The Crash Tax Crash Test

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Was it a coincidence BC brought in its new Crash Tax the same week Canada’s banks were ordered to simulate a 50% collapse in Vancouver housing values? Plus a 40% dive in the GTA?

Yeah, probably. But the writing is now on the wall. In fact it was on this blog in stark terms a few weeks ago, a message I repeated in the ever-reliable HuffPost and a blizzard of Tweets. Get out.

So, here’s the latest.

On Monday the BC government shocked everyone with a massive tax on foreign buyers of real estate within Metro Vancouver. Wow – 15% of the total transaction value, plus the usual land transfer tax. It’s the 2016 version of the Chinese head tax that the province just finished apologizing for 26 months ago.

“While the governments which passed these laws and polices acted in a manner that was lawful at the time, today this racist discrimination is seen by British Columbians — represented by all members in this legislative assembly — as unacceptable and intolerable,” said Premier Christy Clark in 2014, proving she can suck and blow like a killer whale.

Of course, if you believe that Chinese dudes are the No.1 cause of house prices nobody can afford, and locals have been victimized by this globalization, then taxing the crap out of them is probably going to down the market. Plus it might send foreign capital (if it is such a force) sweeping into unsuspecting little Victoria, or cute Kelowna, infecting citizens there with the same FOMO that’s ruining YVR. In any case, it’s a bombshell tax without precedent or known consequences. So if foreign buyers are in fact the market-movers, this is akin to a giant mortgage rate hike. Yes, what you just saw leaving town was your equity.

There’s more. The province sought to back up the Crash Tax with a flood of new data on Tuesday, this time almost doubling the estimates of foreign influence in local real estate. From June 10th to July 14th, 6.6% of all buyers in BC were from offshore, almost three-quarters of them in Vancouver, where they accounted for 9.7% of the dollar value of properties traded.

Hmm. Sounds like a lot, doesn’t it? Perhaps the assertion here that it’s mostly locals who are responsible for insane prices, speculation, over-borrowing, runaway leverage and visceral house horniness was all wrong. But wait. The data shows the average amount spent by Canadian buyers in Van was $911,425, while the average spent by the (allegedly) money-laundering, property-snorfling foreigners was $946,945.

In other words, over 90% of all the real estate deals were consummated by local families, who spent about exactly the same as the gazillionaires from you-know-where. This seems to cast in doubt the province’s assertion that foreign buying “represents an additional source of pressure on a housing market struggling to build enough new homes to meet demand. The Province’s additional tax on foreign purchases will help manage foreign demand while new homes are built to meet local needs.”

But it’s the locals who are 90% responsible, right? And removing 10% of the demand for a housing market has already been proven (in the US) to be enough to crash prices by 32%.

It’s all so confusing. Or blatantly political. Laws passed based on conflicting data, without study, suggesting unknown consequences and covered with a patina of racism by a government that should know better.

Anyway, now we have this – a Crash Test after the Crash Tax.

Canada’s bank cop, the Office of the Superintendent of Financial Institutions (OFSI), says it will order the Bay Street boys to do stress tests showing how their banks might withstand a massive 50% plop in property values in Vancouver and 40% in Toronto. Ouch. That would reduce the average detached house equity by about $700,000 in YVR, pushing an unknown (but growing) number of over-mortgaged locals (and Chinese dudes) underwater. At the same time the regulator wants the bankers to test for a 30% real estate correction taking place in other markets.

This is not a one-off request, by the way. The feds are clearly worried about the imminent nature of a real estate event, and the impact it could have on our all-pervasive big banks. Just weeks ago OSFI said it would be tightening up on its regulation of mortgage lending, given that household debt has been bloating again while house prices wobble higher.

Meanwhile, detached sales fall in YVR, listings creep higher, the sales-to-listing ratio deteriorates and the overall economy weakens. Not cool.

But nobody had a really good reason to expect a crash. Until yesterday.

223 comments ↓

#1 Finnigan Joyce on 07.26.16 at 6:09 pm

FURST!

#2 turn of the tide on 07.26.16 at 6:13 pm

“Foreign buyers spent more than $885 million on Metro Vancouver real estate in just five weeks, according to new data released by the B.C. government on Tuesday.

The money represents about 10 per cent of the value of all real estate purchased in the region over that span, the government said.”

http://www.cbc.ca/news/canada/british-columbia/vancouver-real-estate-foreign-data-1.3695439?cmp=rss

As reported, 9.7%, with locals and foreign buyers spending almost equal amounts per deal. — Garth

#3 Frank on 07.26.16 at 6:15 pm

Calling BCs tax is rabble rousing. It in no way discriminates against Chinese more than any other foreign citizen. Don’t be salty because your call to look away from foreign investment isn’t being heeded, you might be wrong.

#4 Lulu on 07.26.16 at 6:15 pm

Repeat after me saying *Crash Tax Crash Test 10 times in the fastest possible and your tongue will CRASH!!!! LOL

Love your title today, Sir!!

#5 TurnerNation on 07.26.16 at 6:15 pm

In short term all markets move on emotional trending. Long term, fundamentals change its course . (Bankers and Bankers’ politicians will do this.)

#6 Pete on 07.26.16 at 6:16 pm

A simple question Garth: If one had $200K to invest today, would it be better placed in: A) physical Gold or B) a house in YVR?
They are deliberately launching this crash now. The media is on board.
The fun is commencing, it’ll really get ramped up just in time for the US election. Coincidence?

#7 specuskeptic on 07.26.16 at 6:17 pm

“But nobody had a really good reason to expect a crash. Until yesterday.”
Does this indicate more than a slow melt then? Or are we still on that page?

“In any case, it’s a bombshell tax without precedent or known consequences” would suggest you’re saying all bets are off. (except the one against the future of RE in general in Canada for the foreseeable future…)

#8 wallflower on 07.26.16 at 6:19 pm

Offshore money MUST be significant in RE Canada because everywhere I look, people are saying Well, now, Toronto will have to do the same thing…Last I knew, families house hunting in North Van were not looking at alternatives in Markham… !!!!!
AND if this comment from yesterday’s comments is typical of realtor thinking —
Expected one day marketplace impact based on a discussion with realtor today: $250k
Then OBVIOUSLY offshore money is significant.
Finally it is now being stated as 10%… which is a LOT!!!!!
http://www.theglobeandmail.com/news/british-columbia/new-stats-show-1-in-10-home-sales-in-vancouver-region-went-to-foreign-buyers/article31121420/

Another comment regarding yesterday’s comments: Dude; totally agree – just a general term like “heh you guys” – I use guys all the time, meaning, whatever sex is listening to me! So #174 Price out in Vancouver on 07.26.16 at 10:30 am – go out and get a life with all the real people – we are using DUDE like GUY; in fact, my sister uses the word F**KER to refer to her very best friends! Words are being stretched all the time.
Actresses are now actors. At their insistence! The world is changing and we no longer have stewardesses… Dude!

#9 mark on 07.26.16 at 6:20 pm

Oh come on, Victoria or Kelowna? You know it will be Prince George that becomes BC’s premier real estate destination.

#10 Jason on 07.26.16 at 6:21 pm

The time to do a stress test is not while the patient is having a heart attack.

The stress tests should have been done two years ago while the patient was still in a position to be rehabilitated.

#11 fleabitten monkey on 07.26.16 at 6:22 pm

Hi Garth or anyone with knowledge on this…
Q: How is the BC gov permitted to institute such a tax only on certain areas within the province? Shouldn’t property transfer taxes apply equally to all areas within the same taxing jurisdiction?

#12 JO on 07.26.16 at 6:28 pm

I am on the front lines of this historic debt based Ponzi scheme and by far and away the largest factor contributing to this joke is locals borrowing their brains out
For most with decent jobs and good credit it is not hard to get approved for a lot given the junk monetary policy in place. Those declined usually throw a hissy fit and find a shady broker or lender and get the money anyway

The entire system is out of control. Many believe that the government or bank of Canada are there to protect them from their stupidity but what a shock they will experience as the house of cards comes down

95 % of the blame belongs to the borrowers who freely chose to apply and use the massive debt to speculate on housing – the other 5% is blamed between the govt (including city and provincial due to bizarre land use policies ) and bank of Canada and executives at the major banks and other lenders

Sadly as this monster dies out the social and economic devastation will be spectacular. Modern day slavery is here and wait for the pathetic politics it will bring over the next 5-10 years

The social contract is disintegrating and will leave the majority destroyed

Using a debt based counterfeiting operation to fool the masses into think they are getting richer while they are being actually being taxed is going to bring down our system but this is not doom; on the contrary the hope is we will replace this junk neoliberal economy with something better for all of us once we purge the scum at the top

#13 turn of the tide on 07.26.16 at 6:28 pm

If 5-10% of market participants are very high bidders, with deep pockets, they could have a major effect of price increases, no?

#14 Catalyst on 07.26.16 at 6:29 pm

It’s not a test for the big 6 banks + HSBC…its only for the ‘other’ guys. What percentage do they make up of the market…I’m not sure but would like to know.

#15 turn of the tide on 07.26.16 at 6:31 pm

What happens in an auction when you removed only 10% of the participants, but the wealthiest 10%? What’s the impact of demand? A mesmerising question.

#16 ole Doberman on 07.26.16 at 6:32 pm

As ive said here before the evil trinity of banks, RE industry and crooked politicians got rich over the decade now theyre just trying to cover their arses when the inevitable happens

#17 MSM-Free Zone on 07.26.16 at 6:33 pm

If history is any indication, and given the fact that the BC government has demonstrated the BCREA cannot be trusted in self-regulating even a kindergarten lemonade stand, I’m guessing it is probably the BCREA who is guilty of sucking and blowing the public at large, including their self-serving ‘data’.

#18 Careful on 07.26.16 at 6:35 pm

#4 Lulu on 07.26.16 at 6:15 pm

Repeat after me saying *Crash Tax Crash Test 10 times in the fastest possible and your tongue will CRASH!!!! LOL

Love your title today, Sir!!.

Careful Lulu. Calling Garth “sir” can get you banned. ;)

#19 46 and 2 on 07.26.16 at 6:38 pm

Banks ordered to do stress tests….why bother? What exactly is it you all think the banks are going to say?

The truth?

Good luck with all that.

#20 Denise#1 on 07.26.16 at 6:39 pm

Garth’s “Plus it might send foreign capital (if it is such a force) sweeping into unsuspecting little Victoria, or cute Kelowna, infecting citizens there with the same FOMO that’s ruining YVR”.
===================================
The Vancouverites who sold there are buying up houses in Victoria like crazy already. So now, quite likely; the foreign buyers will be descending on little old Victoria, Kelowna etc. Plus as Garth said, the local FOMO’s will start hyperventilating. I’d bet on it actually.
So, the Mayor of Oak Bay wants to get the ball rolling on implementing a foreign buyers tax (& other controls?), good move Mr. Jensen. Meanwhile the flaky, vapid Mayor of Victoria – Ms. Helps wants to “wait and see”, like the mess-creating, (tent city anyone?), dithering idiot she is.
Interesting, frustrating, exasperating times…

#21 Dman on 07.26.16 at 6:40 pm

Hi Garth, the realtors I know, had their phones ringing at 5am. There is a lot of panic as they feel they could lose a lot of deals that are in the works. The last 3 deals where I or one of my friends sold were all the same. A buyers name is put on the original offer and then the name is changed on the final closing. That’s why it is difficult to know the real numbers of foreign buyers in the lower mainland. The name may not be foreign but the money may be???

#22 nonplused on 07.26.16 at 6:41 pm

I like to test crazy ideas at the extremes to see if the general concept is any good. So here is an idea. Let’s raise the crash tax to 100% for foreign buyers and get rid of the dreaded land transfer tax for local buyers altogether. What will that do? I don’t know everything it might do but I expect it will get rid of the foreign buyers to start.

#23 F.dover on 07.26.16 at 6:42 pm

So the next rate hike is which decade now?

#24 betamax on 07.26.16 at 6:44 pm

Garth: “It’s the 2016 version of the Chinese head tax”

The head tax was designed to discourage Chinese immigration. A tax on foreign buyers (not immigrants) is nothing remotely like that.

Garth: “this time almost doubling the estimates of foreign influence in local real estate”

This is what everyone in the GVRD already suspected. And it doesn’t even count foreign-sourced money spent by landed immigrants.

From the link below: 10% homes sold in Van to foreigners, but 18% in Richmond and Burnaby.

http://www.theglobeandmail.com/news/british-columbia/new-stats-show-1-in-10-home-sales-in-vancouver-region-went-to-foreign-buyers/article31121420/

Garth, after denying the degree of foreign influence on the market, now you’re essentially saying: If foreign money was an influence, it won’t be any longer.

That remains to be seen. Enforcing the tax may prove difficult in all cases, and 15% may be a mere hiccup to foreigners eager to stash wealth, especially given the already low Canadian dollar.

#25 Funny Scenario on 07.26.16 at 6:46 pm

The crash tax is just front running the now almost certain housing crash and have it blamed on a populist decision, hence “you wanted it”. Can’t have it just happen without a perceived reason, or it might implicate the current gov.
But the rate of drop for the stress test is amazing. Either who requested it is just incompetent (big surprise) and indulging in kiddie dreaming, or we are in for a lotta pain, owner or not. The “economy” is now addicted to housing and Canada will suffer deeply. With gold and oil going back where they came from the dollar will have troubles stopping at 50 cents. I wonder what is the plan? Or is it too much to ask from the supply drama teacher.

#26 Khan on 07.26.16 at 6:49 pm

“. It’s the 2016 version of the Chinese head tax that the province just finished apologizing for 26 months ago.”

This tax applies to all foreigners. Why does everyone think this is just about the Chinese? Maybe play the racist card??

The tax applies to my brothers from Syria as well.

#27 Crdt on 07.26.16 at 6:49 pm

According to Garth this will have no impact at all because the insignificant volume of Chinese purchases will amount to nothing at all, besides, they are so wealthy they will simply dig a tiny bit deeper into that fully legitimate suitcase of ethically earned currency. Nothing to see here, move along, be happy.

