Press "Enter" to skip to content

Let’s not speculate about speculation in housing markets

The escalation in urban housing prices in recent years has raised concerns about “speculation,” with some regulators and market watchers pointing the finger specifically at foreign buyers.

The Ontario government, for example, bought the speculation narrative and introduced a new 15 per cent tax that is called the “Non-Resident Speculation Tax.”

Other regulators, including the Bank of Canada, also observed in May 2017 that rising housing prices in Toronto were being driven by “speculation.”

When it comes to real estate, however, drawing the line between investment and speculation is not as clear-cut as it may sound.

If you argue, as we do, that expecting capital gains in return for an investment in an asset does not necessarily make it speculation, then the distinction becomes even more difficult.

Benjamin Graham, the author of famed investing books including Security Analysis (first published in the 1930s), made one of the most frequently referenced distinctions between investment and speculation. Graham and his co-author observed that an “investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”

Even if property values plunge, the rental income stream generated by investment properties largely holds steady

Unlike investing in stocks, however, in most cases investing in real assets does not carry the risk of losing the principal in its entirety, especially in the long-run. And even if property values plunge, the rental income stream generated by investment properties largely holds steady.

Another feature usually attributed to speculation is the shorter investment time horizon.

Those active in flipping condos, i.e., investing in pre- or under-construction condominiums and later assigning the rights to another investor in a short-period at a higher price could be labelled as speculators, by this measure.

But flippers do serve a productive purpose as they are inherently different from households that acquire housing with the intent to occupy it.

Condo flippers are often the ones who offer the much-needed risk capital in the approval (pre-construction) phase of a project to builders and developers, thus helping them satisfy the pre-requisites set by the banks for larger construction loans.

If the risk investors (condo flippers) leave the market, where will the risk capital come from?

When one acquires the rights to an unbuilt or a recently built unit from a flipper, one is expected to pay more for acquiring a less risky asset. The initial investors (call them speculators if you must) invested earlier not in a house but in an idea or a plan with uncertainties (risk) that would take years to complete. The risk in investing in a yet-to-be-built condo is much higher than walking into an open house and making an offer.

While there are, no doubt, some people buying existing condominiums who are out to make a quick buck, a large percentage of short-term holders are buying at this pre-construction phase.

The term “speculator” has also been used loosely to refer to private investors who acquire housing and rent it out, but this, we feel, is yet another misappropriation of the term.

Those who invest in housing and then make it available to renters, though being driven by expectations of capital gains in the future, are serving an important economic purpose. They are the primary suppliers of new rental housing in large urban centres. And since the current rents are not sufficient to cover the mortgage, taxes, and other costs associated with owning an investment property, private investors are essentially subsidizing renters, in the hopes that future capital gains will offset the lack of adequate cash flow now.

Forty years ago, Professors J. R. Markusen and D. T. Scheffman analyzed the sudden escalation in housing prices in Canada and the impact of a similar “land speculation tax” in Ontario. They noted that then, too, speculators were being blamed for price escalation without anyone first defining the difference between investors and speculators.

Their solution was to define a speculator as one who buys and sells land (or housing) “without the intention of affecting improvements, or using the land as an input in a production process.”

By that definition, neither condo flipping nor investor-owned rental housing qualifies as speculation: Investors provide housing that generates a stream of rental services, and flippers provide risk capital for new housing development when no one else steps up.

Invoking the “speculator” bogeyman may be good politics, but economically speaking it doesn’t tell the whole story.

Murtaza Haider is an associate professor at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at

Site designed by Shafquat Arefeen
The motion also counters the NFLPA's assertion that the NFL's ruling is damaging to Elliott.Watson Tosses 3 TDs as Texans Beat Browns 33 17"We are extremely disappointed with Mr. 1. 1, the Monday before Super Bowl Sunday, revealing a switch form the 2015 ad's prehistoric setting to the future. But thankfully, it is also a land where the right to call out wrong is sacred. They look like grim reaper feet. And grassroots activists, public defenders, and juvenile experts are pressuring elected officials to simply stop charging kids as adults so that they can stay in juvenile programming, where they belong. In a league of men who crush bones and brains for a living, their offenses range from drunken misdemeanors to serious felonies such as the murder charge against New England's Aaron Hernandez this season and the murder/suicide by Kansas City's Jovan Belcher in 2012. In past 3 vs. In all this talking of political winners and losers, what gets forgotten is what moved a handful of NFL players to take a knee to begin with. For the Dallas Cowboy faithful, NFL Hall of Famer, Troy Aikman only ranks 41st All Time, with an 81.6 QB rating. Licensees typically need to submit an application and pay a fee. While the specialists say their services have cleaned up an industry rife with fraud, critics say their "expert authentication" is little more than pseudoscience used to generate millions cheap oakleys in profits at collectors' expense.. And he kept calling play action passes even though the 49ers were losing, the offense was averaging just 3.4 yards per carry and the Panthers were blitzing because they expected the Niners to pass. It was the first time Michigan had ever played Penn State, Mullendore said as he looked at the autographed magazine page framed on his wall. Admirers even dressed their children in youth uniforms of their beloved team.. Here's what you don't want to hear with Hurricane Irma bearing cheap china jerseys down, in some form, on South Florida: Anyone thinking the Dolphins game is at the forefront of public concern. I got your back. Richard Ellenbogen, co chair of the NFL's Head Neck and Spine Medical Committee, said the league is working to shift that culture. And maybe he does at least to some extent. This communication contains "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. So he's a good friend of mine and I want him to do what he wants to do," Trump said. The Seminoles would like to start the season over. But aside from the statistics, colleges and NFL scouts look for prospects with great work ethic and pandora charms good character.. It also requires skills that are as much about running a business as it is handling a sports team.Start at the cheap jerseys BottomThe first step toward becoming a general manager is getting a job in baseball. There are a lot of people I owe for where I'm at right now.". But the spots scored well almost every year in ad ranking services.. ESPN first reported the trade Tuesday morning.. Talk about that.. I been trying to think of ways to keep myself entertained without football since mofo's wanna have a NFL lockout. "There certainly going to be communities out there where a helmet, no matter what price point we come in at, is going to be maybe too expensive," he said. Family is much more likely to donate if they concerned about their loved one if they exhibiting symptoms or signs that are concerning them, or if they died accidentally or especially if they committed suicide, she said. Since NFL teams are in the business of trying to please their customers, not alienate them, they are understandably reluctant to sign a player who will be the subject of controversial news coverage every day. In an interview on CNN Miller said, I had any respect for her, it probably would have been hurtful. But that optimistic cheap jerseys view for pandora bracelet Kaepernick, the former Super pandora bracelet Bowl starter for the San Francisco 49ers who sparked a movement by players by refusing to stand for the anthem last season to protest the treatment of African Americans in the United States, is far from universal.