Regrets

REGRETS modified

My door swung open About a dozen of them entered.

Twenty-two years ago the realtors were in a funk. A boom housing market had turned to bust. The economy was slumped toward recession. Many people who’d bought in a frenzy three or four years earlier, when everyone thought houses were going up forever, now owed more than the properties were worth. Toronto and Vancouver values were down by 30%. Nobody had seen it coming.

Walking into my Parliament Hill office were the presidents of the national real estate association and the homebuilders organization, plus their in-house economists and hangers-on. The lobbying effort was intense for a shiny new idea to rescue the plunging market. ‘We want first-time buyers to be able to use RRSP money for a down payment,” they told me. “This is an emergency situation and we must stabilize things before millions of families lose everything.”

But, I said, retirement savings are for retirement. Why would we corrupt the system by letting people divert this money into a house? If they don’t have enough for a down payment, why should they be able to buy real estate? Won’t we regret this later?

Because, they said, plunging equity could make a recession worse – combined with the negative numbers of the day. We need to encourage new buyers. (At the time both inflation and mortgage rates were in double digits.)

So, I bought it. The rest of the government did, too. We brought in the Home Buyers Plan, but only on a temporary and urgent basis. Once middle class equity was stabilized, the program would end.

The deal: virgins could withdraw money from RRSPs for a down payment and pay no tax, on the condition they repaid it starting in two years and finishing 15 years later. Any missed payments would be added to their income in that year, and taxed at their marginal rate. The immediate goal was to rescue a free-falling housing market. The ultimate goal was to encourage people to save and invest for retirement.

In a few years it all changed. Housing prices plateaued and started to climb. Rates came down. But politicians who came after me made the HBP permanent, then dramatically increased the amount a couple could withdraw – to $50,000.

Well, now the Home Buyers Plan has been used about 2,500,000 times and roughly $30 billion has been removed from financial assets inside RRSPs and dumped into the real estate market. Combined with cheap mortgage rates and lenient bankers, this helped push average detached home prices over $1 million in two major markets and made houses so expensive it takes over 70% of gross income to own one in Vancouver.

While real estate values have moderated, declined or tanked in most western countries since the financial crisis, here they’ve bloated into gasbag territory, while home ownership has become a cult. The HBP has done its bit in swelling house lust and persuading an entire nation you won’t need to save money when you can sink it all into a house instead.

But, now we have troubles, as the raid-your-RRSP scheme is telling us.

A University of Guelph thesis points out at least a third of all the first-timers who snatched down payment money this way between 1995 and 2007 didn’t actually pay it back, even when the annual repayment was less than 7% of the amount taken. Since then, things appear to be getting worse.

By 2011, says the Canada Revenue Agency, almost half (47%) of all the people who sucked their RRSPs dry to buy a home had not started returning the money. As a result, all of those missed payments were added to taxable incomes, and borrowers were forced to pay more as a result. Why would they let this happen, increasing their income tax burden rather than putting the small annual sum back inside their RRSPs?

Probably because they didn’t have the money. The HBP plan plus historically low rates, in addition to society’s overwhelming house horniness, just encouraged the virgins to buy as much real estate as possible with maximum debt. After all, who wants a starter home anymore? Everybody thinks their first house has to be better than their parent’s final one.

And last week, as I reported, Morningstar equity analyst Dan Werner has this stunning news for us: while all these new homeowners have been unable to repay their RRSP withdrawals, our mortgage debt profile has come to mirror that of the US just before its devastating real estate plop. Today 23% of Canadians have financing of 80% or more on their houses. At the height of the American housing bubble, it was only 22%.

Now that we have low inflation, low mortgage rates and free RRSP money for houses, what will the realtors propose next when real estate topples under its own excess? And how long will it take to recover? A generation?

A lot of folks may wish they’d never touched those savings.

In case I depressed you, watch this:

184 comments ↓

#1 Albert on 07.13.14 at 2:41 pm

If the economy is bad, they won’t raise the interest rate, therefore the money will still be cheap.

which will make the housing price go up even more

is that true ?

No. — Garth

#2 David McKenna on 07.13.14 at 2:44 pm

Let me be the FIRST, to say, has $50k for a couple out of an RRSP really lead to $1 million dollar homes? I’d disagree on how much impact this can really have.

More than those immigrant buyers everyone moans about. — Garth

#3 Tripp on 07.13.14 at 2:46 pm

Early post today Garth, enjoy the game!

My neighbourhood in west end Ottawa is slowly approaching aberrant levels. A 3br townhouse is around $300k and a 60 y/o detached with 2×4 walls and smelly basement is around half a million. There is little movement on the market though, some have been up for sale since last fall.

#4 Jamie Czerwinski on 07.13.14 at 2:52 pm

> Let me be the FIRST, to say, has $50k for a couple out of an RRSP really lead to $1 million dollar homes? I’d disagree on how much impact this can really have.

$50k is exactly 5% of $1M. But who’s counting?

#5 Flawed on 07.13.14 at 3:25 pm

Now that we have low inflation, low mortgage rates and free RRSP money for houses, what will the realtors propose next when real estate topples under its own excess? And how long will it take to recover? A generation?

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

Garth why do “govt or ex govt ” people continue to say there is LOW inflation. I guess that means that people that say such things do not purchase the following:

Food
Gas
Electricity
Natural Gas
MSP (medical services plan for our FREE Cdn healthcare)
Insurance
Drivers License
Property Tax
Eco fee after eco fee that only goes to govt salaries
Fuel Surcharges
Bridge Tolls
Carbon Taxes – for global warming that does not exist

All of which goes up 3 to 10 times the so called inflation rate oh….and the icing on the cake? While public sector workers get “inflation increases” in salaries PRIVATE sector workers have not had an increase in wages in 20 years.

And the Class Warfare continues…..

You confuse cost of living with inflation. — Garth

#6 Mean Gene on 07.13.14 at 3:34 pm

Oh what a tangled web we weave; When first we practice to deceive. – Sir Walter Scott (Marmion, 1808) 

#7 Flawed on 07.13.14 at 3:37 pm

You confuse cost of living with inflation. — Garth

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

So what’s your version? The dictionary version says its the increase in money supply which no politician or economist ever acknowledges. The result of which is the increase in prices of goods and services.

We are talking about the rise in goods and services right? Otherwise known as……..inflation. So if the increased cost of living is not inflation, please tell us what is causing the increase in the cost of living please which is driving the average person into the ground.

Worry more about incomes than prices as a measure of economic malaise. — Garth

#8 Fred on 07.13.14 at 3:40 pm

That’s a lot of voters! I would not be surprised if the prudent has to bail out the foolish through some government actions (taxes).

#9 Greg on 07.13.14 at 3:43 pm

Hi Garth, re:50k impact if left to grow/compounded in an RRSP instead?

(If that online compound calculator is right)
If a 25 year old left the $50,000 in their RRSP instead, growing compound annually at an average of ~7%, by age 60 it would grow to around 1/2 million to help live on at retirement. Right?

#10 Bargains everywhere on 07.13.14 at 3:47 pm

Yes, I question the cost of living vs. inflation too. My understanding is that inflation measures the % increase in the cost of living.

Things are definitely getting more expensive out there. Groceries have been skyrocketing over the past few months.

#11 Shawn on 07.13.14 at 3:50 pm

A lot of folks may wish they’d never touched those savings.

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

Indeed, a main feature and benefit of the RRSP was that due to tax on withdrawal it was treated as untouchable (until retirement or unemployment) money by most people. Well except for first time home buyers.

Yeah the home buyers plan was a bad idea.

Time in the markets is far more important than timing the markets and so it is best to leave RRSP money fully invested until retirement.

TFSA is, in theory. better than RRSP. Except often not really in practice as it is too accessible.

Well, in the end you can’t to protect people from themselves. You try, but stupidity cannot be over estimated.

#12 Shawn on 07.13.14 at 3:51 pm

You confuse cost of living with inflation. — Garth

Inflation is measured as the increase in the cost of living using a basket of goods needed to live?

#13 Mark on 07.13.14 at 3:58 pm

Allowing RRSPs to be raided for a housing purchase is a travesty. As is allowing CMHC to even be in the subprime mortgage guarantee business (to the tune of $900B of subprime mortgage guarantees). This is money that is diverted away from businesses that actually create jobs, towards one sector, real estate. And weakens the financial security of Canadians, since we know that unearned home equity does not last forever and interest rates eventually will correct to the upside.

If the CMHC was allowed to run amuck in the 1990s, Canada may not had the investment capital available to be a strong participant in the tech sector in the late 1990s. The tech sector was basically the only thing that kept Canada’s economy afloat and prevented Canada from devolving into a banana republic. Resources/commodities are hot today, but unfortunately, there are no “Nortels” waiting in the wings, ready to prop up the Canadian economy if that highly cylical sector experiences a downturn. Also, it is profoundly unfair to our domestic engineering talent that there’s very little capital available to employ them with either while most of it is diverted to housing/FIRE.

#14 Ben on 07.13.14 at 3:59 pm

Because, they said, plunging equity could make a recession worse – combined with the negative numbers of the day. We need to encourage new buyers. (At the time both inflation and mortgage rates were in double digits.)

So, I bought it

Why is it so hard for politicians to accept falling house values? I want *everything* to fall in cost in real terms. Milk. Petrol. Housing.

Big mistake Garth.

I doubt it would have been misguided if the program had been, in fact, temporary. Recall that a five-year mortgage was 14%. — Garth

#15 Flawed on 07.13.14 at 4:04 pm

Worry more about incomes than prices as a measure of economic malaise. — Garth

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

Correct……and while the cost of living continues to skyrocket, wages for private sector workers has not risen in 20 years.

#16 young & foolish on 07.13.14 at 4:10 pm

I’d be surprised if government would encourage such recklessness on it’s own. It just goes to show that lobby groups really do pull too much weight in Ottawa.

Politics comes before economics ….. remember that next time you are waiting for conditions to return to the “mean”, or when someone tries to convince you we live in a “free market” economy.

#17 Anthony on 07.13.14 at 4:11 pm

If I were to pull $25k out of my RRSP to purchase a condo like some of my friends my age, around 28. That would be pretty silly.

Over the next 16 years I expect to be in higher tax brackets, and I expect federal and provincial taxes to increase in the future.

So even if I do pay it back in full, I’m still paying more tax from utilizing the HBP. Since my contribution reduces my taxes when they were lower.

No thanks to the HBP. RRSP money is for withdrawal when my income in a year is low, retirement or otherwise.

#18 boopsie on 07.13.14 at 4:40 pm

Hmmmm
sounds like a Jelinek to me. It is my hope that in future, somewhere, somehow, the politicians will have the good sense to take the advice of their (what once was) sensible and pragmatic civil service.

