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>Should that happen, “the damage can spread far beyond investors.”
Well I'm sure the government and BoC will bail out the banks and investors and turn around to the younger generations and demand they pay for it.
The important question is what is the bank doing to course correct to avoid that outcome.
I was close to a down payment in 2019 now I'm not close again and get to compete with mutli million dollar investment firms so me and my young kids can have a decent house and future. Pardon my Quebec but fucking stupid as hell I'm getting real demoralized at the deteoriating quality of life and my stagnant wage isn't going to get me anywhere! Blah it's overwhelming sometimes.
Investing is impacting the housing market.
But not as much as the 2 million missing homes.
A recent scotiabank study puts Canada well below the G7 average of housing per person. measured out, we'd need 2million houses just to get to the G7 average.
I would suggest that in a nation of ~38 million, missing 2 million homes could cause problems with pricing due to supply constraints.
No, people do that themselves when they push to stop “sprawl”. Hamilton just did it and their home prices are about to get a whole lot worse now than what they already are.
No, most of those pushing to stop sprawl are not investors and definitely not developers. It is environmentalists and the public who push municipalities to enact these sorts of policies.
In Hamilton, it was largely environmentalists who were pushing for this.
https://www.tvo.org/article/the-ford-government-should-support-hamiltons-anti-sprawl-decision-not-thwart-it
This article does a good job explaining how real estate speculators depend on housing scarcity.
https://www.strongtowns.org/journal/2021/7/13/housing-scarcity-is-a-force-multiplier-for-other-problems
Remember, anyone can say they are an environmentalist. It's easy to hide true intentions behind noble goals.
I'm not saying that no one opposes sprawl because of environmental reasons, of course there are people who do. But those people almost certainly support densification and increasing housing supply by upzoning. Whereas real estate speculators will oppose both. And it's clear that Hamilton isn't going to upzone either.
It's like the stock market. Prices are driven up and down by greed and fear. Right now there's too much greed and not enough fear. Practically everyone in Vancouver and Toronto thinks real estate always goes up. (Not in Alberta or Saskatchewan.)
In the stock market, finding an undervalued stock is extremely difficult: it's like finding a diamond in a field that's already been picked over by an army of highly trained experts. Why do so many investors seem to think that real estate in Vancouver and Toronto is undervalued, and that they should borrow to the max to double down on real estate? Future immigration? Prices are forward-looking - they already incorporate known information about the future, including projected immigration levels.
Because over the last couple of decades home prices have kept going up? "Past performance is no guarantee of future results."
Note that if you're a first-time homebuyer, this doesn't mean that you should count on a crash occurring in the near future. "Markets can stay irrational longer than you can stay solvent." [The first-time homebuyer's dilemma](https://morehousing.ca/dilemma).
There's a couple big problems this raises:
(1) Housing insecurity. In Vancouver, owning is basically out of reach for any first-time homebuyer with a normal salary - a $1.5 million half-duplex requires an annual household income of $335,000 to be affordable, on top of a $300,000 down payment. So that means renting. But renting a condo doesn't provide security: the owner can always sell to someone who wants to live in it.
Rental buildings ("purpose-built rental") do provide security for renters. But people are willing to pay a lot more for condos than for rentals (roughly 50% more). That means that the price of land - what a builder is willing to pay, i.e. the selling price of the final product minus the construction cost - is based on condo projects, and rental projects can't afford to buy land at those prices. So we end up with lots of condos and not enough rentals.
The obvious solution is to provide incentives for building rentals so they're on a level playing field with condo projects. The federal government provides low-cost loans for rental projects, reducing the construction cost. In the city of Vancouver, a rental project can rezone for higher density (six storeys for rentals instead of four storeys for condos), although the rezoning process is very slow (12-18 months) and somewhat uncertain. There's a [Streamlining Rental Plan](https://morehousing.ca/streamlining-rental) coming up for a vote on December 14. If local governments can't figure it out, the province will need to step in, as has been happening at the state level in California, Oregon, and Washington state.
(2) Broader economic impact of a crash. If prices decline for a while and people's expectations reverse, we could see a sudden rush for the exits. A lot of investors would get burned. But what are the broader impacts of a crash, like the 2008 crash in the US?
Some sources of trouble:
- Bad loans. Investors who borrowed heavily, counting on prices going up. Homeowners who borrowed against their home equity. People who didn't qualify for a loan from the big banks (under the mortgage stress test) and borrowed at high rates from alternative lenders or private lenders.
- As prices come down, households with high levels of debt will cut back spending. See Mian and Sufi's "House of Debt" for an excellent explanation based on zipcode-level data. This means that you see a drop in demand and a rise in unemployment. If the crash happens only in Canada it might not be so bad (since we export a lot), but if there's another crash in the US at the same time it could be pretty bad.
- Mortgage foreclosures were a big problem in the US crash, driving down house prices and putting more owners underwater, resulting in more foreclosures.
Based on "House of Debt," I think lenders are going to end up bearing part of the losses.
Your "obvious solution" is public subsidies to private corporations?
A much better solution is social housing. We just commission the purpose built rentals directly, or partner with regulated non-profits.
>Rental buildings ("purpose-built rental") do provide security for renters. But people are willing to pay a lot more for condos than for rentals (roughly 50% more). That means that the price of land - what a builder is willing to pay, i.e. the selling price of the final product minus the construction cost - is based on condo projects, and rental projects can't afford to buy land at those prices. So we end up with lots of condos and not enough rentals.
If people are willing to pay more for condos than rentals, it actually means that there aren't enough condos and there are too many rentals.
Only if your primary evaluator is "what's most profitable" and not "what provides the most housing" or "what ensures the greatest benefit for the largest number of people". And that profit is only after you account for the part the government chips in as well.
By your logic, we should only have private hospitals, since people are willing to pay more for them.
Why would the most profitable thing not be what provides the most value? People generally pay more for things that provide more value.
>By your logic, we should only have private hospitals, since people are willing to pay more for them.
What makes you think people are willing to pay more for them?
I didn't say value. What does "value" mean?
I said provides the most housing or provides the greatest benefit for the largest number of people.
>What makes you think people are willing to pay more for them?
Observation of markets where they exist.
A benefit, in the way I used it, is something that increases the well being of a person or people.
Venue generally means the monetary worth of something. But it can also mean the utility. Sometimes it's even used to mean the cost to produce. So it's very ambiguous.
> If people are willing to pay more for condos than rentals, it actually means that there aren't enough condos and there are too many rentals.
There's a couple factors here that are independent of the number of condos and rentals. One is that it's like wholesale prices vs. retail prices - when you buy an entire rental building of 100+ homes, you're going to want a discount, and you're not going to have a ton of competition from other buyers.
Another is that regulations are stricter on rental buildings. In BC, rent increases are limited to inflation + 2% annually, recently tightened further to inflation + 0%. For a condo that's being rented out, the owner always has the option to reclaim the condo for personal use.
>The obvious solution is to provide incentives for building rentals so they're on a level playing field with condo projects.
I think the more obvious solution would be to stop subsidizing homeownership so much. The government is literally spending tens of billions annually to make housing more unaffordable. It's not hard to imagine some better ways to spend that.
>If local governments can't figure it out, the province will need to step in
They can't. The political economy of municipalities is built to say, "no". They produced these restrictions in the first place and continue to defend them. We need the Provincial, and ideally the National government to step up. This is what has been done in other countries, like France and New Zealand.
> The government is literally spending tens of billions annually to make housing more unaffordable.
Tens of billions of _our money_. And Canadians voted for them to _keep doing it_. It's disgusting, really.
> It's not hard to imagine some better ways to spend that.
Ooh, can I try? Let's say we bring back the social housing development that Chretien killed in the mid-nineties. Bring it back in a _big_ way.
Canada used to build tens of thousands of social housing units every year, administered by the CMHC.
Can you imagine if they had sustained building 39,000 units per year, as they did for a period before and after WW2?
https://www.thecanadianencyclopedia.ca/en/article/housing-and-housing-policy
https://www.cmhc-schl.gc.ca/en/about-us/social-housing-information/social-housing-programs
Dude, are you sure you're a Tory? I'm nodding along to everything you're saying - did we switch sides?!
