Humans

Three months ago Evan and Dawn asked me for the name of a killer realtor in downtown Vancouver. “Made some good money on this condo,” Evan said, “and now we think we should get out.” Smart kids, I said. And I sent them the name of a woman whose fingernails stop traffic.

They listed the two-bedroom (low-rise) unit for $489,000. Nice, since they’d bought it for $310,000 in 2005. A week later there was a conditional offer for $476,000, which fell through. (The buyer had unit in the building, and couldn’t sell.) Then, crickets. Evan was shocked at the way the market seemed to be unraveling, so he and Dawn dropped the price.

Yesterday it sold for $465,000. After commission and costs, the gain is $126,000, or 40% over six years – 6% annually, about what a balanced portfolio would have returned. And this was during what was arguably the frothiest period in the house-horniest city in the history of Canadian real estate. Just imagine what happens to condo values when reality visits. Like now.

“I’m happy with the outcome and the timing is perfect,” says Evan. “I’ve attached 2 pictures for you that tell the story. One is when we listed, the other is yesterday. There are now 3 more places listed for sale in my building. Listings have exploded in the last 3 months. I feel lucky to have sold at this time.” And so he should.

Here’s a shot of Evan’s building on listing day (left), and yesterday. Imagine what it will look like in April, when the listings flock back to Capilano.

 

A few more words to add to yesterday’s post about condos – the sex toy of choice for flippers and speckers. Between six and eight of every ten purchases over the past year in Toronto have been made by people with no intention of living in the concrete boxes. They’re the ones you see in the newspaper pictures and on the six o’clock news lining up like zombies outside an Apple store. But instead of shelling out a few hundred bucks for an i-whatever, they’re desperate to secure a unit selling for hundreds of thousands.

Many will never close the deals, assigning them before buildings are even built. Others will close, mortgage to the hilt, search for a tenant, and suffer a few years of negative cash flow because (of course), ‘real estate always goes up.’ And often it does.

But this rampant speculation is a leading indicator of HouseAgeddon.

As a new report this week from Capital Economics concludes: “We believe overly-confident investment behaviour explains rising house prices and the strength in new home sales and turnover rates in resale markets. The sharp rise in house prices, however, has meant that longer-term housing affordability and excessive household debt are now major downside risks to future economic growth.”

Sound familiar? You bet. This is exactly what Mark Carney’s been preaching for months now (and most recently, this week), plus the IMF and anyone else without a hand down the pants of the housing business. Household debt, thanks to real estate lust, is the thing you most have to worry about. Yes, it may swamp the economy. Worse, it will kill the market – with dire consequences for those who have put too much of their net worth in a home. Actually, it’s already started.

(By the way, bury the notion that only irritating cities like Vancouver and Toronto are at risk of a housing plop. Capital Economics also found prices have jumped sharply this year ‘from already elevated levels’ in most places – like frostbitten Winnipeg and irrelevant Quebec. It means the entire market could be at risk. That’s right. Nowhere to hide.)

But too many amateur investors and flippers do more than just make real estate unaffordable. They can also murder it on the way down. At least that’s what a new US Fed study finds – and Americans should know. US real estate is still groping for bottom.

“Optimistic investors – speculators – used low-down-payment, nonprime credit to place highly leveraged bets on the housing market, perhaps facilitated for some by reporting an intention to live in the house,” says the report. “Because they didn’t have to put much money at risk, these investors were able to continue to buy housing even as prices rose further.”

But when the bubble burst, these same people were the first to leap from the Hindy. They defaulted on loans or walked away from minimal downpayments, “accelerating the rate of decline and feeding the collapse.” At the peak of the US real estate orgy, the report notes, one in three new home purchases was made by an investor.

See the parallels? Nothing to do with sub-prime mortgages or differences in banking regs between countries. It’s all about human nature. We lunge to buy what’s rising, and panic to unload what’s not. It’s why condo marketers hire people to line up. Soon there are hundreds behind them.

Human decoys.

 

173 comments ↓

#1 TurnerNation on 12.09.11 at 9:42 pm

First :)

#2 Zeus on 12.09.11 at 9:51 pm

The wife and I are in our late 20s, take home 120k a year in safe gov’t jobs, and have absolutely no reason to get into this market right now. The market here in Vancouver is silly, and renting 1/2 a house in North Delta that is walking distance from the wife’s office for $800 a month inclusive of all bills, wouldn’t even match the condo fees/property taxes of a 1000 sq/f box down the road.

Over the last year since coming back to Canada from an extended expat stint in Asia, I have def. noticed condos dropping in price, particularly in New West, Coquitlam, and parts of Burnaby.

Interestingly, a contact of mine who owns one of the larger realty companies in West Van, recently divested his ownership, sold his West Van house/sports car, packed the family up, and left for SoCal.

The smart money is leaving. My money is going into a TFSA/RRSP/growing a 3rd income from a small biz

#3 ballingsford on 12.09.11 at 9:52 pm

Condo bubbles in Ottawa and other areas are starting to burst! No need to post the link as you guys are already on top of this stuff. You read the headlines like the rest of us and are also able to read between the lines.

#4 T.O. Bubble Boy on 12.09.11 at 9:53 pm

CityPlace in Toronto is ground zero for condo “investor” madness… In 10 years that area will be a 50-storey version of Regent Park.

#5 TurnerNation on 12.09.11 at 10:00 pm

Smoking man – did you go to Alpha exchange’s party last evening? It was open bar…

#6 jonny on 12.09.11 at 10:01 pm

Grow up. Who cares if your first.

#7 squidly77 on 12.09.11 at 10:01 pm

It’s why condo marketers hire people to line up. Soon there are hundreds behind them.

Human decoys.

Indeed.

#8 GregW, Oakville on 12.09.11 at 10:01 pm

Hi Garth, Some may be interested in these, on TVO Sat&Sun 5pm. http://bigideas.tvo.org/ or down load.

The world is going through a seriously topsy – turvy phase. Mental habits about how institutions work, no longer offer certainty. And even though economically Canada by comparison with other countries is not doing too badly, there are dynamics at play which are altering the character of this country.

This weekend, Globe and Mail’s Ottawa bureau chief John Ibbitson is offering his reading of Canada’s changing political culture. His point of departure is the last federal election. Ibbitson sees it as one for the history books. Not only did the Conservatives win a majority, but the decimation of the Liberal party was symptomatic of something much deeper at work. John Ibbitson sees it as a collapse of an elite consensus which has created Canada but which no longer is able to represent its changing demographics, economics but also new values. The axis around which Canada moulded itself is moving westward and with it a whole slew of notions of what Canada stands for are subject to revision.

And if you missed last weeks.
Armine Yalnizyan and William Watson debate whether inequality is a threat to democracy. 55min.
see same link above.

#9 Helpful Advise on 12.09.11 at 10:07 pm

I was FIRST. And I’m a grown up.

#10 Zeus on 12.09.11 at 10:10 pm

“Yesterday it sold for $465,000. After commission and costs, the gain is $126,000, or 40% over six years – 6% annually, about what a balanced portfolio would have returned. ”

While I get your point Garth, you fail to connect the fact these are leveraged gains. If they only put 15K down payment, a gain of 126K over six years is sick

Not the case. But if it were, you need to add in the occupancy burden – financing, strata fees, property taxes, lost opportunity cost etc. – which a person renting the same unit would not face. Do the math. — Garth

#11 View on 12.09.11 at 10:14 pm

Fun trivia… around the corner from me a spec home was built and listed in 2009 (or there abouts) and finally SOLD. Original price for this semi lakeshore was $1,300,000 and this past week sold for the low low price of $511,000. The Kelowna area is seeing first hand the shock and awe from the south!!!

#12 Gord In Vancouver on 12.09.11 at 10:16 pm

Thanks, Garth.

#13 LondonHauling on 12.09.11 at 10:18 pm

GT wrote: (By the way, bury the notion that only irritating cities like Vancouver and Toronto are at risk of a housing plop…. Nowhere to hide.)

Not even London, you look at Fig 2 in :

http://www.cmhc-schl.gc.ca/odpub/esub/64327/64327_2011_B01.pdf?lang=en

I love how they title it “Gradual Price Appreciation” – my math: Average price 2001 looks to be about $135K…. Average price now per Remax news release on the radio last week $238 = about a 75% increase in TEN years.

So if historical average is 2.5% and you consider compounding, one would expect ~ 35% in ten years. So that means 40% overpriced

I agree with GT, downturn will be slow, maybe a drop of 8 – 15% to start but then over sic or seven I bet we will be down 30 – 35%.

#14 Tim on 12.09.11 at 10:23 pm

You neglect to mention that the gain would be higher than 40 percent, assuming they put 25 percent down, due to leverage. IF they put less than 25 percent, it would be that much better.

I had to listen to a guy who bragged that his condo in Richmond was up over a hundred grand this year alone

#15 MARTIN on 12.09.11 at 10:23 pm

“i-whatever’ — your lines are AAA

#16 LondonHauling on 12.09.11 at 10:26 pm

This one is interesting too – see Fig 2…

Shows London SFH average prices since 1990 – pattern looks like the USA just before 2006! Also interesting to see how London lagged behind Toronto in the last drop (nadir in 1995).

http://publications.gc.ca/collections/collection_2007/cmhc-schl/nh12-224/NH12-224-2007-1E.pdf

Looks like a 20% drop from 1993 to 1995 – and the 1993 values was not reached again until about 2003. A lost decade. Will it be two decades this time?

#17 TaxHaven on 12.09.11 at 10:27 pm

AMAZED he managed to sell at $465,000! Obviously there are still buyers, somewhere.

Why doe anyone buy a condo anayway? It’s a concrete box, usually in the sky. It has no title to any actual land. Living in the box, one is entirely dependent on electricity, pipes and elevators for the essentials of life – movement, water, heat. You have to jockey oftentimes with inches to spare just to maneuver your one car into its allotted spot. (I could park a TANK on my small-town 3/4 acre lot.)

And with a condo glut even now, there is little chance of ever getting your equity cashed out. In the meantime you’ll be paying condo management fees, perhaps electricity or elevator surcharge. Forget having a bonfire. Or sometimes even a barbecue. No “loud” music, either.

Don’t like those nanny-state neighbours? Tough. THEY outvote you. You face another level of government in your condo committee. They can uproot trees, ban window-boxes, behave like garbage nazis, put in faux-concrete pink flamingos, spend your money on dancercise classes or unused paddling pools for nearly-non-existent kids.

I have NO IDEA why anyone would do it – even WITHOUT taking on debt.

#18 Humpty Dumpty on 12.09.11 at 10:32 pm

No one can serve two masters; for either he will hate the one and will love the other, or he will hold to the one and despise the other. Ye cannot serve God and mammon. For this cause I say unto you, Do not be careful about your life, what ye should eat and what ye should drink; nor for your body what ye should put on. Is not the life more than food, and the body than raiment?

Hmm…. See why are “human nature” never sucumbs to anything but its own depravity…

http://www.buzzfeed.com/mjs538/the-most-powerful-photos-of-2011

#19 MARTIN on 12.09.11 at 10:36 pm

i heard some rumors today that Germans are printing deutschmarks just in case things get a bit outta hand. if europe turns back to their currency its gonna be a lot of volatility in the world markets. and as i learned out from this blogg where is volatility there is a chance to make $$$

any opinion from the honorable and the crew?!

‘Rumours that Germans are printing…’ We don’t deal in rumours here, dude. — Garth

#20 Stinky on 12.09.11 at 10:39 pm

Figure 2 from CMHC. Add a 10 more years in the past, make the x axis a little tighter, and then wholly crap you have a dramatic house price increase in Canada. Funny how they added gradual

#21 TurnerNation on 12.09.11 at 10:42 pm

2nd?

BCE and National Bank raised their dividend this week, respectively 5 and 6%.

And how’s this BarfPlan(tm) un-balanced portfolio coming along these days?
________________________________________

#124Long Gold on 11.15.11 at 1:08 pm
Thanks for embodying every point I’ve ever made about gold investors. — Garth

what you think is irrelevant- profits decide who is right.
I challenge you to put up a portfolio that can beat mine….

0.5% cash (wal mart emergency money)
20% gold bullion
25% GDX-NYSE market vectors gold miners
40% GDXJ-NYSE market vectors gold junior miners
8% nat gas (futures)
3% U-TSX (uranium fund)
4% POT-TSX (potash, for some agri exposure)

current prices…
CDN cash= C$1813/oz gold
gold bullion= US$1771
GDX= US$60.87
GDXJ= US$31.39
nat gas spot price=US$3.44 (Henry hub physical future)
U-TSX = C$6.10
POT-TSX= C$47.11

Beat that

I don’t gamble. Have fun. — Garth
__________________________________________

#22 Devore on 12.09.11 at 10:46 pm

#14 Tim

I had to listen to a guy who bragged that his condo in Richmond was up over a hundred grand this year alone

He should try selling it, to see how much it’s worth.

#23 Mr. Lahey on 12.09.11 at 10:46 pm

Beach Girl:

“Mr. Lahey, Sometimes is is good to enjoy a bit if levity. You are entertaining me, anyway. I think Sir Garth should wear a kilt.”

What an excellent suggestion Beach Girl! It would fit the down east Hoedown now wouldn’t it? Glad you are enjoying my posts.

#24 Stevenson on 12.09.11 at 10:51 pm

Slow down? Where? In a feared market Toronto is still growing in the low season. Imagine if Europe gets things in shape. It’s the only thing holding growth back. The stock market is ready to take off if it was not for Europe.

http://www.theglobeandmail.com/report-on-business/economy/housing/toronto-edmonton-help-drive-new-house-prices-higher-in-october/article2264295/

#25 not 1st on 12.09.11 at 11:05 pm

Why doe anyone buy a condo anayway? It’s a concrete box, usually in the sky. It has no title to any actual land. Living in the box, one is entirely dependent on electricity, pipes and elevators for the essentials of life – movement, water, heat.