#19 saskatchewan roller on 07.13.14 at 4:44 pm

I am in the last year of my HBP, and i only took a paltry $8,000.00 to buy a $88,000.00 home. It was a starter home and truthfully i wish i was foced to save for the downpayment. Although that little program allowed me to get a start and now today i have a beautiful home in the burbs and a rental property that produces a tidy income. Also my family contribute regularly to RRSP, RESP,TFSA,etc. In my case the $400/year the program deducted as repayment seems paltry in comparison to the gains i have with home ownership.

#20 Ben on 07.13.14 at 4:56 pm

I doubt it would have been misguided if the program had been, in fact, temporary. Recall that a five-year mortgage was 14%. — Garth

Sorry Garth all I thought at that figure was: good.

We’ve seen low interest rates destroy the value of equity as debt is near-free.

#21 TurnerNation on 07.13.14 at 4:58 pm

I always take a dim view of government.
A bunch of very rich men whispering in the ears of rich men who pass it on to slightly rich men.

So run for office. — Garth

#22 Andrew on 07.13.14 at 6:07 pm

I doubt it would have been misguided if the program had been, in fact, temporary. Recall that a five-year mortgage was 14%. — Garth

“Nothing is so permanent as a temporary government program.” – Milton Friedman

#23 Joe2.0 on 07.13.14 at 6:12 pm

People who don’t think immigration isn’t effecting property prices are high.

I just watched the cup with a buddy of mine who recently bought a house in Pender Harbour, up on the Sunshine Coast.

The buzz amongst the RE community was the news that Chinese investors are buying up RE agencies in Gibsons as well as loads of properties, such as a large parcel on lower Gibsons for a resort.

It is different here.

What real estate agency in Gibsons? Do you realize how dumb that sounds? — Garth

#24 Sheane Wallace on 07.13.14 at 6:13 pm

Germans can get their gold back after all!

#25 totalinvestor.com on 07.13.14 at 6:22 pm

I’ll read this article when the beer wears off.

http://s8.postimg.org/72nycrntx/germany.jpg

#26 Sheane Wallace on 07.13.14 at 6:23 pm

It is simple – incomes go down, prices up and interest rates are negative. Until we level China and India as workforce lifestyle.

Cheers.

#27 Ilona on 07.13.14 at 6:34 pm

Thank you for the video! =) And for HBP – we didn’t repay it for most part, and next year will be the final payment (paid off the mortgage faster than the plan) Had the extra money, but didn’t have much faith in the RRSP and the markets… now trying to catch up – lots of unused contribution room in both RRSP accounts :)

It would be nice to read a positive example once in a while. Like this guy: http://canadianmoneyforum.com/showthread.php/20690-what-is-your-investment-average-so-far. Averaged 15% in the last 20 years! And he’s 73 – so didn’t start young, but did great!

Better late than never as they say :)

#28 FormerSaskie on 07.13.14 at 6:36 pm

Garth. do you have some survival suggestions for all of the people who drank the koolaide and are going to wake-up in a financial nightmare soon?

#29 Out west on 07.13.14 at 6:55 pm

I used the program in ’99 at 25 y/o. Pulled out 7000 from rrsp’s to buy a $170k, 3BR town house Brampton. Same property now is 350k. I sold that house 3 years for $210. We entered the market at the right time and The run up in housing the past 15 years has been very beneficial to our net worth…would love to cash out and would if it weren’t for kids and dogs.

As far a repaying the withdrawal. It was easier to just add $467 to each years income in non- contributing years. The extra $’s paid in tax was negligible.

I suspect those who use the program see it as interest free money, with a slight ding on the tax bill, and perhaps oblivious to the lost opportunity cost of keeping it in the rsp

#30 Dominoes Lining Up on 07.13.14 at 6:59 pm

#25 Sheane Wallace

Good for the Germans. I have done business in both countries. Argentina remains a hopeless quasi-dictatorship to this day, one of the most corrupt nations on earth with little appreciation for law in everyday life. It’s no wonder folks there look to things like football for a diversion. I pulled my business out of there a few years ago after getting too many demands for payoffs.

Germans generally are leading the charge for global economic sanity. Better they should get a little ego boost this world cup.

#31 Joe2.0 on 07.13.14 at 7:04 pm

Yup pretty dumb sounding should of read travel agencies not RE.
Thanks for keeping me honest.

#32 Millenial on 07.13.14 at 7:06 pm

Hey Garth,

Funny pic. You should do a post about marriage and pre-nuptial agreements one day, you know, pre-marriage planning. Lou Skizas always says the biggest financial decision you’ll ever make is getting married.

#33 zee on 07.13.14 at 7:06 pm

Garth, is there a tax advantage to not pay the rrsp back and instead use the funds to buy new rrsp which you can deduct from your income. some tax guys said it is. please clarify this for us.

Unpaid amounts are added to your income and taxed. You can offset that my making new contributions. But why bother? — Garth

#34 Vlad on 07.13.14 at 7:08 pm

Ron Paul says collapse is imminent and end of the dollar is near. What say you?

Nutbar. — Garth

#35 Babblemaster on 07.13.14 at 7:09 pm

The HBP is certainly an example of stupid government interference in a free market system and the resultant unintended consequences. You can be sure that if there is another housing crash, the feds will come up with other “short-term,” ill thought-out schemes to pump up prices.

#36 TurnerNation on 07.13.14 at 7:11 pm

No interest in politics. I’m a capitalist. Let the markets free.

#37 Waterloo Resident on 07.13.14 at 7:11 pm

here is the rates on U.S. 10 year bonds, from 1965 until now.

http://finance.yahoo.com/q/ta?s=^TNX&t=my&l=on&z=l&q=l&p=&a=&c=

If you look at the chart carefully, you will notice a nice downwards sloping channel from 1980 until now. The high point of the channel is around 2.75% and the low end is about 1.5%. We are currently at the high end of the channel and have started to decline, so if the past trends hold true, interest rates on 10 year bonds should be 1.25% cheaper in about 6 to 12 months from now, and mortgage rates will also be about 1.25% cheaper, and that should make houses rise by about 30% to 50% over the next 3 years.

You made that up, right? — Garth

#38 keith cavanagh on 07.13.14 at 7:17 pm

Sign of the times
When money gets tight people naturally cut back on the ‘extras’. Hamburgers instead of steak. Friends over for beers instead of going to the pub. No more Saturday nights out at the local movie house, now its Netflix on t.v.
And when it comes to summer vacations, people stay home. No more cruises, flights to exciting destinations, expensive hotels or even road trips, instead its ‘Stay-cations”
People keep their current accounts in sharp focus. They are well aware of what they owe and what bills must be paid first.
But what happens when all these adjustments are made and people still cannot stay current?
They cheat….otherwise good people cheat.
I see it every week here in Vancouver – cars on the road with expired vehicle insurance. Not the 7 day or less variety but months and months expired.
When the annual premium can easily run to $2000 or more and people must drive to get to work, people cheat.
Rational people allow themselves to ‘forget’ to renew and save hundreds a month.
Its a risky game; a bad accident and the consequences could be catastrophic.
And then there is the price of getting caught by the Police; $600 ticket and towed on the spot.
I have spoken to drivers and told them their insurance is expired. They say things like “Oh, I forgot to put the decal on” or ‘this is the wife’s car’ (?!)
But I think they know exactly what they are doing.
Take a look around on your way to work tomorrow. You will see them.
Otherwise honest people cheating….. because they have to.

#39 gladiator on 07.13.14 at 7:21 pm

Garth,
the signs of distress I see in TO are many “for lease” signs for commercial real estate (even some For Sale ones!!!) and the surge in “garage sales” everywhere I go (in North TO). Never seen so many of these before…

#40 Drill Baby Drill on 07.13.14 at 7:27 pm

Dear pathetic Blog : in Calgary many in the oil patch are reaching a ceiling on wage increases especially in engineering services as well as field contractors. Demand for engineering services is slowing (has been for 18 mths). This really wont bite back until a year from know if it continues. There is cost inflation on many items without even considering housing. Costs for gasoline, insurance, property taxes and food have climbed significantly over the past several years and with the plateau being reached on wages here in Cowtown it is going to be interesting.

#41 Ralph Cramdown on 07.13.14 at 7:38 pm

What real estate agency in Gibsons?

Re/MAX Molly’s Reach Into Your Pocket Sunshine Coast Homes

#42 Mark on 07.13.14 at 7:42 pm

“in Calgary many in the oil patch are reaching a ceiling on wage increases especially in engineering services as well as field contractors. Demand for engineering services is slowing (has been for 18 mths). “

If anyone wants proof of this, apegajobboard.ca has now been turned into an APEGA-member-only service. So non-APEGA members, don’t even have access to the postings as the employers were obviously inundated/overwhelmed with applicants from elsewhere. Shades of “Jobless Men, keep going, we can’t take care of our own” indeed from Alberta’s APEGA.

#43 joblo on 07.13.14 at 7:48 pm

Harpo & Merky?
Who wants to see them when the countries teams win?
What did they do to contribute?
makes me puke

#44 liquidincalgary on 07.13.14 at 7:49 pm

“everything” has been skyrocketing.

nice broad statements. do you mean, relative to YOUR income??

i find i can still purchase a tank of gas (oil down 10 straight trading sessions), can still find my way to the grocery store and do my weekly purchases…and still have enough change left over to buy my morning Tim’s

#45 Concessionman on 07.13.14 at 7:51 pm

Worked for me, as a 26 year old partier who blew his paychecks on enjoying life (but was wise enough to be socking a bit away in RRSP’s since I was 16), the HBP made possible the purchase of my first house in 1992 (at 12.9% interest lol). Paid it off in 10 years, sold and almost doubled my money (or more like got all my money back), upsized, paid it off in another 10 now sitting on a 750K spread…thanks BM!

#46 dave c on 07.13.14 at 7:54 pm

That video is depressing. Everyone using that guy. The schoolgirl pretending to be poor so that she empties that guys wallet. The lady wasting the bananas because she didn’t need them. The vendor lady yelling at the guy all the time and expecting him to keep helping her.

If the message was give, give, give because people will expect it and then take advantage of you then it came across loud and clear!!

What did that little girl think when she and her mom were busted for fake begging??

Sounds like the panhandler around Abbotsford that drive Hummers.

Then the go on to sell life insurance when clearly the guy has no dependents. What a scam.

Thanks for the eyeopener!

#47 KommyKim on 07.13.14 at 7:57 pm

RE: #6 Flawed on 07.13.14 at 3:25 pm
PRIVATE sector workers have not had an increase in wages in 20 years.

What a load of crap!

#48 dave c on 07.13.14 at 7:57 pm

Borrowing 50k from an RRSP to make 250k to 500k (house appreciation) is a pretty good return plus you get a house to live it. Win, win.

#49 james on 07.13.14 at 7:58 pm

#38 Waterloo Resident

Do you see the big smoking gun in your post?

“If past trends hold true”

Complex systems are generally not predictable, and they are capable of regime shifts, cascades and all sorts of interesting behaviour. Past trends may be the best heuristic in the short term, but it is a dangerous heuristic.

#50 Herb on 07.13.14 at 7:58 pm

The reason we have not heard from Smoking Man is that he watched Garth’s video and imploded.