None of which I said. — Garth

#28 Cottingham a bargain on 07.26.16 at 6:52 pm

Yonge corridor northbound from lake shore all the way to gamble road Richmond hill, delineated by bay view to the east and Bathurst to the west ,will see nothing but increased demand and prices . Yonge street is the longest street in the world with fortunately the longest story to be had by incoming new Canadians:

Keep buying RE in this area

#29 nonplused on 07.26.16 at 6:52 pm

PS there are parts of BC, mostly near the Alberta boarder where all those pesky Albertans have their cabins and vacation homes, where the property tax on a second home is greatly higher than the locals pay. So be careful everyone, those commies in BC don’t just see Asians as “foreign”. They justify it by some bla bal bla about how the rich tourists should pay for the local kid’s school and the roads and such.

Tax policy is such a funny thing, because it’s always a balance between 2 impossible extremes, 0% and 100%. Well for booze and alcohol they have achieve much higher than 100% and they probably will for marijuana as well when Bieber, ops Trudeau (wrong glamboy) legalizes it.

For example pretty much everyone travelling from Alberta to BC by car including the BC residents fills up the tank whether they need to stop or not before crossing the border, same as people travelling from the US to Canada always do. This is “tax avoidance”. I remember one time flying from Calgary to San Francisco on a corporate jet for business and we landed in Montana to top up the plane because the fuel was so much cheaper there. It’s incredibly inefficient to take a plane out of the air half way but they did it anyway because of taxes.

#30 everythingisterrible on 07.26.16 at 6:53 pm

Much ado about nothing. This will have 0 impact on housing prices in Vancouver. There are so many ways to get around this Tax. Just lip service from Christy’s property developer backed liberal government who did a complete flip flop on this issue. Straight up pandering for votes as the election looms. Too little too late is the general consensus in Vancouver, won’t save her from getting punted to the curb in May.

#31 Say What? on 07.26.16 at 6:53 pm

“It’s the 2016 version of the Chinese head tax that the province just finished apologizing for 26 months ago.” – Garth

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What nonsense! No comparison whatsoever.

#32 Smartalox on 07.26.16 at 6:53 pm

The ‘foreign buyer’ data includes all non-Canadian residents, right? Americans don’t enjoy any special status when it comes to BC real estate, because of Free trade, right? And the same with people from the UK, and Germany? Just asking because my company recruits specialist professionals from these jurisdictions.

#33 crowdedelevatorfartz on 07.26.16 at 6:57 pm

“Christy Clark in 2014, proving she can suck and blow like a killer whale…..”
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Our profuse apologies to barnacle encrusted, mammal eating cetaceans everywhere…..

#34 Say What? on 07.26.16 at 6:57 pm

“In other words, over 90% of all the real estate deals were consummated by local families, who spent about exactly the same as the gazillionaires from you-know-where.” – Garth

—————————————————–

You really are obfuscating. Aren’t you Garth. The point is that foreigners, that are just rich or laundering their money, will bid up prices. Locals who want to buy also have to bid high if they want to purchase property. This drives up prices for everybody. No way this is a good thing for society.

#35 Insurance Guy on 07.26.16 at 6:59 pm

All foreigners. Not seeing the racism. Not that I do or do not agree with the tax.

#36 Say What? on 07.26.16 at 7:00 pm

“But nobody had a really good reason to expect a crash. Until yesterday.” – Garth

——————————————————

Garth, you suck and blow at the same time. You’ve been preaching about a RE correction for years and have given the reasons why it was coming. Now you say there was no good reason to expect one! WTH?

Learn to read. I forecast a correction and a slow melt. No more. — Garth

#37 Suede on 07.26.16 at 7:00 pm

one real estate deal we were looking at has just come back to us.

Agent called and said the buyers in Tokyo got spooked and are out. They didn’t see the place at all. They just don’t want to mess with government intervention.

Pandora’s box?

Not to scare everyone, but Singapore dropped a foreigner real estate tax back in 2013.

How has it done since?

Ouch….

http://www.bloomberg.com/news/articles/2016-04-01/singapore-home-prices-have-longest-slide-in-almost-two-decades

Singapore is similar to Vancouver.

Can’t build any more land.
Buyers from Asia.
Great place to live.
Shitty hockey team.

Let’s see what happens.

Cashed up and ready to go

#38 Smartalox on 07.26.16 at 7:01 pm

Not mentioned in the OSFI’s plans are what stress tests will be conducted by the provincially regulated credit unions. All that foreign-buyer tax money is going to be earmarked to bail out VanCity, and Coast Capital when the market implodes.

#39 Say What? on 07.26.16 at 7:03 pm

“It’s all so confusing. Or blatantly political. Laws passed based on conflicting data, without study, suggesting unknown consequences and covered with a patina of racism by a government that should know better.” Garth

——————————————–

Nowadays, just recognizing someone’s ethnicity (I don’t know what “race” really is) can be construed as racism by the leftist super politically correct.

#40 Dave on 07.26.16 at 7:13 pm

Sure , local families are the ones buying the multi million dollar homes in Vancouver. I guess they just rent them out to Chinese then.

Stupid. — Garth

#41 A Canadian Abroad on 07.26.16 at 7:20 pm

In the words of Cramer on CNBC:

SELL, SELL, SELL!

You have till Aug 2nd, after that, profits are your loss.

#42 szalanc on 07.26.16 at 7:23 pm

#37 “Not to scare everyone, but Singapore dropped a foreigner real estate tax back in 2013. How has it done since?”

According the article you referenced, prices have dropped a total of only 9% since the peak in September 2013.

Why would that scare anyone?

#43 A Canadian Abroad on 07.26.16 at 7:27 pm

Ok, in all seriousness. When we have been expats and lived abroad. We rented one home in one country and owned another after that in a different country.

As expats (foreigners), if we couldn’t buy, it’s not a big deal. We just rent a really nice place instead.

In fact, owning a home abroad, isn’t that great to begin with and it’s something WE wouldn’t do again. The effort isn’t worth the hassle, stress nor the taxes upon selling, let along FX exchanges and the worry of something happening when you are not even in the country.

I learned that lesson prefer a balanced portfolio (less risk, more liquidity).

#44 rainclouds on 07.26.16 at 7:27 pm

OFSI gonna stress test CMHC? They are on the hook for mortgage defaults not the big 5. They covered their bets.

Not so sure about Blue Shore, Van City et al.

Bad news daily. No pumping in the press.

Getting interesting ……….

#45 Setting the Record Straight on 07.26.16 at 7:29 pm

Some individuals have supported a vacant house tax, presumably to apply both to residents and non residents of Canada. Those who endorse such a tax endorse the principle that the government has the right and obligation to discourage or perhaps even prevent an owner from lawfully enjoying his or her property in a manner which he sees fit. The government does not demand we drive a car if we wish to leave it in a garage.
Taxing property because the government disapproves if your lifestyle is quite a expansion of the state.

Others disapprove of an incremental land transfer tax for foreign buyers, without condemning on principle any land transfer tax. ( not discussing a minor fee to cover the costs of registration) it’s your property, why in the world would there be a legitimate rationale for taxing the transfer of ownership. Beyond this tax is the even more egregious annual property tax. Having purchased your property and laud in full, you may be deprived of same because you fail to pay municipal property taxes. You are not deprived of your motor vehicle if you fail to licence and sure it– you are deprived of the right to use it on public roads.

#46 VanMan on 07.26.16 at 7:29 pm

YVR real estate is being treated like a commodity in the global markets. There is no question about that. When something is “hot” and begins to trend it attracts all types of investors – speckers, day traders, longs, etc.

The reality is that Vancouver is a beautiful city and people do want to live here however, the real rise in price is the potential for foreigners and locals to try and make a few quick bucks while siphoning off free money from lenders and exploiting the lax tax laws and loopholes through external capital inflows. It’s so blatantly obvious to the public that it’s sickening and it seems our elected officials don’t have our backs, even though they do know what is going on. With real estate be aware, because when something is traded like a commodity whether it be gold, grain or housing – expect massive gains and equivalent losses. The greater fool theory is real and for one to gain someone also has to lose. There is no other outcome possible.

Ninety per cent of trades are by locals. Lay the blame for speculation and excess where it belongs. — Garth

#47 Heisenberg on 07.26.16 at 7:35 pm

If anything this tax is going to stimulate the number of listings on the MLS from those gullible nervous nellies that like to panic sell.
It might result in a temporary slight drop in prices, but that won’t last.

Vancouver is turning into China’s Monaco. You don’t need to read cooked stats to see that happening. Just go for a walk outside.

#48 the Jaguar on 07.26.16 at 7:37 pm

Now realtors are scrambling to change the possession dates on the contracts to avoid the taxes. Doesn’t take effect for a few days. As a seller one might say ‘Why should I?”. Or maybe someone’s palm will be greased. CRA watchdogs where are you?
Garth I thought you might comment on the CBC Calgary report about the 56,000 workers who left the city and returned to their ancestral homes. And the anticipated effect it will have on the Calgary marketplace. Then again, the 15% tax is a bigger story.

#49 Marius on 07.26.16 at 7:38 pm

The official numbers are 18% in Richmond and Burnaby. The real numbers are probably higher.

http://vancouversun.com/news/local-news/foreign-buyers-bought-885m-of-metro-vancouver-real-estate-in-five-weeks-data-shows

#50 boonerator on 07.26.16 at 7:40 pm

Something about this tax took me back to Grade 11 chemistry. We had a solution in a beaker that was X, we added droplets of something, one more drop and whoa, it was now Y.
Wikipedia calls it catalysis.
“Catalysis (/kəˈtælᵻsᵻs/) is the increase in the rate of a chemical reaction due to the participation of an additional substance called a catalyst[1] (/ˈkætəlᵻst/). … Often only tiny amounts are required”
https://en.wikipedia.org/wiki/Catalysis

Isn’t it in the nature of bubbles that a very small change produces disproportionate results.
Garth has rightly been telling YVR boomers to sell, maybe this tax is the catalyst.

#51 Ways and means on 07.26.16 at 7:46 pm

A realtor friend ,who works for Mc Donald realty in vancouver says there already working on ways around this tax….it won’t make any difference. ..apparently ????

#52 John on 07.26.16 at 7:48 pm

Next stop Toronto! Until Wynne does a copycat tax. The bank stress results were appalling!! So Garth, best wisdom…. If housing prices slide down and folks are under water, how long before the banks send out letters demanding cash top ups to keep the new reduced worth of the house higher than the debt owed? Any stats on possible under water owners by any variable. Ie location, age. Thanks

#53 Chaddywack on 07.26.16 at 7:52 pm

The law applies to all foreign purchasers regardless of ethnicity. A white Brit will be taxed the same as a Chinese national.

Hardly racist.

#54 jess on 07.26.16 at 7:55 pm

1MDB scandal prompts Singapore to shame banks engaged in money-laundering
http://www.japantimes.co.jp/news/2016/07/25/asia-pacific/1mdb-scandal-prompts-singapore-shame-banks-engaged-money-laundering/

#55 jess on 07.26.16 at 7:57 pm

vulture fund tax/

The Office of the Revenue Commissioners is investigating at least 40 Section 110 Special Purpose Vehicles amid claims that the ‘tax-neutral’ law is being used by companies and funds, many of which are controlled by offshore entities, to avoid paying tax on the purchase of distressed property and other assets in Ireland….”I understand officials from the Department of Finance and the Revenue Commissioners are currently examining coverage concerning the use of certain vehicles for property investments,” he said, in response to a parliamentary question from Wicklow TD Stephen Donnelly, joint leader of the Social Democrats,
http://www.rte.ie/news/2016/0724/804470-vulture-funds-tax/

#56 Jenmick on 07.26.16 at 7:59 pm

Markets – Bloomberg
http://www.bloomberg.com/news/articles/2016-07-26/end-of-an-era-as-china-s-love-affair-with-u-s-real-estate-fades

#57 Andrew Woburn on 07.26.16 at 7:59 pm

#114 Nelley on 07.25.16 at 10:33 pm
#74Andrew-Careful Andrew-the truth is a hate crime these days. Lots of delicate flowers on this blog-scary racism threatens them at every turn.
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Dalits are not a race, they are ethnic Indians indistinguishable from the rest of the population. They are a persecuted social subclass originally marked out by the dirty, dangerous and unpleasant jobs their ancestors were forced to take such as leather tanners and collectors of “night soil”. Over the centuries this led to a physical and social separation from upper castes, often maintained by violence. They were denied access to normal living standards and opportunities. Although India’s majority Hindus are usually blamed for their shameful treatment, other sects including Christians, also discriminate against their own Dalits.

Still the deeply-rooted animus to Dalits has the same effects as racial discrimination. To it’s credit, the Indian government has officially outlawed such discrimination and has long had an affirmative action program for Dalits but this seems to be no more effective than similar AA actions in the US. Just like native groups in Canada or blacks in the US, Dalits in India find they cannot count on impartial treatment from law enforcement and government agencies. As well Indian states are powerful and often dominated by religious parties and business interests which oppose the interests of Dalits.

None of these comments are meant as an attack on India. There are few leading countries with clean hands on human rights. My concern is a reality check on the prospects of investment success in a nation few of us really know anything about. When China was opening up, you heard Vancouver stock promoters say stuff like, “There’s a billion people in China! If only two percent of them buy toothpaste, it’ll be yuuge!”. Yeah, why waste money on market research. But I can see the same psychology developing over India’s apparent prospects.

Japan’s rapid development was overseen by benevolent government agencies in one of the world’ most homogeneous, peaceful countries. China’s incredible development was driven by a strong central one-party government. Democratic India on the other hand is a cacophony of competing voices where promoting development is like herding cats. They have just lost one of their best ever Finance Ministers, which to me is a distressing sign he was ruffling established interests.

Do I believe in the development potential? Yes. The Indian middle class is still tiny with lots of room to grow. China may have already blocked much of India’s potential to become an industrial exporter, so growing the domestic economy seems to be the best route. Building out the shortfall in infrastructure seems like a no brainer for a world awash in cheap capital with nowhere to put it. India has a wealth of brainpower as can be seen in their expat techies and managers at leading world companies. Still the big question is the cultural cliff India will have to climb to reach real lift-off. The plight of the Dalits is just one of many bricks in this wall.

Anyone who wants to know more about Dalits could check out https://en.wikipedia.org/wiki/Dalit

#58 Aggregator on 07.26.16 at 8:01 pm

#37 Suede – Singapore is similar to Vancouver.

Not really. Singapore and Hong Kong are seeing housing declines because their currencies are pegged to the dollar. When the Fed hiked, their monetary authorities had to raise rates as well.

