Cost of housing in Canada

[Halifax Tar]

And if you lose money on your principle residence? Then what?

That's life isn't it ? I mean we don't always win... Don't move and you don't have this problem.

Not trying to be a dick, just honest...

 

[Brad Sallows]

I heard an idea about property taxes that I thought was interesting.

For those under the older capped rates, like me, we should only be allowed to sell our property at the assessed values, not a penny more. If we want to try to maximize our profits then we need to be paying the yearly assessed rate, uncapped.

I think that's fair.

Capped rates is yet another a political fix applied by politicians to make their own lives easier. Punishing homeowners for it is bizarre.

 

[Brad Sallows]

I would rather see it set up so any profits made above inflation on a property are subject to capital gains. That will cool the market and provide a ton of tax money.

It will encourage people to sit on property as long as possible and refrain from sinking money into upgrades. (It yields incentives similar to rent controls.) This is a good policy only if you favour stagnation.

 

[Brad Sallows]

Stop playing the politicians' game of trying to find new money for them to spend.

 

[IKnowNothing]

With the notable exception of civil servants, the majority of Canadians do not have an adequate pension plan and are financially unable to establish one so they rely upon the sale of their property to simply exist for the last 20 years (give or take) of their lives. Or perhaps as Halifax Tar suggests passing it on down to family so they have a chance of an home apart from a council flat whilst living in the basement. Leave the family home alone or at the very least set the windfall tax as you put it at an amount that allows a retired couple/individual to move into something other than a social services residence. Current costs of a decent home are in the neighbourhood of 40,000 a year so given that 20 year span that would be a minimum of 800,000.

What was their plan prior to the market going insane?

 

[Lumber]

I would rather see it set up so any profits made above inflation on a property are subject to capital gains. That will cool the market and provide a ton of tax money.

Your jurisdiction just needs to change its property tax rules to automatically reassess every 5 years like many do now. It isn’t always a bad thing, I managed to actually lower the price of mine last time.

@Halifax Tar and I live in the same jurisdiction. Or houses are reassessed every year. I've seen my property taxes go up every year since I bought my home in 2018. The increase in property taxes is capped though (I think it's max 2% per year), which is nice because my increase in assessed value has FAR out paced that.

 

[Halifax Tar]

@Halifax Tar and I live in the same jurisdiction. Or houses are reassessed every year. I've seen my property taxes go up every year since I bought my home in 2018. The increase in property taxes is capped though (I think it's max 2% per year), which is nice because my increase in assessed value has FAR out paced that.

I don't like our capping system. I think its just another example of oldies getting theirs and fuck everyone else.

They have starved this municipality for cash for generations, and now the chickens have come home to roost and they don't want to accept their share.

 

[IKnowNothing]

It will encourage people to sit on property as long as possible and refrain from sinking money into upgrades.

Most Principal residences (by definition) aren't owned by speculators or landlords, and most home owners aren't policy analysts or think tanks.

The majority of real people make housing decisions based on the simple intersection of what they want and can afford, not a complex analysis of multi-decade tax optimization.

 

[Halifax Tar]

It will encourage people to sit on property as long as possible and refrain from sinking money into upgrades. (It yields incentives similar to rent controls.) This is a good policy only if you favour stagnation.

When it comes to property and homes I am 100% fine with stagnation. How my home more than doubled in price in 6 years is beyond me, IMHO its capitalism go awry.

 

[Lumber]

I don't like our capping system. I think its just another example of oldies getting theirs and fuck everyone else.

They have starved this municipality for cash for generations, and now the chickens have come home to roost and they don't want to accept their share.

When it comes to property and homes I am 100% fine with stagnation. How my home more than doubled in price in 6 years is beyond me, IMHO its capitalism go awry.

Yea but it's exactly that "capitalism" that would have screwed me if it weren't for the increase cap. I bought in 2018 at a "reasonable" price, and expect my house to appreciate at roughly the same rate (ie. slowly) as it always has (housing, if nothing else, always used to be "cheap" in Halifax). But then everything blew up after Covid. My assessed value is now over double what I paid for it. If there was no cap, I'd see double my property taxes, and I'd be screwed. I'm not an "oldy getting mine and saying fuck everyone else."

 

[IKnowNothing]

@Halifax Tar @Lumber

That's an interesting sidebar. I take for granted that the meaning and execution of something as ubiquitous as "property tax" is uniform across the country.

Do your tax assessments actually track true market value?

 

[Lumber]

@Halifax Tar @Lumber

That's an interesting sidebar. I take for granted that the meaning and execution of something as ubiquitous as "property tax" is uniform across the country.

Do your tax assessments actually track true market value?

No, they are always lower than true market value (or at least mine have always been). It was the same when I lived in Ontario; the assessed value was always lower than the market rate, but the two would go up together, just not always by the same amount.

I always took it as a rule that legally assessed values for tax purposes were always less than market value, but now that I think of it I have no idea if that's a universal truth.

