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Housing CANNOT be an investment, and I say this as a homeowner whose house value has nearly tripled since I bought it. I bought a house simply because I didn't want to rent for the rest of my life.
It's obviously absurd to claim to want affordable housing and refuse to cause prices to go down. If housing is an "investment" then you are by definition fucking over all subsequent homebuyers. Everybody needs a place to live.
I'm not saying you're in any way wrong, but for my own understanding, are schemes to help people onto the housing market not effectively the same thing, while still retaining value for those who expect to do things like funding retirements with their existing properties?
No, because that government money to fund those programs has to come from somewhere, and it's almost always debt that future generations end up saddled with, so it's still making younger folks pay for it either way.
Absolutely fucking wrong. The immense value tied up in housing is killing the economy...
So written, a condo owner whose property value went up 50% over the past five years.
I don't get what the point is except for investors.
People using it as a "retirement holdings" might try to sell and then find they can't afford to live anywhere in retirement.
People saving property to leave an inheritance have kids waiting for their parents to die so they can afford a home to own.
Actually, w.r.t. to retirement savings it can be valuable as a lot of the better assisted living arrangements will require an upfront payment of hundreds of thousands of dollars for unexpected expenses along with a regular rent expenditure.
This is arguably an awful way to finance elder care and doesn't justify making housing unaffordable but that stored value is useful if you think you'll need assisted living.
So in 30 years when I need assisted living but was never able to afford a house, what am I supposed to do? Die in the street?
Our government really should have better programs to assist seniors and there should be non profit, government owned and operated assisted living available. Over 1 million seniors needed to use the new dental benefit so clearly there is an issue with how canada treats their seniors financially.
Ah, that's fair. I didn't consider assisted living!
Hey, no worries... I've been getting deep in the weeds on this one as my mom is in her eighties and trying to decide how to allocate her savings for her EOL.
It really sounds like the issue there is just another subset of housing (un)affordability.
Oh, definitely... and the consolidation of assisted living into fewer and fewer PE firms should scare the shit out of everyone - but it is important to remember that a few people would be screwed if the housing market suddenly collapsed... that said, we absolutely should deflate this market - we just need to consider some fixes for the house-wealthy cash-poor older folks who might be really fucked by this.
then find they canβt afford to live anywhere in retirement.
I think the plausible circumstance is them selling and moving out of Canada, really it's the logical thing to do when you destroy the eco system you inhabit for gains. Then the money also gets spent out of Canada, we might spend less on healthcare cost for the elderly but I could see the math working out to be a net loss.
I think the plausible circumstance is them selling and moving out of Canada
Or moving to SK
Or moving to SK
Same thing. (Or was that the joke?)
Lifelong SK resident.
The fundamental issue with housing as an investment is that it is a monolithic and non-fluid vehicle, which makes it worse when leverage comes into play. Whereas stocks can be purchased/sold at any time in an instant and have fractional costs (sometimes as cheap as 10$ per stock), houses are not, and fast fluctuations in prices could heavily impact your ability to realize your gains. So it is, on that aspect, a terrible investment.
For large companies owning thousands of units, this is not an issue since they are spreading the risks across the units (by buying diversely located units of all types). They can also quickly execute purchases and sales since they are in that exact business.
So the argument that houses are ways to pass down wealth is misguided: they are terrible ways to pass down wealth, and parents should leave a trust fund or safe investments rather than a house if their goal is to build generational wealth - housing should be passed down for personal reasons.
I'm not smart enough regarding macroeconomics to know the right answer, but I feel like there has to be a solution that makes home ownership affordable for new entrants into the market without causing the value of existing homes to tank so hard and fast that we end up with a 2008-style crash again. I'm pretty confident that getting large-scale corporate investment out of the picture is part of the solution, and I don't care if the method involved there hurts the corpos pretty bad. Maybe an oppressive rent-control scheme that makes keeping the properties untenable for corporate owners, forcing them to want to sell as fast (and therefore as cheaply) as they can. I don't know what zoning laws are like in Canada (compared to here in the US), but I think merging zoning for low- and mid-density residential such that suburban NIMBYs can't block multi-family units from being build is another necessary step. As far as everyday folks who bought into the housing system, I'd like to see them as protected from the fallout as possible, especially since (at least the US) government has been all-too-happy to let home ownership replace pensions as the primary way people are "supposed" to retire.
I think a rent cap could be a good way. It could be raised wrt to inflation. Then, government housing, better loan systems for non profit and maximize density to allow building taller rather than wider (making land cost minimal), but not tall enough that would create increased cost (elevators are expensive to maintain for example). A lot of initiatives need to be put in place, but one that could be effective is to lower costs of construction and find ways to increase productivity by improving resource management
Lmao how is selling my house and buying another ridiculously inflated house part of my retirement?
Look. I already told you. I deal with the goddamn customers so the engineers donβt have to. I have people skill. Iβm good at dealing with people. What the hell is wrong with you people!?
Another way to say this: if no one can afford housing, no one retires or has a nest egg.
That's a fact, but like, I'd prefer not to be homeless when I can't retire.