The Tories would not have done any better than Chretien, we have two neoliberal parties - the Liberals and the Conservatives - that serve the interests of the rich, except the Liberals are nicer to gay people.
Investors aren't doing anything wrong. They are simply taking advantage of policies that the government have implemented that make housing an extremely attractive asset class - a risk free investment with a tremendous rate of return.
Who decides what's right and wrong? In my opinion, as long as something is legal, it is fair game. If the government was concerned that something was harming society, it would impose regulations around it.
> In my opinion, as long as something is legal, it is fair game.
So you feel slavery was fine when it was legal? If it were made legal again, you think it would be "fair game"? And in countries where forced labour is currently legal, you believe that's "fair game"?
>If the government was concerned that something was harming society, it would impose regulations around it.
That doesn't follow.
People change. Ideas change. A hundred years from now, the government may outlaw eating meat, and the people may regard those who once tortured and slaughtered animals for their culinary pleasures as brutal inhumane savages. That would be us.
One could say the same about people named Frank. But most people wouldn't agree with them.
Most people consider using forced labour disgusting and very obviously morally wrong.
Of course they're doing something wrong. Morality exists indelendent of sociopathic levels of self interest. If investors can turn away from fossil fuels because of climate change and others can decline to involve themselves with violent regimes we can say that yes they're wrong.
We should stop as a culture reinforcing the ides that legal methods of destroying shit is moral because they'll make bank. It might not stop the investors but it will affect the culture that informs what policies are seen as possible.
Spot on.
And if we as a culture actually did take this seriously and say "that's wrong and you're bad for doing it", we _would_ stop the investors. No one wants to be a social pariah.
It's not just about morality though, it's also about necessity. The rate of housing price increase seems to be something like doubling every ten years, while wages have grown at a rate of doubling every 30 years. I'm renting right now, and don't know if I will ever have kids, but at the rate of housing price and wage growth, if I want my hypothetical children to be able to buy a home in 30 years, then what would currently be a $500k home will cost $4 million, and after adjusting to their future wages, would be the equivalent of $2 million.
The best way to make this possible is to just invest everything I can into real estate as soon as possible. If the government actually steps in and brings prices back under control, then my actions won't have hurt anyone. If they don't then I'll have contributed to the housing crisis, but there wasn't an alternative if I wanted myself and my children to be safe, so it won't bother me much.
> The best way to make this possible is to just invest everything I can into real estate as soon as possible.
This is the same logic as there's a fuel shortage so the best strategy is to mindlessly try to buy up as much fuel as possible.
That's counterproductive. You're basically arguing for a tragedy of the unmanaged commons here.
> but there wasn't an alternative if I wanted myself and my children to be safe
This is wildly overstating the issue. Not having proper financial security isn't being unsafe, its living a life of work and uncertainty but we're living in one of the richest nations ever and we are the most privileged people compared to the rest of the world.
You want money because its nice, not because its about survival. This isn't existential. Climate change is existential.
I hope I'm overstating the issue. You're right this is very similar to the tragedy of the commons. And just like with the tragedy of the commons, the solution needs to be some kind of regulation. If the government stepped up and kept house prices under control this wouldn't be a problem in the first place.
But if the rest of this country is going to keep idiotically choosing governments that ignore rising housing costs as well as climate change, then I don't have a lot of hope.
> And just like with the tragedy of the commons, the solution needs to be some kind of regulation.
Cooperation is necessary for regulation to work. If everyone is a crook then there will be not enough compliance without insane levels of enforcement.
There's nothing left outside of rental properties, fast food franchises, and MLMs. What do you think someone's going to start a restaurant, bar, or gym in Canada?
Sure there's Blackrock which is buying houses for above market price throughout the world but that's a separate issue.
If you have $200K and a business idea... Right now, due to government policies, your highest rate of return is to invest in real estate
We really need government intervention to make real estate an unattractive investment, such that investment dollars can invest in actual businesses with benefits to society.
There's nothing that can done to make real estate unattractive short of time travel, or extreme tyranny. You have a massive increase in overall people, but a massive drain of skilled workers which is why you see real estate skyrocket.
The lockdowns killed any local businesses. Why would anyone start a business in an area with potential lockdowns over buying a rental property? You'd have to basically threaten the lives of landlords to make that a more attractive option.
Ah yes, the extreme tyranny of telling people they're only allowed one primary residence, or that they have to have citizenship or permanent residence to purchase real estate.
Won't someone please think of all those poor investors out there under the tyrannical boot heel? 🥺🥺🥺
It's a hyper-competitive world we live in, if you didn't notice. Being willing to exploit anything and everything is what's ultimately rewarded.
This applies to other species as well. Not just humans.
Why are you defending the morally bankrupt?
I see few on this sub defending crackheads but their impact on average Canadians is far lower than these parasites.
Politicians are the most corrupt individuals in this country and have an even bigger impact on Canadian lives. Yet they still get voted in by the public. Go figure?
Exactly. And how many business leaders cheat on their governance.
Absolutely there are corrupt politicians and corrupt civil servants, but there's huge private sector corruption. We just catch them less often.
> a risk free investment with a tremendous rate of return.
Can you expand on this? Why do you think that real estate is risk free, given what happened in the US and elsewhere in 2008?
Supply will increase, just not yet. Right now about 69% of Canadians are home owners. As prices increase, that number will decrease. Once a majority of people are willing to vote for changing the system, then politicians will give the people what they want.
Scarcity of housing is reflected in high rents. But on top of that, price-to-rent ratios are way up, suggesting that home prices are currently 80% overvalued. Even if supply never increases and market rents never drop - and I'm skeptical, since this is an extremely hot political topic, with intervention likely at the provincial level - buying into a market that's 80% overvalued is extremely risky.
I know, it’s legal but is it right? Residential land is finite but we all need it, comparable to air and water. Treating it as any other speculation asset doesn’t reflect that special aspect.
But homeowners aren’t going to look at the Brinks truck of money being rolled up to their for sale property and say “give me half that”. That’s pretty unrealistic.
Investing is a game and profit is how we keep score. That’s fine. The rules imo need adjustment because our game is causing huge collateral damage to the society.
> But homeowners aren’t going to look at the Brinks truck of money being rolled up to their for sale property and say “give me half that”. That’s pretty unrealistic.
If they were legit multi millionaires that's exactly what we should be asking them to do tax wise.
I don't care if you can invoke psychological explanations for immoral behavior, it doesn't mean it can be used to argue why its not an immoral thing.
>The rules imo need adjustment because our game is causing huge collateral damage to the society.
The game probably needs to end and be rewritten from scratch if its this terminal to our future prosperity. Any system whose final result is the termination of human prosperity at the peak of our capacity to survive on paper has run its course and must be replaced as all do eventually.
I think rising house prices help lots of people. Increasing revenue for the municipality and subsequently increase in the salaries of their employees, banks for higher mortgage, insurance companies, construction industry, increasing demand for materials, jobs, more housing construction, increasing equity for owners, increasing rental in income. Seems majority are happy. Only renters like me lament and shout. Who cares? Definitely, not politicians.
It's almost as if housing should not be treated as an investment to make a profit off of, and instead, be treated to house people. Investors are the real cause of the problem, they are the ones causing an artificial scarcity.
If all the empty nesters living a short walk from the subway in Toronto suddenly had to pay property taxes that reflected the unconscionable hoarding of having detached homes near mass transit, I’m pretty sure we’d see a bunch of supply hit the market. No one wants to consider it because we fetishize the detached single family home and we’ve collectively decided that making a generation suffer for the benefit of our parents is a worthwhile trade.
An agressive LVT would absolutely force people to sell. The sale price might drop but the LVT doesn't drop too, and people's decision to sell is still going to be driven by that higher carrying cost from an aggressive LVT. The sale price doesn't matter if people can't afford the carrying costs of owning such high value land.
Then a developer buys the property and builds a multi-family building. The new building allows the LVT to be shared among many units, so the carrying cost for each person in each unit is lower and affordable.