#59 Victor V on 07.26.16 at 8:02 pm

Terence Corcoran: Politicians might finally have found a way to bring the housing crash they seem to want so badly

http://www.financialpost.com/m/wp/news/blog.html?b=business.financialpost.com/fp-comment/terence-corcoran-politicians-might-finally-have-found-a-way-to-bring-the-housing-crash-they-seem-to-want-so-badly&pubdate=2016-07-26

Government policies that deliberately aim to lower housing prices for the middle class run the risk of wiping out much middle class wealth. Is that the plan? Will Canada’s banks and politicians be on hand to take credit after their housing price-control schemes kick in? Similar foreign buyer taxes have been imposed in Singapore and Hong Kong, where the latest headlines on housing values announce that “Hong Kong property prices are now in free fall” and “Singapore house prices continue to fall.”

#60 Andrew Woburn on 07.26.16 at 8:02 pm

“Bank threatens charges for deposits as negative interest rates loom”

http://www.thetimes.co.uk/edition/news/bank-threatens-charges-for-deposits-as-negative-interest-rates-loom-rx0p3cgsv

#61 jay on 07.26.16 at 8:04 pm

I bet the internal poll number’s show that Chrusty is gonna get her ass kicked in the next election and that’s why she brought in the tax, it’s too late .

#62 Andrew Woburn on 07.26.16 at 8:05 pm

Just as Garth keeps warning us:

“82-year-old Sechelt woman living in car”

http://www.cbc.ca/news/canada/british-columbia/doris-anthonysz-sechelt-elderly-homeless-car-1.3694358

#63 Mean Gene on 07.26.16 at 8:06 pm

Nothing wrong with government coming up with a new source of income, it does suck for our cousins across the border.

#64 Nelley on 07.26.16 at 8:10 pm

DELETED

#65 Meanwhile in ab on 07.26.16 at 8:15 pm

And in alberta the ndp has decided to sue itself after not reading their assigned homework and making a potentially 2 billion dollar mistake… Sigh. They really are spitting in the face of 5 huge alberta employers (and tax payers) all in the name of saving face.

I don’t think the tax is going to have much of an effect and OSFI is all bark no bite, so all of this is really is just business as usual.

#66 crowdedelevatorfartz on 07.26.16 at 8:18 pm

@#171 Priced Out in Vancouver

No I just dont want to re-elect a govt that has ignored the rampant property speculation and tax avoidance……..because it suited them.
They dont give two s**ts about you or me….
A Liberal govt that had Uber realtor Bob Rennie as their main campaign contribution money raiser.
A liberal govt that ignored years of shady real estate deals by god only knows who and now……now…..when we are a mere 8 months from election time…..they pull a knee jerk “tax” out of the bag……
Just to look like they have done something.
All at the expense of “foreign” investors that may or may not be real issue….time will tell on that score.
But lets face it. Foriegn investors may fill your Liberal campaign fund with money ….but they dont vote.
What I now find amusing is the Main Stream Media have suddenly grown testicles….
Whereas 2 weeks ago they were still pumping real esate with “news” stories about people buying in the Fraser Valley ….all while the “news” was sandwiched between nonstop ReMax ads….. Now? Crickets.
And the media are finally,endlessly talking bubble, bubble, bubble…….
God bless the MSM to eat their own dead and blame it on someone else…..the liberals could learn a thing or two……if only vacuous Christy Clark didnt have the intellectual capacity of a moth mesmerized by a coleman lantern……
So, yes. I will hold my nose and vote NDP in the next election….just to toss the corrupt, trough feeding hogs from office.

I wont even talk about the disasterous liberal environmental legacy project that is being rammed through to Christy’s ‘point of no return”…….

https://lailayuile.com/2016/07/21/site-c-aerial-photos-show-mess-of-dikeswater-and-slides/

Oh and wait for the photo op of a 4th generation rancher family that will be hauled off their land this Christmas so that BC Hydro can build an “access road”….The fact that they have been the most vocal opposers to this unneeded Dam…..is pure coincidence im sure…….
May the liberals rot in a special hell or jail…..either way I’d be happy.

#67 The Dude on 07.26.16 at 8:23 pm

I guess governments are racist for charging foreign students more for tuition than locals too, right Garth?

User pay, dude. — Garth

#68 White Crock BC on 07.26.16 at 8:28 pm

The OFSI’s action today will do much more to cause a crash/ correction/ slow melt than the 15% tax.

#69 Vampire Studies GMST 454 on 07.26.16 at 8:29 pm

From the globe and mail

“The changes apply to smaller federally regulated lenders, such as Canadian Western Bank and Equitable Bank. It is unknown if the Big Six banks are facing similar revisions to their own stress tests, given that OSFI keeps confidential the criteria used in the stress tests for these institutions.”

Seems to me the biggest institutions at risk are the large credit unions in BCs lower ML and the GTA.

#70 mouldy in YVR on 07.26.16 at 8:32 pm

http://www.theglobeandmail.com/report-on-business/canadas-big-banks-could-withstand-a-severe-housing-crash-moodys/article30531315/
…no need to worry…….old news………

Of course the banks could sail through it. Homeowners, not so much.– Garth

#71 JSS on 07.26.16 at 8:36 pm

What will be impact on common share dividends of Canadian banks under a 50% housing melt scenario ?

Zero. — Garth

#72 Sydneysider on 07.26.16 at 8:37 pm

Some of the logic in today’s post suggests that, rightly or wrongly, you regard your readers as fools who have not done well in Economics 101.

Quite separately, this kind of tax is not unprecedented. Here are details for Singapore’s:

https://www.iras.gov.sg/IRASHome/Other-Taxes/Stamp-Duty-for-Property/Working-out-your-Stamp-Duty/Buying-or-Acquiring-Property/What-is-the-Duty-that-I-Need-to-Pay-as-a-Buyer-or-Transferee-of-Residential-Property/Additional-Buyer-s-Stamp-Duty–ABSD-/

Vancouver ain’t Singapore. But look how that turned out. — Garth

#73 WallOfWorry on 07.26.16 at 8:40 pm

Until there is clear evidence that mortgage rates are on a sustained increase there will be no meaningful correction. Vast majority of people are still afraid of the stock market (hangover from 2008) and too infatuated with the sexy returns in the real estate market.

Tomorrow the Fed needs to decisively signal that interest rates are on the rise to influence current market conditions. They can only do that by hiking rates starting tomorrow. There is simply no excuse for them not to.

No hike tomorrow. — Garth

#74 Metaxa on 07.26.16 at 8:56 pm

@ crowdedelevatorfartz…in general:

Referring to the BC Liberal Party as liberals or Liberal is sort of like referring to the Hell’s Angels as motorcycle enthusiasts.

Once affiliated with the Liberal Party of Canada, the British Columbia Liberal Party became independent of its federal and provincial counterparts in 1987.[10] After the 1991 provincial election, the BC Liberals subsequently displaced the British Columbia Social Credit Party as the province’s de facto centre-right conservative party opposed to the centre-left British Columbia New Democratic Party. Polls often show BC Liberal voters to predominantly vote Conservative and Liberal in federal elections.[11] The party commonly describes itself as a “free enterprise coalition”.[12][13][14]
From the wikkipedo place.

Its a opportunistic party made up of former SoCreds, Cons and provincial Liberals who didn’t want to put the work into resurrecting their own parties.

#75 WallOfWorry on 07.26.16 at 8:57 pm

#73….Garth….I agree that there is no rate hike tomorrow. I also expect the hyperbole that we have come to expect explaining why…but the reality is that the $21 T government debt that the US has with 1% GDP growth means that the US cannot afford rate hikes. The fact that your previous prognostication for a slow and steady path of interest rate hikes hasn’t materialized should signal to you that their are greater concerns than the Canadian real estate market.

#76 Harbour on 07.26.16 at 9:01 pm

Were just catching up with Australia, New Zealand, etc.. on our Crash Tax

#77 Finally on 07.26.16 at 9:02 pm

I’m back, it’s been over 1 year since I did my last post because I decided to buy a SFH in Burnaby. I bought it for 1.1(10 year old house) and now my neighbors are selling for 1.5(50 year old house). Best decision I ever made to buy, just saying.

As for the 15% tax, good, my kids can eventually buy at least their own condo if prices go down.

You’ve made nothing until you sell (and remember to deduct closing costs and commission, plus financing charges). By the way, why wouldn’t the house devalue along with the condo? — Garth

#78 Ziggy on 07.26.16 at 9:07 pm

I’m not sure if 10% foreign ownership is as significant as indicated by the headline news. Relatively speaking, many North American and European cities have similar rates of foreign ownership.

The prices in Vancouver are ultimately determined by the 90% of buyers categorized as local.

#79 Victor V on 07.26.16 at 9:10 pm

Don’t blame Chinese buyers – B.C.’s tax was long overdue

http://www.theglobeandmail.com/report-on-business/rob-commentary/dont-blame-chinese-buyers-bcs-tax-was-long-overdue/article31124996/

This announcement has been a long time coming. The reality of a self-regulated market is that foreign speculators are going to use the regulatory framework to their advantage. It is not up to foreign governments to control how their citizens invest; rather, it is the responsibility of Canadian leaders.

The new tax is unlikely to come as a surprise to the Chinese government or Chinese investors. Indeed, China’s consul-general in Vancouver addressed the matter last year, saying that B.C. regulators, not Chinese investors, should be blamed for rising prices. She suggested a number of policy options, including improved oversight of the real estate development community and a luxury tax on overseas investors. Essentially, she was saying that if we provide the environment for speculators from Mainland China or other countries to operate, they will do so.

#80 Gulf Breeze on 07.26.16 at 9:10 pm

If I remember correctly, didn’t you state that the YVR real estate market was vulnerable to a correction, due to a number of factors, chief among them rising interest rates?

Maybe I am wrong, but I don’t recall you warning anybody that a provincial tax on foreign investors would provide the impetus for a crash. Just sayin’.

The market is overvalued, unstable and with sickly vital signs. Won’t take much of anything to push it over. — Garth

#81 macroman on 07.26.16 at 9:16 pm

Freakin realtors in Van will not be getting any sleep until Tuesday, deal writing bonanza for last gasp before cliff.

Any deals in pipeline have to be grandfathered.

I too can’t believe the province can wave their magic tax wand on one area, that is discrimination and I bet a lawsuit tout suite.

Hi, I am from the government and I am here to help you.
Gong!

#82 Musty Basement Dweller on 07.26.16 at 9:21 pm

Hmm I guess we really will have a crash in Vancouver then. 10% foreign capital is obviously way low if you were to include the reality of presently legal monetary gifts between family members. Not a big surprise to anyone who knows people in the industry in Vancouver.

Meaningless. Over 40% of all first-time buyers now in Canada use family money to do so. — Garth

#83 Brian Ripley on 07.26.16 at 9:26 pm

“the Chinese head tax”

Another tax. This is not what we need in this province, in this country. We need a complete tax reform. In 2012 I posted links to the The Automated Payment Transaction Tax

http://www.chpc.biz/history-readings/category/apt

The foundations of the APT tax proposal—a small, uniform tax on all economic transactions—involve simplification, base broadening, reductions in marginal tax rates, the elimination of tax and information returns and the automatic collection of tax revenues at the payment source. The APT approach would extend the tax base from income, consumption and wealth to all transactions. (Wikipedia)

POSITIVES
Strong dollar due to economic stimulus attracting foreign investment where no income or excise taxes exist.
Very low interest rates due to extra savings by individuals and attraction of foreign investment capital allowing lower cost capital and infrastructure expansion.
Budget elasticity for government including the ability to respond to special demands such as war or national emergencies.
Eliminate budget deficits with minor adjustments in an already extremely low tax rate.
Eliminate accumulated national debt through same mechanism if desired; further strengthening the currency.
Multiplier effects of economic stimulus creating greater numbers and value of transactions in an upward spiral reducing rates or allowing more services.
Incentive to move toward a “cashless” system.

NEGATIVES
Public insensitivity to expansion of government budgets and commensurate regulation.
Very low interest rates for people relying on secure, fixed sources of income.
Loss of tax incentive for charitable contribution. People will have more wealth to give but must do so without economic advantage.

#84 wait_and_see on 07.26.16 at 9:26 pm

This tax is unfortunately about 6 years too late. Garth has been saying for years that there is little effect of all of this foreign captial on the local market, and now with this tax we will see who was correct. I am sure the BC gov’t with their reported 10% influence is still an underestimate. The BC gov’t did not want to put this tax in, and resisted this idea for years. The 10% does not count foreigners buying through all sorts of proxy schemes, fake companies, and PR people living in Kerrisdale and West van with an annual reported income of 20K (while the breadwinner lives elsewhere). I am HAPPY to lose some equity in my home if it makes for a better future for our children and less of a dog-eat-dog society. Bring it on!

#85 Larry Laffer on 07.26.16 at 9:33 pm

Knowing that foreigners make 9.7% of total YVR-area buyers is one thing, but it may not be that relevant to explain the sky-high prices. What I’m really curious to know is the origin of the money used for down-payments or transaction costs. There we might have some surprises. AFAIK, nobody is tracking this information, which is a pity.

#86 Victor V on 07.26.16 at 9:33 pm

I’m 24, I make $140,000 a year and I own two homes. I don’t regret a thing

http://torontolife.com/city/life/im-24-i-make-140000-a-year-and-i-own-two-homes-i-dont-regret-a-thing/

#87 45north on 07.26.16 at 9:39 pm

Canada’s bank cop, the Office of the Superintendent of Financial Institutions (OFSI), says it will order the Bay Street boys to do stress tests showing how their banks might withstand a massive 50% plop in property values in Vancouver and 40% in Toronto.

moldy in YVR: from your link: Amid a chorus of concern about Canada’s overheated housing market, Moody’s Investors Service says it believes the country’s biggest lenders can easily withstand a severe market downturn

Moody’s is talking about a 30% decline in Vancouver and Toronto.

JO: The entire system is out of control. Many believe that the government or bank of Canada are there to protect them from their stupidity but what a shock they will experience as the house of cards comes down

Sadly as this monster dies out the social and economic devastation will be spectacular.

a family I know is considering buying in Vancouver. I said what I had to say which was prices could go down. The father simply resumed his task on the barbecue.

#88 Bottoms_Up on 07.26.16 at 10:00 pm

I bought in 2013…5% down…25 yr am….a 30% crash marked from now till next year would put me 30k underwater….not an entirely disasterous scenario, would suck if I was forced to sell for whatever reason. But most likely, the bank would continue to suck money from me and the shareholders would still get paid.

