Canada Housing/Debt: Trust me, I'm a landlord.

The Something Awful Forums > Discussion > Debate & Discussion > Canada Housing/Debt: Trust me, I'm a landlord.

PC LOAD LETTER: May 23, 2005; WTF?!

Cultural Imperial posted:

I think Krugman and Summers have a much better idea, that is to implement negative interest rates.

Doing negative interest rates means loving over wage earners and trashing retirement funds. An economic boom does no good if only HENRY's and the rich see any benefit.

Also Krugman and Summers are neoliberal policy pushing assholes, however intelligent and awarded they might be.

# ? Nov 30, 2013 07:18

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# ? May 9, 2024 23:24

namaste friends: Sep 18, 2004; by Smythe

Xoidanor posted:

What is even an "illegal nightly rental"? Maybe it's because I'm living in a country where zoning isn't the fundamental aspect of urban planning but I have no idea what the article is even talking about.

Think of it as property speculator protection racketeering. Lots of idiots bought overpriced condos in the lead up to the Olympics in 2010. Unfortunately, no one predicted that the winter Olympics wouldn't draw further speculation to whistler. In the years since then, the market has either dropped or stayed the same. It depends on who you ask.

Unfortunately the hospitality industry in Whistler has a lot of influence over the municipality as you can imagine in a resort town. I think it's likely these corporations pay a lot of taxes. In order to protect these companies from airbnb or vrbo, the municipality implemented a mandatory system of licensing whereby you weren't allowed to rent out your abode without first paying a 5k tax.

The speculators are now stuck with their condos which they hoped to sell for a profit. Rather than sell now at a loss, many of these speculators are renting their properties out without paying the whistler rental tax.

# ? Nov 30, 2013 07:24

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

PC LOAD LETTER posted:

Also Krugman and Summers are neoliberal policy pushing assholes, however intelligent and awarded they might be.

An argument and/or examples, as opposed to an ad hominem attack, would be elucidating here.

# ? Nov 30, 2013 07:33

Throatwarbler: Nov 17, 2008; by vyelkin

Well you could make a plausible argument that rental housing makes more requests of municipal services than long term residents, and in a resort town where short term rentals are a significant percentage of the population at any given time it sort of makes sense to charge them extra. It's rather difficult to enforce though as you can see.

# ? Nov 30, 2013 07:35

PC LOAD LETTER: May 23, 2005; WTF?!

Lexicon posted:

[citation plz]

The guy just posted an article where Krugman gives Summers accolades for (and says he has advocated the same for a while) pushing for more economic bubbles as a financial cure all for our macroeconomic ills, what more could you possibly want?

# ? Nov 30, 2013 07:52

ocrumsprug: Sep 23, 2010; by LITERALLY AN ADMIN

PC LOAD LETTER posted:

The guy just posted an article where Krugman gives Summers accolades for (and says he has advocated the same for a while) pushing for more economic bubbles as a financial cure all for our macroeconomic ills, what more could you possibly want?

I read the article a got more of a "it appears to be the case" vibe than any strong argument that it was desirable.

# ? Nov 30, 2013 10:35

HookShot: Dec 26, 2005

Xoidanor posted:

What is even an "illegal nightly rental"? Maybe it's because I'm living in a country where zoning isn't the fundamental aspect of urban planning but I have no idea what the article is even talking about.

There are three basic zoning for residential in Whistler.

There's "Phase 2" which is pretty much hotel rooms/designed for monthly rentals. The owners are allowed to stay 28 days in the winter, 28 days in the summer.

Then there's residential, where only the owner is allowed to live in it or rent it out long term.

Then there's the middle one, which I can't remember the name of, where you're allowed to rent it out nightly, or you can live in it, basically you can do whatever the hell you want with it.

What the lady is saying is that there's people in properties zoned as residential that are renting their places out nightly.

# ? Nov 30, 2013 16:26

Shifty Pony: Dec 28, 2004; Up ta somethin'

Cultural Imperial posted:

Think of it as property speculator protection racketeering. Lots of idiots bought overpriced condos in the lead up to the Olympics in 2010. Unfortunately, no one predicted that the winter Olympics wouldn't draw further speculation to whistler. In the years since then, the market has either dropped or stayed the same. It depends on who you ask.

