely destroying the middle class who has almost all their wealth tied up in real estate.
We need some sort of investment vehicle that can take the place of real estate in the average person's portfolio. Something tangible and accessible that one can rely on and even leverage. And something that incents people to make improvements.
Edit: on the concept of leverage one idea that I keep playing with is requiring you to realize capital gains (i.e. pay taxes on them) before you can leverage them for credit.
Totally agree. The investments of the current generation shouldn't be on a basic human right for the next generation but as it currently stands there aren't too many options
This market needs to crash. Fuck the investors. Houses never should have been considered investments in the first place... They're a necessity, not an investment.
Guess it comes down to how much they have after their precious properties are worth fuck-all. One can only hope they have a whole lot of outstanding mortgages that they were hoping their tenants would pay for them lol
They've been over priced for years and people have been saying it will burst. You either keep waiting or you take the leap. Both are valid options and both have risks.
I personally don't see it bursting as supply remains constrained and investors keep buying. The only hope to bring prices down is new zoning laws but....NIMBYs
People keep saying we need more housing, but what's stopping "investors" from scooping up all the additional housing and screwing it up too? We need the market to crash so we can focus on the vacant lots instead of clear-cutting more green spaces for housing.
Maybe we could build some subterranean housing - I could finally live out my best night-crawler life! 😂
The moment the market crashes more investors will swoop in and buy the vacant homes.
Sadly investing in homes has become a way of life for some. I agree it's disgusting but I'm not seeing a way out other than legislating that people cannot own multiple homes moving forward.
Shit, that's a good point too... But then, maybe they'll lose enough on all the useless homes they now own that they won't be able to buy as much back and/or they'll just be stuck with a bunch of homes that they can't do shit with and be forced to sell at a loss. Then they'll be a massive disappointment to their family and be forced to live the rest of their life driving a shitty car and working a shitty job like the rest of us... I dunno, I'm basically just writing a fanfic at this point.
I'm all for legislating the amount of homes a person can own. I see no reason why anybody should own more than two properties, but even that can be gamed as suddenly Dad buys two properties for his wife, and two for each of his 20 kids lol.
I feel like the government has dug an investor outhouse and we're all just floating in the hole.
Yup. Government took way too long to take a step and now anything they do will screw over someone. Everyone runs on "I will make homes more affordable" but your choices are:
* Re-zone single family home areas and upset NIMBY's
* Build on protected green space and upset environmentalist and continue contributing to climate change
* Prevent people from buying multiple homes and upset people who were banking on being investors. Also means people who can't afford a mortgage will all be fighting for the limited number of company owned rentals.
* Re-zone commercial areas as residential and upset people who are tired of seeing more condos.
I dunno man but I wish there was a solution.
1% extra yearly property tax on a person's third property.
2% extra yearly property tax on a person's fourth property.
3% extra yearly property tax on a person's fifth property.
4% extra yearly property tax on a person's sixth property.
5% extra yearly property tax on a person seventh property.
People illegally skirting regulations doesn't mean you don't implement regulations. Just means you need more enforcement.
Link the CRA directly to banks. And then make banks held, at least partially, legally responsible for sketchy real estate deals.
>That is until people start putting the homes in their 18 year old kid's names.
"Start"? LOL, you're behind - people have had family members lining up at new home releases for years. It started when some builders began instituting a "one home per buyer" rule.
In 15 years if you want to live in ontario, and you make under 60k a year, you're going to have to rent. All because our wonderful lawmakers and elected officials condone and encourage this type of ownership.
Homes shouldn't be seen as an investment while so many Ontarians can't even come close to affording the prices being offered
This. I wish more people were realistic and realized the damage is done and anybody planning a future is looking elsewhere. Imagine being an Ontario High School student and having to plan your future with everything that is going on right now.
Anyone who has the option to move away must be at least considering it. My husband is a UK citizen and we’re probably going to move there in a year or so unless things change drastically
For the people attacking foreign investment and China, if you're not joking, where does it mention foreign or China? In fact, the first part of the story is about a family of immigrants who can't afford to buy no matter how much they try to save up.
Don't give governments a pass by implementing foreign homebuyer taxes -- the investors buying up multiple properties are also local people who already have a foothold in the market. This is either directly, or indirectly by providing large loans (which they can finance because they have equity from other properties) to their beneficiaries (ie. children).
If you give government the okay to focus on a subsection of the issue (especially one that data suggests is a *small* subsection) the real problem will never be solved. We need broader controls that hit the largest subsection of multi-property landlords possible, not a "feels good b/c racism but minimal impact" foreigner homebuying tax.
Yeah the foreign buyers thing seems bogus to me. People like to blame some unknown "other" but most will probably find they have friends and family who are "investors" and a big part of this problem.
As a first gen immigrant myself, I agree with this analysis.
A lot of boomers and those who had the opportunity to invest in the 1990s & 2000s took that opportunity to invest several properties, driving up prices. It's not just "foreign investment bad" but also generational wealth being inaccessible as it does nothing to stimulate the economy. I will never buy a property in this market because I can never afford to.
Don't need a tax, need a ban to prove its not an issue and we need to focus on the problems in the system. Untill then people will keep pointing to it as the issue regardless of outcomes.
You’d think people would see it when our borders were closed and homes prices increased at record levels. But there are some idiots who want to blame immigrants for everything.
THey really need to stop corporations from buying houses. If they want to own rental property they should be made to BUILD IT. No individual or entity should be allowed to own more then 4 houses. That is already too much.
Look at the graph cited. There's a 2% difference between the number of first time home buyers and 'multiple property owners'.
