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Discouraging speculation.

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A few weeks ago I linked to this BBC news story about a new Spanish law aimed at reducing speculation and corruption in their housing market. Unfortunately there are no solid statistics regarding the level of speculation in our local real estate market, but I would venture the following guess: whenever an asset increases in value there will be people willing to speculate on the chance that it will go higher.

So how much is too much speculation? And if our market has been knocked out of calibration by too much speculation is there a healthy and reasonable way to discourage it, or are we better off letting the market do what it will and waiting for excess speculation to be flushed out by a correction?

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satv

Finally,finally Rob(satv) makes sense. The buyers of the over priced cracker boxes in Vancouver have the mentality,motivations, a thoughtful analytical skills of 5 yearolds. 6/14/07 7:26 AM there you go jim just a 7k sqf.piece of that art selling for 18 million.beware of kids thanx jim

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Jim

digi:If we assume for a second that economic theory is not voodoo, or a myth, then I would expect the renovation trend to wane with home sales. It may even be a leading indicator.

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digi

Jim: good catch – I thought this was interesting:But the pace of renovations may be slowing: two years ago, the average Canadian family expected to spend $14,000 on home renos, the agency reported in 2005.I'm suprised to see that, I wonder if thats just the difference between expectation and reality or if renovations are actually dropping?Here's a clickable link to that article.

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digi

"They promised us they were not going to go below market value."What a hilariously slippery promise to make: These condos wont go below what people are willing to pay for them.It actually sounds like some sort of guarantee but is totally meaningless. Thats genius!

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Jim

<a href="http://www.reportonbusiness.com/servlet/story/RTGAM.20070614.wrenos0614/BNStory/robNews/homehttp://www.reportonbusiness.com/servlet/story/RTG… />Article in Globe on renos. I read as 1/3 are flippers or speculators or treating the reno'd property as an investment. Imagine if 1/3 of these specu-renovators decide to cash out.

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Jim

satv:(rob chipman):"if you look at the art made by 3-5 year old children world wide.you will find house around beach covered by mountains, sun or moon over mountains.100% of dream art you can match with city of vancouver a beautiful gift by nature."Finally,finally Rob(satv) makes sense. The buyers of the over priced cracker boxes in Vancouver have the mentality,motivations, a thoughtful analytical skills of 5 yearolds.

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ReductiMat

CMHC : Crown Corp, Government controlledI'd say they are better than the media at being Learah-type cheerleaders to this bubble.

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tulip-Mania2

Land use: Government controlled.Money supply: Government controlledCMHC : Crown Corp, Government controlledMedia, politicians, land developers? Who controls them?

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freako

No need for a speculation tax. But maybe some tighter lending standards would keep a lid on things.Normally, I'd expect the market to be better than the government at assessing risk, but it looks like the way mortgages are packaged and resold is so murky that accountability goes out the window.If people can't restrain themselves, one would hope that their bankers can. It looks like the tighter lending standards did a number on the U.S. market. If our bankers got more concerned and stopped approving some of the riskier loans, there would be enough marginl pressure for appreciation to stop dead in its tracks.

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patriotz

Exemption, actually. On both capital gains and imputed income.Don't forget the home owner's grant and RRSP down payment program too.

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dingus

"I don't want to see government manipulate the housing market with targeted tax measures"What do you think the principal residence deduction is?

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scoop

Buds, Great quotes in that article from those who bought at the peak:"I feel really mad, really sad, hurt." But especially this one:"They promised us they were not going to go below market value."

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M-

Phht, we have the Olympics, real estate will never drop, it only goes up. Foreigners will buy BC real estate once we've had the Olympics. They'll rescue us from our scary mortgages and make it so that we really WILL be priced out forever. Then with our RE winnings we can go and retire to Florida, where prices have crashed even though everybody in the US retires there.

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scoop

"Official documents will list everybody who has owned any piece of land in the five years before its development."I get how that controls corruption, but not speculation. I must be missing something. I don't want to see government manipulate the housing market with targeted tax measures any more than I want to see them bail people out when this thing collapses.

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patriotz

When will this happen hereCan't happen here because because Vancouver RE is being bought by drug money and crooked foreign bigshots and in Florida its just… oh never mind.

