Careful what you hope for

condo

Orlando realtor Heather Joubran,
where zero rates don't help.

Some people have come by to say they see no reason Canadian interest rates can’t stay in the dirt for years. A la Japan. Others have asked me to comment on what might happen if they did.

Here are some thoughts.

First, it’s key to remember that today’s rates are not market rates. They are uninfluenced by economic supply and demand, the level of the currency, money supply or inflation. Therefore the Bank of Canada, in dropping its key rate to 0.25% and leaving it there, did a political thing.

This was not in the central bank play book, but rather a response to an emergency situation. It went hand-in-glove with spending tens of billions in tax dollars to buy mortgages from our big banks and plunging the country into the worst annual debt ever to bail out Chrysler Canada and GM and plaster ‘Canada’s Action Plan’ billboards everywhere. This is the most extreme form of interventionist Keynesian economics Canada has seen. Too bad it does not seem to be working, as Monday’s numbers show.

So, what we have are emergency rates. They’ll stay in place as long as an emergency looms. When the economy sputters back, inflation increases, borrowing demands push bond yields higher or people starving on their GICs mobilize, rates will return to market levels. As I’ve said, I expect that to take mortgages back to the 7% or 8% range by 2014-5 – just in time for renewals.

But what if they stayed unchanged? Wouldn’t that keep this real estate party going, protecting recent indebted buyers with new equity and goosing the economy?

Well, won’t happen. There will be no sustained real estate price increases until wages and incomes rise. Second, emergency rates have brought forward demand from the future, not created new demand. Third, rates are already starting to rise in other countries, and our central bank cannot withstand a widening trend. Fourth, the Americans will raise rates to support the falling dollar. And why not? Cheap money has done absolutely nothing to reflate their crashed housing market.

I was reminded of that when I read a report from Orlando, and condo owner David Burt. He paid $167,000 for his unit three years ago, and is hoping now to sell it for $37,000. The Florida city has seen a 56% drop in condo prices over the past year, and the median apartment now sells for just over $50,000. The closest disaster area in terms of price is Las Vegas, with a 46% annual plunge. Despite near-zero interest rates, lenders are not even financing empty units sitting in near-vacant builders with bankrupt condo associations.

But, despite the above, what if rates did remain near zero here? What would that mean?

In a word, it would mean desperation. Rates would stay low if demand for goods and services withered and we entered a period of renewed recession. Or worse. They’d stay low if business owners were facing imminent failure and laying off new legions of workers. They’d be low if the economy slipped back into contraction with unemployment racing past 10% on its way to 15% or more. If there was deflation instead of inflation. They would stay low if the Bank of Canada had absolutely no other weapons to combat a cycle of tumbling incomes and prices. In short, emergency rates would remain so long as we had an emergency. And there’d be little reason, I would imagine, why anyone would be out buying a house.

And then Toronto might smell like Orlando and Vancouver taste like Vegas.

So, I look for the cost of money to rise. And with it, hope.

Asked, $719,000.  Sold, $747,000.

House1

Steps from the Toronto mega-corner of Yonge & Eglinton, 1,200 square feet with a front-‘lawn’ parking pad, on a 21-foot lot. The owners received almost $30,000 over asking after 6 days on the market. Many believe the real cause of the US housing crash was not dodgy lending, but foolish buyers.

135 comments ↓

#1 Claudius Emeperor on 11.30.09 at 9:29 pm

in Japan with almost 0 interest rates for 2 decades housing prices declined over 65 percents in absolute values.
The government dept increased significantly.
Luckly our govenmnet dept can not increase significantly, we spent the money fueling the bubble, not fighting the crises caused by it’s burst.

If bank of Canada does not increase the interest rates significantly in the next months I am going to convert all my savings into Euro’s and my RRSP into euro stocks.

Take care Mark (Carney).
And good luck baby boomers.

#2 Bottoms_Up on 11.30.09 at 9:52 pm

In 2008 I remember watching a US real estate show (it was likely filmed in 2006/7) where a single mom of 2 (or was it 3?) kids with a salary ~$50,000 took on a $300,000 mortgage with one of those fancy products that have uber-low rates for a year or two that then resets much higher. It seemed that ANYONE could get loads of cash from lenders in the US. I was flabergasted that with a Ph.D. and chincy salary of $25,000 banks (in Canada) would not give me anything, I just did not understand the disconnect between the two countries. I have now learned, in large part thanks to Garth’s blog, that it all boils down to risk, and mortgage-backed securities eliminated risk from the US lenders. We are in a similar boat with CMHC in Canada today. Although I still believe our banks are/were more prudent and this should help buffer the bursting bubble.

On another note, although Ottawa is not as bubbly as Toronto or Vancouver, take a look at this $365,000 townhouse in northern Kanata, walking distance to nowhere (30 min. car commute to downtown Ottawa, 60 min. in snow/traffic or by bus):

http://www.realtor.ca/propertyDetails.aspx?propertyId=8716616

I can only think to myself, when gas is $2/litre who is going to want to live there? I guess there are always ‘work-from-home’ types that make $120,000/yr?

#3 stillwaiting on 11.30.09 at 9:56 pm

Dude, In your example the increase from 485K to 747K over 7 years represents a compound increase of 6.4% per year. Is that really big bubble territory?

Since 2003, the TSX appears to have increased by more than 8% annually.

Then buy it. — Garth

#4 Ronaldo on 11.30.09 at 10:22 pm

#3 Stillwaiting – do you know of anyone that was making $5000/mo 7 years ago that is making $7700/mo today (other than a realtor)?

#5 Dan in Victoria on 11.30.09 at 10:23 pm

I don’t think all the pain is over yet down south, not by a long shot.
Who would give this “man” a mortgage?
Another wat to understand the absurbity of the US federal governments condition is to reduce it to family terms.
The fed’s collect about $2.5 trillion in total revenues every year. That is from all sources of taxes and fees.
Think of that as an individuals annual gross salary.
The debt owed by the government can be looked at as a large mortgage.
Thus we have a family that has a mortgage of 44.8 times greater than gross salary.
That would be the equilivant of a man with a 50 k salary having a mortgage of $2,240,000.
An interest only mortgage at 6% would require the family to pay an interest sum of $134,000 per year.
A conventional mortgage would be much higher, it becomes even more ludicrous when one reconizes that taxes, food, clothing.savings, etc.all have to be subtracted from gross pay to determine what is left for debt service.
What about state and municipal debt?
From http://www.economicnoise.com
And I wonder where the sheep in Canada think we are headed?
Oh Right, its diffrent here.

#6 Typhoon on 11.30.09 at 10:29 pm

Hey, I recognize that house. It’s on Soudan, which is right around the corner from me. Maybe I should take a picture of the buyer and post it for all to have a nice laugh at.

#7 jess on 11.30.09 at 10:31 pm

yeap, and those same americans called people who used food stamp lazy that is until now when they need em since Bush renamed them nutritional supplements less shameful eh.
====================
Keynes’s tax
a tax to change the behaviour of the toxic soup sellers.
===========================

Nov. 30 (Bloomberg) — When Qatar’s biggest natural gas shipment to the U.S. arrived this month, it signaled to Barclays Capital Inc. and PFC Energy that this year’s worst performing commodity investment won’t recover in 2010.

Murwab, a Qatari liquefied natural gas tanker, carried the first shipment to the U.S. from the Persian Gulf nation since June 2008. Its cargo, enough to heat about 9 million homes for a day, added to the largest gas inventories for this time of year since at least 1994, Energy Department data show.

Rising supplies threaten to hurt the record-large $4.2 billion bet in the U.S. Natural Gas Fund LP, while traders hold 51 percent more options contracts to buy gas than they do to sell. The International Energy Agency warned of a glut that Qatar’s energy minister said may last until 2012. Wall Street’s consensus forecast for a 51 percent rise in U.S. gas futures to an average $6.09 per million British thermal units next year is too high, according to industry consultant Schork Group Inc

#8 homeless on 11.30.09 at 10:38 pm

While talking about lending practices of Canadian banks, I am really surprised by hearing stories of people selling homes above market price.
What happens is that seller would make a deal with buyer to sell him at a price lot more(100K or 200K or even more) than market price. Once buyer’s lender pays the seller, he would pay back the agreed amount to buyer. Buyer would pocket the extra money and seller would also benefit from pocketing some of the extra money.
Seller would usually file bankruptcy afterwords. I wonder why banks would not do appreciate the property before approving the mortgage. Is it because mortgage is CMHC insured and bank does not care about the loan.

#9 Piccaso on 11.30.09 at 10:45 pm

I think it’s all about location, if you don’t want the commute then pay the piper. I work on Yonge and Merton (Davisville). We rent a furnished two bedroom apartment, pretty nice I might add, utilities, cable tv in both bdrm’s and living room, wireless internet, everything… even a waterfall, pond with fish and baby grand in the atrium… all for $2100 a month. I split it with a colleage and walk to work.
Another person I work with from the Toronto area commutes 1.5 hours each way to work. I would get fed up with that pretty quick!
Not saying that dog house is worth 3/4 mil though especially when I pay $1,000 a month right next to it.

#10 Calgary_rip_off on 11.30.09 at 10:50 pm

Garth this is not bad news if interest rates rise and level market values. A $180K house at $15% interest is a better investment than a $400K house on 2% interest. Less risk and more room for growth on equity. Great post!!

#11 junius on 11.30.09 at 10:51 pm

The degree to which people in this country remain tied to the most conventional positions is really alarming. I had lunch with a friend today in Vancouver who declared, “Now is the time to buy, in the long run real estate always goes up.” I told him in the long run we are all dead but real estate can go down for decades and mentioned the Japanese example. He dismissed it and said it couldn’t be true or relevant.

Real Estate reminds me so much of political thinking in how we lose our objectivity to the potential realities.

#12 Typhoon on 11.30.09 at 11:10 pm

Toronto Housing Prices are starting to come down.

See Toronto real estate board market update at:

http://www.torontorealestateboard.com/consumer_info/market_news/index.htm

The month of October averaged 423,559
The first two weeks of November averaged 415,066

This is a 2% decline in 2 weeks. Geeze, at this rate, in one year….. naw… I’m bearish, but not that bearish.