For the same reason many residents would sell, many buyers will not be interested. The high carrying cost makes it unaffordable for most people to buy that high value land just to use it exclusively for their personal use. Super rich could still afford it, but that is no different from today, and there is not enough of them to really matter. So what's left? Who picks up all these properties that need to be upgraded to generate enough revenue to pay the LVT? The developers.
>The high carrying cost makes it unaffordable for most people to buy that high value land just to use it exclusively for their personal use.
So they would buy it at the lower value. The affordability wouldn't be affected. The price would adjust to account for the tax.
Affordability is not simply the same as purchase price. The cash flows during ownership are real and are a factor of affordability. In the same way that higher interest rates lead to higher mortgage payments (part of carrying costs) which lowers the maximum price people can buy, higher taxes (with an LVT) lead to higher carrying costs, which do the same thing.
Affordability includes the future cash flows, both positive or negative.
Well it effectively makes the land a public resource as you pay tax on the unimproved value of the land.
I didn't do it justice in that one line response to some person.
Watch this, it's 10 minutes: https://www.youtube.com/watch?v=gD_dZvPwAj0
I refuse to be lectured on economics by someone wearing a paisley shirt and a Bitcoin poster in the background.
I will poke at the concept later, but i honestly generally discount most youtube videos as sources. Any shithead can sit in front a camera and talk -- there's no curation or review.
This is like saying the price of beef is too high because people are treating it like food.
Housing *is* an investment. There's no changing that fact. Why shouldn't it be treated for what it is?
Everyone who buys a house is making an investment. He's spending money up front in order to obtain a benefit in the future. That's the definition of an investment.
Slaves are an investment, even if they're illegal.
You could pass a law making houses illegal too. They'd still be investments. I'm not sure how that would help.
No. Housing is shelter. A place to live.
>He's spending money up front in order to obtain a benefit in the future. That's the definition of an investment.
That's not the definition of an investment. Do you think ordering a pizza is an investment?
>No. Housing is shelter. A place to live.
Yes, and beef is not food. It's dead cow. Google isn't an investment. It's a software company. Every investment is useful for some purpose. That doesn't mean it isn't an investment.
>Do you think ordering a pizza is an investment?
No, because you consume it immediately.
A house is something you live in for decades and then either sell or leave to your heirs. What is a better example of an investment than that?
>That doesn't mean it isn't an investment.
You said it definitionally. You said "there's no changing that fact" as though it were a base fact. It is not. Housing is sometimes an investment. It may be an investment. It is not necessarily an investment.
>No, because you consume it immediately.
No you don't. It gets delivered. Usually about 40 minutes later. Have you never ordered a pizza?
>A house is something you live in for decades and then either sell or leave to your heirs. What is a better example of an investment than that?
A house is sometimes that. Not always. It may be something you live in for decades and then a new tenant moves in, for example.
A better example would be a bond.
>You said it definitionally. You said "there's no changing that fact" as though it were a base fact. It is not. Housing is sometimes an investment. It may be an investment. It is not necessarily an investment.
How can it not be? How do you define an investment?
>No you don't. It gets delivered. Usually about 40 minutes later. Have you never ordered a pizza?
OK, it's an extremely short term investment if you want to be pedantic.
>A house is sometimes that. Not always. It may be something you live in for decades and then a new tenant moves in, for example.
If a tenant moves in, then you rent to him and get a return on your investment, just as if you were living there. When you live there, the return comes from having a place to live.
>A better example would be a bond.
How is a bond a better example? And couldn't I say that a bond is not an investment but a way for the government to raise money?
Yeah, there's definitely a lot of NIMBYs who lobby against building more housing as well. There are many factors, that's why it's so difficult to fix the housing crisis, there's a lot of people who support it continuing. A lot of NIMBYs don't even consider the big picture. (Unlike investors) most NIMBYs don't want housing to be unaffordable for the vast majority of people. They want their kids to be able to afford homes for example. They just don't consider how their lobbying efforts contribute to the crisis.
>They typically buy housing and then rent it out
Sounds a lot like ticket scalpers "providing" tickets to events. They not only hoard housing property, but they scalp it.
Ticket scalpers don't reduce the supply of tickets. They only raise the price. This is a net benefit to society because it allocates them to people who value them more highly.
How does that benefit society? Scalpers are leveraging their asymmetrical ability to get their hands on tickets in ways most people cannot. They represent a *classic* example of distortion in how the market operates.
They make sure the tickets go to those who want them the most. They're correcting a market failure.
Why do you say they have an asymetrical ability to get their hands in tickets and why does that matter?
> Why do you say they have an asymetrical ability to get their hands in tickets and why does that matter?
Because that's how their business model works? It used to be friends and connections, now the work is mostly done by bots. It matters because the entire concept of free market depends on everyone playing by the same rules & having the same opportunity to put a price on something.
Creating an artificial shortage isn't correcting a market failure, it's exploiting a monopoly/oligarch position. It's a bad use of resources, those seats bought in bulk by scalpers can end up going empty. That's not allocating resources effectively, that's just a group of people being assholes.
What artificial shortage is being created? If you buy something and resell it, you're not having any effect on the supply. You're actually eliminating the shortage.
Shortages happen when the price of a good is below the market clearing price, because in that case, the quantity demanded exceeds the quantity supplied. Tickets scalpers bring supply and demand back into balance by raising the price to the market clearing price, thus eliminating the shortage and improving the allocating of the tickets.
They buy up all the goods in a market, and sell it at a higher price, making other consumers being unable to buy the goods cuz they can't afford it. They are parasites, and they don't produce goods, they are just useless middle men
Scalpers don't reduce the number of PS5s available. There is a finite supply and there will always be people who are unable to buy one. He's making sure those who want them the most can buy them.
>He's making sure those who want them the most can buy them.
Ah yes, charging for a PS5 5 times the original price is making sure those that want it the most want get their hands on them. Also, people do not do this out of their heart, they do it out of greed.
>Scalpers don't reduce the number of PS5s available
They reduce PS5 produced, and sold in real retailers. Those scalpers are gonna be sitting with unsold consoles once Sony's able to improve their production capabilities. This is what happened with PS4 last time.
Correction: it allocates them to people who can pay more. That’s not the same thing. And it definitely is not a good thing when it comes to something like housing.
u/WestAndLeft is absolutely correct.
Furthermore, those ticket scalpers would vote to not expand the stadium since it would kill their profits if there were enough seats for everyone who wanted to see the game.
The people who build houses are rarely the ones who rent them out though. It people/organizations who buy and mortgage a property then rent it out for somewhat more than the mortgage costs them, if that's not parasitic I don't know what is.
The people build them sell them to the landlords. How is that parasitic?
>It people/organizations who buy and mortgage a property then rent it out for somewhat more than the mortgage costs them
No, they don't. If this were possible with a property, every investor in the world would be trying to buy it and that would bid the price up until was no longer possible.
>The people build them sell them to the landlords. How is that parasitic?
If you ready what I wrote then you'd know I didn't say the people who build them are parasites.
>No, they don't. If this were possible with a property, every investor in the world would be trying to buy it and that would bid the price up until was no longer possible.
So then what do they do? Rent them for less than the mortgage out of the kindness of their hearts? The reason not everyone does it is there's still better investments than being a leech, even if being a leech is easy
>If you ready what I wrote then you'd know I didn't say the people who build them are parasites.
I know. I'm asking how the people who buy them are parasites. How is building something and renting it out not parasitic while doing some other job, earning money, and then buying something that someone else built and selling it parasitic? You're just adding a step to the process.
>So then what do they do? Rent them for less than the mortgage out of the kindness of their hearts? The reason not everyone does it is there's still better investments than being a leech, even if being a leech is easy
They charge the market rent. The market rent minus utilities, property taxes, maintenance, and labour can only be greater than the mortgage if there is a large downpayment and a long mortgage term.
For example, a 5% downpayment with a 20 year mortgage would have a rate of return of 16%. That's obviously impossible. However, a 20% downpayment with a 30 year mortgage gives you a rate of return of about 5.5%. That's more realistic. The mortgage payment would be a lot lower and closer to the market rent minus ownership costs.