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BC Buds

When will this happen here:http://www.winknews.com/news/local/7896352.htmlTownhomes a steal in Fort MyersBy WINK NewsFort Myers – You're not going to believe what some brand new townhomes went for on the auction block Thursday night in Fort Myers, considering where prices have been. A three bedroom townhome previously priced at $310,000 sold for about $180,000! First time home buyer Brandon Quarterman, a student at Florida Gulf Coast University, was the lucky bidder. He said, 'I'm feeling great. more money in my pocket!"The two and three bedroom townhouses in the San Simeon development, which is off of Winkler Avenue, were selling for prices we haven't seen in Southwest Florida in quite some time. And that was the whole point. Marketing reps with the developer, Levitt and Sons, say they're trying to quickly unload the fifty homes. Most of them were left over after people… Read more »

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satv

"you must respect appreciation"there is no law to stop any one to buy any property based on speculation or not.if you have a down payments and monthly income to run mortgage and manage your property you are done.safest investor you can count if some one can manage 25% down.person can buy as much properties as you can.I am agree with WILL that our city is not a spain.I also agree that we need more housing than what we have now.developers introducing projects because of appreciation you can call that is also based on speculations.if there is no appreciation do they have any bussiness to please people in need of housing.people have rights to think for their best(grow up not included).if you think of otherway then govt have to ban lottery corporations,casino's,all the gambling because those are also based on speculation… Read more »

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dingus

"such as government into free markets always end up backfiring."Yeah, like creating property law and the land titles system. What a mistake!

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Drachen

me"Thats wrong on so many levels. Economics 101. Any outside influences such as government into free markets always end up backfiring."Umm that's not 'Economics 101', that's 'Neo Fascist Economics 101a' and it's been proven demonstrably false on many occasions and in many different countries. What you're espousing is the Straussian school of political thought which has been shown as complete BS by the US time and again.Don't take that road, I know where it leads and it isn't pretty.Government ALWAYS influences the free market. Even those that try not to have too much impact. Successful governments find ways to influence the free market towards the common good.Think about it, don't just repeat what you heard on Fox News.

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Me

Thats wrong on so many levels. Economics 101. Any outside influences such as government into free markets always end up backfiring. The market is a very fine tuned delicately held together system based on supply and demand that will adjust and fix itself. Its like saying theres too many wolves so we should go kill them. Meanwhile the deer population explodes exceeding food and they are starving and etc.

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exvancouverite

I'm of the mindset that society would be better served if we held housing in a different light than stocks and such.But that would take away all the fun. It's unfortunate that some people confuse shelter with being a basic necessity of life … when, really, it's just an investment 'tool'.Let's not get all maudlin about families needing a roof over their heads.It's an investment not a home.

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patriotz

You cannot treat real estate in any manner different from any other assetYes you can, because land is not capital. The improvements you build on land are capital, but the land itself is not. It was just there.Taxing gains on land will not discourage investment. This concept has been around since the beginning of the Industrial Revolution, when landlords were rightly seen as rivals of capitalists, collecting unearned rent on their lands which could instead be going toward capital formation.If you want a real-life example, Hong Kong has no freehold land ownership, just leasehold, which amounts to a capture of speculative gains by the government. This allows HK to keep tax rates low and encourage investment. Seems to have worked pretty well.

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Jim

You do pay capital gains tax on any residence that is not deemed your principle residence. Seems sufficient. But cheating abounds.

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Garth

Not related to the story, but I just wanted to say that my personal barometer for the housing market is MLS #V650171, just down the street from me (I'm renting) in Kerrisdale.After taking seemingly forever to be built, it was listed at 3.6 million. I told myself that if it sold for that, I would give up and go live in a ditch.Well, it's dropped twice now, and is at 2.9 million. I'm hopeful that it won't sell for over 2, although I don't think conditions have gotten bad enough for that.http://www.tiny.cc/oyTLL

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markx

Given that Canada is not desperately short of farming land, I wouldn't worry about overdevelopment. If too many condos get built, I'll be happy to rent a two bedroom downtown condo for $500, if the market crashes to that extent.

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