It usually takes 3 to 4 business days to get the month end information, so now that November is over, probably Friday or maybe Monday the numbers will be out for the whole month of November. I bet the average will be down even more. If no one else posts a comment to this, then I’ll be sure to do so.

#13 Genghis on 11.30.09 at 11:19 pm

What happens if interest rates stay low? Well, low interest rates are no guarantee that house prices will remain stable.

Interest rates were low in 2007, when the real estate market in the US began to implode. There was not a hint of a future interest rate hike in the air, but the crash still happened.

#14 Josh on 11.30.09 at 11:23 pm

Garth, when are you coming to Saskatoon?

#15 Rob in NVan on 11.30.09 at 11:24 pm

Debt, ever-increasing; bubble, ever-inflating; consequences, forthcoming.

November 23, 2009 report from “Bankruptcy Canada”:

“The personal bankruptcy rate in Canada had a huge upward spike in September, 2009, according to numbers released by the Office of the Superintendent of Bankruptcy. In the month of September 12,305 Canadians filed personal bankruptcy, which is an astounding 47% increase over the 8,347 who filed in September 2008. In addition there were 3,160 consumer proposals filed, for an increase of 38% from last September.”

Filers rushing in to beat the September 18 onset of the “new bankruptcy rules” (making bankruptcy far more expensive for higher earners) contributed to the increase. The “new rules” state that surplus income gets chopped for 21 or 36 months, versus the “old rules” that required only 9 months of income docking. Apparently all these bankrupt higher-earning people know a sweet deal when they see one. Maybe they’re the ones lining up to buy all the condos.

http://tinyurl.com/yfbtomm

Roger Suave of the Vanier Institute of the Family provides data to suggest what recovery from a recession typically looks like:

* Jobs lost in each recession: about 350,000. After the 1990’s recession, it took five years for the number of jobs to return to the 1990 level.
* Average household incomes dropped in the last recession by $3,800. Income levels did not recover for 10 years
* Record poverty rate reached in last recession. Rate in the nineties did not recover for 11 years.
* Twice the number of Insolvencies

http://tinyurl.com/y9ty2e4

#16 Typhoon on 11.30.09 at 11:32 pm

Hey Garth, I don’t know if you have a name for your new book yet. Can I suggest that you call it “The concrete box”

#17 rp on 11.30.09 at 11:40 pm

The US will not raise interest rates, their plan is to inflate away the debt. They will never default, nor will they stop spending. China is walking right into it, buying USD to keep their currency peg. They view USD reserves as a sunk cost. Canada probably can’t get away with this strategy, but we’re going to try. And please don’t try to say central banks are independent, because who can say where the Federal Reserve ends and Fannie Mae & Freddie Mac begin. Then it’s off to the Treasury for more bonds for “quantitative easing”. What a bunch of BS.

I honestly don’t understand why anyone has any faith in any currency these days. It’s all a big game, and the only sure thing is that we’re being hosed.

#18 Ted on 11.30.09 at 11:43 pm

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

Its not free! He pays rent enough to cover the cost to own. Better to be in my pocket that somebody else. It has a 7 year 25year am 3.85%. Bet I will make money on this one.

#19 Joseph on 11.30.09 at 11:55 pm

Great post!

#20 AxeHead on 11.30.09 at 11:58 pm

I dont’ care if you’re from Calgary, Vancouver, Regina, or Montreal…that house is stupid for the price. Anyone buying at this price is either too rich or too stupid. This is truely unbelievable.

So Garth’s point is – if interest rates stay down, we’re in emergency territory and it sucks to buy a house (cause it’s going down)…if interest rates rise, you mortguage is too high and it sucks to buy a house (cause it’s going down). The only one who wins is he who waits for the inevitable correction and then buys – but timing will be the essential key.

Too simple, really.

#21 Jane54 on 12.01.09 at 12:01 am

I really don’t get Vancouver!

I lived in Montreal during the 1976 Olympics and I remember that the boom came before the games and a bust, that took Montreal a decade to shake, came after the games. Why would Vancouver be any different. Plus a post-games bust also happened in Calgary in the 1980’s. Getting the Olympics would seem to be an economic death wish. Note to self- get on the train to London tomorrow and buy a house now, flog it in 2011.

Also I thought that the point of Vancouver was to sell your mansion in Ontario and retire to a snow-free and cheaper life in retirement. How does this work if the RE prices in the retirement community are triple the value of the house you want to sell elsewhere? I would have throght that this source of buyers was important to BC as few good paying jobs there. Most of my family are there and often under-employed. Better to retire to Florida or Spain or as we did to Italy and grab a bargin home and put the rest in the bank.

And while we are on Vancouver exactly why would rich Asian types prop up the RE market there. Most Asian countries have a low income tax structure whereas from what I have read on this blog Canada seems to kick-off at 40%. I really don’t think that rich Asians are that dumb or they wouldn’t be rich Asians!.

#22 Aizlynne on 12.01.09 at 12:04 am

Garth, you know that NINJA loans were one of the main contributing factors to the US housing collapse.

The foolish buyer got involved because the lenders basically allowed them to pay less than rent for 5 years and told them “not to worry”.

As far as I know, the Cdn banks were not giving out NINJA loans, but that isn’t to say they didn’t take hefty losses in the US housing market.

Garth, your reasoning stands on it’s own most of the time without having to throw in drivel like your “foolish buyers” statement.

#23 Jonas on 12.01.09 at 12:08 am

For all the fools who think that low rates are here to stay… what country do you think is most similar to Canada in terms of size, poplulation, exports and resources? hint – they just raised rates for the 3rd straight month…
http://www.bloomberg.com/apps/news?pid=20601087&sid=aaqSnPJFlLpA&pos=2

No infation?

http://www.youtube.com/watch?v=eZA0qNsf4m0

One more cheerie thing to think of before I go…

http://www.thethirdjihad.com/12min.php

#24 Einsam Solo on 12.01.09 at 12:35 am

With such low rates now, 7% or 8% is going to seem like usury.

#25 nonplused on 12.01.09 at 12:36 am

It’s time to swap out your paper assets for hard assets. Actually, it’s been a good time to do that since 2002 but now time is running short. Get out of the dollar, US now and Canada soon, run don’t walk.

And that does not include buying a house with 95% financing. The “paper” side of that deal is going to hurt. USe no leverage in anything you do. Don’t even buy gold on margin.

#26 Jane54 on 12.01.09 at 12:36 am

Yes I also want to know where Onemorething lives exactly??

#27 JET on 12.01.09 at 12:50 am

Great read:

http://www.marketwatch.com/story/obama-leading-us-right-to-great-depression-2-2009-12-01

http://www.gmo.com/websitecontent/JGLetter_ALL_3Q09.pdf

#28 Soylent Green is People on 12.01.09 at 12:55 am

It certainly feels very hot in here. Heated up…, yes.

And I need answers. Should I sell stocks, put in cash and wait for market correction before buying back in?

I have another 20+ years to go to “retirement”.

Is it worth it when you factor in the costs to sell everything and then to buy back in???

Please for the love of God could somebody answer me. I promise I will not hold your feet to the fire if something bad happens to me. I am just looking for opinions.

.

#29 InvestorsFriend on 12.01.09 at 1:07 am

It used to be said that the Bank of Canada can set short term rates easily but that the 5, 10 and 30 year rates are set in the market.

Who in the market is investing in 5, 10 and 30 years governement bonds at very low interest rates?

I believe it is pension funds in part…

No one is holding a gun to their heads… apparently they just can’t find a better use for the money.

Of course it is also partly because all them big dumb funds have rules like “a minium of 20% of our assets to be invested in Canadian government bonds”. Or even 60% in some cases…

That’s like pointing a gun to their own stupid heads and blowing their financial brains out…

Buffett calls this the institutional imperative… big institutions mindlessly imitating each other or otherwise mindlessly following obsolete rules…

Will interest rates rise? Yes more than likely. It’s called regression to the mean… extremes just don’t last in fashions, in weather, or in financial markets…

#30 tech4monkies on 12.01.09 at 1:14 am

Speaking of rates: Australia lifts interest rate for third month in a row, to 3.75 per cent.

http://ca.news.finance.yahoo.com/s/30112009/2/biz-finance-australia-lifts-interest-rate-third-month-row-3.html

#31 Nostradamus Le Mad Vlad on 12.01.09 at 1:21 am

“. . . the BoC . . . did a political thing.” — If Carney / Harper / Flaherty are in cahoots with the US Fed and DC’s dictates, it would effectively mean that we are a separate country in name only. Other than that, we’re now the 51st State.

“. . . by 2014-5 – just in time for renewals.” — Never mind renewals; that is when nine or ten mln. boomers (if they’re not already laid off / run out of EI benefits and on pogey with a McMansion to keep) go onto CPP / OAS / GIS, but what if those three are running on empty as well?

Who picks up the tab for that? See links following for swine flu, ‘cuz no one will have any tab to pay!
——
Sheeple are damned if we do, damned if we don’t. First, the mutated version of H1N1 which causes black lungs now appears to be in Iowa and NCarolina, probably soon here; second, it’s the nano particles in the swine flu shots.

With the following link about the US going under, life is headed toward an ever-growing louder crescendo.

When the US sinks, how far behind will Canada be? After all, Harper and Flaherty are proven liars (and very good at it, too) — 12-18 Months?

Canada’s economy barely scraped past zero per cent today, whereas India’s grew quite well.
——
A Cdn. view (CBC) on GoreGate.

A 10 min. clip on the hoax of ClimateCrap.
——
Naughty CIA. Wonder if CSIS does the same here?
——
Saw a line in a story I was reading last night: “THERE ARE NO RULES FOR GOVERNMENT, or FOR ANY OF THEIR ENFORCERS!”

One aspect that the elite are leaning toward is using loads of propaganda (verbal diarrhea) for WW3 (watch for a ramp-up in booga-booga about Iran), but NOT going that route; just going to use chem-trails to spray most of us with their ugly mutated A-H1N1, canceling our respiratory systems and choking us into the great yonder.

A very effective form of crowd control. Well, toodle-oooh!

#32 Mark on 12.01.09 at 1:25 am

“Many believe the real cause of the US housing crash was not dodgy lending, but foolish buyers.”

Well it’s like separating the chicken and the egg, they go hand in hand. But… Foolish buyers are nothing new, it was the new innovative ways in which mortgagors could put risk at arms length that really spun things out of control IMO. In the past Banks had an interest in weeding out the foolish buyers but suddenly that incentive was gone.