#89 Smoking Man on 07.26.16 at 10:06 pm

Just a bunch of hype to cool things down before Negative rates.

Population in or outflows is what you got to watch.
US markets that got beat up in 2008 had huge population outflows.

The Herd is fearless…

#90 46 and 2 on 07.26.16 at 10:11 pm

Meaningless. Over 40% of all first-time buyers now in Canada use family money to do so. — Garth

Garth, how do you know this? I hope you are not quoting “stats”?

And if you are why in the world would you trust the info?

Saying this is kind of like saying you know exactly what the underground economy generates.

#91 46 and 2 on 07.26.16 at 10:19 pm

I think that maybe the accountants and lawyers and the money changers need to realize that whatever it was you were taught about economics, fundamentals, currencies, trade, macro and micro economics went out the window in 2008.

What we have have is just a bunch of idiots sitting at computers, creating currencies and putting out fires with the powers that be hoping for a better day.

QE and digital currency was and is the death of normal economics.

Throw all of your books out.

#92 TurnerNation on 07.26.16 at 10:21 pm

Probably still room in the <250m AUM advisory firm range for a new entrant

How about BBB LLC:
Beer: how to 'shotgun' a can.
Bourbon: the perfect Old fashioned.
Balanced portfolio: natch.

#93 The Wack on 07.26.16 at 10:28 pm

Asians have been buying in YVR for decades, nothing new, remember Hong Kong 1999. They like it here, we welcome them, who doesn’t like “dim/sum. Vancouver has never been affordable, it’s just gotten crazy the last year or 2 and foreign investment has been a contributing factor in whipping up the locals into such a frenzy as thinking they better buy now now now!! Starts in Van, trickles out the valley as the city folk bring their buckets of cash to the burbs and drive those prices up, and so on and so on!!

Garth, the real story now is lack of rentals and rental gauging! You like to tell people to sell and rent, not very practical in the lower mainland.

It’s a dangerous world out there, most of us just want to come home to our own home and have a cold beer on a hot day!

Cheers!

#94 Willy H on 07.26.16 at 10:28 pm

I am confused. According to this blog foreign buyers are insignificant with negligible impact on prices or demand nationwide.

Therefore one could extrapolate that the new GVA tax will have minimal impact all round.

If foreign buyers have been underestimated than I for one would welcome this “crash” tax.

After all, why do I come to this blog? Because I made investment decisions that keep my exposure to over valued realestate to a minimum. Like many others I have been waiting for a price correction for the past 7 years!

Anything that precipitates such a drop is damn good news in my opinion.

It sure doesn’t look like interest rates are going to continue to ratchet upward with Brexit playing out over the next 5-7 years.

#95 Van Isle Renter on 07.26.16 at 10:28 pm

Don’t ya just get the feeling that this tax was implemented in the Wile E. Coyote fashion? Kind of like the RoadRunner handing Wile E. an anvil just when he ran off the cliff and was treadin’ air.

Yeah. That’s about what it sounds like to me.

#96 46 and 2 on 07.26.16 at 10:32 pm

If you believe that Alberta WAS the “economic engine of Canada” you need to come to Calgary, sit yourself down with a couple of oil guys with lots of grey hair that have been through the ups and downs and all arounds and they will tell you point blank just what kind of kaka we are in.

“We” means Canada if you believe my first sentence.

The truly scary shit is that this is not over….not even close.

#97 Nemesis on 07.26.16 at 10:40 pm

…”…it’s a bombshell tax without precedent or known consequences.” – HonGT

#FunnyYouShouldSayThat,Or… #Oddly,SomeOtherJurisdictionsGotThereFirst…

[CBC] – Foreign home buyers: How other countries limit money from abroad

…”Countries around the world have tried to make home ownership more affordable with an assortment of different approaches. Some seem to work, others … not so much.

The following is hardly an exhaustive list, but it provides a glimpse into the options Canada might consider down the road:”….

http://www.cbc.ca/news/business/real-estate-housing-foreign-buyers-1.3479508

[NoteToGT: Premier Clark may be many things but if you’re going to compare the undisputed QueenOfRetail to predator cetaceans try this one instead: https://youtu.be/cXllyl05O04 ]

#98 Victoria - the original on 07.26.16 at 10:51 pm

This worked out well ….

Retweeted Mike Klassen (@MikeKlassen):
Email from ‪#‎Vancouver‬ realtor advises clients on how to beat new 15% foreign purchaser tax thru assignment. ‪#‎VanRE‬ https://t.co/pEJMey8s4b

https://pbs.twimg.com/media/CoVdPeMUkAEgLqO.jpg

Perfectly legal. You would do the same. — Garth

#99 greyswan on 07.26.16 at 10:51 pm

I have no problem with 15% tax, (maybe increased in future) on foreign real estate purchases in Greater Vancouver.
And like Australia purchases should be restricted to only new construction.
….the 15% tax should be applied the all regions of Province of B.C. and include everyone except Canadian citizens.
…..can you say…..brexit!!

#100 toronto1 on 07.26.16 at 10:57 pm

The tax will be coming to Ontario soon.
Read between the lines– even top economist at BMO is pushing for ontario to implement the tax. Ontario FM is watching it closely etc..

Garth- im not as savy as you but from the time that the bank CEO’s went on TV asking for govt intervention to the OFSI pushing for stress tests and tighter regs etc.. it almost seems to me that its the banks that are really pushing for slow down more so then the people.

gotta wonder why? what is their data and models telling them? what are they trying to avert as banks almost always hate regulation unless it benefits them in some way.

my speculation is that people (banks customers) are so highly leveraged that even a minor recession or blip can cause absolute havoc in the credit market. I think they are trying to slow the market down and have a slow melt as if they do not succeed then it will be a hard crash.

#101 Anitapatina on 07.26.16 at 11:04 pm

Stressing about the stress tests! Deposits in these banks (EQ in particular) are covered by the CDIC no matter what happens to the housing markets… correct? Or is the next news that the CDIC will not be able to cover the insured deposits if these banks go under.

I recently deposited $500,000 split between 5 banks thinking my money is safe (4 in the big banks)… but EQ is being stress tested… Should that deposit be moved elsewhere … Like under the mattress perhaps.

#102 Smoking Man on 07.26.16 at 11:07 pm

Suzanne Suranden has lost her mind

#103 Madcat on 07.26.16 at 11:09 pm

It’s not about racism. It’s about more and more people coming into our country stomping out the trees and building houses on our beautiful land. Let’s keep our beautiful land and our diverse culture as is. We don’t need more people…. An ever-expanding population cannot be sustained forever. Canada is beautiful as it is. Let’s not ruin it by opening our doors to the entire world!

As far as I’m concerned the government finally did something worthwhile! Congratulations to the Liberals you just won my vote!!

#104 Ed on 07.26.16 at 11:12 pm

Garth, I appreciate your voice of sanity but I fear it is one of few amongst many voicing stupid, xenophobic, isolationist fallacies. I do hope things will change as at the moment it looks like the world is retreating into stupidity. As humans we have a built in weakness–the ability to see reason and deliberately ignore it in favour of emotional, animal reactivity. Too many have forgotten the horrors of the last world war and the many more localised repetitions of such.

#105 Aggregator on 07.26.16 at 11:14 pm

#76 Harbour – Were just catching up with Australia, New Zealand, etc.. on our Crash Tax

And if anyone bothers to look they'll find that home prices in Auckland and Sydney have risen since then.

It's not foreign buyers driving this market, rather capital inflows from all over the world. CIBC just sold a EUR$1.25B covered bond backed by mortgages for 0% interest (was negative really). Who bought these? European banks who need yield and quality collateral.

The same trend is happening in the money markets which has inflated deposits at Canadian banks. Once deposited, banks can then fractionally lend out 9x that amount domestically. This is where the big money comes from and what keeps the plumbing under the mortgage market going.

The question everyone should be asking is this: What happens when that money wants to leave? And it will leave at some point because it has to in order to balance our current account. That's when the problems begin and bank lending eases because they can't find the money to fund more mortgages.

#106 Lulu on 07.26.16 at 11:17 pm

#18 Careful

I never write anything silly, in fact calling Garth Sir is a respect of what he put in for us, you think too much, maybe you should be more careful :)

#107 Smoking Man on 07.26.16 at 11:22 pm

Crooked Hillary playing the woman card all the way.

This election has nothing to do about her and hubby in it for the money.

Dead poor before now super rich on civil servant salarys.

Woman roar.

If you want to bet on the election in November.
Ghost Busters at the box office should give you a clue.

I will take any bet and give you ten to one odds that Trump not only wins. But wins in a landslide.

The thing the Dr’s of Herdonomics in the DNC are not factoring in. House WIVES that love there husbands who are having a bad go because of bad trade deals.

Dr Smoking Man
PhD Guru of Herdonomics

#108 crowdedelevatorfartz on 07.26.16 at 11:25 pm

@#74 metaxa
“Its a opportunistic party made up of former SoCreds, Cons and provincial Liberals who didn’t want to put the work into resurrecting their own parties.”
*******************************************

You’ll get no arguement from me.
Liberals, Socreds, whatever…….lazy , corrupt, opportunistic, money grabbing scum

#109 Just in on 07.26.16 at 11:28 pm

DELETED

#110 crowdedelevatorfartz on 07.26.16 at 11:31 pm

@#82 Brian Ripley
“In 2012 I posted links to the The Automated Payment Transaction Tax ……”
*******************************************

Apparently no one read it THEN either.

Perhaps if you include gratuitous, slanderous, sexist allegations of the most beastial order……..you might get someone to read it…….with photos of course…….(sorry, wishful thinking on my part)

Just sayin’

#111 RayofLight on 07.26.16 at 11:50 pm

I watched Bill Clinton’s endorsement speech for Hillary to-night. The maestro at work! Hillary & Bill Clinton is the change and experience the US, the world needs to navigate through the challenges ahead . The US and the world are at a fateful fork in the road. One fork represents shallow, fear, hate, divisiveness and a minute by minute policy spewing sociopath, the other represents real change ,mentored by real experience, by a person capable of seeing the grey areas ,and unintended consequences of complicated issues. To my friends in the US, please vote for your children’s future, vote for the light,vote for Hillary, not for the dark,not for Trump.

#112 S.Bby on 07.26.16 at 11:59 pm

#77 Finally
I thought it was 1.2 million?
You know what it was worth 3 years ago is what it will be worth 3 years from now.

#113 Smoking Man on 07.27.16 at 12:03 am

Not every man can succeed in school, make it to the epa-center of acceptance, the shrine of you’ve made it baby.

Some of us have learning disabilities, some of us too consumed with new-lee discovered healthy hormones at puberty that puts higher education on the back burner and getting the hottie back to your moms house the only priority worth pursuing at the time.

Not even going to touch the topic of woman centrist curriculum. Shit I’ll have mob of angry lesbians chasing me down 38th street with baseball bats and modified bear traps reset to get and destroy testicles.

These forgotten men that can cut the grass in a chis cross pattern, can dig a ditch, can assemble a car in a plant, buck rivets have loving wives that will never vote for Hillary.

Blacks and Hispanics who understand the laws of supply and demand will avoid her.

Not all of them can figure out a good bull shit story can set em free. Why is lying so underrated.

Legal Latinos, blacks, big red rock eaters. the reason your wages are low, or your out of work, and houses are expensive is because of Trade deals that allow freedom of capital, but not freedom to cross boarders. Labor markets are no different than any market. Flood it with illegals you increase the supply which suppress wage growth. Hillary and Goldman like that.

Those big banks in Canada, such progressive inclusive posts on linked in, and social media, while offshoring jobs.

The machine needs to make sure portfolio managers always have the edge so pension funds can get yield because of all the useless old buggers out there.

Come on SJW lets get Dr assisted suicide passed so the kids can get the inheritance faster.

I’m relay drunk, Garth please check this one.

#114 Ole Doberman on 07.27.16 at 12:03 am

#95 46 and 2 on 07.26.16 at 10:32 pm

If you believe that Alberta WAS the “economic engine of Canada” you need to come to Calgary, sit yourself down with a couple of oil guys with lots of grey hair that have been through the ups and downs and all arounds and they will tell you point blank just what kind of kaka we are in.

“We” means Canada if you believe my first sentence.

The truly scary shit is that this is not over….not even close.
———————————————————
Good observation. I know of 5 O&G workers that expected to come back to work by now with oil expected to be around 60ish – well we know where we are at.

My other observation is that more luxury houses are coming on the market with rooms for rent – you think this could be oil execs over extended themselves, and now need strangers occupying rooms to make ends meet?

One other thing to add as I’ve been looking around the room rental market. One of the rooms I came across was a guy from China. He is renting the room cause he is going back to school….in Bejing!

I asked don’t mainland Chinese come to Canada for School, I mentioned Vancouver. He said the trend is reversing!

-Doberman P.I does it again!

#115 Nemesis on 07.27.16 at 12:05 am

“I will take any bet and give you ten to one odds that Trump not only wins. But wins in a landslide.” – HommeDuTabagisme

#”Don’t buy a single vote more than necessary. I’ll be damned if I’m going to pay for a landslide.” – Joseph P. Kennedy

#116 Victoria - the original on 07.27.16 at 12:14 am

Perfectly legal. You would do the same. — Garth

Yes I would. This new regulation is just smoke and mirrors – it is going to change nothing.

:-)

#117 BillyBob on 07.27.16 at 12:15 am

I have to say I’m seeing a couple of logic disconnects here.

Premise: foreign money is inconsequential compared to local money.

Yet it could cause a crash to tax it.

?

Premise: “Billionaires from Guangzhou” aren’t a significant factor.

Yet this tax is “racist”, with a decidedly anti-Chinese bent? (“head tax” comparisons. Careful, the rhetoric meter is starting to overheat.)

I’m curious how taxing insignificant amounts of money, from people that aren’t bringing hardly any in, can crash a market and be racist?

Yes, slightly tongue in cheek, but when deriding others for sucking and blowing…? :-)

#118 BillyBob on 07.27.16 at 12:17 am

Should have said “are bringing hardly any in”. Apologies for the double negative.