Unfortunately the hospitality industry in Whistler has a lot of influence over the municipality as you can imagine in a resort town. I think it's likely these corporations pay a lot of taxes. In order to protect these companies from airbnb or vrbo, the municipality implemented a mandatory system of licensing whereby you weren't allowed to rent out your abode without first paying a 5k tax.

The speculators are now stuck with their condos which they hoped to sell for a profit. Rather than sell now at a loss, many of these speculators are renting their properties out without paying the whistler rental tax.

True resort towns such as Whistler are a bit of a special case but I'm normally entirely for severe restrictions on short term rentals of residential property in urban areas. And by "severe restrictions" I think they should be banned 100% unless the property gets re-zoned commercial or a B&B is formally established. Even without the widespread tax dodging, they invite out of town "investor" speculation like no other and remove housing stock from the pool of rentals for those who actually live in the city (and who the city leadership is supposed to represent) driving up rent for everyone while properties sit vacant for significant fractions of the year.

While a great deal of the opposition to them is NIMBY bullshit (and hotels angry at the competition) I think that short term rentals are an area where people are for the right result for the wrong reasons, due to the effect they have on rental availability especially of the affordable type. Why put your apartment or house on the market for a year long lease when you can throw in some lovely Ikea furniture, pay for the lowest cable package, and make the weekly rent over 2x what the monthly rent would be and gouging like hell during special events? As an added bonus none of the normal tenant protection or B&B/hotel accessibility laws apply!

# ? Nov 30, 2013 16:32

namaste friends: Sep 18, 2004; by Smythe

PC LOAD LETTER posted:

The guy just posted an article where Krugman gives Summers accolades for (and says he has advocated the same for a while) pushing for more economic bubbles as a financial cure all for our macroeconomic ills, what more could you possibly want?

I'm not trying to defend summers but you should read Krugman's nytimes column.

# ? Nov 30, 2013 17:45

namaste friends: Sep 18, 2004; by Smythe

http://license.icopyright.net/user/viewFreeUse.act?fuid=MTc2ODY2MTA%3D

quote:

Flaherty charges CMHC new risk fee on mortgages
By TARA PERKINS
Part of Finance Minister's continuing efforts to limit taxpayer exposure to overheated housing market

Finance Minister Jim Flaherty is taking another step to curb taxpayers' exposure to the housing market, by charging Canada Mortgage and Housing Corp. a new risk fee.

As of Jan. 1, the Crown corporation will have to pay the government a fee equivalent to 3.25 per cent of the mortgage insurance premiums it writes and 10 basis points on portfolio insurance it writes.

The fee is part of Mr. Flaherty's continuing efforts to rein in CMHC's activities and limit the risk for taxpayers. Earlier this week the International Monetary Fund said the Canadian government should do more to reduce its role in the mortgage insurance system and transfer risk to the private sector.

Steps that Mr. Flaherty has already taken in recent years range from tightening the rules that govern which mortgages are eligible for insurance, to capping the amount of insurance that CMHC can have outstanding at $600-billion, and restricting the ability of banks to buy portfolio insurance to reduce their capital requirements.

Mortgage insurance is mandatory in Canada when the borrower has a down payment of less than 20 per cent. It reimburses the bank if the borrower defaults on their mortgage. Portfolio or bulk insurance is something that banks can buy to cover large portfolios of previously uninsured mortgages.

CMHC estimates that the risk fee will result in a payment to the government of about $50-million next year, based on its projected insurance volumes, but that the hit to the Crown corporation's earnings will be less than that because the fee will be amortized.

"We certainly don't anticipate it to have any impact on the availability or cost of mortgage funding, so we don't see it as a material event," CMHC chief financial officer Brian Naish told reporters on a conference call Friday, adding that it will have a "very minimal impact on our bottom line."

CMHC said it earned $452-million in the third quarter, up 20 per cent from a year ago, thanks largely to a reduction in net claims. The total amount of insurance in force fell to $559.8-billion, compared with $566.1-billion at the end of 2012.

Royal Bank of Canada analyst Geoffrey Kwan said that CMHC's two private-sector rivals, Genworth MI Canada Inc. and Canada Guaranty, already have to pay a risk fee to the government of 2.25 per cent of premiums written.

The fact that CMHC's new risk fee is higher than that likely reflects the fact that Ottawa provides more backstop to the Crown corporation, he added. The government guarantees 100 per cent of CMHC's business, but only 90 per cent of its private-sector competitors.

Why is Naish talking like the CMHC is supposed to have a profit motive? That is so hosed up. The CMHC's mandate is to enable home ownership as a matter of social policy, not rapacious greed or am I just naive?