As it is here with the CMHC, why bother to check your client’s references when the government has you covered? The real culprit is not sub-prime it’s loose lending practices and a lack of due diligence on the part of the banks and if ANYONE thinks that Canada’s lending institutions are somehow superior to those in the US in that regard they are in for a shock.

#33 Adrian on 12.01.09 at 1:34 am

Garth,

This may be somewhat off topic, but have you discussed here the effects of the information revolution on the economy? I read an article recently about the positive impact the internet will have on innovation and how it will boost productivity. Sure, it will allow otherwise hidden ideas to be published at almost no cost, and rapid development of such ideas via massive collaboration. We’re already seeing the impact of this in the form of OpenSource software, information services like Wikipedia, instant news delivery via blogging, and entertainment through digital publishing and streaming. Notice how as in all the above examples, businesses are usually not in control of this innovation.

How can existing businesses handle these challenges? Can a room full of office workers really match the level of innovation and compete with hundreds of people collaborating online in terms of efficiency and cost?

The way i see it, many existing businesses that do not produce tangible products are going to have a very hard time as they face competition from these sources. As a consumer today, I already have an option to get my news from various blogs instead of the mainstream media, in fact, I prefer it. Same goes for software. There are many free applications out there that are legitimate alternatives to expensive packages from well known development houses. Looking for quality advice? I’m sure there is someone online out there willing to provide it for free or next to nothing (thanks Garth!). Feeling lonely? Reach out and skype somebody. I can think of other countless examples. I can’t believe that so many are willing to work for free, and can accomplish so much in the process, but it certainly is true.

To the affected industries, this means restructuring and loss of productivity as businesses reinvent themselves and face increasing competition, and with that layoffs, cost cutting and possible bankruptcy. Of course this is going to put downward pressure on earnings both individual and corporate, and that’s on top of the impact globalization is having already. We can already see it happening with newspapers, publishing and television. I think the changes are going to be fast and severe, many businesses will be unable to adapt, and it will devastate the already fragile economy in the process.

There are industries that are going to be unaffected or even benefit from these developments I would imagine. Manufacturing should remain unaffected, along with the energy sector, housing, and the food industry. Too bad manufacturing is mostly gone from North America though. Too bad we don’t encourage such innovation and would rather support obsolete dinosaurs that have no chance of competing in this environment.

Maybe I’m being too pessimistic here, but I don’t see a lot of economic improvement in the near future as a result of this. I hope someone finds a flaw in my reasoning. If this is in fact the future, chronic high unemployment and deflation is the only outcome. If you think your debts are hard to service now, wait till you start competing with free labor and take a nice wage cut along with everyone else.

By the way, I’m in the software business, and I’m shitting in my pants right now.

#34 Onemorething on 12.01.09 at 1:47 am

Negative Equity and Foreclosures will be a leading indicator of where things are going vs. unemployment!

This has now hit the prime mortgages in the US and I agree 100% with Garth that it will take US RE to a whole new lower level. Canada is in a shocking state right now — be very concerned!

Forced to keep businesses running over the next decade, employers have no choice but to drop salaries by 20% or dump employees. Both are happening right now. The only way I see keeping unemployment at bay during deflationary times is to just cut everyone’s salaries in half. Half of something is better than nothing.

I dont think people understand the death spiral we are in right now sucking in who seemed to be healthy 6 months ago with jobs and payable mortgages.

RE and UNEMPLOYMENT will move hand in hand negatively until the GREAT GLOBAL RESET finally is done.

A Decade – YES!

A great audio interview from Robert Prechter on King World News. I expected him to be very technical given he is the CEO and Founder of Elliot Wave International but he reveals some strong forecasts.

I am in agreement with just about everything he says. Real Unemployment of 33% coming??? He thinks so!

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2009/11/27_Robert_Prechter.html

#35 Peter Pan on 12.01.09 at 1:51 am

Oh my God! Whoever bought that house in T.O. should have their head examined… Sometimes in these situations you say, “Well, at least they can do a tear-down and rebuild”… but the lot is so narrow, you really can’t do anything… 1200 square feet… Wow!

#36 Jojo on 12.01.09 at 2:06 am

Inflate or Die!
So Garth, we’ll die in 2011.

#37 taylor192 on 12.01.09 at 2:07 am

Garth, there’s only one answer to give those who quote Japan’s low rates for 2 decades:

http://www.istockanalyst.com/images/articles/Japan-Real-Estate-Prices2009104235.jpg

There is nothing wrong with low rates if you buy a house as a consumable good as people here used to decades ago. Its not an investment, a place to park your retirement funds. Its a consumable good, something that wears out over time and requires more and more money for maintenance.

#38 coop on 12.01.09 at 2:19 am

I read through Statistics Canada’s daily report where they talk about the almighty .1% increase in GDP (hence the recession is over) Thought this line was interesting…

“The output of services-producing industries increased 0.6%, with the wholesale and retail trade sectors and real estate agents and brokers leading the way. Goods-producing industries (-1.4%) continued their downward trend that started in the third quarter of 2007, with the mining and oil and gas extraction contributing the most to the decrease as a result of temporary shutdowns.”

Good ole real estate agents and brokers are keeping the economy going.

http://www.statcan.gc.ca/daily-quotidien/091130/dq091130a-eng.htm

#39 Peter Pan on 12.01.09 at 2:40 am

I predict we’ll soon see a rapid rise in interest rates in 2011-12 akin to 1994 and 1995 where the Fund Rate went from 3% at the beginning of 1994 to 6% Feb 1, 1995. Even though unemployment was still stubbornly high, the US Fed jacked up rates in rapid succession.

Then everyone will try to jump from variable to fixed rates, but the exits will be jammed like a movie theatre on fire…

#40 gpoz on 12.01.09 at 5:15 am

This is maybe a little off topic, but do you have any predictions as to what might happen to the US economy if that nation experienced another unexpected mega natural disaster such as hurricane Katrina?

#41 Mike (Authentic) on 12.01.09 at 5:57 am

Garth, really excellent points:

1. Cheap money has done absolutely nothing to reflate the US crashed housing market.

2. There will be no sustained real estate price increases until wages and incomes rise.

3. Emergency rates have brought forward demand from the future, not created new demand.

4. Rates are already starting to rise in other countries

So, should we hope for a .1% economic GDP boom?

Mike

#42 Onemorething on 12.01.09 at 7:58 am

Jane #54, et all, Onemorething is a Citizen Of the World.

But likes to run a business and pay tax in HK, keep a factory in China running while all others are closing doors, and resides in SE Asia where the Big Mac Index is $1.38 USD.

HINT LINK

http://currencyforthelongterm.files.wordpress.com/2008/10/big-mac-index-2005.jpg

I have a 4 hour drive to Phuket Thailand and Singapore. Less than 2 hour flight to Bangkok for Tom Yan Kung, Bali for a massage or Vietnam for Pho Noodle Soup.

Groceries are very inexpensive where I live, but 5-Star restaurants even cheaper if you can believe it!

We have good beer, play ice hockey, ride Harley’s and can party all night with people who all speak English but come from all religions.

My 80 something parents live in the GTA, my wifes in Vancouver. We are hard pressed now to ever return with the exception of holidays.

Why go to Cancun when you can be hanging out in the Maldives!

#43 David Bakody on 12.01.09 at 7:59 am

#1 Claudius Emeperor on 11.30.09 at 9:29 pm

Why not good ode Yankee dollars first ….. to-days news coming with another 40B + a year for Afghanistan and here in Canada soon to be news for new Billions for the cause also.

US Debt – $ 12,152,807,632,417 now growing over 3M/min

Could the real cause for RE speculation be it is the only horse left in the race for quick change? I would be interested to see where all these RE people are investing …. betcha it ain’t RE!

#44 JO on 12.01.09 at 8:04 am

Rates will rise sharply at some point in the next 3-5 yrs whether we have deflation or inflation. The bond market has what amounts to a noose on the economy. We’re damned if we grow, and damned if we don’t. If we don’t grow strongly enough, bond markets will eventually request higher rates to account for the heightened credit risk (highly likely in UK and US in 2010), but if the economy somehow starts to accelerate with growing levels of debt and money and stays there for more than 2 quarters or so, watch out – rates will rise even faster. Who in their right mind would want to hold onto a 20-30 year Gov’t bond when the money you get paid in will easily loose a lot of value ? So yes, at some point, rates will rise. Many of these weak hands doing the buying in the last 3-4 years will realize the disaster when they get their renewal letters…at that time, your friends in Ottawa will take $ from the majority and use it to bail out these speculators and greedy, incompetent buyers.

Add to this mix the high chance of sharply rising taxes and user fees at every level (watch property taxes in Toronto). But also keep an eye out on the global warming fraud..even before the sensational “ClimateGate” scandal that broke out a week or so ago, many respectable people were highly suspicious of the attempts to blame manmade activity for global warming..well that has always been false..only a very small part of it may be do to our activity..but watch out..if these bastards pass cap and trade (AKA Cap and Tax), your tax rates will explode and liberty will be non existant.

When is that new book with tax minimization techniques do out ?

JO

‘Money Road’ will be published Feb. 1 and available here a couple of weeks in advance. — Garth

#45 pbrasseur on 12.01.09 at 8:30 am

Garth I think your analysis is correct:

Low rates = Bad news because it would mean the economy is not recovering, obviously that would have to impact RE demand at some point.

Higher rates = Affordability will crash, not not mention loads of trouble at renewal for the high price no cash down crowd.

Only one thing could sustain the current Canadian RE market: better affordability and there are only two ways for that to happen:

1) Massive government intervention to prop up or subsidize the market. Very unlikely, keep in mind the Canadian public debt to GDB ratio will soon hit 80%… But if governments insist on doing that it would only forward demand even more and make this bubble even more dangerous.

2) Rapid average income increase that would maintain affordability. Extremely unlikely, in any case such an increase could only happen in a vibrant economy where interest rates would explode…

Conclusion: RE is going down, it’s just a question of when, how fast and how far.

My guess is: soon, rather slowly (this is Canada after all…), very far.

#46 Into The Sunset on 12.01.09 at 8:59 am

In the previous discussion a few wanted my contact information regarding my “paying no income tax”.