#51 devore on 07.13.14 at 8:00 pm

#1 Albert

If the economy is bad, they won’t raise the interest rate, therefore the money will still be cheap.

which will make the housing price go up even more

is that true ?

Yes. When economy is bad, house prices go up.

Real estate economics.

#52 KommyKim on 07.13.14 at 8:02 pm

RE: #15 Ben on 07.13.14 at 3:59 pm
Why is it so hard for politicians to accept falling house values?

Re-election.

#53 liquidincalgary on 07.13.14 at 8:05 pm

don’t forget that when

“everything is skyrocketing”

you really should calculate that in REAL terms, not nominal. ya, when i started driving, gas was .30/liter. inflation adjusted, it’s still less expensive now

#54 AK on 07.13.14 at 8:11 pm

Great Pic…..

#55 Freedom First on 07.13.14 at 8:14 pm

Enjoyed the video Garth. Very uplifting. I am not the angel that young man is, but I do help people.

Maybe this will help some people to understand why I see all debt as being “bad debt”. There is always money available to help others and get everything you need + far more than you ever dreamed without debt. The consumerist and materialistic thinking/mentality prevalent in so many societies is very very sick. No exception.

Once again Garth, I thank you for your Blog of truth. I am humbled.

#56 Dean on 07.13.14 at 8:14 pm

Unemployment rate climbs to 7.1% as Ontario hit hard, and house price keeps going up, http://www.theglobeandmail.com/report-on-business/unemployment-climbs-to-71-as-jobs-market-limps/article19562032/

#57 NetCentric on 07.13.14 at 8:22 pm

Thanks for the video link Garth. Loved it.

#58 takla on 07.13.14 at 8:22 pm

re #4 garth”there will be NO hyperinflation in N.A”…Seems Inflation is generally riseng at a time the economy enters recession, at the same time long term interest rates stagnate or fall leading to the dollar falling.This seems to be the paradigm were in at the moment,perfect time in my opinion to add Au to your portfolio if we have a strong sell-off in the stock market.

Au/Ag are up from yr end over 10-11 % respectively after 16 central world banks anounced they would be reduceing their gold sales as others have been accumulateing au at record levels.
As the dollar weakens is it not prudent to take precautions to protect your wealth…thoughts

#59 devore on 07.13.14 at 8:24 pm

#15 Ben

Why is it so hard for politicians to accept falling house values? I want *everything* to fall in cost in real terms. Milk. Petrol. Housing.

It is current economic theory dogma that asset prices must rise, otherwise the economy is not doing well. Government as a result engages in large scale counter-cyclical policy to soften the valleys by supporting asset prices, particularly house prices, because real estate represents a significant and highly leveraged portion of consumer net worth. In a consumer driven economy, the only thing that really matters is how well the consumer is doing.

Whether government should engage in such manipulations is arguable, but it typically fails regardless, because it is either ill-advised and does not have the desired effect and often the opposite effect, or ill-timed and usually overshooting targets.

#60 economictsunami on 07.13.14 at 8:28 pm

Ontario’s Job Market Is Beginning To Look Like A Disaster

“Manufacturing payrolls sank to under 750,000 last month, the lowest in records going back to 1976. And back in 1976, Ontario’s population was 8.2 million, or about 40 per cent lower than today’s 13.5 million. …

The latest job numbers from StatsCan, released Friday, paint a vivid picture of what’s wrong with Ontario.

While Canada lost 9,400 net jobs in June and the unemployment rate edged up to 7.1 per cent, Ontario saw 33,900 jobs lost in the month (some of that was offset by job gains mostly in western provinces). Its jobless rate edged up to 7.5 per cent.

More than a third of those losses — 13,600 jobs — were in the manufacturing sector, which economists have been telling us for months is right on the verge of a renewed boom, thanks to the U.S.’s economic recovery. …

http://www.huffingtonpost.ca/2014/07/13/ontario-unemployment-jobs-economy_n_5581990.html?utm_hp_ref=canada-business

People are risking not just the present but their future.

Low rates should have coaxed many to refi/ re consolidate and keep their investments diversified.

Instead low rates and the wealth effect have provoked many to consume more on credit, go even further in debt and gamble too much on one illiquid asset.

Crying shame really…

#61 Ralph Cramdown on 07.13.14 at 8:32 pm

#35 Vlad — “Ron Paul says collapse is imminent and end of the dollar is near.”

You can get a good outline of Ron Paul’s portfolio via his congressional annual financial disclosures, available here:
http://clerk.house.gov/public_disc/financial-search.aspx

With investing acumen like that, I foresee a lot of paid speeches on the rubber chicken circuit in his ostensible retirement… unless he turns out to be right, of course.

#62 Ben on 07.13.14 at 8:40 pm

#46 from Concessionman says it all Garth. Where did his “profit” come from? You know it, I know it: the next generation.

To the people who replied to my #15 post, yes re-election is the reason. So Concessionman voted for himself to get rich at the expense of people who were not yet old enough to vote, or were perhaps not even born. That’s a lovely bunch of people right there!

#63 Sheane Wallace on 07.13.14 at 8:41 pm

#38 Waterloo Resident
…………………………….
It seems Bill Gross from Pimco is betting exactly that way with aggressive move into mid term bonds using short term financing… People holding bonds at this rate of food and gas inflation and NIRP could qualify as insane.

It seems Argentina is about to join BRICS, demise of the dollar might help them settle their debt.

Ron Paul could be only 70-80 % correct. The remaining 20-30 could bring coffee to $ 7.
And debt is suddenly manageable.

Gold talk is always so amusing. I love how you guys root for hyperinflation, economic collapse, and implosion of the country whose economy keeps the lights on. — Garth

#64 Nemesis on 07.13.14 at 8:44 pm

#InspiredByThisEvening’sThematicCinematic.

http://youtu.be/tH2w6Oxx0kQ

[NotToSaltierDogz: I’ve said it before and I’ll say it again… When you’re gasping your last breath… It isn’t portfolio rebalancing or {insert favourite ticker symbol} you’ll be contemplating when the TerminalShowReel begins.]

#65 Sheane Wallace on 07.13.14 at 8:46 pm

#62 Ralph Cramdown

His portfolio is very bold, he is basically betting on gold sky rocketing by holding leveraged mining stocks. Farmland is a great choice, his mining could quadruple easily in the next 3-5 years. The dividends are not bad at all.

Wish I had his guts….

#66 Sheane Wallace on 07.13.14 at 8:50 pm

Gold talk is always so amusing. I love how you guys root for hyperinflation, economic collapse, and implosion of the country whose economy keeps the lights on. — Garth
————————
absolutely not a gold bug.

US economy will survive, so I am not selling my US internationals.

But yes, the dollar is going to loose some value.
It won’t be catastrophic, people will survive.

#67 Sheane Wallace on 07.13.14 at 8:51 pm

And let’s not forget that CMHC is keeping the lights of our economy on… For now…. As these RRSP decision did some time ago…

#68 Smoking Man on 07.13.14 at 8:51 pm

#51 Herb on 07.13.14 at 7:58 pmThe reason we have not heard from Smoking Man is that he watched Garth’s video and imploded.

Herb the real me is lot like the dude in the video… I mean, me. The fingers typing smoking man posts….

Smoking Man is a character… Hell his creator might not even smoke.. Or drink..

But do you realize, getting pleasure from good deals is as much as a learned behavior as taking pleasure doing bad deals.

All based on your programming…

Only schizophrenics, weirdo wack jobs.. People detatached from reality can understand this..

#69 takla on 07.13.14 at 8:58 pm

re#62,,,,good one Ralph,get a load of those dividends he’s collecting on a portfolio that looks like hes well over 50% in mineing/precious metal companies/stock.
Garth may not like the man but in my book he calls a spade a spade and he knows what real money is..,juring his run up to republican leadership race he proclaimed that if elected to president his first action would be to eliminate the Federal Researve…man’s got balls!!

Between his ears. — Garth

#70 hawk on 07.13.14 at 8:59 pm

#39 keith cavanagh on 07.13.14 at 7:17 pm

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

You have it the wrong way around.

Mandatory car insurance, with insurance companies forever behind the scenes buying up politicians and govt officials are the “cheats”.

In a society that was truly free there would be no such thing as mandatory car insurance and a whole host of other policies and taxes that leech of the productive citizen as exist today.

If the US founding fathers were alive today, N. America would be unrecognisable to them.

#71 Nick on 07.13.14 at 9:01 pm

Do the math. $30B/2.5M= $12K per house, hardly enough to move the market.

It all adds to the pile (as I clearly stated). There is no longer a need for this plan. — Garth

#72 Habs76-79 on 07.13.14 at 9:05 pm

LiquidInCalgary states that gasoline prices today are still cheaper when adjusted for inflation as compared to $0.30 Litre. Well sunshine your math is wrong.

I easily recall paying about $0.30 litre back around 1983 or so. Using The Bank Of Canada inflation calculator ( dubious towards the low side IMO) it would equate to $0.66 litre in 2014. UM WHERE THE HELL ARE YOU GETTING GASOLINE FOR $0.66Litre TODAY!?!

On top of that sunshine, when factoring inflation the avg. wage increase in North America has been BEHIND the inflation trend since the the mid 70’s

#73 Tony on 07.13.14 at 9:06 pm

Re: #59 takla on 07.13.14 at 8:22 pm

It has nothing to do with what you describe and everything to do with the end of the London silver fix August 15th. Whether silver retests the $18.75 mark on the news or keeps rising, soon everyone will know. Also a lot is because is because of the change of the Fed in America. Gold and silver has yet to be pounded to the downside by the FED this year.

#74 Retired Boomer - WI on 07.13.14 at 9:07 pm

Well, Inflation is mainly in your head, but some groceries are up a few percent, gas is up what a nickel? How’s your pay-check?

Using a retirement fund for a down payment was asinine when interest rates fell below 10%. In the US we are just a stupid, but limited to a lot less than 50K.

Those who didn’t pay it back as agreed should face a penalty (say 40% EXTRA TAX)…. or consider the remaining balance as an immediate take-out and pay the extra tax in the tax year of default.

I would hope the program would be killed off as a way to slow RE’s allure, but doubt any elected politico has the guts to vote against the young if he has any dreams of reelection.

Well, you get the government you deserve. We did. A so called conservative that started two wars, financed on a credit card while the housing sector melted down, taking much of the world with it. OOPS!!

Then we get a two bit legislator from Illinois with a good grasp of English but little leadership experience to try to right the ship. He has done a fair job, but is this the best we can do???

The prospects do not look clear for 2016 but some idiot will get elected. Just hope it is not a so-called American “conservative”

As for Canada, you should be in the heat-up phase of an economic melt down all your own, so we shall see what your plans might be.

#75 Bob Rice on 07.13.14 at 9:10 pm

“Germans generally are leading the charge for global economic sanity. Better they should get a little ego boost this world cup.”

Last thing Germans need is an ego boost.