# ? Nov 30, 2013 18:21

cowofwar: Jul 30, 2002; by Athanatos

Xoidanor posted:

What is even an "illegal nightly rental"? Maybe it's because I'm living in a country where zoning isn't the fundamental aspect of urban planning but I have no idea what the article is even talking about.

Hotels, chalets, and other tourism accommodations are considered 'legal'. Some homeowner renting out a room for a couple nights to a tourist on airbnb is considered illegal. It's considered different from normal month to month renting.

# ? Nov 30, 2013 18:21

etalian: Mar 20, 2006

Cultural Imperial posted:

The CMHC's mandate is to enable home ownership as a matter of social policy, not rapacious greed or am I just naive?

Well it was originally created as way to help soldiers returning from WWII get reasonably priced homes through state housing but eventually warped into something else.

# ? Nov 30, 2013 19:00

namaste friends: Sep 18, 2004; by Smythe

McLean cub reporter has no idea about the role of central banking.

http://www2.macleans.ca/2013/11/29/housing-bubbles-worldwide-will-test-one-of-the-big-lessons-from-the-financial-crisis/

# ? Nov 30, 2013 19:18

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

Other than for Flaherty's CYA motivations, why impose a 'risk fee' on the CMHC when it's a crown corp? Is that not a bit like moving a portion of your money from your left pocket to the right and calling it a 'fee'?

# ? Nov 30, 2013 21:34

PC LOAD LETTER: May 23, 2005; WTF?!

Cultural Imperial posted:

I'm not trying to defend summers but you should read Krugman's nytimes column.

I've read some of them.

He says some things on social issues that I'd agree with, in that respect he is fairly left leaning compared to the main stream. When you get down to what his actual solutions are they all pretty much boil down to, "throw money at the banks + Wall St. and hope some of it trickles down to Main St".

IOW Reganomics with Keynesian logic/language as a academic smoke screen for justification that'll go over well in a op-ed from the Atlantic/Economist/WSJ/<insert neoliberal policy pushing rag here> for the "socially liberal/financially conservative" crowd.

Good lord, he actually agreed with Summers that "improved financial regulation isn't necessarily a good thing" because it "may discourage irresponsible investment". That he agrees with Summers about anything should have your BS-o-meter pegged in the red zone, Summers is that big of a dick, but to agree on something like that is actually sickening to me. All the poo poo that has gone down with MBS/CDS + MERS + robosigning + the credit rating agencies clearly shows the need for improved regulation and LOTS of it.

The only people who will deny that are either ignorant of all that poo poo (IOW the public at large) or neoliberal assholes. I know Krugman isn't ignorant and he certainly isn't stupid so neoliberal rear end in a top hat it most definitely is.

# ? Dec 1, 2013 01:30

Bleu: Jul 19, 2006

The Krugman is the delightful leprechaun of New York that I read all the time, but it's important to remember that, before he settled in to lay siege to the US madhouse for the last decade, he was originally a pro-globalization financial centrist. He's drifted steadily leftward over recent years (he unironically cited Naomi Klein one time!), but not that much by international standards.

edit: That said, Summers is a, quote, "reptilian bank-whore" that even Krugman couldn't support in the Fed.

Bleu fucked around with this message at 06:18 on Dec 1, 2013

# ? Dec 1, 2013 06:10

namaste friends: Sep 18, 2004; by Smythe

http://www.nytimes.com/2012/05/14/opinion/krugman-why-we-regulate.html

quote:

It�s clear, then, that we need to restore the sorts of safeguards that gave us a couple of generations without major banking panics. It�s clear, that is, to everyone except bankers and the politicians they bankroll � for now that they have been bailed out, the bankers would of course like to go back to business as usual. Did I mention that Wall Street is giving vast sums to Mitt Romney, who has promised to repeal recent financial reforms?

http://krugman.blogs.nytimes.com/2012/02/21/partying-like-its-1934/

quote:

When I read headlines about the call by European leaders for action to stimulate growth, I wondered for just a second whether there was a crack in the austerian consensus. But noooo. The answer of the leaders to a severe shortage of demand � the private sector simply isn�t spending enough � is, wait for it, deregulation and trade liberalization.

