If you are a wealthy Chinese (or just have lots of money and are looking to invest); for the past decade, Canada’s housing market has provided an amazing place for you to park your money.
Vancouver was one of the best of those cities, but recently they past some stupid law to discriminate against foreign buyers. Guess what? The foreign buyer who has 5 million dollars is cleverer than a government worker. So what happen since the anti-foreign tax law? Apparently, there is huge number of billionaire students that are buying up the city.
The prices for the most part haven’t raise, yet the number of transactions have declined; while the number of vacant houses are at all-time high.
To have a quick understanding of Canada’s housing market; here is a gallery of NATIONAL RESIDENTIAL STATISTICS for Canada (source: creastats .crea .ca):
and here is the MLS® HPI BENCHMARK PRICE for different housing markets (different cities) in Canada (source: creastats .crea .ca):
Now, to summaries the Vancouver housing market:
1- It is going to be a ghost city (like many ghost cities in china)… very expensive ghost city I might add.
2- It was a good opportunity to make free money as a Canadian, just by flipping house in Vancouver…. But not anymore!….. Because the government yet again intervened and tried to “help” the people by totally messing up the situation. Before the government greed get in the way and before the government of Vancouver try to increase the taxes (for no logical reasons); there were lots of people getting rich by flipping houses to the wealthy… and the wealthy were having a civilized place with good laws and stable government to park their money. But hey, a government employee should always ruin the party. The only lesson in here is that, please stop reading Huffingtonpost! That was one of the places that they were promoting increase in foreigner buyer taxes.
3- The tax income is going to be lower this year…. and the city is going to have budget problem in near future.
because, the house flippers and house buyers have already moved to a new market. The ordinary people have been long priced out of the market and they are never going to be able to buy their way back into the city. So, like always, what the government had in mind; they have accomplished the reverse of it (unless they really wanted to mess up things really badly)
To be honest, I’m usually tired after number 3… so enough of Vancouver!
So, what is next? As I said above; both the house flippers and house buyers have moved to other markets… markets such as Toronto or Seattle.
So, if you have money you better get into those markets (It is probably too late already… but hey, there is always a little bit of room before the government get itself involve and tries to save you from making too much money).
Another trend that might be a positive for investing in USA housing market is the projected increase in value of US dollar. This means, if you invest your Chinese Yuans or Canadian Dollars into the US market today, in probably next year, you have made just a little bit of money just on the increase of value of US $ compare to your today’s Yuan or CAD. Also, the interest rate is going to go higher from here. Here comes the tricky part…. higher interest rate, might even means higher value of USD, but also have a negative effect on the real state prices. So, it is not that easy! you thought it was easy? nahhhh, it is a little bit hard.
And one more thing in regard to US real state investing: (Just a friendly reminder) America is not Canada! They have a lot more criminality which can reduce the prices of a neighborhood really quick (usually in black neighborhoods). So, price of housing and future profit has a lot to do with what would be the racial composition of that neighborhood that you are going to buy your house in; not just at the time of purchase, but also in the near future. It means, even in New York city or San Diego, 100 fit can make or break profitability of investment in a piece of real state. Sometimes, the racial composition of a neighborhood is decided by the mayor of that city in an afternoon. In that afternoon, you can lose a lot of money. So, I guess the conclusion is: It is much harder to invest in US cities.
So, where to go from here? Only one city has left!!! Toronto!! Despite noises from hufingtonpost (they’re not your friend… it is better to understand this as soon as you can), the city of Toronto market just got hotter. The city has the ability to produce real state for many years to come (it is technically a desert compare to Manhattan Island… you’ll probably see much more high rises… and price rises on those high rises). The interest rate in Canada doesn’t seem to be rising anytime soon. Some of those Vancouver refugees have already rushed into the city of Toronto (and they will bring even more by this time next year). It is like buying a piece of real state in the New York City 40 years ago… and just wait for 10 years to get your 4 decade NY return.
Obviously we are not trying to give you any advice! Specially the very volatile housing market (don’t forget the 2008) Invest at your own peril.