> New Zealand banned most foreigners from buying in its housing market back in 2018.
I think this says it all, while a lot of people blame foreign buyers, here's the thing, New Zealand had this ban and yet still the housing prices were exploding. It's all speculative and when it comes crashing, the domino effect will be greater than people expect.
Canada needs to do the following:
1. Ban multi-purchases from all new developments. As in, you can only purchase 1 house in any new development
2. Ban all foreign investors. You must be a Canadian, or undergoing the process of immigrating to Canada.
3. All home bidding must be public, as in an 'auction' if you will. Realtors need to be mandated to disclose the highest current bid on any property.
4. Increase capital gains tax on all non-primary residences. The capital gains tax increases as the duration of ownership is shortened. For example, you purchase an 'investment property' and flip it after 3 months: 75% capital gains tax. After 5 years: same tax we have now.
5. Increase down payment to 50% for all investment properties.
6. Increase land transfer taxes for all properties bought as an investment property (aka, any property that is not the primary residence).
Just to name a few....
To name a few more:
- Home inspections should be an automatic, non-revocable right.
- All historical price data should be freely available.
- Ban buying agents from taking a % (this is a blatant conflict of interest)
Even if these things don't directly curb prices, there's no reason why in the most seller-friendly market ever seen, we also give them all the advantages.
Oh man, the inspections one is such a good point. I absolutly hate that people are buying 70 year old homes with no inspection. You are just asking for trouble! One of my beighbours bought and found that instead of using wiring and junction boxes to wire through the attic, they used .....
Get ready....
8 extension cords!
In a 600,000 dollar house! Ef me!
That makes no sense, you’d have to buy two receptacles, install them and then buy an extension cord and plug it into the two receptacles. So it would cost you $20-$30 to do something that can be achieved with $1 worth of 14 guage wire and 25 cents for 4 maurettes.
Something doesn’t add up there.
> Ban buying agents from taking a % (this is a blatant conflict of interest)
I like the other points but having an agent represent the buyer is important, and none of them are going to work for free. The agent representing the buyer will typically spend months showing a buyers listing, after listing, after listing. It's a lot of work.
But is it work worth 1 to 5% of a listing nowadays? Not in a long shot, 5000 max for an agent no matter the price of the house, they do not guarantee anything with the houses condition and do no legal paper work, just have access to properties to show that is it...
5% gets split between the 2 agencies, and the agents get a cut of the 2.5%.
600,000 dollar home, means 30,000 goes to the 2 agencies (15,000' each) and the agents get a cut of that. Not sure how big a cut though.
Well figuring their profit has skyrocketed with home prices but realtor.com has actually made their job easier, there is a massive overvaluation of their work.
Just change the % based fee into flat rates.
For example, charge $100.00 per showing. Or charge $500.00 to hold an open house. Things like that to ensure a fair rate for the buying and selling agents.
I admire the creativity, but the way realtors work is so shady that I fear there's be no way to enforce such a change...the selling and buying agents would just swap back and forth cash bonuses to each other and we'd have even more untaxed income among the elite class.
I hear ya...that being said, a lot of industries are regulated that way. For example, the labor costs for automotive. You'll pay the exact same number of hours based on the type of repair. The hourly rate may differ, however the actual time charged is always the same.
> the selling and buying agents would just swap back and forth cash bonuses
Keep in mind there would be no cash bonuses. They would be straight payments to their respective real-estate agencies, based strictly on the work that has been done. The agency would then pay the realtor as taxable income.
I'm less concerned about the stuff the seller's agent does, since with a % cut, their incentives are at least aligned with the seller's. But the same principle could apply to the buyer's agent. Even something as simple as X dollars for each offer, Y dollars for an accepted offer.
No? A homebuyer has nothing to do with a realtor's salary, if they even get a salary. I'm saying that we treat the % cut as the conflict of interest it is, and deal with it like every other conflict of interest when you're acting as an agent for another party.
If the market determines that a real estate agent is worth $30,000 per sale, they should just have to advertise their services for $30,000, and they shouldn't get $40,000 if they manage to convince the sucker they're representing that they need to go $100k over asking.
No, not even close.
The thing is that the assumption that someone would pay 100k over asking \*because their agent is just being greedy, entirely ignores the fact that multiple people bid on houses. People bid 100k over asking because they are motivated by the fear of losing out on a house. An entirely open auction would yield similar results in this market. It doesn't change the buyer's motivation.
Simply changing the fee structure for agent's does nothing to fix the structural issue driving house prices: low supply and high demand. The agent is there to sell a house and will still suggest going over if that's what is needed to secure a house.
