Who can you trust?

BABY DOG modified

Push-back? You bet. A bunch of realtors and condo-floggers were unhappy with me days ago when I pointed out the average SFH detached house in 416, the hotbed of Canadian real estate lust, has declined in value by 16.7% over the last five months.

But it’s true. At least as far as the official real estate board stats are concerned (yup, the ones they inflate monthly). What was just over $1 million in April was $843,138 last week. That’s a reduction of about $169,000, or darn near 17%. And while prices normally decline seasonally (making August a great time to buy), this year the plop’s been more than double the average.

Why? Simple. Ever since the feds punted CMHC insurance on houses over $1 million, sales have been quietly and steadily eroding, with prices now in the follow. Gone are the days when a high-income, cash-poor ditsy lawyer could waltz into Leaside and buy a boring $1.4 million faux baronial anorexic house with $70,0000 grand down on his gold card, adding the $48,200 in land transfer tax to the mortgage. Now that house takes $300,000 in cash.

In fact we have a million-dollar line in the sand, as far as most markets are concerned. On one side are the riff-raff, hipsters, minivan, kid-popping middle-class climbers, and on the other those who wonder where the buyers went, sitting on massive gobs of uncomfortably-illiquid net worth.

In the middle is the real estate cartel, deceiving as usual with no useful market analysis, plus broad statements like this: “Sales were up strongly for all major home types across the GTA through the first two weeks of August. During the first 14 days of August, the number of home sales grew at a faster pace year-over-year compared to the number of homes listed for sale. This means that competition between buyers increased relative to the same period last year, which explains the continuation of very strong average price growth in the GTA.”

See what I mean? Strong sales “for all major house types” and “competition between buyers” – it suggests anyone not jumping in immediately will be paying more. But the facts are buyers now, at least in a category where there are 2,800 listings in this one region, will be paying less. A helluva lot less.

Nor is this just a Toronto thing. Former realtor and housing watchdog Ross Kay has also seen this trend forming for some time. As of the middle of this month, he says, there was “a clear and measured change” in the market for houses which remain CMHC-insurable (below a mill) and those no longer eligible.

“While those sellers under $1,000,000 have increased their selling prices 4.91% since July,” he says, “when the homes over $1,000,000 are included in the average we recorded a 6.87% decrease.” Kay also claims that 75% of all houses listed on the MLS system nation-wide will end up selling for less than their listed prices.

So there ya go. A 17% drop in the average 416 detached house since April. And almost a 7% decline in national prices in the last 45 days. Seasonality plays a role, without a doubt, but if this trend continues unabated into the key autumn selling season, it is simply more evidence that peak house is behind us.

Now to Australia, where houses are sold by auction, and this anguished young man.

More than a week ago, as I dreamt of goats, I wrote about independent Aussi senator Nick Xenophon and his showboating campaign to create a Canadian-style Home Buyer’s Place down under. Here we call state-assisted retirement savings “RRSPs”, and (as you know), lusty young first-time virginal homebuyers can pluck up to $50,000 from their plans for a real estate down payment, on the condition they eventually pay it back. Sadly, a huge number do not – likely because they bought so much house with such bloated debt they have no money.

In Australia, such savings are called “superannuation” and Senator Nicky wants kids to be able to raid it the same way, because that country is also plagued with seminal horniness and houses people can’t afford. But, as I explained here, the HBP doesn’t work. All we have done is transfer $30 billion from savings and investments into real estate, allowing 2.5 million more sales, and helping jack prices to the point where we are the second-most-unaffordable country on the planet.

Suddenly (since my blog post) a movement of sane, mostly young people in the land of the billabong has erupted to stop Nicko, because they fear the plan would (as here) simply goose values more. They also suggest the senator, who owns eight investment properties may be working in his own naked self-interest. Imagine. Shocking, I tell you.

Well, here’s the petition, and I didn’t see anywhere that northern hosers are excluded from adding their voices. By the way, the young ‘roo warriors credit me with creating the HBP here in Canada. I did not. Too busy inventing trouble.

HBP CHART modified

157 comments ↓

#1 crowdedelevatorfartz on 08.22.14 at 5:16 pm

Oiii sign the petition mate!
gimmme anutha stubby ya drongo baastaad!

#2 Parliment on 08.22.14 at 5:23 pm

Garth just visited your old stomping grounds Parliament, this place is government la la land it is not a true representation of the real working world, all the world governments of every country is soon to be broke due to the use of fiat currencies and I know you are not a fan of real cold hard coins but to each their own right Garth!

BTW totally off topic check this out:

https://www.youtube.com/watch?v=7vd_OuqUAaI

#3 Jimmy on 08.22.14 at 5:25 pm

Was hoping today’s post would be about the latest news on Chinese buyers in Vancouver. On the off chance you missed it (methinks though did not) http://www.theglobeandmail.com/report-on-business/economy/housing/vancouver-housing-data-reveals-chinese-connection/article20164662/

#4 Millenial on 08.22.14 at 5:34 pm

Hey Garth,
Great post as usual. One quibble though:
http://www.accu-assist.com/grammar-tips-archive/08-18-06_GrammarTip_who-whom.htm

#5 Mayor Rob Ford on 08.22.14 at 5:40 pm

Garth should run for my office!

#6 Montrealer on 08.22.14 at 5:45 pm

As long as we don’t trade our HBP for their Vegemite/Marmite we’re ok. We don’t want that stinkin’ stuff ;)

#7 I'm stupid on 08.22.14 at 5:47 pm

I was challenged by a friend to do the ice bucket challenge, I declined. I asked to see his donation, he of course didn’t make one. So I said you’re just a fool dumping water on your head. Make the donation and I’ll match it. He quickly changed subjects.

It’s the mind set of people today. They do things just to fit in or to make themselves look good. When you look closer they’re just losers dumping water on their heads.

I’m not knocking the ice bucket challenge. It was a very good campaign to raise money and awareness for ALS but I think most people are using it to make themselves look good. I have a yearly budget for charity based on my income. I don’t go around telling people, I do it because I want to and donate what I can afford.

#8 devore on 08.22.14 at 5:54 pm

All we have done is transfer $30 billion from savings and investments into real estate, allowing 2.5 million more sales, and helping jack prices to the point where we are the second-most-unaffordable country on the planet.

It is widely known the best way to put out a fire is to pour more gasoline over it. That way, the resulting blaze will burn out quicker, leaving a pile of ashes behind.

#9 totalinvestor.com on 08.22.14 at 5:59 pm

8 Mind-Blowing Numbers From Toronto’s Real Estate Market

http://totalinvestor.blogspot.ca/2014/08/8-mind-blowing-numbers-from-torontos.html

#10 Nemesis on 08.22.14 at 6:00 pm

“Too busy inventing trouble.” – Hon. GT

Stroking the Goat[ee] then were we, AuldPold?

http://youtu.be/4ZFuh3DVsnY

#BonusZenForBruces,Sheilas&’MenAtWorkDownUnder’

http://youtu.be/XfR9iY5y94s

#11 Anson on 08.22.14 at 6:01 pm

Correct me if I am wrong, but isnt the reason one holds various investments inside an rrsp is to reap the benefits of years of tax free compound growth?
So if one is to withdraw funds from an rrsp and repay it at a later date and lose the benefit of tax free growth,then what is the sense in having an rrsp?

#12 Anson on 08.22.14 at 6:17 pm

RRSP’S May go the way of the dinosaur, because after all rrsp’s are all about delaying paying taxes until a future date,when one (hopes,thinks,imagines)that they will be in a lower tax bracket than when they put the money in.
Look around you and open your eyes and ask yourself, do you really believe taxes will be less in the future?

#13 devore on 08.22.14 at 6:31 pm

#11 Anson

What is the sense of having a TFSA and keeping it in a savings account? What is the sense of building equity in your house and then raiding it to buy depreciating consumer goods?

It’s mostly to feel good about “saving”, until you need money for something more important, like a house or a vacation, then you spend it all because you deserve it.

#14 Blacksheep on 08.22.14 at 6:57 pm

Flawed # 156,

“Second you sound like these guys:”
————————————————-
You do (don’t?) get, that you completely missed the point.

I’m not critiquing the value of alternative currencies in comparison to sovereign. I’m not pro Gov. or pro Fiat. I hate the fact sovereigns can print at will, diluting my savings.

I’m not saying technology will not change things, cause of coarse it will.

I’m simply pointing out reality:

We are forced to pay our taxes to clear the liabilities and maintain the perception of demand for $.

Stop paying taxes and see how much grief you get.

This militant action is applied by the sovereign to create the perception of demand for said $, Confidence in $’s is required by other countries, to continue accepting said sovereign currency for trade.

Most fiat critiquer’s think they understand the $ system (as did I) when in fact, do not have a basic concept of money and how it really works. It seems you may be in this group or you would not respond to my comment in the fashion you did.

Research, MMT, Stephanie Kelton and the university of Kansas. This is just a starting point: https://www.youtube.com/watch?v=XBP7ROp2s4o

Once you have a better understanding, we can discuss the likelihood of a sovereign nation voluntarily (no collapse) relinquishing control of it’s $, like what took place in the Euro nations. Just ask PIGS how things are working out.
————————————————
Sheane Wallace # 157

“States were invented to protect citizen’s rights not to loot them. When a state becomes a tool of oppression one should be free to walk out of the ‘contract’.”
————————————————-
Agreed. This sounds reasonable enough to me.

Unfortunately, it’s nothing like the world we actually live in.
———————————-
Oh ya….”Who can you trust?”

No one, other than, close friends and family.

#15 45north on 08.22.14 at 7:04 pm

Matt does a great Australian accent

#16 Setting the Record Straight on 08.22.14 at 7:13 pm

From yesterday
“And since i’m not only a member, but an owner, they’re paying my about 4.6% after dividend credit and RY keeps chugging along higher since fall 2011 with their profit party.”