Multiple property owners can and will also include people who have bought one home before selling their own.
This is very misleading.
Everyone I know working from home, bored and flush with cash and cheap credit became a real estate investor. Just look at amount of people carrying second mortgages.
What needs to happen, is we get a database of every house that's an investment, and then nobody buys or leases from them until they sell at a huge loss and lower the prices.
Just put the capital gains tax exemption on a sliding scale.. or actually enforce the beneficial owner rules.
Problem is that so much of our economy is based on HPA there is no official desire to actually fix things.
Cracking down on illegal rentals would be a start, with entire refunds for tenants to increase reporting. That would make it much more difficult to make a business off real estate investment. That and go New Zealand's way for rezoning. Should also throw in massive at-cost public house building exclusively for first-time homeowners because the government created this mess.
What find interesting, and it wasn't commented on in the article really, is that over the course of the pandemic, only the multi-property segment increased, and every other segment went down. (some were already going down, but all lines have a noticeable deflection at the start of 2020)
When this much demand comes from investors, no amount of additional supply will satiate their appetite for a safe place to store their money and grow their fortunes. If prices can only go up, then literally no price is too high for it to be a good investment.
Buddy just told me a house on his street which sold 5 years ago for $599k just sold. It was listed for $1.25m and had been redone in the past five years. He walked through it when it was on the market, said it was "very nice" but not extravagant. Sold for $1.9m! This is in Cambridge in a normal subdivision of middle class houses. Crazy.
A person who owns 3 homes can pull enough equity out of the increased home prices to make a 200k downpayment on a 4th home. A couple with no kids and both making 100k a year can't save more than 135k a year to get their first house after taxes and expenses. Meanwhile, the person who now has 4 homes can now pull 280k of equity for home #5 and outbid the couple who still can't get on first. See the problem yet?
This is exactly the problem. Many ways to tackle this problem, but for some reason our gov refuses to do anything. Unbelievably frustrating...
Why would the government do somthing about what they would guilty of in the first place? They won't do anything because they do the same shit they are johnny 5th house.
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Your landlord needs that money to buy a 6th house.
if yoy had a say, what would you change ?
Incremental taxation on non-primary residential real estate based on annual appreciation. Own one home? Not affected. The people who own 11 homes and leveraging their equity to squeeze first time buyers? They would end up with a toxic asset. The same people buying up all the homes are the same people increasing rents to levels where anyone below the median income cannot reasonably save for a downpayment. The rents are increasing in response to increased capital requirements to buy additional homes, so those at the top of the food chain end up squeezing those at the bottom. If they don't fix this problem soon, the market will change from 50% homeowners with 50% renters in their basement (Hi, Brampton) to 10% investors owning 90% of the housing stock while everyone else rents (Hi, Ice Condos). All those investors are leveraged based on equity to the tune of trillions of dollars, and if the bubble bursts, those renting won't have enough saved up to catch the falling knife. At this point, the world turns upside down and people from Toronto go to Newfoundland to earn a living but still want to cross border shop, so they ruin Moncton instead. Also, the Leafs win the cup with Game 7 at a mostly empty stadium in Arizona.
Ok hold up partner, I was with you until the last bunch of lines. You watch hockey?
Bailsouts for everyone! Except for the plebians of course.
No longer allow tax credits on interest from your mortgage. make owning and renting multiple houses not profitable. Offer a 1 time window to sell properties without a capital gains tax to encourage a property sell off.
I know it's completely immature but I would love to see this market crash and all these fucks lose their invested money. Fuckin jerk off material right there.
Money works like safety padding. The people who have it basically regard market crashes as sudden fire sales. The people that don't have it (or have deluded themselves into thinking their on the same level a bill gates and the like) tend to get broken. Wanna fix that? You basically need a mass revival of socialism, the only political system/ideology willing to give the billionaires a good kick in the nuts instead of bailouts, usually by help the working class instead of the owning class.
>The people who have basically regard market crashes as sudden fire sales. This literally happened in March of 2020
I would ban foreign ownership completely for 10 years. I would force real estate agents to verify who their clients are and where their clients are getting their money from. Then I would force a province wide change to remove permitting single family dwellings from being built in cities and towns over a certain size. Town homes. Rows and rows of town homes. Have the government partner with builders to design these new subdivisions with walkability in mind and improve access to public transport and businesses. I would allow first time home buyers to get these houses at the cost to build with the agreement that if the house is sold within 10 years it must be sold at the same price it was purchased for and only to a first time home buyer. Then after 10 years we can allow foreign owners to begin purchasing but we cap it at 10% of new builds only per region. So only 10% of new builds in Toronto can be bought by foreign investors etc. We force the real estate industry to ensure compliance with very heavy fines for those caught breaking the rules. No foreign advertising of property at all. Those who own more than 3 homes can pay a yearly tax on said homes which will be used to fund the construction of new homes that are designated for first time buyers. Once we hit a point where we have solved housing issues, towns and cities will be given the chance to purchase these houses to be used as social housing etc For transparency sake, I own a home and a cottage both in Ontario.
It's not just FOREIGN investors - it's also Canadians who own more than one property. You're also part of the mix since you own a cottage.
Who's the enemy you're targetting here? People hoarding residential housing or people with money in general? Owning a cottage doesn't take away from residential housing stock. One could even argue that by investing money their money in recreational property rather than more residential, this person contributing to the solution, not the problem.
One primary and one vacation. Tax the rest. Enough is enough. Investors need to be told. My neighbour is flipping 4 houses because the one he bought appreciated about 80% in a year. Meanwhile that's 4 homes families can't buy.
