Justice

Oil at 48 bucks. Ouch. President Donald Trump proven to be a Twittering liar. Yikes. One more sleep until T2 slaps around investors. Mercy. And meanwhile the FBI’s probing if Russia threw the US election while that North Korean dipstick builds rocket capable of reaching Surrey plus Britain begins amputating from Europe.

And what do people in Canada care about? You bet. How much their house is worth this week.

(EDITOR’S NOTE: I thought you were going to tell people how to invest in this post, after you led them on yesterday. Patience. It’s coming. Go play with a pencil. – Garth)

There’s been mucho talk about whether a Van-style foreign buyer’s tax should be smothered over smouldering Toronto. The realtors argue against it, saying they see on 4.9% of deals involving offshore cash. But most everyone agrees now that “something” has to be done to geld a market where 20% annual gains are routine and nobody can actually afford to move.

Finally, this pathetic blog can report some good news – recognition of one of the true reasons (not a fake reason, like Chinese dudes) why real estate’s unaffordable in a market of six million people. It’s speculation, aka house lust. Also known as greed. Look around. It’s everywhere. Over 50% of all condo sales are to speculators, investors and amateur landlords. Houses are bought and then sold within months, sometimes with multiple closings on the same day. That hasn’t happened in Toronto since the late 1980s. And as prices ratchet higher, the fever grows – people desperate to buy in at historic levels, because they can feel in their groin it’s going higher.

So what can be done?

Simple, slap the speckers with a new tax. After all, there are far more of them than there are foreign buyers – and the damage they’re doing to prices is more acute. So, Ontario’s now asking federal finance minister Bill Morneau to increase the level of capital gains on residential real estate. “My primary focus is to address the concerns of middle class Canadians who are worried about buying their first home,” he tells the feds. “It is important that the housing market remains stable, meaning that borrowers and lenders are resilient and able to withstand economic shocks.”

Currently someone flipping a house after a period of ownership must include 50% of the profits in his/her taxable income (that percentage could rise for all forms of capital gains in the budget tomorrow). But if the CRA thinks you never intended to move in but bought and sold only to make money in a rising market, then 100% of the profit will be added to your income – taxed at your marginal rate. The only escape from capital gains is to actually have dwelled in the property as your principal residence (not just for a few months, but years), then claim the exemption on your annual tax return.

Meanwhile one of the big banks is also honking up this tree. Says Scotiabank: “The idea, simply, would be to raise the cost of speculation, without excessively interfering with the market mechanism. Stricter enforcement of property owners paying a capital gains tax if the home is not a principal residence will begin to address speculation but more specifically targeted measures are needed. A number of possibilities exist to do this, such as introducing a tax on sellers who flip a property within a certain period of time.”

For all you xenophobes, the bank also says a Chinese Dudes tax in Ontario would have no effect because there aren’t enough foreign buyers. It also says Vancouver’s market did not flop because of a FB tax, but simply because houses got too expensive for people to buy. Hence, sales plunged.

So there. Let’s see what tomorrow brings.

$     $    $

Regarding the balanced and globally-diversified portfolio mentioned here yesterday, this blog has offered the ideal breakdown on a few occasions. I hope you took notes.

In general, the 40% fixed-income allocation should be half bonds and half preferreds. Bonds are included not because they pay much, but to dampen volatility as they usually move in the opposite direction of equities. A government bond ETF might be only 6-7% of the portfolio, with more in corporate bonds (three times the yield), some provincials, plus a little slice of high-yield debt (paying about 7%). The preferreds are obvious – dividend close to 5%, tax-friendly, relatively stable, quarterly income stream and the rising potential for capital gains as interest rates bump higher.

On the 60% growth side, 21% in Canada (including 5% in REITs), an equal weight in the US and 18% international works (only 3% of that in emerging markets). Keep 20% of the overall portfolio is US$ – and the total exposure to the S&P (big US companies) would be about 13%.

The number of ETF positions (large cap, medium cap, small cap etc.) should be dictated by the portfolio size. If you have $50,000, then buying a dozen securities is foolish. If you have a million, it’s not. Establish the correct weightings and then rebalance one or twice a year. The rest of the time, play with your dog.

157 comments ↓

#1 NoName on 03.20.17 at 6:34 pm

Hey, smoking man can you reach out to flop and sea what’s up with him, didn’t post for a while.