No they are not. The government is ostensibly stealing a smaller amount from dividend income than from other
income. But the corporation can not deduct dividend payouts from their costs as it could with interest payments.. So the government steals from you,the owner, at the corporate level. The government already took a pound of flesh.

#17 Shawn on 08.22.14 at 7:14 pm

Who Can’t You Trust?

For one, the creator of the chart above that shows a 44 year data series that grows over time but does not use an exponential scale so that growth over time can be properly compared.

Anyone who is too invested in a particular viewpoint is probably not to be trusted as they will cherry pick data to support their case every time. They can’t help it really.

Don’t trust most people who posts on this blog because many of them have totally misguided views. A few here have demonstrated good knowledge, good analysis and a relatively unbiased view, and honesty and frequent visitors can judge who they are.

#18 Catalyst on 08.22.14 at 7:23 pm

Is this a good time to start offloading my REIT shares (XRE.TO)? I am thinking they might see some headwinds with rising interest rate looking like its around the corner, falling property values, etc.

#19 bdy sktrn on 08.22.14 at 7:28 pm

matt is a whiner – man up dude, try a shave and a haircut, then a job.

WHOSE fault is it that YOU can’t buy a house. hint… it’s YOU.

100% of van westside sfh are over 1M and none are cmhc. none. zero.
many/most east side are as well.
therefore van sfh prices are fair market and not influenced by cmhc at all.

the ferry to the land of the nearly dead is $250 for the family – victoria will always be a polished up nanaimo. – but VREU – you go girl! maybe just post the new stuff instead of the pages of copy/paste

#20 Anson on 08.22.14 at 7:43 pm

Whats the problem??? “OLD PEOPLE WITH NO FUTURE MAKING PLANS FOR FUTURE.
What did Yellen do today? Yup no action just hand holding.
Janet Yellen cannot make rational decisions due to her age.
How can someone be expected to make plans that will benefit future generations when she knows she won’t even be around much longer.
Everyone in charge of what really matters from climate change to the looming retirement and health care issues are just fine with kicking the can down the road because these people are ancient and they know due to their age a little longer is all they need.

#21 nonplused on 08.22.14 at 7:46 pm

Sadly, I remember when the CHMC “line in the sand” was $175,000. And it wasn’t that long ago really, about 1998 was my experience. Ok, I guess that is a long time. But reported inflation doesn’t take that number to a million.

That house that I bought for $175,000, because that’s all the CMHC I could get, is now worth over $500,000. At supposedly less than 2% inflation I don’t know how that is possible.

The CMHC limit matters. At the time, I couldn’t pay more. So both relators and the home owner took a cut to get the closing price down to $175,000 and make everyone happy the deal had closed, asking price was higher. But I just couldn’t pay it.

Now you can pay whatever you want up to a million? Where are people getting all this money? Oh ya, CMHC. That means “backed by you and me”.

#22 Linda Mulligan on 08.22.14 at 7:53 pm

Regarding house prices & how they apply to net worth. If the property in question isn’t actively being sold (has a solid offer) then the value lies in the fact it provides shelter & amenities (bathroom, bedroom, kitchen) to someone. While it is tempting to use the highest possible figure one might receive when calculating net worth, it would probably be best to only use whatever figure the property tax bill gives for the value of the property when including it in a net worth calculation. Also be realistic – if the property has not been maintained & has ‘issues’ then don’t think you can sell for the same amount as a property that has been maintained & is in good to excellent condition. The only exception is if the value of the property lies in the land/location itself – prime unobstructed view of scenic beauty with larger than normal plot of land in desirable location (close to all the desired amenities) is always going to be worth more.

#23 Sheane Wallace on 08.22.14 at 7:54 pm

#14 Blacksheep

Unfortunately, it’s nothing like the world we actually live in.
———————————-
Times change and sometimes pretty fast.

The speed with which the idiots in power are losing the grip and control of the population (Smoking man calls them farm slaves) is alarming.

#24 Sheane Wallace on 08.22.14 at 7:55 pm

Oh ya, CMHC. That means “backed by you and me”.

I am paying nothing until I see Harpers behind in jail.

#25 west coast is dead ? on 08.22.14 at 8:18 pm

Is this for real, is this true, because if it is then this will be the trigger that collapses the west coast real estate. the west coast .
http://www.silverbearcafe.com/private/08.14/horror.html

#26 CPG on 08.22.14 at 8:29 pm

Juggling Dynamite

#27 Realties.ca » Who can you trust? on 08.22.14 at 8:47 pm

[…] Source: http://www.greaterfool.ca/2014/08/22/who-can-you-trust-2/ […]

#28 TEMPORARY® Foreign Prime Minister on 08.22.14 at 8:49 pm

“…Gone are the days when a high-income, cash-poor ditsy lawyer could waltz into Leaside and buy a boring $1.4 million faux baronial anorexic house with $70,0000 grand down on his gold card, adding the $48,200 in land transfer tax to the mortgage…..”
=========================

Priceless. George Carlin would be proud.

#29 X on 08.22.14 at 8:51 pm

The sales and prices of homes above 1mill and those below, shows that buyers are maxed out. Any change in rates blows this market out of the water….

#30 Fed-up on 08.22.14 at 8:52 pm

The million dollar limit for CMHC insurance is still absurdly high. Especially when one considers all the horses (hundreds of billions of dollars) they let out of the barn long before they drew that line.

Reduce it down to 400 or 500k or better yet, let the crooked Canadian banks insure their own reckless gambling.

#31 Shawn on 08.22.14 at 8:56 pm

Who is Sad? and why?

Nonplused at 21 has moved beyond being merely nonplused and is sad. He wrote:

“Sadly, I remember when the CHMC “line in the sand” was $175,000.”

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

Other than the fact that this means you are getting up there in age, why does this make you sad?

Do you also pine for the mortgage interest rates that applied? or the salaries of those years?

Since you remember it, what year was it? Link to evidence? Was the $175k limit a general rule or simply the maximum YOU could get?

#32 Dr. Talc on 08.22.14 at 8:58 pm

#25 west coast is dead ?


relax , the atomic bomba, the nuclear bomba , and nuclear power are all one big hoax, do some research.
rense is disinfo

#33 Shawn on 08.22.14 at 8:59 pm

Interested in Harper’s Behind?

Sheane at 24 said:

I am paying nothing until I see Harpers behind in jail.

*******************************************
Dude, remind me never to share a jail with you.

#34 wex19 on 08.22.14 at 9:08 pm

Look up Thomas C. Assaly Charitable Foundation

Non-Profit Organization. South of Ottawa development that never turned a shovel. Another sad story of a real estate scammer that took foggy eyed investors money and skipped off to Florida. Switched the developments funds to a “Charitable Foundation” in the blink of an eye. Foundation owns a house in Florida where this fellow now has a home office beside the pool.

#35 TEMPORARY® Foreign Prime Minister on 08.22.14 at 9:11 pm

“….Ever since the feds punted CMHC insurance on houses over $1 million, sales have been quietly and steadily eroding, with prices now in the follow…..”
========================

$1 million? Why stop there?

RBC just posted another record profit of $2.378 billion (I’d type all the zeroes but my anti-carpel-tunnel software won’t let me).

Why do taxpayers continually allow themselves to backstop record bank profits through the CMHC, then allow themselves to be fleeced further by artificially high housing prices? Let the Big Five swallow their own risk and housing prices return to affordability.

Of course, no Canadian politician would ever let trillions of voter pyramid home equity evaporate merely for the sake of their up-and-coming homeless children.

No Canadian economic recovery coming any time soon, unless your province is lucky enough to be sitting on a pile of liquid dinosaur feces.

P.S. Lots of $1,000,000-plus starter-castles for sale along Mississauga Rd north of Lakeshore Rd and not moving. Pity. Maybe they can burn their 4×8 REALTURD® signs this winter to keep warm .

#36 SealTeam0 (I'm so secret I'm not sure I exist) on 08.22.14 at 9:16 pm

A dog and his boy, perfect, that’s how life should be.

#37 Porsche on 08.22.14 at 9:24 pm

In white collar south west Edmonton where I rent… a house down the street was for sale by owner forever and then a Remax sign came up on the front lawn and it still sits.

#38 Sebee on 08.22.14 at 9:25 pm

Damn it…chart shows real estate always goes up.

#39 Porsche on 08.22.14 at 9:29 pm

The biggest thing in the Edmonton real estate market came from City Hall this week, with city council voting to allow “skinny houses” and garage or garden suites in all single family neighbourhoods with RF1 zoning. If all goes according to plan, owners will be able to sub-divide lots as narrow as 25 feet, after a public hearing next winter. In the meantime city council will look at revamping the entire zoning code, suggesting the code code be seriously simplified. Developers didn’t get everything they wanted, but this is the most recent example of the city working to increase density and curb urban sprawl.

#40 Canaussie on 08.22.14 at 9:29 pm

#6 Montrealer – Marmite is British and I’ll take Vegemite any day over poutine – which looks like it belongs in a toilet bowl – before it’s digested.

#41 TEMPORARY® Foreign Prime Minister on 08.22.14 at 9:45 pm

#39 Porsche on 08.22.14 at 9:29 pm
“…..city council voting to allow “skinny houses” and garage or garden suites in all single family neighbourhoods with RF1 zoning. If all goes according to plan, owners will be able to sub-divide lots as narrow as 25 feet…….”
=========================

A shortage of land on the wide open prairies.

Who knew?

#42 Porsche on 08.22.14 at 9:54 pm

#41 TEMPORARY® Foreign Prime Minister

If all goes according to plan, owners will be able to sub-divide lots as narrow as 25 feet

and people thought 50′ lots looked like a string of dominoes. lol

#43 Bottoms_Up on 08.22.14 at 10:16 pm

#21 nonplused on 08.22.14 at 7:46 pm
——————————————-
No you can’t pay whatever you want. You must have at least a 5% dp, AND qualify to make payments on the mortgage at the posted 5 yr fixed rate.