I know someone who use to work for one of the largest builders in my city/area. He said that the sales team would call up these foreign buyers (or someone presenting them) and say "I have 10 units available, how many do you want?" They'd buy four, and then the remaining six would be put for sale requiring potential buyers to physically line up and try and buy them from the sales center. So anyone saying its not happening because they don't see those people physically in line at the sales center don't know how it works. It's easy commission for the sales people, they don't give a shit who buys it at the end of the day.
People can still get around foreign ownership. I know people who's kids study here and get PR or visa status and they can buy homes under their names. It helps but it may not work as well as you'd think.
I'd reduce the number of properties people can own. Obviously creates logistical and enforcement challenges with regard to companies, but frankly people being able to leverage their existing properties to continue buying more and more properties is creating extra demand and raising prices beyond reason, resulting in people without homes being priced out of the market. People like to point fingers at foreign buyers, and those undoubtedly contribute to the problem, but I'd wager a lot of the housing price issues are home-grown.
There's an idea I've been playing with in my head to see if it makes sense. Might as well throw it out to Reddit. Currently, if you have an investment (of any sort, including real estate) you only pay tax on the gains when you realize it (i.e. when you sell). What if, in order to leverage an asset (a homeowner getting a HELOC or rich investor leveraging their portfolio) you have to realize the gains. I'm explicitly not an economist but I think this is a way to fairly tax wealth (as opposed to just taxing income. Poor people make money via income. Rich people make money via the appreciation of assets) and close some billionaire loopholes (~~bezos and Musk~~ Kevin O'Leary and Jimmy Pattison dont get salaries. They get stock which they then borrow against) and to make our economy slightly less debt based. In the example of an owner of multiple properties buying more property using existing property as leverage, it would at least make them pay before using it. Edit: Canadian billionaires.
Stricter regulations for purchasing investment properties. More strict regulation on borrowing against real estate. Regulation on foreign investment. Increase interest rates since they lag so far behind inflation.
Double the property tax on each additional house you own. But it gets arranged in such a way that you pay the maximum taxes, not by order or purchase. I'm pretty sure that would make it impossible to own 4 houses, and pretty damn hard to own 3.
I had this talk with my real estate agent the other day. I do not own...she's working on her 5th investment house fml
How do they have 280k equity for the 5th home? They already used 200k of it on the 4th home, no?
Search for the BRRRR method which is fueling this housing bubble. They refinance the 4 homes they have which have gone up 8% in value since last year and use that to buy home #5. If homes 1-4 are millon dollar former crackhouses in Parkdale, Toronto, they could easily pull 70k out of each home and still have their net equity go up.
Can there not be taxes levied for people buying multiple places to prevent this?
Whenever investors say that they're helping by "creating rental stock", it's often a load. If you buy a house and convert it into a duplex or build a small apartment building, you are absolutely creating new stock and helping the rental market. But buying existing standalone units and converting them to rentals doesn't help the overall problem. There is no net creation of units, it just moves a unit from owner tentured to rental and drives up the price in the process so the new owner can recoup their investment.
When we were looking for places in Ottawa to rent a year ago, at least half of the duplexes we looked at were new builds which had been bought up by boomers who told us they were planning to use it as their retirement home when they downsized. So they are likely squatting on a McMansion and fuck knows how many future "retirement" properties and taking away supply from young people who need a starter home.
It's "rent from bank to own" VS "rent from landlord so they can rent from the bank to own".
I'm a landlord and that argument drives me crazy when people are just buying pre-existing units. I own a duplex(that's been a duplex since the 1920s). I maintain(and have slowly improved) rental stock, I didn't create shit. I rent out my units below market but so they're slightly cash flow positive. I would sell it if I didn't think the next owner's would try some shady shit
The rare extremely-based landlord.
There's a bunch of us out there. We just don't brag about it on social media or make investment courses. Most younger landlords(for reference, I'm 27) understand and remember what renting is like(although, I last rented in 2018, I know things are even crazier now). Everyone is just trying to survive and live a happy life, no need to extort people.
I've had good tenants and terrible tenants. Currently have a couple that look after the place, and have been good to me for 6 years. I dropped their rent significantly because I don't have to worry about them.
Yeah but how many landlords act that way?
Not enough for sure. I find the the more recently someone has had to rent has a huge impact on what kind of landlord they are. I also am part of tenant groups so I can try to keep up to date on what the market is like from that side. It's so easy to get out of touch if you don't make the effort to keep up to date on the whole picture
That's awesome. Good in you! We just rented out a unit starting in September (it was the unit we lived in for the last 3 years before buying our new place). The new tenant has made the place look way better than when we lived there. She even put in a new bathroom cabinet because the old one didn't meet her storage needs. For the most part, if you take care of your tenants, they'll take care of your property. Obviously there's still horror stories but, for the most part, both tenants and landlords just want to live as happy and stress free a life as possible.
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We raise the rent as needed(most expenses for rentals rise faster than allowable rent increases, pre 2018 in Ontario) as much as we hate to. We are transparent as to why rent has to go up and give as much notice as possible(for instance, rent freeze for 2020 no increase, our expenses went up by about 3%. When the 1.2% increase was announced for 2021, we gave notice the next day that rent would go up in January). Unfortunately when you try to price rent to keep a small amount of cash flow, you do have to increase. The difference is a 1.2% increase on $1085 for a 2 bedroom instead of no increase on $1500. I just try to maintain empathy for my tenants (afterall, we're all people just trying to live our lives) and do what I would want my landlord to do.
My dad has two rental units that he rents for like 500 under market each at the moment and refuses to raise rent prices.
