I can't recommend this article enough on that subject:
https://www.vox.com/22524829/wall-street-housing-market-blac...
"The role of institutional investors is still being studied, but the popularity of the narrative strikes at something dangerous: People want a convenient boogeyman and when they get it, they often ignore the structural problems that are harder to combat. Housing undersupply is the result of decades of locals opposing new home building. It’s not something that can be blamed on Wall Street greed and the nefarious tinkering of a private equity firm. And that’s a much harder truth to stomach."
If you view housing and ownership of your domicile as something that should be accessible to people, then housing necessarily cannot be viewed as an investment vehicle and large corporations, REITs, wallstreet, etc. need to be excluded so that more supply can be available to "correct" buyers.
Limiting these groups does help on the supply-side. While it may not be the root cause, it's far better than showering the demand-side with cash like tax breaks for first-time home buyers.
Perfect is the enemy of good.
But if supply gets constrained enough that prices complete detach from those fundamentals, then, sure, why not jump in? These investors are only in this market in the first place because of supply constraints, so it's not just that low supply is a more important factor than the investors -- the investors wouldn't even exist if not for the low supply!
Limiting large investors does not solve the problem, but it could help alleviate some acute symptoms.
black markets spring up to serve demand when there's law and regulation that tries to prohibit such demand. I don't see how making the real estate market this way is gonna get it better.
The only way to make prices drop is to increase supply. trying to tax a fringe group, or to penalize investors etc, is not going to do well at all. And doing so will also dry up investment for growing supply.
> help alleviate some acute symptoms.
A short term symptom abatement, if it even does abate anything, is not going to make any difference tbh. Concentrate on solving the fundamental issue - lack of supply due to various interest groups resisting supply growth.
https://www.brookings.edu/blog/the-avenue/2022/03/31/where-p...
https://noahpinion.substack.com/p/the-yimbys-are-starting-to...
The real issue is that there is not enough supply in desirable locations.
You're quite correct that more money chasing after the same limited number of homes is just going to drive up prices.
Also, institutional investors do have a reputation for inciting bubbles and that possibility absolutely needs to be carefully scrutinized, particularly for something as essential and socially compounding as housing.
If you drive through any major American (or Canadian) city outside of the core downtown area...it's pretty clear _something_ is preventing large developments. If you drive through the Bay Area, or stand on a 4-storey "high-rise" and look out over miles upon miles of aging bungalows, and consider the value of the land they're sitting on, it's really a bit shocking.
And if you look into adding a suite for rental to your house, it'll be pretty clear what the barrier is to new development. It basically doesn't matter where you are in the country.
Local zoning really does play a huge role in housing cost in North America.
And yet, at every hearing I've attended about housing, ever public comment period for a project, it is my "neighbors" opposing the homes. The editorials in the local paper about how re-legalizing fourplexes would lead to (I'm paraphrasing) "those people" living in your neighborhood are not from wall street bankers, they're from people I've met who live here.
There are some very real concerns that people have. Violence. Drugs. Noise. School quality. People want a good environment in which to bring up their kids and these are all crucial. Fortunately they could be solved in other ways than expensive housing. Unfortunately people have a very justified fear that they wont be.
Foreign ownership is just one problem though, and IMO a smaller one than both cheap debt and lack of supply.
Both are incorrect in the same way, and incite an emotional response of hating some "other" for causing the problem at hand!
We have been eyeing for a new construction neighborhoods in the last many years so we can get something larger and more specific for our needs (multi-generational). All I see are town homes and apartments. For reference, our city population is ~25,000...we have lots of land.
For the record - we don't need new construction and if an existing home fits our needs exactly we'd go for it. But I'm just referencing that no new single family home neighborhoods have popped up as abundantly as before...just townhouses, condos and "Luxury Apartments" with rents more than my monthly mortgage.
Also, capital from China must be at least an order greater than capital from all of Middle East combined. Not defending their decision not to do anything when your Arabs and Iranians were buying up real estate, just that it was a drop in the bucket and pretty easy to ignore. Chinese capital, on the other hand, is becoming cumbersome for quite a few countries now
Due to history and geography, in Vancouver's case it's largely money from Hong Kong, Mainland China and the United States.
For London for example, it's from Russia and other places.
Money from Asia is being referenced because it's a concrete example.