I am not prepared to put my email address out to the public. I spent a great deal of time and money putting together this collection of alternatives to paying the GODS of Ottawa and Toronto their pound of flesh.

I’m retired and do a small amount of consulting under my numbered company using my old consulting name. If anyone is really serious about obtaining my information and methods…and they are all legal…..I will suggest a small sum be paid of $100. Soooo, if anyone out there wants the info. you have my offer! Let’s seperate the talkers from the walkers!

Post your address where I can contact you and I’ll arrange to talk to the ones that realize you don’t get something for nothing. No email addresses for the obvious reason……the one on the blog that always wants
to play the smarta**. We all know one!

I’m not a very good book writer nor do I tour and get paid, but I do make money and don’t pay income taxes.

(a) This is not an open commercial site. People I cannot gauge the legitimacy cannot solicit business from others. So forget that. (b) There is no honour in not paying taxes if you are able and required to do so. It sounds like you’re a tax evader. Convince us otherwise. — Garth

#47 Bottoms_Up on 12.01.09 at 9:36 am

#32 Mark on 12.01.09 at 1:25 am
…..if ANYONE thinks that Canada’s lending institutions are somehow superior to those in the US in that regard they are in for a shock.
—————————————————-

Ok, here’s one for you Mark. My wife and I were turned down for $280,000 in Aug. 2009 by TD bank (after putting 8% down). Stable, decent paying jobs. Both of us with credit scores in the high 700’s. The caveat? My wife’s job was a contract. Her academic success, past jobs, work ethic, high credit rating, even a letter from a prospective employer saying she would land a full-time job wasn’t enough for the bank to lend to us (and we could qualify for $240,000 based on my salary alone!!).

So, don’t tell me that Canadian banks are the same as those in the U.S. For us it was like pulling teeth to get someone to lend to us, and we are extremely low-risk borrowers with no debt and good jobs!!!

#48 Bottoms_Up on 12.01.09 at 9:43 am

#28 Soylent Green is People on 12.01.09 at 12:55 am
—————————————————–
Selling at the ‘top’ and buying back later is a decent strategy, especially if you feel there’s not much more to go to reach ‘the top’. Some believe the markets will go sideways for many years, so this strategy, I think, would make you more money than just ‘riding out the bumps’ and getting dividends along the way. Switch to a discount brokerage (Tradefreedom) and it will only cost you $10 per trade.

#49 Fools Rush In on 12.01.09 at 9:50 am

#2 Bottoms_Up on 11.30.09 at 9:52 pm

Before we bought our current home, about 19 yrs ago, we looked at some properties about a 30-40 min. drive during peak hours from our jobs. The homes were more to our taste & on 1 acre lots, etc. But, our jobs were in almost opposite directions with no public transportation. When we considered the travel costs (gas, downtown parking (for me), wear & tear on the cars, etc. we said no way. It just didn’t make financial sense. We ended up buying a smaller home closer to our jobs. My husband’s ‘home office’ is only 7-10 minutes from work & at least he’s reimbursed for part of his gas. And this year, we’ve kept his gas bills and I’ll see whether it’s worth claiming a portion of his car insurance, maintenance, etc.

#50 BigAl (Original) on 12.01.09 at 9:55 am

Along the line of #33 Adrian on Technology…

In my experience, yes, internet/computer technology has been great for end-use knowledge / entertainment.

However, in the average workplace, it has doubled the work of most people whereby they need to do everything twice – once on hard copy, once on ‘the system’. This dual record-keeping has made work less efficient for office workers, BUT more efficient for higher-up decision makers such as managers and accountants who have easier access to greater amounts of data.
Is this good or bad? That depends…has the quality of senior level decision-making improved?

One restaurant owner I know has gone completely back to a non-computerized work environment. Only a simple $200 cash register now. Everything else is strictly paper – for him, it works better.

#51 Downsized and Delighted on 12.01.09 at 10:02 am

The cause of the U.S. housing crash was over leveraging, especially with second properties. (like the ones in Orlando). It works for awhile, but when it begins to fall apart there is a domino effect that is unstoppable.

How closely does Canada resemble the U.S. prior to their downturn? Not all that much (we don’t have the second property investment that pervaded the U.S. market in Florida and Nevada) – but we obviously have the over leveraging at the low end of the market here. That is why I feel that end of the market is particularly vulnerable in Canada, especially since purchases made at this end of the market are not made out of necessity.

So I have to agree with Garth that parents who buy their kids a condo are doing them no favour.

#52 Evangeline on 12.01.09 at 10:08 am

#12
((Toronto Housing Prices are starting to come down.))

Every day on Toronto’s Craigslist there is an increasing number of listings for foreclosure and distress sales.

#53 Downsized and Delighted on 12.01.09 at 10:09 am

#46 Into the Sunset: Why would we pay you $100 to learn your secret of evading…..oh sorry – “avoiding” taxes when you have already told us that you are doing so by setting up an off shore company (probably a trust)? Shouldn’t we just go ahead and hire a lawyer and an accountant who will then tell us about the latest court cases that Rev Can won involving these tax evasion schemes?

The difference between tax avoidance and tax evasion is mostly time.

#54 Oakville Owner on 12.01.09 at 10:13 am

Garth and the blog dogs,

What are your thoughts on Baby Boomers now starting to sell their $1 000 000.00 plus homes in places like Toronto and move to the burbs like Oakville. The ones I have met in my neighbourhood appear to be thrilled. They have cashed out at the peak and bought a 2-3 year old home for approx half of what you would pay in the city. They are still very close to family and friends etc and the towns new hospital is slated to be built in the area in the next five years. Sure a drop in values is coming but do you feel location like this will wither the storm. Already starting to see young Dr’s and medical type buying in the area as well. If Boomer are going to put a strain on health care in the coming years, could you make the argument that “small” pockets of relestate, like this one can perform much better then the masses?

#55 Nostradamus jr. on 12.01.09 at 10:32 am

“”Real estate surge no ‘blip,’ TD says””

http://www.theglobeandmail.com/report-on-business/real-estate-surge-no-blip-td-says/article1383904/

…Especially is no blip in North Shore of Vancouver…

North Shore going to be most private gaited community in Canada…w/ access from only two bridges and one highway from north.

Nostradamus jr.

#56 Kurt on 12.01.09 at 10:35 am

Garth, “There is no honour…” Thank you! I hear all kinds of snivelling about taxes, but in the end they buy us a lot. May be not as efficiently as we would like, but they do. To pay *no* tax when you are able and required to do so, and yet continue to live in this country, is a point of shame, not pride. Pulling one’s own weight in society is a virtue. If I’d found some loophole to avoid doing so, I’d not brag about it, just as I would not brag about lolling about on EI or welfare if I could be working, in a traditiional job or otherwise.

#57 I hate Taxes on 12.01.09 at 10:40 am

EMAIL ADDRESS DELETED
Hit me Into The Sunset………….
Thx

This site will not assist in tax evasion. — Garth

#58 dave99 on 12.01.09 at 10:47 am

#5 Dan in Victoria,

You wrote that with income of $2.5T the US Gov’t has a mortgage of 45x income? That would be $110T. I wonder if you slipped a decimal point.

#59 Into The Sunset on 12.01.09 at 10:48 am

#46 Into the Sunset: Why would we pay you $100 to learn your secret of evading…..oh sorry – “avoiding” taxes when you have already told us that you are doing so by setting up an off shore company (probably a trust)? Shouldn’t we just go ahead and hire a lawyer and an accountant who will then tell us about the latest court cases that Rev Can won involving these tax evasion schemes?

The difference between tax avoidance and tax evasion is mostly time.

#53 Downsized and Delighted

Well downsized and delighted, please show me where I stated I had set-up and IBC or a trust? Which for your information I have not although they are legal. Of course you are quite knowledgable in this area, are you not?

Yes, by all means YOU should hire a lawyer and accountant to explain to you about the difference between tax avoidance and tax evasion. The difference of which has never been fully explained to you, reading your comments.
At the same time learn to comprehend what was stated and put away the crystal ball that allows you to assume; for you know what the first part of assume does and in this case the “u” is very applicable.

I really don’t believe you have any knowledge of how to avoid paying as little tax as possible. I stated in my original blog comment in the previous subject, we have been maximizing avoidance for over 15 years and the tax court you talk about, where by the way CRA (Rev Can) losses 85% of its cases has never appeared regarding my strategies.

By all means D & D, just keep on feeding the insatiable coffers as more and more requests are issued as I and many others do depend on you.

And who pays for your health care? The rest of us? — Garth

#60 Downsized and Delighted on 12.01.09 at 11:01 am

#54 Oakville Owner: I’m the obvious person of interest on this topic since I have done what you point out – although I didn’t trade neighborhoods. Speaking for myself, this move is probably temporary. But I may be speaking for most babyboomers. Once you make the first move, it’s easy to think about moving again. So your new neighbours may not stay as long as you expect. If you’re looking for a new trend, babyboomers on the move may be it.

#61 Artisuseless on 12.01.09 at 11:02 am

@ stillwaiting – both are grossly over-valued because of cheap lending and back-stopped banks.

This ‘rebound’ today in stock indexes world wide had nothing to do with Dubai – but with the BoJ pledging another 10T Y or 110B USD in cheap loans to keep the party going.

#62 Jim on 12.01.09 at 11:02 am

Garth,
I have been waiting for years to buy property. My RSP acct is maxed out and my non RSP acct is getting large. I’m faced with paying taxes on this money and, to lower my taxes and to keep my money growing, I have to take on more risk by putting much of it in equities. I just received another rent increase-every year for the past five years my rent has increased by over 3%. If rates don’t increase substantially for another 4-5 years, then are you implying that those of us with impulse control will have to wait another 4-5 years before it makes sense to buy? Hell, at that point, I’ll have a 50% down payment if prices flatline.

Jim

Negotiate a three-year lease. — Garth

#63 Borat on 12.01.09 at 11:06 am

#52 Evangeline

Another “metric” is the ever increasing “rentals” on CL.

I’m finding between 50 – 100 a day in my small city and people asking outlandish amounts for their “income / rental” properties.

Just looking at Tonronto CL under “Apt/Housing”, Monday had approximatley 600 adds for housing…

Vancouver CL under “Apt/Housing”, Monday had approximatley double that for 1200+ adds for housing…

The addition of the clueless investor into the landlord / property management game is in full gear… These low rates convinced many now was the time for that second property or condo.