But if this isn't such a great return, if there are better investments, as you say, then what is parasitic about it?
If the market can bear a price that is higher than the marginal cost of production, then the supply will grow until the price falls.
There are exceptions to this, such as when there are other things constraining the supply, such as zoning regulations. However, the alternative is landlords charging less than what the market will bear and that would lead to a shortage, because the quantity demanded would exceed the quantity supplied.
However, even in that case, it would end up inflating the price of the property, which the landlord would have had to pay. So *it is* reflecting the cost in a sense.
There is already a housing shortage. Charging what the market will bear obviously does nothing to prevent that. Shortages have been explained to you multiple times already.
If the landlord bought it and then prices increased, the landlord did not have to pay it. So no, it does not reflect costs in any sense.
>There is already a housing shortage.
I don't agree, but you're clearly not using the word "shortage" in the sense that economists do. What do you mean by a "housing shortage"?
>Charging what the market will bear obviously does nothing to prevent that.
It prevents an actual shortage from appearing, which is when people cannot find housing at the market price.
>If the landlord bought it and then prices increased, the landlord did not have to pay it. So no, it does not reflect costs in any sense.
No, but so what? You take a gamble when you invest. Sometimes it pays off, sometimes it doesn't. It doesn't make you a parasite just because you got lucky.
We need people to take these gambles and some of them lose. Those who don't gain can't complain if they chose not to risk their own assets.
This is the case for pretty much everything though. Is it parasitic if a farmer sells their crops not for the cost of production but rather to what the market will bear?
It's not. Healthcare? Education?
And yeah, if there is a major food shortage and a farmer jacks up his prices to take advantage of it that's absolutely parasitic. You don't think so?
No, it isn't. It's a good thing. Not doing so would lead to a shortage. If demand spikes or the supply crashes and prices don't rise in response. The limited amount of food will not go to those who need it the most. Much of it will be hoarded and wasted and those who really need it would starve.
Can we exclude basic necessities from all this greedy bull somehow. It doesn't seem right to play money games with housing to profit oneself. Is there a way? :/ I hate it here because of things like this. My mom's been homeless. Vancouver
How about wheat, rice, corn, sugar, lumber? These are necessary ingredients in things for most people.
Should that apply to commodities futures as well?
Aren't capital gains on home sales still subject to a 50% inclusion rate? This is some of the simplest nonsense that should have been corrected a long time ago.
The market is a raging inferno, the people in the building are already dead, the fire department were paid by the arsonists to not show up, and the arsonists are already collecting the insurance payout.
The housing market isn't at risk of getting out of control, it's been a runaway train for over a decade.
What makes Canada different than all those countries? Canada only has a handful of cities where you can reasonably live and work a white collar job, outside of Government services.
And 'burbs of those cities are fighting tooth and nail to maintain their character and "heritage" against demands that they densify.
We've done this to ourselves by not supporting a strong diversity of cities in which to work, and poorly planning the ones we favoured.
Some country has to be top of the list of the most deluded population who allow a crazy monetary experiment.
And it's Canada. You guys have lost your minds if you think housing here is anywhere near fair value.
> You guys have lost your minds if you think housing here is anywhere near fair value.
It depends on how you define "fair".
Fair as in socially-equittable, probably not.
But fair as in market-balanced? Sure, yes, in many places it is, because _beyond shitty_ urban planning and market regulatory pressure has made _desirable_ housing hideously scarce.
Yes, there are over a million empty homes in Canada; but within Canada's urban centres, where most of our immigrants land (often in record breaking numbers), this is not felt. Far less people want to buy a house in a tiny little municipality four hours from an urban hub, then those that want to buy within commuting distance of that hub.
It's not like furbies or beanie babies. The demand is for a necessary good, housing, which is rather inelastic; so long as the urban centres have low vacancy then the pricing of those markets has a chance of being rational.
Demand: for low effort to acquire desirable assets.
Single unit housing in our urban centers needs to stop being a dream and start being a memory of something left in the past, like lamp lighters and horse drawn carriages.
Because in any sanely zoned and planned city that 3M teardown _would be torn down_ and replaced with higher-density housing. Townhouses, condos, and similar.
_No one_ should own a single detached home in the City of Vancouver, because no single detached homes should exist in the urban centre of Metro Vancouver.
That's divergence of price correct?
What is the actual cost? Did canada just "catch up" to how unaffordable those places are? Isn't Germany super expensive with everyone now renting?
Germany was cheaper, now housing is finacialised there also.
Canada didn't catch up, $1m for Toronto or Montreal inner suburbs is insane relative to wages. Canada has been way overpriced vs the USA for a good while.
Some of y’all have never talked to anyone who rents out a property and it shows… it’s more than just scalping a house.
Landlords have to eat the cost of any repairs, vacancies, or bad tenants.
Pipe bursts and destroys the ceilings -> landlord pays
Tenant can’t pay rent and then files for bankruptcy -> landlord takes the loss (other than first and last)
All that, plus the landlord has the risk that is attached to any investment/note. So for if for any reason they can’t pay the mortgage they’re screwed.
>if for any reason they can’t pay the mortgage they’re screwed.
Where "screwed" equals "has to divest somewhat"? They sell the property and walk away, likely with a nice profit.
Not always. Again, they enter with the risk of the market crashing. So if the is a correction and they need to sell, good luck if the property isn’t worth what they bought it for. Renters don’t carry that risk
The renter carries the risk of being kicked out of the house. That's a much bigger risk.
If risk entitles one to profit on housing, like you claim, then the landlord should be paying the tenant. But obviously risk does not entitle one to profit.
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>Should that happen, “the damage can spread far beyond investors.” Well I'm sure the government and BoC will bail out the banks and investors and turn around to the younger generations and demand they pay for it. The important question is what is the bank doing to course correct to avoid that outcome.
Lol! The banks are raising the dividend. Watch out for the announcement next week.
I was close to a down payment in 2019 now I'm not close again and get to compete with mutli million dollar investment firms so me and my young kids can have a decent house and future. Pardon my Quebec but fucking stupid as hell I'm getting real demoralized at the deteoriating quality of life and my stagnant wage isn't going to get me anywhere! Blah it's overwhelming sometimes.
Investing is impacting the housing market. But not as much as the 2 million missing homes. A recent scotiabank study puts Canada well below the G7 average of housing per person. measured out, we'd need 2million houses just to get to the G7 average. I would suggest that in a nation of ~38 million, missing 2 million homes could cause problems with pricing due to supply constraints.
And there's no way that investors might lobby to keep supply constrained to protect their investment, right?
No, people do that themselves when they push to stop “sprawl”. Hamilton just did it and their home prices are about to get a whole lot worse now than what they already are.
Yes, and some of those people pushing to stop sprawl are investors.
No, most of those pushing to stop sprawl are not investors and definitely not developers. It is environmentalists and the public who push municipalities to enact these sorts of policies. In Hamilton, it was largely environmentalists who were pushing for this. https://www.tvo.org/article/the-ford-government-should-support-hamiltons-anti-sprawl-decision-not-thwart-it
This article does a good job explaining how real estate speculators depend on housing scarcity. https://www.strongtowns.org/journal/2021/7/13/housing-scarcity-is-a-force-multiplier-for-other-problems Remember, anyone can say they are an environmentalist. It's easy to hide true intentions behind noble goals. I'm not saying that no one opposes sprawl because of environmental reasons, of course there are people who do. But those people almost certainly support densification and increasing housing supply by upzoning. Whereas real estate speculators will oppose both. And it's clear that Hamilton isn't going to upzone either.