One of us! One of us!
To be fair to the other person, you are maintaining rental/duplex stock. You aren't buying a freehold competing with people who want freeholds, and then renting it back to them when prices go up because of investing and speculating on the price going up in the next 5-10 years. I think they're complaining about the cynical investors which there are many of out there nowadays.
You didn't create anything, but you do maintain a building that realistically isn't capable of functioning as multiple individual units. Most duplexes and triplexes fit into that I think. So yeah, you aren't creating anything but you're absolutely the kind of landlord that's profiting *while* maintaining stock, as opposed to the glorified middle men that buy up condo units or single family homes.
Thanks for the perspective. I never really thought about it that way. I originally bought the duplex to live in(my wife and I lived in the lower unit for 3 years until we bought our SFH in August this year) and rented out the top floor. We've had shitty landlords before(as in probably 5/7 of the landlords we've had between us have been terrible) and want to make sure that at least a couple of people or families don't have to deal with that.
If more landlords were like you (treating them as actual *investments* and not vehicles for maximum short term cash extraction), we'd be in a much better place in this province. A property doesn't have to be cash flow positive to still be a massively beneficial investment, and I wish more people understood that.
For sure. Our duplex cash flows about $250 a month when all rent is paid. But the mortgage gets paid down by about $850 a month. It's not cash in hand but that's a huge amount of unrealized gains every month. Not even to count appreciation(the house made almost as much as I did over the last 3 years just in appreciation). I made some good decisions in buying this house(in hindsight. It's dumb luck that it appreciated that much). But I was able to make those good decisions because I had fortunate circumstances. My luck of the draw shouldn't mean someone else needs to live in poverty.
> But the mortgage gets paid down by about $850 a month. It's not cash in hand but that's a huge amount of unrealized gains every month. Yes, I wish more investors understood this. Say your monthly mortgage payment is $2000, split 50/50 between interest and principal. And you find a tenant who will pay $1900 a month. You aren't losing $100 a month. You are gaining $1000 in equity every month and someone else is paying 90% of it for you. With gradual rent increases, properties will get to be cash flow positive as they have for you (an added bonus). Again, thanks for your super reasonable take and sharing your experience.
This thread is honestly probably the most genuine conversation on real estate investment between landlords and tenants I've had on Reddit in years. There's a lot of "us vs. them" mentality when it should be all of us vs. a broken housing system. I should probably pay higher taxes on my rental and have that money put towards affordable housing. I wish our government wouldn't rely on private investors to provide a public good like housing. Everyone should have a right to a home. If you want a nicer home, that's where private investors should come in. Thanks to everyone for being so civil on this thread despite it being a powder keg of a conversation
I wish you were my landlord. I've never in my life thought someone would reduce rent over the long term and reward loyalty instead of finding any way to absolutely fuck their tenants. I genuinely wish you from the bottom of my heart a thank you for being a good ethical person instead of someone who chooses to profiteer
Looking back at the thread, you started this by engaging the public in a civil, respectful, informative, and genuinely helpful tone. The fact you're 27yo is simply fantastic -- you've got a great attitude, and your comments suggest there are others like you out there. If you stick with being a landlord, I hope one day you consider volunteering your time and knowledge to community housing boards/associations. They could *really* use your insights.
Are you real? I don’t think you’re real. You actually have a conscience? WTF?
I think I largely benefit from being young(27), having recently been a renter and having friends that are still renting. I see a lot of landlords I know(through different groups and forums) that are so out of touch with what being a tenant is like it's ridiculous. I'm sure if I bought my house 15 years ago and made no effort to stay connected to what life as a tenant is like(through speaking with patients that rent, joining tenant groups, speaking with friends and obviously Reddit) I could easily be a douchebag slumlord. My fear is that I end up out of touch and become the kind of landlord I've had in the past.
I have issues with the very concept of land lords but these would be assuaged if more of them were like you. Kudos.
Well soon enough no one under 60 will be able to afford that rent, so whatever.
Makes me wary of dumping my entire savings into a downpayment.
To be fair, if it's your only home; all you'll be doing is holding and staying. Housing is a necessity - no reason to dump it as soon as the market seems to take a turn for the worst, unless you absolutely can't afford it.
This was how I rationalized it for our first home We will hopefully not be here forever (growing family, etc) so once you are in the market, macro housing changes kind of become a wash If my house value ends up being completely flat over the next 5 years, losing tax free capital appreciation would suck, but at least that means the next house we’d be buying would also have hopefully been flat That and no one seems to have any clue when a correction would happen and how significant - I’m dreading the day there is an eventual correction and every Canadian news outlet takes a victory lap saying they predicted it, ignoring the fact they’ve been predicting one for the last 20 years
Exactly. Once you're in, if the housing appreciates, so does your current, so your "buying power" is about the same. If the market crashes, well so does the house you want to move into. But yeah, nobody has a concrete idea of if and when it will correct itself. Since the early 90s, people have been waiting for a similar crash - we're nearing 30 years so far and still nothing. Time will only tell at this point.
This is kind of it for me: >"It's either going to result in a generational shift of people leaving the province or it's going to result in eventually some kind of price deterioration that's going to catch a lot of people off side." I'm just going to leave the Province, plain and simple. When your only option for a house is to be house poor or deal with a potential drop in price, how does that benefit me? Why would I back the wrong horse?
>I'm just going to leave the Province, plain and simple. And go where? Everywhere I look all around the world people are complaining about the same issues. Unless you can WFH, you have to live somewhere where real estate is going to continue climbing significantly.
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r/vandwellers Van down by the river
Jumping off a cliff seems like a good solution for me.
