Spec nation

'The prices went up $50,000 last night...'
Mark 1
...and here's why we all should care.

Does Garth Turner hate Toronto? Or just realtors? was the intriguing title of an article by a realtor (who else?) which a blog dog sent me yesterday. The reference was to the Saturday posting here on a condo called River City and its park-under-a-soggy-expressway-ramp concept. Oh yeah, and the 349-square-foot unit sans bedroom or closet, selling for $180K. Oh yeah, and the fact it’ll sit on toxic industrial land in a part of Toronto that is uninhabited for a reason. In any case, you can read here why I don`t know from nothing.

The sad truth of all this is that I hate neither T.O. nor realtors. But I sure don`t like what I`m seeing.

Young buyers tumbling into a mortgage to live in a broom closet beside a highway ramp with zero resale value shows me people are truly confused. The kids who would do such a thing, instead of maintaining their freedom and renting an actual liveable space. The realtors who defend this as some kind of worthy investment. The developers who would, in a country mostly devoid of people, design homes reminiscent of a Tokyo subway car.

But that`s just the start. I`m troubled by more. By this:

  • This morning the government unveiled numbers showing the recession is over. But it isn`t.

Third-quarter economic growth was tiny – less than one half of one per cent – but that will be welcomed as evidence the worst is behind us after almost a year of negative growth. Trouble is, the one bright spot the feds point to as the engine of that growth is housing. The only reason real estate is hot – a bubble, actually – is due to the emergency interest rates still in effect. If mortgage rates were at market levels, there’d be no housing boom, no GDP growth and no charade.

In fact, taking any solace from what`s happening in the housing market is a game-changing mistake. The toxic condos above are one example. Here`s another…

  • People camped out in downtown Vancouver over the weekend to be the first into the sales centre for ‘The Mark’ condominiums. This 40-storey building will not be erected for three years, and probably never.

But the worrisome aspect is not that 460-square-foot units were being snapped up for $324,000 – a staggering $704 a foot in a regional Canadian city of 600,000 people – or even that some prices were increased by $50,000 the night before units went on sale. The biggest worry is not that idiot buyers were slapping money down for what was basically a futures contract with a bizarre 40-month delivery date.

Instead it was that the frenzy over The Mark, like the lottery for River City and the elbow-throwing condofest in Toronto last week, all show we’re now in the final stages of a boom which will not survive thanks to one thing: speculation. Read these few lines from the Vancouver Province’s report:

“I’m here because they are selling Yaletown at today’s prices, but the speculation is [that] prices will go up after the Olympics,” (one buyer) said.

Steve Dhana was amazed by speculator interest as he watched investors rushing to place bids on units. “The prices went up $50,000 last night,” Dhana said. He hoped to buy a unit in the $500,000 price-range, and also expected prices to surge in February 2010.

The Mark 2

First we had greed over a rising asset. Then delusion it would rise forever. Then fear non-buyers will be priced out for good. Then herd panic. Now rank speculation. I have seen this movie before – Nortel, Bre-X, dot-coms and real estate. I know the ending.

  • Lastly, I hope many of you read the Globe’s piece on debt over the weekend.

As I’ve been harping here for months, there’s nothing that will affect your future more than what governments are doing now. There’s a tax storm coming, which is why I’m devoting a hunk of my new book to aggressive tax avoidance. There’s now zero chance we will be growing our way out of this mess. Look at the debt levels below, then realize the Boomers haven’t even started blowing their pensions-and-health-care hole in public finances yet.

There are effective strategies to weather this storm.

Buying a concrete box ain’t one of them.

Debt

132 comments ↓

#1 john green on 11.29.09 at 7:37 pm

I work for a major steel distribution center in Vancouver. 35 years .They just laid off 15 % of the crew on Friday.
I`am going to have to E- mail them,and tell them the recession will be over on Monday !

#2 Hazzard on 11.29.09 at 8:01 pm

Why in the world would real estate increase in value AFTER the olympics? Does anyone watch 2 man luge and think “I have to live there”?

#3 Terry on 11.29.09 at 8:08 pm

All is unfolding as it should, be patient Garth and remember “Depressions Take Time”, there will soon be many people falling into the abyss as we eventually will all have to realize that we can no longer “extend and pretend” any more.

T.

#4 Bob on 11.29.09 at 8:18 pm

empty condos in forseeable future in Canada? that’s what happened to Thailand after real estate bubble there in late 1990′s…

#5 Sid on 11.29.09 at 8:18 pm

Garth, you strike me as the type that has researched various market activity in Canada’s history. Have you found in your research and experience that areas that have the highest, fastest growth almost always have the highest percentage crash? Does past performance really have an impact on whether a market will crash or is it dependant on the regions’ own fundamentals? If an area has experienced very modest price growth (less than 10% in the last 5 years) than is it less likely to crash?

#6 kc on 11.29.09 at 8:21 pm

Take your rose coloured glasses off gents.

The market is soon to go south in a big way.

You are running out of greater fools.

Garth

LOL how true … the funny thing about this “new” set of investor digs, and the fact that “they” can’t sell the much “famous” Olympic village digs is.. why build more boxes to compete with the boxes that arn’t moving… The hype and BS is over the top. Oh my bad…. wait till after the “Olympics” and the TOP DOLLAR investors are frothing at the mouth to buy into the hype???? Somehow I truely can’t see this happening…. By the time the golden “O” show is over the world will have deleverged another half trillion ….

cheers

#7 Jeff Smith on 11.29.09 at 8:22 pm

Wow, look at dis. Some lucky dude got his mortgage lifted by a judge. If the @#$@4 really hits the fan here in Canada I think this type of treat might prevent foreclosure from being a big problem for people. Darn should have bought that big house with the 40 year am after all. I think I missed the boat :(

http://abcnews.go.com/Business/judge-helps-couple-avoid-foreclosure/story?id=9176415

#8 K. Caron on 11.29.09 at 8:26 pm

The only thing I would point out is that government debt, as long as it is financed internally is not so bad as it looks. Each January the government pays out interest on its debt, and each April it reaches into the pockets of debt holders and takes back around 40%.

Who says this is domestic debt? — Garth

#9 Publius Enigma on 11.29.09 at 8:27 pm

Hope springs eternal, Mr. Turner. Optimistic beings, we are.

You are fighting against human nature.

However, just because something is unthinkable doesn’t mean it’s impossible.

Keep doing what you do. You are helping people with the words you freely publish. But you cannot help the masses, because we are not programmed to think critically.

#10 TheFirstRick on 11.29.09 at 8:30 pm

“I’m here because they are selling Yaletown at today’s prices, but the speculation is [that] prices will go up after the Olympics,” (one buyer) said.

++++

And if prices don’t appreciate? Oh well, some laundered drug money is better than no laundered drug money at all!!! Ask CC&RA. BC, the Narco State of the North. Have a look at the photo, I’ll bet my left ka-hoo-na there isn’t anyone in that picture who earns more than $35K per year. On paper, anyway.

#11 pjwlk on 11.29.09 at 8:32 pm

Yeah, add the proposed new “world government” proposed by the United Nations Conference in Copenhagen, and an imminent new Carbon Tax to your list of worries too!

#12 Joseph on 11.29.09 at 8:33 pm

And the tragedy of these numbers is that both the population of the USA and Canada never endorsed these large deficits. A CNN poll from a week ago stated that Americans believe that “the government should balance the budget even when the country is in a recession and is at war.” Think of what these numbers were like in previous generations when voters were generally more conservative. A deep disconnect has taken place between the voters and our politicians in the last 30 years. The immigrants who came to the USA and Canada 50 years ago would never have endorsed these large deficits as they have already experienced the consequences of an economy that can’t sustain itself. This is why in large part they moved to Canada in the first place. But somehow the politicians got the idea that they would never get re-elected unless they continually introduced more social programs at the expense of the average taxpayer to appease an apparent societal voter majority. Who fed these guys these ideas? Likely a few lobby groups. Nothing of this was inevitable.

#13 Into The Sunset on 11.29.09 at 8:34 pm

Garth..the one topic I haven’t seen mention by you before this blog is tax avoidance.

I was glad to see you are goiung to include a portion of your new book to this subject.

Make sure the thick ones understand the difference between Tax Avoidance and Tax Evasion.

We have been practising tax avoidance for the past 15 years and will continue to do so. Why ? ….Because the only way anyone will survive the coming sunami of increased taxes is by doing so if they want to have enough to live a happy retirement.

We have most of our investments offshore, secure and growing at a level I won’t mention because instantly people say it’s too good to be true.

There are certainly a lot of scams that are too good to be true and we went through a baptism of fire before we got it right….but we got it ….both off shore and right here in Canada. We pay no income taxes and increase our net worth by 35% each and every year.

Tax away Federal; Tax away ProvinciaL.Onward and Upward !!!
Lemmings, bid your broom closets out of site then crash
and burn. Nobody can tell you different !!

#14 Joshua on 11.29.09 at 8:37 pm

Hi Garth,

Just curious, didnt calgary have a similar boom in housing back in `1988 when the winter olympics came to Calgary and then a major correction or crash happened not to long after. Do you think the same will happen to Vancouver.

#15 Keep Waiting on 11.29.09 at 8:43 pm

Any substantive comments on Dodge’s statement that Canada can keep the rates low till 2015? Apart from your “deflationary nightmare scenario” statement? Not much a commentary now….

If that is the case, all those first time homebuyers correctly listened to the realtors, who said rates will stay low for many years. And these are the guys with six weeks of education for their profession who predicted correctly.

