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Today: 20.01.2018 - 03:18:39
   Canada Mortgage Hub Discussion Board -> Mortgage Rates Canada -> What's the economic problem with setting an upper limit on housing prices?
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pricier9654

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What's the economic problem with setting an upper limit on housing prices?
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nonferetrum

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Ignoring the fact that would be illegal...1. What are you going to do with people who actually own house worth more than your upper limit? Presumably, they'll either default on their mortgages, declare bankruptcy, or simply never sell them (hoping for the law will go away). Most people would immediately be financially ruined. Banks would be out billions.2. If people can't sell it for what it is actually worth... they will obviously just rent them out (and exorbitant prices to cover the millions they've lost), lease it for 99 years (for the same price as it is worth, trade it for another house or assets they can sell for a fair price, etc. Rental rates would go through the ceiling.3. Presumably no one will build any more houses. There is no profit since the land now costs nearly as much as the land and building. 4. It still doesn't make getting a house any more possible for 'average' salary people in Vancouver. With houses at say half-off... everyone will be buying 'cheap' houses in Vancouver in order to rent them. With fewer people selling, fewer houses built, and everyone bidding on houses as rental income... you've merely moved the problem from unable to afford, to simply unable to find a house. Further... no seller would accept *any* conditions. If you don't have a full, non-inspection, 30-day, cash offer... they'll sell it to someone who does. Again, most average Vancouver folks would need a mortgage to buy a house and sellers won't give you the time of day.5. Property tax revenue, schools, roads, community services, would simply collapse. If your $5M house is now worth $2.5M, you have effectively halved the taxes the city collects. If you try raising the tax rate, again more people will go bankrupt and the banks won't pay the taxes either.6. Every business, construction company, investor, etc.would immediately flee Vancouver. It is almost impossible to get workers to your city knowing that at any time the government can effectively half the value of your house. Further, presumably they could do the same to commercial property also. Banks would refuse future mortgages... in fears the government might to this again.
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