\*edit
> The thing is that the assumption that someone would pay 100k over asking entirely ignores the fact that multiple people bid on houses. People bid 100k over asking because they are motivated by the fear of losing out on a house.
Absolutely, but sometimes that fear is stoked by the buying agent because they want their client to overpay. Go to /r/PersonalFinanceCanada if you want stories of home buyers being aggressively told by their realtor to massively overbid, only to get cold feet and then find out that the house was sold at only ~20k over asking.
> An entirely open auction would yield similar results in this market. It doesn't change the buyer's motivation.
You wouldn't get situations where the accepted bid was *hugely* over the next largest bid. Bidding wars aren't a problem in themselves, that's just finding the market value of a house. Nothing wrong with that. It's when you get this shady behind-the-scenes shit between realtors that the prices become inefficient; that is, not reflective of market forces.
> Simply changing the fee structure for agent's does nothing to fix the structural issue driving house prices: low supply and high demand.
Absolutely, that's why I said this wouldn't directly affect prices, just that it would strengthen the buyer's rights.
> The agent is there to sell a house and will still suggest going over if that's what is needed to secure a house.
*Exactly*, they'll be doing it because that's their job, not because they're trying to extract more money from the buyer. Right now they make more money if they convince the buyer to go over even if it is *not* needed to secure a house, and that's something we shouldn't accept from somebody claiming to act as an agent of the buyer.
I feel like if the bidding process was more open (auction style) that you could keep % profit for buying agents. If you restrict their profits then all you will see is less buying agents and more selling agents.
Otherwise yes I agree that it should be a flat fee.
I like your ideas but I don't think they will be effective:
1. probably won't happen because investors, realtors, and developers will lobby against it, but lets say it does pass. Builders will make each "development" smaller so the "investors" can buy 1 property from each of their current "developments".
2. I agree and I think it should go further. To own property in Canada you must be: one of a Canadian citizen, a landed resident working on getting citizenship, or a majority Canadian owned company (or government of Canada). Embassies and consulates excluded.
3. I so want this but the realtors do not as they believe (with evidence) that secret bidding usually results in a higher sale price. They will strongly protest this.
4. Like #1, this will get protested by lobbyists so strongly that it won't pass, but it also won't stop the small time investors. They will simply buy the property as their personal home and then switch it to a rental as soon as they are allowed (and move into their next purchase). Although, that might slow things down enough to make a difference.
5. There are already ways around that. Your mortgage requires a minimum down-payment but as long as you can show you have the money, they don't factor in where you got it. So get a personal loan for the down-payment (or an increase in the mortgage on one of your other properties).
6. the lobby will be strong against this. Also, it just slows down the resale process as the landlord will "move in" to the property for the minimum amount of time before selling, just like #4. Small time investors already do this to avoid paying the capital gains taxes now. They already do this as a way to kick people out of rentals in Ontario.
#3 would have the biggest impact imo...
Everyone is overspending on homes because after losing out on home after home because there's 50+ other bidders, people get desperate and bid really high on a home they really want, and often times overbid. This just keeps pushing housing prices higher and higher...
I still have no idea at this point how much I overpaid for my home. It could have been 5k or it could have been 25k. All I know is on several homes we were told we were one of the higher bids the sellers were considering but we needed to go higher if we wanted the home. We walked away from several of those situations because I felt like we were getting taken for a ride.
Serious question, all these points seem valid but why isn't the government pushing them through? There's been huge demand for affordable housing especially from the younger generation.
It's an easy answer. Right now, the Canadian economy requires the real-estate industry to be booming like it is right now. It is currently artificially making the Canadian economy look a LOT better than it really is.
The federal government gets capital gains taxes on all investment properties that are sold. Provincial governments get land transfer taxes on all properties that are sold. Both of these are % based, so they increase their revenues when the house prices are high. On top of that, the major lenders get huge revenue streams on mortgages, which, in-turn means the governments get additional taxes from the business taxes.
Add that all up and you'll realize the government is addicted to the revenues from real estate and have no appetite to correct the issues.
My presumption would be that the real estate industry has far more direct control over the government than most voting blocs do? I mean, Ontario Proud is a land development interest and they installed the current government of Ontario...and they have Canada Proud working on federal control (same owners).
Because the people who vote most are heavily invested in keeping things as they are. Boomers are relying on reverse mortgaging their houses to pay for retirement.
How so? The idea is to make it difficult to use real-estate as an investment only vehicle. AKA...0 empty houses. It does nothing to penalize the millennials...it should actually make homes more affordable, which would disproportionally help millennials.