This is not so much a bad idea as an irrelevant one. What would it do to reduce the burden of household debt? What would it do to narrow the destructive German surplus?

http://www.nytimes.com/2012/05/21/opinion/dimons-deja-vu-debacle.html?ref=paulkrugman

quote:

The point, again, is that an institution like JPMorgan � a too-big-to-fail bank, not to mention a bank whose deposits are already guaranteed by U.S. taxpayers � shouldn�t be engaged in this kind of speculative investment at all. And that�s why we need a return to much stronger financial regulation, stronger even than the Dodd-Frank regulations passed back in 2010.

http://www.nytimes.com/2011/03/21/opinion/21krugman.html?ref=paulkrugman

quote:

Let me expand on that for a moment. When the 2008 financial crisis struck, many observers � myself included � thought that it would force opponents of financial regulation to rethink their position. After all, conservatives hailed the debt boom of the Bush years as a triumph of free-market finance right up to the moment it turned into a disastrous bust.

But we underestimated the speed and determination with which opponents of regulation would rewrite history. Almost instantly, that free-market boom was retroactively reinterpreted; it became a disaster brought on by, you guessed it, excessive government intervention.

There remained, however, the inconvenient fact that some of those calling for stronger regulation have a track record that gives them a lot of credibility. And few have as much credibility as Ms. Warren.

(BTW, Ms. Warren is neither a neoliberal nor a reaganite or whatever)

http://www.nytimes.com/2010/04/02/opinion/02krugman.html?ref=paulkrugman

quote:

Breaking up big financial institutions wouldn�t prevent future crises, nor would it eliminate the need for bailouts when those crises happen. The next bailout wouldn�t be concentrated on a few big companies � but it would be a bailout all the same. I don�t have any love for financial giants, but I just don�t believe that breaking them up solves the key problem.

So what�s the alternative to breaking up big financial institutions? The answer, I�d argue, is to update and extend old-fashioned bank regulation.

After all, the U.S. banking system had a long period of stability after World War II, based on a combination of deposit insurance, which eliminated the threat of bank runs, and strict regulation of bank balance sheets, including both limits on risky lending and limits on leverage, the extent to which banks were allowed to finance investments with borrowed funds. And Canada � whose financial system is dominated by a handful of big banks, but which maintained effective regulation � has weathered the current crisis notably well.

# ? Dec 1, 2013 06:23

namaste friends: Sep 18, 2004; by Smythe

Lexicon posted:

Other than for Flaherty's CYA motivations, why impose a 'risk fee' on the CMHC when it's a crown corp? Is that not a bit like moving a portion of your money from your left pocket to the right and calling it a 'fee'?

Yeah this doesn't make sense to me. I think the only logical conclusion is that the CMHC, while officially is a crown corp, is being given enough latitude that even the politicians are treating it like your run of the mill for-profit insurance company.

# ? Dec 1, 2013 06:27

PC LOAD LETTER: May 23, 2005; WTF?!

Cultural Imperial posted:

<bunch of Krugman quotes>

You do realize I was quoting Krugman too right? I know you could quote him saying reasonable things for more than a few pages straight but you haven't really addressed what I said and doing so further won't help. Its not his reasonable things I disagree with after all, its his solutions. Look if you want to continue this just PM or something because I don't think anyone else here is interested in this and it is the Canadian Housing Bubble thread after all.

edit:I don't know enough on them to intelligently comment. Sorry. \/\/\/\/\/\/\/

PC LOAD LETTER fucked around with this message at 19:10 on Dec 2, 2013

# ? Dec 1, 2013 07:49

TheOtherContraGuy: Jul 4, 2007; brave skeleton sacrifice

PC LOAD LETTER posted:

Doing negative interest rates means loving over wage earners and trashing retirement funds. An economic boom does no good if only HENRY's and the rich see any benefit.

Also Krugman and Summers are neoliberal policy pushing assholes, however intelligent and awarded they might be.

What if RSPs/TFSAs had access to "preferred rate" bonds that weren't available to unregistered accounts? Is such a thing possible?

# ? Dec 2, 2013 17:10

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

Somewhat amusingly, Kevin O'Leary of all people has thrown his lot in with the Canadian housing bear side: https://www.youtube.com/watch?v=Okp_-hyQSFg

# ? Dec 2, 2013 21:42

Mrs. Wynand: Nov 23, 2002; DLT 4EVA

Cultural Imperial posted:

Krugman & Summers, BFFs posted:
So how can you reconcile repeated bubbles with an economy showing no sign of inflationary pressures? Summers�s answer is that we may be an economy that needs bubbles just to achieve something near full employment � that in the absence of bubbles the economy has a negative natural rate of interest. And this hasn�t just been true since the 2008 financial crisis; it has arguably been true, although perhaps with increasing severity, since the 1980s.