#76 Ben on 07.13.14 at 9:17 pm

#72 Nick – do the economics. Prices are set at the margin. Around 3% of stock is sold per anum and this sets the price for *all* housing.

You can’t just average across like that, it’s not how markets work.

#77 Millenial-Falcon on 07.13.14 at 9:23 pm

This doesn’t apply to vancouver where the vast majority of sfh are owned outright. That is what you call insulation to a rate hike and or stagflation. This place is unholy and Garth’s kryptonite

Link showing the LTV numbers for Vancouver? — Garth

#78 takla on 07.13.14 at 9:23 pm

Gold bug,stock bug,realestate bug…pick your poison I guess,practiceing prudence with ones hard earned ,after taxed money is essential in our times of boom/bust Ponzi’s.
Believe me ,the last thing i hope for is hyperinflation and economic collapse but I hedge accordingly as im informed on current world finance,im also grateful to tesla and our country for getting and keeping the lights on but of course I hedge that by having my own solar backup system just in case ;}

#79 Catalyst on 07.13.14 at 9:30 pm

When things appeared to be getting bad, you acted to prop up family balance sheets. This house party must go on, and our leaders know it. So they will do any and all things in their power to make sure housing continues to increase.

Also, that you say inflation is low is laughable at best. The majority of what people spend their income on is not counted and the number is kept low purposely so that they do not need to adjust CPP or OAS payments higher. Ask any real human and the price of nearly everything has been escalating quickly.

#80 gmc on 07.13.14 at 9:33 pm

What is Christine Lagarde talking about, July 20/14 new reset??? she is the IMF leader
just asking???????

#81 Mister Obvious on 07.13.14 at 9:38 pm

#42 Ralph Cramdown

Only a serious old timer CBC-watching Canuck would have a clue about your clever reference to ‘Molly’s Reach’.

I guess that speaks volumes about me.

#82 sheane wallace on 07.13.14 at 9:57 pm

The ridicule of gold by MSM is very strange, it seems somebody is very afraid of something.
If gold was so darn worthless why even bother to ridicule it? Why do the big banks and analysts even bother to discuss it?
I personally think that gold is worthless, the question is what will be it’s value in the years to come. If zero I am fine with it but I doubt it. If 3-5 k I do mind investing in it, specially in GDXJ which looks darn cheap these days.

#83 Aggregator on 07.13.14 at 10:05 pm

Secret Path Revealed for Chinese Billions Overseas

For years, wealthy Chinese have been transferring billions worth of their money overseas, snapping up pricey real estate in markets including New York, Sydney and Vancouver despite their country’s currency restrictions.

Now, one way they could be doing it is clearer. Last week, when China Central Television leveled money-laundering allegations against Bank of China Ltd., the state-run broadcaster’s report prompted the revelation of a previously unannounced government program that enables individuals to transfer their yuan and convert it into dollars or other currencies overseas.

So much for OSFI's anti-money laundering rules and Canadian banks' due dillegence. They know where every hot wire transfer is coming from to buy real estate. Yet they look the other way.

Forget it. The entire Canadian system is corrupt. Even the regulators. This won't end.

#84 Nemesis on 07.13.14 at 10:06 pm

#Bravo,Ralph&MrObvious…

http://youtu.be/ENMOwXwRTZU

[NoteToGT: Just between the two of us… it wasn’t a terribly happy set. Still, that said, I did once manage a rather memorable Slap&Tickle with Rae: http://www.bcentertainmenthalloffame.com/artist.php?id=brownr&aview=bio ]

#85 -=jwk=- on 07.13.14 at 10:10 pm

#82 I’m an old relic myself, well old enough to pretend to race jetboats as a kid :)

#86 Stupesing in Cabbagetown on 07.13.14 at 10:28 pm

#47 – dave c – I watched the video too and got exactly the opposite impression. The man’s kindness was received with gratitude and the little girl was able to go to school because of the money he gave her.

Not depressing at all: rather a “warm fuzzy.”

#87 Gaikok on 07.13.14 at 10:31 pm

$22 Billion in California Homes Sold to Chinese All-Cash Buyers; “Beginning of Tidal Wave” says NAR Chief Economist

10 7月 02:02

Real estate is well back in bubble territory in some places, notably California. It won’t end any differently this time for the buyers, but at least banks will not be on the hook for all of the loans.

All cash buyers from China are bidding up the price of mansions, defined as anything with two stories.

Bloomberg reports Chinese Cash-Bearing Buyers Drive U.S. Foreign Sales Jump.

#88 Financial Poodle on 07.13.14 at 10:37 pm

Regarding the video… thanks, man. I needed that.

#89 Basement dweller on 07.13.14 at 10:49 pm

Still don’t understand a few things

Rates are the same as last year but prices
Are rising?

With high levels of debt why aren’t listing up ?

It appears that there are tons of condos for
Sale yet no correction

I agree how is 50k driving prices 5% y/y?

#90 OttawaMike on 07.13.14 at 10:50 pm

Brad Lamb says you can’t lose and now is the time to buy more than ever because we are entering a recession.

http://new.bradjlamb.ca/wp-content/uploads/2014/06/Condo-Millionaire-Toronto-MM040414.pdf

What could possibly go wrong in the long term and for what reason would Brad be elastic with the truth?

#91 Detalumis on 07.13.14 at 10:54 pm

That’s a good one, blaming young people. You need to study your history, people haven’t been responsible since the mid 1950s onwards. My subdivision was developed in the late 50s, early 60s and populated with easy federal money handed out to young couples to encourage them to move out to the suburbs without having to save up for many years like those before them. NHA loans are responsible for urban sprawl, no living in walk-ups and saving for 15 years.

A quote from a woman who moved to my area “When we came to Oakville in 1958, we were one of hundreds of couples who had trekked from Toronto in order to take advantage of purchasing a small detached home on a large lot with not only a 25-year NHA mortgage (courtesy John Diefenbaker), but also a minimal down payment.” Yeah right, everyone was oh so responsible back in the day.

I bought my house in the early 80s using a combo of free federal housing grants, a zero interest provincial loan, a down payment made up of a tax refund from when they let you claim a spousal deduction if you married on the last day of the year and a staff low interest personal loan from the bank I worked at. That’s no better than using an RRSP for your down payment or taking out a mega-mortgage at historically low interest rates

So really, nobody has been responsible for the last 55 years. Neither myself in the 80s or the woman who moved to my area in 19-fricking-58.

#92 millenial1982 on 07.13.14 at 10:55 pm

I’d be willing to bet half of the people who haven’t paid their HBP amount back each year simply don’t realize or care that they owe. Too busy taking care of their self interests and who cares because the rules don’t apply to them. People are careless. Do you really think most of the people stretching themselves so thin don’t have the smarts to realize this but would be responsible enough to pay it back knowing the importance….nah.

#93 SHELTER THE MONEY NOT THE PEOPLE on 07.13.14 at 10:56 pm

Hopefully some deep thinking benevolent Politician will study the Swiss system of Government and take the best parts and try to amend our constitution.
We need to get away from the 4 year dictatorship we now have.
Would you all not be happy to have a vote on all bills passing parliament.
Are we too simple to be entrusted with this task, or are the Swiss people more intelligent than Canadians and therefore able to be trusted with such earth shattering decisions.

http://en.wikipedia.org/wiki/Direct_democracy

#94 Mark on 07.13.14 at 10:58 pm

“I easily recall paying about $0.30 litre back around 1983 or so. Using The Bank Of Canada inflation calculator ( dubious towards the low side IMO) it would equate to $0.66 litre in 2014. UM WHERE THE HELL ARE YOU GETTING GASOLINE FOR $0.66Litre TODAY!?!”

1) Taxes have gone up considerably on fuel, while they’ve gone down on income.

2) A typical vehicle today burns on the order of half of the amount of fuel as one burned back in 1984 per unit of distance travelled.

3) Fuel is only a relatively small portion of the all-in cost of a car; other car costs have fallen significantly for years (this is why the parking lots of the local high schools are filled with reasonable cars, not the jalopies that the high schoolers could afford on their meagre employment incomes!).

4) Other members of the overall transportation basket have stagnated in price (ie: air travel) compared to 1983.

I cleaned out my car yesterday and found receipts for 2005, 2007, 2008 gas purchases. Many of them were actually at prices slightly higher than what I’m paying at the same pumps today, 6-9 years later. 135.9 versus the 127.9 at the pumps today. And the discounters seem to be more aggressive today.

#95 vorticity on 07.13.14 at 10:59 pm

thank you for “unsung hero”…touching

only wish there were more unsung heroes

#96 Ontario's Left Coast on 07.13.14 at 11:03 pm

Regrets? I’ve had a few…

#97 Joseph R on 07.13.14 at 11:06 pm

#71 hawk on 07.13.14 at 8:59 pm

“If the US founding fathers were alive today, N. America would be unrecognizable to them.”

No kidding! Cars, Airplanes, power lines, skyscrapers, woman and black people walking free.

Yep!

#98 Retired Boomer - WI on 07.13.14 at 11:07 pm

Garth-

The video was the most uplifting part of today’s post.
Thanks!

#99 Retired Boomer - WI on 07.13.14 at 11:10 pm

People in their 20’s to early 30’s who drained their RRSP will have lost FIVE TIMES the face value if not repaid.

That’s what the cost will add up to had it been left in the market earning historical rates of return until retirement.

Hope that condo, semi, or home appreciates that much over the same time period.

#100 SHELTER THE MONEY NOT THE PEOPLE on 07.13.14 at 11:17 pm

Monday, October 19, 2015.
This is the date of the next federal election.
It is also the date when the real estate correction will begin.

#101 Nemesis on 07.13.14 at 11:20 pm

#InTheImmediateAftermath… #OfArgentina’sLossToMutti’sSquad.#&StoicallyUndeterredByTeutonicSwagger… #ThePatronsOfRick’sCaféAméricain… #UnilaterallyTookItUponThemselves… #ToPutAnEndToYetFurtherChorusesOfDrunken,”Die Wacht am Rhein”.

http://youtu.be/HM-E2H1ChJM

[CaptainRenault, ever the AstuteGambler, decided that this time… he would finally plow his accumulated ill-gotten gains into something truly worthwhile.. and ironic. In a Gallic way.]

#102 flawed on 07.13.14 at 11:29 pm

#48 KommyKim on 07.13.14 at 7:57 pm
RE: #6 Flawed on 07.13.14 at 3:25 pm
PRIVATE sector workers have not had an increase in wages in 20 years.

What a load of crap!

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

Your the communist so you woul know

http://www.edmontonsun.com/2012/09/01/gunter-public-sector-wages-are-getting-out-of-hand

#103 Rainman on 07.13.14 at 11:33 pm

Not much mention of the video? Anyone not getting that…. too bad. :) True worth, I loved it

#104 Mark on 07.13.14 at 11:34 pm

“People in their 20′s to early 30′s who drained their RRSP will have lost FIVE TIMES the face value if not repaid.”

