Who’s worried about debt?

According to this article over at the CBC, Canadians love a good home equity line of credit – they’re practically addicted to that sweet sweet HELOC money at rock bottom rates.

“We are addicted for sure. Who wouldn’t be addicted to something so easy [to get]?” says 35-year-old Ali about the free-flowing lines of credit that have enabled him to splurge on the finer things in life.

“It’s easy, accessible cash at a very cheap price. The banks make it so easy for you to obtain it,” says the software engineer.

Some people say the national reliance on debt is a risk to our economy and to the lifestyles of the indebted.  But the Canadian Bankers Association isn’t worried and spenders say they are aware of the risks:

While Ali and Haji like to spend, they believe they’re behaving responsibly and say they’re aware of potential pitfalls. That’s why they’re still undecided about another loan.

“If you get a line on this [house] and God forbid something happens to me or [my wife] and we are unable to sustain our lifestyle or stream of income that we have, then we would be in trouble and that may lead to us losing this house,” says Ali.

And that’s why some rooms in the family’s home remain empty. Ali shows CBC News his large, mostly barren master bedroom and talks about his grand plans to furnish it — sometime in the future.

“Without the credit line, it’s slow,” he laments.

But things could always change. The couple says just last week the bank called, inquiring if the family was interested in another loan.

Read the full article here.

 

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Slagathor
Guest
Slagathor

…[I]f an investor bought a house for $1 million and flipped it a few months later for $1.1 million…

But that’s not what’s happening in Dunbar. Investors are buying up houses for $1 – $1.5M tearing them down, putting $700 ~ $1M into a new house and selling them for $4.2~4.5M. It’s pretty lucrative and that’s why there’s so much of it happening.

Since they all seem to sit empty for a long time before the for sale sign goes up, I suspect somebody is claiming them as their principal residence to avoid the capital gains tax.

Softy
Guest
Softy
bullwhip29
Guest
bullwhip29

cont’d…

and just to add that I’ve heard CRA actually putting the boots to repeat flippers and taxing them 100% on the gains which they deem to be business “income” as opposed to investment gains

bullwhip29
Guest
bullwhip29

@ #70
for quick flips (ie. a few months) it is pretty hard to claim principal residence esp when you consider most of the typical bills associated with actually living in a home wouldnt be incurred. simply changing a mailing address from house A to B doesnt cut it with cra now. they can clearly see status flipped back and forth over the course of a few months. no rational person would actually go to the trouble of actually moving and spending all that cash to live somewhere else for a few months and then go ahead and sell. anyway cra has been going after many of these folks in recent yrs

patriotz
Member

@63:

Your post purports to be a response to my post @41 but isn’t. I was talking about sharing information with China on demand, about persons who have not been charged with an offense in Canada. That’s what “fishing expedition” means.

China has on numerous occasions demonstrated their contempt for us and our allies by stealing personal information and I find the idea that we should volunteer it absurd.

jonathan
Member
jonathan
@66: A BiV article on West-side house flipping While the article had valid points there is one easy way to get around that pesky capital gains tax – by the investor moving their address to the house to be flipped for the tax year thereby it being their principle residence and thus when they sell it, as long as that house was their principle residence for the entire time they own it, they do not need to pay capital gains. I believe that’s a current loop hole that is being exploited. Though there are talks of implementing a minimum live-in period before declaring a property as principle residence you still need to deal with siblings or other family members being listed as the owners (keeping it in the family) though it is admittedly more complicated to manage for investors. No… Read more »
bullwhip29
Guest
bullwhip29
@ #66 buyers are looking for very upscale, grand residences with all the bells and whistles and maxed out sq ft OR a lot to build one. if the value of the lot has increased significantly over the short term, maybe yo can do ok. the days when someone could apply lipstick and mascara then relist the place for hundreds of thousands more are long gone. in richmond, most neighborhoods are primarily made up of new mega-mansions, empty lots where that type of house is being built and old tear down homes where the current owners either dont want to list at a realistic asking price (ie. lot value) or just dont want to sell at all. in neighborhoods like terra nova there has been little to no price action in approx 5 yrs since the houses are on the… Read more »
Gnomes of Zurich
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Gnomes of Zurich

Ah, the early 80’s
When rates jacked up to over 20%
No one saved homeowners then
The lambs were sacrificed

http://www.theglobeandmail.com/report-on-business/economy/housing/remember-when-what-have-we-learned-from-80s-interest-rates/article24398735/

bullwhip29
Guest
bullwhip29
@ #58 “That’s because a cut in the central bank’s overnight rate affects mainly variable-rate mortgages, which account for just one-fifth of mortgages these days. ” once it becomes clear to more ppl that overnight rate isn’t going anywhere for many more yrs (perhaps longer) this % will change. imho the powers that be will do whatever they can to keep this debt bubble (not just housing) from imploding in a violent way. so, sure more morphine might not cure the patient (or in some cases bring a corpse back to life), but free doses will continue to be made available to whoever wants it. central banks’ only option is to print their way out of this mess without making it too blatantly obvious that the value of your paper currency savings is about to go up in smoke. and… Read more »
Many Franks
Member
Active Member
A BiV article on West-side house flipping: Playing Dunbar’s lucrative flip side “A well-backed investor leveraging 20% down financing [around $400,000] would yield over 100% [on their cash investment],” said Derek Tinney, Landcor Data operations manager. Vancouver realtor Ken Leong, who admits to a brief – and heady – history of flipping condominiums for himself and clients, said it takes more nerve and cash to speculate on Vancouver’s detached-house market than during the exuberant days of condo flips a decade ago. Leong said that if house price increases go soft – as in the current condo market – investors could find themselves financially under water fast. Buried below the big numbers and cherry-picked examples are some important details: [I]f an investor bought a house for $1 million and flipped it a few months later for $1.1 million, he or she… Read more »
space889
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space889