#2 Wrk.dover on 03.20.17 at 6:36 pm

Repost from tail end of yesterday

#108 Wrk.dover on 03.20.17 at 6:21 pm
http://thechronicleherald.ca/business/1451477-solar-for-farms-on-the-horizon

Can’t understand the premise of this one, other than being an offer of something for nothing

#3 Ray Skunk on 03.20.17 at 6:39 pm

For those blog dogs who have had to ensure Tony Robbins’ far-too-many teeth staring them down from various parts of the TTC these past few weeks…
Here it is, your brutally honest review of the Toronto Real Estate Expo:

http://www.zerohedge.com/news/2017-03-20/i-attended-top-canadian-housing-market-so-you-dont-have

Of course, nothing surprising whatsoever.

#4 Old Salt on 03.20.17 at 6:43 pm

After the licking I got yesterday for admitting to investing some of my middle class earnings, I’m going to heed todays advice and head off for a walk with the dog.

#5 crowdedelevatorfartz on 03.20.17 at 6:43 pm

You mean I get to clean up dog poop once I become a millionaire?
A whole new level of bliss on the quest to achieve nirvana.

#6 David P on 03.20.17 at 6:44 pm

I am really surprised that tax hungry T2 hasn’t slapped flippers with capital gain tax on primary residence (let’s say if you buy/sell within 1-2 years) I think that would be fair, but I guess that wouldn’t go well with the powerful Real Estate lobby?

#7 take it easy on 03.20.17 at 6:45 pm

President Donald Trump proven to be a Twittering liar.

So he is finally like a real politician then?

If he didn’t do it on Twitter, he might even be considered “presidential” aka old school, main stream, swamp politician?

Back to reality, things that actually matter:

http://www.zerohedge.com/news/2017-03-20/i-attended-top-canadian-housing-market-so-you-dont-have

Originally, I thought this would be a bit of a joke. There were billboards in all the Toronto subway cars advertising the Canadian Real Estate Wealth Expo – learn how to become a millionaire. I thought this was so ridiculous, it may be fun. What better way to experience the top of the housing market than watching Tony Robbins and Pitbull along with a bunch of US real estate professionals explain how Toronto real estate is the path to riches.

Prices were originally $150 per ticket, but I was able to buy for $50. While it deeply bothers me that I paid $50 to these shameless (amoral) self-promoters, I thought it would be worth it to witness, in person, the top of the housing market.

I had thought, there can’t be that many people stupid enough to attend this, but I was very wrong – 15,000 people were there! I was blown away. Bubbles are largely psychological. This crowd was tangible proof of that. 15k people in one spot listening to Americans explain why real estate in Toronto is an exceptional investment. The whole experience was horrifying. The crowd was very well-dressed, middle- to upper-middle class (from appearances), and super excited to hear how much money could be made if you just buy real estate (most of them clearly already owned).

#8 not 1st on 03.20.17 at 6:46 pm

Garth, how does the govt pay a yeild on its bonds? Only one way, taxation. So when you buy a bond or a bond fund, you are tacitly approving of a tax on yourself at maturity.

#9 Alice on 03.20.17 at 6:49 pm

Home buyers in Toronto just got gamed by the oldest trick in the real estate book apparently.

“If Toronto Real Estate Is So Hot, Why The 45,000+ Cancelled Listings Last Year?”

https://betterdwelling.com/city/toronto/if-toronto-real-estate-is-so-hot-why-the-45000-cancelled-listings-last-year/

#10 Smartalox on 03.20.17 at 6:50 pm

Capital gains on property should be taxed at 100% within the first 12 months of ownership, with a reduction of 20% for each year there after, net of costs.

Net of costs means that you can still deduct, from your profits / gains in value, the costs of things like renovations. You buy a fixer-upper, deduct the cost of fixing it, and pay taxes on your profit (i.e.: your income).

If you live in a place for a prolonged period of time, it becomes your primary residence, no tax on gains.

There can be special exceptions for people who have to sell within 5 years, such as having to move to find work or school (under the same rules that allow you to deduct costs of moving, currently), or getting married (combining two households into one), or getting divorced (selling a marital home to split the proceeds), or some other life event.

Of course rental income would remain taxable, but professional landlords already deduct expenses, and are prone to hold properties for multiple years, anyway.

#11 Long-Time Lurker on 03.20.17 at 6:52 pm

You’ve got a good strategy, Garth.

Yes, I take notes. I’m ever the student of the game.

By the way, Kim Jong-Un is toast. If the USA doesn’t take him out then Red China will whack him. I’m sure they’re tired of having that nutcase on their border.

#12 TurnerNation on 03.20.17 at 7:05 pm

From the Killing us Softly Dept. (not to put too fine a point on it but..)

I’ve stated I believe the elites’ goal us a passive, genderless class of workerbee slaves.
Pharma will do that – disrupting our bodies:

https://nowtoronto.com/news/ecoholic/pesticide-banned-in-europe-found-in-toronto-tap-water/

(What, you say, how could this be, surely someone will do something? Recall: in the past century that our elites easily sent 100s of million of us to death – in wars. All in the name of freedom and backed by science.
Did they care? Ha. Ha.