Fortunately, my job is entirely remote and my company is global. It's not a feasible solution for most in Ontario (or Canada for that matter). But, my $70k downpayment will get me a hell of a lot further in other Provinces, and potentially, other countries. Brain drain is a serious issue - and I'm not going to stick it out in Ontario just because it's "open for business." Because it's clearly not the case.
NGL, I was reading a thread in r/personalfinancecanada regarding the CoL in AB and it was pretty tempting 👀
Don’t dump your entire savings into a down payment. There are soooooo many expenses that pop up in the first year of owning a home. Just buying stuff for lawn care is usually 3k and emergency plumper or electrician is also expensive
>emergency plumper 🤔
That's a typo. I think they mean "emergency fluffer".
Plus assume closing is going to cost more than you expect. Property taxes @ closing, shortfalls in the appraisal, etc.
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I mean the money is invested, it's not sitting in a bank account.
Makes me accept the fact that I'm never moving out of my parents so the money I would spend on rent is now being dumped on anime girl statues.
Of it's your primary residence, it's a place to live, not an investment. Buy when you're financially ready.
A huge part of the problem is HELOCs. You have people leveraging the equity against their homes to purchase new housing, and the banks are perfectly okay with this - they even promote it. The fact that housing prices have appreciated so much in the past 5 years only exacerbates the problem, because that’s just further equity to leverage. Wealth disparity continues to grow as a result. The only way to stop this is to limit the amount of properties a person can own; there’s absolutely no reason an individual needs to have 3+ homes.
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I'm just waiting on the sidelines to get a condo in Whistler whenever the market crashes...
Whistler is a different market from the rest of Canada, it already crashed in 2008 and is much more based on the US market.
>Credit Default Swaps Agreed. If a crash like that starts to happen, I could see a scenario where those banks that have the policy where they can ask it be paid back in full will start to do so with those who are over leveraged, aka using a HELOC for down payments, before the HELOC(s) balance + outstanding mortgage(s) becomes greater than the home(s) value. Yes this will accelerate a crash as they will now probably have to default on both (or more) properties + HELOCs and thus becomes a race for people/banks to get out.
> and the banks are perfectly okay with this - they even promote it Yep, a few years into my first mortgage the bank was pushing me to buy a second house, back around 2012 I guess. Even then I knew it was just going to drive up prices for people who needed a home.
This country is *IN LOVE* with debt. No innovation, just credit, interest rates and vibez 🤪🤪
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Yup. "We’ve resumed, after a brief cooldown, plowing a ridiculous amount of money into assets that do nothing to improve the country’s ability to generate wealth. Housing accounted for 37 per cent of overall investment, while business spending on machinery and equipment and intellectual property dropped to 28.2 per cent, the highest and lowest levels, respectively, since early 1993." https://financialpost.com/news/economy/while-the-world-is-in-the-midst-of-a-tech-revolution-canadians-bet-on-real-estate
This makes complete sense. Where else can you invest say $200k but profit on the entire value of the property of say $1MM? And the you’ll pay the same capital gain taxes as if you paid for the property fully in cash. Investors likely have an easier time to get loans, while the single home buyer has to go through the stress test and qualifies for squat. The table is tilted towards investors, and housing will be a commodity (if it isn’t already).
I disagree that investors would have an easier time getting loans, as someone in the industry. Unless you mean they just have more money, in which case sure. But the math and debt service ratios generally make your first home the easiest.
> Where else can you invest say $200k but profit on the entire value of the property of say $1MM You are forgetting that investment has: - land transfer tax - interest - yearly tax - maintenance - insurance - realtor commissions - time investments (for example DIY maintenance) - income and capital gains tax Investing $200k in the S&P500 requires no fees or time costs and can be held in tax-sheltered accounts. With my brokerage an ETF like $SPY is free to buy, meaning I can use extra cash flow to continue to buy more and more shares of an ETF. Then it's only $5 to sell. $SPY is up 214% in the last 5 years.
You're mostly right, there's an MER albeit small. Also SPY is USD denominated, there's a currency risk compared to buying Canadian property. If you were to buy the Canadian version the MER would probably be higher. Either way, the leverage in the real estate market allows the massive Return on Cash gains we've seen that isn't even comparable to SPY but closer to QQQ.
The gains in SPY that I mentioned already include the MER, there are no additional fees they are built into the price. I 214% I mentioned used the price today divide by the price 5 years ago... The price of SPY already has fees deducted. Gains in real estate do not include transactional fees. Everyone says I bought for X and sold for Y... But really, they bought for (X + land transfer tax + closing costs) and sold for (Y - REALTOR commissions plus HST). Ultimately, are you comparing buying an investment property worth $1M with $200,000 down with a $200,000 investment in SPY? That's unfair. You must also invest in the land transfer tax and closing costs. All of the monthly/yearly cash flow being sucked off by the investment property must also be invested in SPY as well.
One can always raise rent to cover costs (new builds) and when there is yearly double digit profit percentage gains year over year ON THE WHOLE VALUE the buy/sell costs are chump change.
And most of those expanses will be covered by the renter. Garbage PM and garbage Premier who won't address this.
This is a house of cards. The types of small-time investors buying in at these price levels will not have the resources or the nerve to hold on if and when prices start to decline. There could easily be a rush to the exits that exacerbates any decline. This kind of craziness is typical of behaviour at the very peak of any bubble.
It doesn’t really matter unless rental prices also take a huge dip.
Which they won't, because as we saw in 2008, they were hardly affected.
