House
hunting ain’t what it used to be. Not even compared to, like, two years ago.
Back then I was looking to buy a place with my Dad, his wife and my brother. We
looked for several months, got an idea of the market, put in a few offers and
finally ended up with something that satisfied our needs. Prices were creeping
up, as they had been for months, maybe a bit faster than usual, but not in an
unsustainable, anxiety-inducing way.
Today we
see a vastly different market. Prices in the last two years have escalated by leaps
and bounds, leading many to speculate on the possibility of a housing bubble
that’s about to burst. I’m not even gonna touch that here.
A main
reason for this surge in housing prices seems to be foreign investment, particularly
from mainland Chinese. The Greater Vancouver Area has been hit the worst—about
a third of Vancouver properties have increased in price by more than 50% since
2010, with some having doubled—but the Greater Toronto Area is also feeling the
pressure. As foreigners introduce their bags of money into local housing markets,
prices inflate to unaffordable levels, thus leaving domestic buyers out in the
cold (in some cases, literally).
What’s
worse, many of these foreign buyers hide the true extent of their back-home earnings
from Canadian tax authorities in order to minimize the taxes they pay; or they
brazenly dodge tax payments altogether. Compounding the problem, Canadian real
estate law allows foreign buyers to register homes in their spouse or child(ren)’s
name as a primary residence rather than as investment property; so when they
sell the house, they pay no capital gains taxes. Yet many of these dwellings
are obvious investment properties, bought to serve exclusively as rentals.
Praveena’s colleague spoke of a neighbourhood house that was empty seemingly forever,
until the day a busload of Asian girls in school uniforms was unloaded in its
driveway—either a party or a sorority house (which really is just a long-term
party house). At any rate, countless houses sit empty for weeks or months as
junk mail piles up and lawns overgrow, basically becoming neighbourhood
eyesores. But we’ve gotten way off topic. I just needed to vent, because the
likelihood that these foreigners are engaging in illegal activities infuriates
me. They’re cheating us out of 1) precious federal and provincial tax revenues,
and 2) affordable housing. Some estimates put the consequent overvaluation of
Canadian homes at twenty percent in relation to long-term economic growth. But
of course there’s nothing we decent, home-buying Canadians can do about it. Yet
what of this proposed 15% tax on foreign-purchased Canadian real estate, you
ask? It may be a nice gesture; but in reality, what will it actually inhibit?
Fifteen percent seems like a drop in the bucket for rich Chinese (any racist
undertones are completely unintentional).
Anyway,
if all that’s not a big (and frustrating) enough obstacle to overcome, Praveena
and I are looking in a rather specific area, simply because she can’t live far
from her work. And if you think the prices in Toronto are inflated, in Vaughan/Maple
they verge on spirit crushing. Based on the houses we’ve seen, the expectation
seems to be that buyers will pay a lot to get a little. Not so long ago—five
years ago? Ten? Certainly in the period leading up to the 2008 financial
meltdown—a $700,000 house was plenty big and impressive for its cost. Today the
same-priced house is old, small and shabby. To put things in perspective, a
buddy of mine bought a new house in Maple eleven years ago for $325,000 and
sold four years ago for $600,000. Nice little profit, yes? But two years ago
his neighbour sold for a million. Granted, the neighbour’s house was noticeably
bigger. Still, my buddy wishes he’d held on a couple more years.
If you crave
that million-dollar house you’ve always dreamed of, you’re in for a surprise. Today,
a million bucks doesn’t get you much. The house may be nice and shiny and even
modern, but chances are, it’s not a value buy. Too small or too old or too
isolated or too something. Is there
value to be found? Possibly, but finding it requires diligence and
patience. And probably luck. Many of the houses we’ve seen in the last few
weeks were listed in the eight-to-nine hundred thousand dollar range. But when
we went to see the place, the listing agent revealed that the sellers were
looking for a million-plus. Value-wise, they probably were eight-to-nine
hundred thousand dollar houses. Yet the strategy is to low-ball the listing
price to get people to come and see the property, and from there the hope is
for all-out (bidding) war.
Yes, house-hunters,
be warned: bidding wars are everywhere. Many buyers have probably lost out on
several previous bidding attempts. So they panic, worrying they won’t get the
place they really want, or any place,
without grossly overbidding. You never know when you’re competing against wealthy
Chinese.
Real
estate agents don’t help the situation. They come across as pleasant and
helpful, with their price-raising optimism and friendly suggestions. They all
have their own ideal features in a house. Some want the walkout basement, others
the corner lot. Finished basement! Spacious backyard! Great neighbourhood! In an
agent’s eyes, any of these elements turns a house into a must-have, especially
compared to the rest of the market shite. Make no mistake, though: while these
agents may altruistically seem to have your best interests in mind, their goal
is to maximize the value of the properties they are selling. Sure, they’ll warn
against emotional bidding or bully bidding, but secretly they love anything
that fattens that good ol’ price.
House hunting
has always been a source of stress. Now, though, the competition—faceless
foreigners with apparently bottomless pockets—seems downright intimidating. But
all isn’t necessarily lost. Be firm with your desires and demands. Do your
research. Check homes in the area and their selling prices. Have a budget. (A pre-approved mortgage helps.) And
keep shopping, shopping, shopping, in hopes of finding that special bargain
everyone else seems to have missed. It’s basically the shopaholic’s credo put
to use on the biggest purchase you’ll ever make. Most important, remember that no
matter what the agent says, no matter what the cost of the house, it’s you who
decides whether you’re getting value in return for the asking price. It’s you,
ultimately, deciding whether to fork over your hard-earned money.
Hopefully
you find what you’re looking for. It will require patience. We’re patient, and
we’re hopeful.
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