“We have a very good system of foreign investment creating a lot of new housing in Canada”
Now that our government has said it’s a “good system” to sell off our new housing supply to foreign investors (vs domestic homebuyers), why is this a problem? 1/
First of all, it doesn’t really matter if foreign investors are buying a new home or a resale home – the problem this creates in our housing market is the exact same, it artificially inflates home prices.
Why does this happen? 2/
When a Canadian tries to buy a new house or condominium, their home buying budget is based on their domestic income and their down payment is based on the after tax dollars they have saved.
Can a young household compete against a wealthy foreign investor – of course not! 3/
Foreign investors firstly have made their money in countries/cities where incomes are higher and tax rates are substantially lower giving them a significant advantage over a young family earning a household income of $100K CAD and paying taxes in Canada 4/
Now this assumes the foreign investor even earned their money legally.
A lot of the money flowing into Canada’s housing market is coming from criminals who want to use our housing market to launder their money 5/ financialpost.com/pmn/business-p…
So not only is a young family that earns $100K per year competing with wealthy foreign investors, they’re competing with wealthy international criminals who don’t care about house prices or affordability because their only goal is to launder their money.
Welcome to Canada! 6/
Now builders and politicians often argue that the fact that the vast majority of new condominiums are bought by investors is “proof” that we need to court these investors because without them it will kill off our housing supply.
This is truly an idiotic statement 7/
The reason few end users buy new construction condos is not because we don’t have demand in Toronto, it’s not because young first time buyers don’t want to buy a new condo
It’s because they can’t compete with foreign investors and criminals who will pay much more than them 8/
Pre-construction condos in the Toronto area cost 30+% more than resale condos because they are dominated – as Adam gleefully pointed out – by foreign investors.
Foreign investors can outbid domestic home buyers earning a salary in Canada.
It’s that simple. 9/
Vancouver, Sydney, Auckland and Toronto are in the top 5 most unaffordable housing markets in the world, only behind Hong Kong.
I don’t think it’s a coincidence that all three countries saw a significant amount of foreign capital flow into their housing markets 10/
Adam is now feigning concern about the “very good system” they created...
Selling off our new housing supply to the highest international bidder.
But their "very good system" has screwed an entire generation of home buyers. /
When it comes to Canada's housing market, it's clear now that it was a deliberate strategy of the @JustinTrudeau Liberal government to put the interests of foreign investors ahead of of Canadians 1/ theglobeandmail.com/news/politics/…
The foreign investors benefited
Our Prime Minister benefited through multiple cash-for-access dinners.
Every home owner would like to see their home's value increase, but the reason for this increase should not be because our federal government decided to sell off our new housing supply to wealthy foreign investors. 3/
But this is largely a product of their own goals to use foreign capital to finance single family home construction which we know inflates house prices.
“We have a very good system of foreign investment creating a lot of new housing in Canada” 2/
He actually admits that our housing market is “a market that’s driven by speculation” and goes on to say that “it gets very very tricky to curb speculation”
It’s actually not tricky, many other countries have done it. Canada has no interest in curbing speculation… Why? 3/
“There’s the risk of losing the tenant and the property not selling ... [and] I can’t find you another tenant. We used to have 10-12 units up for lease, now it’s 80 units. I’ll put a unit for sale in one building and [get] not a single showing on some of these properties.” 2/
The risks today’s condo investors are facing are typical recessionary risks –
a decline in demand due to a drop in immigration and higher rates of unemployment
an increase in inventory as younger people move back home because of job loss… 3/
A brief thread on the urban exodus we keep hearing about.
Firstly, it’s not just anecdotes – you can see here that the outer suburbs have seen the biggest increase in sales year over year since the market picked up again in June 1/
That said, we are not seeing a hollowing out of the city.
Simcoe saw 1,420 more home sales this year vs last year compared to 937 in Toronto.
The big % difference is because total sales in Simcoe are far lower than in Toronto. 2/
While there is a clear behavioural shift, it’s a small percentage of the population.
Everyone isn’t leaving the city to move to the country.
While downtown homes are still very competitive, we are seeing a slow down in the condo market (rentals and resales) 3/
The sales data in the GTA last month represents a delayed spring market, and prices are skewed up by more low-rise home sales but it doesn't change the fact that this is the exact opposite trend that was predicted by most economists including CMHC ca.finance.yahoo.com/news/august-gr…
So far, the only forecast I'm aware of that is even remotely close to being accurate is from @TD_Economics . They were mocked for predicting at the height of the pandemic that GTA prices would end the year up 8%, they are currently up 13% torontostoreys.com/toronto-home-p…
And to be clear, I did not predict the market would be booming during a pandemic and have no idea how long this will last. My point is that overconfidence is a behavioural bias often associated with bulls - but bears are just as vulnerable to this bias.