#119 Mark on 07.27.16 at 12:19 am

“The same trend is happening in the money markets which has inflated deposits at Canadian banks. Once deposited, banks can then fractionally lend out 9x that amount domestically. This is where the big money comes from and what keeps the plumbing under the mortgage market going.”

*sigh*, that’s not true and you know it. Banks can only lend what they can borrow. Yes, it is true that there is a money multiplier effect due to the systemic effect of equity requirements at the banks (which is actually greater than 10X for quality mortgages or CMHC insured subprime mortgages), but the banks are still constrained by their ability to borrow (ie: attract “deposits”) as every dollar lent must first be borrowed.

Didn’t Shawn and I explain this well enough a week ago?

Stressing about the stress tests! Deposits in these banks (EQ in particular) are covered by the CDIC no matter what happens to the housing markets… correct? Or is the next news that the CDIC will not be able to cover the insured deposits if these banks go under.

The big-5 are rock solid on account of having >40% of their asset base adjustable rate, and heavy use of CMHC subprime mortgage insurance.

Its the institutions, particularly the provincially regulated credit unions, which are far scarier on account of far less use of CMHC subprime mortgage insurance and smaller books of adjustable rate vs. fixed rate loans.

Another area of concern for the smaller provincially regulated institutions is their lack of diversification. Geograhically and economically. The Big-5 have fairly robust asset management and brokerage arms which will benefit as wealth continues to flow away from housing, and towards other retirement asset classes. The credit unions, OTOH, are heavily weighted towards residential and small business lending.

#120 nonplused on 07.27.16 at 12:24 am

#67 The Dude

To expand a bit on Garth’s rebuttal, Canadian students enjoy highly subsidized tuition paid for by highly taxed Canadians, the socialist idea being that those students will then get high paying Canadian jobs and pay back their subsidized tuition and more and then also subsidize the next round of students and we will have a glorious well educated work force without excessive student debt. And it works pretty well actually, a lot better than I would have thought thinking about it.

But that is why foreign students pay more. Why should Canadian tax payers pay for foreigners to go to school here if they aren’t going to settle, become landed citizens, and pay taxes? That’s why they get charged more than citizens, it’s closer to the actual cost even though it is still highly subsidized by Canadian tax payers. The universities lie about what their actual costs are but the foreign students still pay more. They should, they will never pay taxes in Canada unless they naturalize and work here. So why should we give them a free education???

And comparing capital flows to subsidized education is completely disingenuous. I think it is bad policy to impose special taxes on foreign capital, but that doesn’t mean it follows that foreigners should enjoy our subsidized education and health care systems unless they pay in like all the Canadian tax payers do.

I mean I am beating up on this now, but my son’s school has a lot of out of district students. And they don’t pay anything. Why? Because the district they belong to pays our district while they await the construction of their new school. Ok, that seems ok. But if I were paying property taxes to educate all these out of district students and their parents weren’t paying anything I would be livid.

So, Q.E.D., you comment is proven destroyed.

#121 Smoking Man on 07.27.16 at 12:28 am

I’m not afraid to say.

I’m a proud Sexist… I’ll debate anyone..

#122 Smoking Man on 07.27.16 at 12:32 am

110 RayofLight on 07.26.16 at 11:50 pm
I watched Bill Clinton’s endorsement speech for Hillary to-night. The maestro at work! Hillary & Bill Clinton is the change and experience the US, the world needs to navigate through the challenges ahead . The US and the world are at a fateful fork in the road. One fork represents shallow, fear, hate, divisiveness and a minute by minute policy spewing sociopath, the other represents real change ,mentored by real experience, by a person capable of seeing the grey areas ,and unintended consequences of complicated issues. To my friends in the US, please vote for your children’s future, vote for the light,vote for Hillary, not for the dark,not for Trump.
…….

I give you a perfect specimen of the mind fkd.

#123 Dyugle on 07.27.16 at 12:38 am

Unpresidented unless the 15% tax in HK is ignored. But that was implemented years ago and it had little effect there so of course it is the model BC liberals would go for. If they were serious they would use the PEI solution of double property taxation on non-residents. Of course you would see this as racist, head shake. The Texas solution of no income tax and an increased property tax to make up the difference would also be seen as racist by you, head shake. It is not about race it is about contributing to the community. Empty houses are a blight on the community. They contribute nothing and the leave local schools empty. The displaced people flood the schools in the outlying areas and choke the highways. Do these empty house owners pay income taxes to allow us to rebuild our highways or improve our schools. No that is for the locals to do again like we already did in the city core. High time we taxed non-residents and made them pay the same tax we pay to live here.

#124 conan on 07.27.16 at 12:39 am

RE #110 RayofLight on 07.26.16 at 11:50 pm

I agree with your sentiment. ISIS obviously wants Trump to win as one can see by the level of recent terrorist activity.

Trump means disruption and confusion among NATO. Broken trade agreements and a global realization that the World’s most powerful country just elected a nut bar.

He will be nutty.

#125 Smoking Man on 07.27.16 at 12:42 am

Bunch of ass kissing stupid monkeys on CNN.
I’m a good lier…. They’re not even close to my skills.

Highest bidder gets me… I have no loyalties.

#126 BS on 07.27.16 at 12:54 am

#45 Setting the Record Straight on 07.26.16 at 7:29 pm

Some individuals have supported a vacant house tax, presumably to apply both to residents and non residents of Canada. Those who endorse such a tax endorse the principle that the government has the right and obligation to discourage or perhaps even prevent an owner from lawfully enjoying his or her property in a manner which he sees fit.

The government is not saying you can’t leave your place empty ‘lawfully’. They are saying if you do you will pay a higher tax rate. They tax many things differently. If they want to discourage something they tax it more. This is nothing new. For example a litre of water is taxed at 5%, a litre of pop is taxed at 12% and a litre of vodka is taxed well over 50%. Some people still choose the vodka.

#127 Rexx Rock on 07.27.16 at 1:05 am

They should have banned foreign home ownership years ago.Then we wouldn’t have all this trouble.

#128 Smoking Man on 07.27.16 at 1:11 am

Liberals, what to be the perfect piece in a gig saw puzzle not designed by them.

Conservatives want to expose the flaw in suck up syndrome puzzle pieces.

And then there is me… I want to give a short term rental an orgasm. Talk about an impossible goal.

We all have demented hobbies.

Writing fiction is my favorite. In spite of Dyslexia

#129 oldwrinkley on 07.27.16 at 1:28 am

Hi Garth,
You neglected to mention that 18 % of sales $ in Richmond were to foreigner money and 17 % of sales$ in Burnaby were to foreigner money. These two are directly adjacent to Vancouver City. Please when giving numbers provide more of the facts not just the ones that tend to support your position on the issue, although as the “owner “of the blog that is your option.
Regards.

#130 Joe2.0 on 07.27.16 at 1:36 am

The strong U.S. Dollar will Hoover up properties, speculation is a 60cnt Canadian peso.

#131 Shawn on 07.27.16 at 1:58 am

OSFI Stress Test…

Based on arbitrary 50% drop in Vancouver house prices. Sounds like fear mongering. Why not 90%?

But anyhow the largest six banks are excused from this test? What joke is this?

What about CMHC, the only real loser in this scenario? Excused also?

I don’t know about OSFI. Some years ago they were largely responsible to for Asset Backed Commercial Paper crises in Canada because they encouraged banks to provide only very weak credit backstops on that paper. The banks then refused to honor the credit guarantees on a technicality, claiming basically that there was no TOTAL shutdown of the commercial paper market. Somehow OSFI escaped blame but they should have got a LOT of the blame.

#132 DON on 07.27.16 at 2:31 am

The North east region of BC counted on the oil patch jobs and counted on the LNG jobs, that have yet to materialize.

And look what happened.

http://www.alaskahighwaynews.ca/peace-region-rents-from-ludicrous-landlord-s-market-to-skyrocketing-vacancy-in-18-months-1.2307524

The news paper also had articles high crime, unpaid civic taxes, outreach stores emptying, real estate over supply, lack of jobs – that is after the BC gov spent 470 Million on the Site C Dam work camp. Today’s issue a must see, all the connected dots in one daily paper July 26 addition.

#133 TRT on 07.27.16 at 2:53 am

Garth and Bob Rennie being mentioned in the same sentence on reddit Vancouver. compared as brothers lol

43,000 regular posters/readers there. About 41,000 agree that its foreign money.

Prices would drop 50% if foreign money taken out of YVR equation.

#134 TRT on 07.27.16 at 2:56 am

@106 Smoking Man

I agree. Trump will win.

The powers that be designed the internet to persuade the masses. unfortunately the plan hit a glitch. the masses now see the deception and are rising. Go to vancouver reddit and see the mass revolt against Chinese money inflows.

If governments don’t do anything about it, expect people to become more knowledgeable and then demand an immediate halt to Asian immigration.

Its coming Garth.

#135 Rural Rick on 07.27.16 at 3:30 am

Bottom line is it is not going to work. If you know how to channel large sums of money offshore this is a minor detail. Sure will scare the pants off the locals though. Heady times for Vancouver re agents.

#136 Freedom First on 07.27.16 at 3:34 am

Yes. I totally expect Canadians to take a financial beating. High, beyond belief consumer debt levels never end well. And the Herd never sees it coming. Fact. Human nature never changes: Fear and Greed and Entitlement rule. World wide.

It’s never different anywhere, or anytime.

On another note. My “Freedom First Impersonators Fan Club” is now Posting 60%+ of the “Freedom First” comments. Well done!

#137 JohnT on 07.27.16 at 3:42 am

@#37 Suede

Not to scare everyone, but Singapore dropped a foreigner real estate tax back in 2013.

How has it done since?

Ouch….
**************************************

I was a mortgage specialist in singapore and saw the rise and fall of the Real Estate market in that tiny red dot. While the 15% stampduty did slow down the market in Singapore, the property prices kept on increasing until the cooling measure which enforced by Monetary Authority of Singapore that all banks to adhere to their very stringent lending criteria. (before this cooling measure, lending criteria was already quite stringent compared to Canada) That killed the market..

http://www.mas.gov.sg/regulations-and-financial-stability/regulations-guidance-and-licensing/commercial-banks/notices/2014/notice-645-computation-of-total-debt-servicing-ratio-for-property-loans.aspx

Not saying that this tax will not cause a correction. But I think more needs to be done.

#138 Denton Texas on 07.27.16 at 4:50 am

Confused much? Foreign nationals are not a race, no one has restricted citizens of every race. Every country restricts foreign nations, with visa’s, property rights, etc. What’s so confusing about the citizen non citizen debate for you Garth?

#139 YVR2ZRH on 07.27.16 at 5:36 am

#42 – – The rate of price drops in Singapore have been about the same pace as the price rises. There prices rose around 33% in 3 years. Here we have just had 33% in one year – so we should expect the reversal to happen initially at the same pace. So – we could see a 20-30% decrease in Vancouver within 12 months – easily.

#140 maxx on 07.27.16 at 7:19 am

#8 wallflower on 07.26.16 at 6:19 pm

“Another comment regarding yesterday’s comments: Dude; totally agree – just a general term like “heh you guys” – I use guys all the time, meaning, whatever sex is listening to me!”

Your use of “guys” was not intended to offend. Ignore such trending social-engineering idiots. The minute you cave to these fools, they are no longer your peers. They become your superiors.
Force them to use what intellect they have and work it out for themselves.
Otherwise, putzes like this are likely to encroach onto your financial well-being.

#141 TurnerNation on 07.27.16 at 8:11 am

Today we will be quaking in fear and trembling with awe, whether or not Central Bankers will attack our low interest way of life.

The world is ruled by ________ not by _________.

#142 Careful on 07.27.16 at 8:15 am

#105 Lulu on 07.26.16 at 11:17 pm

#18 Careful

I never write anything silly, in fact calling Garth Sir is a respect of what he put in for us, you think too much, maybe you should be more careful :)

It’s called humor Lulu. Your post was so incredibly respectful that it stood out in comparison to a ton of the other posts that get regularly published. I was impressed with what you wrote, therefore, the wink at the end. Your politeness made me laugh because it was such a fresh contrast and it caught me off guard.

#143 The Last Post on 07.27.16 at 8:32 am

@ 110 Ray of Light

1) Go to YouTube and type in “Clinton Cash” movie

2) watch it to the end

3) get back to us on that “dark and light” opinion

Lets see how much intellectual / moral integrity you have in reassessing your outlook.

Otherwise, you are just another disingenuous SJW.

#144 Bottoms_Up on 07.27.16 at 8:34 am

#120 Smoking Man on 07.27.16 at 12:28 am
——————————
Did you see the female premiers last night making sweeping statements about men “not as involved in child rearing”, “not impacted by the negativity of politics”. The one from BC was the worst for this, but Notley even went so far as she pushed to have female candidates asked to run instead of males.

#145 The Last Post on 07.27.16 at 8:44 am

new BC tax

This MAY have a big effect on RE market dynamics.

If you were considering buying in the lower mainland ( the biggest purchase of your life) , wouldn’t you wait to see the impact of the tax before buying?

This ‘pause for reflection’ could cause an “air pocket” sharp decrease in demand (buyers waiting) just as motivated supply (smart sellers , developers, investors) swells.

Think about it.

#146 Gonkman on 07.27.16 at 8:47 am

#121 Smoking Man on 07.27.16 at 12:32 am
110 RayofLight on 07.26.16 at 11:50 pm
I watched Bill Clinton’s endorsement speech for Hillary to-night. The maestro at work! Hillary & Bill Clinton is the change and experience the US, the world needs to navigate through the challenges ahead . The US and the world are at a fateful fork in the road. One fork represents shallow, fear, hate, divisiveness and a minute by minute policy spewing sociopath, the other represents real change ,mentored by real experience, by a person capable of seeing the grey areas ,and unintended consequences of complicated issues. To my friends in the US, please vote for your children’s future, vote for the light,vote for Hillary, not for the dark,not for Trump.
…….

I give you a perfect specimen of the mind fkd.

————————————————————

Remember Smokey the Left are easily molded…

Did Hillary pay Bill a $1,000,000 speaking Fee from her Campaign Fund to give the speech?

Or does Bill only make that kind of speech money when he needs Hillary to make a Policy change for one of his “Friends”.

Hillary/Bill are corrupt SOB’s… No wonder Wall Street loves them.

If you really think “Hillary & Bill Clinton is the change and experience the US, the world needs to navigate through the challenges ahead .” then you need a blunt rock to the head.