#44 Victor V on 08.22.14 at 10:20 pm

http://www.theglobeandmail.com/report-on-business/economy/poloz-wont-raise-rates-yet-despite-rising-inflation-retail-sales/article20181018/

Bank of Canada Governor Stephen Poloz said the economy has “lots of room to grow,” suggesting a spate of stronger data points won’t sway the central bank from its plan to leave interest rates unchanged at least until well into next year.

Mr. Poloz made the comments in an interview Friday, after Statistics Canada reported milder inflation and stronger-than- expected retail sales. At the same time, the vast majority of jobs created this year in Canada are part-time positions, a phenomenon that Mr. Poloz said is a “symptom of slack” in the labour market. That argues in favour of maintaining a policy of low borrowing costs, as the economy is a long way from putting pressure on inflation.

#45 Victor V on 08.22.14 at 10:25 pm

http://www.theglobeandmail.com/report-on-business/economy/yellen-says-us-job-market-still-hampered-calls-for-pragmatic-policy/article20168755/

Federal Reserve Chair Janet Yellen acknowledged the U.S. central bank could be closer to raising interest rates than it expected earlier this year, reflecting a surprisingly quick pace of hiring.

Ms. Yellen’s observation was equivocal: She said it also was possible that the economy could lose momentum, forcing the Fed to delay lifting its benchmark rate from zero. However, her willingness to consider the possibility that the Fed’s return to a more typical policy setting is ahead of schedule represents a subtle shift that likely will catch Wall Street’s attention.

#46 Derek R on 08.22.14 at 10:26 pm

Mmmm, Marmite. Love it or hate it.

#47 Scully on 08.22.14 at 10:27 pm

#7 I’m Stupid
You are one of the smartest people I know…sadly. :)
I feel exactly the same way. When everybody started doing it I said, “Must have reached the tipping point.” Pardon the pun. I would rather donate to charity. You can argue that it is drawing attention to ALS but I bet you many who have taken the challenge have not donated, and some probably don’t know what it is…probably think it’s the result of eating wheat and dairy.

#48 Smoking Man on 08.22.14 at 10:55 pm

Damn, Friday night and I forgot to post a ridiculous drunken rant…

Alcohol obviously doing some brain damage..

Well Vegas next week, I’ll catch up..

#49 Not an economist on 08.22.14 at 10:58 pm

“goose”
verb
informal
1.
poke (someone) between the buttocks.

Oh, Garth.

#50 For those about to flop... on 08.22.14 at 11:07 pm

As an Australian/Canadian I am telling you to forget about Vegimite and concentrate on Tim Tams.
They are chocolate covered wafer biscuits and they’re dangerous ! Enjoy!

#51 Spectacle on 08.22.14 at 11:14 pm

Who can You trust?

People like GARTH TURNER , people with integrity, that is who you can trust.

Just to take my point even further….

As #17 Shawn on 08.22.14 at 7:14 pm so elegantly put it,

“Anyone who is too invested in a particular viewpoint is probably not to be trusted as they will cherry pick data to support their case every time. They can’t help it really.”

Pretty much sums up the problematic people we all deal with. Be a light unto yourself.

Regards all….

#52 straight six on 08.22.14 at 11:20 pm

R.I.P. TRUST..
a victim of the dissembler’s well-oiled handshake,
a feigned smile..
a promise
and a slap on the back with a shiv.

#53 Kenchie on 08.22.14 at 11:40 pm

#4 Millenial on 08.22.14 at 5:34 pm

Hey Garth,

Great post as usual. One quibble though:
http://www.accu-assist.com/grammar-tips-archive/08-18-06_GrammarTip_who-whom.htm
——————————————————————

Sorry “Millenial”, had to do this:

http://www.oxforddictionaries.com/definition/english/millennial

#54 Kenchie on 08.22.14 at 11:42 pm

#6 Montrealer on 08.22.14 at 5:45 pm

“As long as we don’t trade our HBP for their Vegemite/Marmite we’re ok. We don’t want that stinkin’ stuff ;)”

Guaranteed half the people who try marmite (UK), and probably vegemite (Australia), would love it. And the other half (yourself included) would despise it.

It’s one of those love-it or hate-it products.

#55 Whitey on 08.22.14 at 11:43 pm

Looks like you got them moving Mr. Turner…

http://www.thestar.com/news/gta/2014/08/22/police_investigating_after_condo_deal_falls_apart.html

The TV guys are on it, too. Isn’t it pathetic when a pathetic blog has to lead the way? — Garth

#56 Kenchie on 08.23.14 at 12:02 am

#12 Anson on 08.22.14 at 6:17 pm

“RRSP’S May go the way of the dinosaur, because after all rrsp’s are all about delaying paying taxes until a future date,when one (hopes,thinks,imagines)that they will be in a lower tax bracket than when they put the money in.
Look around you and open your eyes and ask yourself, do you really believe taxes will be less in the future?”

Well, let’s look at an example of how RRSPs work in practice for people without DBPPs or a decent portfolio of investible funds for their retirement. Let’s say they put away $300,000 (pre-tax) over the course of their career and during that time they were taxed at 33.3%. So they probably would get about $100,000 back over that period from the tax refunds. Assuming they reinvested that $100,000 as it came along (as the gov’t intends it), they would have contributed $400,000 over their 30-year career.

Now assume, for simplicity, the portfolio from its inception and continuous contribution grew to $1,000,000 at retirement age. And that it’s dividend yield is 6%, so $60,000 in income. And let’s say that the tax bracket for $60k is 25%. Then it’s a tax savings of 8.3%.

Hence, you, as an individual, (not society in general) will be taxed at a lower rate than when the income is first earned.

#57 John H on 08.23.14 at 12:15 am

Garth,

What are your thoughts on Ottawa real estate? Someone told me a while back that the city is like the mutual fund of real-estate and immune to big up and down swings. Would you agree, you don’t seem to mention the city often.

Thanks

#58 Kenchie on 08.23.14 at 12:19 am

#38 Sebee on 08.22.14 at 9:25 pm

“Damn it…chart shows real estate always goes up.”

No they don’t. They trend up in oscillational waves. Just like stock indices, except stock indices are steeper…

#59 Smoking Man on 08.23.14 at 12:21 am

One my trip toward death….

I get hammered, almost every night, take one day off to keep the prostate from getting to big..

It occurred to me… I’m amazing..

#60 Kenchie on 08.23.14 at 12:28 am

#39 Porsche on 08.22.14 at 9:29 pm

“A shortage of land on the wide open prairies.

Who knew?”

Availability of land ain’t the problem, my fast-car-lovin’-friend. It’s the efficiency of the commute between home and work for the most amount of people at a reasonable cost that matters. Hence, the urgent need to improve public transit and Transit-oriented development (TOD).

Millennials have shown an interest in living closer to urban centres and in smaller homes (condos in particular) than Gen X and Boomers. Edmonton CH is just seeing the trend and acting on it.

That said, 25′ lots are pretty dang small..!

#61 DocInWaitingRoom on 08.23.14 at 12:33 am

Goats? I hope you arent that lonely Garth… after all those blessed Aussies did like blow billions to some fat bogun in mining cash you too blame the smarter immigrants? Where would Oz be without the Greeks, Italians and Chinese? Maybe like Mississipi in the 1890s… At least hes trying to keep that lone ship afloat. After all they cant eat their own national animal for sustenance when shtf… nor like Robin W said drink their own piss after a few too many pints bless his soul. Water is scarce their too

#62 DocInWaitingRoom on 08.23.14 at 12:40 am

After all it is their money to spend and who cares al least property taxes make the state money. How much taxes did the mining bogun generate for the country to spend to invest for the future like Norway and Saudia Arabia did?
Canada the same boat… damn politicians and their goat fetish. Get a mining tax fetish of 50% and were talking and invest it, stop telling poor folk what to do with their money and get talking to the heffers in office

#63 Frustrated on 08.23.14 at 1:20 am

#7 I’m stupid and #47 Scully

I can’t be more happy to see this ice bucket challenge. In the last 2 months over 40 million has been donated to ALS. I think it is creating great awareness. To be honest, ask me 5 years ago what ALS is and I would have no idea. Ask me 5 years ago what Lou Gehrig’s disease and I would you I don’t know but heard the name. I have ALS and started almost 2 years ago for me. I have to say, this will create awareness because when someone asks my why I can’t walk, I tell them I have ALS and I will tell you. 9 out of 10 people I tell don’t know what it is.

#64 KommyKim on 08.23.14 at 1:31 am

RE: #33 Shawn on 08.22.14 at 8:59 pm
Interested in Harper’s Behind?
Sheane at 24 said:
I am paying nothing until I see Harpers behind in jail.
*******************************************
Dude, remind me never to share a jail with you.

——————————

Much better to be a “top” in jail with Harper than a “bottom” Canadian on the outside getting screwed by the Cons.

#65 schadenfreude on 08.23.14 at 5:57 am

#31 Re:#21 That house that I bought for $175,000, because that’s all the CMHC I could get

#66 Need your help on 08.23.14 at 7:07 am

Does anyone remember the date of Garth’s post that listed the 20 (might have been less) reasons not to buy real estate? It was posted in the last few months.

Thank you

#67 SWL1976 on 08.23.14 at 9:03 am

#40 NostyVlad the Snugglebombed on 08.21.14 at 6:54 pm

Putin vs. Rothschild & Soros No confirmation yet, but it would make things more interesting if it were.

Interesting times indeed, Russia is now the wild card in the plan and part II of course don’t believe everything you hear, but you definitely wont hear this in the MSM

Thanks for keepin on, keepin on Garth by writing and maintaing this informative blog for us all to visit

#68 Porsche on 08.23.14 at 9:08 am

#60 Kenchie on 08.23.14 at 12:28 am

Hence, the urgent need to improve public transit and Transit-oriented development (TOD).