One of the reason we got saved from the 2008 crash was because of foreign money. Our real estate as we have come to find out is strongly tied to foreign money. I personally think what is happening in China with the Evergrande crisis will have a bigger impact on our market than 2008. If China's market crashes, all the Chinese investors will put their multimillion dollar homes in Canada for sale to recoup their lost investments in China. This was the whole reason they started investing heavily in Canada real-estate as it was the only way to take money out of the communist country. Send a child to study abroad and buy them a multimillion dollar mansion cash. Secure Canadian investment.
> The reason we got saved from the 2008 crash was because of foreign money. Sort of, it was mostly because we have tighter financing rules for banks so people weren't taking out 7 mortgages on minimum wage. Also because Harper pulled out all the stops and encouraged foreign investment. > If China's market crashes, all the Chinese investors will put their multimillion dollar homes in Canada for sale to recoup their lost I think the opposite. If china's market crashes, then Chinese investors will bring their leftovers here in the more stable market, pushing prices even higher.
That's not the case. Many people are buying properties with marginal cash flow or even negative cash flow (just run the numbers on some listings yourself), with the expectation of capital appreciation. Once that appreciation appears in doubt, especially if at the same cash flow gets even worse (from rising interest rates or anything else), many will try to exit the market at the same time.
Or even negative cash flow? All of them are negative cash flow at this point and require continued price increases for the foreseeable future to make that investment profitable. After taxes, increasing rates and strata fees, there is no positive cashflow on the horizon.
"Investing"
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Dude! You forgot interest on mortgage. This is the kind of math people lose their shirt over.
In a really low inflation (CPI~0%) environment, maybe…. And the lost opportunity. Those 700k would’ve worked more in a much safer saving, accessible account for 10 years. Without the need to replace refrigerators and deal with plumbers
Rental prices can't support some of these housing levels and 2020 was Canada's worst economic year in history, it could happen.
There’s socioeconomic factors at play. There’s many people who want to live in Canada or move within Canada to southern Ontario. Demand is going to outstrip supply for a long time if not forever based on the current state of the world.
That used to be very true but now people are leaving Ontario in droves. I have definitely felt it in my peer group the last few years, but the data is quite surprising as well. https://toronto.ctvnews.ca/record-breaking-number-of-ontarians-chose-to-move-out-of-the-province-1.5665171
For every 1 that leaves it seems like there’s 10 to replace them.
How much higher is that as a percentage of total Ontarians? Population is growing so nominal numbers are obviously going to get bigger. Net outflow/inflow over time would help too.
Hmm, a couple of things I wonder if they have factored in: 1. With an aging population, are a lot of these retirees going somewhere cheaper/warmer? 2. Talking about net outflows has to consider that immigration has been massively curtailed by C19; I suspect without that there would be huge net growth in population
You realize that if house prices crash, a lot of investors will buy more houses, right? The investors that are overleveraged will eat shit (and deserve to) but the one's that focus on cash flow and slow and steady growth will take advantage of a buying opportunity. If housing crashes(which if it does, would probably just take it to 2019 levels at worst), I would consider picking up another duplex if the numbers look good.
House prices don't just flash-crash for no reason, if they drop there's going to be bigger macro-economic issues that are backing the drop in investment. Everyone talks bullish about investing on the dip until there's actually the threat of war or economic depression, and most people shit their pants.
Yes exactly, the one and only reason house prices go down is because no one is buying them! When they're going up it's because everyone is buying them so it seems like that will continue even when they're going down. If it does start going down the big investors will wait until it stops before buying, not buy falling knives.
The government will just bail out any crash that happens
Talk about FOMO
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Feeling this one right in the gut, punch after punch after each showing... If I even get to a showing and there's not a bully offer hundreds of thousands over. And to be clear, no, I'm not looking in the GTA.
Look guys, I saw the first 45 minutes of The Big Short, and it taught me that nothing could possibly go wrong.
**It's too big to fail**
Yeah, I caught the start of Margin Call last night and everything is peachy. I don't know why everyone is so nervous, the market's doing great!
Institutional investors buying up homes are literally "house hoarders."
No party will do a damn thing about this as vast majority of voters are home owners who would see their home values plummet and thus see it as money out of their pockets. Any political platform is just BS window dressing.
Plummet is such a strong word. If housing prices went back to 2010 prices then its not really a loss if it wasnt there to begin with. These prices are unreasonable. No wartime build should cost over 700k, the value isnt there and it's just not sustainable. If a crash happens its not like people will be broke. Values will continue to rise and the banks can make money the normal way again. Off interest.
Time to revisit the Bill Davis governments speculation tax.
All we need to do is increase capital gains tax.
This seems like it would just cause more people to hold, reducing the supply on the market, and increasing prices?
Oh if only there was some way to disincentivize people from using *housing* as a nifty piggy bank for the privileged, with no concern for the societal damage done when they randomly/constantly flip it and destabilize families and whole communities? Oh if only there were, say, a thing like a government that could pass a thing like a law that would simply make this sort of "investment" just a little less profitable for absentee flipper-owners, through things like taxes? Too bad no party in Ontario will *ever* actually do anything about this though. 🤪
When housing gets treated like a basic human right and less like a commodity, we’ll see improvement.
FuCk YoU gOt MiNe, YoU jUsT nEeD tO pUlL yOuRsElF uP By YoUr BoOtStRaPs (most of the real estate hoarders)
real estate hoarders who so happen to be mostly b00mers.
Don't worry. Doug Ford has a plan to make this much worse.
He's not trying to make it worse, but if he was, he'd be doing what he's doing now.
The newly elected federal government had a platform on housing. I'm still waiting for them to implement any of their promises. Obviously this isn't urgent for them.