The only thing that will happen if Hillary wins is the Clintons will be STINKING rich after 4/8 years and the Lower/Middle Class Americans will be poorer.

The Clintons “Friends” will make out like bandits though.

I am impressed with the stuff she got away with as SOT.. But Hypocrites those 2 are for sure.

#147 The Last Post on 07.27.16 at 8:50 am

@ 124 Smoking Man

CNN = Clinton News Network

don’t you think it is very funny that these SJW Democrats don’t know that it was the Democrats that started the KKK after they fought the Civil War to continue slavery ?

These SJWs are profoundly ignorant.

#148 The Last Post on 07.27.16 at 8:58 am

OSFI stress tests

I don’t believe they are worried about the “big 6 banks”.

It is the credit unions that are beyond their purview that really has them worried is my guess.

The “big 6 banks” have been losing too much business to them due to the uneven regulatory playing field.

Stress testing will expose the credit union balance sheet risk profile that will hasten their further regulation / demise.

#149 The Last Post on 07.27.16 at 9:02 am

Smoking Man

see “Clinton Cash” movie on YouTube

Credible author / movie director , all vetted by lawyers so it has to be factual.

Thoughts ?

#150 Nelley on 07.27.16 at 9:02 am

I read some of these posts today and wonder if they are a poor attempt at satire (including Garth’s)-one poster (ED103) even compared this overdue, easy to avoid copy of Hong Kong’s tax to “the horrors of WW3”.

#151 understood by few on 07.27.16 at 9:15 am

#137 Denton Texas on 07.27.16 at 4:50 am
Confused much? Foreign nationals are not a race…
—————–

Thick much? Yes, it affects all foreigners, but the motivation was to block a certain nationality (which is being blamed for housing prices in Vancouver).

Calling it a modern head tax is a bit hyperbolic, but it’s definitely not Garth that’s confused.

#152 Math Challenges on 07.27.16 at 9:23 am

If ‘foreigners’ are buying a billion aq month in a slow month, what does that do to the YOY numbers. You know this has been sneaking around for many years. This year alone it’ll be over 12 billion based on the governments ‘revised numbers’. The truth is somewhere north of quintuple the governments fudge numbers, and I ‘m say this because they came up with the ‘revision’ so suddenly. as if they were looking for a BS figure they could hide behind when the real numbers come out.

The June-July data was for registrations on properties, not purchases. The actual sales would have happened in the Feb-April period, the peak buying season. — Garth

#153 Approved Smoking Man on 07.27.16 at 9:23 am

Hello, I am Dyslexic Smoking Man and I drink too much. I like to talk in copious quantities about anything to cause discourse. I do not really know what I am saying as most of the time I am inebriated. I will not shut up and go away as I have nothing to do in my miserable life. I love Donald Trump so much that I wholeheartedly will follow him blindly into the abyss. I am Smoking Man and I approve this message.

#154 Dual Citizen In Canada on 07.27.16 at 9:38 am

RE agents in Florida are advertising to sell your home to make it easy for you to move to Canada if Trump gets in. I’ve been telling my buddies to stay away from GTA or Vancouver as you will be throwing away your money in Canada RE. Better to just drive up your Winnebagos and camp out at our multitudinous Wal-Marts or anywhere away from the outstretched, little hands of Emperor Trump.

#155 Noel on 07.27.16 at 9:45 am

#10 Jason on 07.26.16 at 6:21 pm
The time to do a stress test is not while the patient is having a heart attack.

The stress tests should have been done two years ago while the patient was still in a position to be rehabilitated.
_______________________________

They were being done 2 years ago, and many years before that. All the Canadian banks regularly run stress tests on their loans, especially when its as huge a % of their loans as residential mortgages. It just doesn’t make the news. And why would it? A regular part of doing business is analysing your risk.

#156 Kirl Sianery on 07.27.16 at 10:08 am

#102 Madcat on 07.26.16 at 11:09 pm

It’s not about racism. It’s about more and more people coming into our country stomping out the trees and building houses on our beautiful land. Let’s keep our beautiful land and our diverse culture as is. We don’t need more people…. An ever-expanding population cannot be sustained forever. Canada is beautiful as it is. Let’s not ruin it by opening our doors to the entire world!”

What a load of xenophobic nonsense….look how population decline is decimating Japanese economy. Canada should target 100 Million population and try to become a military power with military industries to match….the US economy has run off the back of the Military industrial complex since WW1…..Canada should copy this economic success story!

#157 jess on 07.27.16 at 10:09 am

http://www.gic.com.sg/about-gic/santiago-principles

Government Of Singapore Investment Corporation (GIC
…”GIC achieved a 20-year annualised real rate of return of 4.9% for the financial year ended 31 March 2015. We cannot expect this level of returns to continue. The current high asset prices are likely to result in low returns over the next 5 to 10 years.”

http://www.gic.com.sg/report/report-2014-2015/overview.html

#158 Tudval on 07.27.16 at 10:12 am

Ontario will not impose similar tax any time soon. They are ‘watching closely’. What they’re watching? Of course, the BC election next spring. Ms Wynne is already in trouble with the voters. If she imposes a similar tax, all it will take is a promise by the cons that they will take it back and the libs will be out.

As well, foreign buyers are really a small percentage of the market here. They target the very high end and I see no empty houses. Some may invest in condos to rent out, not a problem, unless you really dislike capitalism. And condos can still be built in almost limitless numbers in the GTA.

#159 AB Boxster on 07.27.16 at 10:21 am

A tax on foreign purchases of Canadian real estate?

Why thats just as absurd as charging foreign students more to attend Canadian universities.
It’s as regressive as forcing those living in Canada to be Canadian citizens in order to vote.
It’s as backward thinking as only allowing 300k immingrants into Canada every year when so many more want to come.
It’s as pathetic as only allowing dual citizenship when people should obviously be allowed to be citizens of any country they wish.
It’s like the silly rules regarding restrictive national passports and visa requirements.
It’s like having border controls in place.
It’s like forcing wealthy foreigners to buy Canadian citizenship with enough money.
It’s like forcing immigrants to pass a test to become Canadian citizens.
It’s like like vetting immigrants and refugees prior to coming to Canada.
It’s like requiring immigrants to Canada to upgrade their skills in order to practice in Canadian professions.
It would be like only recognizing two ‘official’ languages, to the exclusion of all others.

How can Canada be so racist and cruel?

#160 Tudval on 07.27.16 at 10:23 am

What I think is happening, the same what I saw last fall: govt is actually not concerned about an immediate crash, but in fact is scared of the opposite, which might put the crash at a later date from higher levels.

Let’s recap: interest rates still going lower, BOC preparing another cut, taking CAD lower again. Foreign interest increasing as the world around us is in deep, deep doo-doo and social problems that luckily we have avoided so far, will take years to solve, if ever they ever will. So from their POV it makes sense to employ all tools (mostly jawboning) to scare away buyers and do a crash-test in a contained location with little fear of contagion. Of course it’s wrong, but if they can sell it to the masses eager to buy cheap houses in premium locations, it costs them nothing to try (or so they think).

#161 RayofLight on 07.27.16 at 10:26 am

DELETED

#162 Victor V on 07.27.16 at 10:31 am

Posted by a prominent Toronto realtor on Facebook today:

==============

MARKET UPDATE FOR THE WEEK ENDING JULY 22ND, 2016

For the first time in a very long while, it seems like real estate talk around the city has died down. Maybe that’s a good thing for buyers longing for a little distraction from the frenzy. And if distraction is what you are looking for, well there’s the US election, Blue Jays baseball and hunting for the elusive Pokemon that are popping up everywhere. Just to be clear though, Toronto real estate is as hot as the weather with no end in sight.

Listings in the freehold sector backed off by a substantial 15% over the last week while sales fell by just slightly less (13%). With buyers still longing for a place to call home it’s no wonder that with fewer homes, competition increased as 70.3% of transactions in the 416 were in multiple offers. It is interesting to note that in the same week one year ago, only 54% of transactions in the freehold sector had multiple offers. As far as we are concerned tight supply, pent-up demand and historically low interest rates will be the key drivers of our market over the foreseeable future.

And if you thought the freehold sector was frustrating for buyers, welcome to the new world of condo buying in Toronto. It’s true that new listings are down by 10.4% to 536 units across the 416, but sales only backed off a marginal 4.6%. Demand has remained high all year forcing multiple offers to reach 51.5% last week. That shatters the previous record by nearly 7%. If you want to truly understand the pressures that buyers are under in this segment, consider that one year ago only 18% of all condos traded sold at or above the list price.

#163 Tudval on 07.27.16 at 10:33 am

Funny to hear this is not a race issue. Yet south of the border liberals are bringing up the race card if one talks about ALL illegal immigration (but we know where it’s coming from, right?) And even here, same libs have no problem labeling policies as racist, sexist, xenophobe and what have you if the group impacted has any significant representation of a minority. So yeah, it is, according to your own definition and principles laid out.

#164 WTH on 07.27.16 at 10:37 am

WHAT ??
All these years , you have been saying its only 10% foreign buyers and they don’t have any affect on the housing market and its all local buyers fault .

Now you are saying , if we remove the 10% the market might crash… WTH…

Actually foreign buyers did not cause unaffordability in Vancouver. But with the market already starting to roll over, new measures like this could turn a normal correction into something worse. I know those are two separate ideas, but focus. — Garth

#165 RayofLight on 07.27.16 at 10:40 am

My first “Deleted”,now that’s a real “first”!

#166 BS on 07.27.16 at 10:56 am

138 YVR2ZRH on 07.27.16 at 5:36 am
#42 – – The rate of price drops in Singapore have been about the same pace as the price rises. There prices rose around 33% in 3 years. Here we have just had 33% in one year – so we should expect the reversal to happen initially at the same pace. So – we could see a 20-30% decrease in Vancouver within 12 months – easily.

Yup, if you want to know what the market will look like over the next 10 years just flip over the chart from the past 10 years. I am surprised how naive people are on how bubbles work.

#167 waiting on the westcoast on 07.27.16 at 10:57 am

#34 Say What? on 07.26.16 at 6:57 pm says ““In other words, over 90% of all the real estate deals were consummated by local families, who spent about exactly the same as the gazillionaires from you-know-where.” – Garth

You really are obfuscating. Aren’t you Garth. The point is that foreigners, that are just rich or laundering their money, will bid up prices. Locals who want to buy also have to bid high if they want to purchase property. This drives up prices for everybody. No way this is a good thing for society.”

Of course there is an effect on the prices by more people bidding on properties. However, even 10% will not dictate the market. It’s amazing how people think that 10% control the rising price that 90% must follow…

It’s far more likely that 90% have bought into the BS and are willing to pay more (and the sellers hanging on for more $$$) strictly based on herd perception. If the 90% didn’t buy into FOMO or greed, the prices would not move up. They are participants in their perceived gain and the tumble once they realize the market is illusory.

#168 Wow..right in the ass on 07.27.16 at 10:59 am

http://business.financialpost.com/personal-finance/mortgages-real-estate/b-c-wont-give-breaks-on-new-tax-to-foreign-homebuyers-who-have-already-signed-contracts

Quite the 180 by BC gov…

So whats the word Crooked Grandma Wynne? You gonna copycat this juicy tax??

#169 BS on 07.27.16 at 11:00 am

#144 The Last Post on 07.27.16 at 8:44 am
new BC tax

This MAY have a big effect on RE market dynamics.

If you were considering buying in the lower mainland ( the biggest purchase of your life) , wouldn’t you wait to see the impact of the tax before buying?

This ‘pause for reflection’ could cause an “air pocket” sharp decrease in demand (buyers waiting) just as motivated supply (smart sellers , developers, investors) swells.

I bet listings easily double in August and then quadruple from this level by the end of September. By October you will hear the term “no bid” used a lot.

#170 The Last Post on 07.27.16 at 11:18 am

@ 148 AB Boxster

Great post, but you may have to put on the / sarc (sarcastic ) suffix to your post or some SJW might be fooled !

Yours and Aggregator’s posts I always read.

#171 The Last Post on 07.27.16 at 11:20 am

@ 145 Gonkman & RayofLight

go see “Clinton Cash” movie on YouTube.

exactly as you say, but much, much bigger examples

director also published book of same name – can’t do that if not factual

#172 Vamanos Pest on 07.27.16 at 11:58 am

Isn’t a 50% correction in Vancouver laughable? So things are going to “correct” to 10 times average incomes? History shows over and over and over and over, when bubbles correct, they OVERSHOOT restoring fundamentals, not fall short of it.

Recall that in correction, all the things that fed the bubble reverse. Particularly easy lending and sentiment (banks are business, why would they expose their capital so that someone can catch a falling knife?) Plus, with the Fed committed to a tightening cycle, the correction may occur at a time when the Bank of Canada is forced to raise rates to stave off inflation. (Inflation would not usually be an issue simultaneously with a housing decline, but the conditions are currently set-up for that possibility).

I’m predicting more like a 70% decline from peak to trough.

In other words, calamity.

#173 macroman on 07.27.16 at 12:02 pm

Now De Jong saying tax won’t be exempt from deals in pipeline, ie. no grandfathering.

This is going to blow up in the .gov face. Lawsuit central.

Can you imagine a house listed on border of Vancouver jurisdiction as apposed to one inside? Yikes, setting up a big fail there Christy and Mike.

#174 Freedom First on 07.27.16 at 12:03 pm

#120 Smoking Man on 07.27.16 at 12:28 am

I’m not afraid to say.

I’m a proud Sexist… I’ll debate anyone..

FF007

You’re the best. I’m the best. I love you Mr. Smoking Guy.

#175 meslippery on 07.27.16 at 12:07 pm

Prince Edward Island, the one place in Canada where foreign property buyers must check in.

http://business.financialpost.com/personal-finance/mortgages-real-estate/prince-edward-island-the-one-place-in-canada-where-foreign-property-buyers-must-check-in

#176 velobob on 07.27.16 at 12:13 pm

Short the banks!

#177 NEVER GIVE UP on 07.27.16 at 12:17 pm

Another thing that is sorely needed in BC is controls on the self centered municipalities who by delaying building permits force other municipalities to accept more building permit applications.

So now you have a virtual trade war between Municipalities who could care less what suffering the rental and home buying public have to endure.

This is a curse on the general public by city halls that figure they can push the extra work on the other guys.

The only solution is for the BC Government to enact time line legislation forcing all building permits to be processed in 90 days and not 2 years as is now the case.

