The most remarkable thing about Canadian real estate prices?

Developers sold significant lots of property overseas for deep discounts to ensure less local supply and keep domestic prices inflated.

That shakey foundation was ignored, and domestic buyers bid on top of that.
Now that the rest of Canada is paying attention, this is what was happening 5 years ago.

Homes were sold at a significant discount overseas.

Why not sell for the same price everywhere? One word — massification.

<thread> 🧵👇
2/ What makes something expensive?

People justify this with scarcity. But how does a business scale selling a rare product? People have an upper limit to what they can pay, right?

That's where massification comes in, a tactic commonly used in the fashion industry.
3/ The play works like this. You keep selling your product that never goes at a discount at your tier 1 sellers.

In fashion, this would be your Saks, Neiman Marcus, etc. Places where people shop *because* of the premium price.
4/ To grow sales you need to find more customers though. Only so many people have the income to shop at a Tier 1 place.

So what do you do? You make extra and sell it somewhere else. A Tier 2 place, where your Tier 1 shoppers are unlikely to see.
5/ Tier 2 luxury would be your outlet stores like Saks Off Fifth, and Winners.

Now, the people in the Tier 2 location aren't used to spending a premium for your product, so you have to discount it. Those consumers may not have enough money, or they don't want to squander it.
6/ So you discount it. You promise the same appreciation (social or financial), but they have more incentive than the Tier 1 buyer.

In the case of housing, developers were selling the discount units overseas, knowing they could sell them back in a few years. Kind of like a bond.
7/ Now a foreign investor can buy 2 or 3 condos, and get a 20% or so discount. But, it functions like a bond. Sell it early, you don't get the full value (and drive everyone else's value down).

Redeem it just in time, you get to redeem the full value of the unit plus interest.
8/ Now as a brand, your Tier 1 customer is happy because they own a scarce gem.

Your Tier 2 customer is happy because they got better value, and also have that gem.

They are both happy to see other people socially reinforce that their decision was popular. Just wonderful.
9/ We can just ban foreign buyers and stop this, right? You're going to find this one really funny tbh.

When you buy pre-construction, you're buying an assignment, not a home. It's not a home until the property is complete and registers.

Until then, it's just a piece of paper.
10/ Consequently, the buyer of pre-construction overseas isn't a foreign buyer until that unit is registered as a completed home.

You can buy the pre-construction, hold it until the month before, and then sell it.

The foreign buyer never owned a home. They never paid a tax. lol

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More from @StephenPunwasi

Jan 17,
If Canadian home prices fall 30% they would be back at the 2019 crisis levels the Liberals promised to solve.

Dropping another 30% on top of that puts it at the 2015-crisis levels the Liberals said they would solve.

Another 30% lower is where the BoC called it a bubble.
Bonus fact:

If Canadian home prices drop 30%, then another 30%, then another 30%, then 10% ...

... home prices would be where the Bank of Canada said Asian investors have made Vancouver unaffordable.

I shit you not, this is how effective politicians are.
Yes, the Bank of Canada actually expressed this concern in 2011.

Apparently no one remembers that the central bank used to present concerns. Now that they've been politicized, they're the ones dismissing it.

Read 4 tweets
Jan 14,
There's a lot of really amazing buildings in NYC, but let me tell you about my favorite — 432 Park.

It's one of the "billionaire row" buildings, but if you know me — luxury isn't my thing.

I love it because it's the tallest F*CK YOU the world will ever see.

<thread>🧵👇
2/ This is the view from apartment 72A. Nice, eh?

I'm not sure if it was empty when its owner abandoned it. It's since been seized by a lender.

Technically an anonymous shell company owned it. They *think* the guarantor of the mortgage might have been the true owner...
3/ That was Whitney Duan, aka Duan Weihong. She's a Chinese billionaire that went missing in 2017.

Her abandoned art collection is also popping up for sale.

No one knows where she is, but she was likely detained by Beijing for corruption and money laundering.
Read 10 tweets
Jan 13,
Canadian politicians are using the pandemic as an excuse for why they operate a broken healthcare system.

What most people don't realize is Canadian healthcare was ALWAYS on the brink of failure.

A quick thread 🧵👇:
2/ Overflowing hospitals and morgues are just a part of life after failing to properly fund the healthcare system.

From 2019:

3/ Of course, in 2019 it wasn't because it's a broken system. It was a lack of those darn flu vaccines, and a stupid virus that was unexpected.

You'd think Canada would understand viruses are a part of life at this point, and be prepared.

Read 7 tweets
Jan 11,
lol. Fredericton, New Brunswick saw half of its new condo supply scooped up by foreign buyers.

HALF!!!
2/ The play is finding the cheapest place in Canada, and scoop up as much shit as possible.

Canada intentionally tries to inflate home prices knowing supporters don't understand how the sausage is made. They don't care, it's politics. They just want data to brag about.

2/3
3/ Take imputed rents for example. This is the amount a homeowner "pays" themselves to live in their $2 million crack shack.

This is included in self-employment income. Hey, look at you — you're a tenant and a landlord. No wonder you treat your house like crap.
Read 4 tweets
Jan 6,
Canada’s housing crisis will do more economic damage than most can imagine.

Not through a crash, but elevated costs force young people to worry about shelter instead of taking risks.

It’s turned into a plutocracy to rent cheap labor to billionaires.

jacobinmag.com/2022/01/canada…
2/ @JohnOCAP did a great job on the social side, but I’d like to add to the economic side.

No animal procreates when the environment is wrong. Seriously, none. Humans aren't unique in this regard.

As millennials (and Gen Z soon) are exploited, they get uncomfortable.
3/ They're told their jobs are in major cities, they need $100k in student debt, and live in a tiny box.

Meanwhile, previous generations have decided they get to collect additional value just for existing. Sweet gig.
Read 12 tweets
Dec 3, 2021
The year is 2021.

No one under 25 will ever be able to own a home in Canada.

Starbucks has been gentrified by cannabis shops, the only companies that can afford to operate.

The biggest drug dealer is now the Province of Ontario, run by an alleged former pot dealer.
2/ The alleged former drug dealer’s only qualifications are helping his brother, the former mayor of the country’s largest city.

He had lost his gig due to being caught smoking crack numerous times. No one else was qualified they said, in a city filled with brilliant people.
3/ Above him, a mild mannered Chad who only received his position due to his father, who had also been the leader of the country.

The ruling party ran him, despite his years in leadership being less than the number of public videos of him in blackface. No one else was qualified.
Read 8 tweets

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