Real Estate

Vancouver housing bubble?

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Sr. Member
Jan 30, 2006
857 posts
286 upvotes
raygeta wrote: How would you seek to rectify this? Should Canada just start taxing non-residents on the income they earn outside the country? How would they even accomplish this in this scenario? They can't tax the patriarch (he doesn't live or work here, and probably nothing is listed under his name!); do they tax his wife and kids? If so, based on what?

Yes, they're taking advantage of tax law to pay as little tax as possible. But I imagine you take advantage of any and all deductions you have available to you too. Non-resident income just doesn't happen to be one of them.

As an aside, I'm all for a consumption tax, and no tax on anything else. The only thing a complex tax code does is enrich those in the know (and their accountants, etc.), and further distance those who don't have access to that help.
it's kind of super simple and already discussed number of times
tax all newly purchased property above 1 million at 10% and above 5 million at 20% and allow tax credit against income tax
if someone is too clever not to pay taxes in Canada they will property tax
Deal Addict
Apr 10, 2011
1440 posts
861 upvotes
Vancouver
craftsman wrote: -When the house is purchased, it generates capital gains tax for the previous owner.
Rarely. Most houses are primary residences that are excluded from a capital gains tax.

-Commission income for the agent. Also taxable.
Only if declared. Some transactions happen overseas and involve a transfer of a company rather that the property.

-Pays property tax, which is at least a few grand per year. On luxury homes maybe even $10k a year. This doesn't cover education?
Doesn't even come close. If local property tax covered everything that the city provides, the local school boards wouldn't be constantly running deficits and asking the province to build schools and increase funding.

-You think these rich people who can afford to send their trophy wives live near poverty level? Whatever income they declare it doesn't matter. I'm sure it's more than balanced out by the rich guy supporting the wife and kids with money to go on shopping sprees and buying fancy cars. And rich people in general don't give a damn about the minuscule amount of social benefits that our government provides. Spending not only drives the economy but also generates sales tax.

Sales tax collected doesn't come close to income tax collected at the provincial level. According to Statistics Canada, in 2009 (the last set that was published), on the average each province makes approx 2 twice as much on income tax than sales tax collect.

To another poster. What happens when they sell and move the money somewhere else? Well...same thing that any Canadian would do. They get taxed on the sale for capital gains.

See above - ie primary residence and capital gains tax or overseas transactions that are not declared since it was a company that was sold.
Absolutely. Your posts taught me a few things too.
Speedy1 wrote: I am glad another person (craftsman) understands what's going on.
"Commission income for the agent. Also taxable." Have you heard of shadow flipping or assignment sales where income tax may not be paid? I think it has been reported that CRA is looking into it? Whether they follow through and effectively do something about it is another story.

Foreign buyers pay property? I pay property tax too and in most cases I likely pay close to what these people pay. We pay ~80k in income taxes. How much are they paying? Is that fair?

"Whatever income they declare it doesn't matter." Wow, that has to be one of dumbest things anybody can say. Sorry to be so blunt. Think about it again and see if that makes sense to you. No declared income = no income tax? Takes a bigger man to admit his error.

Re their spending, I have already said that other than they driving a car $75k to $100k more than what I drive, I suspect their other spending habits are similar to mine.

Re capital gains, craftsman already explained it to you.

Re property transfer tax, are you aware, sometimes (esp for investment properties where personal residence exemption doesn't apply) they buy it through a company so there is no PTT in subsequent sales?

"What happens when they sell and move the money somewhere else?" Maybe take their likely tax free gains and invest in outside of Canada? A local Canadian will likely keep it in Canada?

Comparing tourists spending money in Canada to foreign RE buyers who pay little to no income taxes while enjoying all the great benefits of living in Canada is just plain silly.
Newbie
Nov 18, 2012
45 posts
8 upvotes
Greater Toronto Area
Fraud and tax evasion are illegal and obviously wrong; I don't think anyone's debating that. But there are surely many immigrant families who don't commit fraud and report all the income they're legally required to (which as discussed, can still be a trivial amount).

Also agree that trading immigrant status for $800k on loan is ridiculous; something like the US investor visa program seems more appropriate. That said, Canada could use more money. Maybe make it a one-time $800k non-refundable payment instead.
Deal Addict
Apr 10, 2011
1440 posts
861 upvotes
Vancouver
raygeta wrote: Fraud and tax evasion are illegal and obviously wrong; I don't think anyone's debating that. But there are surely many immigrant families who don't commit fraud and report all the income they're legally required to (which as discussed, can still be a trivial amount).