This along with a guaranteed credit contraction, guaranteed tax increases and a sideways moving economic growth and employment spells downward pressure on shelter prices, whether you own or rent.

#64 Downsized and Delighted on 12.01.09 at 11:14 am

#59 Into the Sunset: I should have said “in many instances” the difference between tax avoidance and tax evasion is time.

There’s nothing wrong with avoiding taxes. It would be stupid not to. Almost as stupid as paying $100 for tax advice from an anonymous poster on the internet.

#65 Toronto C9 Renter on 12.01.09 at 11:16 am

#54 Oakville Owner on 12.01.09 at 10:13 am

“What are your thoughts on Boomers now starting to sell their $1 000 000.00 plus homes in places like Toronto and move to the burbs like Oakville?”

Oakville, personally I don’t see it. If one has spent many years in one of the 3 or 4 really nice areas in Toronto, its almost unthinkable to move out to some burb in the GTA. Some of the showstoppers would be:

1. Traffic
2. Traffic
3. Traffic

A preferable alternative (what we’re in the process of doing, at least) is wait until we no longer “need” to live here full time, then cash in and buy something in perhaps Georgian Bay / East Cost /Florida /California etc.

My 2 cents

#66 Into The Sunset on 12.01.09 at 11:22 am

(a) This is not an open commercial site. People I cannot gauge the legitimacy cannot solicit business from others. So forget that. (b) There is no honour in not paying taxes if you are able and required to do so. It sounds like you’re a tax evader. Convince us otherwise. — Garth

My mistake Garth! I retract my commercial offer! I’ll wait and write a book, tour and talk and collect by your methods. In reference to your statement about paying taxes if you are able and required to do so.

As a financial guru and former Minister of Finance, you will remember that the British House of Lords I believe in 1927 stated, and I may not have it totally correct ” Every tax paying individual has the right to organize their financial affairs in the best way possible to avoid paying taxes”. This is still applicable to our tax system.

I look forward to your new book and the revelations set down on how Canadians can ‘Avoid” taxes. I will safely predict you will not provide the ways and means I mistakenly offered to supply on your blog.
No loss to me!

Convince you I’m not evading taxes? Sorry this is not a commercial site to be used for soliciting business and I already unwittingly broke that rule. Like you, I’m quite willing and able to provide the methods I use, however I must put this into the business realm and therefore I’m unable to request payment for provision of the proof.

When I really look at it, I don’t know why in the hell I’m even having this conversation and defending. I’m doing it; I’m pleased; and actually the wheels of government would grind to a halt if everyone perfected my methods as the only reason politicians are necessary is to spend our money and totally screw up our system which wasn’t broken to begin with.

I ask again: who pays for your health care? We have the right to avoid paying more than our fair share. We have no right to take, and pay nothing. There’s no honour in your action, so stop boasting. — Garth

#67 Dan in Victoria on 12.01.09 at 11:23 am

Post#58 Dave 99, could be Dave, I didn’t do the math (and i’m not going to) it was in the article, go to the link, the long version is there. I just put it out for discussion, and thought.
I found it appalling……..
I’m just worried that Toody and Muldoon have us headed in the same direction.

#68 MPM on 12.01.09 at 11:38 am

If you think that house is ‘sweet’ check this one out in Wetcouver.

Just a few steps from Robson St in Vancouver. They searched for a greater fool in summer of 2008, $1.1 million. Then they tried again for about a month this summer, $1.2 million. Now they are on the prowl again with the wonderful price of $988k.

http://www.realtor.ca/propertyDetails.aspx?propertyId=8807483

Note to those who don’t know what a realtors point and shoot camera is capable of. It has wide angle lens so it makes the rooms look about 50% larger then they actually are.

#69 $fromA$ia ( o Y o ) on 12.01.09 at 11:49 am

“Its not free! He pays rent enough to cover the cost to own. Better to be in my pocket that somebody else. It has a 7 year 25year am 3.85%. Bet I will make money on this one.”-Ted
*********************************************
Way to go Ted, you think your kid will ever truley become independant?

Odds are he’ll move back home and you’ll be renting that condo to strangers with negative equity.

Maybe you can rent that condo to Nostadamous the troll JR. If you can get him out of his Mom’s basement.

#70 Into The Sunset on 12.01.09 at 11:51 am

And who pays for your health care? The rest of us? — Garth

Ah…to answer your question!

In my 65 years through businesses I founded and through taxes on these businesses, plus taxes on corporate salaries I earned, I paid my health care.

My military servive; the service of a father that died from wounds; the blood left by 4 uncles in Europe and through my brothers time in the air force and two brothers-in-laws, one army and one navy in WW2 balances out the golden health care MP’s and the government mandarins are given together with the new immigrants etc. while the poor lie on the heat grates on the streets outside where fools are paying obscene sums for concrete closets.

I grew up when medical care was non-existent and we were too poor to go to doctors or dentists, only when the school nurse recommended in extreme circumstances. The veterans widows pension didn’t allow for these costs and my mother use to say “you can’t eat medals”.

So Garth, I believe I’ve paid.

I’ll give you some other interesting data.
The cost to the average Canadian for what would you call the level of health care received ? is approx. $11-15,000 per person per year.
The cost for an offshore medical plan when non-resident providing top notch care anywhere in the world at almost immediate availability is $3-3500 US.

#71 CalgaryRocks on 12.01.09 at 12:05 pm

discount brokerage (Tradefreedom) and it will only cost you $10 per trade.

Interactive Brokers is as low as 1$ per trade plus free Rt data and Full API.

Been using it since 2002. Great for automated trading and IPhone support too.

#72 Into The Sunset on 12.01.09 at 12:15 pm

#64 D & D

There’s nothing wrong with avoiding taxes. It would be stupid not to. Almost as stupid as paying $100 for tax advice from an anonymous poster on the internet.

Ah, but there is no tax advice from an anonymous donor on this web site; it has been retracted.
This tax advice will now never be known and the snaring of unimagined numbers that are stupid has been foiled.
Damn the luck!! Curses !!

Well, they will just have to continue to buy loto tickets, far safer than talking to someone that was willing to provide some value for their bucks.

I congratulate you D&D. You’re very astute as well as totally educated in the world of investing outside the less than 3% investment market Canada monopolizes.

As we use to say Bravo Zulu!

#73 Bill-Muskoka (NAM) on 12.01.09 at 12:17 pm

After reading Garth’s blog for so long I have come to this conclusion: ‘Too many Canadians are simply NUTS!’

Does anyone realize what your greed and stupidity is doing to the future generations? Do you even care? Probably not! Just like the anti-environmental types who only see profit! PROFIT! PROFIT!

I put most RE speculators in the same category as drunk drivers, addicts, gamblers, and idiots driving and texting/yakking away on their little toys. The rest of us will have to pay for your arrogance.

Do not be surprised when we say NO!

BTW, watched a woman yakking away on her cell phone behind me yesterday. Apparently, the new law has not penetrated her widdle mind?

#74 Bill-Muskoka (NAM) on 12.01.09 at 12:33 pm

I ask again: who pays for your health care? We have the right to avoid paying more than our fair share. We have no right to take, and pay nothing. There’s no honour in your action, so stop boasting. — Garth

Good for you Garth. I actually am proud to pay my Canadian taxes because they provide services for Canadians. When I was a Yank I abhored them because half of the Federal taxes went towards funding war, weapons, and imperialism, not the people’s needs (Hence, the real reason they still have no universal healthcare system).

I think Canadians should be thankful we put the focus on Canadians.

Yet, we will always need to keep an eye on those who have the chequebook, because they too often forget who’s money it really is! Too many $25,000 speech writing fees. Good grief! I could write speeches all year long for that amount and be happy doing so.

#75 wise on 12.01.09 at 12:35 pm

Economists, realtor..and others..they just only have one forecast according to the trend.
When market is down..they say, market is going down and will bottoming out soon.
when market is up…they say, market is going up and will going up further..
So what do we need this kind of analysis/forecast, my little 5 yrs son could do the samething.

#76 Oakville Owner on 12.01.09 at 12:44 pm

Downsized and delighted & Toronto C9 Renter.

Thanks for your thoughts. As far as traffic is concerned, don’t you think this is much less of an issue when you are presumably retiered and don’t have to make the drive to work any more.I agree if your working that it does not make sense, even I left my Toronto job after getting the same one close to home. Most of the neighbours I have met are now retired, dumped the 1.5 mill to 1.8 mill house in the city and picked up a $600 000 to $850 000 place here. Only time they have to make the drive to T.O is to vist friends and family and they can plan that around the rush hrs.

#77 Toronto C9 Renter on 12.01.09 at 12:47 pm

#66 Into The Sunset on 12.01.09 at 11:22 am

“…actually the wheels of government would grind to a halt if everyone perfected my methods…” (sic)

Sunset, you’re kidding, right?

#78 BAD on 12.01.09 at 12:56 pm

-
Consumer spending taking a hit?

More than half of Canadians are cutting back on holiday spending this year and one in five are not buying gifts at all, even though the majority expect the economy to improve in the new year, according to the new monthly RBC Canadian Consumer Outlook index, launched Tuesday.

Canadians curb holiday spending, look to 2010 for recovery, RBC survey

I suppose if one is “mortgaged to the hilt” one has to cut other expenditures, no?
But if our Canadian economy is 60% consumer driven…
-

#79 T.O. Bubble Boy on 12.01.09 at 1:04 pm

@ #55 Nostradamus jr.

The comments on that Globe&Mail article are priceless!!!

I noted a grand total of 1 positive comment and 41 comments that trash the G&M for pretending that fake realtor-written articles are legit news.

At least there are some people out there that get it… if only 1 of them was sitting in Jim Flaherty’s chair.

#80 Munch on 12.01.09 at 1:07 pm

South Africa probably has the franchise on “stupid”, but for sure those folks buying property now in Canada are truly, truly stupid!

I think! :o

#81 Downsized and Delighted on 12.01.09 at 1:28 pm

#65 Toronto Renter: How does a “renter” go about cashing in? A million dollars won’t even buy you a building lot in Oakville by the way, unless you are talking about some area north of the QEW (which I don’t consider Oakville).