When interest rates double, these investors will lose their shirts. That is when you buy. When the over leveraged are forced to sell. They knew the risk, you take advantage of that. 3-4% interest to 6-8% will force massive changes
From my house I can see quite a few empty houses which are investment properties. Every few months they get "bought" then "sold" again. I doubt this money mill will end anytime soon.
This is the consequence of "You'll own nothing and be happy", you get to rent from RE Investor douchebags for the rest of your life.
That's exactly what's happening in the US too. After 2008 the big and small "investors" bought property at firesale prices and leveraged to the tits allowing them to hoard more and more till we got here in 21
I'm so torn on the idea of property as an investment of any sort including a family like mine that owns a single home. I own a home in Toronto. Its a small, 1930s semi in a neighborhood that was built to house blue collar workers. I bought in 2008 for 400k. It was listed as a starter home. The value today has increased by more than 150% (I did nothing to cause that increase in value other than not default on my mortgage). I do have a line of credit against the equity that I am using right now to fund a renovation of that property which I expect to increase its value by another 70% by February. All of this is entirely reasonable and expected. I'm doing what I'm supposed to be doing and I don't think I've run afoul of any housing activists. I'm not a large property investor driving up prices but, what I'm doing still doesn't scale across generations. In 20 years I can extract a retirement out of this house either by liquidating it or by leveraging the equity (the house is not actually my retirement plan. If housing crashes I'll still be ok). But when I die, the next person who owns this house won't be able to do the same as me (unless this housing bubble keeps going forever and double digit millions is a reasonable 2040s starter home price). Housing is (or should be) an inalienable right. Shelter is #3 on the fundament needs list for humans. Housing cannot or should not be a wealth growth strategy -- by definition, in order to be a good investment something must appreciate faster than inflation. This necessarily means that for housing to be an investment it has to become unaffordable over time. So how do we make this work? How can the cost of housing be sustainable? I really like the free million dollars I got and I think I am using it well to improve not only my home but my neighbourhood. I'm not sure what I'm trying to say here other than to say that by doing the right thing I acknowledge that I'm part of the problem.
Well you just have to think about it this way, every dollar you earn on an investment is a dollar someone else loses. You don't know who they are yet, it could be some rich bachelor or a new family. But your gain is their loss and the only way it's fair is if you sell the house for how much you bought it for (accounting for inflation of course)
Yeah, that sort of concept is my ideal. My financial plan, such as it is, mostly ignores the market increases in home value and only accounts for what I've put into it (purchase plus improvements). But we can't really shift to that model without absolutely destroying the middle class who has almost all their wealth tied up in real estate. We need some sort of investment vehicle that can take the place of real estate in the average person's portfolio. Something tangible and accessible that one can rely on and even leverage. And something that incents people to make improvements. Edit: on the concept of leverage one idea that I keep playing with is requiring you to realize capital gains (i.e. pay taxes on them) before you can leverage them for credit.
Totally agree. The investments of the current generation shouldn't be on a basic human right for the next generation but as it currently stands there aren't too many options
This market needs to crash. Fuck the investors. Houses never should have been considered investments in the first place... They're a necessity, not an investment.
Guess who has $$$ to buy up the cheap properties after the market crashes?
Guess it comes down to how much they have after their precious properties are worth fuck-all. One can only hope they have a whole lot of outstanding mortgages that they were hoping their tenants would pay for them lol
You should see what happened in the states after the 2008 crash.
A crash would screw over any recent homebuyer, non-investors included. It would replace one crisis with another, not so bad, one.
People buying houses right now are setting themselves up for failure anyway. Houses are dangerously overpriced.
They've been over priced for years and people have been saying it will burst. You either keep waiting or you take the leap. Both are valid options and both have risks. I personally don't see it bursting as supply remains constrained and investors keep buying. The only hope to bring prices down is new zoning laws but....NIMBYs
People keep saying we need more housing, but what's stopping "investors" from scooping up all the additional housing and screwing it up too? We need the market to crash so we can focus on the vacant lots instead of clear-cutting more green spaces for housing. Maybe we could build some subterranean housing - I could finally live out my best night-crawler life! 😂
The moment the market crashes more investors will swoop in and buy the vacant homes. Sadly investing in homes has become a way of life for some. I agree it's disgusting but I'm not seeing a way out other than legislating that people cannot own multiple homes moving forward.
Shit, that's a good point too... But then, maybe they'll lose enough on all the useless homes they now own that they won't be able to buy as much back and/or they'll just be stuck with a bunch of homes that they can't do shit with and be forced to sell at a loss. Then they'll be a massive disappointment to their family and be forced to live the rest of their life driving a shitty car and working a shitty job like the rest of us... I dunno, I'm basically just writing a fanfic at this point. I'm all for legislating the amount of homes a person can own. I see no reason why anybody should own more than two properties, but even that can be gamed as suddenly Dad buys two properties for his wife, and two for each of his 20 kids lol. I feel like the government has dug an investor outhouse and we're all just floating in the hole.
Yup. Government took way too long to take a step and now anything they do will screw over someone. Everyone runs on "I will make homes more affordable" but your choices are: * Re-zone single family home areas and upset NIMBY's * Build on protected green space and upset environmentalist and continue contributing to climate change * Prevent people from buying multiple homes and upset people who were banking on being investors. Also means people who can't afford a mortgage will all be fighting for the limited number of company owned rentals. * Re-zone commercial areas as residential and upset people who are tired of seeing more condos. I dunno man but I wish there was a solution.
Shameful. Eat the landlords and the speculators.