There is truth, however. The Wenzhou house wife property speculator trope has some basis in reality, and Chinese markets are already rife with massive speculation that has seeped into foreign markets popular for Chinese emigration (Toronto, Vancouver, and to a much lesser extent NYC and west cost American cities). You don't have to look hard to see the effects in Vancouver, where condo buildings and housing remain empty due to being seen as speculative assets.
American and some western European housing markets (e.g. UK) are a bit unique in that they haven't limited foreigners from buying and speculating on real estate. Whereas in China, many tier 1 and 2 cities have strict residency requirements before you can buy an apartment (but these also apply to Chinese via their hukou residency system).
The really affluent immigrant groups aren't buying multiple properties, they already have a great deal of income, and their properties are well outside most of what HN can afford and do not impact the condo market which is the most competitive, accessible and volatile.
They already taxed and stopped foreign buyers but the home prices in Vancouver keep going up as sales amongst local Canadians make up most of the volume.
Now they announce this virtue signaling to appease the other Canadians who can't afford homes but the problem will not change.
In fact, without outside capital constantly coming in, the Vancouver real estate market is not sustainable. It literally is just another game of musical chairs, it is the news of some Chinese communist elite member buying a mansion in West Vancouver that gets local Canadians eager to own properties.
I'm no stranger to the anti-asian sentiments in Vancouver, just head over to r/vancouver to see people regularly blame Asians for the fact that they can't afford to live there. In fact in the 80s, they blamed Japanese, 90s they blamed Hong Kongers, 2000s they blame Taiwan, Mainlanders.
It's really disgusting to see the blatant racism against one group that is normalized but not for others. It literally is the same attitude that people with anti-semitic views constantly deride Jews of their financial success that largely came out of merit.
This doesn't mean though that there haven't been real issues with the Vancouver market that involve foreign wealth.
Prior to the foreign buyers tax we were seeing condo developers explicitly opening up sales offices in foreign cities, explicitly marketing their condos as pied-a-terres. I understand why people didn't like that. That sort of thing really doesn't help the local buyer or renter.
I'm happy to see that while Canadian politicians have brought in these rules to deal with some distortions of the real estate market from foreign wealth, we really haven't our politicians embrace the bigoted anti-immigrant rhetoric around this topic of the sort that you occasionally see on twitter and reddit.
These were always easy to work around: how many Chinese students come to Canada to study and just happen to have a few million dollars to spend on a house? The new proposal is also easy to work around, the Canadian government isn't serious about solving the speculation problem.
> In fact, without outside capital constantly coming in, the Vancouver real estate market is not sustainable. It literally is just another game of musical chairs, it is the news of some Chinese communist elite member buying a mansion in West Vancouver that gets local Canadians eager to own properties.
Perhaps. We already went through this in the 80s with the Japanese, and after the Japanese real estate bubble burst, Vancouver real estate was depressed for almost a decade (I remember the signs for condos starting at $100k in 1997! And no one was blaming the Hong Kongese for that at the time). China is just Japan 2.0 in this regard: after the Chinese property bubble bursts, Vancouver real estate will be heavily effected.
Now this is why I love HN, its to see another fisherman!
I remember the 90s were depressing time for Vancouver. The economy was in complete slump and NDP took the fall for that.
Now the Chinese real estate market is incomplete shambles, people are in complete denial about that the Vancouver real estate market lags behind. Already the bubble has started to burst in Montreal, which I remember were the last to join the party!
Chinese real estate prices are still pretty high. The government keeps things from bursting by controlling the real estate agents and their companies (owned mostly by red families, they just taper off on sales volume instead of letting prices fall). We will see how long they can keep juggling that. Which is why rich Chinese like to invest in western property markets in the first place: there is more liquidity in Vancouver and Toronto vs. Shanghai or Beijing.
BTW, I'm not from Vancouver, I just visited a lot in the 90s (when I was going to school in Seattle).
For the Japanese it was cheap debt that exported property inflation which led to an immediate drop in liquidity however currently there is cheap debt locally and its the locals participating in the real estate speculation.
the actual foreign ownership is like less than 5% in Vancouver yet the media and establishment constantly loves to shift attention away from REIT and institutional money, rich Canadians and against scapegoat groups.
unlike the melting pot system you have in America, Canadians fall into ethnic tribalism, safety in similarity. There's an idea that everyone can be Canadian/American but its implicit understanding that it is false. Canadians have this sort of superiority complex and see themselves holier than thou, it is far more broken than America in some ways and just in my personal interactions, Americans by large, were far more "Canadian" than real Canadians.