#13 turn of the tide on 03.20.17 at 7:07 pm

“Establish the correct weightings and then rebalance once or twice a year. The rest of the time, play with your dog.”

So, this assumes that if I have 30K cash I should plunk the whole 30K into the aforementioned percentages in a single day (or a few days) and not add to any positions until rebalancing is due after 6 or 12 months?

What is the recommended approach for those who don’t have large chunks of cash handy but are able to “contribute” to a diversified portfolio every 2 weeks?

Thanks!

So, keep contributing and maintain the weightings that way. — Garth

#14 Berniebee on 03.20.17 at 7:08 pm

In addition to fully taxing real estate speculators’ gains:

Tax all gains on sales of primary residences beyond a fair (maybe even generous) allowance for inflation.
Your Toronto house went up 20% last year? Great. When you sell, pay tax on the gain above the 2016 inflation rate. And sure, if prices fall in 2017, you can deduct that from the 2016 gain.

It’s time to remove a basic need like shelter from the “investment” class. Do we cheer when food prices rise? Why is a home any different?

#15 HoweStreet.com on 03.20.17 at 7:08 pm

Ross Kay on HoweStreet.com Radio:
Foreign Buyers Tax, Corporations, and Banks.
Ontario proposed tax hike and rentals.

http://www.howestreet.com/2017/03/20/foreign-buyers-tax-corporations-and-banks/

#16 kitz on 03.20.17 at 7:09 pm

So much click bait and BS in the opening paragraph….

All factual. — Garth

#17 the Jaguar on 03.20.17 at 7:10 pm

All this ‘house lust’. It’s so unseemly. Such desperation. That’s never attractive. I understand the desire to acquire beautiful and elegant things. The Jaguar is one of those things, after all. But when things own you versus you owning them the bloom is off the rose. Like a person whose cell phone has taken over their every waking moment and reason for being, to the extent that they cannot carry on everyday human to human conversations and interaction with others, so too will some be buried by the obsession with real estate. Sane people will not be sympathetic. It will be like coming upon road kill. Sad, avoidable, pathetic. Living a simple and rewarding life. It’s like that small place of quiet and calm inside the tornado raging all around us.

#18 Dave on 03.20.17 at 7:14 pm

Hedge fund manager on housing in Canada

http://www.msn.com/en-ca/money/topstories/ex-wall-street-trader-predicts-vancouver-housing-market-implosion/vi-BBydYxJ?refvid=BBydYxJ&ocid=mailsignout

#19 Vancouver Troy on 03.20.17 at 7:20 pm

“Currently someone flipping a house after a period of ownership must include 50% of the profits in his/her taxable income”

I thought the sale of your principal residence was tax free?

Key word, ‘flipping.’ The CRA decides what that is. — Garth

#20 Ed on 03.20.17 at 7:21 pm

What if my equity portion is all TSX equities but most have exposure to the USA & global such as RY, BNS,TRP,FTS etc.

#21 joblo on 03.20.17 at 7:22 pm

“One more sleep until T2 slaps around investors.”

I thank god everyday for Walmart.

#22 Shawn on 03.20.17 at 7:35 pm

What if oil goes to $20 / bbl over the next 5 years and housing goes into a bear market nationally that lasts 15 years?

#23 Dave on 03.20.17 at 7:35 pm

Garth is right, its not Chinese dudes that are driving the market in Vancouver–there are none…lol

#24 Morno on 03.20.17 at 7:37 pm

The house craze is reaching the point of insanity. I know people who all they can talk about are houses. A buddy tells me he knows guys who owns like 10 houses. And many of his other friends owning multiple properties and rent it out. These are just ordinany people. When you have this kind of mentality, no supply in the world would meet demand. Hopefully the speculation tax is true.

#25 Leebow on 03.20.17 at 7:43 pm

To: Economystics

I thought about your theory for a couple of days and my conclusion is that while being conceptually right, it lacks the necessary mathematical rigor.

For example, the formula you presented is clearly incorrect. Even qualitatively, it contains multiplication, addition and integration (!?). For the theory to be valid and useful for the t2 gang (and it is as we observe), the formula has to consist entirely of differentiation, division and subtraction.

Please advise.

#26 Dan.t on 03.20.17 at 7:55 pm

I have been thinking the same thing for a long time…it is simply Canadians buying 1-2-3 houses, condos and so on and either flipping them or renting them out for a short time and then selling.

Real estate is so embedded in Canada culture that it will take serious government intervention to stop the speculation and stop fools from buying 800k places when they make 60k a year (after tax if they are lucky).