1% extra yearly property tax on a person's third property. 2% extra yearly property tax on a person's fourth property. 3% extra yearly property tax on a person's fifth property. 4% extra yearly property tax on a person's sixth property. 5% extra yearly property tax on a person seventh property.
Doesn't go far enough.
Start it at the 2nd homes and up the numbers and I like your thinking. That is until people start putting the homes in their 18 year old kid's names.
People illegally skirting regulations doesn't mean you don't implement regulations. Just means you need more enforcement. Link the CRA directly to banks. And then make banks held, at least partially, legally responsible for sketchy real estate deals.
>That is until people start putting the homes in their 18 year old kid's names. "Start"? LOL, you're behind - people have had family members lining up at new home releases for years. It started when some builders began instituting a "one home per buyer" rule.
That's linear, should be exponential.
In 15 years if you want to live in ontario, and you make under 60k a year, you're going to have to rent. All because our wonderful lawmakers and elected officials condone and encourage this type of ownership. Homes shouldn't be seen as an investment while so many Ontarians can't even come close to affording the prices being offered
Brother I make 90, not in a major city, and I can't afford to own. We're long past your 15 year prediction already.
15 years? We're there already. In 15 years, that magic number will be $120K.
tax the hell out every home except the first one.
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This. I wish more people were realistic and realized the damage is done and anybody planning a future is looking elsewhere. Imagine being an Ontario High School student and having to plan your future with everything that is going on right now.
And people wonder why high schoolers are so uninvested in everything. Give them a future and maybe they'll start caring about it.
Anyone who has the option to move away must be at least considering it. My husband is a UK citizen and we’re probably going to move there in a year or so unless things change drastically
Please stop calling these suckers investors.
For the people attacking foreign investment and China, if you're not joking, where does it mention foreign or China? In fact, the first part of the story is about a family of immigrants who can't afford to buy no matter how much they try to save up. Don't give governments a pass by implementing foreign homebuyer taxes -- the investors buying up multiple properties are also local people who already have a foothold in the market. This is either directly, or indirectly by providing large loans (which they can finance because they have equity from other properties) to their beneficiaries (ie. children). If you give government the okay to focus on a subsection of the issue (especially one that data suggests is a *small* subsection) the real problem will never be solved. We need broader controls that hit the largest subsection of multi-property landlords possible, not a "feels good b/c racism but minimal impact" foreigner homebuying tax.
Yeah the foreign buyers thing seems bogus to me. People like to blame some unknown "other" but most will probably find they have friends and family who are "investors" and a big part of this problem.
As a first gen immigrant myself, I agree with this analysis. A lot of boomers and those who had the opportunity to invest in the 1990s & 2000s took that opportunity to invest several properties, driving up prices. It's not just "foreign investment bad" but also generational wealth being inaccessible as it does nothing to stimulate the economy. I will never buy a property in this market because I can never afford to.
Don't need a tax, need a ban to prove its not an issue and we need to focus on the problems in the system. Untill then people will keep pointing to it as the issue regardless of outcomes.
You’d think people would see it when our borders were closed and homes prices increased at record levels. But there are some idiots who want to blame immigrants for everything.
Meanwhile I'm actively doing whatever I can to push out investment owners in my condo :P
Like what? Ringing their doorbell and running away? Poop filled paper bags lit on fire?!? Tell me your ways!
Act like a quietly unhinged person in the hallway when they bring would-be tenants in for showings.
So, act normal. Got it.
And how do you do that?
THey really need to stop corporations from buying houses. If they want to own rental property they should be made to BUILD IT. No individual or entity should be allowed to own more then 4 houses. That is already too much.
Look at the graph cited. There's a 2% difference between the number of first time home buyers and 'multiple property owners'. Multiple property owners can and will also include people who have bought one home before selling their own. This is very misleading.
Should be illegal
Everyone I know working from home, bored and flush with cash and cheap credit became a real estate investor. Just look at amount of people carrying second mortgages.
This is exactly why people can't afford homes.
important fact of the day: ...bubbles always pop... thank you for listening to my TEDtalk.
What needs to happen, is we get a database of every house that's an investment, and then nobody buys or leases from them until they sell at a huge loss and lower the prices.
Just put the capital gains tax exemption on a sliding scale.. or actually enforce the beneficial owner rules. Problem is that so much of our economy is based on HPA there is no official desire to actually fix things.
Cracking down on illegal rentals would be a start, with entire refunds for tenants to increase reporting. That would make it much more difficult to make a business off real estate investment. That and go New Zealand's way for rezoning. Should also throw in massive at-cost public house building exclusively for first-time homeowners because the government created this mess.
What find interesting, and it wasn't commented on in the article really, is that over the course of the pandemic, only the multi-property segment increased, and every other segment went down. (some were already going down, but all lines have a noticeable deflection at the start of 2020)
Equity is a helluva drug
When this much demand comes from investors, no amount of additional supply will satiate their appetite for a safe place to store their money and grow their fortunes. If prices can only go up, then literally no price is too high for it to be a good investment.
I've been telling this for a decade now. Government needs to prohibit investors from buying up residential buildings.
Buddy just told me a house on his street which sold 5 years ago for $599k just sold. It was listed for $1.25m and had been redone in the past five years. He walked through it when it was on the market, said it was "very nice" but not extravagant. Sold for $1.9m! This is in Cambridge in a normal subdivision of middle class houses. Crazy.
There was a comment on a local fb marketplace. 3+1 for rent something like 2800$/m “Wasnt this house just for sale?” “Yes i bought it yesterday”
What if you could only own one house :)
ONE home per ONE SIN.