At least that. If you figure someone in their 20s to early 30s would invest rather aggressively in equities, at an average long-term return of 11%, 30->75 is 45 years. The loss may very well be closer to 109 times.

Even if we use a real return of 6%/annum, that’s still 13X. If $25k is the amount taken out, and retirement goes for 20 years or so, that’s basically like foregoing a CPP+OAS cheque every month. Not trivial at all.

#105 Ralph Cramdown on 07.13.14 at 11:34 pm

#84 Aggregator — “So much for OSFI’s anti-money laundering rules and Canadian banks’ due dillegence. “

Due diligence? Hah! Here’s the other end of that money train:

The final incident that led to Ogden’s termination involved a pair of wire transfers structured to work around Chinese regulations that prohibited individuals from transferring more than $50,000 US out of the country annually. The issue was not the fact that Ogden used the work around — a practice CIBC supported, Wong wrote — but the unconventional way she did it.

http://www.vancouversun.com/Judge+slams+CIBC+firing+Vancouver+employee/9550845/story.html

#106 ozy - of course will not pay it back on 07.13.14 at 11:37 pm

of course will not pay it back

will use it and pay it INFLATED in small chunks over 15 y.

made me laugh at Canada’s loose standards

#107 Basil Fawlty on 07.13.14 at 11:42 pm

I like the “Unsung Heroe” and the gold stock Agnico Eagle. Does that mean I’m not half bad?

#108 Mark on 07.13.14 at 11:42 pm

Canadian stock margin debt = $17B
Canadian CMHC subprime mortgage debt = $900B

Rather bizarre that people seem to worry about the stock market, not realizing that the residential mortgage credit market is leveraged in extremis by comparison.

#109 Mr Zipper on 07.14.14 at 12:34 am

Love the video. What a difference in expectation from what the Buddhist culture teaches people about kindness and selflessness. Buddha says ‘Think good thoughts….do good deeds, associate with good people, avoid fools and many good things like that….and boy does it ever show up in Thai society.

Canadians are road ragers….Thais rarely honk their horns……Canadians selfish and covetous….stealing each others plants from front yard gardens ….Flowers bloom on every stoop…no one would ever touch them.

I had a conversation with a hotel manager in Taiwan once when I had flown in from BKK….he said “how come Thai people so nice? I said ” Because of the Buddha”…..He teaches good things.

In Thailand people say ‘Thai Kon, Chai dee’…..it means Thai people live with a good heart. If that were a Canadian commercial it would be all about personal gain, retirement on a yacht or a ten ton pick up truck with dangling balls…greed greed greed grab grab grab.

The commercial in Thai reminds you that a person can give till it hurts and at the end of the day you will benefit from your good deeds…..can you imagine Manulife selling that message?

#110 Nemesis on 07.14.14 at 1:50 am

#SaltierDogz… #DidYouKnowIt’sBastilleDay,Today? #YourFobearanceIsMuchAppreciated… #ShallWeBegin?

#1.TheMightySparrow. #”NonJeNeRegretteRien!”

http://youtu.be/8YGXsw3XK9I

#2.Mireille? #ToDieFor… #Literally&Figuratively. #TalkAboutYour,”Coeur Volant”! #OohLaLa!

http://youtu.be/w_8dafLxLcI

#3.SimplyAmazingWhatYouCanDoWithFunnyHats&AGreatSong.

http://youtu.be/XGV4up_qCH0

#4.So,LikeWhatAreYouWaitingFor… #AllYouNotSoTallGuyz/Galz?

http://youtu.be/TKtCVblxDRc

[NoteToGT: Speaking of NotSoTallGuyz, I simply must tell you, one day, about the GorgeousRedHead Heiress… Her father… a Colonel… TheGurkhas… Who, as it happens, was a NotoriouslyNaughty, OffDuty CrossDresser. NoteToSM: Yes, truly stranger than fiction. But, like, that’s where it comes from. You knew that, right?]

#111 Nick on 07.14.14 at 1:58 am

#77 Ben Prices are set at the margin. Around 3% of stock is sold per anum and this sets the price for *all* housing.

So what? If the average RRSP contribution to a purchase is $12K that’s not going to materially impact demand price. Think before you type.

#112 Casual Observer on 07.14.14 at 2:03 am

“If gold was so darn worthless why even bother to ridicule it?”

A better question to ask is…
If gold is so worthless, why do Central Banks around the world own tons of it, and continue buying more?

Some people are very passionate about gold. They either love it or hate it, but to Central Banks, it is simply treated as another currency. They use it to diversify their reserves.

I have no idea whether gold will appreciate or depreciate relative to the dollar or any other currency, but if you want to hold gold in your portfolio for diversification, do it within reason, and sleep well at night. Just don’t neglect other asset classes (stocks, bonds, etc.)

#113 bdy sktrn on 07.14.14 at 2:09 am

#82 Mister Obvious on 07.13.14 at 9:38 pm
#42 Ralph Cramdown

Only a serious old timer CBC-watching Canuck would have a clue about your clever reference to ‘Molly’s Reach’.
—————————
ralphie in fine form, as usual

../or someone who had dinner there tonight.
and there IS a big w-front development in the works in lower Gibsons being hotly debated.

no china cash yet but its ripe for the picking. 275 can get a rentable sfh , just.

my neighbours cabin on an island close to gibsons just went up for sale, first time iv;e seen an asian name selling this area, ever.

hes asking 10x what we paid 10yrs ago. it is the most wildly mispriced RE i have ever witnessed as it may be worth 400 and he’s asking 800, the agent must be drunk.

#114 Ronaldo on 07.14.14 at 2:57 am

”I doubt it would have been misguided if the program had been, in fact, temporary. Recall that a five-year mortgage was 14%. — Garth”

I recall that rate being 14% in 1990. When the home buyer plan was launched in 1992 I took advantage of it as it was not yet tied down to being for first time home buyers but pretty much open to anyone. At the time we were able to draw $20,000 each from our RRSP’s which we did and that was to purchase a retirement property in the Okanagan although I was still in my mid 40’s. By that time interest rates were on the downturn and we got a rate of 9.25%. We repaid the RRSP’s back within 2 years. The place was rented out for 7 years to an older couple. The market pretty much flattened out and the property was sold 7 years later at a loss. Market finally turned around again around 2004, so a 12 year drought with dropping mortage rates. The rental vacancy rate was 0% when we purchased and by the end of the year there was an 8% vancancy rate. Contractors had overbuilt and developments took up the 4 years to sell out. Many complexes had the window and door openings shuttered with plywood for two years or more. Could this happen again. You bet it could.

#115 Goldie on 07.14.14 at 3:26 am

Aww shucks … That brought a tear to my eye when the little girl showed up in her uniform after being accepted into a school.

#116 Jane24 on 07.14.14 at 3:30 am

Pretty muted World Cup here in England since our team did so terribly. Lots of good jokes though in the major media since the English dislike both the Germans and the Argentines so we couldn’t support either side.

Best was the Sunday Times with pictured a pub scene with excited punters and the caption ‘ Germany vs the Argies, great, one of them will lose!”

#117 Nemesis on 07.14.14 at 4:02 am

#BonusBreakFastZen. #ComedicReliefForSaltierDogz… #ZorbaAlwaysGetsTheLastWord… #OnMarriage&OtherRegrets…

http://youtu.be/cHAqdZ2f5cM

[NoteToGT: Just between the two of us, the Greeks have been, like, totally ‘DiningOut’ on their PhilosophicalHeritage for… Two Millennia+? By the way… Ever swim with Dolphins? Theme parks and captive venues don’t count.]

#118 International Guy on 07.14.14 at 4:29 am

Stunning clip, from an insurance company no less. Nothing like stirring up emotion to make a buying decision. I may have shed a tear, not sure.

#119 TomOfMilton on 07.14.14 at 4:43 am

We are one of those who didn’t repay. But not for lack of money. I had bought the majority of my wifes rrsp as spousal rrsp. But they would not let me replace them in the same way. I mean I knew I would receive no tax benifit for replacing her rrsp…but they put a lot of bizarre rules on how the repayment was to be made…we said F it and just continued to by her spousal rrsp for which I would receive tax benefit and let her smaller income receive a small tax hit. In fact, it turned out better for us as most of the 15 years my wife’s income was zero while taking care of the kids.

#120 Habs76-79 on 07.14.14 at 4:46 am

#95 Mark Says, I’m replying to your point by point post #95

My response your point #1: Taxes on all forms of regressive taxes and fees have gone up substantially, these regressive taxes punish lower incomes most. Income taxes may have gone down most on the upper incomes. But regressive taxes and fees have gone up considerably

My response to your point #2: Not really true. The typical vehicle purchased today is bigger, heavier, off setting much of the avg. fuel economy gains. I’d figure that the average between say 1984 auto fleet and 2014 is probably closer to 25% better at best today.

My response to your point #3: The costs of keeping a car in proper service and legally on the roads has gone up much more compared to 30+ years ago even factoring inflation. Shop labour fees top $100+ per hour, many parts are more complicated if being replaced and cost more, license fees, auto insurance and other material costs ( ie: tires, most cars/trucks have larger wheels and bigger tires all much more costly today) are all much higher priced even factoring inflation for the average auto driver today

My response to your point #4: Air travel probably has gotten cheaper even with all the fees but the service is much more lousy today. City mass transit has gotten pricy too but due to politics have not been hit as hard as car drivers typically have by all level of govt. in fees Auto drivers are low hanging fruit for all levels of govt.

My response to your point #5: Not sure where you live but I live in the Fraser Valley THANK GOD outside the GVRD! 9 Years ago regular unleaded cost oh between $0.95-$1.05 per litre. 6 Years ago before the oil price peaked Summer ’08 it cost about $1.35-$1.45 per litre. After oil dropped back to below $70 for a while, late fall ’08 gas prices here fell to as low as $0.95-$1.00 per litre but has gone up on every year over year range $0.05-$0.10 per litre, per year.

#121 liquidincalgary on 07.14.14 at 6:39 am

#73 Habs76-79

i recall, back in the day, that to calculate the future value of money, we had to plug in a 6% inflation rate.

stick THAT in your fuse-box sunshine!

#122 Smoking Man on 07.14.14 at 8:03 am

Teranet numbers come out at 9:00

Lets see if we have a hockey stick…. Start.

#123 Londoner on 07.14.14 at 8:07 am

BOC does not view inflation in terms of consumer prices. It views inflation in terms of wage growth and economic productivity. There’s been a few of us saying this for a while but we still see the “but my groceries and gas have gone up x%” posts.

So the HBP was a temporary “emergency” plan but became permanent? Sound a bit like emergency interest rates? If low rates are the key to reviving a struggling economy then why stop when inflation hits 2%? Central banks will let inflation run higher then target before they take rates away from “emergency” levels. Yes, that is true even if they raise the overnight slightly. 6% is a long ways away.