____________

I always wondered what happens when a condo complex burns down. Sure you have insurance but would you really get the true cost of the unit back. Who is going to rebuild it?

#26 i.see.debt.people.and. on 12.09.11 at 11:16 pm

i.am.first!NOT!

#27 Uh Oh Canada on 12.09.11 at 11:19 pm

I live in the irrelevant province and currently have enough saved for a generous down payment. I’ve been checking out MLS for properties, hoping to see a reduction. So far, only condos and row houses have dropped in price. Most SFH listings are empty, look staged, and are cheaply renovated in the pictures. Garth is right, there are a lot of flippers and specs out there who have driven the market up and will soon drive it down.

#28 FTP - First Time Poster on 12.09.11 at 11:22 pm

Another timely post Garth. Is it time to expand the website with some useful tools that people can utilize and supplement your posts?

I think you’re preaching to the converted – RE is a deadman walking. How bout more posts on balanced investing, TRUE costs of ownership vs renting and my personal favorite…….vultching!

Those who havent gotten the message by now over the past 3 years you’ve been preaching wont – remember, every society has had its share of village idiots. Those of us who have paid attention would be grateful for more information on the finer topics you have presented.

BTW – those of you who love posting “FIRST!” should email me your name and address. My daughter is 3 – she loves that game!

#29 Mark on 12.09.11 at 11:24 pm

There won’t be a crash I’m Canada because people can’t walk away from properties/mortgages as easy as they can in the US. So without all the foreclosures, there will just be a whole bunch of people stuck in homes, and a long slow steady decline. But don’t expect anything like the US.

#30 MARTIN on 12.09.11 at 11:26 pm

‘Rumours that Germans are printing…’ We don’t deal in rumours here, dude. — Garth

official rumours :

http://www.moneynews.com/StreetTalk/Ex-BushAdviserGermanyPrintsOldCurrencyinCaseEuroDitched/2011/10/04/id/413225

http://www.zerohedge.com/contributed/germany-already-printing-money%E2%80%A6-deutsche-marks

http://www.freerepublic.com/focus/f-news/2798264/posts

#31 DonDWest on 12.09.11 at 11:35 pm

Never, ever, buy a condo!

You’re getting the worst of both worlds. You’re essentially paying property taxes to have your freedom tied down to the responsibility of home ownership; without the benefits.

For starters, most condos are infested with boomers or speculators. The speculators make a ton of noise constantly wheeling and dealing their “homes.” Having constant open house circuses and show casings isn’t exactly my idea of personal living. With the constant commerce floating around; feels like you’ve never left work.

On the other hand, as for the boomers, warning if you’re young meat. They will use you for FREE labour; and you must learn to love it, otherwise they will all vote for punitive measures upon you. You must help Bob with the furnace. You must help Sue with the dog. Whenever there is any heavy lifting required for any situation; you must volunteer yourself. You must keep things good and quiet for the knitting club. And believe you me; as auspicious as this may sound, they may contemplate regulations that make sex banned in the building. Trust me; I’ve been in situations where the baby boomer majority board pushed it. . .

They will want you to spend your money for on-site nurses, clinics, hot tubs, and bingo halls. They will also spend your money on constructing a gym (that the boomers never use anyways). They will relentlessly raise your condo fees to the stratosphere in order to do so. Your condo fees + mortgage can eventually end up becoming more expensive than a SDH. Many condo fees are now just as expensive as rent.

Children are practically illegal in condos. Whatever you do; don’t get anyone pregnant. Children are smelly, noisy, break things, and make a lot of noise. Children are by far too much of a nuisance for the “aging hipsters of the great granite hall.” The speculators hate the children too; children often interfere with photographic horniness rush speculators get as they’re meticulously polishing off their China-wares.

Thankfully I got out in a year without suffering any losses due to a moderate appreciation that given year. I consider myself blessed I broke even, because believe you me; I would have been willing to pay to leave that hellhole. Lesson learned; and this was only at the start of the “condo boom” back in 2002. I can only imagine how crazy it is today. . .

Then again, if you love living your life like its one giant corrupt corporation 24/7 and desire to be an ornament for the condo board; then maybe going into massive debt to pay for a condo is for you.

#32 on the sidelines on 12.09.11 at 11:37 pm

Did they not use your recommended realtor ” woman whose fingernails stop traffic”? The photo has the name of a man on the sign.

#33 Jsan on 12.09.11 at 11:42 pm

“Sound familiar? You bet. This is exactly what Mark Carney’s been preaching for months now (and most recently, this week), plus the IMF and anyone else without a hand down the pants of the housing business. Household debt, thanks to real estate lust, is the thing you most have to worry about. Yes, it may swamp the economy. Worse, it will kill the market – with dire consequences for those who have put too much of their net worth in a home. Actually, it’s already started.”

===================================

So the one question everyone has to ask is, both Harper and Flaherty undoubtedly know that real estate prices in Canada left the realm of sanity a long time ago, Carney knows prices left the realm of sanity a long time ago, they all must know that if prices stay at these lofty levels you can kiss the Canadian economy goodbye a generation from now as households will be buried up to their necks in mortgage debt so………..HOW THE HELL COULD THEY STAND BY AND WATCH…. no…., ALLOW THIS HAPPEN????

It’s one thing if banks were taking the risk on these mortgages and allowing these ridiculous loans, it’s a totally different story when the government through the CMHC is allowing these loans and most likely they were the ones that encouraged these loans….so again I ask….WHY???? Why is this question not being asked by every Canadian that pays taxes, every Canadian that has insured all of these ridiculous loans?? This should be the largest government scandal to date!!!

#34 Van guy blazin kush on 12.09.11 at 11:54 pm

Garth,

You need this blog translated into Chinese. That way I could get my parents and the rest of the family that can’t read English to understand this mess. Also, it may scare HAM away.

#35 Onemorething on 12.09.11 at 11:56 pm

Just more signs Garth of the future trend for RE, the lag in the sheeple when they circle their own little world!

Try taking a trip south and see the RE market, look at how double the Canadian population is relying on food stamps.

Still some GOLD bugs on this blog!

Does anyone honestly think with all the government manipulation that is going on today that GOLD will be allowed to reach 2K.

Come on people, GOLD is just another investment not a store of wealth right now. It must be converted to be any good anyway and into what???

I do own GOLD only for the sake the manipulation goes unhinged and cannot be secured and in this case the only GOLD to have is the REAL stuff and accessible via an arms length.

#36 AACI Home-Dog on 12.09.11 at 11:59 pm

Beach Girl…
yesterday you asked/added:

Garth, would you please write more on the reasons rates
will rise, and likewise why they will not fall? Thanks.

Done. — Garth

__

I am interested as well (you said)

Well, I think Garth means that you should refer to some of his previous posts, where it has been already covered.
(it is up to you to look back, as to where)
but you have lots of time… :)

#37 Bottoms_Up on 12.10.11 at 12:06 am

Attended a meeting the other day. We talked about how the .gov is moving in the direction of social media, and the importance of embracing ‘rogue’ sites like facebook, twitter, on-line social interaction and free learning etc. and how the nature of the game is changing (i.e. we have on-line identities that should be allowed to flourish, and the evolution of how we work will be unlike anything seen before).

Anyway, I thought it was ironic given that Garth got kicked out of politics for doing this exact thing, using social media to connect with his constituents.

So I’d just like to give a shout out to Garth and thank him for running this blog, it has been very informative and stimulating and allowed me to learn from many of my fellow Canadians whom without the blog I would never had the privilege of knowing.

#38 MixedBag on 12.10.11 at 12:24 am

Human decoys? It never occurred to me, but now that I think about it, it makes sense, as I could never figure out who would stand in line for hours to purchase a condo.
You want to sell me a condo, you gotta work and convince me to buy one, not the other way around.

I hate speckers. Not so much for their gains, but for pricing potential homebuyers out of the market, and lowering our buying power.

#39 U-The Man on 12.10.11 at 12:59 am

The Houses of cards, including concrete condo boxes, built by easy credit and supported by greedy speculators, is starting to collapse. Will the Cons and Carney step in to bail out those greater fools who are left holding the debts. That is the multi billion dollar question.

#40 Van guy smokin now on 12.10.11 at 1:11 am

#11 View on 12.09.11 at 10:14 pm
Fun trivia… around the corner from me a spec home was built and listed in 2009 (or there abouts) and finally SOLD. Original price for this semi lakeshore was $1,300,000 and this past week sold for the low low price of $511,000. The Kelowna area is seeing first hand the shock and awe from the south!!!

Can we get a realtor to confirm this sale? Better yet, where’s this DA guy these days? I guess he’s hiding from the good news that was released this month. 

#41 KingBubbles on 12.10.11 at 1:15 am

prices have jumped sharply this year ‘from already elevated levels’ in most places – like frostbitten Winnipeg
——————————-

But it’s a dry cold Garth ;-)

#42 Nostradamus Le Mad Vlad on 12.10.11 at 1:39 am

-
“Human decoys [have] Nowhere to hide . . . condos – the sex toy of choice for flippers and speckers and anyone else without a hand down the pants of the housing business, a woman whose fingernails stop traffic like frostbitten Winnipeg and irrelevant Quebec. See the parallels? Like now.”

It appears this degenerate, pathetic blog has evolved into a pawn shop in Soho, London, UK, along with a vast array of titillating words, strategically placed in the wrong areas for all the right reasons.

Way to go, Garth! You’ve sunk to a new high!
*
RBS Duzzent make cents; China Exports down; Soros Occupy nerve centre staffed by Soros supporters. Soros bankrolls Obama; Eurozone Becoming a fascist-communist state; Printing Presses The safety of the Euro has been greatly exaggerated, and Unrest; Lobbyists Who is worse? Banxters, politicos or lobbyists? Cdn. banks next to fall? Wall St. vs. Russia Who is behind it? European Screwing Mechanism (ESM).

Smart Money Where is it going, CrackShack, Return of the Jedi, No Money, No Problem; Running On Empty, MLR bomb, a.k.a. healthcare; Americans are spending. Less; When things fall apart; 3:43 clip Marketing campaign (propaganda); The US Fed Part 2.
*
E-mails :”IF this accusation proves true, it is a nasty, very public slap in the face of the US State Department (“Hillary Clinton, white courtesy telephone, please!”), which has steadfastly stated that their was absolutely no US effort to deligitimize Putin in the last elections.” wrh.com; Killer Bananas True. Allergic reaction; Beer Belly but this was something completely different; UK keeps sovereignty by rejecting the EU.

‘Net access when govts. shut it down; Comforting The US is going to have access to lots of info., courtesy Harper et al; New Cold War with China (and Russia); Food Storage Facilities and FEMA; Links in Oz. Interesting that Friday, Bell and Rogers became friendly while this was happening down under.

#43 jaymel on 12.10.11 at 1:50 am

I have been wondering when we will have a correction for years. My wife and I are in our early 30’s, bought a condo and then sold it in Victoria for roughly the same price we bought it for 4 years ago…we have our original equity but I can’t help but wonder, why are we not seeing a real correction yet? We have been ripe for a correction for years, and yet we wait, nothing happening. Are we fools for continuing to rent, holding out hope this insane market will head south as it should sometime in the next few years? I would think especially in Victoria, we are in for a 25% correction or more.

#44 Kevin on 12.10.11 at 1:56 am

“perhaps facilitated for some by reporting an intention to live in the house,”

The loopholes are there for the taking.
Vacation or 2nd home from RBC for only 5% down. You don’t need 20%.
http://www.rbcroyalbank.com/mortgages/vacation-home-mortgage.html

This is a statement by NBA about second mortgages

“There are many reasons for buying a second home: you may be dreaming of a weekend place in the country, a chalet in the mountains, a downtown pied-à-terre for those trips to the big city or even a place for your children to live in while they’re away at university.
Whether it’s a seasonal getaway or a year-round home, National Bank’s Second Home Program will help you make your dream a reality.

Over the years, your main residence has almost certainly gone up in value. Why not tap into that equity to make a down payment on a second home or buy it outright?”

Yeah, why not tap into that equity?

#45 Kilt on 12.10.11 at 2:10 am

“Yesterday it sold for $465,000. After commission and costs, the gain is $126,000, or 40% over six years – 6% annually, about what a balanced portfolio would have returned.”

That is so wrong.

You need to factor the gain on the initial investment, which may have been $20,000 down. Then include the difference between the costs of owning and renting. Probably more like 300% over 6 years.

Kilt.

You should have stayed for math class. — Garth

#46 coastal on 12.10.11 at 2:31 am

The difference in the coming crash from the early 1980’s 50% crash is there will be far more people hurt this time with only a 20-30% tank. Back then once the interest rates passed 15-17% range no first time buyer came close to qualifying. Job losses and market psychology is going to sink this far worse than most are predicting.

As well, the prices rises in the late 70’s almost doubled in a couple of years unlike the 6 – 8 years this time around that sucked in hundred fold the amount of suckers.

You can bet Flaherty will soon tighten the lending rules again because interest rates won’t do it for him. Carney’s been chomping at the bit for the last year to crank up the rates 2 points and he’s screwed, along with all the other sheep and flipperholics.

#47 Smoking man on 12.10.11 at 3:44 am

5 TurnerNation on 12.09.11 at 10:00 pm

No

#48 Smoking man on 12.10.11 at 3:47 am

DELETED

#49 Phil & T on 12.10.11 at 4:23 am

Mr Lahey – Do you have powered / serviced sites for us elderlies who have eschewed a fixed abode for the “more spacious” and far, far lower ownership costs RV lifestyle?

We promise not to run the generator at night (although being propane it IS VERY QUIET)!!