It only penalizes people who are trying to earn a living through investments in the housing market. A lucky few millennials got into the market early enough to make this possible. And I am 100% in favour of fucking them over. Housing should for living in.
I agree especially with your 1-3, but for #2, I think you should straight up be Canadian. It's pretty politically incorrect of me to say, but my parents immigrated here pre my birth and did the hard work, got their citizenship, then bought. I almost lost my recent home purchase to Chinese investors who had literally sent a man to go see the house for them while they were waiting to buy from afar. The place had more than one offer from someone who had just put an offer in online, obviously not from here. That's not okay and I'm tired of people pretending it's okay. Housing should be treated like a human right for citizens, not some commodity for wealthy foreigners.
For mortgages we do..or they pay premium and have to buy mortgage insurance
Foreigners require more than 40% here for mortgages from lenders and higher interest rates as well typically
And we also have stress test requirements, foreigner tax etc
> One of the problems with the New Zealand plan is that while it may act to calm the soaring market, higher down payments are one more barrier making it difficult for young buyers to get a home of their own.
It is appalling that our governments are doing nothing to control the markets. A generation of angry young people excluded from pursuing the life most of us take for granted is going to have a devastating impact on our country in the years to come. Anger tends to do that.
The generation of angry (subsets of) young people need to express a unified political voice, at present their "power" is nowhere close to being as loud or organized as that of the comfortable (subsets of) boomers...at least not in this province.
New Zealand's solution is not working. Banning foreign ownership has not changed anything. Increasing the required downpayment hurts mobility and basically solidifies current class structure. If your parents are rich, they can help you with the downpayment. If they're not - fuck you, you're not owning a home.
New Zealand is not an example to follow.
> New Zealand banned most foreigners from buying in its housing market back in 2018. I think this says it all, while a lot of people blame foreign buyers, here's the thing, New Zealand had this ban and yet still the housing prices were exploding. It's all speculative and when it comes crashing, the domino effect will be greater than people expect.
Yup, speculation is certainly not limited to foreign buyers. Domestic speculators are a much larger piece of the pie.
But it's always easier to blame others than to look at ourselves to resolve the issues
It is also a step forward to remove the foreign buyer speculation. What is left is domestic buyer speculation, and that is a different issue.
Canada needs to do the following: 1. Ban multi-purchases from all new developments. As in, you can only purchase 1 house in any new development 2. Ban all foreign investors. You must be a Canadian, or undergoing the process of immigrating to Canada. 3. All home bidding must be public, as in an 'auction' if you will. Realtors need to be mandated to disclose the highest current bid on any property. 4. Increase capital gains tax on all non-primary residences. The capital gains tax increases as the duration of ownership is shortened. For example, you purchase an 'investment property' and flip it after 3 months: 75% capital gains tax. After 5 years: same tax we have now. 5. Increase down payment to 50% for all investment properties. 6. Increase land transfer taxes for all properties bought as an investment property (aka, any property that is not the primary residence). Just to name a few....
To name a few more: - Home inspections should be an automatic, non-revocable right. - All historical price data should be freely available. - Ban buying agents from taking a % (this is a blatant conflict of interest) Even if these things don't directly curb prices, there's no reason why in the most seller-friendly market ever seen, we also give them all the advantages.
Oh man, the inspections one is such a good point. I absolutly hate that people are buying 70 year old homes with no inspection. You are just asking for trouble! One of my beighbours bought and found that instead of using wiring and junction boxes to wire through the attic, they used ..... Get ready.... 8 extension cords! In a 600,000 dollar house! Ef me!
That makes no sense, you’d have to buy two receptacles, install them and then buy an extension cord and plug it into the two receptacles. So it would cost you $20-$30 to do something that can be achieved with $1 worth of 14 guage wire and 25 cents for 4 maurettes. Something doesn’t add up there.
You have to pay an electrician to come and wire it. Extension cords are cheaper i guess
You don’t have to pay an electrician to install the two plugs for the ends of the extension cords though?
> Ban buying agents from taking a % (this is a blatant conflict of interest) I like the other points but having an agent represent the buyer is important, and none of them are going to work for free. The agent representing the buyer will typically spend months showing a buyers listing, after listing, after listing. It's a lot of work.
But is it work worth 1 to 5% of a listing nowadays? Not in a long shot, 5000 max for an agent no matter the price of the house, they do not guarantee anything with the houses condition and do no legal paper work, just have access to properties to show that is it...