#82 Downsized and Delighted on 12.01.09 at 1:43 pm

#66 Into the Sunset ” Every tax paying individual has the right to organize their financial affairs in the best way possible to avoid paying taxes”. This is still applicable to our tax system.”

Nothing wrong with that statement, but you did state that most of “YOUR” investments were “offshore”. Now I’m sure that YOU (in your great realm of knowledge) would know that Canada has a “self reporting” tax system, so obviously your offshore investments (gaining 35% annually) are on your tax return?

Isn’t it funny that someone as wealthy as yourself would suddenly feel the need to give tax advice over the internet at $100 a pop.

#83 kitchener1 on 12.01.09 at 1:58 pm

RE: Into the sunset

There is a BIG difference between tax avoidance and tax evasion.

One of the more common stragedies, that i think you have utilized is working full time and having a consulting/side business.

Its a win/win for you and the gov’t. You get to write of certian expenses, gas, rent, car, supplies etc… as so long as they relate to your business at hand. The gov’t does not except you to make a profit for 3 years and they don;t really care if you even just break even. Its all good as one day that company might grow into a full time enterprise where you hire workers etc… and pay more tax.

The downside is that if you work full time and are laid off, you will not qualify for UI.

Offshore trust accounts are effective but you have to be invested in something like 70-100K to make it worth your while. I wonder though, while you are engaging in “tax evasion” are you still collecting full CPP/OAS etc..? becuase at that point you crosses the line.

Side note to anyone thinking about engaging in these activities, the govt takes tax evasion more seriously then manslaughter, if convicted you are nailed to the wall.

Sure, 85% of Revenue Canada’s attempts may be unsucessful, BUT, how much will it cost you in lawyer fees/accounts etc.. to win that descsion. Its a cat and mouse game and you better have some deep pockets to even start it.

#84 dd on 12.01.09 at 2:00 pm

#55 Nostradamus jr.

…North Shore going to be most private gaited community in Canada…w/ access from only two bridges and one highway from north…

Breaking news … this just in … After THE major earthquake the North Shore community is trapped from the outside world. The North Shore freeway and all bridges are down. NS residences plead for refugee status in outer communities but are turned away …

#85 jess on 12.01.09 at 2:15 pm

20 NOVEMBER 2009 | GENEVA — The Norwegian Institute of Public Health has informed WHO of a mutation detected in three H1N1 viruses. The viruses were isolated from the first two fatal cases of pandemic influenza in the country and one patient with severe illness.

Norwegian scientists have analysed samples from more than 70 patients with clinical illness and no further instances of this mutation have been detected. This finding suggests that the mutation is not widespread in the country.

The virus with this mutation remains sensitive to the antiviral drugs, oseltamivir and zanamivir, and studies show that currently available pandemic vaccines confer protection.
==================

fabrication, fraud and deceit on the part of the climate change denial industry, documented in James Hoggan and Richard Littlemore’s brilliant new book Climate Cover-up,
=======
If you believe climate change is made up rather than man made then you must agree with these same thinkers who also believe that you can cure aids with beetroot and lemon juice, gangster capitalists,smoking doesn’t cause lung cancer, listen to experts on fox who promote their own ‘funds and that give themselves titles that sound impressive and lastly, the you betcha gal who has refused to classify the polar bear as an endangered species on the grounds that the sea ice is here to stay, but is making plans for opening up the Arctic Sea to oil drilling, on the grounds that the ice is due to disappear.
http://www.guardian.co.uk/environment/georgemonbiot/2009/mar/06/climate-change-deniers-top-10

#86 Drake on 12.01.09 at 2:50 pm

Bares repeating. Renting is all well and good if you live in an urban area, but if you’re in a small town, forget it. You’re lucky if you can find a nice place to BUY let alone rent. If anyone has a trick for finding rentals in such a place, I’d love to hear it (and no Craigslist, these hicks barely know what a computer is).

#87 PeckedToDeathByDucks on 12.01.09 at 2:55 pm

Proliferating Prodigious Paperprestidigitizers

– great news from Japan….quantitative easing on a massive scale will help the economy go up, and gold and oil and food and the price of everything

– most excellent response from USA…..we will have to raise the debt ceiling to unheard of heights to give us some operating room. Let’s not be so responsible this time.

The Trouble With Paperprestidigitizers
Do you know what you get if you print too much paper?
– A fat wallet?
No, you get a whole bunch of other countries addicted to printing too much paper.
– Well central banker, all I can suggest… is you open up even more printing presses. Take us into warp speed Mr. Carney!

#88 X on 12.01.09 at 2:56 pm

Into the Sunset – Ummm….why don’t you just write a book about your methods? It appears that there is an interest for your tax knowledge.

#89 omg on 12.01.09 at 2:59 pm

The European Experience?

Lately my well travelled friends have started pointing to Europe as an example of how Canadian housing prices will stay high even though our largest trading partner’s average prices have cratered.

They state that historically prices in western Europe have been at least double what you would expect to see in the US.

So for example in similar sized cities to Victoria in Spain, France or Italy, you could see prices of $500 to $700 K for a nice 2 bedroom condo or $800-$900 for a decent 3 bedroom house. Further they say they have not noticed a big decline in sales when they travel over there.

I have had a look on the internet but cannot really decipher the European market. Can anybody shed any light on what has happened to Euro housing prices over the past couple of years, and this idea that prices over there are historically double what they are in the US.

#90 The Truth on 12.01.09 at 3:03 pm

There is no bubble.

Interest rates are not going to rise. American 5 year bond is now at 2% or less. This is what return people with lots of money are expecting on average for the next 5 years. Expect prime to remain at 1% or less for at least 5 years. Still in doubt?–check US Treasury websites.

Expect dollar to go down versus the USA. Result will be jobs boom and more immigration. Thus demand will remain. Still in doubt? — check Citizen and Immigration publication ‘The Monitor’ for current numbers.

People with lots of money are all putting it into assets as they realize paper money will be worth less and less. Still in doubt? — check prices for metals such as copper, silver, etc. It’s not how much money you have but how many assets you have. Thus land will continue to go up in value…detached from incomes, etc.

#91 The Truth on 12.01.09 at 3:04 pm

Correction: ‘Prime’ should read ‘Bank of Canada rate’

#92 Larry on 12.01.09 at 3:06 pm

Prices will continue to rise so long as rates are low and CMHC backs the banks to lend the cash. People cannot be trusted to see common sense and the herd mentality prevails.

#93 Al B on 12.01.09 at 3:11 pm

Thought this was interesting. Seller can’t afford to close on day of closing!

http://www.redflagdeals.com/forums/time-closing-seller-does-have-enough-funds-close-820869/

#94 Gord In Vancouver on 12.01.09 at 3:14 pm

Have Your Cake & Eat It Too Journalism

But he said with sales and prices recovering to 2007 levels and beyond, the typical home right now is about 12 per cent overpriced.

and then…

But in the shorter term, Gauthier feels a tight home market will help propel home values another nine to 10 per cent over the course of next year.

http://www.vancouversun.com/news/Canadian+housing+boom+overdone+Report/2290525/story.html

#95 Jeff Smith on 12.01.09 at 3:16 pm

#42 Onemorething on 12.01.09 at 7:58 am

>But likes to run a business and pay tax in HK, keep a
>factory in China running while all others are closing
>doors, and resides in SE Asia where the Big Mac Index
>is $1.38 USD.

Do you think labour is still cheaper in China for the forseeable future? Last I heard, the factories are relocating away from Guangzhou and Donguan and moving further north-west (chongqing??) where the labour is still cheaper. Personally I think the days of cheap labour in mainland china are numbered. The fact that you have to set up office in SEA tells the story.

>[snip], but 5-Star restaurants even cheaper if you can believe it!

Surprising, but why is this so, really?

>We have good beer, play ice hockey, ride Harley’s and
>can party all night with people who all speak English
>but come from all religions.

It’s great that they can speak english. Is this the case throughout the country of only in KL. I suspect that once you leave the cosmopolitan hub of KL and drive into the country side you will be met with the locals who only speak in the local language. This is still ok as the majority of people would reside in the big city most of the time anyway. However I personally would enjoy grabbing a car on the weekend and drive to the small towns by the cost to check out the scenes. By the way, is the place safe outside of the big city?

#96 Markham boy on 12.01.09 at 3:21 pm

To the couple that got turned down by TD for a $280k mortgage, all you have to do is go to a mortgage broker. They can get you whatever amout you want, and you don’t even have to have a job. I know numerous individuals that got approved for mortgages without even having a job!

#97 Jonas on 12.01.09 at 3:24 pm

Hey Garth,

I’ll give you $100 to shut down Nostradamus Jr. , $200 if you shut him down and kick him in the nuts.

I only take bullion. — Garth

#98 nonplused on 12.01.09 at 3:38 pm

US government bankruptcy mathematically certain:

http://www.economicnoise.com/2009/11/28/spiraling-to-bankruptcy/

Canada cannot be far behind.

Here is the one part about real estate most people don’t understand in an inflation: Just because the price of food, transport, energy, etc. is going through the roof does not mean you personally are going to have any more money to pay your mortgage.

#99 BAD on 12.01.09 at 4:03 pm

-
#93 Gord In Vancouver on 12.01.09 at 3:14 pm

Have Your Cake & Eat It Too Journalism

Ah, the TD report:

TD Economics: Resale Housing Outlook, December 1, 2009

The actual report is in fact somewhat bearish considering its source.
-

#100 Mr. D - Ottawa on 12.01.09 at 4:19 pm

Reply to #70 Into The Sunset

“I’ll give you some other interesting data.
The cost to the average Canadian for what would you call the level of health care received ? is approx. $11-15,000 per person per year.
The cost for an offshore medical plan when non-resident providing top notch care anywhere in the world at almost immediate availability is $3-3500 US.”

Given that you profess to be very good at avoiding (or evading taxes) I would expect you to be accurate with numbers and not just make them up. The cost of health care is close to $5452 CAD per person in 2009. It was $5170 CAD in 2008. Good luck with your ‘offshore’ medical plan at 3-3500USD.

Also note that health care costs rise as people age so if you have income and are paying no taxes, then you really are cheating the system.