Should you and yours need extra power, it’s rated at 8KVA so we should be able to help “keep the home fires burning” (or at least the lights!!)

– Now, where have we packed the thermals . . . ..!!

#50 scared on 12.10.11 at 4:24 am

Ottawa has declared that they are going after cheaters – the ones that come to Canada based on fraud. FINALLY!! I am so sick of meeting new immigrants that blatantly flaunt the fact they don’t intend on living in Canada but want citizenship and all the benefits. It is about time. They are going after 6000 people? That’s nothing. I think it’s more like hundreds of thousands.

#51 Pat on 12.10.11 at 5:50 am

#17 TaxHaven on 12.09.11 at 10:27 pm:

“Why doe anyone buy a condo anayway? It’s a concrete box, usually in the sky.”

– live downtown
– little maintenance, no snow shovel
– nice views living in the sky

“It has no title to any actual land.”

– I ain’t no farmer, the nearby park has enough land

“Living in the box, one is entirely dependent on electricity, pipes and elevators for the essentials of life – movement, water, heat.”

– yeah, the modern conveniences – electricity, plumbing, running water, central AC; I’d rather have them

“You have to jockey oftentimes with inches to spare just to maneuver your one car into its allotted spot.”

– obviously, condos are for good drivers only

” (I could park a TANK on my small-town 3/4 acre lot.)”

– sorry, I don’t own a tank

(Disclaimer: I live in a house :) )

#52 House on 12.10.11 at 7:26 am

But you have stated that most cannot just walk away in Canada. They will have to declear bankruptcy. Maybe a little thing but then the effect in Canada may thus be slightly different.

You can always walk from a deposit if you feel like a fight. — Garth

#53 MarcFromOttawa on 12.10.11 at 8:11 am

I had to liquidate all my shares (236 of XIU) yesterday due to a long overdue, but still unexpected, property tax bill for 20 months + special assesment. Don`t ask me why but I was hoping my mortgage was paying the property taxes.

I tried to sell them Thursday late afternoon for a market price of 17.04 but it didn’t go through. I was lucky enough to sell on Friday instead at 17.15~

Lost 35$ with commission (average price was 17.33$)

Looking to add XRE, XVD, and maybe some select DRIP investing next go at it.

#54 Beach Girl on 12.10.11 at 8:24 am

#169 Bond Man 1, Beach Girl 0 on 12.09.11 at 9:18 pm

thank you Beach Girl for reminding me why I live in Parkdale. Bond Man is bang on.

so to speak. as it were.

___

Really have no idea of what you are trying to say. What does, so to speak, as it were, mean?

The reason you live in Parkdale, is you are probably broke. Or a working tax slave in some trendy industry, that pays squat. As they cannot usually sustain themselves for a few years. And you think you are a big down towner. You are not. You will probably always be poor, and you live in a neighbourhood that reflects it. This is not rocket science.

Now head of for that latte, and a strut down nowheresville. Feeling superior. Good morning.

#55 scib on 12.10.11 at 8:36 am

Germany printing Deutsche Marks, British Foreign Office warns of euro chaos
Posted on 27 November 2011 with 8 comments from readers
http://www.arabianmoney.net/us-dollar/2011/11/27/germany-printing-deutsche-marks-british-foreign-office-warns-of-euro-chaos/

Germany has its printing presses working overtime but they are not printing euros but Deutsche Mark notes in case the eurozone sovereign debt crisis ends in a return to national currencies.

At the same time the British Foreign Office has issued warnings to embassies in the eurozone to prepare to handle the problems of its expatriates who may be unable to access local bank accounts and face rioting mobs.

#56 Beach Girl on 12.10.11 at 8:53 am

#36 AACI Home-Dog

Beach Girl…
yesterday you asked/added:

Garth, would you please write more on the reasons rates will rise, and likewise why they will not fall? Thanks.

Done. — Garth

__

I am interested as well (you said)

Well, I think Garth means that you should refer to some of his previous posts, where it has been already covered.
(it is up to you to look back, as to where) but you have lots of time… :)

____

I did not ask The Great One to expand upon this issue. I only said I was interested. It was someone else who requested this information.

As to how I spend my time, that should be of no interest to you, I sense loneliness and a tad of hostility.

This is the time of SAD seasonal (some bullshit or another). I suggest you dress warmly go for a walk, buy yourself a coffee, and say, I made it through another day.

#57 Stupesing in Cabbagetown on 12.10.11 at 8:58 am

Speaking of condos, this story has left me wondering if “leaky condos” and substandard building is being done on purpose: http://www.businessweek.com/magazine/the-king-of-all-vegas-real-estate-scams-12082011.html . GO GRANNY!

#58 househornyhousewife on 12.10.11 at 9:00 am

Garth,

I have always said and will continue to say that when it comes to real estate, you need to buy something that has value, independent of the market.

In 2003, when we purchased our property, condos were hot and everyone espoused the trendy urban lifestyle, even here in Sherbrooke, Québec (considered even more irrelevant than Québec City by the rest of the country). Condos were coming up all around us and many were buying these cheaply built boxes. In a region where you can purchase 5 acres of residential property for around $100,000.00, I could never understand their logic.

Instead of going for the flavour of the month, I decided to buy a property that was in a beautiful old neighbourhood with lots of mature trees (the “old north”) .. not considered very “cool” at the time. Most people were buying said condos or building their own mausoleums in the “new north” (cutting down the trees and building huge homes from property line to property line). Our yard is large and very private despite the fact that the property is within walking distance of everything (you cannot buy old trees and plant them around your property except for $100’s of thousands .. thus VALUE). Our house is also a heritage home that drips with curb appeal and old world charm (they call it “cachet” over here). As the saying goes, “They don’t build them like that any more”. Our property was purchased for $260,000.00 and it is estimated that it would cost over a million to rebuild it exactly as is (using like materials etc..). Current market value is around $450,000.00 (for here this is considered expensive). There has always been a market for these homes but the market is solid and steady, unlike the condo or new neighbourhood market which is in fashion one day and out of fashion the next.

Now that I am looking to move to a lakefront property, I am being EXTREMELY careful to do the same thing as before. Purchase something that will maintain its value irrespective of market conditions. As a result it is taking an awfully long time and my patience is wearing thin. I have turned down a number of properties with problems despite what they seemed to be on the surface. However, I KNOW that this is the only way to go when it comes to real estate because in a “whatever” market (who knows when you may have to sell), valuable properties will STILL sell and one won’t get stuck with something forever.

Value means plenty of acreage in a sought after location, a magnificent view, privacy from your neighbours, old growth trees, solid and classic heritage building, a home that has attractive features (not granite and stainless … PLEASE !, anyone can simply buy that anytime) such as unique architecture that enables it to capitalize on a positive feature of a property (be careful on this one because if it is too unique you will narrow your buyers too much .. classic style is best .. but there is unique and classic). Unique and unusual stuff that you cannot purchase unless you buy that specific property.

If you search for good value and pay a fair price (ie. instead of what the lemmings are paying or what the asking price on the sign says .. I mean what the bank evaluates it for .. the bank never takes unnecessary risks and neither should you), you will not be stuck in the future because there will always be a buyer for your property. And by good value I don’t mean what’s temporarily hot like cabbage patch dolls, i-phones and condos. I mean REAL value.

In this slower market it is the nicest properties that will sell because buyers will always exist. There will simply be much fewer of them now and properties will have to compete for their attention. Even condos will continue to sell but only the older ones with beautiful encompassing views, large rooms and high ceilings.

Who knows, maybe this slower market will mean that developers will stop building the cheap crap that I have been seeing over the last ten years because this will no longer sell. If the market can lynch these folks and leave them with nothing then I can die happy.

I have real estate agents phoning me up to ask me when we will be moving (we had the house on the market at one point until we walked away from a purchase deal for reasons I won’t get into here .. our ex sellers are still sitting on the market with no visits and their hands in their laps, HAH !). It seems there are a number of buyers who want to buy into the old north but there is only one house for sale here at the moment (three others have recently sold). As tempting as it is to rush into ANY purchase deal because the time seems to be right, I am holding on until I find the right property.

Why ? because I know that irrespective of the market, what I own has value. It may go for less money than in a bull market but same goes for the property that I will purchase and since the new property is higher end I stand to make more in a bear market on this transaction (this is why we are looking now).

Real estate is not such a horrible thing. One does however have to be extremely careful because it is a huge outlay of money and it doesn’t turnover very quickly. If one is patient and doesn’t make hasty decisions (ie. curb those damned emotions), I still think that buying real estate for the right reasons (ie. not for speculation but as a residence) is not such a horrible thing. Of course if you cannot afford to do so then for heaven’s sake DON’T BUY !

HHHW

#59 pbrasseur on 12.10.11 at 9:06 am

Smart kids, I said. And I sent them the name of a woman whose fingernails stop traffic. – Garth

I just love this blog :-)

#60 Mike Rotch on 12.10.11 at 10:08 am

Onemorething on 12.09.11 at 11:56 pm
“………..I do own GOLD only for the sake the manipulation goes unhinged and cannot be secured and in this case the only GOLD to have is the REAL stuff and accessible via an arms length.”

I was recently wrestling with whether to start buying physical gold and/or silver. After all, I believe even Garth himself says 5 to 15% of a portfolio can make sense.

I came up with the following findings:

If you’re buying metal, or metal-backed paper as a speculative investment, you only worry about potential for profit. Based on my limited understanding of these things, the fundamentals don’t really support buying at present prices, so I sit and wait.

On the other side, if you’re buying metal to keep under your mattress (which if you’re a doomer seems the only way……), you have a few issues to consider:

-Have to store the stuff. Better have a good safe and/or a damned good hiding spot.

-A schmuck like me that’s buying an ounce or less at a time is stuck paying 10% or more above the market price for gold (plus whatever fees might be tacked on top of that….I didn’t finish the research or place orders yet. Now, I haven’t had to sell any gold yet, but I’d be damned surprised if the dealer I have to sell it to is going to pay above market price, and maybe they even screw you further with price/fees on smallish lots.

Bottom line, for the retail level investor there is a 10% or more haircut right at buying!!!! At that, mutual fund fees are starting to look less bad!

-If the S really does hit the F, I’m not sure that any metal except for carefully packaged lead and steel are going to be worth anything……

That said, I’ve decided that I can gamble with small stakes. On top of my current investment program, I’m planning to start buying one or two silver maple leafs every month and stashing them in a place that no home-invader would ever toss.

-Tiny bit more forced savings in something that’s semi-liquid and will always be worth something even if it’s less than book,
-One more financial instrument to hobby-watch and cheer on,
-Little bit of PM stashed in case the S really does hit the F. Better still, stashed in smaller value units….gold maple leafs don’t come in pieces of 8!

As stated, my feeling is that in a catastrophe, lead and steel are the only metals worth anything.

#61 Mike Rotch on 12.10.11 at 10:14 am

Pat 51:

Your three points on why one might want to live in a condo are perfectly correct.

That said, buying at today’s terms, and tying up a huge chunk of your net worth in a “dime a dozen” illiquid asset is idiocy.

One can rent the same unit, invest the difference in costs into a Garth plan or other worthy system, and come out far better several years down the road.

#62 Sanddancer on 12.10.11 at 10:50 am

Yesterday i sat in Kitts coffee ( Vancouver) and listened too a realtor go thru his BS to a unsuspecting female. She had obviously just sold her place and he talked her into a $1.2m offer on a place just of W. 4TH.
They were going for a second viewing on Sunday, and making a “strong” offer after that.
I felt very sorry for her !

#63 Strataman on 12.10.11 at 11:33 am

Think condo’s are a good investment? Next time you see a maintenance contractor in your building ask them politely if they live in a condo or sfh. If they live in a condo ask them if they rent or own. I am in the condo service trades, I have never met a tradesman that has bought a condo!

#64 Ret on 12.10.11 at 11:35 am

#51 Pat.

Condo ownership, in my warped view of the world, has all the disadvantages of SF home ownership and apartment renting and none of the advantages of either. No thanks. I’m not giving up my 4 car driveway, garage and big knob grill.

Also, I don’t do the public transit thing well. I tried it once in Hamilton. It was scary.

#65 Strataman on 12.10.11 at 11:36 am

Oh and most journeymen technicians are in the 100,000 plus single income bracket and they “like” condos for the income! :-)

#66 Foggy on 12.10.11 at 11:37 am

Funny thing bout condos…
When I first became interested in possibly buying a home (late 70’s) there were 4 possibilities.
Condo
Townhouse
Semi-detached
Fully detached
The single family detached house was the preferred choice but the most expensive. If you were desperate the bottom of the barrel was the condo. They were an odd abherration of a “home”. The odds of any capitol appreciation of these things seemed slim. The better alternative was to go a few bucks higher and get a townhouse. You’re now on the soil, have 3 bedrooms, a backyard and better value for your hard earned money. And the key word is “value”. Does that thinking process happen anymore? Is this box in the sky really worth this much money? Back then myself and all of my friends thought no and never contemplated buying one – for any reason.

#67 Evangeline on 12.10.11 at 11:38 am

((Why doe anyone buy a condo anayway?))

Many seniors downsize to condos when a house becomes too much of a burden to maintain. Condos force them unload a lot of accumulated possessions, which is a process of rejuvenation for many. Security, maintenance, community, a sense of freedom so they can travel worry-free, etc. — there are lots of reasons why seniors who can afford it downsize to condos.

#68 Okanagan Renter on 12.10.11 at 12:08 pm

Can this blog get any better? And I mean both GT’s sublime posts and the posts, give or take a few village idiots. I never thought I’d find anything interesting enough to tear me away from reading the G & M in the morning, but now I can’t start my day without consulting this oracle first.