Millennials have shown an interest in living closer to urban centres and in smaller homes (condos in particular) than Gen X and Boomers. Edmonton CH is just seeing the trend and acting on it.

That said, 25′ lots are pretty dang small..!

———————————————————

Bingo!

The neighborhoods are already a fish bowl of cars parked up both sides of the street leaving one lane to drive.

#69 Bob Rice on 08.23.14 at 9:29 am

Here’s the story on the condo scam in Toronto…

http://www.thestar.com/news/gta/2014/08/22/police_investigating_after_condo_deal_falls_apart.html

Local media all over it today. Hopefully the public pressure will lead to a just outcome. — Garth

#70 Italians love real estate on 08.23.14 at 9:51 am

Are all you people still waiting for a housing crash or correction in the GTA ?

More likely that we get an extinction size asteroid strike from space before that .. LOL

Too many immigrants in the GTA with an immigrant mentality that tells them to “buya da realestata”

Good luck bears , you’ll need it

#71 crowdedelevatorfartz on 08.23.14 at 9:56 am

@#37 & 39 Poor-shhhhhh

Where’s edmonton?

#72 crowdedelevatorfartz on 08.23.14 at 9:58 am

@#63 Frustrated
sorry to hear about your diagnosis but the “ice bucket” thingy is a silly fad that will be dead in a few weeks.

#73 crowdedelevatorfartz on 08.23.14 at 10:06 am

@#59 Smoking Man
“It occurred to me… I’m amazing..”
++++++++++++++++++++++++++++++++++++

Yes, yes you are. One of a kind actually……….

#74 Ret on 08.23.14 at 10:08 am

#44
Bank of Canada Governor Stephen Poloz said the economy has “lots of room to grow,”— because the economy has basically tanked outside of Alberta. Brilliant statement Mr. Poloz!

Mr. Poloz leads an elitist existence relying on like minded academics, theoretical models and Stats Can to show him the way forward. So what could possibly go wrong?

#75 Dm in c on 08.23.14 at 10:09 am

31 -Do you also pine for the mortgage interest rates that applied? or the salaries of those years?

That’s a good point. The ceiling was what $175k? In ’99 we got our first mortgage on a bungalow in halifax for $75k. The rate was 8.25. My salary was $27k. So it’s all relative.

#76 Victor V on 08.23.14 at 10:41 am

Pick-and-pay TV model could force station closures and leave more than 30,000 people out of jobs, group says

http://business.financialpost.com/2014/08/22/pick-and-pay-tv-crtc-canada/?__lsa=b7ea-a0e3

OTTAWA — A watchdog group says some local TV stations could close and more than 30,000 people could lose their jobs if Canada’s broadcast regulator adopts changes it wants Canadians to consider.

The Canadian Radio-television and Telecommunications Commission is proposing new regulations that would, among other things, allow consumers to pick the individual channels they want from cable and satellite service providers, on top of a trimmed-down basic service.

#77 jess on 08.23.14 at 11:07 am

cooks and laundries

Winnipeg mortgage broker accused of fraud
CBC.ca ‎- 15 hours ago
Jason Zarrillo of Integrity Mortgage Services is facing allegations of fraud under the Mortgage Broker’s Act after a Manitoba Securities

=============
OCCRP PRESENTS: The Russian Laundromat

Call it the Laundromat. It’s a complex system for laundering more than $20 billion in Russian money stolen from the government by corrupt politicians or earned through organized crime activity. It was designed to not only move money from Russian shell companies into EU banks through Latvia, it had the added feature of getting corrupt or uncaring judges in Moldova to legitimize the funds. The state-of-the-art system provided exceptionally clean money backed by a court ruling at a fraction of the cost of regular laundering schemes. It made up for the low costs by laundering huge volumes. The system used just one bank in Latvia and one bank in Moldova but 19 banks in Russia, some of them controlled by rich and powerful figures including the cousin of Russian President Vladimir Putin.

https://reportingproject.net/the-russian-laundromat/

#78 Nemesis on 08.23.14 at 11:17 am

#FedUpWithGentrification&OffLeashDogParks… #HogTownSquirrelRegistersFinal,ElectrifyingProtest
#PoliceWitholdingDetailsPendingNotificationNOK

[G&M] – The legend of the white squirrel

…”The death of one of Trinity Bellwoods Park’s white squirrels – found presumably electrocuted, hanging by its teeth from a hydro wire, its limbs rigid – has made instant celebrities of the albino rodents that have made this west-end park their home for decades.”…

http://www.theglobeandmail.com/news/toronto/the-legend-of-the-white-squirrel/article20182654/

#79 Fed-up on 08.23.14 at 11:38 am

@#70 Italians love real estate

————————————————————————–

As a fellow Italian Canadian that owns a fair share of real estate, I must say that you are an utter and complete moron. Try posting something of substance for once without regurgitating the same old, repetitive drivel over and over again. You make the Smoking Man look like a rocket scientist by comparison.

#80 Funny that on 08.23.14 at 12:01 pm

Looks like you got them moving Mr. Turner…

http://www.thestar.com/news/gta/2014/08/22/police_investigating_after_condo_deal_falls_apart.html

The TV guys are on it, too. Isn’t it pathetic when a pathetic blog has to lead the way? — Garth
==============================

the press is lazy, too hard for them to find the stories themselves. great newsmen are from a different era

#81 DJG on 08.23.14 at 12:03 pm

If average prices of SFD had been up dramatically, you would have claimed it was because of more expensive homes skewing the numbers.

Anyone with common sense and who’s spent even five minutes following the market knows that no house in Toronto has fallen in value by 17% in the last five months. As always, you completely undermine your arguments by being at least as selective with the data as the real estate cartels.

You must know that the reason for the dramatic fall is simply because smaller houses or ones in cheaper areas skewed the stats, and because in this context there are a very small number of SFD transactions, not because the same house that would have sold for $1.1 now sold for $999.

From yesterday’s sold listings:

274 Rusholme: List $1.25, sold $1.375, DOM 8
51 Parklea: List $1.285, sold $1.48, DOM 6
162 Randolph: List $1.499, sold $1.652

And here’s one that did sell for under asking:

35 Chestnut Park: List $5.9, sold $5.3, DOM 13

Want to guess how much the numbers of SFD get skewed just by one or two $5M+ sales in the next round of numbers?

It is just so hypocritical to write in post after post after post about the poor use of data by those with a vested interest in real estate, and then use equally poor data analysis to make the counterarguments.

TREB stats over five months show a consistent trend down in SFH home prices in 416. The reason is a slowing in sales above $1.5 million. Facts are facts, and cherrypicking a few recent high-end sales does not cancel them. The seasonal decline this year is twice that of the norm, which is interesting given mortgage rates have hit a new low. — Garth

#82 Flawed on 08.23.14 at 12:06 pm

And the US “police state shooting rampage” recovery continues…..

http://armstrongeconomics.com/2014/08/22/the-second-murder-by-police-st-louis/

http://armstrongeconomics.com/2014/08/23/police-disarming/

Who would want to move the US these days with police shooting everyone and everything?

“Police shooting everyone and everything.” Exaggerate much? — Garth

#83 Flawed on 08.23.14 at 12:09 pm

OCCRP PRESENTS: The Russian Laundromat

Call it the Laundromat. It’s a complex system for laundering more than $20 billion in Russian money stolen from the government by corrupt politicians or earned through organized crime activity. It was designed to not only move money from Russian shell companies into EU banks through Latvia, it had the added feature of getting corrupt or uncaring judges in Moldova to legitimize the funds. The state-of-the-art system provided exceptionally clean money backed by a court ruling at a fraction of the cost of regular laundering schemes. It made up for the low costs by laundering huge volumes. The system used just one bank in Latvia and one bank in Moldova but 19 banks in Russia, some of them controlled by rich and powerful figures including the cousin of Russian President Vladimir Putin.

https://reportingproject.net/the-russian-laundromat/

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

Big deal…..

New York banks have been FINED over 100 BILLION for the TRILLIONS of dollars they wash for terrorists and drug dealers world wide. And of course no one goes to jail.

#84 Flawed on 08.23.14 at 12:14 pm

Who would want to move the US these days with police shooting everyone and everything?

“Police shooting everyone and everything.” Exaggerate much? — Garth

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

Wait till its your 3 year old granddaughter they execute and answer that Garth.

You are done here. Bye. — Garth

#85 Flawed on 08.23.14 at 12:23 pm

Who would want to move the US these days with police shooting everyone and everything?

“Police shooting everyone and everything.” Exaggerate much? — Garth

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

Yup…….definitely exaggerating.

http://www.policestateusa.com/2014/08/

You read a web site (“Police State USA is a volunteer, grassroots journalism hub dedicated to exposing the systemic formation of an American police state”) that sells bullet-proof vests? Go away. — Garth

#86 I'm stupid on 08.23.14 at 12:40 pm

#63 Frustrated

I’m sorry to hear about you having ALS. As I posted, I’m not knocking the ice bucket challenge. My point was that if you’re going to participate, you should fully participate and that includes making a donation. If you don’t donate you’re just an attention seeker.

It’s fair to assume at least 1million people did the challenge and ALS raised $40million. That’s an average donation of $4. The actual number can very well be 10million people or an average $.40 donation.

I participate in Movember every year. It’s a fun way to raise money for a good cause. But I make a donation and raise money. Otherwise I’d just be a moron with a moustache.

If you’re one of those people that just did it for Instagram, to make yourself look like you care and didn’t donate, you should be ashamed of yourself!

#87 Retired Boomer - WI on 08.23.14 at 12:50 pm

I will never understand the desire to own a house at a cost that exceeds one’s rational ability to “pay” for it and still have a decent life.

Ditto for 4 wheels and a seat.

Each of us defines our life differently, understood.

Any shelter owned or rented that needed more than a third of my take home pay to ‘live in’ was not affordable.