Now where have I heard that before, some other economist of sorts...

quote:

The idea that's blowing my mind, maybe the housing bubble in Canada isn't really a bad thing? Inflation is low, the boomers are getting old and the population is declining if you factor out all of the investment class immigrants. Maybe building lovely condos is really paying for all the government services that we want?

... and of course with neoliberalism you see the same data but with end up with a spectacularly mistaken conclusion. I'm also not sure how/why he is throwing classical Keynes under the bus in the same article, while actually acknowledging that "spending is good, and while productive spending is best, unproductive spending is still better than nothing". Eroding everyone's retirements is preferable to just straight up public works becauuuuuse.... ______ ?

# ? Dec 2, 2013 23:56

Mrs. Wynand: Nov 23, 2002; DLT 4EVA

Baronjutter posted:

Woah I'd love to read your data on why you don't believe in induced demand, you could make big bux proving to urban and transport planners why they're wrong doing lecture tours.

I don't think he is actually contradicting them. Induced demand does assume that your highways are indeed "connect[ing] areas zoned for cheap residential homes with the rest of the city", but that basically is always the case. I mean sure land prices in our suburbs/exurbs have risen in lockstep with the city core, but they are still a whole order of magnitude or so cheaper than the city proper on a per-squarefoot basis.

If that weren't the case why would people move outwards (and fill up traffic capacity)? But also, why would that ever not be the case? (Unless your city is already in freefall or something a-la Detroit.)

Mrs. Wynand fucked around with this message at 00:21 on Dec 3, 2013

# ? Dec 3, 2013 00:00

Mrs. Wynand: Nov 23, 2002; DLT 4EVA

Also, I've been wondering about this, playing devil's advocate for a second: Is there any reason why interest rates would ever rise unless the economy was already booming for some other reason and monetary policy said to step on the breaks by jacking up the interest rates? Seems like madness. Unless I'm missing something, I think it's reasonable safe to simply discount this possibility.

With that in mind, I don't think it's completely unreasonable to say that real estate etc will be in for a "soft landing" barring some other (probably external) unforeseen event. It is of course a bad position to be in because you can't very well lower interest past nominal zero (hence Krugman's insanity above).

Now, having said that, are these external events really that unforeseeable? There is at least one elephant in the room by way of the Eurozone, which is going to do something bad, at this point the only question is "what exactly?", but will it be enough to trigger a daisy-chain of foreclosures and bankruptcies and full-on "wheels are off the wagon" economic crisis? It may well not. I mean I wouldn't exactly bet on it myself, but we are rather far from the real damage when it (whatever "it" ends up being) drops.

I dunno, I've said it before, but I think the "soft landing" outcome isn't actually that outlandish, it's just far more painful than people think it will be (continued economic stagnation and high debt loads for a very long time to come).

Mrs. Wynand fucked around with this message at 00:23 on Dec 3, 2013

# ? Dec 3, 2013 00:13

Mrs. Wynand: Nov 23, 2002; DLT 4EVA

Lexicon posted:

Somewhat amusingly, Kevin O'Leary of all people has thrown his lot in with the Canadian housing bear side: https://www.youtube.com/watch?v=Okp_-hyQSFg

Is that ownership-costs-as-%-of-household-income graph right? Was it actually that much higher in the 90s? I don't know much about the 90s bubble (immigrated in the late 90s). How bad was that fallout? How was the world economic background at the time? Or even just the national one?

# ? Dec 3, 2013 00:16

Bip Roberts: Mar 29, 2005

For reference, would a maybe-not-worst-case-but-real-bad scenario of a housing crash like Japan had be considered a "soft landing"?

# ? Dec 3, 2013 00:29

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

Dusseldorf posted:

For reference, would a maybe-not-worst-case-but-real-bad scenario of a housing crash like Japan had be considered a "soft landing"?

I dunno - isn't Japan usually the polar opposite of us on the price-to-rent ratio charts these days? That seems like the outcome of a pretty extreme crash.

# ? Dec 3, 2013 01:04

Franks Happy Place: Mar 15, 2011; It is by weed alone I set my mind in motion. It is by the dank of Sapho that thoughts acquire speed, the lips acquire stains, stains become a warning. It is by weed alone I set my mind in motion.