Also agree that trading immigrant status for $800k on loan is ridiculous; something like the US investor visa program seems more appropriate. That said, Canada could use more money. Maybe make it a one-time $800k non-refundable payment instead.
Good plan.

The U.S. investor visa used to be (not sure about today) that you had to invest (yes 'invest', not 'loan the govt') in a business with $1M which caused the creation of 10 jobs I think. They didn't give away their citizenship for just a 'loan'. And that was for a country that doesn't provide the vast free social services (medical, etc.).
Newbie
Nov 18, 2012
45 posts
8 upvotes
Greater Toronto Area
kashirin wrote: it's kind of super simple and already discussed number of times
tax all newly purchased property above 1 million at 10% and above 5 million at 20% and allow tax credit against income tax
if someone is too clever not to pay taxes in Canada they will property tax
Sounds good to me (until I want to buy a $5M+ home). But how would you get traction for this when the average home in Vancouver and Toronto are >$1M? You can't just tax "newly purchased property" and hope to have the desired effect; this would also impact existing home owner equity and resale values. And let's be honest here...how many people are really living in the home that their incomes are reasonably expected to support?
Deal Addict
Jun 29, 2007
4623 posts
1306 upvotes
User503729 wrote: I think some of the folks here underestimate the tax revenues generated by wealthy immigrants. I've highlighted a few considerations (though admittedly, some of the below may be slightly outdated as I have been out of country for a number of years now)

- a number of them invest not insignificant dollars ($200,000 to $1,000,000) through a number of investor immigration programs.

- those wealthy offshore kids who attend our universities pay 5-10 times more than local Canadian kids; universities heavily depend on these funds and act as indirect subsidies for local attendees

- someone has indicated that wealthy offshore families spend on a similar clip as locals. I completely disagree. It is not a coincidence that the number of higher end stores (from up scale grocers to restaurants to department stores like Saks, Nordstroms, etc) have sprung up in a number of major centres. These stores generate significant profits, employ a large number of good paying jobs, etc etc

If you compare the above spin-offs relative to the income taxes generated by the average wage of $40-50k and income taxes of $15-20k, I don't think the overall tax differential is at all.
Man, here we go again.
1) That money they invest is simply an interest free loan for a number of yrs, and then they get the whole thing back. $800k x 2% per yr x 5 years is only $80,000. Selling permanent residence status for entire family for $80k is crazy. In the mean time (5 yrs), how much benefit do they enjoy living in Canada paying no or minimal tax?

2) Attending university and paying 5-10 times more. New wealthy immigrants with permanent residence status pays the same amount as other local students. Students from other countries (with no family in Canada) and are coming just to study pay 5-10 times more. We are discussing new wealthy immigrants with permanent residence status paying no or minimal tax. Easy to understand?

New wealthy immigrants with permanent residence status paying little to no tax spending a lot of money at high end stores?? I would like to do the same if I didn't have to pay $80k in income taxes every yr. Do I have a choice? Please Cdn govt, let me generate economic spin offs.
Deal Addict
Jun 29, 2007
4623 posts
1306 upvotes
raygeta wrote: Fraud and tax evasion are illegal and obviously wrong; I don't think anyone's debating that. But there are surely many immigrant families who don't commit fraud and report all the income they're legally required to (which as discussed, can still be a trivial amount).

Also agree that trading immigrant status for $800k on loan is ridiculous; something like the US investor visa program seems more appropriate. That said, Canada could use more money. Maybe make it a one-time $800k non-refundable payment instead.
You are still having trouble understanding the topic here.

The many immigrant families who work hard, contribute to Canada and pay their fair share of taxes are not the issue here. Those are the kind we want in Canada.

What we are talking about is new wealthy immigrants with permanent residence status paying no or minimal tax. Easy to understand?
Deal Addict
User avatar
Jun 24, 2002
2959 posts
627 upvotes
BC
Speedy1 wrote: You are still having trouble understanding the topic here.

The many immigrant families who work hard, contribute to Canada and pay their fair share of taxes are not the issue here. Those are the kind we want in Canada.

What we are talking about is new wealthy immigrants with permanent residence status paying no or minimal tax. Easy to understand?
The tax they pay on their 500K sports car is more than a low income family will pay their entire lives.
Deal Guru
Jan 27, 2006
12587 posts
5752 upvotes
Vancouver, BC
Buggy166 wrote: Thats kind of the problem. If you're not a canadian, and you dont legally work in Canada, you should never be allowed to step foot in this country for longer than the standard visitor's visa time line, to begin with.