And perhaps all those first time buyers were not the greaterfools for taking advantage of low interest rates, since they not only get to pay down five years of mortgage at low rates, but have the option to lock into low rates for another 5/7/10 year fixed period anytime before 2015.

If rates stay low beyond next year, your followers will become buyers, as few can afford to sit on the sidelines for another 6 years (till 2015). Many have been predicting the end of the marke since 2005. For those patience bears, hope a decade of waiting does not mean too much :)

Of course if this so-called bubble lasts a decade, well, then it really wasn’t your typical bubble now. And yes, yes, if it starts to deflate five years from now, then people will still say its a bubble. But a decade’s worth of payments and price appreciation will still put them far ahead of those patient renters, who continue to wait, and wait, and wait….in a permanent state of denial.

Real estate prices cannot increase without income gains, now that future demand has been brought forward. Moribund interest rates will simply show no inflation resulting from no economic growth. The two – rising prices and flatlined rates and incomes – are mutually exclusive and your argument is bankrupt. — Garth

#16 Future Expatriate on 11.29.09 at 8:44 pm

Someone needs to ask Tiger Woods if living in a multi-million dollar McMansion with a “beautiful” wife and kids is the way to true happiness.

To the point you’d try to ram a tree.

#17 Gord In Vancouver on 11.29.09 at 8:45 pm

What’s sad is that Global BC and other cash strapped media outlets will treat this like BC’s economic renaissance and give it much more attention than it deserves.

If you’re a real estate bear who’s sitting on the sidelines, this is a gift from god as young, naive buyers will add more bulk to the obvious bubble.

#18 Tim on 11.29.09 at 8:50 pm

Bre-X. Dot Com. Nortel… Housing.

Have personal examples from all of them. Bre-X was bought by some family members, saying that ‘there had to be gold there.’ This was after the geologist was pushed out of the helicopter. I’d put my highschool dishwashing money into the stock, lost it, and learned my lesson.

Nortel was purchased by family members who said ‘it had to go back up’ when it was at 13.00 per share… I believe they’re still holding the stocks…

Was in the Computer Science department, when a soon-to-be-retired IT consultant told me how he’d invested most of his savings into the ‘New Economy’ stocks. No one was going to buy anything from ‘brick-and-mortar’ companies, and my degree from a non-online University would be soon obsolete. This was in February of 2000…

And now with housing. Our household income is a little less than the median household income in our lovely neck of the GTA. I could no more afford a three-hundred thousand dollar house (and sleep at night), than I could bailout Dubai. But, it’s real estate (as they say), and the Good Lord ain’t makin’ anymore land.

#19 Bottoms_Up on 11.29.09 at 9:04 pm

#13 Into The Sunset on 11.29.09 at 8:34 pm
—————————————————
Income earned internationally is taxable by the Canadian government, n’est pas? You must have a real ‘good’ accountant.

#20 vreaa on 11.29.09 at 9:17 pm

Great piece, Garth. Speculation is alive and well, and out here in BC it appears to be growing in greenhouses.

It can be argued that EVERY real estate purchase here in Vancouver over the last 4+ years has had a very significant speculative component, in that even buyers who were buying for personal use were only paying outrageous prices because they expect further price appreciation going forward.

I, too, have showcased The Mark condo release as an example of speculators at work.
See here -
http://tinyurl.com/ylkqjfm
“Vancouver is back in boom times… Unlike anything in the world… The speculation is that prices will go up after the Olympics”

Also, I have transcribed some of the exchange between you (Garth) and Tony Iannou on the Bill Good show last week (27 Nov 2009) as representative of important action and sentiment in the Vancouver RE market.
See here -
http://tinyurl.com/yabhmxv
“A lot of our clients do have a huge amount of equity, especially if they are in the market, trading up.”

Leverage works both ways, as lots of owners will be discovering in the coming years.

#21 calgaryrenter2 on 11.29.09 at 9:26 pm

I work for one of the oil and gas majors. They started axing people this past week, management first, worker bees in Mid December. Just in time for Christmas.

ho ho ho….hold off on the house.

#22 Rich in Calgary on 11.29.09 at 9:37 pm

“The Mark”?

That’s the term that con artists use in reference to their chosen victim.

I find it amusing that the Developers would also use this name for their project. Coincidence?

Either that, or you have to admire that kind of honesty this late in the game.

#23 kabloona on 11.29.09 at 9:49 pm

#5 Sid, that’s basically what happened in the US, just have to take a look at Case-Shiller for the evidence. The bubbliest places like Vegas, Phoenix, Miami, etc. crashed the hardest from the peak while the least bubbly such as Indianapolis or Dallas have declined the least from their peak values.

I think Dallas is down by only about 5%, whereas Las Vegas is off by over 50% from the peak….

#24 Burls on 11.29.09 at 10:03 pm

But the worrisome aspect is not that 460-square-foot units were being snapped up for $324,000 – a staggering $704 a foot in a regional Canadian city of 600,000 people

Your’re being uncharacteristically sloppy here, Garth.
The units are being sold in a trendy downtown area of a coastal urban center with a population of 2,400,000; not 600,000.

Be that as it may, the units are still rediculously overpriced, and their being so is only possible because of the super low interest rates and CMHC guaranteed 5/35 mortgages.

My Point: Your case is strong enough without trying to stretch the truth here, Garth.

I thought it was closer to 2.1 million, but I would hardly put Richmond, Surrey and Delta in the same real estate market in an urban area which lacks mass transit outside of the major urban area itself. Compared to Toronto – prices are double for a population which is 65% smaller. That spells delusion. — Garth

#25 ManfredSteyn on 11.29.09 at 10:03 pm

#23 kabloona,

You are quite right about the various degrees of crash by U.S. market. The further they climbed…

The New York Times has an interesting graphic on that:

http://www.nytimes.com/interactive/2009/04/29/business/2009-wide-housing-graphic.html

#26 EastPole on 11.29.09 at 10:08 pm

Some very well articulated points about our own subprime monster – the CMHC. See ‘Canadian Real Estate Goes Wacky’ post.

http://futronomics.blogspot.com/

#27 X on 11.29.09 at 10:11 pm

RE #2 Hazard – too funny, I am sure that there is a market for some people who will see 2 guys in tights competing in the luge, and want to move there. But I am not one of them. LOL.

I feel sorry for some of the people buying now, they really believe they are doing the right thing for their family. Even if you try to tell them, they don’t believe you.

#28 Calgary_rip_off on 11.29.09 at 10:19 pm

Garth, some lunatic killed his kids in Calgary NW-dude probably had one of those overpriced mortgages and couldnt handle it combined with the traffic and claustrophobia.

Hopefully no nuts go crazy and do more of this. But in Calgary a person’s image is defined by what they own. If I thought like this I would do the sane thing and go jump off an oil building downtown. Im surprised that more people in Calgary dont see the materialism, like a bunch of rats scrambling for the bacon…

I suspect though when the interest rates increase there will be more axe murderers, divorces and craziness here.

Just on friday the mayor couldnt get his council in line to deal with the ice rink roads that evening. It was bumper cars and craziness out there on the roads. It was every person for themselves with capitalism working overtime, people helping each other out and no sign of coordination of the conservative government, ie, let the people figure it all out and then pay their taxes. Bingo.

Bring on the crash. I am hoping 20% interest rates. That should level the whole city.

#29 IceBerg on 11.29.09 at 10:20 pm

This is an interesting clip on energy supplies and how certain agencies have not been forthcoming in this … Matt Simmons is quite respected for his knowledge.

http://www.kingworldnews.com/kingworldnews/Broadcast_Gold%2B/Entries/2009/11/13_Matt_Simmons.html

#30 Evangeline on 11.29.09 at 10:21 pm

From the Globe article:

((The bonds governments issue to pay the bills from their economic stimulus programs will absorb money that otherwise would have been invested in the economy. Interest payments will rise, leaving less money in treasuries for education, infrastructure or tax cuts. ))

Interesting factoid in
this video
… the INTEREST payment alone on the U.S.A.’s 2009 debt was $700,000,000,000 … more than was paid to finance the entire Iraq war.

#31 I hate Taxes on 11.29.09 at 10:21 pm

Into The Sunset …………..feel free to share some of that info PLEASE!!!!! Leave an email address, I must know more. Screw this Govt and the taxes they force down our throats!

I hate taxes……..And I pay more than my fair share, believe me.

#32 Ted on 11.29.09 at 11:03 pm

I have said it before here on this blog. Garth’s pronouncements are linear. While this may end badly for some it will not for most. In my market CMHC is already resolving home sellers who are under water with a variation of the US style short sale. And the 349-square-foot unit sans bedroom or closet, selling for $180K Is an excellent choice for singles. I purchase one in July $160K with patio, lake view in July. Great location and an excellent choice for my student son. Many singles living in down town Toronto live a turn key life style. These properties are not built or designed for families. They meet the need of the current demographic demand. Garth knows this, so why make an issue of it.
More variables exist in todays market than ever before and the results will reflect those fundamental variables in a way that is not as easily predictable as Garth makes it out.

Any parent who buys their ‘student son’ a condo does them no favour. — Garth

#33 ontheshoreline on 11.29.09 at 11:23 pm

Evidently Tiger didn’t ram the tree on purpose,he was distracted by his wife’s attempts to plant a 5 iron on his head,theu the back window.

#34 T.O. Bubble Boy on 11.29.09 at 11:31 pm

The saddest part of that 2010 Debt as % of GDP is that Canada was actually reducing its debt AND had an oil boom happening before Harper/Flaherty ruined the country.

Cutting the GST for absolutely no financially sound reason was the beginning of the end. Canadians had learned to live with it… there was minimal political capital to be gained in the GST cut, and there were hundreds of other ways that the government could have cut taxes.