#31 DonDWest, great comments on the perils of condo ownership. My wife & I currently rent a superb unit in a condo where 95% of the units are occupied by owners, so we’ve experienced first hand the tyranny of the majority. It’s an “adult lifestyle” building, so our plans to have a child in the next year or so will probably involve leaving his hallowed box in the sky. The building by-laws don’t outright ban children, but it’s clearly biased against such. Ironically, most of the crowd here is in the early 30s, like us. Are Gen Xers going to live up to our 90s angst and sterilize ourselves off the planet?

#69 Michel QC on 12.10.11 at 12:11 pm

I am currious to know why it is “irrelevant Quebec”?

#70 Ex-Cowtown on 12.10.11 at 12:17 pm

52 House on 12.10.11 at 7:26 am

But you have stated that most cannot just walk away in Canada. They will have to declear bankruptcy. Maybe a little thing but then the effect in Canada may thus be slightly different.

++++++++++++++++++++++++++++++++++

I believe that it depends on the province. I think Alberta is a no recourse province, so yes, you can just walk away. It was a favorite past time in the crash in the early 80’s; sell your house to someone else for $1 (yes one lone stinkin’ dollar) and go live in your brother’s basement until it all blows over.

At least you could start all over from nothing rather than spend your entire life as the Royal Bank’s bitch.

#71 GregW, Oakville on 12.10.11 at 12:25 pm

Hi All, a new Book question? I just heard this author ~11am+- on BNN, HEADLINE with Howard Green.
Maybe it’ll be down loadable latter?
http://www.bnn.ca/Shows/Headline.aspx

After buying Mr. Garth Turners book(s) for Xmas gifts!
Latest “MONEY ROAD – Tools for the wild ride ahead”
http://shop.xurbia.ca/collections/all

What do you think of the information in this new book by David Chilton, “The Wealthy Barber Returns”?
http://www.wealthybarber.com/

#72 Daisy Mae on 12.10.11 at 12:25 pm

JSAN: “WHY???? Why is this question not being asked by every Canadian that pays taxes, every Canadian that has insured all of these ridiculous loans?? This should be the largest government scandal to date!!!”

***************************************

I wonder the same thing. Speculators are only doing what this government made it easy for them to do — and that is to be ‘greedy’. Can’t blame them for acting ‘human’ in this regard.

#73 Lorne on 12.10.11 at 12:33 pm

#24 Stevenson
That article, if you read carefully, is about “new” homes….and I just wonder how many “new” homes were sold in Edmonton in November?? For some reason, this information is not available! Just another example of manipulation by the RE industry…they look for any stat that looks even a little positive (in this case.6% increas in new home prices in Edmonton) and submit a wonderful article about this! Just read a news story in the local Comox paper….fewest homes sold in November in the last 10 years. Not sure what this means….other than the fact it was not put together by the real estate industry!

#74 Form Man on 12.10.11 at 12:39 pm

#33 Jsan

you raise very good points. why would Harper ( a ‘trained’ economist) and Flaherty not realize what was going to happen ?

I think they truly thought they could manage it ( things are different under the Conservatives ). They suffer from a superiority delusion. In fact, they had time to at least minimize the damage when we saw the results of the U.S. debacle in autumn of 2008. Unfortunately, they were on the hunt for a majority government, and they couldn’t resist the juice to the economy that was resulting from easy lending standards. I believe they thought if they could simply talk up the market for a couple of years, growth would come roaring back, stabilizing the market, and they would look like heroes. They were wrong. It appears we have followed exactly in the footsteps of the American folly. If voters continue to elect folks who put the attainment of power ahead of the good of the country, then that is exactly what they will get.

Canadian housing has been inflated due to financial de-regulation ( exactly the sort of thing that westernman believes in). Sadly, westernman and taxhaven( much like H and F ) are prisoners to their ideology and lack of reading comprehension, and so will continue shouting nonsense to the world along with the rest of the neocon ideologues

#40 van guy smokin now

we all wonder where DA is ( he made a brief appearance a couple of days ago, to admit he has fallen on hard times ). I think he is quite busy in Kelowna fending off angry buyers to whom he sold properties to in the last few years ( and have seen their equity vanish ) Things are definitely getting ugly in Kelowna.

#75 Bottoms_Up on 12.10.11 at 12:55 pm

“The American” still hasn’t answered my question so I’ll post it again.

Dear American,

Why are you so interested in Canadian real estate?

#76 Mr. Lahey on 12.10.11 at 1:06 pm

#49 Phil and T

“Mr Lahey – Do you have powered / serviced sites for us elderlies who have eschewed a fixed abode for the “more spacious” and far, far lower ownership costs RV lifestyle?”

Yes we do Phil! We wouldn’t be much of a trailer park if we didn’t. Thanks for offering to allow us to use the generators in needed but I can assure you we have all the backup power needed. Sunnyvale had a banner year in our slush fund and we have spared no expense in upgrading the park. Why I will give you the spot next to the granite topped trailer the bearded oracle is staying in so you can walk and over and introduce yourselves before he does his Hoedown jig in his kilt with Beach Girl. We are just going to love the FASTPGFBDCParty! It is shaping up to be one for the ages and we look forward to your arrival. Bubbles will personally escort you to your site. He is such a loveable fellow!

#77 Ammo & Viagra on 12.10.11 at 1:09 pm

Right on G-man ! it’s really starting to crystallize now.

#78 young & foolish on 12.10.11 at 1:22 pm

Oh Beach Girl ….. you are so …. um, yesterday!

Condos are apartments. So what? Well, in this country, traditionally, people rented apartments. Now they have the option to buy them (as in most European cities). Unfortunately, the flippers and speculators have turned a reasonable idea into a bad one.

Either way, you still have to pay for shelter.

God loves renters.

#79 coastal on 12.10.11 at 1:24 pm

This repeated excuse that declaring bankruptcy will deter people from walking away is total BS. If you can’t pay, you can’t pay and will have no choice. Declaring bankruptcy is not a good thing but in today’s world it’s not a big deal to those who went out and took out a monster mortgage working crap jobs. 7 years and you start over and many times it will happen sooner.

#80 BPOE on 12.10.11 at 1:32 pm

Canadian flippers don’t have over 400 grand to get a 6% return in a balanced portfolio. This is the magic of leverage. Plus TAX FREE if their primary residence.

Flippers don’t get tax-free gains. — Garth

#81 Tony on 12.10.11 at 1:32 pm

Re: #21 TurnerNation on 12.09.11 at 10:42 pm

Goldman Sachs is short natural gas and has squashed every attempt at a rally based on the draws that come out around 10:30am every Thursday.

Day trading or trading every rally to a new 52 week low for natural gas has been the biggest profit maker of any trade this year. HND has been a good trade but day trading HND has resulted in 5 times the average return of HND this year. While Goldman may cover some of the shorts late in December look for natural gas to trade down to the $2.50 U.S. mark. Goldman wants revenge after what happened with silver.

#82 BPOE on 12.10.11 at 1:40 pm

It’s a great return. Nothing wrong with that return at all. The lost opportunity arguement is just pure bull. The fact of the matter is most people want to buy a home. Most people renting are doing so because they can’t afford to buy. Canadians have huge debt and this is not just the Canadian homeowners. Renters aren’t getting all these “opportunites” because the vast majority are in debt and are busy shuffling through low interest visa cheques to keep from sinking
***************************************
While I get your point Garth, you fail to connect the fact these are leveraged gains. If they only put 15K down payment, a gain of 126K over six years is sick

Not the case. But if it were, you need to add in the occupancy burden – financing, strata fees, property taxes, lost opportunity cost etc. – which a person renting the same unit would not face. Do the math. — Garth

#83 Kilt on 12.10.11 at 1:57 pm

“You should have stayed for math class. — Garth”

Purchase price $310k. No mention of down payment, so lets say 10%. Mortgage of 279k. Assuming 4% over 30 years, payments would be $1330 a month. Insurance, fees, taxes and heat are going to add another $600 a month.

Renting a 2br in downtown Vancouer – $1500 to 2000 a month. At best, you would be able to save $500 a month if you went with the cheap option, otherwise its a wash. Invested over 6 years at 5% would net you $42k.

Renting (investing you DP at 5%) = $83,500 (approximately)

Buying = $126,000

You would need a return of 15% in the first scenario to even match the money made from making the leveraged RE purchase. The TSX has only returned 5% annualized over those last 6 years.

That is based on quite a few assumptions. If they paid cash, then your analysis is more on the money. Nobody with cash to buy a $300k condo actually does. They buy a $700k condo.

Garth, I understand the message you are trying to get across to people. I am a renter because I can’t for the life of me justify spending 500K on 2br condo or pile of crap house in Vancouver. But you message is lost on people like me (who have Math degrees and Accounting backgrounds) when you post rubbish. The above house purchase netted a 15% annulalized returns on a 10% downpayment after you account for extra costs of owning vs renting.

Over the past 10 years housing has been a very good investment for the majority of Canadian, especially as a leveraged investment. Lets keep things in perspective.

Kilt

This was obviously an unleveraged example. — Garth

#84 VICTORIA TEA PARTY on 12.10.11 at 2:04 pm

DEUTSCHLAND UBER ALLES…BUT FOR HOW LONG?

Maybe Germany DID win the war afterall!

It took a doughty-looking East German-born lady, Frau Merkel, to do it, as opposed to that late horrendouos nutcase wannabe Austrian “artiste”, so-called.

So, what’s the real bottom line? The Euro-elites have decided to stand on the throats of the Euro-peasant classes with mind-numbing austerity measures lasting for the next decade and likely longer than that. However, the banks will be bailed out because they’re too big to fail!

That’s what those numbskulls actually did with an agreement that now makes the Euro-rules look like layers of stratified, ossified, rock.

What those fools SHOULD HAVE DONE BUT DIDN’T was to DO SOMETHING about paying down their horrendous debts.

So, how does this European danse macabre affect some feckle real estate horny toad in Vancouver?

Wait for it. It does!

Because if the European politicians don’t get their acts together eventually the markets will. And that will manifest itself with hugely higher bond yields and eventually more inflation transmitted via goods and services traded out of Europe.

And if YOU don’t think that’ll translate into tsunami-like higher rates in Canada, and thus Vancovuer, then you’ve not been paying attention.

The brilliant sub-story out of Brussels was Britain’s decision not to deal itself in. Prime Minister David Cameron will be very kindly treated by history for his logical, if brave, stance.

He knew that lying down with the Devil’s disciples will achieve nothing but endless domestic national economic grief.

Britain must now solve its OWN debt problems and find new trading opportunities. That will be tough, but that grand old country will succeed. It has before this.

The prime minister has achieved pantheon-like status along with predecessors Lady Margaret Thatcher and Sir Winston Churchill.

Indeed, Friday was Mr. Cameron’s “Finest Hour.”

Germany’s finest hour, it was not.

While Frau Merkel found a vapid French poodle, of the Vichy-breed most likely to deal with, generally speaking poodles are trouble. They yap, annoyingly, and attract fleas.

Ms. Merkel’s new job will be to keep that creature under control all the while herding the rest of the European “cats” at the same time. Not even a southern Alberta quarter-horse breaker can do that.

#85 TurnerNation on 12.10.11 at 2:06 pm

Circling back to Whistler BC: they ditched a perfectly good transit system in favour of a Soviet-style Greenwashing quota, when they bought new hydrogen buses, a hydrogen filling station, and a new bus yard.
Predictably the system is broke and reducing bus driving hours by 20% !

Small justice: almost the entire elected municipal regime was turfed in the recent elections.

But what do I know here in Toronto. We still run rusting 1980s era streetcars, some 70s subway cars still with orange seats and fake wood grain paneling. The subway stations themselves are leaking asbestos filled messes, with most having torn-out ceiling sections in an attempt at stemming the tide.

The last new highway was Hwy 407 which was prompty sold by provincial Cons to a vulture capital firm. Predictably the per km charge rose from .04 to .19 over the years, with no end in sight.

Mayor Rob Ford (Boss Hogg) claimed to be the solution. Instead he’s just pandered to two large unions: allowing the police a slight buget increase (to support gold plated salaries – highest in Canada – and benefits), and OKd a transit fare increase – ditto: supporting the gold plated TTC union). Property tax increase was already announced. Of course he ran on a no taxes campain…

Cuts to: Zoo, Libraries, Child Care and recreation programs. Never forget, the first thing they did in Iraq was allow the museum to be destroyed. Culture is a big threat to any peoples’ revolution.

Ford’s campaign manager, in a recent magazine interview, bragged something like: A boy from Windsor [him] took on the “champange sipping socialists” in Toronto and won”. See, it’s a war. We are the target. We are sub human to them. Idealogy and dogma trumps all.

Guys like him and Westernman would have loved South America a few years ago. They chould have run the prisons, and ‘disappeared’ any anti govt “leftists”, torturing confessions out of all of them. People are the same world wide…it’s a slippery slope. If the conditions are right – as their are now moving – anything can occur.

But hey, if we don’t like it we are always free to leave! Perhaps to a 2nd or 3rd World country where the cities are run as corrupted local fifedoms…

#86 highway61 on 12.10.11 at 2:13 pm

say what you want but there’s still some money to be made in calgary condo market.

http://www.calgaryherald.com/business/real-estate/Calgary+luxury+home+market+booming/5838371/story.html

#87 Mister Obvious on 12.10.11 at 2:17 pm

#31 DonDWest

Agreed, there are a thousand good reasons to avoid condos and you have nailed some excellent ones.

However, the undercurrent of boomer bashing in your posts does not serve you well. Perhaps when you get older you will come to realize traits like greed, stupidity, dishonesty and laziness are not confined within generational boundaries.

You should lighten up a bit. Seek friends and allies in all age groups and economic brackets.

#88 Dave on 12.10.11 at 2:18 pm

Garth, I’ve been reading your blog since ’08 or so. I remember even back in 2004 wondering when the housing “bubble” was going to break. I kicked myself for not buying what then seemed to be an expensive house in an un-renovated area of The Kingsway that could have netted me a nice profit inside a year or two.