“An infant under the age of one costs an estimated $8,239 per person. Between age one and age 64, spending averaged less than $3,809 per person.
Among seniors, per capita spending jumped to :
* $5,589 for those aged 65 to 69.
* $7,732 for those 70 to 74.
* $10,470 for those 75 to 79.
* $17,469 for those 80 and older.”

http://www.cbc.ca/health/story/2009/11/19/health-care-spending-canada.html

#101 Toronto C9 Renter on 12.01.09 at 4:23 pm

81 Downsized and Delighted on 12.01.09 at 1:28 pm

“#65 Toronto Renter: How does a “renter” go about cashing in? ”

As mentioned, we’re “in the process.” The cash-in part of the process was completed in 2008. And it was not 1 M. Anyways, I’d never live in Oakville but I know lots of people love it.

Now we’re in the market for the next property. Currently high on the list is Longboat key, next is Laguna, another potential is South Shore NS. So we have lots of work narrowing down our list. But thats half the fun.

#102 Downsized and Delighted on 12.01.09 at 4:33 pm

Into the Sunset “In my 65 years through businesses I founded and through taxes on these businesses, plus taxes on corporate salaries I earned, I paid my health care”

I thought you hadn’t paid any tax for 15 years? I guess you meant on “certain” investments.

I’ll have to check my income tax return to see if I’m “paid up” on my health care.

#103 E. Buzz Miller on 12.01.09 at 4:34 pm

Jane54 asked:

“And while we are on Vancouver exactly why would rich Asian types prop up the RE market there. Most Asian countries have a low income tax structure whereas from what I have read on this blog Canada seems to kick-off at 40%. “

That explanation is too easy. They make the money in Asia where the taxes are low and then they invest the money in Vancouver RE, which has up to now been an excellent investment.

Jane54 didn’t ask what happens to them when rates go up, but that question is so easy I’m going to answer it even if she didn’t ask. They don’t have a mortgage because they paid cash, so nothing happens when rates go up. That’s the difference between Vancouver and Orlando.

Just in case there’s any misunderstanding, I’d LOVE to see Vancouver RE go down because it would be good for Canadian society. I am neither buying nor selling RE right now. But I’m not holding my breath.

But you have no trouble with racial stereotyping? — Garth

#104 Nostardamus jr. on 12.01.09 at 4:53 pm

Please don’t pay too much attention to my posts. The pot in BC is sooooooooooooo freakin’ good….

Nostradamus jr…..once a clown…always a clown.

#105 HouseBuster on 12.01.09 at 5:11 pm

So Garth… when is it that the stock market is going to go down?

When it fails to rise or slide. — Garth

#106 CM on 12.01.09 at 5:28 pm

Kevin from Edmonton Housing Bust digs into the numbers…

http://edmontonhousingbust.blogspot.com/2009/12/personal-saving-rates.html

Personal Saving Rates of Canadians

http://dynamic-evolution.com/ehb/091201-1.jpg
^^ graph

#107 Drake on 12.01.09 at 5:32 pm

Shouldn’t even be an income tax. We should all pay for what we want on an open market, not have the govt dictate what they think we need then force us to pay for it whether we want it or not.

I’m sure that would work out well. — Garth

#108 Dave on 12.01.09 at 5:34 pm

nd I need answers. Should I sell stocks, put in cash and wait for market correction before buying back in?

I have another 20+ years to go to “retirement”.

Is it worth it when you factor in the costs to sell everything and then to buy back in???

Please for the love of God could somebody answer me. I promise I will not hold your feet to the fire if something bad happens to me. I am just looking for opinions.

———————————————–

no, why would you do that? There’s no certainty there will be a great crash in the stock market again. Keep 20-30% in the market and maybe dollar cost average with the rest on a monthly basis. When things seem a little more sensible, or if a nice pullback comes, buy more.

#109 rory on 12.01.09 at 5:40 pm

#72 Into The Sunset

Want to minimize your tax burden? Here’s what you do:

Be a citizen of one country, resident in another, and hold your assets in a third. With the exception of U.S. citizens, who are taxed on their worldwide income no matter where they reside, setting yourself up according to this three (or more) country rule can allow you to pay zero or close to zero in taxes each year.

Are you following the above statement or are you deemed to be a resident of Canada …yea or nay…yea you would be in evasion, nay would be avoidance….IMO.

#110 CM on 12.01.09 at 5:46 pm

Just an update on the Calgary rental market. The median rental price (per month) for a SFH in Calgary has officially fallen another 3%.

For those that have seen my posts before, I track the median rental price of SFH and 2-bedroom apartments in Calgary using the data from rentfaster.ca

Link to all SFH for rent: http://tinyurl.com/ygt7uj2

Here is the data (month: price)

07: $1650
08: $1600
09: $1600
10: $1600
11: $1600
12: $1550

Looks like the rental decline is happening at about 1% per month.

The current median price for a SFH in Calgary is $408k.

This translates to a current price/rent ratio of 263.

Generally, anything above 200X is considered a terrible investment for renting out.

Over and out,

cM

#111 kc on 12.01.09 at 5:50 pm

More Bullshit and Propaganda….. have a bucket ready if you read this for you might want to toss your cookies, or plan “B” toss your computer into the bucket…

I have to ask this Question thou…. they state in here that house “buying” is the #1 reason for this OH SO SLIGHT 0.4 and if this is true… then this next question really needs to be asked….

“That availability of credit helped fuel a dramatic turnaround in the national housing market, and should help push the economy ahead as recent home buyers buy furniture and carry out home renovations, she said.”

Will that be cash or credit to “furnish” your new digs?

It’s official: Canada’s recession is over

http://www.financialpost.com/story.html?id=2285314

#112 Downsized and Delighted on 12.01.09 at 5:54 pm

99 Toronto Renter: You have very good taste in real estate. Not sure about the Longboat Key part, but coincidentally I’ve been looking at the other two areas myself recently. Laguna was my favourite place until they made the tv show about it. No one knew about it till then. I played basketball on the beach there many many years ago. For those of you not in the know, Laguna Beach is a very artistic community south of L.A. Anyway, I’ve been looking at Malibu listings just for fun hoping to find a beach house for 40% off (like Garth has led us to believe). I haven’t found anything but apparently Sean Penn picked up a knockdown house for around that discount.

South Shore is another nice location, but I haven’t found any discounts there either, even though the Americans are leaving.

#113 Dave on 12.01.09 at 5:57 pm

There is no bubble.

Interest rates are not going to rise. American 5 year bond is now at 2% or less. This is what return people with lots of money are expecting on average for the next 5 years. Expect prime to remain at 1% or less for at least 5 years. Still in doubt?–check US Treasury websites.

Expect dollar to go down versus the USA. Result will be jobs boom and more immigration. Thus demand will remain. Still in doubt? — check Citizen and Immigration publication ‘The Monitor’ for current numbers.

People with lots of money are all putting it into assets as they realize paper money will be worth less and less. Still in doubt? — check prices for metals such as copper, silver, etc. It’s not how much money you have but how many assets you have. Thus land will continue to go up in value…detached from incomes, etc.
—————————–‘

who cares if interest rates stay low. You think rates will salvage the real estate market? People are hanging on a string. The economy and jobs better come back quick, because spending and discretionary income are down, down, down.

You want to compare the price of metals, which are being gobbled up by China and India because of their much bigger version of the industrial revolution, and assume real estate in Canada is in the same playing field? Land will not go up in value in the next 7 + years. Leveraged assets get clobbered in times like this. Land will not detach from people’s income. They have until now, but soon will return to normalcy.

#114 Jeff Smith on 12.01.09 at 6:04 pm

#102 E. Buzz Miller on 12.01.09 at 4:34 pm
[snip]
>Jane54 didn’t ask what happens to them when rates
>go up, but that question is so easy I’m going to
>answer it even if she didn’t ask. They don’t have a
>mortgage because they paid cash, so nothing
>happens when rates go up. That’s the difference
>between Vancouver and Orlando.

I doubt that the majority of buyers in Vancouver would be affluent enough to pay cash for their real estate. Everything being equal, the majority of citizen aren’t in the top wealth category.

#115 Bob on 12.01.09 at 6:07 pm

TD’s economic report says that prices could hit 10% higher next year but no bubble.
http://money.ca.msn.com/investing/news/breaking-news/article.aspx?cp-documentid=22770894

“The residential housing market froze late last year in the wake of the global financial crisis”
This is very false. Last fall sales were stalling, prices were eroding, listings were hitting record highs and confidence in the market was evaporating because of the whispers of a bubble. Builders and sellers were offering “free” cars and upgrades to sell. Now the MSM is blaming the downturn in housing last year with what happened outside our borders and not by the fact that we joined the rest of the global housing bust.

When one looks back on the past year, it is not hard to understand why RE has been propped up here. Record low interest rates, home buyers tax credit, stock markets and savings tumbling for millions of Canadians (since kind of climbing back). People are not sure about the stock market, but the RE market has been a safe haven for them or so they think that and the MSM does one hell of job of reinforcing that idea.

The time lag between the US (and global ) and the Canada housing bust was increased by the global financial crisis but 2010 will shorten that gap pretty quick.

#116 diamond on 12.01.09 at 6:12 pm

Just like the Great Depression, as soon as the “stimulus” of 0% and $ giveaways is pulled away, this false “recovery” will revert back to contraction/deleveraging in a painfully necessary way.

Major governments have done nothing to solve the issue of over-indebtedness and malinvestments which must be wound down in a natural process of recession/depression. All of these efforts to rescue the economy (0%, Stimulus $, Quantitative Easing, etc) are only prolonging the eventual, unavoidable, correction.

Central Banks of the Developed world are absolutely destroying the middle class with these efforts which will result in loss of purchasing power, higher taxes, and slower economic growth due to constrained consumers and businesses.

As for houses, I would like to know how people can possibly think that real-prices for houses won’t be affected by:
-> Aging, deleveraging, downsizing Baby-Boomers (largest CDN demographic)
-> Rising interest rates – inevitable
-> Persistent, high unemployment
-> Higher paying manufacturing jobs replaced w/Service Sector jobs.
-> Over-indebted Canadian consumers
-> RE demand brought forward via Low Rates
-> Higher Taxes due to Canadian Govt losses from exposure to Automotive Sector ownership, CMHC losses due to Sub-Prime Lending, CPP Losses due to MBS exposure, wasteful Stimulus $pending
-> US Consumer debt aversion, lower consumption
-> etc….