If we had intelligent people running this country’s finances, our situation could actually be different. But no – we’re trying to ride the consumer debt train right out of the recession just like every other country tried and failed with.

Top 5 Flaherty/Harper decisions that screwed the country’s finances:

1) Housing Bubble (CMHC’s 0%/40-yr, buying risky bank mortgages). Caused the pending disaster that we’re in today.

2) Auto bailout (spending millions of dollars per job saved instead of spending 1/10th of that amount to invest in growth jobs that won’t dissapear in a couple of years).

3) GST cut – absolutely no reason in my mind to do this. That 2% cut put the country’s finances right at the brink of deficit (with no wiggle room), which we’ve since blown right through.

4) Stimulus spending – fixing roads is necessary, but putting the entire stimulus towards basic infrastructure/construction does not promote any future growth.

5) Bending over to foreign investors who rape and pillage Canadian companies. This includes the Income Trust fiasco, Nortel fire sale, and everything in between. “Encouraging Foreign Investment” has meant “giving away the country to foreign corporations” every day the Conservatives have been in power.

#35 john m on 11.29.09 at 11:37 pm

Great post Garth…its reality,things are not getting better,businesses that have been around for decades are closing their doors,food banks are swamped like never before,UI benefits are running out for many,wages and hours are being slashed it goes on and on……… Hmmmmmmmmm makes me wonder what Flaherty’s group of Canadian billionaires (advisory group) think about this scenario……..hmmm curiously i have heard nothing about this group since they were assembled……something i think the press should be looking into……

#36 nestor on 11.29.09 at 11:45 pm

Garth. you are correct that there are serious problems because of these debt levels. however, you are wrong about the massive tax increases to come. they can not tax the economies to oblivion. the are going to inflate their way out of this debt problem. inflation is really the only option here as most of these economies have little or no savings rates. (and, yes. inflation IS the “hidden” tax). but they are going to have the printing presses work overtime. N

#37 Taxpayer like you on 11.29.09 at 11:50 pm

5 Sid 23 Kabloona

Visit demographia.com and read their latest housing
affordability studies. They provide an interesting theory backing up those stats you give.

13 Sunset

You’re exactly who they will be looking for. Don’t think that you’re safe because it’s all legal now (if it really is).

16 Expat re: Tiger. I would never want the curse of fame
and fortune “enjoyed” by Tiger or any other super celeb.
He cant go for a walk, a drive(!), to dinner, into a store
without it being a media event. Just think about the things we do everyday in relative anonymity. Also think about what must be a constant security issue. A target for whackos, mobsters, even terrorists.

Rich? Sure to a point anyway. Famous? No thanks.

Any gloating Als fans out there??

#38 Jonas on 11.30.09 at 12:06 am

I can’t help but think that what really sucks about all this is that the sensible people, well OK, the people with a brain and capable of cognitive thought and reason, will be the ones who have to bail out these complete morons that are buying with the 5/35′s. Don’t make the exuse that they are young, who cares? They are incredibly stupid, plain and simple. They will deserve the months of agony when rates go up until they are forced to sell but it is us, the ones with more than 6 brain cells, that will pay for it in the long run.

In short, we are all screwed because of stupid people and blood sucking realtors with no morals. Someone should really think about regulating this industry. Banks that are giving away money like it’s free because it actually is thanks to Carney and CMHC, blood sucking leech real estate agents that spent a grueling 5 weeks online to get thier “accredidation” and country full of stupid people. That’s a recipe for disaster if I have ever seen one.

The action of the stupid people in the last few condo offerings just may be enough for Carney to think that he has sucked in enough stupid people and offer up a surprise rate hike. Just like Aussie.

Believe it or not, I was at a dinner party and a stupid couple that recently bought were there. Someone other than me had the sence to ask ” what if the rates go up?” , there is a god I thought. Then then morons actually said they think that rates will go down from here and stay down for years. Give me strength and stop me from stabbing them both with my fork. I attempted to explain that rates were basically zero and Carney has already eluded to the plan that he will begin to raise rates at some point in the summer, but why fricking bother. About half of the people thought that prices will continue to rise as we the economy continues to grow. I tried to explain that rates are historically low, will not go lower and that incomes are flat to down and that employment is down and getting worse. I asked them where they thought house prices would be when the variable rate is 5% and rising and the fricking dumba$$ actually said higher. I swear to god it’s like living in a bad zombie movie. They are every where, stupid people without a brain that God gave a gnat. These will all be the same people with their hands out when the shit hits the fan and last one of them with a surprised stupid look on their faces will collectively say “wow, huh… I did’nt see that one comin’”

#39 West Coast Woman on 11.30.09 at 12:07 am

I’ve lived in Vancouver most of my life (>50 years) and what’s going on here is completely irrational. The various levels of government hyping that the Owe-limpics are going to bring in all these new people, and people are buying into it and paying ridiculous prices for housing.

The house across the street was last purchased 2001/2002 for $445,000, and sold last month for $1,588,000. This house had been nicely renovated with a basement suite added.

The house two down from me sold two months ago for $1,560,000 and is now back on the market for $1,888,000. Nothing has been done to it in the interim.

The house around the corner was bought for $998,000 at the beginning of this year and just sold for $1,790,000! This house was updated (a bit) and had a bachelor basement suite.

In 2001/2002 a well-maintained house in this neighbourhood cost about $500,000. The current price for a knock-down in this neighbourhood is now $1,500,0000+, with new houses selling for $3,200,000 to 3,500,000. These are on lots approximately 50′ x 120′.

Have people gone insane just because interest rates are low? Do they really think that people are going to move here because Vancouver looks pretty on the TV.

And let’s not forget about the City Council building luxury condos for those athletes and now – oops – no legacy of affordable housing for people who actually live here. They’re calling them waterfront property, but they’re on old (formerly polluted) industrial land between two very noisy bridges. Sound carries over water so you won’t be able to have a conversation in your condo if you have the window open. And for that pleasure you’ll pay a cool million plus (if you can even see the water).

Well, the party will soon be over, and then what? I think a lot of unaffordable ghetto condos in waiting are on the horizon once the specuvestors realize they can’t rent it or sell it.

#40 Onemorething on 11.30.09 at 12:47 am

More and more I am hearing from affluent friends that they are leaving the USA for better pastures and it’s not Canada!

Why, they need to protect their money (what’s left of it), they need to protect their jobs (as job losses will never be replaced), they need to protect their families (as neighborhoods as turning into ghost towns).

Note: Americans must pay taxes back to the US if living overseas for 10 years! There is a $75K exemption.

Without a bottom in umemployment there will be no housing bottom in the USA.

The writing is on the streets in Canada, the crash is overdue and as far as tax issues, Garth’s new book may suggest things you can do however you may just have to bite the bullet and leave your home and native land.

But few are in the position to find work overseas!

Unlike the US, Canadians can declare non-residency as soon as they leave as long as you follow the no house no spouse left behind basic guideline.

I will have to speculate that the Canadian Government will turn this to the US policy before too long!

#41 Nostradamus Le Mad Vlad on 11.30.09 at 1:19 am

One of the major differences between 1989 and this dip is that good, high-paying manufacturing and trades carried sheeple who lost their condos through — still had a paycheque coming in. Little different this time, as The Big Three, their suppliers and others have all but disappeared.

Re: the chart (concrete box) at the end of Spec nation and the sequence of numbers: 1-1-10. This refers to Jan. 1, 2010 which could be a trigger for potential short-term hyperinflation, and could also very conveniently be interlinked with these two — Bashing Iran / Power plant / Reincarnation does exist! (See cartoon.)

Damned mutated swine flu is increasing in intensity. Supposedly, it is killing people in various countries, such as the US, France, Norway, Brazil, China, Japan, Mexico and Ukraine.

In combination with the financial downturn, depopulation is well underway. The masses are quite messed up now, and didn’t really need these — Dec. 1

This will probably have far-reaching implications — CDS A Rothschild (see prior link) has been put in charge of the finances there. Convenient for someone, no?
——
Climate Crooks — Series of Good Links + Sux , along with Five More Inconvenient Truths

“So whatever data CRU announces they will release in the future HAS TO BE MADE UP.; i.e. a new set of phony claims.” (Courtesy wrh.com.)

#42 Pitaking on 11.30.09 at 1:22 am

My favorite piece of conversation that I heard at multiple xmas parties this weekend around Calgary, “my relator told me the boom in housing will be back this spring, 2010 will make 2007 look like nothing.” Apparently the mass layoffs occurring around southern Alberta will have no effect on our local market. Bring on the bust!

#43 Jim on 11.30.09 at 2:22 am

Case Shiller Index Still Predicts Massive 45% fall from todays Prices
http://blog.ml-implode.com/2009/11/case-shiller-still-predicts-massive-45-fall-from-todays-values/?ref=patrick.net

#44 Peter Pan on 11.30.09 at 3:21 am

Rich in Calgary – A Pox upon your House! I was going to make the observation on “The Mark” being a designation con men use for rubes (aka victim) but you’ve already made it. I learned that after watching that painful movie The Brothers Bloom…

I guess the developers must have drunk when creating their marketing campaign… In Vino Veritas!

#45 omg on 11.30.09 at 3:59 am

So I know this is not scientific, (but economics is not scientific either….)

The most compelling reason to me to support a major correction in the Canadian housing market is simply how incredibly out of sync we are with our biggest trading partner’s housing market.

1) In the US average prices are down something like 25% and show no signs of stabilizing. (Not withstanding US housing experts call of the “market bottom” 3 or 4 times over the past 2 years.)

2) Canadian average prices are actually up significantly during the same period that US prices continue in a death spiral.