Dusseldorf posted:

For reference, would a maybe-not-worst-case-but-real-bad scenario of a housing crash like Japan had be considered a "soft landing"?

I don't think you can call an event so bad that it's called "The Lost Decade" a 'soft landing' by any means. However, if you are actually smart enough to run the numbers in terms of the Canadian FIRE sector as a percentage of employment and economic activity and all of that stuff, it's pretty easy to come to the conclusion that a Canadian 'soft landing' would indeed look like that.

Which is why anybody throwing the term 'soft landing' around with regard to Canada should be dismissed right from the get-go: it means they haven't done any homework. You can't just say "Well, 30% of all national economic activity will cease, but things will just putter along!" like that's even a thing.

# ? Dec 3, 2013 01:08

Bip Roberts: Mar 29, 2005

Lexicon posted:

I dunno - isn't Japan usually the polar opposite of us on the price-to-rent ratio charts these days? That seems like the outcome of a pretty extreme crash.

Right, but I thought Japan didn't bottom out sharply. I thought it was just a sluggish drop-off from the peak followed by a 10 year economic quagmire.

Edit: Is the term "soft landing" used for the mechanism of the crash, I.E. sharp versus gradual or for the result of the crash I.E. no decrease in quality of life after the crash?

# ? Dec 3, 2013 01:09

Mrs. Wynand: Nov 23, 2002; DLT 4EVA

I think the "soft" part pretty much just refers to the actual housing prices. i.e. it remains expensive and the economy is crap at the same time!

# ? Dec 3, 2013 01:11

Throatwarbler: Nov 17, 2008; by vyelkin

EThe way the market peaked and dropped in the late 1980s isn't so different but the aftermath and long term consequences are very specific to the Japanese. Biggest thing you need to keep in mind is that Japan has an odd mix of xenophobia/insularity that almost completely rules out immigration or even long term expatriates, a steeply declining population and across the board deflation in everything, not just housing.

Every market is strange in its own way but :japan:

is just a bizzaro backwards-land and I like to make effort posts about it because it's also how China will end up eventually. Western commentators get all kinds of :saddowns:

when they look at Japanese economic figures because all their assumptions are turned on their heads. GDP growth since the 1990s has been essentially zero, so westerners call it a stagnation, except when you factor in the steep decline in the working age population, the GDP per working age adult has actually been growing faster in Japan than the US or EU.

Another example is consumer price deflation as a result of currency appreciation. In any economy, the corporate sector is short the local currency(being net borrowers) while the household sector is long(being net savers). Japan is a rocky archipelago with almost no natural resources so every barrel of oil and ton of steel the Japanese consumer uses must be imported, while the much of the corporate sector is export oriented which means that the effect is magnified vis a vis economies in North America.

So how does this work? Oil prices have been going up right? Well in USD terms sure, but what happens to oil/gas prices when you factor in a 300% appreciation of the currency vs the USD?

What does a young Japanese person do when houses get cheaper every year but your purchasing power overseas goes up every year due to currency appreciation? Until recently when China overtook it Japan was the worlds biggest consumer of luxury goods, I'm sure it's still tops per capita. I think they actually run a trade deficit with France and Switzerland. If you are Japanese and your vices in life are Louise Vuitton accessories, Bordeaux wines, Swiss cheese/Chocolate and doing smokey donuts in the parking lot in your Chevy Tahoe, and then life has been pretty sweet as long as you don't blow your entire paycheque on real estate speculation.

The whole net effect is a transfer of wealth and purchasing power from the corporate sector to the household sector, which reverses what happened during the 1960s-70s where the economy grew rapidly on the back of corporate investment and borrowing from household savings. Corporate profitability suffered while households became richer.

# ? Dec 3, 2013 01:47

Paper Mac: Mar 2, 2007; lives in a paper shack

Dusseldorf posted:

Right, but I thought Japan didn't bottom out sharply. I thought it was just a sluggish drop-off from the peak followed by a 10 year economic quagmire.