A once humble and down to earth bunch (Canadians) have now been turned into greedy, keep up with the jones, debt loving (as long as it is for real estate), house obsessed fools…but prices only go up so it’s all good but the culture it breeds sucks.

Actually kind of sickening. I don’t get it. Everyone so smug because they own a piece of real estate but are life long bitches to the banks.

#27 take it easy on 03.20.17 at 7:56 pm

#12 Joe on 03.20.17 at 6:57 pm

Isn’t the budget announcement on Wed?

Yes. And this is tomorrow’s blog. — Garth

you wish… you gotta do your daily chore even if you feel it’s tomorrow already.

#28 dr. talc on 03.20.17 at 7:56 pm

Morneau says “My primary focus is to address the concerns of middle class Canadians who are worried about buying their first home,”

so why have hst on new homes?
buyers dont have the cash, builders pay it and it gets blended into the mortgage, so the buyers amortizes the tax for 25 years. Millionaire politicians cant conceive that people dont have the cash to pay their tax. Average 416 house is 1.5 mill, that’s 195 k in tax if it’s a new house. What did the government do to deserve that amount of tax? add on two land transfer taxes/ thats almost as funny as forcing them to buy insurance on the the cmhc loan so the government can spare the banks ‘risk’

Morneau should resign

#29 Blacksheep on 03.20.17 at 8:01 pm

“Ouch. President Donald Trump proven to be a Twittering liar”

“meanwhile the FBI’s probing if Russia threw the US election”
————————————–
Watched the FBI /NSA circle jerk with North and Comey
speaking nothing but vagaries.

Any body who believes these elite class, professional liars is a fool. This is what they are trained, to do.

Snowden and Assange have exposed this a great length.

This is simply the system defending its self from Trump, in any means possible. He is going to be removed, the only thing left to be determined is how…

#30 Gerry in North Toronto on 03.20.17 at 8:05 pm

TFSA wake-up. Garth, you frequently promote the value of TFSAs, but I just learned that, as of 2018, T2 will not be allowing TFSA admin fees to be paid from accounts outside the TFSA. Therefore, any TFSA managed by a large investment firm will have a contribution limit of $5,500 less 1% of the account value. It is not unreasonable to have $60K in a TFSA today. If one’s brokerage house is charging 1%, your 2018 contribution limit will be $4,900 [and decreasing each year into the future]. This will drive me to a self-managed online account, but how can this logic make sense to the rule makers? Perhaps the big investment firms don’t want to be bothered with TFSA accounts so they charge 1%. Seems very stupid.

#31 D'arcy BC on 03.20.17 at 8:05 pm

“And meanwhile the FBI’s probing if Russia threw the US election”

i thought most people that were paying attention knew the Russia meme was invented by butt-hurt DC career hacks state to excuse HRC’s awful campaign/distract from the leaked emails showing MSM+DNC staffers were leaking debate questions to Hillary (i.e. actually tampering with the election)

Of course, what you say is true (maybe they are “probing”) but this is old hat for career politicians (hacks like HRC) to deflect whatever they did wrong (tamper with the election by scooping debate questions in advance) and project the accusations repeatedly back at their opponents until it becomes gospel.

#32 Shawn on 03.20.17 at 8:06 pm

Oil is only in its 6th year of a structural bear market that was preceded by a broad commodity bubble. This bear market in oil was caused by the technologically disruptive process of fracking. Fracking is not going away and is only improving in terms of cost efficiency. I don’t think we have seen the real impact of alternative energy either – this will cause further pain in the oil complex. Commodity bear markets generally last 15+ years. I don’t think we’ve seen the bottom yet. What got broken in the oil market doesn’t go back together again. Why do you think the Saudis are selling Aramco to the public now after all of these years? Wouldn’t it have made more sense to sell it when oil was $147 / bbl? They know it’s over.

#33 take it easy on 03.20.17 at 8:08 pm

#17 kitz on 03.20.17 at 7:09 pm

So much click bait and BS in the opening paragraph….

All factual. — Garth

Prove it or drop it.

Otherwise it’s empty posturing. Virtue signalling.

All the serious finance guys leave this to political pundits.

How much more time you need to decide which one is you?

#34 Smoking Man on 03.20.17 at 8:08 pm

#1 NoName on 03.20.17 at 6:34 pm
Hey, smoking man can you reach out to flop and sea what’s up with him, didn’t post for a while.
…..

I noticed that…Probably has his reasons.

I’m winding down my twitter. I’ve removed all political posts from facebook. Removed everything from Linkin. Sensing a witch hunt for deplorables in the near future.

Never realized how powerfull these globalists are. The have a mental case herd that they easy control.

Trump hasn’t gone after anyone yet. He’s weak.

