So if you're the stereotypical rich foreigner who wants to invest in real estate here, what's the stop them from incorporating a company locally, and then having that own the house(s)? And that's just one workaround I can think of in the first 30 seconds. As with all well-intentioned simplistic schemes, this will hurt normal folks - immigrants who don't have their paperwork sorted out yet - and do absolutely nothing to the big $$ driving home prices up.
Not being able to stop it entirely doesn't mean it's not a good idea. Increasing the hurdles that need to be jumped through will be off-putting to some who would have otherwise went down this road, and provides the state with more avenues to actually have control over foreign buying. Immigrants who don't have their paperwork sorted out yet shouldn't be buying homes imo. Get your ducks in a row.
What is more likely is that some foreigner would use a relative in Canada, who has PR or citizenship, to buy the property on their behalf.
But foreigners buying home in Canada was never that big of an issue. I think in the hottest areas it was high single digits. It did have an impact no doubt, but it was mostly Canadians running amuck on cheap debt that ran home prices into the stratosphere.
But the funny part is that home prices are already dropping fast (due to rising interest rates) so I can't wait until some politician claims this legislation works.
While I didn’t follow the news closely, this seems to have come from the Vancouver and Toronto real estate markets. City level laws might have been tried but they lack teeth. This issue is also leading towards a vacancy survey and tax for vacant houses to provide material to escalate (I feel) if necessary.
And worldwide, people might want cheaper housing but they din’t want their own house value to decline. The former occurs in the neocortex while the latter seems to lie deep in the lizard brain.
It’s a fine investment in a diversified portfolio because traditionally it was a hedge in both capital and monthly cash flow, and decoupled from other asset classes. It also offered freedom where you can make improvements to the land to increase the rate of growth. There were also non-monetary investments because your lifestyle choices had certain kinds of freedoms it offered (in exchange for giving up others)
So it’s definitely a good investment when it’s affordable. In current environments, it’s actually less of a good investment than how it used to be used (stable, inflation-protected hedge) because it’s more in the asset class of stock and intertwined with other asset classes. That’s good for you on the upswing (which is why you think it’s incompatible with affordability) but not so good on the downswing. Also high volatility and even rapid growth isn’t something most people look for in housing and housing-related costs. In other words, people now treat housing stock the same way as company stock which does make it incompatible with affordability but it’s traditional role is a hedge in your portfolio.
As I understand it, a good investment portfolio is one that increases in value faster than inflation. A single investment though can be at inflation or even generate slight negative returns if it's role is as a hedge to sacrifice some of your overall upside to limit your downside risk. Did I get that wrong?
Housing is also pretty unique in the range of investment options available to "normal" people in that you can get meaningful leverage without some form of collateral posting/margining requirement or ongoing covenant testing.
I don't think there is much in the literature to suggest that increasing the zoned capacity will lead to significant declines. All I've seen is that such development will instead curtail the significant gains that march past local median wages, which seems like a good thing even if you are a homeowner, unless you identify as a Scrooge McDuck with no empathy for your friends and family or people in your community.
Given that most developers charge a premium over the local market, modest development increases average prices. The bigger problem is it makes existing property look less shinny and new. New buyers are typically richer, or at least more liquid, to be able to afford to pay upfront for the property growth that the existing properties have achieved.
Well, there are fines for helping bypass the laws.
"The Act has a $10,000 fine for any non-Canadian or anyone who knowingly assists a non-Canadian and is convicted of violating the Act. If a court finds that a non-Canadian has done this, they may order the sale of the house."
I would assume opening a numbered corp to own the house would fall under this category?
Most of the "super-rich" owned houses in Canada are already owned by corporations to leverage the protections corps have.
Only a $10k fine? On a 1 million dollar house that works out to 1%, and your house doesn't even get seized, it only gets sold so you keep all the appreciation that occurred during that time. Considering that transaction fees (eg. for the agent) are probably more than 1%, this doesn't seem like a huge impediment.
... and you don't legally own the property. The original owner can just return your money and move back in. People can squat on your property and you have no legal right to evict them. You've just created a legal nightmare.
Seems like that will just drive the foreign super rich to ‘buy’ citizenships too. With enough money and in-country fixers/ lobbyists, that’s usually not unobtainable in most countries.
I wonder if you'd eventually get a weird marriage for citizenship market from such legislation. Like say you are a modern millennial couple and both you and your partner don't care about the institution of marriage. Are you going to leave money on the table, or get a huge lump sum for both you and your partner to be legally married to some investors that you might never need to meet in person?
> and do absolutely nothing to the big $$ driving home prices up
Are the price rises because 1 person bought a penthouse for $100mil or because a million 'normal' people outbid each other for the 100k house in the suburbs?
Prices rise because a certain proportion of workers are high income workers, and when you limit supply such that a region can't fit all its workers, that's who wins the bidding war for the house or who happily overpays for that ratty apartment and this process raises all boats over time. There's no backstop either; people on the low end of the economy end up paying more and more of their disposable income until they have to start putting bunks in bedrooms and living rooms to pay the rent on their wages. Only middle class people can afford to move to a lower cost of living area since moving as high upfront costs with sometimes no prospects of a job at the other end so you need a savings to float for some time.
And this is exactly why the society should not subsidize rental living in any way and heavily make it a priority to help private people to buy and maintain ONE house for themselves. Just taxing rental predators out of the market would be a good start, there's no need to ban or outlaw anything. Then actions like giving huge tax exemptions for both the seller and buyer if it's between private persons and the buyer is going to live there would actually send the good signal for society.
However, after all tTis whole thing is just another reason to live in rural areas because rental predators are pretty much non-existent. Of course not everyone is so privileged, but those who are should seriously consider leaving cities for their own good.
It wouldn't be such a good investment if the supply wasn't constrained. If you want do devalue the dollar, print more. If you want to devalue the housing market, make it legal to build more.
This sort of loophole is closed in BC where they've created a beneficial owner registry. They will still know who owns the numbered company and their nationality.
I believe other provinces are looking into similar things.