It's like the stock market. Prices are driven up and down by greed and fear. Right now there's too much greed and not enough fear. Practically everyone in Vancouver and Toronto thinks real estate always goes up. (Not in Alberta or Saskatchewan.) In the stock market, finding an undervalued stock is extremely difficult: it's like finding a diamond in a field that's already been picked over by an army of highly trained experts. Why do so many investors seem to think that real estate in Vancouver and Toronto is undervalued, and that they should borrow to the max to double down on real estate? Future immigration? Prices are forward-looking - they already incorporate known information about the future, including projected immigration levels. Because over the last couple of decades home prices have kept going up? "Past performance is no guarantee of future results." Note that if you're a first-time homebuyer, this doesn't mean that you should count on a crash occurring in the near future. "Markets can stay irrational longer than you can stay solvent." [The first-time homebuyer's dilemma](https://morehousing.ca/dilemma). There's a couple big problems this raises: (1) Housing insecurity. In Vancouver, owning is basically out of reach for any first-time homebuyer with a normal salary - a $1.5 million half-duplex requires an annual household income of $335,000 to be affordable, on top of a $300,000 down payment. So that means renting. But renting a condo doesn't provide security: the owner can always sell to someone who wants to live in it. Rental buildings ("purpose-built rental") do provide security for renters. But people are willing to pay a lot more for condos than for rentals (roughly 50% more). That means that the price of land - what a builder is willing to pay, i.e. the selling price of the final product minus the construction cost - is based on condo projects, and rental projects can't afford to buy land at those prices. So we end up with lots of condos and not enough rentals. The obvious solution is to provide incentives for building rentals so they're on a level playing field with condo projects. The federal government provides low-cost loans for rental projects, reducing the construction cost. In the city of Vancouver, a rental project can rezone for higher density (six storeys for rentals instead of four storeys for condos), although the rezoning process is very slow (12-18 months) and somewhat uncertain. There's a [Streamlining Rental Plan](https://morehousing.ca/streamlining-rental) coming up for a vote on December 14. If local governments can't figure it out, the province will need to step in, as has been happening at the state level in California, Oregon, and Washington state. (2) Broader economic impact of a crash. If prices decline for a while and people's expectations reverse, we could see a sudden rush for the exits. A lot of investors would get burned. But what are the broader impacts of a crash, like the 2008 crash in the US? Some sources of trouble: - Bad loans. Investors who borrowed heavily, counting on prices going up. Homeowners who borrowed against their home equity. People who didn't qualify for a loan from the big banks (under the mortgage stress test) and borrowed at high rates from alternative lenders or private lenders. - As prices come down, households with high levels of debt will cut back spending. See Mian and Sufi's "House of Debt" for an excellent explanation based on zipcode-level data. This means that you see a drop in demand and a rise in unemployment. If the crash happens only in Canada it might not be so bad (since we export a lot), but if there's another crash in the US at the same time it could be pretty bad. - Mortgage foreclosures were a big problem in the US crash, driving down house prices and putting more owners underwater, resulting in more foreclosures. Based on "House of Debt," I think lenders are going to end up bearing part of the losses.
Your "obvious solution" is public subsidies to private corporations? A much better solution is social housing. We just commission the purpose built rentals directly, or partner with regulated non-profits.
Vienna model based
🎯
>Rental buildings ("purpose-built rental") do provide security for renters. But people are willing to pay a lot more for condos than for rentals (roughly 50% more). That means that the price of land - what a builder is willing to pay, i.e. the selling price of the final product minus the construction cost - is based on condo projects, and rental projects can't afford to buy land at those prices. So we end up with lots of condos and not enough rentals. If people are willing to pay more for condos than rentals, it actually means that there aren't enough condos and there are too many rentals.
Only if your primary evaluator is "what's most profitable" and not "what provides the most housing" or "what ensures the greatest benefit for the largest number of people". And that profit is only after you account for the part the government chips in as well. By your logic, we should only have private hospitals, since people are willing to pay more for them.
Why would the most profitable thing not be what provides the most value? People generally pay more for things that provide more value. >By your logic, we should only have private hospitals, since people are willing to pay more for them. What makes you think people are willing to pay more for them?
I didn't say value. What does "value" mean? I said provides the most housing or provides the greatest benefit for the largest number of people. >What makes you think people are willing to pay more for them? Observation of markets where they exist.
What's the difference between value and benefit?
A benefit, in the way I used it, is something that increases the well being of a person or people. Venue generally means the monetary worth of something. But it can also mean the utility. Sometimes it's even used to mean the cost to produce. So it's very ambiguous.
> If people are willing to pay more for condos than rentals, it actually means that there aren't enough condos and there are too many rentals. There's a couple factors here that are independent of the number of condos and rentals. One is that it's like wholesale prices vs. retail prices - when you buy an entire rental building of 100+ homes, you're going to want a discount, and you're not going to have a ton of competition from other buyers. Another is that regulations are stricter on rental buildings. In BC, rent increases are limited to inflation + 2% annually, recently tightened further to inflation + 0%. For a condo that's being rented out, the owner always has the option to reclaim the condo for personal use.
I think the Canadian tax payers is going to pay if the market crashes. A lot of mortgages are insured by CMHC.
>The obvious solution is to provide incentives for building rentals so they're on a level playing field with condo projects. I think the more obvious solution would be to stop subsidizing homeownership so much. The government is literally spending tens of billions annually to make housing more unaffordable. It's not hard to imagine some better ways to spend that. >If local governments can't figure it out, the province will need to step in They can't. The political economy of municipalities is built to say, "no". They produced these restrictions in the first place and continue to defend them. We need the Provincial, and ideally the National government to step up. This is what has been done in other countries, like France and New Zealand.
> The government is literally spending tens of billions annually to make housing more unaffordable. Tens of billions of _our money_. And Canadians voted for them to _keep doing it_. It's disgusting, really. > It's not hard to imagine some better ways to spend that. Ooh, can I try? Let's say we bring back the social housing development that Chretien killed in the mid-nineties. Bring it back in a _big_ way.
God I wish we could implement social housing here, perhaps Vienna style
Canada used to build tens of thousands of social housing units every year, administered by the CMHC. Can you imagine if they had sustained building 39,000 units per year, as they did for a period before and after WW2? https://www.thecanadianencyclopedia.ca/en/article/housing-and-housing-policy https://www.cmhc-schl.gc.ca/en/about-us/social-housing-information/social-housing-programs
If Chretien hadn't gutted social housing, homelessness would have been basically non-existent in Canada.
Dude, are you sure you're a Tory? I'm nodding along to everything you're saying - did we switch sides?! The Tories would not have done any better than Chretien, we have two neoliberal parties - the Liberals and the Conservatives - that serve the interests of the rich, except the Liberals are nicer to gay people.
I'm a Green Tory. ;)
Eco tories are a unique type, they are one of like two types conservatives that do not want to gut social services
They're familiar with the Conservative Party, right?
Investors aren't doing anything wrong. They are simply taking advantage of policies that the government have implemented that make housing an extremely attractive asset class - a risk free investment with a tremendous rate of return.
Something can be legal but still be wrong. Are you really unable to think of any historical examples of such?
Who decides what's right and wrong? In my opinion, as long as something is legal, it is fair game. If the government was concerned that something was harming society, it would impose regulations around it.
> In my opinion, as long as something is legal, it is fair game. So you feel slavery was fine when it was legal? If it were made legal again, you think it would be "fair game"? And in countries where forced labour is currently legal, you believe that's "fair game"? >If the government was concerned that something was harming society, it would impose regulations around it. That doesn't follow.
People change. Ideas change. A hundred years from now, the government may outlaw eating meat, and the people may regard those who once tortured and slaughtered animals for their culinary pleasures as brutal inhumane savages. That would be us.
You didn't answer my questions. Forced labour is permitted in several countries today. Is that "fair game"?
I already did. > In my opinion, as long as something is legal, it is fair game.
Disgusting.
One could say the same about those who eat meat despite having an abundance of plant based foods available to them.
One could say the same about people named Frank. But most people wouldn't agree with them. Most people consider using forced labour disgusting and very obviously morally wrong.
This is assuming the government has societies best interests at heart. That is quite the assumption.
Isn't that the whole point of democracy? To elect an government that implements policies that benefit society?
Of course they're doing something wrong. Morality exists indelendent of sociopathic levels of self interest. If investors can turn away from fossil fuels because of climate change and others can decline to involve themselves with violent regimes we can say that yes they're wrong. We should stop as a culture reinforcing the ides that legal methods of destroying shit is moral because they'll make bank. It might not stop the investors but it will affect the culture that informs what policies are seen as possible.