That was based on the old 20% down 30 yr fixed US term.
Smart buyers then tried to pay it on a 15 yr amortization schedule.

Some rules still make sense. Renting never killed anybody, buying did (financially speaking).

Can you see the new reality unfolding in your town, showing the old rules weren’t totally crazy?

Boy I wish those interest rates would start raising soon!!

#88 Bottoms_Up on 08.23.14 at 12:53 pm

#76 Victor V on 08.23.14 at 10:41 am
——————————————–
And the alternative? Force millions of consumers to pay for service they don’t use, effectively bankrupting the population and destroying the economy, simply by its contribution to a thousand cuts….

#89 Arfmooocat on 08.23.14 at 1:03 pm

Anybody know or work with someone that always counters whatever you say with a better way?

You could be talking about anything? Maybe you said I won the lottery and they’d come back with a better way of winning it next time?

LMAO… I work with one of these kind of people.

#90 Italians love real estate on 08.23.14 at 1:05 pm

#79 fed up- ” as a fellow Italian Canadian who owns a fair share of real estate..”

Thank you for reinforcing what everybody knows to be an accurate stereotype.!

” la terra e sempre la terra”

#91 Mike T. on 08.23.14 at 1:07 pm

‘Putin vs. Rothschild & Soros No confirmation yet, but it would make things more interesting if it were.’

it is not – at least I do not think so

It is the same as the WWE – when they are on stage (in the ring) everyone hates each other. Behind the scenes everyone is in on the joke being played.

Don’t fall for the East (BRICS) vs WEST (US Canada Europe) narrative.

It is just you and the Universe, everything else is noise.

#92 Linda Mulligan on 08.23.14 at 1:13 pm

#39 & #60 – the zoning changes being implemented are not due to a shortage of land on the prairies. They are not even due to the growing trend to live closer to amenities/TOD etc. & catering to that growing demographic. What they are is the first baby steps to trying to limit the fallout of trying to maintain services over an ever increasing area, the cost of which can only be absorbed by a rapidly increasing & densified population. This is Canada – if it were not for high levels of immigration, our population would be decreasing. As it stands, due to the rapid aging of the current world wide population Canada will by the year 2030 have over 20% of its entire population be over the age of 65. Even if we all of us live to be 90 to 100 plus there is going to be a severe population drop & economic impact when the Grim Reaper finally gets to collect…… And for a truly grim example of what happens when population levels drop exponentially look to Detroit. A former economic powerhouse in receivership with entire subdivisions being bulldozed as there is neither the tax base or the population to support them. Replacing aging infrastructure costs a lot & simply put, it is cheaper from a tax & maintenance perspective to build up rather than keep on building out. Building out is the highest profit, least expense for the developers/builders but the most expensive long term cost for the taxpayers when the infrastructure needs replacing.

#93 scully on 08.23.14 at 1:49 pm

#63 Frustrated
Agreed. And well said.

#94 Turn it off on 08.23.14 at 2:17 pm

OTTAWA — A watchdog group says some local TV stations could close and more than 30,000 people could lose their jobs if Canada’s broadcast regulator adopts changes it wants Canadians to consider.

—–
Hey, 50 years of bundling and tiers helped Uncle Ted
buy Sky Dome
30,000 unemployed media types? That’s a ‘good news story’. TV networks are the enemy. (911)

#95 Debtfree on 08.23.14 at 2:17 pm

Msm is as lame as it gets . Global tv pretends that remax has a satilite giving us the weather . Maybe the police got the invisible condo heist news by reading Garth’s blog . If you want to see real , hard edged journalism that is still alive and well . Vice.com But it’s not for the sqeemish .

#96 Entrepreneur on 08.23.14 at 2:52 pm

People are getting angry and upset. Everyone has the right to be upset to a point.

#66 Need your help “…reasons not to buy real estate…”
Try “Blog-dogenomics” on June 1, 2014…10 points.

http://www.greaterfool.ca/2014/06/01/blog-dogenomics/

Hope this helps.

#97 Piccaso on 08.23.14 at 3:12 pm

#92 Linda Mulligan on 08.23.14 at 1:13 pm

and the reason population continues to drop is because people can’t afford a family now.

I’m a baby boomer whose father worked at a trade and mom stayed home raising us 4 kids.

We had a modest single family home, two vehicles, had new clothes and books when school started. Went to summer camp, summer hockey school, etc, etc

Dad could afford it.

#98 Mister Obvious on 08.23.14 at 3:19 pm

#89 Arfmooocat

“Anybody know or work with someone that always counters whatever you say with a better way?”
————————

Yep… a classic sign of the narcissistic personality disorder. It’s good that you can keep your sense of humor in the face of it. That’s the only defense.

#99 Bottoms_Up on 08.23.14 at 3:43 pm

#63 Frustrated on 08.23.14 at 1:20 am
———————————————
degeneration of peripheral neurons for unknown reasons….it’s obvious why most people don’t know what it is….a very complex disease indeed.

#100 Bottoms_Up on 08.23.14 at 3:46 pm

#57 John H on 08.23.14 at 12:15 am
————————————–
Stable employment, mainly reflects and is affected by government hiring and firing. Doesn’t go as high as the bigger cities on the upswing, and doesn’t go as low on the down swing. Can still be affected by rising interest rates.

#101 JR on 08.23.14 at 3:54 pm

This Giant 3D Printer Built 10 Houses In Just 1 Day.

http://www.resilientcommunities.com/giant-3d-printer-built-10-houses-in-just-1-day/?utm_source=outbrain&utm_medium=content-distribution&utm_campaign=outbrain

#102 TurnerNation on 08.23.14 at 4:28 pm

The most unsalable house in Toronto? Imo.

Its front facing the arse end of a hotel/condo complex – this means parking garage, hotel delivery traffic, and vent fan noise at all hours – the end of its backyard lotline enjoining a 13-story kando that was just erected!
It’s like right there. Right there. This is on the King W party strip so expect a steady stream of cig butts, drink bottles and bodily fluids raining down from balconies. And noise from the soon to be finished rooftop patio there.

http://beta.realtor.ca/PropertyDetails.aspx?PropertyId=14110028

– Perhaps on a related note (but I’m not a smoker)I find myself spending more time with that Kando Realtress I met a few months ago. The type of research I do for fellow Blog Dogs…

#103 Ray Skunk on 08.23.14 at 5:23 pm

#102 TurnerNation

Clicked the link for shits and giggles.

They’re trying to sell a $1.5m home and the pictures look like they were taken on a 1995 320×140 PotatoCam.

Upon closer inspection the pictures have been lifted from Airbnb!

Assuming it goes for asking and standard 5% applies, the seller will stump up $75k+HST in total commission. For their slice of the pie, their realtor didn’t even bother to send a photographer over.

More ammo for the FSBO brigade.

#104 Shawn on 08.23.14 at 5:59 pm

RRSPs can save tax

Kenchie at 56 I agree with your conclusion that RRSPs can save tax.

But let’s modify your example bit.

A guy puts in $300k over the years and gets 33.3% back in taxes. Let’s say he puts in $3k per year for 30 years.

Now imagine that each year he only has $2k. He borrows $1k and pays it back with the $1k tax refund. He makes a $3k contribution each year generating the $1k refund to repay the loan.

So HIS direct cost has been $200k and the government has effectively funded the other $100k. The government funded one third of the RRSP.

The RRSP has grown to $1,000,000 and let’s say he still faces $33.3% tax rate.

As the money comes out he would eventually pay $333k in taxes. Ouch people say. But wait. He nets $667k from his own $200k investment.

He gets two thirds of the RRSP and the government gets a third.

You can think of his $200k having grown completely tax free to $667k. The tax of $333 is really just repayment of the government’s (one third) share of the RRSP.

Effectively he invested the $100k on behalf of the government all those years.

The net return in this example is precisely the same as for a tax free account.

Now of course tax rates could be higher in retirement. But they have to be a LOT higher before the RRSP investor pays any net tax on his share of the RRSP. (And yes they can be a LOT higher given clawback of old age pension).

Let me give people a real life example. My spouse’s RRSP has had $66,371 invested in it over the years starting with the first $2,000 in 1991. We received tax refunds and so the net cost to us was well under $50k, perhaps closer to $42k. It has now grown to $702,290. What kind of tax rate would it take in retirement to make this work out bad? The tax free compounding is a good part of the reason for the gain.

#105 Kenchie on 08.23.14 at 6:57 pm

#92 Linda Mulligan on 08.23.14 at 1:13 pm

“#39 & #60 – the zoning changes being implemented are not due to a shortage of land on the prairies. They are not even due to the growing trend to live closer to amenities/TOD etc. & catering to that growing demographic. What they are is the first baby steps to trying to limit the fallout of trying to maintain services over an ever increasing area, the cost of which can only be absorbed by a rapidly increasing & densified population.”

A) Linda, using a real name on blogs is not recommended.
B) I appreciate the macro perspective you are providing regarding the high cost of servicing extended sprawl. However, macro is just the sum of micro perspectives. And the micro perspectives are (for the most part) heading towards what I noted above, supported by anecdotal evidence from “#97 Piccaso”.
C) Even if you’re worried about too many octogenarians running around Greater Edmonton, they will likely be trending towards denser areas in the same way their kids (millennials) will be too. Thus, less aggregate demand for sprawl.
D) There’s no forecast that says Canada’s population will have a “severe” drop in the future, particularly in high-flying Alberta.
E) Detroit’s failure is a symptom of it being a high-cost manufacturing hub without a Plan B to develop a diversified economy. Edmonton and Calgary are, more or less, one-trick pony towns. Calgary, according to the Hachman Index, is less diversified than Edmonton (probably due to gov’t work force there). So yes, there’s a possibility of a similar fate happening in Alberta’s two big cities. But I highly doubt it because, unlike manufacturing, oil production doesn’t simply get out-sourced to low-cost labour countries. So using Detroit as an analogy isn’t exactly fair.