@crikey – Japan is a very xenophobic country too. But I guess one advantage of fingerprints is that it gets around the issue of requiring Muslim females removing their hijab for identification purpose since that’s like a total sin worthy of stoning and going to hell in their faith.

space889
Guest
space889

Huge housing market sales in May, average national wide price up 8.1%

http://crea.ca/canadian-home-sales-strengthen-further-may

crikey
Guest
crikey
@#41 Patriotz You imply that. the point of fingerprinting of foreigners is to help China, not Canada. I assure you that places where it is done,like Jaoan , do it to help themselves. We already have systems in place that are supposed to uniquely identify us, but they are seriously lacking. “Full names with birth date” as unique identification are a joke and open season for cheaters from both Canada and abroad, as others have shown very clearly. Social Insurance Numbers are better, but ultimately flawed as the names that they depend on being uniwue . Fingerprints are the answer, the right unique identifier. Japan has actually being doing it for several decades for one purpose or another, and they are doing fine thank you very much. What harm does it do to be able to identify somebody? About Japan’s… Read more »
Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

get a variable rate mortgage and buy a house. you can get 2.05% right now. your mortgage will basically be rent. they are giving money away. otherwise, kelowna is a nice place to live.

space889
Guest
space889

@crikey – Sure it’s the foreigners only to start…well pretty soon it’s going to be domestic citizens as well, you konw for your protection. It’s a slippry slope given what democractic gov’t like US are capable of.

But then again, people happily give their fingerprints to avoid typing a passcode on iPhones, so what do I know.

btw, fingerprints can be faked too, likely not that hard.

space889
Guest
space889

@flaneur – Actually it is even worse cuz this Li Liang guy probably owns the Aus, Can, US, etc assets either under a totally different English legal name like Liam Liang or trust/shell companies where the sole shareholder is Liam Liang.

So there is going to be a lot of manual investigative work involved in trying to link together all these identities. The tax sharing agreement isn’t going to be a magic bullet nor is eliminating foreign money/immigration going to be a magic bullet in collapsing the RE market.

southseacompany
Member
southseacompany

And the world bond market is crashing;

“Why no one should be surprised by the bond collapse that has wiped out 2015 gains”
http://business.financialpost.com/investing/why-no-one-should-be-surprised-by-the-bond-collapse-that-has-wiped-out-2015-gains

southseacompany
Member
southseacompany

@#57 Maybe sooner.. maybe later. But it’s not the BoC that is going to decide. Fixed rates are set by the bond market, not Poloz.

“What the housing bulls won’t tell you about residential real estate”
http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/its-time-to-think-about-exiting-the-real-estate-market/article24923923/

“Mr. Adatia believes the Bank of Canada might have to cut rates again in the months ahead, but he doesn’t see a big benefit for the housing market.”

“That’s because a cut in the central bank’s overnight rate affects mainly variable-rate mortgages, which account for just one-fifth of mortgages these days. ”

“Fixed-rate mortgages, the more popular choice among today’s home buyers, could actually get more expensive this fall. Mr. Adatia said the U.S. Federal Reserve is widely expected to start nudging rates higher in September, and this could pull rates in the Canadian bond market higher. “

bullwhip29
Guest
bullwhip29

@ #55
which is why rates ain’t going up anytime in the foreseeable future. all this nonsensical chatter about rates possibly spiking are intended to get people off the fence, keep everyone on edge and maintain a certain level of froth in the market. next moves from the BOC and other authorities will be to ease further, not tighten. the only real question that remains is when and how quickly.

bullwhip29
Guest
bullwhip29
@ #38, 41 anyone that has a nexus card (i’m guessing millions do now) has already handed this info over to big brother to use anyway/anyhow he wishes with or without your consent. lol…and all this time everyone thought they were simply paying $10/yr for the privilege to cut the line at the border thereby making that day trip down to the outlets or costco so much more convenient. the plan all along was to get the public to voluntarily hand over their biometric data which could then be linked to every other electronic record on file (passport, DL, credit cards, banking info, online transactions, facebook acct, email, cell phone etc) with the various authorities around the world. at a later point in time all this info will be req’d just to obtain a passport, without which you won’t be… Read more »
would-be buyer
Guest
would-be buyer
Shut It Down Already
Guest
Shut It Down Already

“You are aware that corporations do pay (or don’t pay, sometimes) income tax?”

You are aware that a company has to have an income in any given year to pay income tax?

patriotz
Member

@52: “What happens when the property is owned via a company?”

Same as if it’s owned by an individual. What difference would it make if the owner was a corporation? You are aware that corporations do pay (or don’t pay, sometimes) income tax?

Shut It Down Already
Guest
Shut It Down Already

“As I’ve pointed out, what we need is penalty taxation on RE when the owner is not paying an appropriate level of income tax….”

What happens when the property is owned via a company?

patriotz
Member

Sorry should be @44