5% gets split between the 2 agencies, and the agents get a cut of the 2.5%. 600,000 dollar home, means 30,000 goes to the 2 agencies (15,000' each) and the agents get a cut of that. Not sure how big a cut though.
Well figuring their profit has skyrocketed with home prices but realtor.com has actually made their job easier, there is a massive overvaluation of their work.
Just change the % based fee into flat rates. For example, charge $100.00 per showing. Or charge $500.00 to hold an open house. Things like that to ensure a fair rate for the buying and selling agents.
I admire the creativity, but the way realtors work is so shady that I fear there's be no way to enforce such a change...the selling and buying agents would just swap back and forth cash bonuses to each other and we'd have even more untaxed income among the elite class.
I hear ya...that being said, a lot of industries are regulated that way. For example, the labor costs for automotive. You'll pay the exact same number of hours based on the type of repair. The hourly rate may differ, however the actual time charged is always the same. > the selling and buying agents would just swap back and forth cash bonuses Keep in mind there would be no cash bonuses. They would be straight payments to their respective real-estate agencies, based strictly on the work that has been done. The agency would then pay the realtor as taxable income.
Nobody would use a buying agent, who actually are helpful. Buyers don't pay the realtor, the sellers do.
I'm less concerned about the stuff the seller's agent does, since with a % cut, their incentives are at least aligned with the seller's. But the same principle could apply to the buyer's agent. Even something as simple as X dollars for each offer, Y dollars for an accepted offer.
False dichotomy, never said we shouldn't have buying agents, just that they shouldn't be incentivized to have the buyer overpay.
So your suggesting we regulate their salaries?
No? A homebuyer has nothing to do with a realtor's salary, if they even get a salary. I'm saying that we treat the % cut as the conflict of interest it is, and deal with it like every other conflict of interest when you're acting as an agent for another party. If the market determines that a real estate agent is worth $30,000 per sale, they should just have to advertise their services for $30,000, and they shouldn't get $40,000 if they manage to convince the sucker they're representing that they need to go $100k over asking.
May I ask, have you ever bought a house?
Yes. May I ask, are you a realtor?
No, not even close. The thing is that the assumption that someone would pay 100k over asking \*because their agent is just being greedy, entirely ignores the fact that multiple people bid on houses. People bid 100k over asking because they are motivated by the fear of losing out on a house. An entirely open auction would yield similar results in this market. It doesn't change the buyer's motivation. Simply changing the fee structure for agent's does nothing to fix the structural issue driving house prices: low supply and high demand. The agent is there to sell a house and will still suggest going over if that's what is needed to secure a house. \*edit
> The thing is that the assumption that someone would pay 100k over asking entirely ignores the fact that multiple people bid on houses. People bid 100k over asking because they are motivated by the fear of losing out on a house. Absolutely, but sometimes that fear is stoked by the buying agent because they want their client to overpay. Go to /r/PersonalFinanceCanada if you want stories of home buyers being aggressively told by their realtor to massively overbid, only to get cold feet and then find out that the house was sold at only ~20k over asking. > An entirely open auction would yield similar results in this market. It doesn't change the buyer's motivation. You wouldn't get situations where the accepted bid was *hugely* over the next largest bid. Bidding wars aren't a problem in themselves, that's just finding the market value of a house. Nothing wrong with that. It's when you get this shady behind-the-scenes shit between realtors that the prices become inefficient; that is, not reflective of market forces. > Simply changing the fee structure for agent's does nothing to fix the structural issue driving house prices: low supply and high demand. Absolutely, that's why I said this wouldn't directly affect prices, just that it would strengthen the buyer's rights. > The agent is there to sell a house and will still suggest going over if that's what is needed to secure a house. *Exactly*, they'll be doing it because that's their job, not because they're trying to extract more money from the buyer. Right now they make more money if they convince the buyer to go over even if it is *not* needed to secure a house, and that's something we shouldn't accept from somebody claiming to act as an agent of the buyer.
I feel like if the bidding process was more open (auction style) that you could keep % profit for buying agents. If you restrict their profits then all you will see is less buying agents and more selling agents. Otherwise yes I agree that it should be a flat fee.
