Real Estate Speculation Tax?

Yves Smith at Naked Capitalism, one of our favs, recently weighed in on "hot" foreign money distorting real estate values and the detrimental warehousing of real estate in those markets: Vancouver Mayor Mulls Empty Homes Tax...

The amount of housing being warehoused by the super-rich in “world” cities has hit the point where prime residential neighborhoods are becoming glitzy ghost towns.... [In London] formerly popular restaurants in Kensington have closed because there are too few locals to keep them going. 

Sydney, Melbourne, and more recently Auckland have been see a huge influx of Chinese buyers, distorting the overall housing market. And a lot of this appears to be laundered money.  New York and San Francisco have also seen distortion.. 

A report presented to the City in March which found just under 11,000 empty homes in Vancouver, most of which are  apartments or condos. Amid growing pressure, Vancouver’s mayor, Gregor Robertson, has stepped up his call for a tax on empty homes, arguing that if a home is being treated like a business then it should be taxed accordingly. 

As noted in Dateline’s report, the vast majority of wealthy migrants to Vancouver have contributed very little in either taxes or economic activity to the city.  The idea of taxing vacant property seems like an obvious and long-overdue measure. I hope it catches on here.

The Nattering One muses... we wish this idea had caught on years ago, during previous bubbles. Many know the tomb of the unknown soldier, but many probably don't know the following regarding all the vacant REO that was and still is being warehoused by the banks, as we noted in The Tomb of The Unknown Bailout...

Most of those foreclosed REO homes were NEVER charged the appropriate assessed property taxes by the taxing authorities.  They were "taxed" based on the "unimproved land value" with all other taxes and special district impounds being waived or given legal forbearance by the taxing authority. The resulting city, county and state budget deficits were made up through, reductions in public services, borrowing (public debt) and tax increases on the rest of the property tax base.  Even though they profited, not even the bulk purchases by the hedge funds (tens of thousands of homes at 10 cents on the dollar and lower) were required to make restitution on that public debt. And that is the tomb of the unknown bailout. 

In our Nimby's, Flippers and What Would Jesus Do?...  Harry Dent had reported on measures taken by the Singapore government to combat speculators and flippers: 

Those in charge instituted a succession of strong measures to curb foreign buying and speculation in general. The first was an up-front property sales tax of 18% for foreign buyers… ouch! The second was additional taxes on properties that were flipped: 16% within one year and 12% within two years. The third step Singapore's government took was to cap the amount of debt a borrower is allowed to take on compared to their income.

We Nattered...

If only we only had the brains, balls and virtue to match Singapore's lead. But alas our moral turpitude will not accommodate such righteousness. And not just for foreign buyers, stick to them even harder, but domestic as well. The speculators, flippers, investors and landlords need to be put in shackles and driven out of the market, so that normal folk, can have an affordable place to live the dream. 

For the umpteenth time, we Natter the following... 

Homes are sticks and bricks where people live their lives and raise families. Homes should not be chattel for serial flippers, speculators and landlords. Seek margin in video games or cars or stereos or durable manufacturing, not the necessities of life. If you lived in the home for an extended period and it appreciates, that's one thing. But beware, when you turn your own backyard into a major source of wealth, that's when the trouble starts.

And we shall leave the speculators, contractors, flippers, real estate agents, escrow, title, banks, lenders and loan agents, where you are... as in would you please redirect your efforts towards investment in real economic activities, as opposed to profiteering from speculation based upon asset bubbles, the backs of others (the greater fools) and financialism. Then again, we could say the same for Wall Street and the markets at large. 

The whole industry is really nothing more than a pack of used car salesmen, their lackeys and parasitic agents feeding off of a basic need, the right to housing and a fantasy of home ownership known as the American Dream. We have Nattered many a time, here, here, and here, that the ownership society is illusory and has become the sharecropper or debt slave society, as you NEVER own your home. Wanna bet? Try not paying the feudal lord's property tax and see what happens. Unless of course, your the bank that works with the dukedom, which has foreclosed on all the suckers, dupes and greater fools that get caught in their web of deceit and pecuniary trap.

In the only recorded violent act of one Christ, who flipped over the tables and destroyed the marketplace in the temple, where the money changers were double ending every deal and said...

Is it not written, 'My house shall be called a house of prayer for all the nations'? But you have made it a den of robbers.

In closing, we agree with Yves and Vancouver, an uber stiff taxing of what can only be classified as speculative transactions, regardless of the chattel involved, should be the law of the land.