Author Topic: Garth Turner - Real Estate in Canada  (Read 488731 times)

alertmeipp

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Re: Garth Turner - Real Estate in Canada
« Reply #750 on: March 19, 2016, 06:53:12 AM »
very few asking, many bids, have none, get one, have one, get more. price spiking. buy now or pay more later, it will never come down, even if it does, it will be small correction, leverage up, ratios don't matter, it's the new era.

sounds familiar?


scorpioncapital

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Re: Garth Turner - Real Estate in Canada
« Reply #751 on: March 19, 2016, 07:29:00 AM »
I really don't understand how crashes occur in general. I don't even understand how the 2008 RE crash happened. I mean with stocks or RE, my first assumption is that nobody is obligated to sell anything ever. You can get much poorer based on "paper losses" and you may be uncomfortable but if they are excess savings or a house you live in , it is just a personal upset. The real problem is if you can't pay the financing cost and RE is almost always leveraged. To not be able to pay such cost you must lose your job or the payment must go up alot.

JBTC

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Re: Garth Turner - Real Estate in Canada
« Reply #752 on: March 19, 2016, 07:52:01 AM »
I really don't understand how crashes occur in general. I don't even understand how the 2008 RE crash happened. I mean with stocks or RE, my first assumption is that nobody is obligated to sell anything ever. You can get much poorer based on "paper losses" and you may be uncomfortable but if they are excess savings or a house you live in , it is just a personal upset. The real problem is if you can't pay the financing cost and RE is almost always leveraged. To not be able to pay such cost you must lose your job or the payment must go up alot.

It's generally caused by a number of factors happening at the same time.

In 2008, business cycle started to turn down and jobs were lost.

Mortgage rates started to go up after the teaser rate period.

As sentiment weakened, prices began to fall.

There were too many speculators heavily leveraged, and their game was up once prices fell.

People overstated their incomes. They were able to keep their homes initially only because prices were going up. Once that stopped, they had trouble making monthly payments.

In other words, if jobs are stable, rates are stable, not too many leveraged speculators, mortgages are properly underwritten, the owner occupiers should be able to withstand certain price falls.

Of course in 2008 the bad mortgages ultimately caused the entire financial system to break down, which in turn made the housing bust worse.

scorpioncapital

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Re: Garth Turner - Real Estate in Canada
« Reply #753 on: March 19, 2016, 08:09:56 AM »
Yeah you really need a snowball event - and a major recession. Otherwise even a drop of 20 or 30% in house prices is not enough to really get the ball rolling downhill - although the media will probably be screaming at even a 10% drop.

JBTC

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Re: Garth Turner - Real Estate in Canada
« Reply #754 on: March 19, 2016, 08:27:14 AM »
I can buy a house in California with an even more moderate climate than Vancouver in a country with overall somewhat lower taxes and lower cost of fuel, food, etc..and finance it with a 30 year mortgage. I am not convinced Vancouver is so great as to justify such high prices based on geography alone.

If your personal circumstance allows that, I can see that makes sense.

But the majority of people in Vancouver don't have that choice. This is because there is a border between Vancouver and California.

Just two hours drive south of Vancouver, Seattle is cheaper in housing and almost everything else. It has more jobs and higher income. It has lower mortgage rates. But most Canadians cannot simply move there to live.

This is why comparing housing prices across countries has limited practical value most of the time.

And the Vancouver housing speculators know this too well.  ;)

Viking

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Re: Garth Turner - Real Estate in Canada
« Reply #755 on: March 19, 2016, 10:19:45 AM »
I think a key cause of the real estate popping in the US was they ran out of fresh meat. By 2007 if you had a pulse you 'owned' a home. Income did not matter. Job did not matter. The market simply exhausted itself.

scorpioncapital

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Re: Garth Turner - Real Estate in Canada
« Reply #756 on: March 19, 2016, 10:38:20 AM »
I can buy a house in California with an even more moderate climate than Vancouver in a country with overall somewhat lower taxes and lower cost of fuel, food, etc..and finance it with a 30 year mortgage. I am not convinced Vancouver is so great as to justify such high prices based on geography alone.

If your personal circumstance allows that, I can see that makes sense.

But the majority of people in Vancouver don't have that choice. This is because there is a border between Vancouver and California.

Just two hours drive south of Vancouver, Seattle is cheaper in housing and almost everything else. It has more jobs and higher income. It has lower mortgage rates. But most Canadians cannot simply move there to live.

This is why comparing housing prices across countries has limited practical value most of the time.

And the Vancouver housing speculators know this too well.  ;)

Good point, I think you've hit on an essential aspect of globalization and even perhaps part of the Canadian real estate market flare. While it's true most citizens cannot easily be resident in another country on account of being born in Canada, a quite large proportion of people have dual residence/citizenship this almost creates a 2-tier system because while non-residents can invest and buy property here and while immigration is not as difficult as in some other countries, non-residents have some key benefits, namely usually low to no tax back home as well as being able to avoid capital gains, gst, and other major taxes here. Not sure at what % of non-resident immigration this can really heat up the market. But the stats are old (from 2006) showing ~20% of Canadians are foreign born. However this is *not* an accurate reflection of citizenship/residence issues. Many countries allow even Canadian born with parents or grandparents from another country to re-establish citizenship there very easily and thus I would put the % of residents who can in fact play "residence arbitrage" at much higher than 20%. We'll see when the census comes out but I'd say it's 50% if not higher at this point. Of many countries out there including UK & USA, I think Canada is one of the few that has really gone with the large foreign population policy, after all it's a newer country and with a small base to start from.
« Last Edit: March 19, 2016, 10:41:18 AM by scorpioncapital »

gary17

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Re: Garth Turner - Real Estate in Canada
« Reply #757 on: March 19, 2016, 10:43:00 AM »
the best way to invest in Canadian real estate, however, is to be a resident for income purposes.  this is because the principal residence is completely tax free. 

so what I've often seen is the husband is a non resident - working somewhere in Asia - and the house is in the child or wife 's name - who are residents - and enjoy tax free gains

scorpioncapital

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Re: Garth Turner - Real Estate in Canada
« Reply #758 on: March 19, 2016, 10:55:41 AM »
the best way to invest in Canadian real estate, however, is to be a resident for income purposes.  this is because the principal residence is completely tax free. 

so what I've often seen is the husband is a non resident - working somewhere in Asia - and the house is in the child or wife 's name - who are residents - and enjoy tax free gains

I'm not so sure this structure of claiming non-residence while your immediate family is here wil or can work for long,

"The most important thing to consider when determining your residency status in Canada for income tax purposes is whether or not you maintain, or you establish, residential ties with Canada.

Significant residential ties to Canada include:

a home in Canada;
a spouse or common-law partner in Canada; and
dependants in Canada;"

This is from the CRA website. Anyway I'm sure this and using shell corporations to buy/sell real estate to avoid taxes is a minor factor but one thing struck me as the world globalizes and people come and go EVERY country is having real problems integrating their benefits, social systems among people with various nebulous types of status. I hope this gets sorted out to make it easier, especially as cross-country mobility and trade expands.
« Last Edit: March 19, 2016, 10:58:20 AM by scorpioncapital »

wisdom

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Re: Garth Turner - Real Estate in Canada
« Reply #759 on: March 19, 2016, 12:55:04 PM »
One should look at the snowbird phenomenon or how many Canadians bought properties in phoenix, Florida, palm Springs to understand how easy it is for Canadians to move between Canada and US.

It is leverage that kills and Vancouver cannot be any different. The longer this continues the more leverage is used and more unstable the system.

I do not believe any other factors matter in the long run as all markets eventually turn.