To an outside observer this just has to look bizarre and begs the question how can this be sustained given the close linkage of the Canadian economy to the US economy?

#46 dec3ptiKon_ on 11.30.09 at 4:20 am

Here’s a funny comment I found while searching for a cheap place to purchase in Las Vegas.

BRIAN
Fri, May 8, 09 at 04:37 PM
I’m a Broker & owner of a 25 year old Las Vegas real estate company….the market here is finally starting to pick back up with all the repos for sale. …Sure prices are going to be flat for a little while longer but the price of homeis now typically 50% off from prior years!…Incredible deals for buyers where the seller pays your closing costs as well…..any ???? email me at ….just sold an exceptional home to Canadian couple from Regina!

Anyone have a chart on how much the price of housing has gone down since this helpful realtor wrote this back in May?

what a joke…

#47 Munch on 11.30.09 at 4:42 am

Carry on Garth, you are doing the Right Thing!

A thankless job I know, but your place in Heaven is assured!

The only question now is “Are you SURE you want to go to Heaven?”

#48 pbrasseur on 11.30.09 at 8:16 am

First time I see 80% of GDB for the Canadian debt number, not long ago it was 64% (counting the provinces)… We are sinking fast, and our taxes are high, not much room to manoeuvre there…

As for the US I you should know the 94% number includes intra-government debt related to social security (liability not counted elsewhere), the real number for the debt the US actually needs to service is 63% (after the recession, this is equivalent to pre-recession numbers in Canada and much of Europe). This means that despite all the brouhaha US fiscal status is still much better than in most other welfare states, including ours, not to mention they have much better margin due to lower taxes and better productivity.

If you want to count social program liabilities for the US you should also do it for other nations, their numbers would explode as well. But in the end don’t we all know those massive social programs everywhere will have to be scaled back because absolutely nobody can afford them?

#49 David Bakody on 11.30.09 at 8:35 am

When Harper & Co spread the good news the recession is over I suspect those million plus out of work will be rushing to spend-spend, spend as the banks call them to come in and get bundles of cash just in time for Christmas. AND how about a big fat Christmas bonus like all kinds of people will be receiving from our bailout money ………..no wonder there are frenzies in the Real Estate World.

In any rate not One but Two great Canadian football games over the weekend …. The CFL Rules!

#50 David Bakody on 11.30.09 at 8:41 am

#33 T.O. Bubble Boy on 11.29.09 at 11:31 pm

Well put Ditto..

#51 Sean on 11.30.09 at 8:44 am

I hate taxes … Into the Sunset… be very careful!! Taxation in Canada is based on residency. If you want to “enjoy” the benefits of a tax haven, move there! That’s what I have done… but be warned, it is far from easy, and far from paradise… regardless of what the brochures may say. Avoiding taxes by not declaring offshore income is actually called evading taxes, and it’s not looked on that kindly. If you’re going to play that game, you might as well just go rob a bank… the risk reward is probably higher given the potential upside;>

#52 Piccaso on 11.30.09 at 8:51 am

#38 West Coast Woman

Unbelievable, the greatest ponzi scheme in Canadian history.

#53 pjwlk on 11.30.09 at 8:53 am

#13 Into The Sunset: How safe is your money really when you have no laws that are enforceable by you to protect it? Also I believe that foreign income is indeed taxable in Canada unless perhaps you are running a foreign owned corporation or something. Getting your money back into the country to spend it is another issue again.

I know there’s got to be loopholes somewhere, because I’m pretty sure the big boys at the top don’t pay their fair share of taxes.

BTW, I remember reading somewhere that if your income is solely from dividends, there is no tax payable in Canada.

#54 Sean on 11.30.09 at 9:04 am

#37 Jonas… and many others

There seems to be a real hate on for the young and foolish who are out there buying. I am neither that young, nor hopefully that foolish… but I see the blame lying elsewhere. There is a sense of desperation out there, and it is not at all unfounded. Since probably the mid-nineties (some will argue earlier) when Greenspan really started pouring gas on the fire with easy money, we have witnessed nothing but asset bubble after bubble. In the case of real estate, people are looking at 15 years of their real wage buying them less and less. Many have experienced nothing else in their entire working life… they have no experience, no role model to show them the value of working hard and saving. The very concept is an historical relic for an entire generation. And where should all the little kiddies learn this lesson?!? From their parents of course! And this is entirely where the blame lies… with the Baby Boomer generation, who should know better, and were taught better… but who now believe that “it is different this time”. I really feel there should be more compassion for the younger generation, that have been dealt a truly crappy hand by their parents. And as all (almost all) reading this blog will agree, this generation will be sorting out this mess for the rest of their lives.

#55 Sean on 11.30.09 at 9:20 am

#38 West Coast Woman… and others

As a Canadian, I really do hope we put on a great show for the world with the Olympics. When BC is at its best, it really is “the greatest place on earth”… I lived there for many years. However… I remember numerous (probably the majority of) times when I would head out to enjoy this paradise called BC. With a sailing or two wait, I would finally get off the island, only to hit the welcoming standstill of traffic on the mainland. Hours later, I would emerge from north Van headed to Whistler, the drizzle having given way to fog and hard rain. Finally at the hill, I would confront the hordes at the base, still in the rain (next day now), and eventually make my way up the mountain. Only to find that the 40 cm “fresh”, was actually fresh slop, which my skis could barely slide over. After a few runs of ankle-jerking, knee-jerking torment, I would retire to Dusty’s for some beers, and we’d all BS about what an amazing day it had been… haha! Of course, there were also those truly amazing blue sky, 40 cm of champagne powder days as well!

Which BC will the world see, I wonder?

#56 Q on 11.30.09 at 9:43 am

There is no cure for mass stupidity!

#57 miketheengineer on 11.30.09 at 9:54 am

#41 Nostra…

You said:

“Little different this time, as The Big Three, their suppliers and others have all but disappeared.”

You forgot to mention, and will not be coming back. Welcome to the future. This is a complete disaster for this country.

What is going on with the welfare numbers? Have they started the trend upwards, any spikes….this would be a good indication of housing defaults, and would indicate when the RE would trend down. Anyone know?

#58 Fred Barker on 11.30.09 at 10:03 am

Real Estate drives economy.

“Service-producing industries increased output by 0.6 per cent, with the wholesale and retail trade sectors and real-estate agents and brokers leading the way.”

“The story was different among goods-producing industries, where output continued a downward trend that started in the third quarter of 2007 by slipping 1.4 per cent.”

“Mining and oil-and-gas extraction contributed the most to the decrease as a result of temporary shutdowns, Statistics Canada said.”

http://www.cbc.ca/money/story/2009/11/30/gdp-economy-statistics-canada.html

This report is as I said it would be. Sadly, the stimulus is artificial. — Garth

#59 ruraldude on 11.30.09 at 10:23 am

Who says this is domestic debt? — Garth
I thought the whole world was awash in red ink. Must be the countries with the fastest and biggest printing presses. Dumb me, how could I be so naive. Mean while our pretentious economy roars on. Or did I mean stumbles on.

#60 Mike (Authentic) on 11.30.09 at 10:27 am

Real Estate drives economy.

LOL, ok, it’s a Hubba-bubba Bubble. Great fool to greater stupidity. Like Kenny G said… You gotta know when to hold em (houses) you gotta know when to sell em (houses) you gotta know when to run away (from those Realtors)…

“This report is as I said it would be. Sadly, the stimulus is artificial. — Garth”

Right on, Right on!

#61 Mike (Authentic) on 11.30.09 at 10:29 am

Seriously now, you gotta be kidding CBC!! It made me laugh so hard I almost fell off my chair!

0.1% GDP growth signals recession’s end

BMO economist Michael Gregory said. “If Canada’s recession was not … over last quarter, it is now.”

http://www.cbc.ca/money/story/2009/11/30/gdp-economy-statistics-canada.html

#62 Jeff Smith on 11.30.09 at 10:42 am

>#40 Onemorething on 11.30.09 at 12:47 am
>More and more I am hearing from affluent friends that
>they are leaving the USA for better pastures and it’s
>not Canada!

>Why, they need to protect their money (what’s left of
>it), they need to protect their jobs (as job losses will
>never be replaced), they need to protect their
>families (as neighborhoods as turning into ghost
>towns).

>Note: Americans must pay taxes back to the US if
>living overseas for 10 years! There is a $75K
>exemption.

>Without a bottom in umemployment there will be no
>housing bottom in the USA.

>The writing is on the streets in Canada, the crash is
>overdue and as far as tax issues, Garth’s new book
>may suggest things you can do however you may just
>have to bite the bullet and leave your home and
>native land.

>But few are in the position to find work overseas!

>Unlike the US, Canadians can declare non-residency
>as soon as they leave as long as you follow the no
>house no spouse left behind basic guideline.

>I will have to speculate that the Canadian
>Government will turn this to the US policy before too
>long!

How is the health care system like in Kuala Lumpur?? I suppose that it’s similar to the US where you are covered if you have a good employer, otherwise its out of your own pocket. I think the one advantage that Canadians have is free health care. However, this is not guaranteed to exist indefinitely. If that is gone then I am sure some Canadians wouldn’t mind to move elsewhere.

So what kind of jobs are in demand over there? You sound like you work in the financial industry.

#63 john m on 11.30.09 at 10:46 am

I just read that our government saved 1.4 billion in interest on our national debt due to low interest rates.Well interest rates will go up its inevitable and considering the pace at which our countries debt is increasing at current low rates………..what happens when rates rise…………….”welcome to the future” !

#64 CM on 11.30.09 at 10:54 am

I heard the perky CBC guy announce the end of the recession this morning.

