Canadian housing bubble thread

[m22au]

Short-seller Cohodes: Home Capital is a 'hornet's nest of trouble'
http://www.bnn.ca/video/short-seller-cohodes-home-capital-is-a-hornet-s-nest-of-trouble~1105061

HCG down about 19% today.

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[_eug_]

This morning Ontario unveiled their "Fair Housing Plan"

Measures include:
- 15% tax on foreign buyers who dont live or work in the GTA
- Rent control which caps rent increases to inflation

There are other initiatives as well which can be found here:
https://news.ontario.ca/mof/en/2017/04/ontarios-fair-housing-plan.html


It doesn't make sense to me that foreign students are exempt from the foreign buyers tax. Enroll in a college or university and buy a few houses avoiding the tax.

 

[i960]

It doesn't make sense to me that foreign students are exempt from the foreign buyers tax. Enroll in a college or university and buy a few houses avoiding the tax.

I'm sure a few connected individuals made sure that happened. It's clear what the loophole is - and it doesn't make any sense to me that a foreign student would even be considering real estate while going to school.

 

[Gotcha]

I'm sure a few connected individuals made sure that happened. It's clear what the loophole is - and it doesn't make any sense to me that a foreign student would even be considering real estate while going to school.

I bet its because the government still wants the foreigner's money. They always talk about investing in Canada, and they did after all have those investment visa's until not too long ago where you just had to park some money with the government tax free, and then you got it all back, along with permanent residency, and you really didn't invest in the country at all, just invested in yourself.

They probably just figured out that parked money, in the form of buying a house isn't any sort of investment. But perhaps they don't want to turn away students because they do after all pay the international rate for the universities, which is usually over 3 times the rate that the locals pay, and if the student really is going to school, they are also spending money in other ways while here. The foreigner who just buys a property and never visits it makes a limited contribution to the economy, but the student, they probably figure, spends much more money here. I think they didn't want to risk losing this cash cow. Many articles already point out that the big universities in Canada require this internal student fee because its paramount to their bottom line. Without this huge influx of cash, they wouldn't be able to operate in the same way.

 

[_eug_]

Why cant the international students rent like the vast majority of Canadian students? It makes no sense that a student will come here and pay 1.5 million dollars for a house which they will live in for a maximum of 3-4 years while they go to school (probably much shorter than that as they may only doing a few semesters anyway). This is foreign speculation money just like the rest of it. This is just a loophole to be taken advantage off.

I worked in the mortgage industry in Vancouver and after they implemented the foreign buyers tax there last summer we had buyers changing applications to add Canadian residents to the purchase agreements, claiming common law relationships. Some even claiming same sex relationships. These people had no issues with qualifying on their own before so I call bullshit.

If they are serious about this tax, there needs to be no exceptions and no loopholes.

Maybe the students who end up staying for a number of years after education to work and pay tax then they can apply for a rebate of the original foreign buyer tax but there has to be proof of a certain number of years of filed income taxes in Canada.

 

[jj90]

Why cant the international students rent like the vast majority of Canadian students?

The majority of international students DO rent. You claim to have worked in mortgages in Vancouver then you should know that is true.

Only 10% or so buy, these are the ones who's parents are wealthy enough to buy anyways and are just using their kids's name.

 

[i960]

Only 10% or so buy, these are the ones who's parents are wealthy enough to buy anyways and are just using their kids's name.

Yeah this is why everyone is pointing it out as a clear loophole that was (intentionally?) left open.

When a municipality has an incentive in the form of increased property taxes the entire thing is at odds with the local population and creates a moral hazard.

 

[_eug_]

The majority of international students DO rent. You claim to have worked in mortgages in Vancouver then you should know that is true.

I worked for a lender doing mortgages for 5 years, we did deals all over the country. I got sick of looking at peoples finances and the ridicules debt loads and left that job last summer. We did very few deals for foreign buyers or foreign students, personally I never did a single one. These people are either getting mortgages from brokers that can speak their native language or just paying cash.

Most deals were done with Canadian families who were heavily indebted and barely able to qualify for a mortgage. Lots of parents co-signing mortgages. Lots of "gifted" down payments from parents to children. Refinancing every year or two to consolidate maxed out credit cards into the mortgage. It is really not a pretty picture when you look at it from the inside. I had to decline clients who made unconditional offers on properties during bidding wars because of bad appraisals or incomes that didnt match the information that they told me in the pre-approval stage.

I truly believe that the housing market here is a ticking time bomb. Something has to give.

 

[Gotcha]

When a municipality has an incentive in the form of increased property taxes the entire thing is at odds with the local population and creates a moral hazard.

Yes, and lets not even forget that governments can run a deficit for god knows how long, rolled over year after year, without any hope of ever paying off the debt, and this never has to be explained. So even if there is a dip in revenues collected, it really isn't a huge problem.

An individual will often hit a brick wall when it comes to how much they can borrow, but the government, especially federal, never. I often wonder how the government can tell the citizens to be careful with their money, and say this with a straight face, while at the same time doing the complete opposite with the finances of the citizens.

 

[ironchef]

I'm sure a few connected individuals made sure that happened. It's clear what the loophole is - and it doesn't make any sense to me that a foreign student would even be considering real estate while going to school.

Unless you are one from China.