The country honestly feels very much broken and the more dystopian and divided it becomes, the more it will push people on the fringes away to isolation. Ethnic enclaves aren't by choice, they are a byproduct of an unwelcoming and implicitly hostile incumbent establishment.
It is probably much higher than that, 5% is just what ownership can clearly be traced to a non-resident foreign owner. But you have a lot of property owned by Chinese students. The government is really conservative when they measure these numbers. Heck, I think the empty Seattle townhome next to mine, which I know is owned by an old retired couple in Beijing (the daughter told us as much before she left), is not counted as foreign owned even though it for all practical purposes is (and was bought with money from China...but then again, I bought my townhome largely with money I earned in Beijing as well).
I'm sure plenty of resident Chinese and Indians own property in Vancouver also (since there are so many of them), but I wouldn't count those as foreign owners either. At that point, it is mostly Canadian money chasing after Canadian assets, rather than Chinese or Indian money. Here in Seattle, it is rich techies driving the market, and many of those just happen to be Chinese or Indian (citizens, permanent residents, and H1s). That is a different problem (rich techies like us bidding up the market, not that many techies are Chinese and Indian).
Is "fisherman" supposed to be a Canadian expression?
I don’t really know whether you have read the rest of what I wrote or just got triggered by me seemingly defending “foreigners” and hit the Reply button.
I don’t mean to single you out specifically, there other posts that seem oddly similar.
Anyway, I think there’s a big distinction between immigrants (who cease to be immigrants at some point, how many years does it take in your opinion by the way? Who is more worthy of being helped to buy a home - a immigrant who came to the country 30 years ago, or a natural-born 25 year-old citizen?… but I digress.) and investment real estate that requires an intervention.
Let’s say we put a huge tax on all real estate that isn’t a primary residence, I am all for making it super unprofitable to hold so that rents cannot cover the expense - to force all these REITs having to fire-sale their holdings to people who want to live in them.
There was a two year moratorium announced today, but there are several exemptions. Permanent residents, refugees, some international students on the path to PR, and people here on work permits are all exempt.
>Let’s say we put a huge tax on all real estate that isn’t a primary residence
Because cottages are a traditional part of life here and real estate is one of the only ways to make real money for someone with some capital in the middle class.
At what point cottages cease to be “way to make real money with some capital in the middle class” and we firmly enter the territory of “make a buck while fuck everyone else”? One or two is probably the former. 80,000 properties we all probably agree is the latter.
Yeah the Right loves to blame poor foreigners while the Left prefers to blame rich foreigners but at the end of the day they at least agree that it is never the voters themselves who are to blame.
Also for real how can the voters (ie the average citizen) be the problem? The average citizen has no money and no political or regulatory power. The average citizen just exists in a system they have no control over and responds to incentives. Hoping that en mass people won’t do that is like politely asking a river to move.
To use the UK as an example, attacking rich foreigners for their "non-domiciled" tax status is extremely common. This is where you live in the UK, but for tax purposes hide your wealth in another system with lower tax rates, effectively paying no income taxes at all in the UK. Variations of this concept exist throughout the world in many countries and routinely draw politically ire.
Just this week: https://www.bbc.com/news/uk-politics-61017993
Wealth coupled with a collection of passports often creates far more opportunities to avoid tax than being stuck under the rules of one single State, rightly or wrongly.
Tax evasion is seen as a moral problem no matter how you accomplish (so hiding it with your other citizenship is just as bad as using a shell company).
Tax evasion is a legal term, not a moral one. Tax evasion isn't a problem in USA given that it has the highest compliance rate in the world. Jurisdictional arbitrage is a freedom and should be protected as such.
While I agree that getting people to change their mind is pretty hopeless, I dislike the framing that they are just "responding to incentives" and therefore not only off the hook for the shitty outcomes of their choices, but also not responsible for the choices themselves.
> The foreign-buyer ban won’t apply to students, foreign workers or foreign citizens who are permanent residents of Canada, the person said.
The article says some of those foreigners will be exempt. I will say this, the country needs the immigrants' money (ie spend in that country, on top of taxes paid)
If you want a convenient scapegoat, blame the McGuinty government of the early 2000s. When the 2005 Greenbelt Act was passed, developers across the country warned of a housing crisis in the future due to the effect the bill would have on the price and timelines for new construction. 17 years later we'd prefer to blame China or NIMBYs, but the reality is Canadians, and especially Ontarians, did this to themselves when they allowed politicians and environmentalists to ignore the concerns of land developers and engineers.