Why isnt real estate in Florida or California even higher than in Canada? By all accounts it should be. They offer way better climates and way better business opportunities.

Unfortunately for foreigners, the US government actually looks into who goes in and out of the country, and where the dirty money comes from. Soon as they find out, they freeze assets. In Canada? The government lives off dirty money.
Actually, the prices in California have recently started to move upwards... I recently looked at a listing in LA which last sold in 2011 for $450,000 for 1,200 sq ft and before that it was a few thousand cheaper so moving at the rate of inflation. It's currently listed for $899,000.
Newbie
Jan 15, 2016
24 posts
7 upvotes
Speedy1 wrote: Man, here we go again.
1) That money they invest is simply an interest free loan for a number of yrs, and then they get the whole thing back. $800k x 2% per yr x 5 years is only $80,000. Selling permanent residence status for entire family for $80k is crazy. In the mean time (5 yrs), how much benefit do they enjoy living in Canada paying no or minimal tax?

2) Attending university and paying 5-10 times more. New wealthy immigrants with permanent residence status pays the same amount as other local students. Students from other countries (with no family in Canada) and are coming just to study pay
5-10 times more. We are discussing new wealthy immigrants with permanent residence status paying no or minimal tax. Easy to understand?

New wealthy immigrants with permanent residence status paying little to no tax spending a lot of money at high end stores?? I would like to do the same if I didn't have to pay $80k in income taxes every yr. Do I have a choice? Please Cdn govt, let me generate economic spin offs.
1) I think it goes beyond just the initial 5 year investment period. These incoming families (or their kids) often end up investing in small businesses in the communities they land in – just drive through Richmond (Van) or Markham/Richmond Hill (Tor).

2) There are a ton of folks who send their kids to the country to attend school prior to being a permanent resident. Paying 5-10 times the local tuition is not a big deal for these people and they are not delaying their kids education to gain permanent status in the country to save a few dollars. I know a number that was in that situation when I attended university. Even if you assume that 100% of the students pay a subsidized tuition, a large % of these graduates also end up working in the communities they went to school in or investing their own dollars starting their own businesses, generating economic spin-offs.

3) Consumption tax and income tax generate the same dollars for the government $ for $. It makes no difference (other than allocation of funds Federal vs Provincial) that they are spending $200,000 a year to generate $26,000 per year in consumption tax vs. someone making $60,000 a year and paying income tax for the same amount.
Newbie
Jan 15, 2016
24 posts
7 upvotes
Speedy1 wrote: You are still having trouble understanding the topic here.

The many immigrant families who work hard, contribute to Canada and pay their fair share of taxes are not the issue here. Those are the kind we want in Canada.

What we are talking about is new wealthy immigrants with permanent residence status paying no or minimal tax. Easy to understand?
The other thing that factors in is the elimination of the five-year tax exemption that had previously allowed new immigrants to avoid paying taxes on offshore assets. That is anticipated to generate about $100 MM in next tax revenue in the next couple years.

In any event, we are talking about 8,000-10,000 immigrants that fall into this category per year (+/- 3% of all immigrants or the 0.02% of the population). Easy to understand?
Deal Addict
Jun 29, 2007
4623 posts
1306 upvotes
User503729 wrote: 1) I think it goes beyond just the initial 5 year investment period. These incoming families (or their kids) often end up investing in small businesses in the communities they land in – just drive through Richmond (Van) or Markham/Richmond Hill (Tor).

2) There are a ton of folks who send their kids to the country to attend school prior to being a permanent resident. Paying 5-10 times the local tuition is not a big deal for these people and they are not delaying their kids education to gain permanent status in the country to save a few dollars. I know a number that was in that situation when I attended university. Even if you assume that 100% of the students pay a subsidized tuition, a large % of these graduates also end up working in the communities they went to school in or investing their own dollars starting their own businesses, generating economic spin-offs.

3) Consumption tax and income tax generate the same dollars for the government $ for $. It makes no difference (other than allocation of funds Federal vs Provincial) that they are spending $200,000 a year to generate $26,000 per year in consumption tax vs. someone making $60,000 a year and paying income tax for the same amount.
Re your (1) and (2), it's just a guess on your part. No doubt there are some of those but my guess is there are very few. Your points would go against a lot of experts (like UBC/SFU profs and others who are a lot closer to the situation than you and me) who say otherwise. People that will agree with you though are likely politicians and bureaucrats. You wouldn't be a bureaucrat would you?