Uh-huh. I believe you.

Here’s a depressing piece from TomDispatch on the foreclosure capital of the U.S., Stockton, California.

Forget about the official figures. The real unemployment rate in the U.S. is approximately 17.5%. Empty houses and despair everywhere. Only the banksters are cleaning up.

Tomgram: Andy Kroll, The Illusion of Recovery

Wall Street has, according to Louise Story of the Times, figured out how to make money from the mortgage mess by “buying billions of dollars’ worth of home loans, discounted from the loans’ original value” and pocketing profits while shifting “nearly all the risk for the loans to the federal government — and ultimately taxpayers.”

#65 john m on 11.30.09 at 10:59 am

Canada’s federal debt clock………i was just watching the debt clock——–shocking!……we are going deeper in debt by approximately $104,000.00 a minute and its picking up speed

#66 MPM on 11.30.09 at 11:08 am

The recession is over??? Really?? On tourist street central, Denman St in Vancouver (just a few blocks from the cruise ships and beside the beach), there lies a few people with empty wallets and broken dreams – oh ya, the end of the recession.
I have lived near this street for 6 years, and currently there are 4 empty stores (the most I have ever seen). Two of them say that they are renovating, but there is never anyone there. I imagine that most of them are being pushed out by greedy landlords charging insane prices to lease a 250 sq ft store…and after the Olympics, I hope to see the greed hungry landlords burn on their sword. There are current market values and then there is something called ‘rape’.

Just up the road, there is a ‘dream condo’ development – 8 floors on Robson st with a Starbucks on the street, what else in Vancouver?? This was a perfectly functioning office building for the past 40 years before the idea of building condos. Construction stopped about a year ago and it is completely covered by tarps. The only work happening on the site is the security guard that you see there once in a blue moon….hmm, how many people pre-bought this one…2yrs before Dubai.

Also in the news from the wild wet coast, ‘we can grow plants with no dirt’! Yes it’s true, in Vancouver, the elected officials that bend over for the IOC everyday have sanctioned that flower stores can display flowers in front of their stores but they must not show dirt. Produce stores can have fruit on specially designed tables but they cannot show cardboard of any kind, and Chinatown must not display anything in the street….but then it’s not a chinatown??….
All this from my local produce guy who after 15 years has decided that he has had enough of the bs and is closing shop before the Olympics – so Carney/Harper can add 3 more people to the unemployment line that can buy an apartment that will probably never been built for $500k.

#67 junius on 11.30.09 at 11:20 am

I think the situation in Vancouver is simply madness. Here we are right at the height of the “Olympic Stimulus” and our jobless rate continues to grow, Meanwhile many of B.C.s’ commodities such as lumber are projected down for next year. At the same time the provincial government has pulled back on giving incentives to the emerging new media sector and traditional film and tv production. They are betting the farm on a post-Olympic increase – but from what sector? Tourism? Housing? What primary (as opposed to secondary) industry?

Madness. There goes the farm!

#68 Nostradamus jr. on 11.30.09 at 11:26 am

…Sooooo many people here forgetting Hongcouver is not about jobs.

…Soooo many people here forgetting Hongcouver is not about BC Hinterland…is only about Hongcouver City.

…Soooo many people here forgetting Toronto is not Hongcouver.

…Soooo many people here forgetting Hongcouver has rain, is soooo good for skin.

…Soooo many people here forgetting “”"Hongcouver is different.”"”

Nostradamus jr.

#69 Herb on 11.30.09 at 11:27 am

And while we are going to hell in a handbasket with the economy, we have shills telling us that happy days are here again because there has been a 0.1% upward tick in the GDP, and a government continuing to assure us that all is well and has been all along.

And because there is no effective Loyal Opposition, we are stuck being governed either by fools unable to perceive and pursue the national interest, or knaves disregarding it with malice of forethought.

What do we do now, besides grin and bear it?

#70 Joe on 11.30.09 at 11:45 am

What a joke these developers are pumping & promoting garbage properties like this….

349-square-foot unit sans bedroom or closet, selling for $180K ??? Are you kidding me??? Whoever buys this unit should be checked into a mental hospital.

#71 Jim on 11.30.09 at 11:48 am

Time to buy, Dodge says rates can stay low to 2015
http://www.financialpost.com/news-sectors/story.html?id=2277574

Posted by several people already, and cast as irrelevant. If rates stay low, we are truly in the soup. — Garth

#72 $fromA$ia ( o Y o ) on 11.30.09 at 12:02 pm

…Soooo many people here forgetting “””Hongcouver is different.”””

Nostradamus jr.

Racistalert!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Clean up your blog Garth.

#73 Borat on 11.30.09 at 12:19 pm

There are too many of you with a bad case of the mental retardation; believing low rates are good.

#74 kitchener1 on 11.30.09 at 12:31 pm

Garth, I think you should really do a blog post on the danger of interest rates staying at these levels for 5 years as I don;t think that people understand what that means.

I wish these new buyers would pick up an economics textbook and read/ understand market dynamics.

FYI, has anyone actually thought that all the BoC is doing is talking down the loonie, any hint of a rate rise will send the loonie soaring past parity. Either way, its not the BoC that decides the interest rates, its the bond market.

Low interest rates for years to come=
deflationary stagflation:
no return for boomers on their GIC’s
once demand is exhausted in commodity markets, RE, cars etc.. its a huge drop off cliff
prolonged long term unemployment
HUGE decrease in standard of living
Think Japan but worse as we will not have the carry trade to finance our spending.

Those who are saying we will bring in 50 year ammorts, its never going to happen, the Con’s already reduced the 40 years.

#75 Popeye on 11.30.09 at 12:46 pm

If real estate is responsible for giving us a 0.1% GDP increase, I can’t see policy implementation any time soon that would ‘deflate’ the housing bubble. They need housing to go up, up and away to keep the masses appeased and to maintain the illusion that indeed it is different in Canada.

My prediction: no where near the top of the cycle. I give it 2 to 3 years to peak.

The bigger the bubble, the bigger the pop. — Garth

#76 Onemorething on 11.30.09 at 12:59 pm

#62 Jeff Smith

A reasonable employer anywhere in Asia will offer good healthcare. A professional with an upper management position will offer excellent healthcare.

Have you noticed how many people are deciding to have surgery in SE Asia from Europe-UK-NA?

For those who dont have healthcare, you can buy a plan as it is very inexpensive, walk right into a private hospital of your choice, and be taken care of right away.

Again, there is nothing like a user pay society to get your act together. How about a Government Pension Policy that pays a guaranteed 7%. How about a max tax bracket which is 27% or close to half of that after deductions.

Big Mac index at $1.34 USD and fuel at less than 0.65/litre.

The Canadian Health Care system has been going down hill for over 15 years or longer. You get what you pay for and when the governement directs the program, it can only get worse.

There are always jobs for educated people in Asia especially if you wish to run your own business as tax incentives have been protected for those enterprising individuals.

How about a retirement program that only requires you to pay less than $50K CAD investment in RE or Fixed Deposit for a 10 year visa and allows you to work if you want and renew for another 10 year seamlessly.

#77 Repatriated Expat on 11.30.09 at 1:01 pm

Duh, I thought the recession was declared to be over months ago by the Government of Canada.

Does that mean they were wrong before, or does this mean that they are wrong now? Maybe this means that the recession is really, really over.

Huge layoffs over the past year at the company that owns me, coupled with a long-term work stoppage. Things not looking like a recovery from where I sit.

Anyone seen Bush W lately? I think he has had a face transplant and worked his way to parliiment hill from what I can discern these days.

#78 Men With Hats on 11.30.09 at 1:09 pm

Talk about taking your words out of context .
I have never perceived any dislike (hatred) on your part for any part/region of this great nation .
Perhaps people are actually coming out from under the psychic trance,coma, they have all been living under in regards to the RE market .I hope so .
All I know is that it is going to get bloody .

#79 Repatriated Expat on 11.30.09 at 1:12 pm

This is probably a naïve question on my part, but does anyone know if Stats Can is independent from the meddling of the GOC in general or the Cons specifically?

#80 My_View on 11.30.09 at 1:12 pm

Garth,

Maybe you can tell us what the prices of the DVP condos should be? >99K?.

#81 My_View on 11.30.09 at 1:15 pm

Garth,

Will the new book have something around the lines of 3 years, actually maybe 4-5 years, hell maybe a whole decade before this “crash/correction” happens? (since the release of Greater Fool).

It is a five-year projection. — Garth

#82 Zero Net Worth on 11.30.09 at 1:18 pm

Currently living in Vancouver at the age of 45, with a minus zero net worth (due to incredibly bad luck with money over the past 25 years), I won’t ever be entertaining the idea of buying real estate. However, it still is of interest to me to see what’s going on.

After reading this blog a few times, my life seems so much less complicated than most people out there. I have absolutely nothing to lose. Interest rates can go up or down, RE prices could spiral after the olympics, or go up another 30%, and either way it barely affects me (except for rental prices).

I have many friends who made a killing buying and selling places here over the past 10 years, while I could barely qualify for a $100K mortgage, yet they seem so much more stressed out about life than I am.

The thing is, when I watched my father die in front of me over 6 years ago, it made me realise that we leave here with nothing, and that happiness is a choice. It doesn’t matter how much you accumulate, it all just passes on to someone else, and means nothing in the big picture. I guess that was my father’s philosophy as well. He didn’t believe in life insurance, and wouldn’t even have had a will unless my step mother forced him to get it together, but there was nothing in it anyway, so it was just a signature on a piece of paper.