Anyhow, I closed on my non-Kingsway house last week. I’m renting and taking the proceeds and investing them in preferreds and some of the other items you’ve described on these pages. Even if I don’t earn 6%, it’ll make a hefty contribution to my rent. I know people who are paying half or more of what I pay in rent, in condo maintenance fees!

My rental isn’t my ideal, but I got a good deal, owning it would be costing me more and with winter here, I can leave anytime I want on vacation without worrying about snow, maintenance, taxes or any of the other headaches that come with ownership. Finally, with several 100K to my name, I can afford do take off!

I’m debt free and still worried about how the prices of everything are going up. Bell upping outdated technology that many are moving away from by $2 a month on Jan 1? Crazy. When rates do increase, it’s going to be very messy for a LOT of people.

Thanks Garth!

#89 TurnerNation on 12.10.11 at 2:34 pm

To add, about the Toronto Ford mayoral regime: he stopped granting interviews to the Toronto Star (largest daily newspaper in Canada) in a snit. Let me guess, they are all “leftists” out to get him. Paranoia.
A war is called a campaign; an election is a campaign. We are the targets in both cases. First rule: control or shut down the media. Again, how long until TorStar editorialists receive threats, or hassles from police? Not here you say? We are different?

Twice Ford was caught by citizens driving while talking on his cell phone (against the new laws). Realistically everyone does it and perhaps he should set a better example, but this does not both me). What does: in both cases he flipped the middle finger or swore at them. The arrogance and contempt for us is evident. We are the enemy of his campaign. A corrupted local fifedom is upon us. He is in-line with Haprer, so watch out.
This has nothing to do with politics or left vs. right. It’s about power hungry, lazy, sociopaths seeking power.

#90 shifty on 12.10.11 at 2:41 pm

Well, well we have the first house repo. down the street. Been a long time since I’ve noticed this happen in Victoria. It’s had two price reductions and been on the market for three months. Is this an example of the future of real estate.

#91 Usuk on 12.10.11 at 2:59 pm

#26 i.see.debt.people.and. on 12.09.11 at 11:16 pm
i.am.first!NOT!
——————–

My bad, I thought you were a teenager locked away in a basement somewhere. I was only half-right.. Using expressions like “not” means you’re stuck in the 90’s, so you’re probably a late-30’s life failure who still lives in his parents’ basement. What’s the matter, no shift at the Mickey D’s today to keep you occupied? I sure hope you’re not posting to blogs from your phone at work – I’d hate to have to complain to your boss that you left pickles on my Big Mac.

U.suk, loser.

#92 Usuk on 12.10.11 at 3:03 pm

#9 Helpful Advise on 12.09.11 at 10:07 pm
I was FIRST. And I’m a grown up.

———–

Thanks for sharing, you failed. By the way, sonny, adults don’t call themselves grow ups, so you’ve given away your age. Either that or you’re a failure at life, because the word is spelled “adviCe”. Go play with i.see.debt.people – i hear he has Super Mario bros. Loser..

#93 Bill Gable on 12.10.11 at 3:08 pm

The condo building we Rent in, is legendary. For all the wrong reasons. The plumber whom the the landlord provided for a new tap, told us that this building is so badly piped it is going to have to be redone -again!
The building is less than 20 years old, and refitted once before.
“Anyone who owns here is in deep doo doo”, he said politely.
This building is hardly occupied…so speckers and flippers are going to not only have a turkey they can’t sell, but there will be repiping in the next few years.
That should be great for cash flow!
Soon as it is announced – we’re gone.
Love renting – the stress level – ZERO.

#94 The thing in the basement on 12.10.11 at 3:25 pm

31 Don

“…they may contemplate regulations that make sex
banned in the building.”

Obviously they were afraid of you procreating!

#95 HolyCow on 12.10.11 at 3:42 pm

See:

http://www.newworldparty.org/2011/11/housing-after-bubble-bursts.html

“Many Canadians believe that when this housing bubble bursts, they will have a soft landing, unlike the American’s. They say that the outcome for Canada will not end in a disaster like it did for the U.S. economy, because Canada did not have AAA rated CDOs (Collateralized Debt Obligations), NINJA loans, etc.

True, Canada did not have these, but neither did Spain, Ireland or Japan. Nevertheless, Spain and Ireland are now worse off than the U.S. Here is a comparison:…”

#96 Blog Dog Carney on 12.10.11 at 3:42 pm

Mr. Lahey – I know some of the dogs dont think I’ve been very good this year, but I tried. It’s those damn euro idiots that keep screwin’ it up for everyone.

May I come to the FASTPGFBDCP? It would really be good therapy for me. I could even follow the ‘dales with a shovel just to get some blisters on my banker hands. And I will need some new Itialian rubber boots for that too.

In the new year, I promise to raise rates as much as I can (or am allowed by the masters).

#97 live within your means on 12.10.11 at 3:44 pm

#66 Evangeline on 12.10.11 at 11:38 am
((Why doe anyone buy a condo anayway?))

Many seniors downsize to condos when a house becomes too much of a burden to maintain. Condos force them unload a lot of accumulated possessions, which is a process of rejuvenation for many. Security, maintenance, community, a sense of freedom so they can travel worry-free, etc. — there are lots of reasons why seniors who can afford it downsize to condos.

………………….

Evangeline – why not just rent a nice size apt.? Sis & I bought a condo townhouse eons ago. Yes, it was cheap but close to downtown. Year after we got hit with a special assessment. All the roofs had to be replaced. And the board who had been in power for years were corrupt IMHO. Even the Auditor told me figures were suspicious, but he could only go with the figures given to him. I would never again buy a condo apt. or TH. I know that the laws have been tightened since then, but………

Friend has a lovely attached TH (not a condo) suitable for a couple & overlooks a heritage park. She’s trying to sell it and rent an apt. as she wants to travel.

#98 Samson on 12.10.11 at 3:59 pm

Sorry Garth, but the 6%-per-year calculation does seem a bit fishy.

Why not look at the situation from cash-on-cash return point of view?

It’s the cash-on-cash return and the opportunity to make “money for nothing” that attracts the speckers into real estate.

After all, the people buying that house in the first place didn’t actually have $300K+ to spend. They probably had a small percentage of that, say, $60K at best. Most likely a lot less than that.

If you take a look at the cash-on-cash return on their downpayment – the amount of cash they actually locked into the deal – it’s staggeringly high. Definitely not 6% per year.

Not only did they get all of their own money back after selling, they cleared another $60K at least.

It’s extremely unlikely they would have been able to achieve that return with a typical “balanced portfolio” of paper securities.

Stop making stuff up. The example was not of speculators, but people who bought with cash and lived there for six years. This is called investing in real estate. Buying to flip with high leverage is called gambling. — Garth

#99 Bill Gable on 12.10.11 at 4:14 pm

I have been watching the Vancouver Olympic Condo farce with great interest, since day one.

This latest is just another in a long line of horror shows that Mr. Turner always warn you about.

Don’t eat before reading – this is disgusting.

“Ritta Mikkonen cried tears of joy when she and her husband Connor were selected to move into a coveted condo in a social housing block in Vancouver’s swanky Olympic Village.
The former forestry engineer has been unable to work since a car accident seven years ago and neither can her husband, a former RCMP officer who suffered blood clots in his legs. When she got the call, they had been homeless for 14 months.
“I was so overwhelmed I started crying,” Ritta Mikkonen said of learning they would get a one-bedroom at $400 per month. “I felt like we won the lottery.”
But the fixed-income couple is fearful all that could come crumbling down again because those units of subsidized housing are still proving to be unaffordable.
They say they’re not getting the deal they believed they were, and on Thursday called on the city to make things right.
Shortly after moving in, the couple and dozens of fellow tenants in the supported housing units opened some unexpected utility bills. In some cases, the costs rang in at upwards of 10 per cent of their monthly incomes.
“We don’t want to whine too much, because we’re very grateful for what we have,” said Connor Mikkonen, standing outside the complex that was initially built to house athletes during the 2010 Winter Games.
“At the same time, the income doesn’t support the payments. We already go to the food bank once a week. If we were forced to pay this Enerpro bill, we would have to move.”
The tenants contend they’ve been saddled with additional costs they were never told about when signing resident agreements. They pay monthly BC Hydro bills for electricity, which was understood, but also get bills from a third-party billing company called Enerpro.
Those bills cover the costs of heating and hot and cold water, which is calculated through a high-tech metering system that shows how much water and energy is being used in real-time.
It’s all part of the village’s aim to be environmentally sustainable and the tenants have since learned the system should produce the same, if not lower, bills. The city utility provides the energy siphoned from sewer systems and solar panels.
Residents were so shocked when they received their first bills — the Mikkonens were charged $148 for two months, although some bills came in at $50 — they complained to the city. Payments were suspended until about January 2012, but the group now fears the time when the bills come back online.
The property managers have told residents if they don’t pay up, they may face eviction, said lawyer Scott Bernstein, with Pivot Legal Society.’

http://tinyurl.com/cl8szh8

#100 BPOE on 12.10.11 at 5:18 pm

Don’t expect an answer. A bitter dude who can’t stand the fact Canada’s banks kicked America’s rear end. Canada knows how to manage their money America is simply clueless in Seatlle. Who could forget “Mission Accomplished” Such a sad sad Country
*****************************************
.#74 Bottoms_Up on 12.10.11 at 12:55 pm
“The American” still hasn’t answered my question so I’ll post it again.

Dear American,

Why are you so interested in Canadian real estate?
.

#101 TurnerNation on 12.10.11 at 5:38 pm

Somebody tell DA…the bmw 3 series are a ‘girls car’.
It’s 5 or nothing.

#102 edmontonian on 12.10.11 at 6:04 pm

In EDmonton here are sales for the month of November are almost as low as Nov. 2008 when the US Stock market collapse and the prices of oil collapsed with it!

Very scary with these low interest rates!

#103 Mr. Lahey on 12.10.11 at 6:07 pm

#96 Blog Dog Carney

“May I come to the FASTPGFBDCP? It would really be good therapy for me. I could even follow the ‘dales with a shovel just to get some blisters on my banker hands. And I will need some new Itialian rubber boots for that too.In the new year, I promise to raise rates as much as I can (or am allowed by the masters).”

Well, well, well if it isn’t Mark Carney himself. I knew you were lurking and would eventually not be able to resist coming to the FASTPGFBDCParty. I have contacted the bearded oracle, all seeing sage, mystic reader of the financial tape, guru of Bay Street, Wall Street and Main Street and he has advised me that you can come on the condition you debate him along with Ron Paul who has already accepted Sir Garth’s request. Yes, some humility is in order and following the dales with a pooper scooper will do your Goldman Sach hands some good. Hard work is honest work Marky. Then after your humble act of contrition you will (after a good hand washing) climb up on the podium with the sagacious one and the debate will start on how you, yes you Mr. Central Banker who lowered interest rates to ridiculous levels and created the biggest housing boom since the sub prime fiasco south of us. Oh Marky I hope you are ready for the pent up energy that our fearless leader is going to unleash in the debate. There will not be hard feelings though as the Hoedown will begin shortly thereafter and we will provide you with a Nova Scotian kilt in honour of our Scottish ancestors and you will joing Captain Garth and Beach Girl in the opening jig. You can even bunk with the bearded one in the granite countered trailer. See you there Mr. Carney!

#104 Spiltbongwater on 12.10.11 at 6:17 pm

#98 Bill Gable on 12.10.11 at 4:14 pm

I really am having a hard time feeling sorry for the couple that get to live in a nearly brand new waterfront apartment for $400 per month, but they can’t afford to pay their utilities. I am surprised that they are not complaining about having to pay for their own food. Oh wait, they use the food banks, ya next thing they will be crying that nobody has given them a free bed and wardrobe to hang their free clothes.

#105 Ammo & Viagra on 12.10.11 at 6:23 pm

#36 AACI Home-Dog & Beach Gal
An easy way to access past topics in Garth’s posts, is to type in the topic..ie deflation. Then type “site:greaterfool.ca”
I hope that helps

#106 Beach Girl on 12.10.11 at 6:48 pm

#77 young & foolish

Oh Beach Girl ….. you are so …. um, yesterday!

Condos are apartments. So what? Well, in this country, traditionally, people rented apartments. Now they have the option to buy them (as in most European cities). Unfortunately, the flippers and speculators have turned a reasonable idea into a bad one.

Either way, you still have to pay for shelter.

God loves renters.

___

You really think you are superior, I am from Europe. Bet you haven’t even crossed the pond.

I really liked the moron who gave me a history of the Parkdale area. Like, I didn’t know that. And this mental midget is telling me about Europe.

#107 CHMC + Mark "the Talk" Carney = Housing bubble on 12.10.11 at 6:52 pm

HolyCow on 12.10.11 at 3:42 pm
See:

http://www.newworldparty.org/2011/11/housing-after-bubble-bursts.html

“Many Canadians believe that when this housing bubble bursts, they will have a soft landing, unlike the American’s. They say that the outcome for Canada will not end in a disaster like it did for the U.S. economy, because Canada did not have AAA rated CDOs (Collateralized Debt Obligations), NINJA loans, etc.

True, Canada did not have these, but neither did Spain, Ireland or Japan. Nevertheless, Spain and Ireland are now worse off than the U.S. Here is a comparison:…”
——————————————————————

Canada Has NINJA loans. Canada had 40 years and ZERO DOWN. Canada has CASH BACK mortgages. Canada’s housing ponzi/bubble is now BIGGEST and WORSE then the US. Mortgage brokers/realtors/Mark “the Talk” Carney / Harper /F the idiot all knows this to be 100 FACT!

#108 Okanagan Renter on 12.10.11 at 7:11 pm

#85 highway61 said:

“say what you want but there’s still some money to be made in calgary condo market.”