I'd say that would be fine in theory, if "retain its value" meant that housing would follow very closely but tailing local inflation. That won't happen though. As long as "housing needs to retain its value" ideology runs the country, housing will be viewed as an investment and scarcity will cause it to push inflation upwards. Even trying really hard to quell these prices it might beat inflation, and even if it were a success it would take decades of nominal-growth with negative-real-returns to bring those prices to parity with incomes.
So no, even if "technically maybe?" the answer is still no.
The place next door just got rebuilt as a fourplex, each unit of which is going for 1.6 million dollars. The mortgage would be $8k/month. I and my partner have no kids, no car, and both have solid incomes in union jobs. Our current rent is a hair under $1k/mo because we've been in this place awhile.
That mortgage plus taxes, utilities, would still be almost all our income. It's ridiculous.
Fuck. The. Investor. Class.
It's like they know they lose next election and are just trying to leave the most broken mess in attempt to smear the next party
At this point PP wins by just saying he's not Trudeau, this is such a bad situation
PP is also doing his part to increase housing prices (at least in his platform)
Singh is the one against it and itβs not helping his numbers so this isnβt a relevant issue to Canadians
Yeah PP wins and this is about to get a whole lot worse. I'm afraid of the future here
High housing prices are bad for the economy
Housing prices become high when there is a scarcity of houses in job markets. This means you will have a shortage of labour in those markets because people canβt afford to be there
And if you have a house + are paid well that is still bad for you because there will be less in your area for you
Housing needs to retain its value so politicians can stay in power. Appealing to homeowners with policies that enrich them is popular, but bad for everyone.
Well yeah. People's entire life savings are wrapped up in their houses. We all saw what happened in 08 when the housing market crashed. It would cause absolutely massive fallout if people's largest asset that they've been investing in their entire lives lost a bunch of value. It's unfortunate that they're not more affordable, but devaluing them would be catastrophic.
I think we should clarify what devaluing mean - I think it's reasonable for a house purchased in the 90s to not decrease in value if proper maintenance is applied - but what's our rationale for housing to be a profitable investment? Why, rationally, should it gain value over time... and why should that gained value outpace interest rates, the stock market, and wage cost-of-living increases?
I'm in favor of devaluing real estate because it's currently astronomically overvalued and viewed as an investment vehicle - if it were reasonably valued I'd be in favor of land having a flat value relative to inflation and construction having a slow depreciation rate as the materials age and require more active maintenance... with the only real increases in value coming from renovations or other active investments in the quality of the house.
Why is it that teleporting back in time, surrendering cash according to inflation, buying a house, teleporting forward in time, selling that house - then repeating that on a loop... why is that an infinite money glitch?
Similar to nature abhorring a vacuum - capitalism abhors a free money glitch (and in all other cases, free money glitches get absorbed by arbitrage).
Devaluing them in a deliberate and controlled manner is much better then waiting for a crash.
Slowing their appreciation seems like a better solution for people who bought in the last few years. Having their homes lose value in a controlled manner would ruin some people. They'd not only lose money on their life savings, they'd be trapped, unable to ever move without paying even more money, or filing bankruptcy if they don't have more money to lose.
Slowing appreciation below inflation is depreciation/losing value. It's a hard tagert to nail, but if we can keep the needle between static price and inflation; we're doing well.
They'd not only lose money on their life savings, they'd be trapped, unable to ever move without paying even more money, or filing bankruptcy if they don't have more money to lose.
This already happens, we just don't hear about it. And we normally blame the homeowner for falling into a preditory trap.
Also the building envelope and internals IS a depreciating asset, always has been. It takes effort to maintain it.
Right now it's just the land values rocketing so high that on many places the crack shacks sitting on top depreciates slower than land value increases. So people's homes are still losing money, it's just the land underneath them goes up faster.
Edit:
They'd not only lose money on their life savings
Diversify yo bonds.
Land should retain its value, houses should deteriorate just like they do physically.
Suddenly I want to buy an F-350 and a "F π UCK TRUDEAU" flag. It's nice to see that every political party in Canada has finally united to fuck Canada.
Let's be real, those of us who can't afford housing can't afford a jacked up F350.
not that simple. Trudeu is a jerk etc. But in this case the only reasonable measure that will minimize damage is to prevent further price growth. Maybe allowing growth at "under inflation" rates which could soften the blow to poor saps that are neck-deep in mortgages.
I AM in a ridiculous mortgage and I would be thrilled to see housing prices stop growing for the next decade or so. Every time prices go up the city starts drooling and adds another 100 bucks to my property tax.
Here's my case for keeping housing prices high: the rich are largely insulated from fluctuations of the market. If housing prices drop then what's left of the middle class will be destroyed. Then the rich will come in to pick its corpse. Property will be concentrated even more in the hands of the rich and given 20 years we'll be in a worse position than before. I think what we need is to slowly increase housing supply while financially weakening the owner class. Eventually, housing prices will come down but the rich won't be able to buy all of it. But shocking the system in the short term will prevent any average Canadian from owning property ever again. We'll have to weather the storm for a while but things will get better. But I'm not a rocket economist, so feel free to refute this.
It would be dependent on why the drop occurs.
If it's because Canada become unfriendly to holding housing as a investment then I don't see how your scenario would be applicable. Specifically any scenario where Canada actually wants to keep housing affordable would mean people look elsewhere for investments.