Anyway, I wish you all the best of success, whether you decide to buy now or two years from now. Just keep in mind that there are many people who will never be able to, and are still content with their lives. It’s become like a real life game of monopoly out there. He/she with the most toys wins. But life is what happens while we’re making plans … and it goes by in a blink of an eye. Don’t forget to have fun! :)

#83 Elle on 11.30.09 at 1:21 pm

“Racistalert!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Clean up your blog Garth.”
—————————————————————

Garth,

The caliber of expression on some of these posts has really “gone down hill”!

Could we have a, stupidmoronsuckingalert!!!!!!!!!!!!!!!!!
please!

elle

#84 Mike Turner on 11.30.09 at 1:23 pm

Here’s a good article from the Globe on what happens when a country goes too far into debt in Newfoundlands case we became Canadians:
http://v1.theglobeandmail.com/servlet/story/LAC.20091127.RREYNOLDS27ART1915/TPStory/TPBusiness/

#85 just a guy on 11.30.09 at 1:29 pm

#60 – Mike (Authentic) – I’d love to hear Kenny G’s version of “the Gambler”. How does he sing with the sax in his mouth?

#86 prairie gal on 11.30.09 at 1:42 pm

Here in Regina all is not what it seems. A friend’s offer of $280k on a house with an asking of $330k was accepted. That’s a difference of $50k or a 15% discount. It appears the supply of greater fools is drying up.

I see the odd aggressively priced house advertised with an invitation to submit offers at such-and-such date, clearly to try to entice a bidding war.

Is this the beginning of the end of the delusion that the frozen tundra is worth shelling out 50% of your income for shelter?

#87 jess on 11.30.09 at 1:46 pm

Who needs to be educated /re – educated Mr. Flaherty?

“Dodge says rates can stay low to 2015″
yes, but Mr. Dodge also has said in regard to central bankers that they:

“does not know with any certainty,” “can only have the roughest idea” and “can only estimate” when it comes to just about everything.

“act to dampen the natural procyclical behaviour of financial institutions and markets. Without such attention, the natural market cycles of optimism and pessimism can be greatly exacerbated and the risk of financial instability increased.”

====================
Accounting standards for the purblind

…”Finally, let me re-emphasize that the build-up of excessive leverage earlier this Mark-to-market accounting for these institutions creates spurious volatility in reported earnings and balance sheet positions. For banks, this creates market incentives for excessive risk-taking in the upswing of the credit cycle and excessive credit contraction on the downswing. For pension funds, it creates the incentive for contribution holidays on the cyclical upswing and excessive contributions in time of market stress. The almost religious zeal with which accounting standards bodies have foisted detailed rules requiring financial
institutions to continuously mark assets to market for reporting purposes has been a major contributor to volatility over this decade. Financial institutions
should smooth profits by setting aside reserves during good times when market prices are likely to exceed the long-run value of assets, and vice versa in bad
times…”
http://www.ceocouncil.ca/en/search/index.php?words=david+dodge

#88 Drew on 11.30.09 at 1:47 pm

Oh home, home on the Don… Who have ever thought that cesspool could be a selling point for real estate? Makes one wonder if there isn’t some way to sugar coat the industrial lands in and around Hamilton’s steel plants and turn them into a sucker’s bet.

” but the speculation is [that] prices will go up after the Olympics ”

Doesn’t that sort of fly in the face of logic? Once the crowds have come and gone, who’s gonna still be there to support such market growth? Sounds like a game for greater fool’s.

#89 Ronaldo on 11.30.09 at 1:57 pm

Yep, the recession is over they say once again. Economy grew at an awesome 0.1% Bring out the Baby Duck and let’s celebrate. Yea right! Kinda like the “town crier” of days gone by. He could pretty much say anything he wanted and the people (the herd) would believe him.
Who are they kidding, we all know they can diddle the numbers to read whatever they want. It’s called creative accounting. Remember Nortel. Keep up the illusion boyz, keep printing money, keep interest rates low, keep piling more BS on top of BS. The day of reckoning is not far off now.

#90 BAD on 11.30.09 at 2:04 pm

-
Since we are talking about the housing impact on GDP let us consider mortgages in the big picture.

Many are saying that an increase in mortgage rates will not make much of difference if Joe Extreme Homeowner can still make the monthly payments. Say that everyone will still make monthly payments and defaults/bankruptcies stay relatively flat if the average mortgage interest rate increases by 2%.

As of October 2009 total household mortgage debt was $954 billion (Overview of Total Household Credit).

Let’s assume an average of 4% (5 year closed rate) interest on these mortgages.

That translates to approximately $60 billion in mortgage payments a year.

If average mortgage rate increases to 6% then the mortgage payments will increase to about $73.2 billion a year for the difference of $13.2 billion. If everything else stays the same that money will not be spend by consumers on purchases.
The difference of $13.2 billion represents about 1.1% of Canada’s GDP that will be missing in consumer spending.
If rates go up by 4% to 8% there will be about 2.2% of GDP missing in consumer spending.

In the case of Joe Extreme Homeowner holding on to a depreciating property making sacrifices, the result will be a decrease in consumer spending and lower GDP. This will most likely lead to job losses that in turn will prevent the now jobless Joe Extreme from holding onto his property.

It seems that whether extended (extremely) “homeowners” default on the mortgages or try to hold on to the house(s) the outcome will be the same.
-

#91 taylor192 on 11.30.09 at 2:07 pm

#32

Garth, can you address what Ted mentions about CHMC and US-style short selling.

Thanks,
Chris

#92 mattbg on 11.30.09 at 2:33 pm

Some of those condos near the Gardiner Expressway are crazy. There is one building in particular that is only feet away from the highway. The funniest part is that it has a balcony — feet away from, and at eye level with the highway! You would step out onto your balcony and be face to face with an elevated highway.

Who buys these things?

#93 Internal Exile on 11.30.09 at 2:59 pm

I think whoever is writing all these “boom times are back in Vancouver” press releases (sorry “articles”) must be living on an orbiting space station high above the earth. I don’t know anyone here who either isn’t afraid of loosing their job, lost it, or know a raft of people who already have. And all the time, the PR and advertising douches that run Vancouver are screaming in our ears about how great everything is and (phew!) wasn’t that a close call with the recession that’s now over, apparently before it began, so get out there and buy Buy BUY!!!

I mean, I know Vancouver is delusional as a general rule, but that article about the condo lineups and “boom times are back” is bordering on the frightening.

#94 Mark on 11.30.09 at 3:08 pm

Doesn’t anyone realize that “The Mark” is what con artists call their victims?

What a poetic name for a condo development in Vancouver…

#95 AM in London on 11.30.09 at 3:10 pm

Onemorething on 11.30.09 at 12:59 pm

#62 Jeff Smith

A reasonable employer anywhere in Asia will offer good healthcare. A professional with an upper management position will offer excellent healthcare.

Have you noticed how many people are deciding to have surgery in SE Asia from Europe-UK-NA?

For those who dont have healthcare, you can buy a plan as it is very inexpensive, walk right into a private hospital of your choice, and be taken care of right away.

Again, there is nothing like a user pay society to get your act together. How about a Government Pension Policy that pays a guaranteed 7%. How about a max tax bracket which is 27% or close to half of that after deductions.

Big Mac index at $1.34 USD and fuel at less than 0.65/litre.

The Canadian Health Care system has been going down hill for over 15 years or longer. You get what you pay for and when the governement directs the program, it can only get worse.
————————————–

Thank you Onemorething for your link on M2H last year.
Am seriously considering Malaysia / SEA or Ecuador myself.

I have been in Health Care in TO for 30 years ( Home Care for the last 15 years) and have seen it all go down hill over time from being simply excellent to mediocre (service) now. Have witnessed first hand the 10 hour waits in Emergency for a 5 minute cursory exam, next day discharges post major surgeries, people having to return to hospitals only to find major conditions having been missed due to time constraints etc etc.

Re: Real Estate, I, like many others on the blog have seen the previous bubbles and know that it is NOT “different this time”. The present first time buyer has not seen a crash yet and so believes that RE only goes up as that is his/her only experience. Simply put, if you cannot put down 25% and amortize at 25 years, you do not qualify for the purchase. If your Agent or Bankster tells you different than it is just smoke and mirrors (CMHC) and you are the Greater Fool indeed.

You have signed yourself into a life time of bondage and slavery but on the bright side, you do have a McMansion with granite counter tops maybe

As Garth keeps saying, this will not end well.

#96 T.O. Bubble Boy on 11.30.09 at 3:12 pm

So, in the US, the government is now pushing mortgage companies to re-negotiate with homeowners that are underwater/unable to make payments:

http://news.yahoo.com/s/ap/20091130/ap_on_bi_ge/us_home_foreclosures

What I find amusing is that this article states that the program “allows homeowners to have their mortgage interest rate reduced to as low as 2 percent for five years”.

What would Canada do in this situation, since many of the risky mortgages are already at 2% (the 2008-2009 variable rate)? I guess this is how some ridiculous concept like 50-year or 100-year amortizations would get introduced.

#97 Men With Hats on 11.30.09 at 3:21 pm

Some jails have bigger cells than those featured condominimums.

#98 Two-thirds on 11.30.09 at 3:26 pm

Is the GDP growth calculated with respect to the previous year value, or previous quarter, or what?

0.1% growth with respect to a level already lower than last year’s GDP is not only exceedingly easy to achieve *mathematically*, but also frightening, *if* it is indeed calculated with respect to low, low values…

#99 Keith in Calgary on 11.30.09 at 3:39 pm

#86 Prairie Gal……

Your friend is not the exception. There are a lot of 1-2 bedroom condos here in Calgary, for sale at prices we haven’t seen since 2004……..seems like the current crop of freshly minted $400-600 a month condo fees being handed around out here, due to all of the delayed assessments and the deferrred maintenance that occured during the 2005-2007 flipping frenzy, have finally come home to roost in the lap of the “greater fools”. I mean after all, now that things have pretty much died on the construction side, you can actually get a trade to do your repairs now at a lower price.