It was pretty vertiginous in the big cities, where the bubble was most inflated:

# ? Dec 3, 2013 01:54

Fuzzy Mammal: Aug 15, 2001; Lipstick Apathy

Throatwarbler posted:

What does a young Japanese person do when houses get cheaper every year but your purchasing power overseas goes up every year due to currency appreciation? Until recently when China overtook it Japan was the worlds biggest consumer of luxury goods, I'm sure it's still tops per capita. I think they actually run a trade deficit with France and Switzerland. If you are Japanese and your vices in life are Louise Vuitton accessories, Bordeaux wines, Swiss cheese/Chocolate and doing smokey donuts in the parking lot in your Chevy Tahoe, and then life has been pretty sweet as long as you don't blow your entire paycheque on real estate speculation.

Yeah analyzing their situation is pretty cool. The proportion of adult women in Japan with at least one LV handbag is 86%. Mind boggling.

My other Japan fact of the day is that this year sales of adult diapers are projected to exceed those for baby diapers.

# ? Dec 3, 2013 02:14

etalian: Mar 20, 2006

Throatwarbler posted:

EThe way the market peaked and dropped in the late 1980s isn't so different but the aftermath and long term consequences are very specific to the Japanese. Biggest thing you need to keep in mind is that Japan has an odd mix of xenophobia/insularity that almost completely rules out immigration or even long term expatriates, a steeply declining population and across the board deflation in everything, not just housing.

Every market is strange in its own way but is just a bizzaro backwards-land and I like to make effort posts about it because it's also how China will end up eventually. Western commentators get all kinds of when they look at Japanese economic figures because all their assumptions are turned on their heads. GDP growth since the 1990s has been essentially zero, so westerners call it a stagnation, except when you factor in the steep decline in the working age population, the GDP per working age adult has actually been growing faster in Japan than the US or EU.

Another example is consumer price deflation as a result of currency appreciation. In any economy, the corporate sector is short the local currency(being net borrowers) while the household sector is long(being net savers). Japan is a rocky archipelago with almost no natural resources so every barrel of oil and ton of steel the Japanese consumer uses must be imported, while the much of the corporate sector is export oriented which means that the effect is magnified vis a vis economies in North America.

So it's a somewhat strange twist on the German export focused economy?

# ? Dec 3, 2013 04:37

namaste friends: Sep 18, 2004; by Smythe

Polololz could increase interest rates with low inflation conditions if there were some sort of current account imbalance that needed fixing by stomping on the value of the loonie.

# ? Dec 3, 2013 08:31

namaste friends: Sep 18, 2004; by Smythe

Nouriel Roubini thinks Canada has a housing bubble.

http://www.project-syndicate.org/co...round-the-world

# ? Dec 3, 2013 08:32

namaste friends: Sep 18, 2004; by Smythe

WHO CARES ABOUT AFFORDABILITY?

# ? Dec 4, 2013 03:54

Mrs. Wynand: Nov 23, 2002; DLT 4EVA

I ended up writing a rather long long-winded reply to a friend-of-a-friend that was bitching on facebook about "chineese investors" (urgh). Figured some of you may enjoy it (also feel free to lift it for your own use):

quote:

Nobody knows what the actual numbers for foreign ownership are, not because it's a well kept secret, but because it isn't actually tracked anywhere and is very difficult to study as you have to sift through and intermediary corporations and holding companies and so forth (which aren't even meant as an obstruction mechanism, it's pretty common to set up a Canadian entity to do business in Canada and unless it's a public corporation there just isn't a way to determine who, in turn, owns these). Figures range from 0.7% to 80% for certain neighborhoods depending on who you ask (or how much a given article bothers to check their sources).

Either way though, it doesn't actually matter one bit where the money is coming from if we're talking about housing prices. What you are actually interested in is either immigration into the city (it is not exceptionally high, certainly not enough to explain the rise in prices we've seen) or units sitting vacant - that's generally speaking what people are so afraid of with regard to "chineese investors". Unfortunately, this is another one of those things that isn't actually kept track of anywhere, so nobody knows for sure. The only study I know of that actually tries to figure this out is by Andrew Yan of Sauder School of Business and he goes by BC Hydro billing and census data and other such sleuthing. That puts unoccupied units at 7.7% on average though with certain neighborhoods (like Coal Harbor, which to be fair does have a much larger number of only very recently completed buildings) as high as 25%.

IMHO, although this figure is quite high, it is hardly enough to account for the 300% or so rise in prices we've seen. I mean, it may be, who knows what the price elasticity of supply for real estate actually is (probably an urban land economist, which I am now), but you can try to imagine what the effect on bids for currently listed homes might be if there were, say, 10% less listings to go around. It means 10% less buyers will be walking away with homes in that timespan so some of those buyers will be willing to increase their bids until they can price those now-excess buyers out of the market. There is no way that alone can drive the actual growth we've seen - it just doesn't make any sense.