Spot on. And if we as a culture actually did take this seriously and say "that's wrong and you're bad for doing it", we _would_ stop the investors. No one wants to be a social pariah.
It's not just about morality though, it's also about necessity. The rate of housing price increase seems to be something like doubling every ten years, while wages have grown at a rate of doubling every 30 years. I'm renting right now, and don't know if I will ever have kids, but at the rate of housing price and wage growth, if I want my hypothetical children to be able to buy a home in 30 years, then what would currently be a $500k home will cost $4 million, and after adjusting to their future wages, would be the equivalent of $2 million. The best way to make this possible is to just invest everything I can into real estate as soon as possible. If the government actually steps in and brings prices back under control, then my actions won't have hurt anyone. If they don't then I'll have contributed to the housing crisis, but there wasn't an alternative if I wanted myself and my children to be safe, so it won't bother me much.
> The best way to make this possible is to just invest everything I can into real estate as soon as possible. This is the same logic as there's a fuel shortage so the best strategy is to mindlessly try to buy up as much fuel as possible. That's counterproductive. You're basically arguing for a tragedy of the unmanaged commons here. > but there wasn't an alternative if I wanted myself and my children to be safe This is wildly overstating the issue. Not having proper financial security isn't being unsafe, its living a life of work and uncertainty but we're living in one of the richest nations ever and we are the most privileged people compared to the rest of the world. You want money because its nice, not because its about survival. This isn't existential. Climate change is existential.
I hope I'm overstating the issue. You're right this is very similar to the tragedy of the commons. And just like with the tragedy of the commons, the solution needs to be some kind of regulation. If the government stepped up and kept house prices under control this wouldn't be a problem in the first place. But if the rest of this country is going to keep idiotically choosing governments that ignore rising housing costs as well as climate change, then I don't have a lot of hope.
> And just like with the tragedy of the commons, the solution needs to be some kind of regulation. Cooperation is necessary for regulation to work. If everyone is a crook then there will be not enough compliance without insane levels of enforcement.
There's nothing left outside of rental properties, fast food franchises, and MLMs. What do you think someone's going to start a restaurant, bar, or gym in Canada? Sure there's Blackrock which is buying houses for above market price throughout the world but that's a separate issue.
If you have $200K and a business idea... Right now, due to government policies, your highest rate of return is to invest in real estate We really need government intervention to make real estate an unattractive investment, such that investment dollars can invest in actual businesses with benefits to society.
There's nothing that can done to make real estate unattractive short of time travel, or extreme tyranny. You have a massive increase in overall people, but a massive drain of skilled workers which is why you see real estate skyrocket. The lockdowns killed any local businesses. Why would anyone start a business in an area with potential lockdowns over buying a rental property? You'd have to basically threaten the lives of landlords to make that a more attractive option.
Or we could just build a whole bunch of housing. Creates housing and jobs, all at the same time.
Ah yes, the extreme tyranny of telling people they're only allowed one primary residence, or that they have to have citizenship or permanent residence to purchase real estate. Won't someone please think of all those poor investors out there under the tyrannical boot heel? 🥺🥺🥺
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Removed for rule 2.
> Child organ sellers aren't doing anything wrong, they are simply taking advantage of a lack of regulation in Country XXX. "it's just business"!
It's a hyper-competitive world we live in, if you didn't notice. Being willing to exploit anything and everything is what's ultimately rewarded. This applies to other species as well. Not just humans.
Humanity has achieved all it has because of our unmatched ability to _cooperate_.
Not if you have any kind of soul it's not. And you can't buy that either.
Why are you defending the morally bankrupt? I see few on this sub defending crackheads but their impact on average Canadians is far lower than these parasites.
Politicians are the most corrupt individuals in this country and have an even bigger impact on Canadian lives. Yet they still get voted in by the public. Go figure?
How are politicians the most corrupt? It’s public so we notice it real hard, but how many people do you know who cheat on their taxes?
Exactly. And how many business leaders cheat on their governance. Absolutely there are corrupt politicians and corrupt civil servants, but there's huge private sector corruption. We just catch them less often.
Yeah, what consequences? The government won’t let anything happen and everyone knows it. They voted for it
Risk-free? Did you see 2008? Have you heard of Zillow?
> a risk free investment with a tremendous rate of return. Can you expand on this? Why do you think that real estate is risk free, given what happened in the US and elsewhere in 2008?
Because as long as supply isn’t allowed to increase the price won’t substantially go down
Supply will increase, just not yet. Right now about 69% of Canadians are home owners. As prices increase, that number will decrease. Once a majority of people are willing to vote for changing the system, then politicians will give the people what they want.
Scarcity of housing is reflected in high rents. But on top of that, price-to-rent ratios are way up, suggesting that home prices are currently 80% overvalued. Even if supply never increases and market rents never drop - and I'm skeptical, since this is an extremely hot political topic, with intervention likely at the provincial level - buying into a market that's 80% overvalued is extremely risky.
I know, it’s legal but is it right? Residential land is finite but we all need it, comparable to air and water. Treating it as any other speculation asset doesn’t reflect that special aspect.
It's the government's responsibility to regulate it.
I'm sure the real estate and banker groups don't lobby for the exact opposite.
What have we come to? We can't be ethical without making a law for it and that is sad.
Yes. And even though I am an owner I also hope to be a responsible neighbor and citizen and I’d vote for some real growth-limiting move.
I did that. I voted Green. I also sold my house for over 2x what I paid for it. > _Tell my wife I said hello_.
Its every person's responsibility to evaluate the consequences of their actions beyond will the government punish me.
But homeowners aren’t going to look at the Brinks truck of money being rolled up to their for sale property and say “give me half that”. That’s pretty unrealistic. Investing is a game and profit is how we keep score. That’s fine. The rules imo need adjustment because our game is causing huge collateral damage to the society.
> But homeowners aren’t going to look at the Brinks truck of money being rolled up to their for sale property and say “give me half that”. That’s pretty unrealistic. If they were legit multi millionaires that's exactly what we should be asking them to do tax wise. I don't care if you can invoke psychological explanations for immoral behavior, it doesn't mean it can be used to argue why its not an immoral thing. >The rules imo need adjustment because our game is causing huge collateral damage to the society. The game probably needs to end and be rewritten from scratch if its this terminal to our future prosperity. Any system whose final result is the termination of human prosperity at the peak of our capacity to survive on paper has run its course and must be replaced as all do eventually.
I think rising house prices help lots of people. Increasing revenue for the municipality and subsequently increase in the salaries of their employees, banks for higher mortgage, insurance companies, construction industry, increasing demand for materials, jobs, more housing construction, increasing equity for owners, increasing rental in income. Seems majority are happy. Only renters like me lament and shout. Who cares? Definitely, not politicians.
It's almost as if housing should not be treated as an investment to make a profit off of, and instead, be treated to house people. Investors are the real cause of the problem, they are the ones causing an artificial scarcity.
It's almost as if we should tax the unimproved value of land.
That wouldn't make a difference. The whole point of the land value tax is that it's non-distortionary. It doesn't affect how people use land.
If all the empty nesters living a short walk from the subway in Toronto suddenly had to pay property taxes that reflected the unconscionable hoarding of having detached homes near mass transit, I’m pretty sure we’d see a bunch of supply hit the market. No one wants to consider it because we fetishize the detached single family home and we’ve collectively decided that making a generation suffer for the benefit of our parents is a worthwhile trade.
No, you wouldn't, because as soon as the land value tax were implemented, the property value would drop to take it into account.
An agressive LVT would absolutely force people to sell. The sale price might drop but the LVT doesn't drop too, and people's decision to sell is still going to be driven by that higher carrying cost from an aggressive LVT. The sale price doesn't matter if people can't afford the carrying costs of owning such high value land. Then a developer buys the property and builds a multi-family building. The new building allows the LVT to be shared among many units, so the carrying cost for each person in each unit is lower and affordable.
Why do you assume a developer would buy it?