$500 a month carries $100K of mortgage debt over 35 years at a 5% interest rate. But it only takes a $100K assessment on to a 16 suite apartment conversion to bump you up $100 a month for 5 years. So, that delayed roof replacement, and those common area repairs can really screw your property value, even though they are supposed to improve them, in theory……..

#90 BAD……..

I was just about to post that.

Wages are stagnant or declining, and they have been for a while now, therefore any increases to the consumers cost of necessities (shelter, food, etc) has to come fom somewhere.

#100 EB on 11.30.09 at 4:04 pm

#90 -

“Facts are meaningless. You can use facts to prove anything that’s even remotely true.”

H. Simpson

#101 Mike on 11.30.09 at 4:17 pm

If you all want a massive hoot just have a look at the video they did up for “restoring the lower donlands”
http://www.youtube.com/watch?v=bEQiNXXgu4g

Even the voice over person doesn’t seem convinced.
As Garth points out… this is all about speculation and greed. Building a condo above an area where animals don’t find hospitable is just typical developer BS.

#102 tech4monkies on 11.30.09 at 4:17 pm

I was reading the local small town newspaper here is Sask and there was a full page advertisement for tourism in Dubia and “you gotta visit and see it at least once!” – hype – and I thought to myself, control the information and you will control the minds of the people. Seems to apply to everything.

Then I came here for a dose of refreshing reality…

If memory serves, I think tomorrow is when the Liberals have there ‘emergency session’ to figure out if they are officially for or against the HST. Should be interesting to see how that plays out.

cheers!

#103 miketheengineer on 11.30.09 at 4:18 pm

Hey Garth:

I just remembered something that happened back in 1997, when I bought my particle board, Mattamy Shack. The day that I went into buy one, and I was a little hesitant about it, she (the RE pusher) pops out, “if you don’t buy it this minute, when we open our doors on monday the price increase by 10k and you pay more.” At the time, I thought is was a BS, and a strong sales pitch to close the deal, I was ready to jump in anyway, so I signed. Sure enough, on Monday morning, the price was changed and all the homes went up 10k, then 2 months later they went up another 10k, etc. Within about 8 months the homes went up about 60k.

It is all supply and demand.

Too bad, some people are going to get burned. How many, no one knows. Same thing happened in the 90′s. Best friend bought a home, paid 120 for a small war time shack. Then the RE market dropped and his house was worth 85k. Could not sell, was stuck. Lucky for him he had a good job (union) and his wife too. They could make the payments, even with 4 kids. They got stuck and learned a hard lesson. Same thing, going to happen here.

You are not blowing hot air Garth. You are a realist to the extreme. Keep calling it as you see it.

#104 john m on 11.30.09 at 4:20 pm

Curiously when the Global recession started Canada was not in bad shape……….where are we today?? …….and today i read the recession is over in Canada?……….all the propaganda in the world will not change where we are headed……….”welcome to the future”

#105 Calgary_rip_off on 11.30.09 at 4:21 pm

#82 Zero Net worth:

He with the most toys generally loses. The more stuff you own the more you are a slave to it.

I’ll buy when I can afford it. Save up the slow and reliable way.

I have a former highschool buddy that is running an internet sales company that sells POS sales equipment. I bet his company is going underwater cause he’s gotten rather self righteous lately. I would hate to be a business owner in these times. He has no safety net. I bet he’ll implode soon. Should be fun to watch as his Marine backside implodes. But what could you expect selling POS equipment?

I predict massive implosions in the coming months in Calgary, lots of heart attacks, axe murderers, and more crazy stuff-all cause of the stupid market values of housing in Calgary.

#106 Rob in busted bubbleland on 11.30.09 at 5:03 pm

Speaking of taxes you should remind people socking bigs bucks away in RSPs that they are taxed at 50% in other words when you take the money out the goverment gets half! Very very few people know that

RRSPs can be ‘melted down’ without tax consequences. Few know that, either. — Garth

#107 bill on 11.30.09 at 5:14 pm

Hi Garth
Could you provide info on the proper method to ”melt down a rrsp”
thankyou for your trouble.

Several pages devoted to that in the new book. — Garth

#108 john m on 11.30.09 at 5:59 pm

Ah yes we are headed for bad times…but when the future looks dismal…there are still some caring individual heroines out there……….the worlds most famous golfer’s wife busted the rear windows out of his escalade with his prized golf club to rescue him after he ran over a fire hydrant and crashed into a neighbor’s tree not wasting a precious minute to open the doors and pull him out………………..:-)

#109 Ottawa on 11.30.09 at 6:05 pm

Attributed to Murray Dobbin edited from the Matt Stiles Website a poster linked above:

Outstanding and Guaranteed by CMHC:
2007 there were $138 billion…
June 30, 2009, that figure was $290 billion…
CMHC’s stated goal was to guarantee $340 billion by the end of this year…
on track to reach $500 billion by the end of 2010.

If this is accurate, and with the inclusion of the tens of billions in new gov’t (I’m referring to pre-crisis) spending over the last few years we have the potential for massive liabilities to be shouldered by future taxpayers. What is prudent about CMHC’s guarantee program – I’m betting no private insurer would go near this? What is going to pay these liabilities? I thought benefiting from fiscal prudence and low taxes, maybe it is just immediate taxes due that people are concerned with.

Try as they might in the future to say housing decreases and defaults were impossible to predict this will be laid at the feet of the government that enacted these policies.

#110 moneyman on 11.30.09 at 6:13 pm

Dubai real estate is down about 40% from peak, since spring ’09.

Today, the Dubai government (which I would compare to a province in Canada – the country being the United Arab Emirates -UAE), announced that it was going to be Chapter 11 for their equivalent of Fannie/Freddie called Dubai World. Dubai World is a real estate developer owned by the Dubai government.

So, friends, Dubai real estate is 40% down from the peak and then today, it is Chapter 11 for Dubai World, owned by the Dubai government.

Dubai said the government has no legal obligation. Creditors will take a haircut.

#111 wise on 11.30.09 at 6:53 pm

There are only two ways in the future:
1. keep the interest low like japan or
2. burst the bubble.

No other way seems rational for now.

#112 omg on 11.30.09 at 6:55 pm

Re #39 West Coast Woman

That’s really funny – these $1.5 million houses with basement suites added.

Who would have ever thought that somebody that could afford $1.5 mm for a house would have to have a mortgage helper.

#113 Billy Dreamer on 11.30.09 at 7:01 pm

Everyone on this blog should just relax and enjoy the show. This is going to be better than any movie you’ve ever seen. No need to feel frustrated, angry, impatient, etc. All those who are not wise enough to understand human nature and those who do not know human history are doomed in the end anyway.

It’s not just in real estate. It’s in almost everything. The sheep are about to get slaughtered again.

I’m going to enjoy hearing people talking about what a horrible “investment” real estate is in the not too distant future. Imagine that! It will be so nice when all this real estate talk is history. Most realtors will have to find real jobs at a time when real jobs will be scarce. And I’ll have my pick of cheap housing in the despair to come. Like Garth, I’ve seen this movie before, and I know how it ends.

Those who are wise enough to do what’s right now will be doing well. And don’t forget, Canada’s fiscal situation may not be great, but the whole western world is as bad or worse. Canada will be OK in the end.

What I’m really happy about is that all of the suffering this will cause will be good for people. It will teach them some humility. Don’t laugh! People will learn the hard way.

Enjoy the show!

#114 Jeff Smith on 11.30.09 at 7:37 pm

#62 Jeff Smith

[snip]
> Have you noticed how many people are deciding to
>have surgery in SE Asia from Europe-UK-NA?

Actually I have heard about this and found it quite surprising.

>How about a Government Pension Policy that pays a
>guaranteed 7%.

You mean pension for people who works for the government over there (ie civil servants?). Or did you mean interests on a government run retirement policy?

>How about a max tax bracket which is 27% or close to half of that after deductions.

Wow! Nice

>There are always jobs for educated people in Asia
>especially if you wish to run your own business as tax
>incentives have been protected for those enterprising
>individuals.

I take it that the incentive is similar to what you get here if you set up a corporation and get to write off a bunch of expenses? Or is it nicer than that?

In any case what you described seems nice, and don’t forget the nice beaches and sunset.

#115 Oakville Owner on 11.30.09 at 7:55 pm

Garth,

Just got a nice little property tax refund from the Town of Oakville. Looks like my request for reconsideration from MPAC has paid off. If the new book does not include a page or two on how to do a RFR, you should consider it. I ran the #’s and this one RFR will save us approximately $3500.00 over the next 4 yrs. Not a bad legal tax avoidance opportunity.

Ran into an old Tory buddy of your the other day. I think he said his name was ” Ron senior” or something like that. Any way he says hello.

#116 wondering on 11.30.09 at 8:12 pm

Duh, I thought the recession was declared to be over months ago by the Government of Canada.

I remember the same thing, back in August, they announced the recession over because of a – you guessed it – .01% increase in GDP. Then in late Sept/early Oct the revised numbers came in and there were a couple of articles on the CBC that essentially said “oh, look, we were wrong, the economy didn’t grow in August after all”, but they weren’t widely noticed and I didn’t see other news media mentioning the change.

Gotta give us a steady diet of good news, after all. If we start feeling pessimistic, we keep our wallets closed.