#106 Kenchie on 08.23.14 at 7:25 pm

This is just pathetic:

“Because their down payment is less than 20 per cent, they had to qualify for CMHC insurance to get a mortgage, and the house was assessed three times before the deal was done. CMHC’s willingness to insure high-ratio mortgages is capped at a million, so Mr. Hughes calls it ‘the magical number,’ the price point that defines the hottest competitions.”
-Professor (doesn’t say of what subject, but not likely finance!)

And

“they made an offer of $20,000 under asking with no conditions and it was accepted right away. ‘Toronto is expensive,’ Mr. Weitner says. ‘If you’re going to break the bank, you may as well go all the way.'”
-Marketing Manager

And

“‘It’s a question of supply and demand – people are sick of driving out to the suburbs,’ Ms. Henderson says. ‘It doesn’t matter where you live in downtown Toronto, it’s all going to be worth something.'”
– Advertising Executive

http://www.theglobeandmail.com/news/toronto/buying-real-estate-in-toronto-the-million-dollar-dream/article20175188/?page=all#dashboard/follows/

#107 Kenchie on 08.23.14 at 7:27 pm

Another gem from the “Advertising Executive” in my post above:

“Her plan is to rent the unit out for about $4,000 a month when the building is ready for inhabitants next year.”

And if there is no “demand” for that type of space at that rent, what will she do?

#108 Daisy Mae on 08.23.14 at 7:45 pm

#55 Whitey: “Looks like you got them moving Mr. Turner…”

http://www.thestar.com/news/gta/2014/08/22/police_investigating_after_condo_deal_falls_apart.html

The TV guys are on it, too. Isn’t it pathetic when a pathetic blog has to lead the way? — Garth

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

Well, ‘they’ all need to be exposed…and Garth is the man to do it!

#109 randman on 08.23.14 at 8:00 pm

40% of U.S. on Welfare; Obamacare Expands Welfare by 23 Million; More on Welfare Than Full-Time-Employed

As a result of Obamacare Medicaid expansion coupled with means-tested Obamacare assistance, I estimate welfare rolls expanded from 35.4% of the population in 2012 to about 40% in 2014.

Let’s go through the math to see how I make that estimate.

Read more at http://globaleconomicanalysis.blogspot.com/#yFODud8MTga2cKD5.99

Wow! tHat US recovery …really humming along!

#110 devore on 08.23.14 at 8:35 pm

#76 Victor V

Pick-and-pay TV model could force station closures and leave more than 30,000 people out of jobs, group says

That’s sad, but these local and community stations have had decades of subsidies, and instead of taking advantage of the gravy train and making something of themselves, they’ve just been riding the train assuming it will never run out of juice.

#111 devore on 08.23.14 at 8:39 pm

#104 Shawn

The math only works out in favor if you assume the tax refund is also invested. Otherwise, you’re merely deferring taxes.

#112 Cici on 08.23.14 at 8:48 pm

#31

Back in those days, $175,000 bought a pretty decent house on the west coast. My dad was averaging about $80,000 a year at the time, and my mom about $40,000. They had nice houses, but never spent over $250,000. And they saved up for renos, doing them room at a time, every few years or so.

They never took lavish annual vacations, had decent (but not fancy cars), and drove them into the ground. No boats, costly hobbies or toys. They were always able to afford food and shelter, never any bankruptcies or debt.

Where are they now? Comfortably retired, but still not living in excess. Most of the families I know are making about what my parents’ did thirty years ago, yet paying five times in mortgage payments, heavily indebted in consumer debt trying to keep up with the Jones’ and little to no savings to speak of.

I think we’ve got one hell of a looming retirement crisis coming around the bend, not to mention the pain that’s going to erupt when credit starts drying up and the shoddy new constructions (townhouses and faux manors included) start to show their wear and tear.

#113 Shawn on 08.23.14 at 8:57 pm

Math Challenged RRSP Investors

Devore at 111 claims:

#104 Shawn

The math only works out in favor if you assume the tax refund is also invested. Otherwise, you’re merely deferring taxes.

******************************************
Whatever you think… IF you spend the tax refund you are effectively spending a loan that will need to be repaid with interest precisely equal to the return on the RRSP , assuming the tax rate is unchanged.

I offer math and you respond with a misconception and no math.

I did get one thing wrong I said tax rates have to rise a lot before the RRSp investor pays any net tax on his investment. In fact if the tax rate rises art all he pays some tax.

An RRSP is an incredible chance to compound wealth tax free. My spouse’s RRSP is a prime example.

Some take advantage of opportunities, some pooh pooh them and say they don’t exist.

To each his own.

#114 Network Admin on 08.23.14 at 9:21 pm

#109 randman
40% of U.S. on Welfare;

Mish is considering people on Medicare as well. By this count, 100% of Canada is on welfare

#115 Smoking Man on 08.23.14 at 9:26 pm

Ebes and flows and curled up toes is what life is all about.
Fear and gear and character smear is what the bad men do.

Imagination with fascination is the only damn way out.

#116 T.O. Bubble Boy on 08.23.14 at 9:56 pm

@ #106 Kenchie on 08.23.14 at 7:25 pm
This is just pathetic:
…..
—————

I’d call it insane. Especially the couple who readily admit every bank would give them up to $1M (CMHC limit), so they buy in a bidding war for $999,999!!!

This will not end well.

#117 NoName on 08.23.14 at 10:04 pm

google talks, it starts slow and borning but as presentation progresses gets very very interesting. an hour long video.

talk description
Andrea Coville, CEO of Brodeur Partners

“She draws on original research and two decades of experience to offer organizations a road-tested plan for creating highly relevant messages that shift attitudes and—most importantly—consumer behavior.

most interesting part of the talk starts here, if you dont have an hour to watch. explains ow carefully crafted messages change consumer behaviour

http://youtu.be/5TLrm-zzrEI?t=33m40s

____________________________

and this, older article, 2010, but excellent read

At the same time, Schmidt envisions a future where we embrace a larger role for machines and technology. “With your permission you give us more information about you, about your friends, and we can improve the quality of our searches,” he said. “We don’t need you to type at all. We know where you are. We know where you’ve been. We can more or less now what you’re thinking about.”

http://www.theatlantic.com/technology/archive/2010/10/googles-ceo-the-laws-are-written-by-lobbyists/63908/

#118 NostyVlad the Snugglebombed on 08.23.14 at 10:57 pm

Who can you trust? Not lobbyists / politicos, CREA, VREEA etc., the m$m and their ilk.
*
#67 SWL1976 on 08.23.14 at 9:03 am — “Interesting times indeed, Russia is now the wild card . . .”
— and —
#91 Mike T. on 08.23.14 at 1:07 pm — “It is just you and the Universe, everything else is noise.”

Agreed, interesting times indeed. Someone once said the universe was organized chaos, and this school of a planet is no different.

What the west is really afraid of is that BRICS, plus about 180 or so other countries will use their own freedom of choice to drop the petro-dollar altogether, and go their own way with their own currencies.

No particular country is bound, or forced to use the petro-dollar. The US (only the govt., not the people) will say loudly that the petro-dollar is the law, the standard. BS! Whose law and standard? From a country who routinely sets up false flags to kill their own citizens, and makes changes in other countries’ political structures to suit themselves?

Things are changing at astronomical speeds now, and ultimately, Soros – Obama’s sanctions on Russia are hurting the western alliance more ( see here ) as well as citizens who live in those countries. For example, Poland has asked the US to buy its apples, because Russia has banned them, and China is putting a stop to a lot of US GMO food from even landing on its shores.

Of course, this has opened the door to Okanagan apple and cherry growers (non-GMO), who are now selling there, and are no longer dependent on the US. Personally, I would pay more to eat the good stuff, but I wouldn’t touch GMO food with a bargepole.

Soros has his fingers in more than one pie. Ordinary folk are beginning to wake up, however and see through the lies govts. are telling them. Not before time.

Re: Everything else is noise, this is a different way of looking at it. There is a sound to silence.

#119 Derek R on 08.23.14 at 11:04 pm

#66 Need your help on 08.23.14 at 7:07 am asked:
Does anyone remember the date of Garth’s post that listed the 20 (might have been less) reasons not to buy real estate? It was posted in the last few months.

There are two possibilities.

On the 27th March 2014, Garth gave 22 reasons why housing was near a top in his post, Race to the bottom.

On the 20th March 2014, Garth gave 10 reasons why you shouldn’t buy RE just yet in his post, The epiphany.

It looks to me like the second post is the one that you want.

#120 Linda Mulligan on 08.23.14 at 11:04 pm

#105 Kenchie: thanks for the blog advice, appreciated. Regarding the Detroit/prairie city comparison, the fact remains that population or the lack thereof is the issue which will have a considerable impact on how cities evolve. Whether it is the loss of business/jobs that lower the population or natural decrease due to death or some unspecified natural disaster, if a city sprawls & the population is dropping eventually the cost of maintaining the infrastructure will outstrip the ability of the tax base to support it.

#121 Shawn on 08.23.14 at 11:36 pm

RRSP Math and Tax

Devore said:

#104 Shawn

The math only works out in favor if you assume the tax refund is also invested. Otherwise, you’re merely deferring taxes.

******************************************
Tomorrow I will explain why:

1. The proper assumption is that the RRSP refund is always invested (and not spent)

2. Why there is no such thing as a “mere deferral” of taxes … not when we are talking about deferring for decades. A deferral is worth a bundle, however an RRSP always tax free (or nearly tax free) investing of your share of the RRSP contribution. (The full contribution less refund).

Stay tuned for this explanation tomorrow. It will be based on math not on common misconceptions.

#122 Jim of North York on 08.23.14 at 11:43 pm

Is it me or are the large number of realtors posting here getting all mad with the drop in not only sales but prices in the GTA? Talk to any honest realtor(yes there are a few) and they will tell you the market is cooling off. Realtors here worry the housing market will go from cool to ice cold. Grab the popcorn the housing bubble ends here.