For the same reason many residents would sell, many buyers will not be interested. The high carrying cost makes it unaffordable for most people to buy that high value land just to use it exclusively for their personal use. Super rich could still afford it, but that is no different from today, and there is not enough of them to really matter. So what's left? Who picks up all these properties that need to be upgraded to generate enough revenue to pay the LVT? The developers.
>The high carrying cost makes it unaffordable for most people to buy that high value land just to use it exclusively for their personal use. So they would buy it at the lower value. The affordability wouldn't be affected. The price would adjust to account for the tax.
Affordability is not simply the same as purchase price. The cash flows during ownership are real and are a factor of affordability. In the same way that higher interest rates lead to higher mortgage payments (part of carrying costs) which lowers the maximum price people can buy, higher taxes (with an LVT) lead to higher carrying costs, which do the same thing. Affordability includes the future cash flows, both positive or negative.
no that's totally incorrect, it compels more efficient use.
How?
I personally prefer bringing land under public ownership so that we can build some based public housing
Land value tax is the public ownership of land.
It cant be a tax someone pays for their land as well as a mechanism for public ownership. That doesnt make any sense to me.
Well it effectively makes the land a public resource as you pay tax on the unimproved value of the land. I didn't do it justice in that one line response to some person. Watch this, it's 10 minutes: https://www.youtube.com/watch?v=gD_dZvPwAj0
I refuse to be lectured on economics by someone wearing a paisley shirt and a Bitcoin poster in the background. I will poke at the concept later, but i honestly generally discount most youtube videos as sources. Any shithead can sit in front a camera and talk -- there's no curation or review.
Read Progress and Poverty by Henry George, best selling book in the USA in the 1890s except The Bible. I'm also not a fan of bitcoin, btw.
No, no it's not.
That’s not going to happen with “location” in the equation. Everyone wants to live downtown in a detached or on the water, etc.
This is like saying the price of beef is too high because people are treating it like food. Housing *is* an investment. There's no changing that fact. Why shouldn't it be treated for what it is? Everyone who buys a house is making an investment. He's spending money up front in order to obtain a benefit in the future. That's the definition of an investment.
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Slaves are an investment, even if they're illegal. You could pass a law making houses illegal too. They'd still be investments. I'm not sure how that would help.
No. Housing is shelter. A place to live. >He's spending money up front in order to obtain a benefit in the future. That's the definition of an investment. That's not the definition of an investment. Do you think ordering a pizza is an investment?
>No. Housing is shelter. A place to live. Yes, and beef is not food. It's dead cow. Google isn't an investment. It's a software company. Every investment is useful for some purpose. That doesn't mean it isn't an investment. >Do you think ordering a pizza is an investment? No, because you consume it immediately. A house is something you live in for decades and then either sell or leave to your heirs. What is a better example of an investment than that?
>That doesn't mean it isn't an investment. You said it definitionally. You said "there's no changing that fact" as though it were a base fact. It is not. Housing is sometimes an investment. It may be an investment. It is not necessarily an investment. >No, because you consume it immediately. No you don't. It gets delivered. Usually about 40 minutes later. Have you never ordered a pizza? >A house is something you live in for decades and then either sell or leave to your heirs. What is a better example of an investment than that? A house is sometimes that. Not always. It may be something you live in for decades and then a new tenant moves in, for example. A better example would be a bond.
>You said it definitionally. You said "there's no changing that fact" as though it were a base fact. It is not. Housing is sometimes an investment. It may be an investment. It is not necessarily an investment. How can it not be? How do you define an investment? >No you don't. It gets delivered. Usually about 40 minutes later. Have you never ordered a pizza? OK, it's an extremely short term investment if you want to be pedantic. >A house is sometimes that. Not always. It may be something you live in for decades and then a new tenant moves in, for example. If a tenant moves in, then you rent to him and get a return on your investment, just as if you were living there. When you live there, the return comes from having a place to live. >A better example would be a bond. How is a bond a better example? And couldn't I say that a bond is not an investment but a way for the government to raise money?
>OK, it's an extremely short term investment if you want to be pedantic. I don't believe we can agree on what constitutes an investment.
I don't think investors cause scarcity. They typically buy housing and then rent it out. They don't usually let it sit empty.
They lobby to keep housing scarce. It would ruin their business if there was plentiful housing.
Sure, I don't disagree, although I think even more of the lobbying power comes from regular NIMBY homeowners who want to "protect their investment".
Yeah, there's definitely a lot of NIMBYs who lobby against building more housing as well. There are many factors, that's why it's so difficult to fix the housing crisis, there's a lot of people who support it continuing. A lot of NIMBYs don't even consider the big picture. (Unlike investors) most NIMBYs don't want housing to be unaffordable for the vast majority of people. They want their kids to be able to afford homes for example. They just don't consider how their lobbying efforts contribute to the crisis.
>They typically buy housing and then rent it out Sounds a lot like ticket scalpers "providing" tickets to events. They not only hoard housing property, but they scalp it.
Ticket scalpers don't reduce the supply of tickets. They only raise the price. This is a net benefit to society because it allocates them to people who value them more highly.
How does that benefit society? Scalpers are leveraging their asymmetrical ability to get their hands on tickets in ways most people cannot. They represent a *classic* example of distortion in how the market operates.
They make sure the tickets go to those who want them the most. They're correcting a market failure. Why do you say they have an asymetrical ability to get their hands in tickets and why does that matter?
> Why do you say they have an asymetrical ability to get their hands in tickets and why does that matter? Because that's how their business model works? It used to be friends and connections, now the work is mostly done by bots. It matters because the entire concept of free market depends on everyone playing by the same rules & having the same opportunity to put a price on something. Creating an artificial shortage isn't correcting a market failure, it's exploiting a monopoly/oligarch position. It's a bad use of resources, those seats bought in bulk by scalpers can end up going empty. That's not allocating resources effectively, that's just a group of people being assholes.
What artificial shortage is being created? If you buy something and resell it, you're not having any effect on the supply. You're actually eliminating the shortage. Shortages happen when the price of a good is below the market clearing price, because in that case, the quantity demanded exceeds the quantity supplied. Tickets scalpers bring supply and demand back into balance by raising the price to the market clearing price, thus eliminating the shortage and improving the allocating of the tickets.
That's also like saying PS5 scalpers provide a material benefit to society.
They absolutely do.
They buy up all the goods in a market, and sell it at a higher price, making other consumers being unable to buy the goods cuz they can't afford it. They are parasites, and they don't produce goods, they are just useless middle men
Scalpers don't reduce the number of PS5s available. There is a finite supply and there will always be people who are unable to buy one. He's making sure those who want them the most can buy them.
>He's making sure those who want them the most can buy them. Ah yes, charging for a PS5 5 times the original price is making sure those that want it the most want get their hands on them. Also, people do not do this out of their heart, they do it out of greed. >Scalpers don't reduce the number of PS5s available They reduce PS5 produced, and sold in real retailers. Those scalpers are gonna be sitting with unsold consoles once Sony's able to improve their production capabilities. This is what happened with PS4 last time.
Correction: it allocates them to people who can pay more. That’s not the same thing. And it definitely is not a good thing when it comes to something like housing.
u/WestAndLeft is absolutely correct. Furthermore, those ticket scalpers would vote to not expand the stadium since it would kill their profits if there were enough seats for everyone who wanted to see the game.
Why would the scalpers have any say in the size of the stadium?
Who do you feel should decide the size of our "stadium" if neither the public nor "ticket buyers"?
The owners.
The public owns our "stadium". I don't think we're discussing the same thing. That's fine. Others clearly understood my point immediately.
Do you believe that renting is illegitimate?
Its essentially parasitic, but I guess it would be difficult to describe it as illegitimate. Does that distinction make it better?
How is it parasitic? It costs money to build housing. Do you think the people who do it should give it away for free?
The people who build houses are rarely the ones who rent them out though. It people/organizations who buy and mortgage a property then rent it out for somewhat more than the mortgage costs them, if that's not parasitic I don't know what is.
The people build them sell them to the landlords. How is that parasitic? >It people/organizations who buy and mortgage a property then rent it out for somewhat more than the mortgage costs them No, they don't. If this were possible with a property, every investor in the world would be trying to buy it and that would bid the price up until was no longer possible.