Why is financializing land and real estate a cause for the problem?
I argue it's not financializing, but the lack of allowance for production of more, when the price signals a demand for more.
When crop prices are high, farmers grow more, or make use of more land to grow. Ditto with electricity or water. Why isn't more land opened up for development, when price of real estate is high?
This is false if you think about it.
What drives the price of a house is what people can pay on their monthly payments.
As rates go down prices go up as people can afford to pay more.
Unfortunately for home buyers this means the downpayment goes up. What you end up with is a bunch of first time home buyers who can in theory afford the mortgage payments but can't build up the $200,000 nest egg required as a 20% downpayment on a $1,000,000 home.
When rates go back up home prices will drop and so will the size of the downpayment required, even though the person will pay about the same monthly on their mortgage.
Lower rate help those with existing homes and therefor existing equity more than those without homes.
> Yeah the Right loves to blame poor foreigners while the Left prefers to blame rich foreigners but at the end of the day they at least agree that it is never the voters themselves who are to blame.
Generally speaking I think you're mostly correct, but there are exceptions, and nuances.
I am one of the odd outliers who believes that much of the blame lies with voters, but at the same time it is a bit of a chicken and egg problem. It's ~true that voters "should" "vote for better politicians", but consider:
- what if the particular flavour of democracy that we practice does not make this possible?
- what if the public's ability to make optimal decisions is a function of the quality of education they received, which is largely a consequence of government policy (and other things, like culture)?
Take HN for example: observe how many comments there are in this subthread (or the overall thread) asserting that "The problem is X", as if the causality behind the situation is due to a single variable. Might this error be to some degree (perhaps even a large degree) a consequence of causality (philosophy, epistemology, logic, etc) not being first class subjects in school (and culture/society), on par with science, math, and language?
And if one's answer to this question is something along the lines of "Oh, they didn't mean that literally, they were just speaking loosely, or expressing their opinion, etc", then I ask: why is it that we have ~culturally normalized (if not worse) speaking (and I would say: thinking) so inaccurately and imprecisely about so many matters that are extremely important, be it housing prices, immigration, war, politics, you name it? Might it be possible that we (~everyone) are "doing it wrong", at massive scale?
If I was forced to nominate a single variable that lies behind not just this problem, but perhaps ~all problems (mostly excluding natural disasters), it would be the inability of the population of this planet to think and speak/listen/conceptualize/understand at a level that is adequate to rise above the local optima we find ourselves stuck in (note: there's substantial unaddressed complexity here: some things are improving on a relative basis, etc - I am speaking in an absolute sense, which includes that which is beyond our current knowledge, or ability to know).
But yeah it’s the immigrants fault. Lets reduce immigration while we are facing a labor shortage.
The truth is, this problem has been growing for many years and public servants have allowed the issue to grow beyond any control (and actually profiting off it in some cases). Now, the rest of the population will suffer and it's become a hard problem to solve.
Finally, yes we have a labor shortage - but it may actually be a labor correction. Wages have been stagnant for years and inflation is running wild. Wages need to rise to catch up - artificially depressing wages with immigration is a recipe for disaster.
[0] https://www.cicnews.com/2022/02/canada-fastest-growing-count...
Wealthy-ish, semiretired older local people, or non-locals with vacation property who do everything they can to shut down any kind of housing project. Their methods include suing the town at great expense to the taxpayers and floating their own and sympathetic friends into town council.
It's extremely frustrating when a really well designed development that takes a year and millions to craft can get shut down in a single meeting by a very loud, adamant and group of busybodies.
Those very same people are the taxpayers. They have and should have the right to represent their interests in a court of law. If the town ends up being a victim of it, so be it.
Yes, of course they have this right, I don't dispute that. But when a single case like this eats up literally 10% of a small town's yearly budget, and the same small group of people repeatedly behave in this way, I also have the right to call them assholes.
The government may be faceless, but there are lots of things that could have been done - including more "development-friendly" practices. However, there's always a cost - do you sacrifice environmental protections? Democratic government principles?
You can't just blame whatever out-group you dislike at the moment. If those neighbors you described vanished as of 5 years ago, the prices of houses would have risen just the same.