Garth, I just wanted to point out that we Canadian citizens actually bailed-out our major Canadian Banks back in 2007/8, long before the bailouts of 2008/9. I believe our Conservative government used our CPP fund to purchase MBS (inevitably the rotten ones..) from our Canadian Banks in 2007 in what the CPP investment board called “diversifying” in their portfolio. Even in 2007, there was some weakness showing up in the RE market, and our Retirement fund was the first tool used to help our Banks. The future is NOT bright for North American middle class…

#117 jess on 12.01.09 at 6:15 pm

v shape defining defaults especially 1930-50
page 5
http://www.economics.harvard.edu/files/faculty/51_This_Time_Is_Different.pdf

#118 jess on 12.01.09 at 6:23 pm

China launches central clearinghouse

The PBOC statement said the clearinghouse has signed a cooperation agreement with Deutsche Börse, which owns the Eurex derivatives trading platform and operates clearinghouses for exchange and over-the-counter products..

#119 Nostradamus jr. on 12.01.09 at 6:24 pm

To all my “too cheap or afraid to purchase, Renter” fans…

…Sending me $100 or $200 will not sway me closer to you.

…I cannot be bought.

Buy a home in Vancouver…rent rooms…find nirvana.

Ohmmmm

Nostradamus jr.

#120 Dan in Victoria on 12.01.09 at 6:34 pm

Since we’re on today about the taxes not, or should of being paid, by some. What about these real estate “flippers” that are claming principal residences and not paying on them, I see it all the time.
My accountant warned me years ago about the pit falls of it. Was good solid advice then, and today.

#121 Patrice on 12.01.09 at 6:41 pm

So when will be a good time to buy?

You have been warning us to not buy for 2 years.

now warning of higher interest rates in 2015.

Maybe a few years for the market to go down after that?

So perhaps in 7-10 years will be a good time to buy?

Please answer.

Thank you!

I will emit three puffs of white smoke. — Garth

#122 Patrice on 12.01.09 at 6:52 pm

I will emit three puffs of white smoke. — Garth

Okay then, can you tell us when should we expect you to emit three puffs of white smoke?

A ball park? anything?

Pretty please with sugar and maple sirup sprinkled on top?

#123 john m on 12.01.09 at 7:19 pm

In a word, it would mean desperation. Rates would stay low if demand for goods and services withered and we entered a period of renewed recession. Or worse. They’d stay low if business owners were facing imminent failure and laying off new legions of workers. They’d be low if the economy slipped back into contraction with unemployment racing past 10% on its way to 15% or more. If there was deflation instead of inflation. They would stay low if the Bank of Canada had absolutely no other weapons to combat a cycle of tumbling incomes and prices. In short, emergency rates would remain so long as we had an emergency. And there’d be little reason, I would imagine, why anyone would be out buying a house.<<<<<<<<<<<, is this not today's scenario?????????

#124 latinlife on 12.01.09 at 7:26 pm

Where’s my

Garth’s rocks for sale for $1200

post?

#125 dawson on 12.01.09 at 7:52 pm

Canada home prices may rise 10 percent in 2010: report

http://ca.news.finance.yahoo.com/s/01122009/6/finance-canada-home-prices-rise-10-percent-2010-report.html

#126 BAD on 12.01.09 at 7:54 pm

-
#121 Patrice on 12.01.09 at 6:52 pm

Okay then, can you tell us when should we expect you to emit three puffs of white smoke?

I suppose when you see the first puff of white smoke from Garth then you may expect two more shortly.

You still run some risk that he can stop on one or two puffs, but then again, nothing is ever guaranteed.
-

#127 Nostradamus Le Mad Vlad on 12.01.09 at 7:58 pm

The headline “Careful what you hope for” sort of goes with a column in today’s KDC by David Bond (Economic Letter). Bond is a retired chief economist with HSBC Bank Canada ( e-mail [email protected] ).

Headlined “Don’t panic, but investors should watch for US inflation”, one para. reads: “What Cdns. should be concerned about is a significant and distinct possibility of a prolonged bout of inflation emanating from the US. That nation is facing massive budget deficits over the next decade with no appetite for either reducing expenditures or raising taxes. The only way to lessen the burden of paying for this growing national debt is either by repudiating the debt that would bring a total collapse of the world’s financial system or inflation.”

Could be linked to what I posted a couple of weeks back — if the US$ rises substantially, then stock markets crash (pretty much everything is on tenderhooks now).

As GS & JPM control economies here, there and everywhere, the US is flush Bust! Further, is broke? Probably, but they’re getting bailout funds from themselves. How is this for fiscal accountability? Adding to the previous, who actually controls the US? Now you know!
——
A-H1N1 — Third Wave?
——
Mentioned earlier was that Gore was close to being a billionaire, so where did he earn that money? Guess!

#128 Piccaso on 12.01.09 at 8:06 pm

You will get it right Garth, history repeats itself eventually.

#129 Downsized and Delighted on 12.01.09 at 8:10 pm

108 Rory : If you are resident in Canada you pay tax here. If you are resident in the U.S. you pay tax there.
If you are resident off shore like the Cayman Islands, you pay tax there. If you are a U.S. citizen you pay tax everywhere with credits for taxes paid in your country of residence. Since there is little benefit to paying tax in the U.S. and the estate taxes are bad there as well, I assume you would only consider the Cayman Islands where you pay very little tax. But you have to remove all ties from Canada. That means no residence here, no ohip, no drivers license – no nothing. Most people love their country and their families enough to stay. But some, especially big ego lawyers with alot of liabilities in Canada choose to go to the Cayman’s. Some people even try to buy phoney residence status offshore, and stay in Canada. But of course, that isn’t legal.

You can send my $100 to the Princess Margaret Hospital Foundation in Toronto.

#130 Onemorething on 12.01.09 at 8:46 pm

#94 Jeff S

Low priced goods manufacturers moved to northern China starting 5 years ago. The ones left in S.China vanished along with many mid to large factories. We were one of the first factories in Donguan in early 90’s. Now last one standing in our area.

Our layoffs simply moved back to N.China to take up farming again which the Central Government supported by subsidies (stimulus) so that a farming job paid almost the same as a factory job (you ended up doing what generations before you did) and you were good at it. Supporting domestic need for food is definately in China’s best interest.

As for labour rates, yes through the roof (double) last 3 years but after the crisis scaled back about 1/2 of the gain. Workers are reluctant as well to come back to factories citing the future seems bleak, stay close to home and family (chinese way).

KL is an unknown to most people, I like it that way! We travel outside the city regularly as there is much to see.

Most MM2H programers live in various major cities in Malaysia but most in Penang which has about 1.5M. Top end RE consisting of 2-3 storey 5000sqft+ homes at around $350K CAD. The same in KL top district $1.4M CAD. However, many will go with a 3000sqft Semi D for around $200K CAD.

As you know Asian Culture revolves around eating driving competitiveness via quality, # of players and price. I can grab a local breakfast or lunch for less than $3 CAD. A SUBWAY combo is $3 CAD, McDonalds Combo $3.25. Regular Family Rest. Dinner for 4 around $40 CAD and 5-Star Dinner including drinks for about $35CAD pp.

Safety is similar to most cities so had to adjust slightly as HK is by far the safest place to live in the world.

Most areas are either gated or employ security for peace of mind.

My plan started 8 years ago in Asia, it should have started sooner. Retirement was always to be Canada but has been replaced with Australia or New Zealand with vacation homes in Thailand, Italy and Canada.

These destinations will grant you visa’s so you can pay your taxes accordingly. I have just applied for Perm. Residence in HK for my business tax haven and connection to China in the future.

The Western World has little to do with the future for my business and my children. I see it everyday!

#131 Jim on 12.02.09 at 12:28 am

RE #89 Europe House Prices
The European Experience?

Lately my well travelled friends have started pointing to Europe as an example of how Canadian housing prices will stay high even though our largest trading partner’s average prices have cratered.

They state that historically prices in western Europe have been at least double what you would expect to see in the US.
——————————-

First off, there are 10 times the number of people, in a smaller space…too many people chasing too few assets. Ask them about property in Spain…

#132 Into The Sunset on 12.02.09 at 12:31 am

To: D&D, Kitchener1 , Mr. D. Ottawa and any others commenting on my messages:

Everyone talks “tax evasion” and “I thought this” and “I thought that” and “you must be doing this” and “why are you asking $100 when your so rich.”( It’s one way I got rich!!)
The $100? is like asking 5 cents for a plastic grocery bag….keeps the cheapskates at bay.

The rest….. you’re a great bunch to talk-the-talk.

Health care cost figures may be correct for what you receive as basic……add a few other ordinary items and see which figure applies.

I thought someone would come close on any one of the ways to reduce taxes to zero. No cigar!
Here’s a hint…. D&D, of course you already know this, at least you will say you do…….Sections 110.1 and 118.1 of the ITA. Go have fun and educate yourselves! This combined with a few other ways and Voila “Zero”.

#133 Vancouver_bear on 12.02.09 at 2:11 am

#118 Nostradamus jr. on 12.01.09 at 6:24 pm

Smoking pot is illegal, but officials tolerate it and ppl smoke it. Growing pot is illegal and is not tolerated. Garth, pls report Nostri to officials…..just his IP address, I am 1000% sure that he is growing and selling pot for profit, that’s why he talks that houses in his lalaland are so cheap!

#134 Soju on 12.02.09 at 6:13 pm

The average house will be up 10% in 2010. Funny, 2 weeks ago it was 20%. Mortgage rates have also decreased since the articles started saying 20%. Does anyone know anything!!!

#135 Terry on 12.05.09 at 3:49 pm

There are many comments stating the cause of the buble is foolish buyers. I am 100 % agree with it and I say the same to my wife. Her opinion is that you have to go with the flow. If you try to be a wise buyer, you will be outplayed by the foolish buyers. They will bid much higher price for a home, you will be searching searching home.

Problem is how to educate the foolish buyers. In this the most important role is played by real estate agent, who are represting buyers. They told the buyer buy it now whatever the price is, it will be more expensive a month after. Second role is played by the newspapers, who are publishing very biased article on real estate. Which are written by real estate brokers with certain prespective.

I do not know what is the solution. Should I continue to rent a small? my kids asking every day when they will go to their own home.