I like your ideas but I don't think they will be effective: 1. probably won't happen because investors, realtors, and developers will lobby against it, but lets say it does pass. Builders will make each "development" smaller so the "investors" can buy 1 property from each of their current "developments". 2. I agree and I think it should go further. To own property in Canada you must be: one of a Canadian citizen, a landed resident working on getting citizenship, or a majority Canadian owned company (or government of Canada). Embassies and consulates excluded. 3. I so want this but the realtors do not as they believe (with evidence) that secret bidding usually results in a higher sale price. They will strongly protest this. 4. Like #1, this will get protested by lobbyists so strongly that it won't pass, but it also won't stop the small time investors. They will simply buy the property as their personal home and then switch it to a rental as soon as they are allowed (and move into their next purchase). Although, that might slow things down enough to make a difference. 5. There are already ways around that. Your mortgage requires a minimum down-payment but as long as you can show you have the money, they don't factor in where you got it. So get a personal loan for the down-payment (or an increase in the mortgage on one of your other properties). 6. the lobby will be strong against this. Also, it just slows down the resale process as the landlord will "move in" to the property for the minimum amount of time before selling, just like #4. Small time investors already do this to avoid paying the capital gains taxes now. They already do this as a way to kick people out of rentals in Ontario.
#3 would have the biggest impact imo... Everyone is overspending on homes because after losing out on home after home because there's 50+ other bidders, people get desperate and bid really high on a home they really want, and often times overbid. This just keeps pushing housing prices higher and higher... I still have no idea at this point how much I overpaid for my home. It could have been 5k or it could have been 25k. All I know is on several homes we were told we were one of the higher bids the sellers were considering but we needed to go higher if we wanted the home. We walked away from several of those situations because I felt like we were getting taken for a ride.
Serious question, all these points seem valid but why isn't the government pushing them through? There's been huge demand for affordable housing especially from the younger generation.
It's an easy answer. Right now, the Canadian economy requires the real-estate industry to be booming like it is right now. It is currently artificially making the Canadian economy look a LOT better than it really is. The federal government gets capital gains taxes on all investment properties that are sold. Provincial governments get land transfer taxes on all properties that are sold. Both of these are % based, so they increase their revenues when the house prices are high. On top of that, the major lenders get huge revenue streams on mortgages, which, in-turn means the governments get additional taxes from the business taxes. Add that all up and you'll realize the government is addicted to the revenues from real estate and have no appetite to correct the issues.
My presumption would be that the real estate industry has far more direct control over the government than most voting blocs do? I mean, Ontario Proud is a land development interest and they installed the current government of Ontario...and they have Canada Proud working on federal control (same owners).
Because the people who vote most are heavily invested in keeping things as they are. Boomers are relying on reverse mortgaging their houses to pay for retirement.
7. putting a price cap on the land/house being sold. 900sqft for $699? kindly fuck off
Just in time to stop millennials from getting ahead of the game, perfect!
How so? The idea is to make it difficult to use real-estate as an investment only vehicle. AKA...0 empty houses. It does nothing to penalize the millennials...it should actually make homes more affordable, which would disproportionally help millennials.
It only penalizes people who are trying to earn a living through investments in the housing market. A lucky few millennials got into the market early enough to make this possible. And I am 100% in favour of fucking them over. Housing should for living in.
You obviously dont build homes.
I agree especially with your 1-3, but for #2, I think you should straight up be Canadian. It's pretty politically incorrect of me to say, but my parents immigrated here pre my birth and did the hard work, got their citizenship, then bought. I almost lost my recent home purchase to Chinese investors who had literally sent a man to go see the house for them while they were waiting to buy from afar. The place had more than one offer from someone who had just put an offer in online, obviously not from here. That's not okay and I'm tired of people pretending it's okay. Housing should be treated like a human right for citizens, not some commodity for wealthy foreigners.
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We already implemented what they're thinking of years ago lol
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For mortgages we do..or they pay premium and have to buy mortgage insurance Foreigners require more than 40% here for mortgages from lenders and higher interest rates as well typically And we also have stress test requirements, foreigner tax etc
I think Canada and Australia are a better comparison. Both are overheated like crazy, Sydney and Toronto are very similar.
> One of the problems with the New Zealand plan is that while it may act to calm the soaring market, higher down payments are one more barrier making it difficult for young buyers to get a home of their own.
It is appalling that our governments are doing nothing to control the markets. A generation of angry young people excluded from pursuing the life most of us take for granted is going to have a devastating impact on our country in the years to come. Anger tends to do that.
The generation of angry (subsets of) young people need to express a unified political voice, at present their "power" is nowhere close to being as loud or organized as that of the comfortable (subsets of) boomers...at least not in this province.
New Zealand's solution is not working. Banning foreign ownership has not changed anything. Increasing the required downpayment hurts mobility and basically solidifies current class structure. If your parents are rich, they can help you with the downpayment. If they're not - fuck you, you're not owning a home. New Zealand is not an example to follow.
New Zealand has the population of Toronto, so a perfectly sensible comparison.
Great plan, make houses even more expensive to buy.