An explanation that I find much more believable revolves around the CMHC relaxing mortgage terms in the late 00s. These actually coincide not only with the Vancouver housing market really taking off, but also with a Canada-wide rise in prices. Moreover, after the 2008 financial crisis pretty much every single central bank around the world dropped its interest rate to the floor (because quantitative easing), meaning not only were mortgages in Canada easier to get, but the actual loans were much cheaper for both Canadians *as well as* anyone else looking to buy. Whatever the foreign ownership numbers may be for Vancouver, we do know for a fact that we have a pretty high immigration rate generally speaking, which may well explain why Vancouver in particular has grown so much faster than other cities in Canada (Toronto, btw, who comes close, also enjoys relatively high immigration).

So anyway, my own conclusion from all this is that the blame on "foreign investors" really is nothing more than the misguided outrage (with none too subtle racist undertones) it looks like it is. Yes, immigration and/or foreign investment and/or (local or foreign) "investment properties" staying empty may well be making the situation worse for Vancouver in particular, but the real culprit is actually the CMHC.

See, Real Estate is NOTORIOUSLY responsive to loan availability. Think back to the scenario I was describing earlier: you are trying to buy a house, but there are more buyers than there are listings, so buyers increase their bids until all excess buyers are driven out of the market. What can actually drive someone out of the market? If you believe in the "homo economicus" rational-actor model of decision making you might think it would be some calculation of expected present value of the price of home ownership over time vs renting and investing the difference yada yada. Even if you don't find this completely laughable, the fact of the matter is that you can make that calculation come out whichever way you want just by plugging in different values for your estimated rate of property appreciation in the future. Will it keep going up at the current rate? Flatline? Go down? When will any of this happen? Tiny changes in any of those variables can end up predicting massive losses or massive profit - it's a useless model.

Turns out that what actually drives buyers out of the market is really quite simple: not being able to get the loan they need to make a competing bid. Most people, once committed to the idea of home ownership, don't really change their mind as long as they figure they can make the monthly mortgage payments (up to about half their income) and don't see the market crashing any time soon. So the price can basically just go up and up and up for as high as the bank will let it. As long as the mortgage is insured by the CMHC, banks are happy to let it go as high as the CMHC in turn let's them. And here we are. I mean, if you look at housing prices during more "normal" times - they usually just respond to one thing alone: rises in income for that region. Not even immigration, just income. Why? Because income determines how quickly you can build up your down payment and if you can't come up with the minimum down-payment required, it doesn't matter how many excess buyers there are and how badly they may want to bid each-other up - banks won't give them a higher mortgage unless they save up a larger down-payment, end of story. People just have to wait until they've saved up more or more inventory gets built - that's the sort of world e.g. your parents probably bought their house in.

That's not the world we live in now though. Income has not risen in Vancouver, merely the down-payment requirement dropped like a rock and loans became dirt-cheap for everyone. The cost of living has gone way way up and we are all just plain worse off because of it. Even if there is no "crash", the "soft landing" everyone hopes for just means maintaining this situation of high-debt, low-disposable-income in perpetuity, it's not actually a "good" outcome by any means (not that I'm saying a crash would be either).

The outrage people feel about housing costs is very much warranted, but it should be directed not at foreigners but at the CHMC and the banks and realtors that made hand over fist profits from all this at everyone else's expense. Remember, the whole point of a CMHC insured mortgage is that it is *insured* - the bank's losses are by definition socialized - if it all comes down, it's all on us, they won't loose a penny. Good time to be a bank though. Then again, when isn't it? :p

I should probably have spelled out my sources, just facebook is not the bestest format for them (lame excuse i know).

# ? Dec 4, 2013 23:33

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

^ Great writeup. I agree with it pretty much 100% - the entire situation with the CMHC is utterly unconscionable. The whole thing disgusts me.

# ? Dec 5, 2013 00:08

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# ? May 9, 2024 23:24

etalian: Mar 20, 2006

Cultural Imperial posted:

WHO CARES ABOUT AFFORDABILITY?

people love spending above 50 percent of their income on housing costs because appreciation is good.

# ? Dec 5, 2013 00:16

The Something Awful Forums > Discussion > Debate & Discussion > Canada Housing/Debt: Trust me, I'm a landlord.

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