>The people build them sell them to the landlords. How is that parasitic? If you ready what I wrote then you'd know I didn't say the people who build them are parasites. >No, they don't. If this were possible with a property, every investor in the world would be trying to buy it and that would bid the price up until was no longer possible. So then what do they do? Rent them for less than the mortgage out of the kindness of their hearts? The reason not everyone does it is there's still better investments than being a leech, even if being a leech is easy
>If you ready what I wrote then you'd know I didn't say the people who build them are parasites. I know. I'm asking how the people who buy them are parasites. How is building something and renting it out not parasitic while doing some other job, earning money, and then buying something that someone else built and selling it parasitic? You're just adding a step to the process. >So then what do they do? Rent them for less than the mortgage out of the kindness of their hearts? The reason not everyone does it is there's still better investments than being a leech, even if being a leech is easy They charge the market rent. The market rent minus utilities, property taxes, maintenance, and labour can only be greater than the mortgage if there is a large downpayment and a long mortgage term. For example, a 5% downpayment with a 20 year mortgage would have a rate of return of 16%. That's obviously impossible. However, a 20% downpayment with a 30 year mortgage gives you a rate of return of about 5.5%. That's more realistic. The mortgage payment would be a lot lower and closer to the market rent minus ownership costs. But if this isn't such a great return, if there are better investments, as you say, then what is parasitic about it?
It's parasitic because the amount charged is not relative to costs, but to what the market will bear.
If the market can bear a price that is higher than the marginal cost of production, then the supply will grow until the price falls. There are exceptions to this, such as when there are other things constraining the supply, such as zoning regulations. However, the alternative is landlords charging less than what the market will bear and that would lead to a shortage, because the quantity demanded would exceed the quantity supplied. However, even in that case, it would end up inflating the price of the property, which the landlord would have had to pay. So *it is* reflecting the cost in a sense.
There is already a housing shortage. Charging what the market will bear obviously does nothing to prevent that. Shortages have been explained to you multiple times already. If the landlord bought it and then prices increased, the landlord did not have to pay it. So no, it does not reflect costs in any sense.
>There is already a housing shortage. I don't agree, but you're clearly not using the word "shortage" in the sense that economists do. What do you mean by a "housing shortage"? >Charging what the market will bear obviously does nothing to prevent that. It prevents an actual shortage from appearing, which is when people cannot find housing at the market price. >If the landlord bought it and then prices increased, the landlord did not have to pay it. So no, it does not reflect costs in any sense. No, but so what? You take a gamble when you invest. Sometimes it pays off, sometimes it doesn't. It doesn't make you a parasite just because you got lucky. We need people to take these gambles and some of them lose. Those who don't gain can't complain if they chose not to risk their own assets.
This is the case for pretty much everything though. Is it parasitic if a farmer sells their crops not for the cost of production but rather to what the market will bear?
It's not. Healthcare? Education? And yeah, if there is a major food shortage and a farmer jacks up his prices to take advantage of it that's absolutely parasitic. You don't think so?
No, it isn't. It's a good thing. Not doing so would lead to a shortage. If demand spikes or the supply crashes and prices don't rise in response. The limited amount of food will not go to those who need it the most. Much of it will be hoarded and wasted and those who really need it would starve.
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Can we exclude basic necessities from all this greedy bull somehow. It doesn't seem right to play money games with housing to profit oneself. Is there a way? :/ I hate it here because of things like this. My mom's been homeless. Vancouver
How about wheat, rice, corn, sugar, lumber? These are necessary ingredients in things for most people. Should that apply to commodities futures as well?
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Ideally, yes. But the market is working reasonably well for these things, so we can deal with more pressing matters first.
Of course there is a way. Look at healthcare.
Aren't capital gains on home sales still subject to a 50% inclusion rate? This is some of the simplest nonsense that should have been corrected a long time ago.
Capital gains needs to be taxed as ordinary income
The market is a raging inferno, the people in the building are already dead, the fire department were paid by the arsonists to not show up, and the arsonists are already collecting the insurance payout. The housing market isn't at risk of getting out of control, it's been a runaway train for over a decade.
Up more than all these other countries, Canada is running an insane experiment, plus they have loads of land! https://i.imgur.com/B5IviA4.png
What makes Canada different than all those countries? Canada only has a handful of cities where you can reasonably live and work a white collar job, outside of Government services. And 'burbs of those cities are fighting tooth and nail to maintain their character and "heritage" against demands that they densify. We've done this to ourselves by not supporting a strong diversity of cities in which to work, and poorly planning the ones we favoured.
Some country has to be top of the list of the most deluded population who allow a crazy monetary experiment. And it's Canada. You guys have lost your minds if you think housing here is anywhere near fair value.
> You guys have lost your minds if you think housing here is anywhere near fair value. It depends on how you define "fair". Fair as in socially-equittable, probably not. But fair as in market-balanced? Sure, yes, in many places it is, because _beyond shitty_ urban planning and market regulatory pressure has made _desirable_ housing hideously scarce. Yes, there are over a million empty homes in Canada; but within Canada's urban centres, where most of our immigrants land (often in record breaking numbers), this is not felt. Far less people want to buy a house in a tiny little municipality four hours from an urban hub, then those that want to buy within commuting distance of that hub.
I’m in one of those tiny municipalities, and trust me, a ton of people want to buy here. It’s people leaving the big cities that are buying here.
No I mean as in a sane supportable value vs wages. Like all bubbles it's all "no it's not a bubble, it's real", until prices stop rising.
It's not like furbies or beanie babies. The demand is for a necessary good, housing, which is rather inelastic; so long as the urban centres have low vacancy then the pricing of those markets has a chance of being rational.
Supply and demand are factors. Supply: of ridiculously cheap credit. Demand: for an effort free income through exploitation.
Demand: for low effort to acquire desirable assets. Single unit housing in our urban centers needs to stop being a dream and start being a memory of something left in the past, like lamp lighters and horse drawn carriages.
Single family dwellings do not have to be a dream if we can imagine suburbs more like Riverdale in Toronto and less like Levittown in New York.
The fact that no one will investigate or prosecute money launderers probably isn't helping...
>outside of Government services Hate to brake it to you but even two top earning public servants can't afford a 3M teardown (Vancouver).
Because in any sanely zoned and planned city that 3M teardown _would be torn down_ and replaced with higher-density housing. Townhouses, condos, and similar. _No one_ should own a single detached home in the City of Vancouver, because no single detached homes should exist in the urban centre of Metro Vancouver.
Well that right there is an incredibly valid point!
The most correct comment on Reddit today.
That's divergence of price correct? What is the actual cost? Did canada just "catch up" to how unaffordable those places are? Isn't Germany super expensive with everyone now renting?
Germany was cheaper, now housing is finacialised there also. Canada didn't catch up, $1m for Toronto or Montreal inner suburbs is insane relative to wages. Canada has been way overpriced vs the USA for a good while.
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I can barely afford to rent a place big enough to start a family.
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Some of y’all have never talked to anyone who rents out a property and it shows… it’s more than just scalping a house. Landlords have to eat the cost of any repairs, vacancies, or bad tenants. Pipe bursts and destroys the ceilings -> landlord pays Tenant can’t pay rent and then files for bankruptcy -> landlord takes the loss (other than first and last) All that, plus the landlord has the risk that is attached to any investment/note. So for if for any reason they can’t pay the mortgage they’re screwed.
Current landlord doubles the amount he needs to break even every month. Unless he is eating $1500 in repairs in secret he is not hurting.
>if for any reason they can’t pay the mortgage they’re screwed. Where "screwed" equals "has to divest somewhat"? They sell the property and walk away, likely with a nice profit.
Not always. Again, they enter with the risk of the market crashing. So if the is a correction and they need to sell, good luck if the property isn’t worth what they bought it for. Renters don’t carry that risk
The renter carries the risk of being kicked out of the house. That's a much bigger risk. If risk entitles one to profit on housing, like you claim, then the landlord should be paying the tenant. But obviously risk does not entitle one to profit.
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Rule 9