The reason that I blame government is because they explicitly had a responsibility to protect society from this. Officials have either neglected or outright contravened this responsibility.
Also, immigrants to Canada usually move to one of its three main metro areas - Vancouver, Toronto and Montreal, which, coincidentally, have also seen the highest amount of housing increases.
Other places, like Calgary or Winnipeg, have not had housing explode in the same way (although prices have risen in smaller amounts there as well).
Keep in mind, the original article is focusing on Canadian housing, which, while complex, may be even simpler than the American model.
Sorry friend, but you're wrong. First, the issue of foreign ownership in the real estate market has already been studied. So, they have evidence supporting the moratorium. And second, this budget also announced that they are going to investigate the role of hedge funds, private capital, REITs, etc. Early actions could be announced before the end of the year.
Can you not do this and also seek to identify hedge funds, private capital, REITs, and other entities which may be more difficult to regulate at a later time? Maybe this first piece of legislation is the quick win?
Are you saying that foreigners who do not reside at all in Canada should be able to buy a primary home in Canada? Because that's what this bill is preventing. If you're a "foreigner" it's not relevant so long as you're actually a resident of Canada.
You can, and I specifically pointed out that I generally agree with what is being proposed, and certainly hope that it isn’t an attempt at diversion by throwing out the usual scapegoat.
As a Canadian, I agree with this.
Part of the problem is that the federal govt doesn't have jurisdiction over the actually issues causing the problem. I _think_ the provinces own it but delegate it to the cities. But for some reason, this isn't an issue in those elections. BC had an election less than a year ago and housing wasn't an issue outside of Reddit. And BC has the second worse housing market in the country (Vancouver).
EDIT: Actually, that BC election was a year and a half ago. I even looked that up before posting and got it wrong. The covid time warp strikes again.
And arguably housing crisis in Canada started with foreign investment. Now domestic players and instituitional investors are also involved in housing market. Together there are enough parties involved not to let housing prices go down.
I am sure banning that wealthy family from China will do “something” to help alleviate the crisis, but I think putting restrictions on capital being used to buy up homes that aren’t primary-residence should be a priority and will have much larger effect.
And to be clear - as it stands with the situation in real estate being what it is right now, I am in favor of massive taxes on real estate investments that are to be used to finance affordable housing to be made available exclusively to first-time buyers and primary residents.
I hear about people pulling out equity in the form of HELOC's to put a downpayment on another home. That's a pretty big chunk of Canadian "investors". And that should scare the shit out of anyone considering that was a major problem in 2008 in the US. People vastly over-leveraging themselves under the assumption that housing only goes up.
The landlords that run the real estate holdings companies are mostly White. They buy up the properties, apartments, condos when they are cheap with the sole purpose of renting them out. Guess who influences local media and politicians. It's not some rich Chinese communist fu er dai they could care less.
The fact is that Canada isn't the all shining socialist paradise that outsiders make out to be. In fact places like Vancouver almost gets a pass when race issues are mentioned because its automatically chalked up as a "social liberal progressive city" compared to other American cities that often get thrown into the "shithole conservative counties"
I wouldn’t call it a paradise but it’s definitely communist
If corporations buying houses was actually affecting the purchase market prices, then we'd see an equal effect on rental prices going down. A corporation can't live in a house, so they'd be renting it out. If these evvvill corporations were keeping houses vacant just to screw over regular hard working folks, resulting in no effect on the rental market prices, then we'd see it in the vacancy stats. But that's never actually mentioned by housing conspiracy theorists because the vacancy stats show that the areas with highest prices have extremely low vacancy rates, because demand for housing is so much higher than supply, because not enough housing has been built.
Rents are high because there are not enough houses on the rental market, because not enough houses are built.
I have downvoted you because this goes against the general spirit of discussion on HN.
Thought I do agree that a non-primary-resident investment, whether from citizens, foreigners, or capital should be greatly limited overall and these rules should only loosen to direct investment towards areas that are in dire need of an influx of capital for redevelopment. That is - if it’s not distressed, and it’s not going to be your primary residence - GTFO, you should be last in line to buy.
And I say that as former landlord. I just believe that if I was looking to make some money - I could probably do just fine under these conditions. I don’t see an issue of buying a distressed property needing a rehab, and I think doing so benefits everyone.
I am getting real tired of society getting ever more dystopian just so that someone can make a buck.
https://www.fool.com/investing/stock-market/market-sectors/r...