Source of the “article”? Calgary Real Estate Board. I guess it must be true!

#109 Timing is Everything on 12.10.11 at 7:13 pm

#83 VICTORIA TEA PARTY

The ‘pudel’ originated in Germany, with some influence from Russia. The ‘French’ poodle is a misnomer. Those Germans…pretty smart! A Vichy poodle. Poodles excel in obedience training.

#110 Phil & T on 12.10.11 at 7:27 pm

Mr Lahey –

Thank you for your very kind invitation, and be assured that we will definitely attend.

We’ve no special needs (apart from being not too close to HV powerlines – after Phi’s “accident” with the microwave / plasma cutter, his artificial joints heat up a lot if too near HV overhead (and even underground) cables).

We are just leaving the outskirts of Quito, and with any luck (and LONG hours “on the Road”) we should make it OK.

– Explains the need to locate the thermal underwear . . . ! !

Give our regards to everyone, and you’ll easily recognise our American Eagle (it will be the one covered in bugs – no time to stop to wash!!).

Perhaps we could provide entertainment of an educational nature – along the lines of “recognise this bug??”.

See y’all??

P&TS

#111 Mr. Lahey on 12.10.11 at 8:00 pm

#95 Blog Dog Carney

I knew were lurking there Carney. So you wanna come to the FASTPGFBDCParty do you? I just checked with the all knowing seer who runs this blog, the bearded oracle and he said yes providing you debate him on how you Mr. Carney have caused the biggest bubble since the tulip mania with your insanely low interest rates. Yep, you and the all knowing sage who runs this blog mano a mano on stage in front of all of us blog dogs! Yes you can follow the parade and pick up the dale’s poop with your very own Sunnyvale pooper scooper. A good act on contrition this will be. See you there Mr. Carney!!

#112 jess on 12.10.11 at 8:06 pm

66 Evangeline

it is great until your fees go up 750/mo to repair the parking gargage.

#113 Milkman on 12.10.11 at 8:39 pm

#85 highway 61:

That Mario Toneguzzi guy has never written a negative article about Calgary real estate. It’s rather sickening that he’s allowed to call himself a senior business reporter instead of senior ad-writer. He’s a joke.

#114 Nostradamus Le Mad Vlad on 12.10.11 at 9:02 pm

-
Well-documented research, mostly through trial and error, is the realization that not only do real men eat bacon, mushroom and swiss cheese quiche, they rent as well, and real women accompany them on this adventure.

By keeping the bulk of their net worth in a balanced portfolio, they are able to help keep the ‘konomy rolling, albeit at a slower pace.

The ones who buy, indenturing themselves to debt serfdom (slavery) for life, are flea-bitten has-been she-men and Barbie dolls, who thought they had the world by the balls, but the opposite is true.

On that basis, a trip back on the time track, to view how other civilizations coped with life, before being swept aside, can be found here.
*
David Cameron “The UK is as isolated as somebody who refused to join the Titanic just before it sailed.”; Slash Not Guns ‘n’ Roses guitar whiz, the BBC by 2/3; Land of the free, home of the hungry; Financial Distraction “Anyone thinking of moving to China?”, and Economic history lesson; Folly Zero per cent; TCF Bank Fees Tad high, no?

Gap widening between rich and everyone else; Cause of underground economy; ECB Treaty doesn’t solve liquidity crisis. That’s what most sheeple are now, or will be in; Bank-O-Meter “. . . there will be more printing of money. And I am more convinced it is straight out of the Federal Reserve Playbook, with subtitles.”; The elite Takedown of the Euro is a part of their long-term goals;
*
Photographic Evidence of war drones in Iran (don’t laugh, you may vomit); Newt Gingrich doesn’t eat quiche and this; Stuxnet Pic Perfect match to Iran network; Turkey – Syria Getting messy. Turkey is a member of NATO. What if the US is using HAARP as a threat, telling Turkey what to do? Chinese – Iranian stealth rec., and Islamabad and Taliban Peace talks, now the US is gone; Otyrannical Seizes more powers.

Stars represent US military bases, but Iran is the threat. Not! Russian Protests Western media lies; Whoa baby! What of the Occupy movement? Incarnations of China A new one is being born; Bloggers are not mere mortals. We have evolved. We are a cut above; AfPak Just like the new Iran air defence system, Pakistan has installed one along Af’stan’s border.

#115 Aussie Roy on 12.10.11 at 9:39 pm

Aussie Update

DESPITE one of the worst property slumps in two decades, many first-home buyers are finding it harder than ever to enter the market, with research showing they need at least $100,000 after tax to buy in half of Melbourne’s suburbs.

http://theage.domain.com.au/home-buyers-priced-out-20111210-1ooxm.html

The big four say the Reserve Bank’s cash rate does not define the mortgage rates they set.

FALLING interest rates make borrowers happy – and savers not so. They make shares and property more attractive compared to term deposits and fixed-interest investments, and generally lead to a boost in consumer confidence – even though they are a sign we should be less confident about the economy.

Retailers reckon they’re the absolute bees knees, even though the real impact on spending can be relatively minor. A rate cut does, however, seem to disproportionately improve how we feel about our finances.

http://www.theage.com.au/business/more-to-a-rate-cut-than-the-first-hurrah-20111210-1oorx.html#ixzz1gBXz1mKa

Inflating homeless by the property lobby – hits the wall

IT seems Kevin Rudd got one thing right. In 2008 he promised to halve homelessness by 2020, and by goodness homelessness has been halved. Trouble is, it had nothing to do with Kevin or the 55 per cent increase in funding he awarded the sector.

The Australian Bureau of Statistics recently reviewed its estimate of homelessness and halved it. Yes, the 2001 and 2006 census estimates have been exhaustively reworked and, with great embarrassment, the ABS has announced there are only half the number of homeless people in Australia as previously thought. What a balls-up.

http://www.theaustralian.com.au/national-affairs/opinion/inflating-homeless-to-fund-lobbyists/story-e6frgd0x-1226165274504

As pointed out in the pathetic blog many times. CB’s don’t have total power to set mortgage rates.
This is an Irish story, Australian banks have recently advised their mega mortgage slaves they to, will not be following further CB rate cuts. Is Canada any different?

THREE OF the State’s leading banks have refused to pass on the latest European Central Bank rate reduction of 0.25 per cent to variable rate customers, while a fourth has only passed on a portion of the cut.

The second ECB rate cut in a month means holders of an average-sized tracker mortgage of €300,000 will be better off by more than €500 a year. For every €100,000 owed a quarter point reduction saves homeowners about €15 a month

While banks must pass on cuts to tracker mortgage holders, they are not obliged to pass them on to standard variable rate holders, who make up 30 per cent of the Irish market or a total of 207,000 mortgages. AIB, Ulster Bank and National Irish Bank said they would not pass on the latest rate cut. All three also failed to pass on November’s rate cut, although AIB eventually relented after significant pressure was applied.

http://www.irishtimes.com/newspaper/ireland/2011/1209/1224308798996.html

A global house bubble built on a global debt binge was always going to have a global end. Kangaroos or Maple leaves won’t make us any different.

#116 The American on 12.10.11 at 9:57 pm

At #74: Bottoms_Up, I’d have to ask the same questions of Canadians. Seems all that Canadians talk about on here is the U.S. and how Canada is following the U.S.’s footsteps. Regardless, in answer to your question, half my friends and family live in B.C. and are completely clueless. I care about them, their wellbeing, and their finances. Some get it. Some don’t. Plus, it is truly fascinating to watch the same thing happen all over again and people (many with the its-different-here-and-we-beat-the-financial-crisis attitude) seem to be standing idly by without a care or clue in the world what is coming. I suppose it is mesmerizing because nothing is different and nothing was averted. In fact, its much worse in Canada when compared to the U.S. I care for them, and if I can share, then I will.

#117 Devore on 12.10.11 at 10:08 pm

#66 Evangeline

Many seniors downsize to condos when a house becomes too much of a burden to maintain. Condos force them unload a lot of accumulated possessions, which is a process of rejuvenation for many. Security, maintenance, community, a sense of freedom so they can travel worry-free, etc. — there are lots of reasons why seniors who can afford it downsize to condos.

And all those reasons are not compatible with condos. A rental apartment will have much more of a community, and give more actual freedom. Many apartments and even entire rental communities have large senior populations, while there are very few age-restricted condos, mostly only in places like Victoria. Most condos, particularly the new ones, have zero sense of community, assuming they’re even occupied, not the places where you know your neighbors and have a “block” party every month. And no one’s gonna make you pay $10,000 for a new roof (that you don’t even have) in a rental apartment.

If you want that freedom and ability to travel, your best option just may be to sell the house, dump the trinkets, invest in income, and rent a small cozy place.

#118 The American on 12.10.11 at 10:12 pm

42ndBPOE, Canadian banks didn’t beat any other bank. Was this a marathon race or something? LOL Canadian banks and your government were beyond crafty when they alleviated your banks of ALL risk and placed it soley on the back of the Canadian tax payer with the CMHC. I suppose you think that is a good thing. If you want to measure it in the terms of beating one another, which clearly you do, then your banks beat some of our’s. Some of ours are ten times and more healthy still than some of your’s, like JP Morgan Chase. In fact, RBC is a partner bank with JP Morrgan Chase so they can play in a little game called derivatives and cross-boarder deposit bases. So what? :-) You clearly have no idea what you’re talking about.

Back to my point, the IMF now has Canadian banks, not U.S. Banks, front and center on its radar for some pretty serious non-conservative and tricky lending practices. Canadian debt levels have soared to levels never seen before even in the U.S. You call that “winning?” In fact, many analysts and correspondent banks of Canadian banks are feeling now its worse there than what was ever seen in the U.S. Canada flew under the radar at a time the U.S. banks were lending left and right to anyone who wouldn’t qualify for jury duty. Guess what? It is no different in Canada.

#119 Blog Dog Carney on 12.10.11 at 10:13 pm

109 Mr. L – thank your sir! Yes, I will debate the bearded one, but it’s almost a ‘no contest’ to start, because I really really really do want to raise those stupid rates! I just wish that euro-scum would get their act together, and my pals South of the border too. Bummer Canadians cant control their RE-crack habit. And thank you for
lending me the shovel, because I’ve honestly never
owned one.

I will also bring a sack of presents too! I’ve got ties and cuff-links up the ying-yang. Maybe a rolex for a door prize. No! Better idea! Winner of the plowing contest will
win my old Rolex I got at the last Goldman Sachs Xmas
party I went to.

#120 M on 12.10.11 at 10:32 pm

#57 househornyhousewife

so i am not the only “Cher-brooke”(watch the next city assesment ! and the associated tax bill) person around this blog. Those mcmansions and mcCondos btw l-Groulx and duvernay are puzzling me too. condos: why would you in Sherbrooke live in condo and the mcmansions: is there that much money in our dear college town ?

M

#121 TheFirstRick on 12.10.11 at 10:33 pm

Kilt

“This was obviously an unleveraged example. — Garth”

Kilt, you almost got Mr Turner to admit he is wrong. A first in the history of this blog.

Almost doesn’t count. — Garth

#122 I'm with Spiltbongwater on this one Bill on 12.10.11 at 10:36 pm

okay I read the post…. “I was so overwhelmed I started crying,” Ritta Mikkonen said of learning they would get a one-bedroom at $400 per month. “I felt like we won the lottery.”

seriously, they have to pay $50 per month utility charge? aren’t these the million dollar condos?

sounds like somebody’s got a case of the entitlements.

give me a break Ritta.

#123 I'm with Spiltbongwater on this one Bill on 12.10.11 at 10:37 pm

sorry forgot to add “you did win the lottery”.

now shut up and stop whining and enjoy your subsidized housing already.

#124 Cory on 12.10.11 at 10:38 pm

#57 HHH

I totally agree. Nice properties will always sell. When my husband and I were looking to upgrade three years ago we purchased a 1.65 acres lot with a lovely new england style colonial. It’s a beautiful property with lovely privacy and trees. We also have an outbuilding as well as an attached double car garage. We could have bought a new build large house in town with granite and stainless that was very close to neighbours but we chose a little smaller house 2600sq ft on the beautiful property instead. It cost just under $700K but it is worth every dime.

#125 TheFirstRick on 12.10.11 at 10:48 pm

#102 Spiltbongwater

Social housing is a necessity. In prime waterfront property it is Left Coast ideology gone mad.

#126 Steady Eddie on 12.11.11 at 12:06 am

You’re all better off owning your home that way you can strip the wood out of the framing and boil it down for food once EU and USA collapses.

hahaha

40 years of unchecked credit expansion will lead to (if we are lucky) a 2001 Argentina style collapse… sorry kiddies, this isn’t your mom and dad’s business cycle.

if anyone born after the 50’s thinks they are going to escape their lifetime without a major world war you are dreaming…

These systemic problems always ends in war…read a history book and know that human nature does not change nor do we ever learn from history. I know you don’t want to believe it just like house prices will keep rising.

Anyone who talks about U.S recovery is an idiot or a shill. 45 million on food stamps 22% unemployment ( I count can’t looking for work after 1 year – sorry it’s not 8.6%). NAFTA killed US and Canada.

what do you think is going to happen after bond vigilantes are done with EU… they set their sights on USA. 15 trillion in debt not including unfunded liabilities. They are gonna pay that back… yeah right…

an entire generation of students with 1 trillion in debt… all of the spending in the future has been soaked up by debt already…

a consumer based economy is a joke. manufacturing and productivity are what make an economy not consumption. Anyone who says otherwise is just a moron shill.

Santa should hand out razor blades this year.

The world is a JOKE and you and I are the butt of it. Calculating mortgage rates and other B.S. It’s a JOKE. A diversified portfolio of B.S paper that when the SHTF may disappear a la MF GLOBAL.