Things are polarizing as Garth pointed out on top. Brown shirts are coming…

Time to shut up.

#35 Readers deserve honesty! on 03.20.17 at 8:12 pm

Why does this blog treat these “official” sources as credible then it comes to their opinion on foreign capital igniting housing to new levels? Since when have these sources been honest about the state of affairs for Canadians?

Excellent video from CBC’s On The Money (hosted by Peter Armstrong). I’ll trust this trader opinion on Vancouver housing (ditto Toronto) before I trust these “official” sources…

http://www.cbc.ca/player/play/899968067635

#36 Hana on 03.20.17 at 8:12 pm

Hi Garth, why there is no real return bonds in bond portion of portfolio?

#37 Pepito on 03.20.17 at 8:14 pm

Tempted to say that the speculator capital gains tax is a brilliantly novel idea, except it’s not. Germany has had a tax law on the books for ages which taxes all capital gains on real estate held for less than 10 years. Note, also, that even with some of the lowest interest rates on the planet, Germany does not have a housing bubble.

Why? It’ called having a socially responsible national housing policy.

#38 mike from mtl on 03.20.17 at 8:14 pm

Garth, why the 21% Canadian? A few months back it was like 18 or so. I’ve dialled back to 17% perhaps will go to 15% on next rebalance.

TSE is pretty much the banks and energy / mining companies – far riskier less upside than EM in my opinion.

#39 dollarmonger on 03.20.17 at 8:29 pm

>>Keep 20% of the overall portfolio is US$<<

Is that similar to currency-hedged ETFs? Or what's the deal with those?

If not, what part of the portfolio would you use USD to buy?

#40 Blacksheep on 03.20.17 at 8:35 pm

Rogers, not North, sorry got my professional liars mixed up.

#41 Tony on 03.20.17 at 8:40 pm

Re: #12 Joe on 03.20.17 at 6:57 pm

Slated for 4:00pm, good thing the budget speech isn’t at Christmas time no one would get any gifts or buy any gifts.

#42 Bruce on 03.20.17 at 8:42 pm

Does anyone understand the portfolio ? It calls for 21 per cent in US equity but then says only 20 per cent of total portfolio in US dollars? How do I make my 21 per cent of US equity etf become only 20?

#43 Economystical on 03.20.17 at 8:44 pm

#15 Berniebee

“For the theory to be valid and useful for the t2 gang (and it is as we observe), the formula has to consist entirely of differentiation, division and subtraction.”

Hmm, I think you may be on to something there. That is why these things need to be “peer reviewed”. And as with all things Economystical the formulas need to be constantly adjusted to achieve the desired outcome.

Regardless how the improved formula might look once finalized before further revisions I think we can all agree that 1+1+1=3 is an outmoded form of thought that does not take into account the various possibilities available to economystics.

For example, the new B-J plan clearly foresees it to be possible for people to pay 50% income tax, 50% sales tax, and 50% capital gains tax and still have 100% of their income available for living expenses and consumer spending. You simply cannot achieve these sorts of results using outdated simple mathematics, you need economystics.

Anyway, it is clear from your thoughtful reply that you are indeed a high level economystic yourself, so any proposed changes you have to the formula I will be happy to include. In fact we can just add your formulas to mine, in economystics the more obscure the better. We simply can’t have the untrained masses comprehending what we are doing to them until after it is too late and their money is all gone.

Spread the good news. Poverty is wealth. Starvation is good for you. You didn’t build that business, the government did. In order to save the planet from global warming, you must sit in the cold and the dark. Taxes are for your own good. We all must pay for society, particularly the people who selfishly contribute the most.

#44 where is the cra? on 03.20.17 at 8:46 pm

https://www.realtor.ca/Residential/Single-Family/17920501/245-DEWHURST-Boulevard-North-Toronto-Ontario-M4J3K4-Danforth-Village-East-York

recently sold for 6 something a few months ago. will they claim principle res – maybe. will cra find them – no.

#45 Cloudy on 03.20.17 at 8:50 pm

Garth, can you explain why owning a dozen ETFs would be foolish with a smaller portfolio? If held in long term would it be okay because you would be adding to each etf with each contribution?

#46 Brendan on 03.20.17 at 8:52 pm

34 yo. Garth I’ve been reading your blog since you were slinging squirrel meat and generators. Have gleaned some great information over the years and just wanted to say thank you. Anyways going to share my allocation. It’s pretty much been like this since almost the beginning apart from the preferreds which I added about six months ago at the expense of some bonds when I realized some gains as I did not have any income in 2016 so was a good time to rebalance.