This will add inventory to the mix and then pricing will come down to the relationship between developers cost and profit margin and not the wild futures market we now have.

#178 Ole Doberman on 07.27.16 at 12:18 pm

“We detect a combination of overheating, price acceleration, and overvaluation.”

LOL!! Any more proof needed of the evil trinity colluding together. It’s like over night these entities are turning against RE and using the media well.

And just now when it’s been obvious to us for years.
The rich just got richer, while the poor holding the bag as usual.

http://www.bnn.ca/cmhc-growing-more-alarmed-by-vancouver-s-housing-market-1.533631

#179 TurnerNation on 07.27.16 at 12:22 pm

Worth noting here in this 2nd world country, as per study in Smoking man’s link a while back

https://www.researchgate.net/publication/304589933_Evolutionary_anthropology_of_police_practice_of_containment_of_targeted_populations_and_of_self-defence_strategies_including_rockets_and_boycott

“Undesirables” (non tax farm slaves) as seen by the State are reserved to be extinguished at any time.

A socio-economic theory of mine too.

Look closely into these two faces. Our heros? Are we next?:
http://www.cbc.ca/news/canada/ottawa/police-officer-in-abdi-death-identified-1.3695996

Slap him with the standard charges all poor, druggies and long hairs get: “assault peace officer, resist arrest”. Sic and sick.

It’s pure profit for the Sunshine listers involved (job security).: police, lawyers, judges, probation officers, psychiatrists.
The system needs poor people locked up. $$$

#180 WallOfWorry on 07.27.16 at 12:33 pm

It is astounding that this blog relentlessly focuses on Canadian real estate amidst house of cards that the global financial markets are. For the Fed not to raise rates suggests either gross incompetence or recognition that they are boxed in and simply can’t. Garth…you have to admit when you boldly proclaimed last December that interest rate hikes were coming slowly and steadily throughout this year that you were way off? Now we are looking at maybe one hike in December and I am betting by then there will be new news that prevents them from doing so. What a sham!

http://www.marketwatch.com/story/why-the-fed-wont-hike-rates-despite-having-its-ducks-in-a-row-2016-07-26?link=sfmw_tw

#181 Bottoms_Up on 07.27.16 at 12:35 pm

#166 waiting on the westcoast on 07.27.16 at 10:57 am
———————————————————–
First time buyers lubricate the market, but move-up buyers pay more, when higher end homes have artificial demand due to foreign money (and ultimately when they don’t care what the price is). And it’s the higher end sales that skew the stats up….seems to me it would have a noticeable effect on prices…..

#182 Ronaldo on 07.27.16 at 12:35 pm

#126 Rexx Rock on 07.27.16 at 1:05 am

They should have banned foreign home ownership years ago.Then we wouldn’t have all this trouble.
————————————————————-

Where did your grandparents come from?

#183 Persnickety Bioligist on 07.27.16 at 12:36 pm

Just to be that omniscient anonymous internet nitpicker, killer whales are not baleen whales, so they suck a lot less than many other cetaceans.

#184 Self Directed on 07.27.16 at 12:46 pm

Been moving all my assets out of the CU and into a Very Big Bank. I don’t trust the new 100% deposit insurance in BC.

#185 Noel on 07.27.16 at 1:05 pm

http://www.realclearpolitics.com/epolls/latest_polls/president/

http://fivethirtyeight.com/features/election-update-trump-gets-convention-bounce-drawing-polls-to-dead-heat/

Still don’t think Trump has a chance to win Garth?

Unfortunately its looking worse and worse by the day. I admit I vastly underestimated Trump & his moron followers in the past.

“No one ever went broke underestimating the intelligence of the American people.”

#186 Victor V on 07.27.16 at 1:14 pm

CMHC warns housing prices overheated in 9 Canadian markets, with Vancouver at high risk

http://business.financialpost.com/personal-finance/mortgages-real-estate/cmhc-warns-of-strong-overvaluation-in-canadian-housing-markets-very-high-evidence-of-problematic-conditions-in-vancouver

Canada Mortgage and Housing Corp. says prices are overvalued in 60 per cent of the top 15 cities it surveys across the country.

In what the Crown corporation calls its Housing Market Assessment Survey, released Wednesday, it said overall evidence of problematic conditions in the housing market for the country as a whole has been bumped up from weak to moderate — with Vancouver singled out for “very high” evidence of problematic conditions in its market.

“For Canada overall, we now detect strong evidence of overvaluation. As a result, our overall assessment has moved from weak to moderate since the last report. Moreover, recent trends in Vancouver have led us to conclude that there is now strong evidence of problematic conditions in our assessment of that market,” said Bob Dugan, chief economist for CMHC.

#187 Fed-up on 07.27.16 at 1:23 pm

#155 Kirl Sianery on 07.27.16 at 10:08 am

#102 Madcat on 07.26.16 at 11:09 pm

It’s not about racism. It’s about more and more people coming into our country stomping out the trees and building houses on our beautiful land. Let’s keep our beautiful land and our diverse culture as is. We don’t need more people…. An ever-expanding population cannot be sustained forever. Canada is beautiful as it is. Let’s not ruin it by opening our doors to the entire world!”

What a load of xenophobic nonsense….look how population decline is decimating Japanese economy. Canada should target 100 Million population and try to become a military power with military industries to match….the US economy has run off the back of the Military industrial complex since WW1…..Canada should copy this economic success story!

————————————————————————————-

At least Japan, the world’s #3 economic superpower, actually HAS an economy. They just don’t build crap townhouses and speculate them to one-another. If Japan wanted to allow in millions of the world’s most desperate to find refuge and citizenship in their amazing culture that dates back thousands of years, they would. A country that was truly decimated by nuclear war and emerged as a force that you any almost everyone else on the planet depends on each and every day, will prevail as they have the tools to do so and have proven that.

What tools does Canada possess? Rocks and trees?

What rhetoric. Canada is nothing and will always be nothing in comparison. Deal with it.

#188 Binder Dundat on 07.27.16 at 1:27 pm

Here is a link to the actual CMHC report referenced above. The prairie provinces look particulary screwed:

http://tinyurl.com/jjt85jg

Highlights:

“Across Canada:

1. Vancouver and Toronto now both show strong evidence of problematic conditions. The level of evidence of problematic conditions for Vancouver has been raised to strong from moderate where we detect a
combination of overheating, price acceleration, and overvaluation. The evidence for Toronto is unchanged
with the strong evidence of problematic market conditions driven by price acceleration and overvaluation.

Hamilton is also now showing strong evidence of overvaluation, resulting in the overall assessment of
problematic conditions for Hamilton being raised to moderate;

2. Weak energy prices continue to affect housing markets in oil-dependent provinces. Despite house-price adjustments, the overall assessments for Calgary, Saskatoon, and Regina continue to show strong evidence of problematic market conditions because of overbuilding and the impact of weak fundamentals on the assessment of overvaluation;

3. Elsewhere, the analytical framework detects moderate evidence of problematic conditions in Winnipeg, Montréal, and Québec. The evidence of problematic conditions for Ottawa was lowered from moderate to weak. The overall level of evidence for problematic conditions in the Maritimes remains weak.

#189 Mike in Toronto on 07.27.16 at 1:31 pm

If I bought in Phoenix, I would have to pay extra income tax on the sale of the property.

This BC tax sounds utterly stupid. Do I understand it correctly? Somebody relocating from another country would get dinged for 15% even if the intent of purchase was to live their as their primary residence while they sought PR status or citizenship?

Meanwhile somebody who’s snagged a dozen properties for income last year would not be affected at all.

#190 WallOfWorry on 07.27.16 at 1:31 pm

Garth…any perspective on the Deutsche Bank issues? Is there risk of financial contagion more globally if DB becomes insolvent?

#191 Wylde on 07.27.16 at 1:36 pm

Wait a sec. The crash test do not include the country’s six largest banks, or HSBC Canada, according to an OSFI spokesperson. The country’s next largest bank, Laurentian, and other smaller deposit taking institutions will be subject to the new stress tests, the results of which are to be reported to OSFI by yearend, analysts said.

http://business.financialpost.com/personal-finance/mortgages-real-estate/canadas-financial-watchdog-tells-banks-to-test-resilience-to-sharp-drop-in-home-prices

#192 Alex on 07.27.16 at 1:37 pm

I personally do think real estate in BC and Tor is severely overpriced and not reflective of economic conditions in the country. With staggering income growth and rising prices, there is a severe disconnect. With that said, I don’t think this tax will have any impact as any foreign buyers “with money” have considerable wealth to absorb any tax and will likely find ways around. As well, the governments (at all levels) know that this is the only strong segment of the economy and will do everything to keep the expensive party going. That includes maintain low rates, favourable conditions for foreign investors, and allowing real estate boards to create artificial demand by citing bidding wars plus witholding data from the public. Expect this to continue with no correction as they know how to keep this bubble out of wack with economic realities. This bubble is not based on free market or supply/demand. It is based on intentional policy initiatives to prop it up as expensive as possible while doing all they can to mitigate against any price corrections.

#193 Blacksheep on 07.27.16 at 2:19 pm

RE: Bare Trusts….

This is how to avoid paying ANY land transfer tax, forget an additional 15%. Christy looks like she’s taken action and the RE board is accordingly outraged, while the whole thing carries on just like nothing happened, oh what theatre.

Quote:

“At present, anyone other than a first-time buyer who buys a house must pay property transfer tax upon transfer of title at the Land Title Office. The tax owed is calculated as 1% of the first $200,000 and 2% of the remaining fair market value of the property (usually the sale price). So if, for example, you buy a $500,000 house, you will be required to pay $8,000 in property transfer tax.”

“But there is a glaring loophole that is being exploited more and more frequently by wealthy individuals and corporations. That loophole involves having the property held in what is known as a “bare trust”.”

“A bare trust is a legal entity that allows for the separation of beneficial and legal ownership.”

“The beneficial owner of a property is the person or persons who make all the decisions concerning such things as rent, repairs, management, sale etc.; they are also the person or persons who receive all the revenue from and arrange financing for the property.”

“The trustee of the bare trust has no substantive decision-making capacity as they simply act upon the instructions of the beneficial owner. Typically the trustee is a corporation that has no other purpose but to act as a trustee for the bare trust and for which the beneficial owner owns all the shares.”

“Now here’s the loophole. Suppose you own a $10,000,000 home or apartment building that you want to dispose of. If you simply transferred title, like most of us do when we sell a home, the purchaser would have to pay $198,000 in property transfer tax.”

“But if instead the property is in a bare trust where the trustee is a company, then you will pay no tax.”

“All you have to do is sell your shares in the company for 1$ (the company has no assets anyway), and sell the “beneficial ownership” rights of the property to a third party via a “bare trust agreement” which is not registered at the Land Title Office.

“Since no change in title occurs, no tax is paid.”

http://www.andrewweavermla.ca/2014/01/15/bare-trust/

Garth, surely you know of this practice, I’m suppressed you never pointed this little loop hole out, being a staunch tax avoidance advocate.

#194 Robert on 07.27.16 at 2:24 pm

The “furriner” tax is a joke and will do nothing more than muddy the waters. We are experiencing a tectonic shift as oligarchs from totalitarian states around the world shift money and people out of their homelands. In BC, we are in their sights and so need to advise our political leaders on how much of our liberal, inclusive democratic nation should be sold to them? How much influence should they have in our domestic markets? How much influence should they have in our political process and with those same politicians. Canada strives to be an open and inclusive society but is it prudent to presume “if we be nice to them, they be nice to us” in all our dealings with those from outside of our culture. It’s one thing to play tourist or stay amongst us for a time, but enabling foreign citizens to use the the west coast of Canada as a land grabbing casino is simply immoral. It’s time to shed our colonial past and assert sovereignty. Just a thought, foreign ownership and dual citizenship may have met the needs of the British colonists and expats who wanted to maintain links with the “old countries” but those days are long past.

#195 Sheane Wallace on 07.27.16 at 2:29 pm

There were clearly speculator’s money in the housing market, most of the smart money there already left the market.
Banks and lenders don’t care as they ‘insure’ their mortgages.

The one left holding the bag would be the overextended idiots who pay 650 k + for semi/townhouse at a crappy location in Brampton (!) or Mississauga (!)
and of course the taxpayers through CMHC

This will be the first wave of bag-holders.

The second wave of bag holders will be all the retirees and people on fixed income who will see their income disappear due to inflating currency and lack of any return on their savings

And the third wave of bag holders will be our kids who will have no jobs due to the capital miss-allocation in the economy, predominantly in housing and financial sector and the complete demise of manufacturing, in global competitiveness we are far behind some third world countries.

Mots of the ‘markets’ here are controlled by oligopolies who are created with the sole purpose to extract maximum wealth from the sheeple.

Guess what: You can’t squeeze water from a stone or take the shoes out of the bare naked.

Kids with 8-10 years at University (PHD, MBA) would land crappy retail jobs bellow $16 CAD/hour, part time, if lucky.

The world economy almost died in 2008 due to much smaller bubble in the states, the price we are going to pay here would be much higher.

Whoever cares about the future of their kids better start packing.

I am.

#196 Sheane Wallace on 07.27.16 at 2:34 pm

take the shoes away from the bare naked.

#197 Grantmi on 07.27.16 at 2:47 pm

#181 Ronaldo on 07.27.16 at 12:35 pm
#126 Rexx Rock on 07.27.16 at 1:05 am

They should have banned foreign home ownership years ago.Then we wouldn’t have all this trouble.
————————————————————-

Where did your grandparents come from?

My Great Grandparents came from Scotland. and they immigrated here, and lived here, and homesteaded their land in Manitoba. They paid fed income and local taxes, contributed to the town, and the economy. Raised families, took part in that, and didn’t run back to the home land and left them here in the family home.

you got it now??????????

#198 Jeremy on 07.27.16 at 3:08 pm

A 40% crash in Vancouver would take prices back t where they were two years ago – hardly real estate armageddon.

The hypothesis that locals is responsible is so obviously flawed. For one local incomes do not support the transaction price. Second, much of what you classify as domestic demand is actually the money trickling down from Chinese purchases of single family homes into the condo market by the downsizing of the sellers.