THERE CAN BE NO RULE OF LAW WHERE FRAUD PERSISTS WITHOUT PUNISHMENT!

THE SYSTEM IS A SCAM.

GO LEAFS GO.

#127 45north on 12.11.11 at 12:13 am

Greg W. I listened to John Ibbitson and found his talk fascinating! I had a vague sense of the Laurentian Consensus but John Ibbitson’s comments has helped define my thinking.

#128 View on 12.11.11 at 1:01 am

“Can we get a realtor to confirm this sale?”

The house sold that I mentioned is beside this listing Van Guy if it helps – MLS® 10011564.

#129 Michelle on 12.11.11 at 1:29 am

Ooh! Danielle Park at “Juggling Dynamite” just posted an awesome reply for someone asking her opinion on gold as an investment:

http://jugglingdynamite.com/2011/12/09/a-word-to-the-gold-bugs/

You go girl! :)

#130 Nostradamus Le Mad Vlad on 12.11.11 at 1:43 am

-
David Cameron Gotta give him credit. He refused to bow down before Brussels’ demands. No guts, no glory; Real Life of Politicos at taxpayers expense; 5:03 clip TPTB are leading us to WW3; Banxters Are Dictators of the west, and EU Plan great for banks, but CC Collapse Continent, not the other CC; People Most German and French citizens don’t want the Euro.

The Fourth Reich All hail the United States of Germany! and German power, Summit to end all summits?, Poland Recall when Poland was debt-free, offered to help anyone else out, then the govt. was killed in a mysterious plane crash in Russia? Look who they owe money to, Happy Family, Goldman Euro collapse, AT&T still charges high fees.
*
Dying The five greatest regrets. Shakespeare’s character, Polonius said, “To thine own self be true”; It’s a cat’s life Some cats have all the luck! 4:14 clip Fukushima — Cold shutdown and beyond? Plus — Stable? 15:01 clip Syria, and what’s going on there. The CIA – Mossad are more than likely behind all these skirmishes; Eccentric Town grows all its own veggies; Pakistan – US relations “Since the Raymond Davis issue, the US has not learnt any lesson.”

Russian Elections US meddling again; Pelosi How to double investments in a few short months; Scalded Propaganda BS Direct from the WH; Links in to non-GMO food sites; Tibet ” . . . there is an old, old saying that when Tibet permits wheels to be brought into the country then Tibet will be conquered by a very unfriendly race.”; HAARP What’s good for one is good for another.

#131 Van guy blazin kush on 12.11.11 at 1:56 am

“Flippers don’t get tax-free gains. “— Garth

Wrong!! Remember that couple that flipped 2 primary residences in 2 years? You got pissed off at them and called them flippers. They made tax free $. Isn’t that right?

#132 “Yesterday I sat in Kitts coffee and listened too a realtor go thru his BS to an unsuspecting female.” | Vancouver Real Estate Anecdote Archive on 12.11.11 at 4:01 am

[...] viewing on Sunday, and making a “strong” offer after that. I felt very sorry for her!” – Sanddancer at greaterfool.ca 10 Dec 2011 10:50am Share:TwitterFacebookRedditStumbleUponDiggLike this:LikeBe the first to like this post. This [...]

#133 Waterloo Resident on 12.11.11 at 4:46 am

Without good jobs, where will the support come to keep house prices high?

I am an electrical engineering technologist and currently cannot find a job in the K-W area to save my life ! I have offered 12 of my friends as well as a head-hunting agency $110,000 if they can find me a job that matches my qualifications: 8 months later and 3 interviews = NOTHING ! That’s what the job market is like right now !

#134 Aussie Roy on 12.11.11 at 7:32 am

Aussie Update

Australias mortgage misery makes BBC TV.

Australia’s economy is continuing to grow strongly, with growth on an annual basis of 2.5% in the third quarter of 2011.

But many Australians are finding it increasingly hard to maintain their mortgage payments, following a period of interest rate hikes and ever rising property prices.

The BBC’s Phil Mercer reports from Sydney on the plight of some homeowners and measures that the banking industry is taking to deal with the issue.

Interesting to note the video story shows how much house prices have increased compared to wages.

http://www.bbc.co.uk/news/business-16062699

#135 wtf????? on 12.11.11 at 7:40 am

C’mon Garth….you can’t let Carney off the hook by saying..”he’s been preaching for months”….as if he and his cronies have been anything except irresponsible. Mururing the Carney is off the hook in some way is like saying the rapist was innocent because the chick was wearing a short skirt.

Carney and Flaherty have screwed this country by screwing the people who built it…..the workers and the seniors. Now they want want to say ” I told you so?” What crap.

#136 Linda Pearson on 12.11.11 at 9:04 am

#12545north on 12.11.11 at 12:13 am

I watched it through twice, once on the web from Greg’s link and again on television later. It gelled for me perfectly my own frustration with the party I’ve followed all my voting life. Unless and until the Liberal party can devise a platform that impassions the electorate, that can appeal across geographical boundaries, that can bridge the divide between languages and cultural differences, and, finally, chooses a leader behind whom all members will rally, there will be no resurgence of the party.

Maybe that is a good thing. Maybe another party will develop from a concerned and like-minded group of citizens, people like me who don’t like to see Canada continue in the direction it seems to be moving. And, no, I don’t mean simply choosing the easy way, that of a merging of the NDP and Liberal parties.

#137 Aussie Roy on 12.11.11 at 9:24 am

Aussie Update

Aussie Banks caught in credit crunch

ANZ has opted to try to broaden the argument and underline just how much other factors influence interest rates, not just the RBA’s moves, by announcing it will publicly set its rates on every second Friday of the month.

Local deposits are no longer the cheap form of financing they used to be. In fact, the battle in the lending market has been matched by an equally ferocious and expensive fight for deposits that has only added to the pressure on the industry’s profit margins.

Nonetheless, the primary issue for the sector is the cost of what is called wholesale funding.

http://www.theage.com.au/business/banks-caught-in-a-new-credit-crunch-20111209-1onoi.html#ixzz1gEQ5qM2U

China

“The downside risk in China’s economy continues to rise,” said Liu Li-Gang, a Hong Kong-based economist with Australia & New Zealand Banking Group Ltd. A reserve-ratio cut before year- end is “very likely” and the government may use tax rebates to support exporters, said Liu, who previously worked at the World Bank and Hong Kong Monetary Authority.

Australia’s economic vitality is increasingly tied to China, which currently takes about a quarter of Australia’s exports. China is also the fastest growing major economy so a slowdown there will drag on global growth which is also being hampered by a stagnant Europe and weak US expansion.

http://m.theage.com.au/business/world-business/chinas-export-growth-slumps-to-lowest-since-2009-20111211-1opaj.html

PARIS

In another sign of how Europe’s debt crisis is rippling through the banking system, Moody’s Investors Service on Friday downgraded the three largest banks in France, saying there was a “very high” probability that the French government would step in to support them if conditions worsened.

Moody’s cut various ratings for Société Générale, BNP Paribas and Crédit Agricole by one notch, citing the problems each faced recently in raising money on the open market.

http://mobile.nytimes.com/2011/12/10/business/global/moodys-downgrades-top-french-banks.xml

#138 Bottoms_Up on 12.11.11 at 9:45 am

#114 The American on 12.10.11 at 9:57 pm
—————————————————-
True, BC is it’s own beast.

But I would put forth that are banks did behave better than most. I saw it directly with my own eyes (well educated, no debt, great prospects,[but only a low paying job]) and I was twice rejected for a small-to-modest mortgage. There is no doubt I would have been approved in the USA at that time.

Also, we do have the CMHC backing mortgages, but with Australia and Britain adopting this policy, doesn’t it show that the policy works?

#139 Mr. Lahey on 12.11.11 at 9:48 am

#117 Blog Dog Carney

Now don’t go defending yourself before the debate even starts over how you weren’t man enough to raise rates and take the pain earlier instead of creating this mania in real estate. It’s going to he a hard landing there Carney as the all knowing, all wise, reader of the financial tea leaves oracle Sir Garth has been waxing eloquent on for the past three years. Yet I admire your machismo in showing up for this debate in front of what may become a hostile crowd though your act of penance following the Clydesdale’s with a pooper scooper will win some sympathy. Your offering to bring prizes will also placate the blog dogs and the Rolex to the winner of the ploughing match between Westernman and Form Man is a very nice gesture. Finally something from Goldman Sachs making its way back to the public! Hey Form Man and Westernman the ante has been upped in your ploughing match! The lucky winner will get a Rolex onced owned by our very own central banker Mr. Carney!

#140 The American on 12.11.11 at 10:32 am

At #136: Wow, where to begin. Bottoms_Up, you stated, “..I would put forth that [our] banks did behave better than most. I saw it directly with my own eyes (well educated, no debt, great prospects, [but only a low paying job]) and I was twice rejected for a small-to-modest mortgage. There is no doubt I would have been approved in the USA at that time.”

I absolutely agree with you here. HOWEVER, the operative words in your statement were “at that time.” Today, the USA and Canada have done a complete role reversal, which is what I’m driving at here. Honestly, anyone can now get a loan in Canada, regardless of credit worthiness. My point is that Canada is now behaving even worse than the USA was behaving, yet so many people living there honestly think everything is a-okay and no bubble is forthcoming.

Your next statement, “Also, we do have the CMHC backing mortgages, but with Australia and Britain adopting this policy, doesn’t it show that the policy works?”

Eh hem, I would have to answer your question with an ABSOLUTELY NOT. This is robbing Peter to pay Paul. Alleviating the lender (the Banks) of all responsibility to do the right thing only perpetuates bad lending practices, which ultimately will negatively impact the recipient of the loan (when he/she defaults because he/she could never really afford it in the first place), and then eventually the public when that recipient defaults (AKA the publicly-backed CMHC). It is a horrific practice, in fact. What has happened is your bubble has only risen to new heights unlike what has been seen thus far. Many Canadians see it as having averted crisis, when in fact the crisis has not yet hit. And, if you look at Britain’s RE market, it has actually suffered now a worser fate percentage collapse than the U.S. As for Australia, their bubble has only recently popped, and it will be only a matter of time before you see the same demise happen there. Up next is Canada.

#141 The American on 12.11.11 at 10:49 am

Bottoms_Up, here is an interesting video on Australia’s recent real estate pop. This is a 60 Minutes excerpt from as recent as this past October. Its sad. But it is even sadder that people do not recognize this is only the very beginning of the trouble ahead.

http://www.youtube.com/watch?v=kSytIhRSYg8

#142 “Yesterday I sat in Kitts coffee and listened too a realtor go thru his BS to an unsuspecting female.” on 12.11.11 at 11:00 am

[...] “Yesterday I sat in Kitts coffee (Vancouver) and listened too a realtor go thru his BS to an unsuspecting female. She had obviously just sold her place and he talked her into a $1.2m offer on a place just off W. 4TH. They were going for a second viewing on Sunday, and making a “strong” offer after that. I felt very sorry for her!” – Sanddancer at greaterfool.ca 10 Dec 2011 10:50am [...]

#143 stevenson on 12.11.11 at 11:06 am

Stop making stuff up. The example was not of speculators, but people who bought with cash and lived there for six years. This is called investing in real estate. Buying to flip with high leverage is called gambling. — Garth

That is hardly called high leverage. High leverage is taking that 300+K and using it as down payments towards a few properties (providing the loaning approval). That is gambling. Anybody who doesn’t or didn’t make use of that opportunity when prices were low are either chicken or stupid. Low capital and high yield tax free income. With the stock market indexes and commodities that fluctuates 2-3% a day, that is gambling.

The example was d/t Vancouver. Prices are not low. As for investing in financial assets, sensible rules prevent leverage of this kind. Try a little research, Mr. Realtor. — Garth

#144 The American on 12.11.11 at 11:09 am

Bottoms_Up, and here is one about Britain…

http://www.youtube.com/watch?v=7ig5q-LPob8
http://www.youtube.com/watch?v=G0bZcTSwmDM

#145 The American on 12.11.11 at 11:18 am

How interesting from 2007… I would envision 42ndBPOE looking a lot like the first guy in this video, Tom Atkins, but with linger hair and a purple sport jacket. They both speak the same language.

http://www.youtube.com/watch?v=yoZV5jt9puc

#146 Daisy Mae on 12.11.11 at 11:32 am

BOTTOMS_UP: “Also, we do have the CMHC backing mortgages, but with Australia and Britain adopting this policy, doesn’t it show that the policy works?”

**********************************

It doesn’t ‘prove’ a damn thing. The shyte hasn’t quite hit the fan…but it will, and soon.

It just shows the Australian and British policy makers don’t have a working brain among them.

#147 Abitibi Doug on 12.11.11 at 11:55 am

I’m not sure what else to say except congratulations to Evan for getting out before it’s too late, it’s like getting out of a burning building seconds before it fills up with smoke. Garth said the rate of return is only 6%, which is true, but at least it’s tax free. Future sellers may not be so lucky.

Now, if you’ll excuse me, I’ll go to the TD Waterhouse web site and look at other investments mentioned on this sad, pathetic (but funny and informative) blog.

#148 Barry in Pickering on 12.11.11 at 12:16 pm

((( [Garth] 40% over six years – 6% annually, about what a balanced portfolio would have returned
————————-
Big swing and a miss there Garth. The average balanced portfolio 50/50 stocks/fixed income has returned 0.5% over the last 6 years.

If I’m wrong, name an index or fund that publishes its results and had 6% per year.

You are wrong. My own portfolio (40 fixed/60 growth, reinvested returns) has achieved that on average since 2005. — Garth

#149 Okanagan Renter on 12.11.11 at 12:58 pm

#138 The American said:

“What has happened is your bubble has only risen to new heights unlike what has been seen thus far. Many Canadians see it as having averted crisis, when in fact the crisis has not yet hit.”