 

[YZT580]

What was their plan prior to the market going insane?

I have no idea of your age but I date back to the 70s and 80s. Our first house cost us $52,000: a little more than two times my annual income. That income was enough that my wife was able to be a full time mom. Our current home which we bought several decades ago cost us 3X my annual salary but a single income was still sufficient to help with university costs. None of that is possible now. We planned on retiring with my pension and when that started to become inadequate we would sell the home and either rent or pay for an seniors condominium. That isn't an option for younger folks either unless they can use the equity in their homes which I suspect most are planning to do. And you want to take that away from them to pay for our government's extravagances?

 

[IKnowNothing]

I have no idea of your age but I date back to the 70s and 80s. Our first house cost us $52,000: a little more than two times my annual income. That income was enough that my wife was able to be a full time mom. Our current home which we bought several decades ago cost us 3X my annual salary but a single income was still sufficient to help with university costs. None of that is possible now. We planned on retiring with my pension and when that started to become inadequate we would sell the home and either rent or pay for an seniors condominium. That isn't an option for younger folks either unless they can use the equity in their homes which I suspect most are planning to do. And you want to take that away from them to pay for our government's extravagances?

Nope. My proposal was a 14.5% tax on the difference between the sale price and the inflation adjusted cost base.

Assuming "several decades" = 4 placing the purchase at 1986 and you didn't do any permit requiring upgrades/additions- that would mean an inflation adjusted cost based 2.77 times that of your purchase price. Call that purchase price 100k, and using your 800k sale from earlier, that would be a windfall of 523, tax of 76k. Assuming mortgage free, after real estate commissions and that tax still netting 692k. Invested at 5% and withdrawing 40k per year (increasing the withdrawal 2% per year for inflation), that 672 supports 21-24 years of covering a "decent home"

 

[Brad Sallows]

What was their plan prior to the market going insane?

For most of the working class, genteel CPP/OAS/GIS poverty. For some, living with family, until social changes "broke" the family model for many. For some, modest savings. For some, downsizing from house to small apartment (for ease of living as well as liquidating some assets).

'70s/'80s high inflation, substantially aggravated by high government spending (and borrowing) blew away much of the value of traditional savings, and it preceded the run-up of housing prices which started after inflation (and interest rates) began to recede.

Expectations are greater. People who can't retire at 55 to 60 on 70% COLA-indexed pensions see people who can, and want a piece of that.

 

[Brad Sallows]

Most Principal residences (by definition) aren't owned by speculators or landlords, and most home owners aren't policy analysts or think tanks.

The majority of real people make housing decisions based on the simple intersection of what they want and can afford, not a complex analysis of multi-decade tax optimization.

I'm writing about how incentives affect the latter. Ordinary people are not actually too stupid to understand what happens when they sell a home, and if rules change so that costs will be higher than anticipated, they're more likely to put off moving for a job or downsizing. It's observable and observed.

 

[Brad Sallows]

Problems people are describing with property taxes sound like governments too stubborn to apply an already used-in-Canada solution.

Assessments rise and fall freely depending on market values (what similar properties are selling for in a neighbourhood). A mill rate is applied as a multiplier, and adjusted each year so that the calculated property taxes are stable (typically increase by some targeted amount each year). When assessments go up or down, mill rate goes down or up.

 

[IKnowNothing]

I'm writing about how incentives affect the latter. Ordinary people are not actually too stupid to understand what happens when they sell a home, and if rules change so that costs will be higher than anticipated, they're more likely to put off moving for a job or downsizing. It's observable and observed.

To some degree, and for a certain amount of time. @ an aggressive number like 14.5% there would likely be a short term supply shock that eventually transitions to an accepted friction. The lower the rate the faster that friction transition becomes. Similarly the 0.5% maintenance credit is arguably too low. Move those numbers to 7.5% and 1% and it's likely a better balance of cooling through de-leveraging the market and eroding the profitability of "live in" flipping.

The "No Permit Reno" stagnation? Nah. No wife is accepting "Honey, we're leaving the bathroom as is because we won't get a tax shield in 10 years- just enjoy the pastel toilet"

 

[Halifax Tar]

Yea but it's exactly that "capitalism" that would have screwed me if it weren't for the increase cap. I bought in 2018 at a "reasonable" price, and expect my house to appreciate at roughly the same rate (ie. slowly) as it always has (housing, if nothing else, always used to be "cheap" in Halifax). But then everything blew up after Covid. My assessed value is now over double what I paid for it. If there was no cap, I'd see double my property taxes, and I'd be screwed. I'm not an "oldy getting mine and saying fuck everyone else."

I don't think you would, and I don't think our property taxes would have risen as much.

The reason we have to keep putting them up is the cap, we need to raise taxes to cover the shortfall it creates.

Mind you we also need a city council that understands needs V wants...

Ive been in my house 15 years, I am capped. And I think its wrong.