Michael Kluckner is in Australia – and it feels kinda like home:

The papers are as full of affordability stories as Vancouver’s. Little comment about the impact of foreign money – they have controls on investment, but it doesn’t seem to have made any difference.

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Sydney

At today’s exchange rate, that median house price would be about $872,000 Canadian

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  1. The price / income ratio in 1985 of 3.4 looks pretty good until you adjust it to reflect the effect of mortgage interest rates. In 1985 the 5 year mortgage was 12%– more than 4 times the current rate. So while the price of housing was lower, the effective cost of housing on a monthly basis was as high if not higher. That was certainly my experience. I wanted to buy a house in the mid-eighties but it took me 5 more years to get in, and even then I needed a 30% downpayment from my parents just to qualify for the mortgage. Plus ça change, plus c’est la même chose.

    1. Agreed completely. Also with the comments below. My “cheap” house in Vancouver in the 1970s had an 11% first mortgage. No wonder the sticker price was so low.

        1. When you factor in changes in cost of living over that time, $100k in 1985 dollars is just over $200k in 2015 dollars. 11% of $200k is almost exactly 3.5% of $700k. But 5 year mortgage rates now are typically less than 3% (I renewed mine yesterday at 2.69%) so it’s actually cheaper now.

  2. I would argue that the restrictions in Australia have made a difference regardless if prices have gone down or not:

    A.) Huge sums of additional taxes have been collected from foreign buyers that can be used for a series of social benefits. No money is being left on the table like here in Canada.

    B.) The fact that Foreign buyers can only buy newly constructed homes has preserved Heritage structures while stimulating new construction thus boosting the economy. If we had this rule in place the destruction of heritage homes in Vancouver’s West side would not exist to level it does.

    C.) In Australia they have Negative Gearing which is an economic strategy used by developers that is a whole other animal that keeps prices high.

    1. Yes Scot that is a large point that is missed in these debates. If the City of Vancouver was able to tax foreigners it could be used to finance a subway for example.

    2. The benefits of a tax on foreign ownership could be good….some cautions, it should be carefully tiered to make sure it does not remove investment in poor economic times (but should cool foreign investment when the market is overheated). That said I would be more in favour of some sort of foreign occupancy tax. No foreign ownership restrictions, but if you are not a Canadian national and don’t live (and pay taxes (ie spend more than 6months a year here)) there is an additional fee on your property taxes….or conversely those fees could be waived if the unit is occupied (rented)…

      1. If this fund was dedicated to capital projects as apposed to operational costs then this could fix the unpredictable nature of this income.

  3. Here’s an article on Singapore where the foreign stamp duty increase has cooled the price of housing:

    http://www.cnbc.com/id/

    “The luxury end of the market is also the most likely to benefit if Singapore rolls back some of the cooling measures imposed to rein in sharp price increases, particularly the Additional Buyer’s Stamp Duty (ABSD), analysts said. The ABSD tacks on as much as an additional 15 percent to the purchase price for foreign buyers and Singaporeans with more than one property.”

    “While that might not seem terribly onerous for buyers at the high end, it appears to have successfully dampened interest in luxury properties in the city-state”

  4. Just more proof central bankers are aiding and abetting a huge real estate bubble around the world with cheap money. It’s laughable that they can’t see it, or perhaps are now too scared to attempt a correction that could blow up much of the world economy.

      1. There is no Ponzi scheme by bankers ! Perhaps by excessively borrowing governments in western democracies, primarily due to excessive entitlement payments (seniors’ healthcare, expensive education for far too many, excessive pensions for too many civil servants) approved by voters and catered to by votees (aka politicians) !

        Interest rates will stay very low for 20+ years, primarily due to demographics. More on that here, mainly due to demographics: http://blog.prestprop.com/about-us/blog/money-is-on-sale-why-interest-rates-will-stay-very-low-for-a-long-long-time-..-and-how-to-use-this-to-your-advantage

        1. Here’s a recap of the 2008 Housing collapse in the States:

          -Inflate the bubble by banks leading to everyone way beyond what they can afford. Encouraged by Central bank.

          -When it collapses bail out the banks, They promised to pay back the government, never did just created more and more profits (make public the loses, privatize the profits). Iceland was the only government to say shove it.

          -Then when the wave of foreclosures hits, corporations go in and buy up homes on masse, more control in fewer and fewer hands.

          This is one world order stuff. Again read Zero hedge