Re (3), what makes you think they spend $200k more than me a year? If I and others paid no or minimal income tax, I am sure we would spend a lot per year too. Do I and others have the option paying no or minimal income tax? In any case, I would rather than a hard working, not so wealthy immigrant making $60k per year and paying taxes vs a wealthy immigrant paying little to no tax spending $200k.
Newbie
Jan 15, 2016
24 posts
7 upvotes
Speedy1 wrote: Re your (1) and (2), it's just a guess on your part. No doubt there are some of those but my guess is there are very few. Your points would go against a lot of experts (like UBC/SFU profs and others who are a lot closer to the situation than you and me) who say otherwise. People that will agree with you though are likely politicians and bureaucrats. You wouldn't be a bureaucrat would you?

Re (3), what makes you think they spend $200k more than me a year? If I and others paid no or minimal income tax, I am sure we would spend a lot per year too. Do I and others have the option paying no or minimal income tax? In any case, I would rather than a hard working, not so wealthy immigrant making $60k per year and paying taxes vs a wealthy immigrant paying little to no tax spending $200k.

You keep coming back to using yourself as a reference point - I assume you want a congratulations for paying $80k a year income taxes which you’ve referenced 2 or 3 times, so here it is.
To give you a sense of the purchasing power of this unworthy set of immigrants - in the last 5 years alone, High Street Retail Sales have grown at significantly higher rates than overall average retail sales and are now in excess of $2,000 psf and super regionals like Yorkdale, Pacific / Eaton Centre are driving north of $1,500 psf. Luxury brand stores in some centres attribute well north of 60% of sales from off-shore / wealthy immigrant shoppers.

Again, it is irrelevant whether the tax revenues from income vs. consumption. I see absolutely no difference of an independently wealthy individual consuming at higher levels and paying consumption taxes vs. a regular working individual paying income taxes and consuming less. I would further say that the multiplier effect on consumption is far greater in the open market vs. how efficiently the government can allocate through its spending programs. I also noticed you have not referenced the upcoming rules of immigrant taxation based on world-wide income which is anticipated to draw in $100 MM in additional revenues for the government.

Further, I think that the fact that you pay what I assume is a relatively high tax rate is your own issue. Many professionals, business owners and / or investors have effective tax rates (through corporate / capital taxes) that are much lower than regular income. Capital is also free to flow from jurisdiction to jurisdiction – there are many Canadians immigrating to other countries to retire and are paying very little income taxes vs. the burden they create in those countries. These effects act as an offset even if you assume that these immigrants in Canada are paying less than their fair share as you reference.
Deal Addict
User avatar
Sep 23, 2014
1722 posts
463 upvotes
Toronto, ON
User503729 wrote: You keep coming back to using yourself as a reference point - I assume you want a congratulations for paying $80k a year income taxes which you’ve referenced 2 or 3 times, so here it is.
To give you a sense of the purchasing power of this unworthy set of immigrants - in the last 5 years alone, High Street Retail Sales have grown at significantly higher rates than overall average retail sales and are now in excess of $2,000 psf and super regionals like Yorkdale, Pacific / Eaton Centre are driving north of $1,500 psf. Luxury brand stores in some centres attribute well north of 60% of sales from off-shore / wealthy immigrant shoppers.

Again, it is irrelevant whether the tax revenues from income vs. consumption. I see absolutely no difference of an independently wealthy individual consuming at higher levels and paying consumption taxes vs. a regular working individual paying income taxes and consuming less. I would further say that the multiplier effect on consumption is far greater in the open market vs. how efficiently the government can allocate through its spending programs. I also noticed you have not referenced the upcoming rules of immigrant taxation based on world-wide income which is anticipated to draw in $100 MM in additional revenues for the government.

Further, I think that the fact that you pay what I assume is a relatively high tax rate is your own issue. Many professionals, business owners and / or investors have effective tax rates (through corporate / capital taxes) that are much lower than regular income. Capital is also free to flow from jurisdiction to jurisdiction – there are many Canadians immigrating to other countries to retire and are paying very little income taxes vs. the burden they create in those countries. These effects act as an offset even if you assume that these immigrants in Canada are paying less than their fair share as you reference.
Thanks for the concise explanation which should clear up the math for alot of people. The western economy is consumption based and is absolutely critical for growth and stability. Without consumption, the entire system will collapse and the taxes paid won't save the economy either.

Maybe someone else can better explain why someone paying $5M iday one on a purchase has more economic benefit than another person paying income tax of $100K/year for 20 years.
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