#124 tell me about it on 07.14.14 at 8:09 am

I took a HBP withdrawal a while back. Paid it back since, but all things being equal I’d probalby recommend again st it. If i didn’t take the money out my return would have been much higher than buy a house.

#125 Herb on 07.14.14 at 8:23 am

#110 Mr Zipper,

here I thought that Smoking Man was the only schizophrenic we had, and then the Neandercon anti-public service propagandist preaches Buddhist virtue!

#126 BillyBob on 07.14.14 at 9:06 am

As a Canadian who’s spent a lot of time in Thailand, it’s pretty naive of Mr. Zipper to assign such virtuousness to the culture. There is a very dark side to the part most Westerners see, the smiling faces and soft “Sawadee-ka”‘s.

That isn’t to say I didn’t enjoy the video (saw it before, still enjoyable), or that the values espoused by it aren’t laudable.

But the naive generalizing is cringe-inducing. No road rage? Has this joker even BEEN to Bangkok? I was there last month and the only reason there wasn’t any road rage was because our crew bus was the only thing on the streets after the military-imposed curfew in that “peaceful nation”!

As far as Buddhism culture, just like any -ism it depends on how its practiced. The sectarian violence in Myanmar between the Buddhist majority and Muslim minority might give one pause for thought before sneering at Canadian culture. No one has a monopoly on selfishness greed, and covetousness. Sorry to burst your bubble.

http://world.time.com/2013/10/01/road-rage-burma-style-parking-dispute-sparks-violent-buddhist-riot/

#127 Smoking Man on 07.14.14 at 9:07 am

No. No hockey stick.. Vancouver flat lines.

Toronto steady, Hamilton on Fire…

#128 Big Brother on 07.14.14 at 9:27 am

Smoking Man we were there for your medical procedure. The Blond nurse is one of us and works for MKULTRA. Tell them the truth that you really do not smoke and drink!

#129 not 1st on 07.14.14 at 9:35 am

Definitive proof of HAM for Garth;

http://business.financialpost.com/2014/07/14/secret-path-revealed-that-allows-wealthy-chinese-to-transfer-billions-overseas-buying-pricey-property-in-vancouver-new-york-and-sydney/

‘Definitive proof’ is an allegation made by a TV network? You have low standards. — Garth

#130 Captain Sensible on 07.14.14 at 9:36 am

#95 Mark on 07.13.14 at 10:58 pm
I cleaned out my car yesterday and found receipts for 2005, 2007, 2008 gas purchases.

————————————–
ewwwww. It took you nine years to clean out your car.

#131 Crossbordershopper on 07.14.14 at 9:39 am

doing taxes in Hamilton, all i see are people who took out these things years ago, got seperated, dont have the house anymore, and are inconvenienced for repaying small amounts like $300 or $400 added to their incomes, for a lousy withdraw of less than 10 grand, many years ago.
its a good idea, the whole concept, withdraw the funds, 2 year grace period, then amortized 15 years. its kind of like a leveraged down payment of the property.
But in Canada its all leverage on leverage on leverage. a big house of cards.
I still dont understand who has $50 grand in their RRSP in Canada and doesnt have a house. From 2 thousand people I see every tax season, the people that have have, and the people that dont dont. Its pretty black and white. with only about 10% of people moving up in the world, and 10% moving down.
If you came from a good family, you have probably went to school, got a job, got married and had a kid, got help with a downpayment and continued your life.
I see quite often the lower end, broken families, (well never officially formed in the first place). health issues. which is surprising to see 26 year old men with no job prospects but health issues? kind of weird the numbers i see in Hamilton.
If you are a kid of a single mom living in a apartment, then good luck you are going to need it because basically in 2030 you wont have a chance, the chinese, indians, romanians and everyone else who has never had a house in their country come here and outbid the locals. If you dont have you will probably never have. So, relax, dont get stressed out, why burden yourself with buying stuff, just rent, eat and drink and be happy.
What is shocking is the 62 year old single men who has a job, like always had a half decent job and ok money, doesnt have $50 to pay you to do your taxes. Those people i laugh at, made 2 million in their lifetime working and dont have $50 bucks to their name!. They rent, dont spend it on trips or cloths, have an old car. Its got to be the weed, food is quite cheap in Hamilton.
I ran into one guy who was 68 still working because he needed to, i said you should retire, he said cant. He was recently diagnosed with cancer, so either you work and then die or die of working, the end is the same.

#132 Victor V on 07.14.14 at 9:41 am

http://www.theglobeandmail.com/report-on-business/economy/housing/ottawas-cooling-measures-could-speed-toronto-condo-price-decline-economist/article19583897/

Canadian housing economist Will Dunning says that actions the federal government took to cool the housing market back in 2012 could make any price declines in Toronto’s condo market worse in the years to come.

“If and when there is a correction in the condo market, the severity will have been aggravated by the actions of the federal government, which elected to depress demand at a time when demand was already beginning to weaken organically and a wave of supply has been developing,” Mr. Dunning writes in a new research note.

#133 Wait, What? on 07.14.14 at 9:45 am

duffy and wallin aren’t buddhist?

#134 Victor V on 07.14.14 at 9:46 am

http://business.financialpost.com/2014/07/11/why-a-real-estate-correction-should-be-welcomed/

Most assume that a housing “correction” (Canadians are too polite to use the term “crash”) would be a negative event for everyone. This is simply not the case.

Only one of the three main groups of home-buyers — first-timers, young homeowners with growing families, and older homeowners thinking about downsizing — would suffer from a precipitous decline in home prices. The other two would
benefit from such a decline.

This blog has consistently warned the virgins and the wrinklies of the dangers ahead. Of course, nobody listens. — Garth

#135 Aggregator on 07.14.14 at 9:55 am

#49 Aggregator on 03.06.14 at 11:59 pm – The termination of IIP was about national security

Ottawa prepares to share personal data with foreign governments

The powers are included in Bill C-24, an overhaul of citizenship law passed last month, though have drawn little attention. The changes amend the Citizenship Act to allow Stephen Harper’s cabinet to draft regulations “providing for the disclosure of information for the purposes of national security, the defence of Canada or the conduct of international affairs,” including under international deals struck by Citizenship and Immigration Minister Chris Alexander.

Now we've got moles all over the place:

Several municipal politicians in BC are under surveillance: CSIS Director

Among the most sensitive files at CSIS…concern foreign interference in Canadian politics. A half-dozen countries are thought to be trying to turn some of our politicians into agents of influence. With success at municipal levels in British Columbia, and even in two provinces at the cabinet level.

@Nemesis "We have a mole Jim. In London? Very near the top." Video

#136 Nomad on 07.14.14 at 10:24 am

Montreal region real-estate market declines for a 3rd trimester. Sales decreased 5% in the second trimester:

http://www.lesaffaires.com/mes-finances/immobilier/immobilier-le-marche-de-la-region-de-montreal-decline-pour-un-troisieme-trimestre/570521

If it’s not foreign money and immigration that’s fueling prices in Vancouver and Toronto, why is Montreal seing price declines? Montreal welcomes far fewer highly-skilled people who can afford to buy houses, because the language law keeps people out (or forces them out): every year, senior employees at our Montreal location, move to Toronto because of this.

Just a hunch: winter? — Garth

#137 Ralph Cramdown on 07.14.14 at 10:31 am

‘Definitive proof’ is an allegation made by a TV network? You have low standards. — Garth

The network in question is CCTV, the state broadcaster. Xinhua has also reported on it, and that the PBoC (state central bank) is investigating. So it’s likely either the truth, or an official lie.

http://www.forbes.com/sites/gordonchang/2014/07/13/attack-on-bank-of-china-for-money-laundering-screams-infighting-in-beijing/

http://www.ft.com/intl/cms/s/0/806ae9b2-08ad-11e4-9afc-00144feab7de.html?siteedition=intl#axzz37AJU7cuY

And as documented in another link I posted here today, a nasty CIBC wrongful dismissal lawsuit revealed the other end of the conduit. The question is no longer if, but how much, and will it continue.

Canadians invest far more in the US than Chinese invest here. The Americans seem to handle it. — Garth

#138 Calgarian on 07.14.14 at 10:35 am

Well, every market has a risk. For those who think interest rates will go up, housing market will take a dive, yet they will do great and be safe by investing in equity market, here is an interesting article. It talks about “next 10 years” by the way, not just 1-2 years.

http://www.marketwatch.com/story/us-stocks-will-be-very-disappointing-for-10-years-2014-07-11?link=sfmw_fb

I have never suggested buying individual equities or having anything other than a balanced and diversified portfolio, in which large cap equity exposure is carefully contained. Putting all your money in residential real estate, by comparison, yields no diversification or balance. And, at worst, no liquidity. — Garth

#139 TR in THailand on 07.14.14 at 10:40 am

Saw the video you posted…the Thais love it. Before every movie in their state of art movie theaters everyone stands including foreigners to watch a video that honors the King. They absolutely love their King here and it will be interesting to see what happens when he passes.

#140 randman on 07.14.14 at 10:48 am

Hey TR in Thailand

Always gives me a tear in my eye when they play the tribute in the theatres …..such a beautiful song and images! …… see you there again soon..enjoy!

#141 randman on 07.14.14 at 10:50 am

Canadians invest far more in the US than Chinese invest here. The Americans seem to handle it. — Garth

HCM=Hot Canadian Money
WFL= Warm fuzzy loonies
LWL= Luke warm loonies

#142 Brandon on 07.14.14 at 11:11 am

Five years ago I was 24 and I dropped 22k into my RRSP. I got a huge tax return the next year and put that in my TFSA. I used that and additional savings to put 100k down on a 200k home (I emailed Garth to get his blessing, lol)

I’m putting 3% of my salary into rrsps to get my employers matching contribution, and my portion also goes towards repaying my hbp.

I never thought I had a decent plan but after reading your blog all these years I feel so lucky to be in my position

#143 Mixed Bag on 07.14.14 at 11:44 am

Good Lord, Garth! I never thought I’d cry at one of your posts, but that video brought tears to my eyes, here at work.
Nonetheless, thank you for posting it.

#144 Holy Crap Wheres The Tylenol on 07.14.14 at 12:19 pm

After reading some of your blog notes I have concluded the following question is relevant!

Is Smoking Man Qohen Leth, from The Zero Theorem?

http://www.kdramastars.com/articles/28650/20140712/the-zero-theorem-trailer.htm

#145 Aggregator on 07.14.14 at 12:23 pm

Canadians invest far more in the US than Chinese invest here

Of which how much of US purchases are proxy sales from HAM buying from Canada?

How Canada's banks help money move in and out of tax havens

In regards to domestic sales: It's no coincidence that article was posted in Q3 2013, exactly when sales in major cities across Canada rebounded — while banks were reporting sales being driven by Canadians ahead of higher mortgage rates. What a bunch of horse shit that is. Because when one looks at average GTA listing prices in Q3, someone started hiking asking prices to the moon. Chart And that was mainly in the high end market. Chart

And by someone, I mean RE brokerages that dominate 80% of GTA's buy-sell side commissions (and similar market share in other major cities). It wouldn't be difficult for Canadian banks to tip off executives of these brokerages that HAM is coming through, so start moving prices higher to inflate our assets and help liquidate our REO inventory.