#123 Bottoms_Up on 08.24.14 at 12:10 am

#116 T.O. Bubble Boy on 08.23.14 at 9:56 pm
———————————————–
Who cares if they paid $999,000?

As you know the bank has to stress-test their mortgage at the 5 yr posted fixed rate. If they can afford it, who cares what they do?

#124 JimH on 08.24.14 at 12:27 am

#109 randman
“40% of U.S. on Welfare; Obamacare Expands Welfare by 23 Million; More on Welfare Than Full-Time-Employed…
Wow! tHat US recovery …really humming along!”
====================================
You poor, deluded kid!
Didn’t your mom tell you to be skeptical of most of what you read on the internet?

Mike Shedlock is a good guy, with some good insights, and I’ve followed him for years; long enough to know to take much of what he says with as many grains of salt as I can stomach.

His major critical flaw is simply that he lets his ideology filter his perception of reality to a ridiculous extent. He has been so busy heaping ridicule on Obama, Bernanke, every Secretary of the Treasury since he was in a stroller, the entire US Congress, and especially the rank and file of the Democratic Party in the US that he has stumbled somewhat in the marketplace and could have done much better…

In short, he has a political and ideological axe to grind. Pity: meanwhile SitkaPacific Capital Management is ignored by folks like me, who wouldn’t dream of trusting their hard-earned wealth with political hacks of any stripe. Mish has always cut off his nose to spite his face and continues to do so. Sad.

Here is Mish’s “Breakdown by Category”

82,679,000 Medicaid
51,471,000 Food Stamps
22,526,000 Women, Infants and Children Program
20,355,000 Supplemental Security Income
13,267,000 Public Housing or Housing Subsidies
5,442,000 Temporary Assistance to Needy Families
4,517,000 Other Forms of Federal Cash Assistance

Please? Do you not see the many blatant areas of overlap??????

Look. Here are some numbers from the US Department of Health and Human Services, U.S. Department of Commerce; and these are vetted by the CATO Institute:

http://www.statisticbrain.com/welfare-statistics/

Wow! They come up with 4% of the US population on welfare…

Well, they can’t both be right, can they? Perhaps they are both wrong? I don’t know, and could care less because I’m too busy money.

Now, randman: Please enlighten us poor mortals: tell us how you have profited by bashing the very real but slow US recovery and ignoring the many and varied opportunities it has presented to even the most undeserving of fools such as yourself since the spring of 2009?

#125 Mocking Sam on 08.24.14 at 12:52 am

Wait! Hold the petition Aussie friends. There is hope afloat for us young folks to get 5% down on a discount million dollar home. You even get to keep your RRSP intact!

http://www.nytimes.com/roomfordebate/2014/08/21/how-much-for-a-kidney/test-incentives-for-organ-donations-theres-no-reason-not-to?smid=tw-share

#126 april on 08.24.14 at 1:30 am

http://www.chpc.biz/ Canadian Housing Price Chart.

#127 Mister Obvious on 08.24.14 at 2:02 am

#105 Kenchie

“Linda, using a real name on blogs is not recommended.”
——————————–

Unless your name happens to be Garth Turner.

#128 Millennial_falcon on 08.24.14 at 2:04 am

#67 and #118

Garth can you please stop allowing these conspiracy theorists to post on the blog? in the 1800’s, they used the Protocols Of The Elders Of Zion, today they are using the internet and this real estate blog.

As for the condo project, I read about it in the Star today. I have to admit, I had a bit of a smirk on my face knowing that I read about it in the comments section here a daya ago.

Buying a pre costruction condo is risky. It requires due diligence on the part of the buyer. Specifically, the reputation of the builder needs to be researched. Some of my friends have made some money on pre construction condos in the GTA, but they made sure the builder was top notch.

Hope they get their money back but I don’t think it is going to happen unfortunately.

#129 Shane on 08.24.14 at 2:37 am

I bought a townhouse today after hearing we had our 15% correction in Toronto. Garth, is a melt going to take many years? I needed a place so it won’t go down again right?

Shane

#130 cynically on 08.24.14 at 3:39 am

#83 Flawed – – – – – – – – And of course no one goes to jail.

Methinks the USA is now copying Canada. Who’d have thunk it?

#131 liquidincalgary on 08.24.14 at 7:35 am

@ #24 Sheanne Wallace

says: “I am paying nothing until I see Harpers behind in jail.”

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

which would only leave the question, “sheanne, does Harper wear boxers or briefs??”

#132 Crossbordershopper on 08.24.14 at 8:11 am

last weekend before the kids go back to school for most of us. Did anyone have any fun this summer. The poor weather really put a squash on summertime based recreational activity and the people who need it for their winter ei program.
Lets all plan on doing somthing fun this weekend.
Next week i should discuss where labour day went wrong and how it differs from when i was a kid and where its going.

#133 Smoking Man on 08.24.14 at 8:54 am

#128 Millennial_falcon on 08.24.14 at 2:04 am

Every successful trader and business man is a conspiracy theorist.

Finding out what your competitors are selling stealing or hiding becomes a habit that then looks at everything.

Everything you see and hear is a sales pitch of some kind.

Would you rather all of us be obedient little students.

But labeling people conspiracy theorist is a chicken shit way of avoiding debate, if there is issue you have with a post. Man up and debate it…

#134 T.O. Bubble Boy on 08.24.14 at 8:59 am

@ #123 Bottoms_Up on 08.24.14 at 12:10 am
#116 T.O. Bubble Boy on 08.23.14 at 9:56 pm
———————————————–
Who cares if they paid $999,000?

As you know the bank has to stress-test their mortgage at the 5 yr posted fixed rate. If they can afford it, who cares what they do?
——————————–

My point isn’t about the “stress test” (ha) from CMHC/Banks.

My point is that people are now conditioned to automatically spend up to $1M BECAUSE they know the banks are allowed to give this size of mortgage out to a very large number of people — the same ones in these bidding wars.

The market has simply taken everyone with 2 decent jobs and less than $200k in the bank to pay close to $1M for a house in the 416. This is artificial demand, supported purely by that CMHC $1M limit.

If CMHC truly wanted to promote affordable housing in Canada, they would drop that $1M to something like 2x the household’s annual income, or maybe 3x the local median household income.

#135 T.O. Bubble Boy on 08.24.14 at 9:03 am

@ #114 Network Admin on 08.23.14 at 9:21 pm
#109 randman
40% of U.S. on Welfare;

Mish is considering people on Medicare as well. By this count, 100% of Canada is on welfare
———————

I noticed the exact same thing.

Food Stamps is concerning… health care (Medicare/Medicaid) should not be. Especially since the elderly (retired, non-working) probably make up a huge % of that.

Plus, Mish took population figures from certain states (California, Texas, Florida, New York) and quoted those as welfare recipients in those states… so, either he screwed up the numbers, or he is saying that 100% of people in those states get some form of government assistance.

#136 Bobby on 08.24.14 at 10:41 am

For#122 Jim in North York,

Yes Jim, the market is cooling here too in Victoria. Lots of action under $550 k, but homes over that are sitting forever.

I’ve gone to many open houses and when you ask the realtors why it isn’t selling many will say price. Homes over $ 1 million are now down to $995 k trying to get a sale, driving others down also. Many homes I’ve looked at have dropped the listing price 10% and still sit for sale.

Just wait until after Labour Day. It will be ugly, especially if you have to sell.

#137 I'm stupid on 08.24.14 at 10:52 am

#112 Cici

I couldn’t agree with you more. It’s called fake it til you make it. The only problem is that most don’t make it. Lol

#138 Herb on 08.24.14 at 10:56 am

#115 Smoking Man,

before you give up your normal internet persona for your new poetry passion, here is a poetic riposte I remember from a Grade 12 English class:

Sir, I admit your general rule,
that every poet is a fool,
but you yourself may serve to show it,
that every fool is not a poet.

#139 I'm stupid on 08.24.14 at 11:07 am

#125 mocking Sam

I could work, if the donors had no control of the recipients. It would need to be a double bind donation. The donor would get the money and the organ would go to the first person on the waiting list but that would entail the govt to pay the donor.

They would also need to pass laws if someone gets caught either bypassing the donor line or fining a donor directly. It’s not like they can ethically remove the organ once it’s been put in so a lengthy prison sentence would be needed.

I can’t believe we’ve come to this type of thinking in our society. And yes the poor are going to be the ones making the donations. Look at the Philippines, they have an organ donation program where Rich foreigners pay donors 100k for kidneys. So it already exists, just not on this continent.

#140 I'm stupid on 08.24.14 at 11:09 am

#138 Herb

Hahaha

#141 crowdedelevatorfartz on 08.24.14 at 11:10 am

@#138 Herb

Good one.
(I’m stealing that poem for a few pompous English Lit. prigs that I know.)

#142 crowdedelevatorfartz on 08.24.14 at 11:15 am

@#129 Shane.
” I bought a townhouse today after hearing we had our 15% correction in Toronto. Garth, is a melt going to take many years? I needed a place so it won’t go down again right?”
+++++++++++++++++++++++++++++++++++

Please tell me you’re joking………….

#143 Blacksheep on 08.24.14 at 11:36 am

Millennial_falcon #128,

“Garth can you please stop allowing these conspiracy theorists to post on the blog?”
———————————————–
Hans, buddy,

Garth’s blog IS a conspiracy blog.

It just focuses on the deceptions used on the innocents (ignorant?) by the RE cartel and the MSM to feed the machine. If your uncomfortable reading certain topics and or commenter’s, please skip right by them (including mine).

Garth already keeps thing pretty PC.

The one thing this blog does not need is censorship.

#144 Shawn on 08.24.14 at 11:46 am

There is Nothing “Mere” about long-term tax deferral

Devore and many others are under the misconception that an RRSP offers “mere” tax deferral rather than tax avoidance.

