The most expensive housing market in the world: Vancouver levies a $10,000 a year tax on empty homes. Not telling the truth and it becomes $10,000 a day.
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While many areas of the US are now back near housing bubble territory after correcting, Canada never corrected and today has seen real estate values inch into the stratosphere. Global wealth, largely from China is fueling the flames of the Canadian housing bubble. While many that live in areas like Vancouver are frustrated in finding a rental or even affording a home, thousands of homes sit empty. Why? Because extremely wealthy foreigners use real estate as an exit hatch in various nations. These homes simply become trophies for the globally connected. Vancouver is taking some action levying a $10,000 a year tax on homes that sit empty. This might seem odd to you that a home would simply sit empty but this is the case in many high priced markets. Let us look at the most inflated housing market in the world.
Canadian housing market
The Canadian housing market is deep into bubble territory. It has been for years but bubbles can inflate well beyond logical comprehension. While the US had its own housing bubble, there was a significant correction. Canada on the other hand never endured any sort of correction.
It is important to note that there was no correction since gains simply compounded on top of already inflated values:
And then you have crazy Vancouver:
Canadian home prices make the bubble in the US look like child’s play. Of course action is now being taken:
“(Calgary Herald) Want to keep your million-dollar luxury pad in Vancouver empty? Get ready to pay $10,000 (US$7,450) annually in extra taxes. Lie about it? That’ll be $10,000 a day in fines.
Canada’s most-expensive property market, suffering from a near-zero supply of rental homes, announced the details of a new tax aimed at prodding absentee landlords into making their properties available for lease. The empty-home tax will take effect by Jan. 1 and will be calculated at one per cent of the property’s assessed value, Vancouver Mayor Gregor Robertson told reporters at City Hall.
“Vancouver is in a rental-housing crisis,” Robertson said. “The city won’t sit on the sidelines while over 20,000 empty and under-occupied properties hold back homes from renters.”
This problem isn’t isolated to Canada alone. It is happening in many large metro areas as money is funneled out of countries into real estate as a safe haven for local mayhem or simply as a piece of diversification for the global one percent. In the end this impacts local working families and displaces communities. Just imagine what it does to a neighborhood when all of a sudden a few homes are simply sitting empty with no activity.
Canada is in a weird position. The IMF has already made it abundantly clear that Canada is in a housing bubble. But the Bank of Canada is all about deflecting this criticism and stating that everything is fine. Clearly there is something wrong when a dilapidated tiny home is selling for $1.5 million to foreign buyers and in some cases without them seeing it.
Local individuals stand no chance. There was an interesting thread on Reddit discussing this from a local real estate agent. When asked about the number of purchases being made by investors, the number is startling:
“Downtown Vancouver, if i had to guess i would say close to 50%.. Detached in other areas (richmond, van, even tsawassen and south surrey closer to 75%)”
Basically half of all sales are happening to investors. Good luck with that Canada!