I guess what I’m trying to say is that a bubble can’t be burst gently because you’d just be throwing money at something with far less value than it was priced for.
The price has been pumped far beyond the value of what’s being priced. The price continues to climb in spite of this because people want to buy something whose price is increasing, thus further inflating the bubble. Eventually you run out of people who want to buy the inflated price.
Once this happens, the burst begins. You now have a whole lot of people who bought something that’s not worth what they paid for. If they went into debt to buy these things, their creditors are now in trouble because they have no collateral on the money they’re owed. What you end up with is a selling frenzy on something no one wants at drastically reduced prices and a whole lot of people who lost their shirts in the process.
To only way to slow down a bubble burst is to not let it form in the first place. Problem is, the people who detect it early are the ones with the most to gain from exploiting it.
That one-to-one does not hold, especially when considering the rate-over-time.
Plus, your point seems to imply that there is no foreign investor bubble, that the price volcano is somehow justified by people living there.
And that is demonstrably not the case.
My question then is why do you post such bollocks? Such verifiable, uninformed codswallop which even a casual observer can see is not based on metrics or truth. Why?
We bought our place in Toronto’s west end (Parkdale) in '89 at the height of the “bubble” at that time. Paid what was then an outrageous sum and our mortgage rate was something stupid like 14%. We didn’t know any better - we were just a couple of dumbass puppeteers. A couple of friends of ours (not puppeteers) got a little burnt 'cuz they were trying to cash in on flipping houses and shit like that. Their own fault. About a month after we bought the prices plunged but we didn’t care. The place was worth less but it was home. Since then the “market” has continued to steadily rise, sometimes slowly, sometimes in rapid fits and starts, but always inexorably climbing. Our place is now paid off and worth 4 times what we spent but it’s still just our home. I figure the only reason we’d sell is if we’re fleeing the country after it’s been invaded by a horde of ravenous shit-gibbons. I suppose anyone who gets hurt financially by any kind of bursting bubble earned their woes from greed. Buy a house to live in. Of course, continually rising prices hurt younger people who can’t afford the prices. We couldn’t afford it either back then but we did it anyway. Like I said: dumbass puppeteers. Will a “correction” in the market help them get a home in the city? Probably not. But what do I know? I like my backyard.
I’m in the east end, and I’m always deflecting real estate agents asking if I’d be interested in selling; and where am I going go live, if I sell? The only options are moving out of town, or downsizing significantly, and since I’m in a 630 sq ft bungalow, that would have to be quite small.
I love my neighbourhood, so moving out of town to a smaller town with fewer amenities is not on the table.
On the other hand, the neighbourhood is now infested with rats, so there’s that.
If the only way to park your money outside of China and keep it away from the Chinese regulators is to pay a 15% fee, it might not matter. They might not be looking for yield.
I find it pretty hard to believe that a 15% surcharge is a big deal to wealthy foreign investors buying into a super-hot housing market.
The transnational costs of buying a house in another country are surely quite high already. 15% increase is what happens every year or two anyway in such a market. These people are, by definition, overflowing with cash they want to park somewhere far away from their home. Money laundering/hiding is usually not cheap.
Perhaps, however, it does work as a signal that their property is not so safe in this particular far flung city, or that something like a non-occupancy charge may come.
Quite true, I had neglected to consider the cost of a money laundering service. Though I feel like these Chinese “investors” will ultimately prefer to find a different real estate market with a less severe taxes.
Bubble or no bubble, addressing a housing affordability crisis with yellow peril rhetoric is just…gross. Your desire to buy a cheap house doesn’t Trump the desires of millions of potential new Canadians to make better lives for themselves (and us).
There’s a few theories; we’ve had some warmer winters, which means more survive (don’t starve or freeze to death), and they’re more active, so more boinking, which means more litters. Also, there’s been a lot of construction especially around subway stations, which is disturbing a lot dens, and they go out through the neighbourhood.
I have a particular problem too; my next door neighbours (dubbed the Blights by another neighbour) never clean up after their dogs in the yard. The dogs are never walked; they are only let out for a few minutes a day to relieve themselves in the yard. I called the city last year, and at that point there was a two year accumulation of feces. The city is ignoring me (and other neighbours) this year. Why is this relevant? Rats eat dog shit. And while there is a reliable food source, they’ll ignore any poison or snap traps.
I am now, for lack of a better word, smelling a somewhat disgusting entrepreneurial opportunity in the pest control industry. Good thing I never chase these ideas.
I hope the bubble does pop but I’m not holding my breath. I’m looking to move to Vancouver from the Bay Area and nothing is more depressing than looking at the real estate market up there. At least their rental market is still marginally better than SF area, but that’s small comfort. So many Canadians I know complain that the Chinese are drivering the boom but I can’t help but be skeptical… Personally I think it’s mostly a dearth of decent jobs in non-urban markets that’s causing the urban population influx and subsequent housing crunch. Also, I think lots of young buyers are being helped by their parents who have few decent ways to invest their savings right now, so reel estate for the kids sounds pretty good to them. The boomers continue to prosper. I’m just guessing, and it’s probably motivated by a desire for emotional comfort as a man in his thirties who feels like he will never own a home in a costal metropolis (woe is me).
But there was talk of a Rat-apocalypse five years ago, so it’s not a new problem. We had some, really cheeky ones that would sit on the lawn in daylight and watch you from ten feet away. They seem to have moved on, but that was probably tied to our acquiring a dog that she actively hunts varmints.
I suppose, then, that the trick isn’t so much to burst the bubble gradually (basically impossible as you note), but to avoid it inflating so wildly to begin with (possible, with appropriate regulation)?
(yes, I know, correlation =/= causation)