Let’s see what the math says about the value of a tax deferral and see how “mere” it is.

Dollars in an RRSP can very easily be inside the RRSP for an average of 25 years. (If started at age 30 and withdrawals started at the mandatory age of 71 and if not yet depleted at death of both spouses, each dollar could live in the RRSP for more like 40 years, so 25 is conservative).

In order to focus strictly on tax deferral the example here will use the same 20% tax rate throughout. I will deal with tax rates of 40% on an RRSP withdrawal in another post. But here I will deal with the power of tax deferral.

Imagine a 10% annual return. Imagine the tax rate being avoided is 20% tax. So if tax paid annually the return is 8%.

$100,000 at 10% for 25 years is $1,083,471. Let’s say you now deduct 20% because we are discussing “mere” tax deferral here. Now we have $866,776.

Meanwhile 100,000 at 8% annual for 25 years grows to $684,848.

The “mere” deferral of taxes in this case led to an extra $181,928. This is 27% more money after tax in this example. We only invested $100,000 and so-called “mere” tax deferral leads to $181,928 more money.

The numbers for 40 years tax deferred?

$100,000 at 10% for 40 years is $4,525,926, or after 20% tax is $3,620,740.

Meanwhile $100,000 at 8% annually (8% because 20% tax assumed paid annually) is $2,172,452.

The deferral of tax in this case led to an extra $2,353,474 or more than twice as much money.

This example is for deferring tax at 20%. Deferring a 40% tax rate is much more dramatic.

When we are talking decades, there is absolutely nothing “mere” about the deferral of taxes. Tax deferral alone can be a powerful tool in getting wealthy.

Next I will deal with the notion that spending the RRSP refund spoils the benefits. It does not.

#145 Shawn on 08.24.14 at 11:49 am

How to Think about RRSP Math

Much of the thinking about RRSPs is wrong.

Putting $10,000 into an RRSP and getting a $4,000 refund appears to increase our net worth by $4000. That is wrong.

We should measure our net worth in an RRSP on an after-tax basis. A $10,000 RRSP adds only $6000 to our net worth if we consider we would pay 40% tax.

#146 Shawn on 08.24.14 at 12:14 pm

How to Think about an RRSP refund and tax on RRSP withdrawals

Yesterday I gave the example (based on Kenchie at 56) of putting $3000 into an RRSP and getting a $1000 refund at 33.3% tax rate.

The only sound way to think about this is that you put $3000 into an RRSP but it only cost you net $2000. That’s the good news. The bad news is that the value of the RRSP to you is just $2000 assuming 33.3% tax also applies on withdrawal.

The only sound way to think about “your” RRSP is that it was subsidized, in this case to the tune of one-third by the refund and you should think of the RRSP as being about two-thirds yours and one-third always ear marked for the government assuming 33.3% tax.

Whether you spend the refund or invest it is a separate decision. The net cost of your RRSP contribution here was $2000. You can think of it as you contributed $2000 of your own money and then more or less loaned the RRSP an extra $1000 and got that back in a refund.

No matter what you do with the refund, the only sound way to think of the RRSP is that after-tax it is partly yours and partly ear-marked for future tax.

If you face a 40% marginal tax rate and get a 40% refund on RRSP contributions, think of your share of the RRSP as always 60% and the government’s share at 40%.

A bit more thought and math will show that as the RRSP grows tax free you always own about 60% of it. Your 60% share grows completely tax free. The 40% tax paid in the end is merely the repayment of the government’s share which was always 40% in this case.

Bleating that RRSPs do not benefit from the lower tax rate on capital gains and dividends is very common but completely misguided.

As long as your marginal tax rate is the same upon retirement your 60% of the RRSP in this example grows completely tax free. (For the math challenged 0% is less than the tax on capital gains and dividends).

The value of growing your share of the RRSP tax free for decades is HUGE.

Yes, there are examples where the marginal tax rate rises to more like 60% due to clawback of the old age pension. In that case you might think of it as 40% being repayment of the government’s original share plus another 20% or 33.3% on your 60% share. Clawback does not affect everyone, especially with income splitting but yes it can mean tax on your share of the RRSP. A solution is to either stay below the clawback or get so rich that your taxable income from other sources is such that your old age money is fully clawed back even before you withdraw anything from RRSP.

Even with clawback the advantage of tax free compounding for many years is HUGE even after paying clawback at the end.

Not many minds will be changed by my posts here today. People have their entrenched views. But the math is the math.

#147 Smoking Man on 08.24.14 at 1:05 pm

#138 Herb on 08.24.14 at 10:56 ambefore you give up your normal internet persona for your new poetry passion, here is a poetic riposte I remember from a Grade 12 English class:

Sir, I admit your general rule,
that every poet is a fool,
but you yourself may serve to show it,
that every fool is not a poet.
……..

Can always count on you for a Sunday chirp..

The name of this blog is called Greater Fool.

And I’m one competitive bastard….

#148 Musty Basement Dweller on 08.24.14 at 1:12 pm

Good video of the Aussie guy. It’s uplifting to see some people (other than many members of this pathetic blog) actually thinking and analyzing what is truly going on in the housing markets of Australia and Canada.

#149 Ogopogo on 08.24.14 at 1:50 pm

A sincere thanks to Shawn for his insightful series of comments on RRSPs. I appreciate how you used a rather high taxation rate (40%) so as not to sugar coat your calculations. RRSPs are clearly a wise vehicle to grow your wealth, if high MER mutual funds, GICs, etc. are avoided of course.

This is why I read every single comment on every single post, even if I don’t comment every day. You just never know what you might miss out on.

#150 straight six on 08.24.14 at 1:55 pm

all of this will pale when the new landlord with all new rules eventually positions himself.
http://www.cbn.com/tv/embedplayer.aspx?bcid=1509282970001

#151 espressobob on 08.24.14 at 2:57 pm

#146 Shawn

RRSP’s can also be strategic.

It’s great to pack away for retirement but its how not where.

Affluent people can enjoy a tax break with RSP, but what happens if they loose their income? Business folk don’t always have bumper years.

When things go south it might benefit those who tap into the RSP at a lower tax bracket than the higher one they were in when they contributed. Any excess can be stuffed in a non-reg or TFSA account.

Tax shifting is worth noting.

#152 Nemesis on 08.24.14 at 3:56 pm

#TodayInHistory…

…”The British fired newly developed rockets that could not be aimed accurately, which added to their terrifying effect. Several screamed over the head of Madison — the first time a sitting U.S. president had been under fire.

The man known as the Father of the Constitution turned to Cabinet secretaries Monroe and Armstrong and observed that it “would be proper to withdraw to a position in the rear.”

Many of the militia men broke ranks and fled, some never slowing down until they reached home.”…

http://www.washingtonpost.com/national/health-science/2014/08/23/abf407ae-24bd-11e4-86ca-6f03cbd15c1a_story.html?wpmk=MK0000205

#153 devore on 08.24.14 at 5:04 pm

#144 Shawn

$100,000 at 10% for 40 years is $4,525,926, or after 20% tax is $3,620,740.

Meanwhile $100,000 at 8% annually (8% because 20% tax assumed paid annually) is $2,172,452.

I don’t know why you are using 20% tax for both the RRSP and non-registered examples. Investment growth and income is tax advantaged, taxed at 50% or less of your income tax rate. Some returns are taxed at 0%. This closes the gap considerably. Additionally, you can structure your investments to provide dividend income during retirement, which is entirely tax free up to a generous amount. Once you add in future tax rate risk, clawbacks, forced withdraws for very large RRSP accounts, which will significantly increase your taxes owed, and the illiquid/expensive to drain nature of RRSPs should you need the money, it’s nothing to stress over.

There are already huge advantages to RRSPs, such as tax shifting (as income supplement during low income years) and income splitting, which make RRSPs desirable, but if you think you will be notably better off maxing it out every year, you will probably be disappointed.

#154 Siva on 08.24.14 at 5:18 pm

Typical two bedroom condo would sell for $330k. This one (MLS#: W2972328) sold for $292k. Aberration or new price?

http://www.torontomls.net/PublicWeb/CL_CF.asp?link_no=53733132.059400&t=l&fm=M

#155 Shawn on 08.24.14 at 6:10 pm

153 Devore asks:

I don’t know why you are using 20% tax for both the RRSP and non-registered examples.

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

Like I told you that example was to isolate the advantage of “mere” tax deferral at the same rate.

Later I pointed out as how the income tax rate on MY share of the RRSP is likely to be about 0%.

Believe what you want. Meanwhile I am tax-free compounding my way to even greater wealth.

Some will learn, some won’t.

#156 Kenchie on 08.24.14 at 10:57 pm

#104 Shawn on 08.23.14 at 5:59 pm

“Let me give people a real life example. My spouse’s RRSP has had $66,371 invested in it over the years starting with the first $2,000 in 1991. We received tax refunds and so the net cost to us was well under $50k, perhaps closer to $42k. It has now grown to $702,290. What kind of tax rate would it take in retirement to make this work out bad? The tax free compounding is a good part of the reason for the gain.”

Shawn, that’s an amazing example of the power of tax-free compounding.

But to determine the deferred tax rate, to determine overall tax savings, doesn’t it make most sense to judge it on the income derived from the $700k in assets?

If that capital produces 6% yield on fixed-income securities, then the cash flow annually is $42k. What’s the marginal tax rate on $42k per year (excluding other sources of income)? It’s probably around 20%, if that. So that’s the tax rate that should be compared to the tax rate when the contributions were first made.

On another note, the $1,000,000 you mentioned wouldn’t be split $667k and $333k between you and the gov’t. The gov’ts portion is the tax on the income paid out from the $1M in the RRIF.

#157 Enthalpy on 08.25.14 at 12:35 pm

So if the system was designed and manufactured to keep prices increasing….what kind of catalyst will cause this set up to fail and revert back to the mean?