If only math were as easy as denial. — Garth

#199 WTH on 07.27.16 at 3:11 pm

Actually foreign buyers did not cause unaffordability in Vancouver. But with the market already starting to roll over, new measures like this could turn a normal correction into something worse. I know those are two separate ideas, but focus. — Garth

LOL…Now I know , not me, not you…nobody has any darn idea about any logical reasons. All have theories and stories… lmao

You want housing correction or nah ?? smh

#200 Screwed Either Way on 07.27.16 at 3:18 pm

On balance I think Garth does a very good job, but he has missed the boat on foreign capital in the Vancouver market. Like realllllyyyy missed the boat. Yes, locals and interest rates have an impact on housing (shocking I know), but the insane price increases in Vancouver are largely due to a flood of foreign capital. VanCity RE has become a Chinese equity play. This tax is the low hanging fruit of this file (it’s not tough to get some sort of resident status through school or straight $$$$) and is no more likely to cause a crash than allowing unchecked foreign capital to flow through the market. Doing nothing was no longer an option, Vancouver’s economy is in jeopardy either way.

There is no data that supports this assertion. — Garth

#201 Brazil ex-pat on 07.27.16 at 3:35 pm

#196 Grantmi on 07.27.16 at 2:47 pm
#181 Ronaldo on 07.27.16 at 12:35 pm
#126 Rexx Rock on 07.27.16 at 1:05 am

They should have banned foreign home ownership years ago.Then we wouldn’t have all this trouble.
————————————————————-

Where did your grandparents come from?

My Great Grandparents came from Scotland. and they immigrated here, and lived here, and homesteaded their land in Manitoba. They paid fed income and local taxes, contributed to the town, and the economy. Raised families, took part in that, and didn’t run back to the home land and left them here in the family home.

you got it now??????????

+++++++++++++++++++++++++++++++++++

I posted a similar article…..never got posted.

#202 Burton on 07.27.16 at 3:45 pm

#110 Rayoflight, sounds like the DNC paid Schills have found Garth’s blog!

#203 CMHC SOUNDS ALARM on 07.27.16 at 4:10 pm

http://www.ctvnews.ca/business/cmhc-warns-of-problematic-conditions-in-vancouver-toronto-housing-markets-1.3004573

#204 Blacksheep on 07.27.16 at 4:16 pm

RE: Bare Trusts

This is how to avoid paying ANY land transfer tax, forget an additional 15%.

Christy looks like she’s taken action and of course the RE board is outraged, while the whole thing carries on accordingly, just like nothing happened, oh what theatre.

Quote:

“At present, anyone other than a first-time buyer who buys a house must pay property transfer tax upon transfer of title at the Land Title Office. The tax owed is calculated as 1% of the first $200,000 and 2% of the remaining fair market value of the property (usually the sale price). So if, for example, you buy a $500,000 house, you will be required to pay $8,000 in property transfer tax.”

“But there is a glaring loophole that is being exploited more and more frequently by wealthy individuals and corporations. That loophole involves having the property held in what is known as a “bare trust”.”

“A bare trust is a legal entity that allows for the separation of beneficial and legal ownership. The beneficial owner of a property is the person or persons who make all the decisions concerning such things as rent, repairs, management, sale etc.; they are also the person or persons who receive all the revenue from and arrange financing for the property. The trustee of the bare trust has no substantive decision-making capacity as they simply act upon the instructions of the beneficial owner. Typically the trustee is a corporation that has no other purpose but to act as a trustee for the bare trust and for which the beneficial owner owns all the shares.”

“Now here’s the loophole. Suppose you own a $10,000,000 home or apartment building that you want to dispose of.”

“If you simply transferred title, like most of us do when we sell a home, the purchaser would have to pay $198,000 in property transfer tax.”

“But if instead the property is in a bare trust where the trustee is a company, then you will pay no tax.”

“All you have to do is sell your shares in the company for 1$ (the company has no assets anyway), and sell the “beneficial ownership” rights of the property to a third party via a “bare trust agreement” which is not registered at the Land Title Office. Since no change in title occurs, no tax is paid.”

http://www.andrewweavermla.ca/2014/01/15/bare-trust/

Garth, surely you know of this practice, I’m suppressed you never pointed this little loop hole out, being a staunch tax avoidance advocate.

#205 bdwy sktrn on 07.27.16 at 4:16 pm

#171 Vamanos Pest on 07.27.16 at 11:58 am
Isn’t a 50% correction in Vancouver laughable? ….
I’m predicting more like a 70% decline from peak to trough.

In other words, calamity.
———————————–
suggested name change to ‘chicken little’ for you!

10% of the market has to pay 15% more = less than a 2% price increase over the whole market.

soooo, expect a drop of 1.5 to 2% over what would have occurred.

+30% again is unlikely, but +20% would have been likely.

so take 2% from that to get +18% y/y price gains as of july 2017.

oh, damn, 18% of 2m is 360k tax free. i might have to go back to work!

#206 Blacksheep on 07.27.16 at 4:17 pm

oops..double post.

#207 waiting on the westcoast on 07.27.16 at 4:23 pm

#180 Bottoms_Up on 07.27.16 at 12:35 pm says “#166 waiting on the westcoast on 07.27.16 at 10:57 am
———————————————————–
First time buyers lubricate the market, but move-up buyers pay more, when higher end homes have artificial demand due to foreign money (and ultimately when they don’t care what the price is). And it’s the higher end sales that skew the stats up….seems to me it would have a noticeable effect on prices…..”

While I agree that those would have impact… it is still up to the 90% to buy into it. The fact remains that they individually decided that paying “more” or “extra” was more important than missing out. They have control and responsibility for their predicament.

Or do we believe that foreigners would have bought 100% of the sales in that window at that price point? I don’t think so…

#208 BS on 07.27.16 at 4:23 pm

#172 macroman on 07.27.16 at 12:02 pm

Now De Jong saying tax won’t be exempt from deals in pipeline, ie. no grandfathering.

This is going to blow up in the .gov face. Lawsuit central.

Yes sure, sue the government for a tax increase. That was funny.

#209 Mark on 07.27.16 at 4:38 pm

“Meanwhile somebody who’s snagged a dozen properties for income last year would not be affected at all.”

That’s been my belief all along. Leaving aside the fact that Toronto/Vancouver RE, on ‘identical properties’, hasn’t gone up in the past ~3 years, basically the big driving force in the market is Canadian (often of southern Asian ethnicity) “landlord families” who leverage themselves into 20-30 properties. Little mini property moguls, who, 1996-2013, did extremely well for themselves.

Now that there’s stagnation, if not reversal in prices, and with the extremely low net returns at current prices, these people are *desperate* to create the narrative of rising prices.

So what did they do? They resorted to ‘assignment flipping’, where basically they’re just passing properties amongst themselves, in transactions that really aren’t true economic transfers between arms-length parties. “Assignment flipping”, of course, to avoid any land transfer taxes and minimize CRA scrutiny.

The real unfortunate thing here is lots of great people are being driven out of Vancouver as they simply cannot compete with this nonsense. When dual-income lawyer families are being driven out. When engineers can’t afford to own housing. When you drive out your intellectual and social elite, and replace it with a bunch of property speculators in a community, you know society’s in trouble. This is what the government should have attacked, not a few dozen “Chinese” who have decided to make Canada their home by buying a home.

#210 Frank on 07.27.16 at 4:53 pm

Mark, I just watched a townhouse down the block sell for $210K more than it last sold for 18 months ago. If I send you the listings will you promise to shut up about your sales mix and identical property nonsense? Many are denying a bubble but youre literally the only moron denying that prices have risen.

#211 Blacksheep on 07.27.16 at 5:06 pm

I’m not ‘suppressed’, but I am ‘surprised’

#212 Perception is everything... on 07.27.16 at 5:25 pm

Now that the narrative is changing, the RE cartel will learn to swim against the current! It’s no longer believable that prices will keep rising, buy now or be priced out forever!

Get used to the term: buy now and catch a falling knife

If you’re a cash buyer, wait and see.

If you’re a seller, well … the time to sell was last year or this Spring if you could time it right.

Next Spring will see 15% drop y/o/y even the RE cartel cannot hide. Then the dam will break into summer 2017 and Spring 2018 may see something like a bottom forming when Vancouver RE will be talked down so much and will be so unattractive that nobody wants to even publicly admit they ever talked about owning RE in Greater Vancouver….

#213 White Crock BC on 07.27.16 at 5:45 pm

But with the market already starting to roll over, new measures like this could turn a normal correction into something worse. I know those are two separate ideas, but focus. — Garth

Rolling over? Seriously? Where? Sources?

#214 Ace Goodheart on 07.27.16 at 5:45 pm

#203 Blacksheep

RE: “All you have to do is sell your shares in the company for 1$ (the company has no assets anyway), and sell the “beneficial ownership” rights of the property to a third party via a “bare trust agreement” which is not registered at the Land Title Office. Since no change in title occurs, no tax is paid.”

You’ll never find someone willing to take title to a property this way. This would have to be a related party

#215 TRT on 07.27.16 at 5:46 pm

“There is no data that supports this assertion. — Garth”

Sure there is. And i will document it first hand over the course of the next week.

Going to YVR airport to pick up relatives Friday…all got 10 year Visitor Visas. Their kids starting school as foreign students at UFV in Sept.

Guess what? One has already bought homes in Abbotsford and the other 2 are planning to…even with the 15% tax.

Why you an enemy of Canada?

Your relatives. Doesn’t that make you ‘the enemy’? Sheesh. — Garth

#216 BOOM! on 07.27.16 at 5:59 pm

Fed stand pat on interest rates.

What a surprise!!

Yellen say her shadow, six more months of low interest rates…film at 11

#217 RayofLight on 07.27.16 at 6:01 pm

Do I think Hillary Clinton is perfect? No.
But my fear is risk. Specifically, the risk of a world war. To me, this risk is negligible with Hillary Clinton, but significant with Donald Trump as president. To me, Donald Trump exhibits the personality of a narcissistic sociopath. He has a low attention span, and sees the world events as reflections for, or against him personally. I believe he would/could be easily manipulated /baited by Putin, and easily forced into reactions through frustration. Is Hillary Clinton perfect, no, but she has an emotional IQ magnitudes larger than Trump’s. Hillary Clinton can see shades of gray in a tense political situation, where as Trump still gets distracted by “pretty lights”.

#218 };-) aka Devil's Advocate on 07.27.16 at 6:01 pm

H.A.M. = Political Hot Potato.

There are a lot of Asians in Vancouver. When I attended university there they claimed as theirs alone a whole floor of the library so much so that as an Anglo you were, made to feel, uncomfortable looking for reference material on that floor. That was over 30 years ago. Today the Asian population in Vancouver is such that Anglos are a minority. Nothing wrong with that, simply another aspect of supply and demand.

I am a REALTOR®. My business is Kelowna. I don’t go beyond my area of expertise but I do have colleagues I work closely with in Vancouver and they tell me, unequivocally, HAM is affecting the market with respect to prices.

Certainly there are many ‘Canadians’ paying big bucks for YVR real estate. Toronto or Vancouver? Seriously? You make your money where you have to, you spend it where you want to. Clearly more people would rather spend their ‘fun’ money in Lotus Land (pun intended).

Walk down any street in BC and you can tell who’s from the East and who’s an indigenous Westerner. We’re way more chill out West.

Actually I think, in BC, we should be levying a 15% PPT (Property Purchase Tax) against Torontonians as well. Really, think about it… you pay your medical premiums there while in good health then retire here, when you need medical attention most, and put strains on our BC Medical System which you have paid little to nothing toward.

Might be a moot point as I hear there is a movement afoot to realign the Canada US boarder from East to West to North to South. East gets Trump and West gets Trudeau – he is pro legalization after all as are more and more of the Western States so clearly there IS already a culture difference that divides.

};-)

#219 };-) aka Devil's Advocate on 07.27.16 at 6:05 pm

Also then ( with the realignment of the boarder ) the Southern most intersect would be somehwere in the Gulf of Mexico ( surely we get Texas ). So that ‘Wall’ Trump wants to build — A NON-ISSUE

#220 };-) aka Devil's Advocate on 07.27.16 at 6:08 pm

AND… we (Westerners) dump the Quebec issue! Of course it will become something more of an Asian demand based issue – but hey… the whole world is headed that way anyway.

#221 };-) aka Devil's Advocate on 07.27.16 at 6:27 pm

Oh and when I was going to school in YVR back then a foreign student asked me to proof read an assignment for her. I read it and complimented her on it. I then asked what jobs she was applying for. She laughed and said she wasn’t considering staying in Canada and working here… she said our taxes are too high.

Make of that what you will, I’m just saying’…

#222 domain on 07.27.16 at 11:09 pm

Should the banks become capital impaired, think Bail-Ins :)

If there is a drop as large as these stress tests simulate, or even half, then even CMHC will be under-capitalized, and would require a taxpayer bailout, so CMHC to cover the taxpayer guarantees on mortgage losses. Or…they simply force the losses where they belong in a normal world (probably after first running out of money), which would be back onto the Banks balance sheets, but then you would probably have to invoke the bail-in rules.

I have had this discussion with some naive colleagues, and most of them say that it would defy the relationships and understanding of what modern banking is, and that the gov would never allow that to happen to their voters.

My counter is that most people in Canada do not have any substantial amounts in deposit accounts, bonds, etc, so robbing the small fraction of upper-middle class (not the uber-wealthy/connected) is politically palatable to the masses, since the masses are broke, and will be convinced that Bail-Ins only affect those evil rich people. We will hear chants of “fair share” and other stupidity about the 1%-ers owing the money to society, and other bs.

But the reality is, that if things get serious, we can expect to see unexpected outcomes. And since the Banks can’t lose, someone will have to. And that someone will likely be everyone in the form of a lower CDN dollar, and a small group as victims of the ‘Taxpayer Protection and Bank Recapitalization Regime’.

But I’m sure everything will be fine, and that those who were so irresponsibly lending money out to bartenders and students for mortgages, also have a plan in the event that they don’t have a chair to sit in when the music stops.

#223 Steven Rowlandson on 07.28.16 at 2:42 pm

Why not legislate that all home prices that exceed 6000 man hours times minimum wage are illegal and are a violation of article 2 section c and d of the UN convention on the prevention and punishment of genocide?
Any one who agrees to drop and freeze their home prices gets their debts forgiven and clemency.
The die hards and genocidal greed freaks get the Saddam Hussein treatment for the crime of Genocide.
The right of real estate ownership should be reserved for Canadian citizens.