When an oligarchy works in collusion to dominate a market, it's called a monopoly. That's how are housing market is controlled and why it hasn't busted. There are no regulations because when you're too big to fail, you're calling the shots and telling regulators what to do, i.e., the government says we're pulling back in mortgage insurance, banks say we're bringing in hot money to offset it, otherwise housing will crash. Done deal.

#146 OttawaMike on 07.14.14 at 12:28 pm

..Or instead of a leaning T.O. half haus you could go to Missouri and buy a 7000 sq ft Bavarian Castle replica c/w 20 acre stocked lake and 100 acres for
$850k.
http://www.stltoday.com/news/local/metro/bavarian-style-castle-for-sale-near-ste-genevieve/article_77aa3d14-31e8-53db-b566-93f7cdd94ff6.html

#147 OttawaMike on 07.14.14 at 12:33 pm

139 Calgarian on 07.14.14 at 10:35 am
It talks about “next 10 years” by the way, not just 1-2 years.
—————————————————
Same site says we are in for a bull run, which is it?:

http://www.marketwatch.com/story/us-stocks-will-be-very-disappointing-for-10-years-2014-07-11?link=sfmw_fb

http://blogs.marketwatch.com/thetell/2014/07/11/bull-market-has-longer-to-run-marketwatch-readers/

#148 Aggregator on 07.14.14 at 12:34 pm

#144

I meant the five RE brokerages that dominate 80% of GTA commissions. Sell-side data shown here (77% share) Chart

#149 OttawaMike on 07.14.14 at 1:02 pm

#146 Aggregator on 07.14.14 at 12:23 pm
i.e., the government says we’re pulling back in mortgage insurance, banks say we’re bringing in hot money to offset it, otherwise housing will crash. Done deal.
—————————————–
Yup, my wealthy Iranian buddy in Toronto told me the same is happening with his community. Get your money to a perceived safe and stable place like Canada and use real estate to hide it.

Typical Canadian attitude. Immigrants with money must have stolen it. Sad. — Garth

#150 Flawed on 07.14.14 at 1:27 pm

Typical Canadian attitude. Immigrants with money must have stolen it. Sad. — Garth

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

Incorrect. Immigrants with money offsetting stable pricing in Canada by buying their way into Canada with money they earned legally or otherwise. There are 7 billion people in the world. Canada is 35 million and it is abundantly clear we cannot have all the “rich immigrants” come here and jack up the prices of housing as it hurts Canadians. The evidence is so abundantly clear I don’t know why it’s even argued anymore.

It’s a free country. I’m hoping it stays that way. — Garth

#151 Flawed on 07.14.14 at 1:31 pm

#130 not 1st on 07.14.14 at 9:35 am
Definitive proof of HAM for Garth;

http://business.financialpost.com/2014/07/14/secret-path-revealed-that-allows-wealthy-chinese-to-transfer-billions-overseas-buying-pricey-property-in-vancouver-new-york-and-sydney/

‘Definitive proof’ is an allegation made by a TV network? You have low standards. — Garth

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

Again…..every little bit of evidence is still evidence. But yet Garth you say no no no no to dozens of your readers continually.

Garth where is your “there is no proof”….proof.

Of course there are foreign buyers – in Van, just as Toronto. Do they set market prices? Hardly. — Garth

#152 Mister Obvious on 07.14.14 at 1:37 pm

#148 OttawaMike

“Same site says we are in for a bull run, which is it?:”
—————————-

It is neither or both depending on one’s point of view.

Remember that most blogs make it up as they go along. The central mantra is to publish unverified sensational stuff first, then later (maybe) make half-assed corrections at the bottom of the same erroneous post which has by then has slipped back into obscurity.

One notable exception to such shenanigans is of course this very blog. Note the absence of any advertising whatsoever, and thus no subsequent need to lower journalistic standards to attract readership.

The basic currency of the internet is not Bitcoin but the “mouse click”. Once that becomes clear, a great deal of the world wide web starts to make sense.

#153 Flawed on 07.14.14 at 1:46 pm

#126 Herb on 07.14.14 at 8:23 am
#110 Mr Zipper,

here I thought that Smoking Man was the only schizophrenic we had, and then the Neandercon anti-public service propagandist preaches Buddhist virtue!

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

Do you wonder why? So in your mind people sick and tired of being bled dry by the govt and wishing to keep some money in their pocket makes them a neandercon?

What does that make the public servants? Gods of Mt Olympus?

I see you banter about that term. Do you even know where “Neoconservatism” comes from? It was invented by Jewish Americans to do what they always do and gain “self interest” support. So stop bantering around a phrase so ridiculous and maybe think that people would like to be able to afford to take their kids to the movies once in a while instead of paying Public Servants to retire at age 58 who for the most part sat around in desks for 30 years doing very little. Everyone has a story about friends in the PS who say how they do nothing and its full of waste so we don’t need to argue that point. So please Herb. Read these two links for us.

http://en.wikipedia.org/wiki/Neoconservatism

http://www.edmontonsun.com/2012/09/01/gunter-public-sector-wages-are-getting-out-of-hand

#154 DJG on 07.14.14 at 1:47 pm

Garth, that’s a pretty classic politician’s way of telling the story: “here’s a policy I introduced but for which I want to absolve myself of responsibility because it was the guys who came after me that really messed it up.”

Actually I voted for a temporary policy, for the reasons explained. What have you done to assist people? Oh yes, criticize. Anonymously. — Garth

#155 Sheane Wallace on 07.14.14 at 1:51 pm

The great unwinding

Article in Yahoo predicting 30 % correction, ouch, the reality could be much worse.

https://ca.finance.yahoo.com/blogs/balance-sheet/canada-banks-trouble-housing-bubble-pops-report-162811862.html

Referring to the same Morningsstar report.
Gold diving today.

#156 Habs76-79 on 07.14.14 at 1:55 pm

#122 LiquidinCalgary says:

i recall, back in the day, that to calculate the future value of money, we had to plug in a 6% inflation rate.

stick THAT in your fuse-box sunshine!

—————————————-

You can plug in what ever number you want I gave you BOC inflation numbers but even at that, at 6% inflation gasoline is still much more expensive today than it was in 1984.

#157 world view on 07.14.14 at 2:17 pm

“What will the realtors propose next when real estate topples under its own excess?”

Well, they could propose tax deductions on interest and principal repayments when people buy their first house. And tax deductions on interest payments on the 2nd , 3rd and 4th houses.

None of which will happen. — Garth

#158 Aggregator on 07.14.14 at 2:22 pm

#150 – Get your money to a perceived safe and stable place like Canada and use real estate to hide it.

You got it. And if one looks at Canadian home prices in foreigners' domestic currency, only then will they understand why an Iranian would want to buy any house at any price. Chart GTA detached is up 213% since 2011 when priced in Rials. 

There is more then enough credible evidence to support to view of hot corrupt money flows into Canada. From the PBOC report to Jason Kenny's fundraiser affiliates to the Iranian bank fugitive residing in Forest Hill — it all adds up to one conclusion: our government and banks are corrupt.

Once societies get this corrupt, it rarely ever goes back to a democracy without a revolution. And now with the Wynne regime leading national Libs to promote more corporate welfare and stimulus spending, housing will most likely keep rising while more Canadians get priced out by foreigners.

Only the bond market can stop this reckless regime now. Which means it can only be a hard landing from here on.

#159 world view on 07.14.14 at 2:28 pm

“What will the realtors propose next when real estate topples under its own excess?”

Another interesting idea: “To make house affordable , the government should subsidize mortgage payments for single (lone) parents.” Lone parents make about 15% of the population. Politicians can probably win elections with this argument depending on the number of lone parents in their constituency.

I think you should create a new post based on the ideas you receive.

Too scary. — Garth

#160 brainsail on 07.14.14 at 2:35 pm

I’m just making this up, as a joke!

We live in Texas and would like to personally thank all of the Canadians that bought houses here with their stolen money. Our home is now worth more today after remaining the same value for the last ten years. Thank you very much!

#161 Ralph Cramdown on 07.14.14 at 2:49 pm

Of course there are foreign buyers – in Van, just as Toronto. Do they set market prices? Hardly.

Even if foreign buyers had no effect on prices, they’d still be a plague in our cities. There is a certain (perhaps unstated) assumption that most homes are occupied by people of appropriate means who pay taxes, spend locally and (if not retired) generate wealth locally. If you want to build suburban retirement communities for 500,000 Americans to live six months a year (which six?) in the suburbs of Regina, I don’t think there’d be much of an impact. But selling 50,000 homes in the heart of Vancouver to people who will only use them a month per year or less means about 75,000 more people PER DAY are commuting via bridge or tunnel, paying their fares, tolls, carbon taxes and parking charges. Downtown is that much less dense and supportive of small business, and you can probably imagine a bunch more knock-on effects. THIS SUCKS. Urban life and planning are not indifferent as to whether units are occupied by local workers and consumers, or vacant.

Even if foreigners didn’t affect prices OR quality of life, I’m not comfortable with rolling out the welcome mat and selling Canada piecemeal to foreigners from certain countries without a lot of investigation. If somebody shows up with a suitcase full of cash (or a bunch of $50,000 wires from a happily cooperating Canadian bank) from a country scoring below 50 on Transparency International’s Corruption Perceptions Index, I think there’s a reasonable probability that the money was obtained with the help of bribery and collusion with an oppressive government or its rogue agents, or expropriation of property from the country’s citizens. It is difficult enough for most people to get rich honestly in a transparent, stable country with the rule of law. To get rich honestly in a country where corruption and fraud are endemic? I’d like to put the burden of proof on the guy with the suitcase full of cash.

All that, but I still think foreign buyers drive prices up. In a market with high leverage and low turnover, it only takes an extra percent of sales or less to drive up prices. Then the kids need help with a down payment and the parents who own the homes whose prices have been driven up take out HELOCs, the kids buy, and prices go up some more, further luring in foreign money that likes a momentum story. There have been plenty of studies and models of bubble dynamics in real estate lately for some reason. Stomping out this particular addition to the Canadian bubble with tighter controls, or with facts showing the size of the effect (requires actual investigation, including checking for nominee/straw buyers) would be progress.

Pretending the issues don’t exist, downplaying their impact, or pinning the xenophobe label on those concerned isn’t going to change anything.

#162 world view on 07.14.14 at 2:55 pm

“What will the realtors propose next when real estate topples under its own excess?”

Here are a few more:
1. “Students with loans over CAD 20,000 should be given interest only loans (at extremely low rates) to buy their first homes, once they successfully graduate. This will encourage students to graduate!! And these students are the future of Canadian society. So they should be given every incentive to boost the economy through home ownership. This will also allow them to reach other milestones such as having children and getting married , not in any order.” The average student loan is about $23,000 and about 250,000 students graduate out of universities every year. If they start exercising their voting rights, then it could be a game changer for politicians.