Very well put. Does it take a Yankee to articulate what so many of my compatriots are blind, deaf and dumb (the hell with political correctness) to? Apparently so.

#150 Van guy smokin now on 12.11.11 at 1:09 pm

Garth, I proved a good point where you were wrong. You decided not to post my comment so it doesn’t make you look bad. Why would you do that? It’s a fair comment with no abusive or disrespectful words.

Any comment written solely to be insulting will not be published. You had no other point. — Garth

#151 Okanagan Renter on 12.11.11 at 1:39 pm

You are wrong. My own portfolio (40 fixed/60 growth, reinvested returns) has achieved that on average since 2005. — Garth

Garth, what do you think of the Warren Buffett ratio of allocating investments as a percent of one’s age? In this approach I’d have 37 fixed (I’m 37) and 63 growth. You seem to favour a less conservative approach of course, but do you see any advantage in the Buffett method for the risk-averse?

It’s a guideline, but not a credo. In my experience most young people today are insanely conservative. — Garth

#152 Blog Dog Carney on 12.11.11 at 2:04 pm

137 Mr. L – I will show further goodwill by volunteering
to wash the tractors after the ploughing contest! I will
also raise rates in the new year. Just a little. And very
slowly. I promise.

#153 Barry in Pickering on 12.11.11 at 2:28 pm

If I’m wrong, name an index or fund that publishes its results and had 6% per year.

You are wrong. My own portfolio (40 fixed/60 growth, reinvested returns) has achieved that on average since 2005. — Garth

—————
The main indexes for bonds, pref shares, and stocks have returned 0.5% average over the last 6 years. You would have needed to outperform these indexes by 40%.

Of course that is possible for some people to do. But in your column, you didn’t say that **you** could do it, you said that a** typical** balanced portfolio did it, over the last 6 years. Which isn’t supported by indexes, or fund results, and a typical investor wouldn’t have seen those results in stocks and fixed income, primarily because of the 2008 crash.

A balanced (40/60) portfolio lost 20% in 08 (when markets were down 60%), was flat in 09 and gained 15% in 10 – for a return of about 5% over the worst three-year period in a generation. Then average in the better returns of 06 and 07, and 6% is no stretch. — Garth

#154 Mike Rotch on 12.11.11 at 2:53 pm

OK Renter @ 149 :

The nice lady at the bank and most of her colleagues always told me my portfolio’s percentage exposure to bonds should be approximately my age, goal being to preserve capital already acquired while leaving some room for growth.

If I’m not mistaken, the Garth plan is wayyyy more aggressive than that – 20% bonds, 20% other “fixed income” instruments (i.e. preferreds), and 60% growth oriented stocks.

“Riskier” than the bank’s model, but the bank’s model has bigger risk of not earning enough to let you retire at a sane age….I like the G-man’s plan!

#155 InvestorsFriend (Shawn Allen) on 12.11.11 at 3:06 pm

Okanagan Renter at 149 asks:

Garth, what do you think of the Warren Buffett ratio of allocating investments as a percent of one’s age?

**********************************
I believe you are invoking the blessing of Warren Buffett in error.

I doubt that Warren Buffett ever advocated such a thing. The equity as age minus 100 is a well-known formula but it’s not Buffett’s and I doubt he ever even endorsed it.

I have studied and read several times each of Buffett’s annual letters since 1957. I have studied several of his Fortune magazine articles. I have read the transcript of many of his interviews on CNBC. I don’t recall such a formula.

In fact I recall Buffett’s advice is more along the lines of invest in the best assets you can find. If bonds are a better investment at a point in time, buy them. If equities are better buy them. He described bonds in the 1940’s as abominable invetments. He has little to no use for long-term U.S. government bonds at today’s low yields. He makes huge use of Treasury bills to park cash and almost no use of long-term United States government bonds.

At September 30, 2011 Berkshire had $2.3 billion in United States fixed maturity securities, compared to $68.1 billion in equities. (Those equities are in addition to the companies that are owned outright) He did however have $13.2 billion in foreign government bonds and $12.6 billion in corporate bonds. (See Note 16 of the Q3 report). Berkshire’s total assets are $385 billion so you can see the amount in bonds of any kind is small (under 10% of assets), the amount in U.S. government bonds is less than 1% of assets.

#156 stevenson on 12.11.11 at 3:23 pm

#144 Daisy Mae

So first Canada and then Australia and Britain. All brainless politicians and policy makers. Yes the everyone else in the world but people here are brainless. Hmm….

#157 charlie on 12.11.11 at 3:25 pm

Quick comment on the 6% return:
You really do need to include the cost differential for renting. Since this was a cash buy (apparently) shouldn’t you include $1500 rent less $600 ownership costs or $10,800 / yr as a return. Adds 3.5% to the return.

So a 9.5% tax free return.

Which, of course, simply means you should have bought that property 6 yrs ago. Not at today’s inflated price.

No. Strata plus taxes plus insurance alone equal more than half the rent. Then add the lost opportunity cost of the equity. — Garth

#158 jess on 12.11.11 at 3:41 pm

the paper shell
David Spargo on the run
http://www.reuters.com/article/2011/12/08/us-shellgames-spargo-idUSTRE7B71AK20111208

#159 GregW, Oakville on 12.11.11 at 4:17 pm

Hi #128 Nastra, Thanks for the links. re: last link

That last one you gave, lead to a story about the fallout we are getting from the now not contained F-Japan reactors. I know some has been see on our east coast too.“Radioactive Rain In Toronto Canada As Large Scale Government Cover Up Of Radiation Dangers Exposed

I know potassium has very low radioactivity and is found in Bananas and gator-add. But I’m not sure how the levels compares to the independent tests in the story or even official tests of fallout we are getting from Japan? Not that much could be done about it now. Didn’t the Government raise the levels it considers ok to let all people live with, shortly after the accident in Japan?
(So I guess all if fine, just move along.)
Your link also lead to some type of water filters claiming to remove the fallout.
I assume R-O can also remove some? Why drink it if you can afford the filters?

IMO, I still think the CANDU design is much better than the F-J reactors that failed big time,
if I had to choice between the two. Since we are going to need lots of on demand power from some were. I’d hate to have my water pipes freeze on a wind free winters night. Buildings codes with better energy efficience in mind, might also help keep the pipes from freezing over one night without power. I wonder if I have properly thought throw the long term consequences?

It all good if the reactor cor products stay out of the bio-sphere for a very long time. More people in Japan may now be asking themselves, what were they and the government thinking?

#160 X on 12.11.11 at 4:20 pm

If there really is so many feigners buying RE in Vancounver, Toronto and surrounding areas, why doesn’t the gov’t change a rule so that foreigners have to put a certain % down on the property.

Because this is a democracy. — Garth

#161 X on 12.11.11 at 4:21 pm

sorry not feigners, foreigners…..my bad.

#162 Okanagan Renter on 12.11.11 at 4:30 pm

Thanks, Garth, for responding to my question. I’ve read your “No Fail” post many times, and have passed it on to other Gen X friends that are equally risk-averse. My main goal now is to educate myself financially (Money Road is hinted to be in my Xmas stocking this year) and increase risk accordingly.

#152 Mike Rotch: Thanks for that breakdown. I agree completely! The TNL@TB model hasn’t been working out for me for years, hence my urgency in learning everything possible about more aggressive investment strategies before taking the plunge.

#153 InvestorsFriend (Shawn Allen): I can’t cite the exact Buffett source at the moment, so it might well have been referenced in error in my secondary source, either as a misreading of Buffett or as a poorly-articulated argument. From your numbers, he is much more risk-taking than I would have imagined. Then again, you don’t get to where he is by playing it too safe.

#163 NoName on 12.11.11 at 4:36 pm

The Uses of Pessimism and the Danger of False Hope

I love title… very good!

https://www.youtube.com/watch?v=Ytp1O_GF4lo&feature=mfu_in_order&list=UL

#164 Kelowna Spec House Sells For 60%-Off 2009 Asking Price | Vancouver Real Estate Anecdote Archive on 12.11.11 at 4:37 pm

[...] semi-lakeshore was $1,300,000 and this past week sold for the low low price of $511,000.” – View at greaterfool.ca 9 Dec 2011 10:14pm Share:TwitterFacebookRedditStumbleUponDiggLike this:LikeBe the first to like this post. This [...]

#165 Cato on 12.11.11 at 4:40 pm

Canadians are driven by the same emotions that drive the rest of the hairless apes on planet earth. We were so sure we were different it led to arrogance. Whats unforgivable is we had the benefit of foresight but chose to dive off the cliff anyways.

The US is finally showing signs of a bottom. It’ll take another 3 years to clear out the excess inventory but at least they turned the corner. All tolled it could be a 10 year process for the return to a balanced US housing market, and they are now only halfway through it. This in an economy that is ruthlessly efficient in clearing debt out of the system.

Contrast this with Canada. We had the benefit of seeing the cause & effects of housing bubbles elsewhere in the world but our market is so corrupted we couldn’t even recognize the warning signs staring us in the face. The process of debt restructuring in Canada is so woefully inefficient and bureaucratic the system is barely functional in the best of times. Minor stress causes entire judicial process to grind to a halt. Our attitude towards insolvency is punitive in nature. Our system serves neither the borrower nor the lender and simply becomes a bureaucratic drag on the economy.

If the US experience is 10 years its not inconceivable that the Canadian experience will last 20 years or more. Thats a generation of misery for those caught on the wrong side of this and we have yet to enter year one. Without massive structural economic reforms we may not see real recovery. We might be destined to simply become a country of have and have nots which sells its resources to the highest bidder.

#166 Blog Dog Carney on 12.11.11 at 4:42 pm

A balanced (40/60) portfolio lost 20% in 08 (when markets were down 60%), was flat in 09 and gained 15% in 10 – for a return of about 5% over the worst three-year period in a generation. Then average in the better returns of 06 and 07, and 6% is no stretch. — Garth

Mr. L – I wont win the interest rate debate but I will beat the bearded one at Math!

100 – 20%(2008) = 80
80 flat(2009) = 80
80 + 15%(2010) = 92

Garth down 8% over 3 years!

Nice try. But by ‘flat’ I obviously meant regaining the 08 loss. So, three-year return is 5%. — Garth

#167 TurnerNation on 12.11.11 at 4:46 pm

This could explain some of Fort McMurray’s house prices. All-in this mechanic job pays 110,000/yr +

http://www.fortmcmurrayonline.com/jobs/job16179/journeyman.automotive.mechanic.job.aspx

If banks will lend 5-8x income, then…

#168 Mr. Lahey on 12.11.11 at 5:02 pm

#150 Blog Dog Carney

“Mr. L – I will show further goodwill by volunteering
to wash the tractors after the ploughing contest! I will
also raise rates in the new year. Just a little. And very
slowly. I promise.”

Now you are talking there Carney. I am sure Westernman and Form Man will appreciate you washing their tractors and a little honest work might do your Goldman Sachs soul some good. The rate raising is also a good gesture on your part. Seems the message is finally getting through to you Markey. See you at the FASTPGFBDCParty cowboy!

#169 HAM in GTA on 12.11.11 at 5:30 pm

So a buddy of mine today informed me that even in the suburbs of Markham the majority of new buyers in his ‘hood are HAM. Many of them are ‘thinking about’ leaving China and coming here, but they buy before they make the choice. And they’re buying into the priciest neighbourhoods – like the Kylemore neighbourhood in Angus Glen West. Here’s what 1.2 million bucks on a postage stamp, 10 minutes north of Toronto city limits buys you.

http://www.realtor.ca/propertyDetails.aspx?propertyId=11304299&PidKey=1053901664

#170 jess on 12.11.11 at 5:42 pm

commingling

http://www.sec.gov/litigation/litreleases/2007/lr20249-brief.pdf

SUMMARY
This action involves misappropriation, misuse and improper commingling of client assets by the investment advisory fm Sentinel Management Group, Inc. (“Sentinel”). Sentinel, whichprior to filing for bankruptcy protection last week claimed to have $1.2 billion in assets under management, defiauded its clients by improperly commingling, misappropriating and leveraging their securities without their knowledge in violation of the Investment Advisers Act of 1940
(“‘Advisers Act”). Among its improper activities, Sentinel transferred at least $460 million in
securities fiom client investment accounts to Sentinel’s proprietary “house” account. …

http://www.americanbanker.com/bankthink/PwC-MF-Global-commingling-client-funds-1043821-1.html

#171 Van guy smokin now on 12.11.11 at 5:58 pm

I hear from some realtor buddies of mine this home sold for 1.3 mil. It’s not showing as sold yet but I can confirm this price once the deal is finalized. That’s a big discount. Owner paid around 900k when they built it several years ago.

http://www.realtor.ca/PropertyDetails.aspx?propertyID=11240500&PidKey=-886026902

#172 InvestorsFriend (Shawn Allen) on 12.11.11 at 6:14 pm

BUFFETT AND RISK

Number 160 Okanagan Renter believes Buffett is a risk taker.

Not really, Berkshire’s large allocation to cash is lengendary. Not all equities are created equally and Buffett chooses wisely.

With large insurance operations, Buffett’s first priority has always bee to maintain Gibralter-like financial strength so that insurance customers can always count on their payments being honored if the time comes.

Buffett actually understands something about risk.

The financial world as a whole has completely mis-understood risk.

Here is my short article on risk and return fallacys

http://investorsfriend.com/risk_and_reward.htm

I wrote this ten years ago. Since then a lot of banks and S&P and many others have worked hard to show that I was right in saying that risk was not well understood. Idiots though that they could precisely measure and control risks.

#173 robert james on 12.11.11 at 6:18 pm

#11 View Do you the address of this Kelowna house that sold for 60% off or the area.. It must have been a repo.. Thanks!!