Canadian Equity ETFs>18%

US Equity ETFS>21%

Canadian REIT ETFS>5%

International REIT ETFS>5%

Bond ETFS> 8%

Preferreds ETFS>4%

Emerging Markets ETFS>12%

International ETFS>26%

Portfolio MER> 0.24%

Portfolio yields just over 2% as I have quite a bit of HXS, HXT market swap etfs which mirror the indexes but don’t pay out dividends instead increasing in capital value giving me a big tax advantage *especially on HXS*
(That might change with the new budget)

I much preferred growth vs dividends as I was in the highest tax bracket for quite a few years when I was working a lot and wanted it to control.

I like my portfolio over all and it has treated me well. I think the biggest dip I have seen so far is close to 80-100K, lost a little bit of sleep over it but not too much and did not panic so I think I may be one of the few that should manage my own money. As well have always done all my own taxes, record keeping, for the last 7-8 years.

One of the best lessons I ever had was working on the rigs in the oilpatch when I was 19 yo and managed to save up $10k grueling it out. While my buddies were out buying pickup trucks I followed a tip on bnn market call and put it all on a mining penny stock thinking I was gonna get rich… went to zero in the next couple months. So anyways that loss carried forward for many years before I could finally burn it. Glad I got some of those lessons out of the way early.

Anyway, Thanks again Garth, hope to be reading this blog for many more years

#47 Andrew Woburn on 03.20.17 at 8:53 pm

– Company offers $10k to employees willing to ditch the Bay Area

“I know there are quite a few people in the Bay Area who are new parents looking to find a better standard of living,” Foster told SFGATE. “It’s difficult for a family of four to afford rent, a mortgage, or child care here in the Bay Area. Even if you are a two-income family this can still be difficult.”

Difficult, in this case, could actually border on impossible. The average two-bedroom residence in San Francisco, for example, runs approximately $4,500 — nearly double what that same place would have cost you in 2011.”

https://thenextweb.com/business/2017/03/20/company-offers-10k-to-employees-willing-to-ditch-the-bay-area/

#48 Al on 03.20.17 at 8:55 pm

Maybe we need another study into what percentage of home sales are by speculators before we slap a higher tax on them. If the 5% of foreign buyers are being given carte blanche to continue parking their money in residential homes, then we also need data on specs before implementing a useless tax.

#49 Sitting on the toilet thinking on 03.20.17 at 8:58 pm

Are they advertising mortgage fraud?https://youtu.be/tgYvWPPKvUo

#50 Economystical on 03.20.17 at 8:58 pm

#26 Leebow

Sorry the above comment was meant for you not #15.

To #15 Berniebee I meant to say:

That is an excellent economystical plan. What better way to generate economystical wealth than charging a person a 50% tax on their primary residence when they sell it and then have to buy another inflated property in the same market. This is forward thinking. The key to economystics is to get the most leverage out of every transaction and let’s not just double count money, but count it 3, 4 or even 5 times. In fact it is not clear there should be a limit to the number of times we count money.

In the old days, people might think that if they owned the house they lived in, they owned the house they lived in. Old school 1=1 thinking. But economystics has proven that if you own a house you have a windfall gain that should be duly taxed. We even got them to buy the “owners equivalent rent” thing in the inflation rate.

In the old days under the outdated 1+1+1=3 model a person might assume that if housing was going up, food and energy were going up, and cars and such were going up, there was inflation. Today we know that is not true if mortgage rates are low, you can substitute canned cat food for steak, and there is an air bag and GPS in the car now. A car you won’t be buying because you can’t afford the gas, so your expenses are actually lower. Anyway who needs a car Amazon delivers right to your door.

#51 Londoner on 03.20.17 at 9:06 pm

“The realtors argue against it, saying they see on 4.9%”

Maybe across the whole of Ontario, but in certain parts of Toronto they represent a significantly higher percentage. If you were a foreigner who’s worked hard to earn your wealth wouldn’t you want to move to a country that allowed you to invest your money without government intervention? Some place that has good schools, a boring yet stable government, easy immigration policies and places no limitation on the number of children you can have. As a bonus the banks can help you avoid those pesky capital controls your gov’t is trying to enforce. I’m sure those that can will choose the US and others wanting to stay in the pacific rim will choose Aus. But there is a growing number of wealthy families out East who are looking West. A foreign buyers tax will have very little impact.

The 4.9% is for the GTA. — Garth

#52 Ronaldo on 03.20.17 at 9:10 pm

Want to see how unpopular Trump is? Check this out. Slide ahead to 2:40………Wonder if Mrs. Clinton would be that unpopular.

https://www.youtube.com/watch?v=wrR7Fq5OQa0

#53 NS Guy on 03.20.17 at 9:12 pm

Popping the Canadian real estate bubble is easy:

1. Slap 15% HST on the purchase of any real estate (house, condo, land) by a non-resident (that’s in addition to the land transfer tax).