2.”If mortgage payments exceed 30% of income before tax, then Canadians will have less to spend on discretionary items and this will lead to an economic slowdown or depression. So we should have a cap on mortgage payments as a percentage of total income. ”

3. “Immigrants to be granted permanent residency if they purchase a residential property.” (This law will most definitely be proposed if there is a crash, as is the case in several parts of Europe in some form or the other).

#163 Victor V on 07.14.14 at 3:04 pm

http://www.theglobeandmail.com/report-on-business/top-business-stories/as-house-prices-rise-fitch-warns-canada-may-have-to-act-again/article19584589/

Along with a new report today showing Canadian home prices still rising comes a warning from a credit rating agency that the government may have to intervene in the housing market yet again.

Fitch Ratings, which has believed for some time now that the residential real estate market is overvalued to the tune of about 20 per cent, warned that heavy consumer debt levels have “made the market more susceptible to market stresses like unemployment or interest rate increases.”

#164 Shawn on 07.14.14 at 3:11 pm

Sad but worth repeating

From Crossbordershopper above at 132, discussing basically how the poor stay poor.

“If you dont have you will probably never have.”

If you are not on track to wealth or prosperity at a young age (maybe poor but on track) you will likley never change.

#165 liquidincalgary on 07.14.14 at 3:12 pm

#157 Habs76-79

so, go out and buy a Tesla :P

#166 jay on 07.14.14 at 3:23 pm

Vancouver West side sale is slowing down, to about 140 per month (167 in June and 195 in May). This is a HAM only territory, all sales are close or more than $2 million.

#167 Fred Smith on 07.14.14 at 3:39 pm

There was a reasonable news story today warning of an inevitable price correction in real estate. I almost fell out of my chair in shock that such a news story could possible see the light of day.

http://www.cbc.ca/news/business/housing-prices-20-overvalued-in-canada-fitch-warns-1.2706388

#168 Son of Ponzi on 07.14.14 at 3:42 pm

Thanks for the Video.
Shows that Asians are very generous and giving people.

#169 Kilby on 07.14.14 at 3:53 pm

#162 Ralph Cramdown on 07.14.14 at 2:49

Pretending the issues don’t exist, downplaying their impact, or pinning the xenophobe label on those concerned isn’t going to change anything.

Well thought out and stated.

#170 Son of Ponzi on 07.14.14 at 3:58 pm

#144 Mixed Bag on 07.14.14 at 11:44 am
Good Lord, Garth! I never thought I’d cry at one of your posts, but that video brought tears to my eyes, here at work.
Nonetheless, thank you for posting it.
——————-
Garth, people reading your pathetic blog at work.
No wonder, our productivity is declining.

#171 Sheane Wallace on 07.14.14 at 4:01 pm

We should come with creative ideas to cool down the market, for example tax on all real estate equity (5,6,7 %) to cover the CMHC losses. It would be fair for the people who benefitted from the real estate boom to pay for the fallout of it.
Also CMHC should simply disappear, no need to insure mortgages, let the banks decide on the down payments (so expect 50 % +).
Immediately revoke the RRSP withdrawal allowance for down payments.
BOC should stop messing with the interest rate and let the market determine it.
If the real estate market is driven truly by wealthy foreigners the above actions should have no impact on it at all.

All of the above is fair and normal (as anything against is actually a call for more lies, deception, financial suppression and theft, could wipe out savers and drive capital controls) and would drive prices down to 30 % of the current valuations.
Cash only purchases would drive the prices down to 20 % of the current valuations.
Or we could vote for a government that rejects the CMHC liabilities. After all if there is no-risk, let’s pass that no-risk to where it belongs – to the banks.

#172 4 AM Sunrise on 07.14.14 at 4:17 pm

I know of one case of obvious HAM from a few years ago. Keep in mind, people, that this is just ONE anecdote: an RE agent open a six-figure HELOC and made regular withdrawals for down payments on houses. These funds were always repaid. Of course the bank cottoned on to what was going on and shut it down.

#173 2CntsCdn on 07.14.14 at 4:18 pm

Great video (although I’m not a big life insurance fan).
Reminds me of a few sayings: “Who is richer, he who has much and wants more or he who has little and wants less?” and … “When you help others, you help yourself”.

Mass consumerism and consumption isn’t the road to happiness. More ISN’T better. We are the species curing diseases and sending space ships to Mars yet we can’t resist greed and wanting “more”. When I see RE in Canada and how people will park their brain for wanting “things” I fear for man kind (not just Canada).

#174 Aggregator on 07.14.14 at 4:25 pm

Of course there are foreign buyers – in Van, just as Toronto. Do they set market prices? Hardly.

Of course they set prices. Table

That table shows annual immigration of permanent residents, TFWs and foreign students by the top nine countries and shows an assumption that if 10% were homebuyers, they would have accounted for 6.3% of sales in 2012.

What's important to understand is that a 6.3% market share is mainly net inflows, i.e., people coming abroad who are buying a home as opposed to an existing homeowner who sells a home and buys another. This means there is added value into dollar volume and more money is chasing supply. And when year-on-year price gains are only moving by 4-6%, a small portion of net inflow buyers could easily move market prices. By how much?

If we assumed 10% of all annual immigrants are homebuyers times the average price, it equates to $10.4 billion of added inflows in 2012. Chart

And that's assuming 10% from nine countries only. Actual landed immigrants from the world is almost double that.

This is what the government is betting on to save Canada from a housing crash as domestic demand for private credit contracts. Or better known as macroprudential policies.

#175 Habs76-79 on 07.14.14 at 4:39 pm

#166 LiquidInCalgary,

Um no, I don’t buy into any of them electric/ hybrid cars. For one they ain’t so green, esp. given that in the USA alone 52% of US electricity is made by burning coal. But they are over rated and over priced too.

I was not crying about gas prices per se but only correcting you that gasoline is way more expensive today even after inflation as compared to 1984 prices.

Facts are facts, fantasies are fantasies.

#176 OttawaMike on 07.14.14 at 5:04 pm

Typical Canadian attitude. Immigrants with money must have stolen it. Sad. — Garth
—————————————————
Nothing in my post implies stolen or misbegotten wealth.

Iranians are liquidating the Persian empire because they are fed up with 30 years of totalitarian Islamic rule and the only way they have to expatriate their funds is on the black market because nobody will touch the Rial, the world’s lowest valued currency.

Frankly, I don’t blame them. Canada’s financial system welcomes them with open arms.
Makes me wonder where FINTRAC is in all of this?

#177 Mr Zipper on 07.14.14 at 5:10 pm

#127…BB….You saw Thailand from a tour bus window and became an expert? You include a video from Myanmar as an example of Thai Buddhism?

I spend every winter in BKK…Oct to Mar and have for twenty some years…have an 3 bed apartment there…… 1700 sq ft, gorgeous place with an Olympic swimming pool, wrap around balcony views, concierge, cleaning service, full satellite & wi fi ( they have 4G in Thailand and beats the crap out of Canadian technology) close to great shopping and transpo, 10 mins to the airport…….bought it under 50 grand. The cost of living there over the winter is a quarter and less of what it is in Canada……we eat out 100% of the time….never cook…except coffee…and often I have that delivered because the delivery girl is such a sweetheart. Typical meal of chicken , rice and veg is about $1.25…….here the same costs $8.50.

Once you get into Thai culture , speak the language and completely away from the tour buses full of horny drunks & punters it’s a completely different place…..the smiles are real.

Road rage is unheard of…..unlike Vancouver being the road rage capital of the world…..personal violence is so rare I can’t think of an incident in my east BKK neighborhood……only in tourist areas where drunkenness and stupid behavior provokes these things. There is no DTES area where junkies and wacko’s rule the city streets. I have never seen a cop shoot a citizen or taser a senior in his hospital bed. Vancouver’s rape rate/assaults on women and overall violence stats are far higher than anything I’ve seen in Asia generally.

Thailand’s Navy has been chasing away Myanmar’s Rohinga Muslims from Thai shores for decades…….America does the same thing with Latino’s on the Texas border….Canada ditto……Italy tries to discourage Tunisians and Libyans….Spain has it’s problem with Moroccans…so whats your point…borders need to be protected …its not a racial issue at all.

Islamic militants have become more aggressive with Arab funding in the southern provinces…don’t blame that on the Thai. Where Canadians really screw up is not understanding anything about Buddhism and then painting broad strokes on how it relates to ‘Canadian culture’….( if there is any such thing) .

In Vancouver the other day I saw a dope shop called ‘Buddha Buds’ with a likeness of Gautama Buddha painted in the window……Can any one tell me what ignorant a-hole decided how defaming that famous being could somehow be good for the dope business by relating Buddha to drugs? Thats how ignorant average Canadians are about Thai culture.

#178 Harry Wilson on 07.14.14 at 5:41 pm

re #132 Crossbordershopper

“What is shocking is the 62 year old single men who has a job, like always had a half decent job and ok money, doesnt have $50 to pay you to do your taxes. Those people i laugh at, made 2 million in their lifetime working and dont have $50 bucks to their name!. They rent, dont spend it on trips or cloths, have an old car. Its got to be the weed, food is quite cheap in Hamilton.”

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Seriously, you’ve never heard of booze? In Hamilton? Decimates savings, health, and personality all in one fell swoop.

#179 Doug in London on 07.14.14 at 5:47 pm

Imagine you have some in case of emergency money and after using it for an emergency decide to use it for everyday purchases until it’s all gone. What do you do when the next emergency comes along? You were right, Garth, the program should have been terminated by 2000 when housing markets were recovering again. With all that stimulating force when it was needed the least (low interest rates, Home Buyers Plan, longer amortization period) it was like spraying naptha into a fire already out of control. What’s going to happen when the inevitable housing correction comes and all the ammunition to keep it going is used up? As we’ve read here many times, it will all end badly. Have any of those boneheads in Ottawa actually thought of that?

#180 pk on 07.14.14 at 6:20 pm

I’m one of those who took out some RRSP and “never paid it back”. But what actually happened was that all the money I put into RRSPs each year just never got claimed as the HBP payback. So maybe many of those stats are folks like me – paid into RRSPs every year but just didn’t file it as HBP paybacks.

#181 4 AM Sunrise on 07.14.14 at 6:33 pm

#177 OttawaMike on 07.14.14 at 5:04 pm

Upper-middle/white collar workers also park their money in Dubai. A financial market stumble there triggers a few panic attacks on the other side of the Gulf.

#182 sue on 07.14.14 at 6:54 pm

LOVED that video!!

#183 Ben on 07.14.14 at 7:39 pm

Nick – you aren’t thinking hard enough about it in your haste to defend your ill-considered position.

#184 Bank Managers Big Comfy Couch on 07.15.14 at 9:08 am

Student pilots out of Buttonville airport checking in their overnight bags at the Royal Bank of hospitality. That’s why their so nice… it’s their business.