#117 Billy on 11.30.09 at 8:38 pm

I live around the corner from the Mark. If you look closely at the picture, you will see it is RIGHT NEXT TO THE GRANVILLE BRIDGE ONRAMP.

At least the view of the Toronto on-ramp will only set you back 180k; in Vancouver it’ll cost you 500 big ones to smell the exhaust in the morning.

#118 Piccaso on 11.30.09 at 8:53 pm

Canada’s debt

http://www.debtclock.ca/

#119 Taxpayer like you on 11.30.09 at 9:11 pm

106 Rob – your RRSP withdrawal is taxed at your
marginal rate. In Ontairio, that is something like 44% on
an $80K income.

The purpose of the RRSP is to defer income, hence defer the tax payable, and allow it to compound tax free. The other benefit should be, with proper planning, that the RRSP is taxed at a lower marginal rate when withdrawn
in your retirement because your income is lower.

So it can be poor planning to have a giant RRSP if you
have sufficient income to push the required RRSP
withdrawal into the same tax bracket as before you
retired. So that million $$ RRSP the industry “recommends” may be too much.

The RRSP is taxed on its remaining value when you die,
except for transfer to spouse(?) but ouch to the kids.

The RRSP meltdown is not new, but involves borrowing
money to invest and a stomach that can handle it.

#120 Rich in Calgary on 11.30.09 at 9:12 pm

#106 Rob in busted bubbleland

Wow! Spoken like some one who has no idea how RRSPs work.

50% tax?!? LOL!

#121 Taxpayer like you on 11.30.09 at 9:14 pm

Rob – sorry should have also mentioned the uncertainty of what the tax rates will be when you withdraw from the RRSP. If they are higher than when you contributed, then
of course some benefit is lost. Have a good evening.

#122 Taxpayer like you on 11.30.09 at 9:17 pm

Here’s a marginal tax rate calculator I like:

http://www.walterharder.ca/MarginalTaxRateCalculator.html

#123 Onemorething on 11.30.09 at 9:28 pm

Hey AM IN LONDON & JEFF,

AM, thanks for the that perspective. May I submit that you can walk into a top private hospital, get looked at in less than 10 mins and likely walk out for less than $20 CAD if you have no formal medical plan. Any medicines will cost you likely 70-90% less including dispensing fees.

Jeff, this is the return on your company contribution pension plan. 10% contribution, match by company 10% making 7% compound interest, tax exempt going in and tax free on divedend coming out.

Yes, beaches, many in SE Asia (all within 2 hour flight) and if you fly Air Asia, look forward to paying around $50 – $100 CAD return.

#124 Into The Sunset on 11.30.09 at 10:55 pm

Bottom Up # 19
Income earned internationally is taxable by the Canadian government, n’est pas? You must have a real ‘good’ accountant.

I didn’t say income earned internationally is not taxable.

I said “I don’t pay income taxes”.

Think – Deductions. Think – Non Resident.

OR Don’t think !…… Just keep on paying !!

#125 Ronaldo on 11.30.09 at 11:04 pm

#92 Mattbg

“Greater Fools”

#126 bill on 11.30.09 at 11:07 pm

Thanks Garth I will put it on my list.
Bill

#127 West Coast Woman on 12.01.09 at 2:25 am

#117 Billy: –

Don’t worry about that on ramp. The brilliant Vancouver City Planners think that taking the loops off the North End of the Granville Bridge (that take traffic to and from Pacific) and building condos on that land is a better use of the land – and our “green” Councillors agree. Next it will be the ramps. Of course no one bothered to ask the 10,000 car drivers who actually use those loops what they thought of the idea. Or the taxpayers who paid for that bridge and land, and will now have to pay for new City Streets to be built to redirect traffic through, creating even more gridlock in the downtown core.

Now Councillor Geoff Meggs has asked staff to look at taking out the Georgia and Dunsmuir viaducts as well – (no doubt to sell the land off for even more “waterfront” condos), which the planners will of course recommend as “a better use of the land”. And Council will agree because they don’t care about the cost to the taxpayers – just the profit to the developers.

I am so glad I don’t live downtown. I wonder how all those people plan on getting out of there if there’s an earthquake when all the bridges are gone.

Oh, yeah, that’s right – they can walk or bike a few miles to the nearest hospital that our politicians want to build on the False Creek flats – if it doesn’t sink into the swamp underneath it first.

After all, the old St. Paul’s Hospital is on a high point of land (a smart move by early City builders) but now that same land could be sold off for more luxury “view” condos! Just like they sold the land across the Street that used to have King George High and Dawson Schools on it – now the “Wall Centre”. The kids who now live downtown have to be driven elsewhere to go to school (more vehicle traffic). Oh so green it is!

Does any other City in this country have the same kind of overspending brain-dead City Council members and idiotic planners that Vancouver has, who think that building condos on every piece of public land is more important than public safety and livability?

Why does it appear to so many of us that the only green those people are interested in is the green from the developers who’ve lined their pockets?

#128 Rob in busted bubbleland on 12.01.09 at 2:50 am

Thanks for the feedback, my point about RSPs was that most people don’t realize that upon death, the government deems that all your assets are sold the day before. So if your had 500,000 dollar house and a half million in an RSP the house would pass on tax free to the kids or the dog:) while the RSP would be cashed out and added to your income, so 500,000 dollars at 44% (hat tip to ‘Taxpayer like you’) means you’d be giving $220,000 to the government. While not 50% it will still be a massive shock to the average Canadian when they file their parents final return.

My sister in law made a similar comment when her Dad died, she said she got all the money tax free because he transferred it to her name a bit before he died, not realizing that her Dad NEVER had it in an RSP so didn’t have to give half if to the government when he died.

btw when we left Canada in 99 one of my Wife’s last pays was a bonus of 2000 dollars, and over half of it (54% to be exact) went to taxes ouch!

#129 Eli on 12.01.09 at 10:03 am

For the person living in Vancouver…complaining that the properties around her have gone up by astronomical amounts…just a observation..why don’t you sell your house and cash in! doh!

#130 Zed on 12.01.09 at 11:51 pm

Debt to GDP in Canada may be more like $2 Trillion or 131% of GDP. See the math at:

http://marketdepth.typepad.com/marketdepth/2009/11/so-shall-we-reap.html

#131 Samuel Adams on 12.02.09 at 11:30 am

Understanding national debts of sovereign nations – please help!

Regarding the chart of countries debt expressed as a total percentage of GDP, it seems that virtually all countries on earth are in debt. This is very confusing. If we take all the countries in the world together, and allow them to both borrow from and lend to one another – mustn’t the totals balance? I mean for every billion, or even trillion dollars one country is in debt, shouldn’t there be a country who is owed that amount of money?

If this is not the case, then who in the world is this money owed to?

It almost appears as if there is some unknown entity which loans money to virtually all national governments. How could such an entity have come into existence? And where in the world does it get the money to lend in the first place?

[Aside to Garth - if you decide to answer this post on your blog, you might just use the above section, I’ll include the rest in case you can answer my other questions as well.]

What is the history of government debt amongst various countries? Which country was the first to go into debt? Who lent them the money? When did all this begin? Has there historically ever been a country that functioned for any length of time debt free? Why can’t any country simply stick to a budget and function debt-free?

Regarding the morality or legality of government debt, how can a government even incur a debt? Isn’t borrowing money a contract? Doesn’t a contract require the consent of both parties? How can a government give consent to a loan that will be repaid by people who aren’t even born yet? Those people didn’t vote for the government or give their consent in any way.

Even if we imagine that the government of the day rules by the consent of the governed (an increasingly questionable premise), and their authority to incur debt is somehow legitimate, wouldn’t the conditions of the loan have to be such that it’s repayment schedule was completed by the end of that particular government’s term in office? Four years in the States, and up to five in Canada?

What possible moral justification could there be for a government incurring a debt, during their rule, which is to be repaid during another’s rule, by citizens other than those who elected said government?

It seems that any loan a government takes on in the name of it’s citizens which is not structured to be paid back entirely within that government’s time in power – is not legitimate.

No government has the right to apply for such a loan. No lending institution should ever make such a loan. Such a loan is not a contract – since both parties did not consent to it. The citizens of subsequent governments of that country need not feel any obligation to repay illegitimate, illegal, non-contractual loans taken in the name of a government which they never lived under.

Can I get a bank loan which requires my children and grandchildren to finish paying it off? What would happen if they decided not to pay up? How is this situation any different from government incurred debt?

Could it be that we simply have no moral nor legal reason to pay?

#132 Ret on 12.02.09 at 8:20 pm

The government and the banks both encourage citizens to save like squirrels in their personal RRSP’s. Free money back at tax time. Yippeeee!
The banks get a huge pool of cash to lend out to the real estate crowd just in time for the spring market and millions of dollars in service charges and plan fees to boot for essentially doing nothing. Try to make a withdrawal and the first words out of their mouth are, “But you’ll have to pay taxes to the government!” This usually is enough to get you to back-off. If not, they threaten hefty service charges for each withdrawal. That RRSP seemed like a great idea at the time, and it was – for the Bank!
The government hopes that you either hold onto every $ in your plan or pass it on to your significant other. At this point, the trap has been set.
Once the last holder of the plan is gone, the Revenuers move in for the kill. The recipients of your estate will wonder why you didn’t enjoy some of your wealth when you had the chance and, why you were so stupid about the tax consequences. Not exactly the final memory that I intend to leave.
By all means, have investments, but I see RRSP’s as a sucker’s game perpetuated by Banks and the Government. Unless your employer is using this as some kind of pension plan for you, that they are jointly contributing to, why would you hold any RRSP’s?