Vancouver, Toronto and How to Burst A Real Estate Bubble

Hey what up guys?!

I’ve been AWOL for a minute, but I’ve been up to a lot. I had my birthday on Sunday and it was an absolute amazing day. And some other interesting things are afoot. More on that later. For now, bit of trivial chit chat about that icy country above the United States.

So recently (the last few years) most people have had their eyes on the Vancouver real estate scene. Chinese (and other foreign) hot money had been flocking into the city for a while, buying up property as frankly, a form of capital flight from their country. In the process, they bid the house prices sky high, pushing many long term residents out of the city (and rewarding many home owners with huge cash payouts). 

However, the bubble finally got to a point that the city figured it was time to do something about it. And something they did. In July the city instituted a 15% land transfer tax that slammed a massive break on the sales of some real estate lots. Hard on the heels of that was an Empty Homes tax that targets the approximately 10,000+ empty and underutilized properties held as investment property without occupants. 

The tax is trying to force the home buyers to put the properties back into the rental market. 

The one two punch has led to predictable results: home sales plunged 33% from the previous years (detached home sales fell 47%). However, prices are still up 30% from last year and $1.5m Canadian still gets you the house equivalent of fuck all, leading UBS to rank Vancouver as the most bubbly real estate market on the scene right now, ahead of London, Stockholm and Sydney. 

But at least it’s not climbing still. There’s a lesson in there somewhere. 

All that hot money has to go somewhere though and right now? It seems to be flowing to that other Canadian city, Toronto. Sales are up 33%, average prices are up about 25% to around $755,000 Canadian. Not quite Vancouver crazy, but well on its way. The city is already pretty expensive so it’s interesting to see how long they let this ride before they do something about it. 

I doubt any of you are interested enough in Canadian real estate for this to matter much but it’s something to be aware of. 

I’m out. 

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