2. Increase interest rates 1/2% immediately and keep raising them by 1/4% each quarter until bubble is popped.

But no, we have a couple of feckless idiots running things (The Boy Wonder and Poloz).

#54 CanadaRose on 03.20.17 at 9:23 pm

Turning Surrey into a sheet of glass would be an improvement!

#55 VERY SIMPLE REALLY on 03.20.17 at 9:26 pm

DELETED

#56 TRT on 03.20.17 at 9:29 pm

Looks like Morneau’s budget committee actually listened?

No hike in inclusion rates EXCEPT for spec housing. Question is whether it will be 75% or 100%.

#57 TRT on 03.20.17 at 9:33 pm

#55 NS guy:

Nothing will be done about foreigners buying here. What is palatable is taxing all 2nd home owners.

That way, banks and corps get the high immigration numbers they want, housing is a place to live so 1 house per family unit, and our pensions stay intact via a growing population base.

Now, if they would distribute the incoming immigrants across Canada. We could easily have 500,000 per year and it would be great for the nation.

#58 TRT on 03.20.17 at 9:34 pm

And a final thing is to crack down on foreign tax cheats. Too much foreign money laundering going on.

#59 Huh? on 03.20.17 at 9:35 pm

I’m confused! I thought all non-primary residences sold are taxed 50%. Profits from a non-primary RE inow have to be reported on your taxes. Also, primary residences that have been lived in for less than a year are also taxed the same way. That’s why some flippers live in it for a year before they flip so they don’t get taxed on it.

How is this proposed change in rules different from what already exists?

There is no CRA ‘one-year’ rule for principal residence tax exemption. — Garth

#60 Smoking Man on 03.20.17 at 9:49 pm

DELETED

#61 Lulu on 03.20.17 at 9:54 pm

Over the years of my observation, ever since the Harper Government lower the interest rate in 2012, property prices shoot higher and higher and more and more speculation happened, more recently in the last two years, the flipping activity ever more severe, before was bought the property, renovate it and sell it (flip), now they just bought it and let it sit three to six months and throw it back out and they all knew supply is so tight and gather with the RE agents probe it higher and higher, real users become less and less, or simply can’t afford anymore. Now hard loft selling like SFH, and more desirable condo location gaining traction as well, more bidding war and over asking is the new normal.

Too bad the government is so indebt, can’t really increase rate too much too fast and flippers knew that as well hence the severe speculating activities going left right and center. Is a vicious cycle. Lets see what is the budget coming and how Wild Bill gonna curb this wave.. Interesting!!

#62 will on 03.20.17 at 10:02 pm

#11, long time lurker

The usa is delighted to have Kim Jong Un in N Korea because it gives them the excuse they need to be in the region with all their hardware and occupying Okinawa. If there was peace then there would no need for the usa to be there and that would be bad for Lockheed Martin, General Dynamics and all the other big military contractors. When you load up on American securities as Garth advises make sure these heavyweights are in your portfolio.

The correct US weighting is about 20%, of which 13% will be the last 500 US corporations. Yes, Disney is included. — Garth

#63 AK on 03.20.17 at 10:09 pm

“President Donald Trump proven to be a Twittering liar.”
——————————————————————-
Whether it’s over Twitter or not, don’t all politicians lie ?

He is the president. A higher standard. — Garth

#64 Smoking Man on 03.20.17 at 10:11 pm

Looking for a star tune, a soul sucker that takes you into a bliss.

You tube sucks.

Wait knights in white satin never reaching the end.

#65 acdel on 03.20.17 at 10:16 pm

Hey Garth, long time reader, short time poster, only one question; what are your thoughts on Ryan’s blog the other day?

#66 Smoking Man on 03.20.17 at 10:17 pm

My last post, forgot, or was to hammered to post the link.

Here it is
https://youtu.be/v3jJpGw_K2Y

#67 Smoking Man on 03.20.17 at 10:22 pm

My photons vs your photons.

Life is all I’m saying..

It gets better when your gone. I like pain so I’m sticking around.

#68 toronto1 on 03.20.17 at 10:22 pm

Remember those whispers about mortgage fraud, those stories a few weeks ago running in range from 5-10-20% range.

interesting article from the Toronto Star re CRA
https://www.thestar.com/news/canada/2017/03/20/panama-papers-have-helped-fuel-a-more-aggressive-cra.html

quoted from the above article
“Instead of just checking the math on people’s tax returns, the CRA is developing algorithms to cross reference outside data — including real estate transactions and luxury purchases — with what people claim to be making.

“The agency knows that people who are trying to avoid paying taxes often manipulate their tax return so they look like they’re low income,” said Gallivan. “The system will flag that despite somebody’s low income on their tax return, they have a lot of money. When we see that flag, we dig deeper.”

So you and the wife really wanted to buy but your income was only 60K and the wife’s was 40K, the nice mortgage broker decided to juice it and get you some “fake paper” so now you make 85K and your wife is pulling down 65K- sweet, easy approval, but the paper needs to go back 3 years, no worries says mortgage dude.

Now you qualify and brought your home, but according to CRA you each make 50K more then stated on your real T4’s and thats for the last 3 years, ouch 150K in undeclared income (even though its not real) has a pretty high tax owing on it.

and you had to sign legal documents and maybe even take CMHC insurance to get the financing- going to be a hard sell to the auditor– sorry sir/madam, i really lied about my income to get a mortgage, honest i swear.

good luck with that.

I know it would never happen, the govt- CRA really cares about you and only goes after the real bad guys. LOL

These auditors are going to have a field day

#69 NOTHING SURPRISES on 03.20.17 at 10:24 pm

The only escape from capital gains is to actually have dwelled in the property as your principal residence (not just for a few months, but years), then claim the exemption on your annual tax return – Garth.

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

There is no rule in the Income Tax Act stating the length of time one has to live in a house to name it as your principal residence…….Period!!

Taxpayers have submitted tax returns having only lived in a home for short periods of time declaring it their principal residence and received fully 100% taxable gains exemptions.

The CRA have many, many, cases over the years showing this. However, they will not identify or provide any information quantifying these cases.

The CRA does not publicize this

From Grant Thornton tax guide: “Just because you live in a house that you own doesn’t automatically qualify it as a principal residence. For example, building contractors or house renovators who follow a pattern of living for a short period of time in a home they have built or renovated, and then selling it at a profit, may be subject to tax as ordinary business income on their gains.” The CRA rule is whatever the CRA rules. — Garth

#70 Rates vs Foreign Capital on 03.20.17 at 10:31 pm

Oh Canada, our home and naïve land….

Amidst years of toothless measures by the federal government to ‘cool’ the market and now rising interest rates, markets in the GTA are on fire while the much vaunted ‘cooling’ markets of Vancouver and Metro communities are having their fires re-ignited.

How come we are seeing double digit gains in the GTA? I mean its not like local economies are on fire or the locals just discovered that we have low rates. We have had low rates for 8 years and we have had anemic wage growth of 1% for many years.

In Vancouver, the media, the real estate industry, the development industry, the banking industry, and officials at the local and provincial level, all down played the impact of foreign capital in the dramatic rise in housing prices.

First, it was apparently ‘racist’ to discuss foreign buyers – I did not know ‘foreign’ is now a race – you better tell the Americans, Chinese, and British buyers they are all a race now; then foreign capital purchases were restricted to the higher end of the market which apparently has no impact – its not like once a house sells for a high price that the next neighour selling says, ‘that was too much, I will lower my price for local buyers’; then foreign capital purchases were apparently restricted to certain neighbourhoods which then morphed into certain cities – provincial data, not the real estate franken numbers, showed 20% or more of purchases in cities like Richmond and Burnaby were from foreign capital.

It took over half a decade for some of those stakeholders and the public to gently talk about the impact of foreign capital and to acknowledge, begrudgingly, its impact on housing affordability.

The same BC style narrative is being spun in GTA at this very moment. Is it really a coincidence that the months after the BC Foreign Buyers tax gets implemented we have Vancouver-like massive price increases in the GTA, as buyers get diverted elsewhere? That months after the BC Foreign Buyers Tax is put into place we have a 7 fold increase in the number of ‘official’ foreign buyers in Victoria and a 20% increase in Victoria prices, where the tax does not apply?

Remember, all it took was 8% of marginal buyers in the US to cause a 32% decline in prices. So do you really think that the so called 5% of foreign buyers has a negligible impact on house prices?

Within a few short months, we will know if low interest rates or foreign capital is the main driver of price appreciation in these hot markets (where economic fundamentals have not changed for years).

Those waiting for rising interest rates to pop the market may be severely disappointed as we enter T1’s first post-national state called Canada….

As a local Canadian, you are a vestige of a bygone era where the needs of domestic constituents outweighed that of foreign capital and global residents. Why has that changed? Because hey ‘its 2017’…..

#71 Smoking Man on 03.20.17 at 10:31 pm

Wyatt my little atistic poddel. I love him.
Dog of dogs.

He’s on my lap. Looking at me with those crazy eyes no idea what he’s thinking. Don’t matter.

I got his back. That’s how it works.,

#72 45north on 03.20.17 at 10:36 pm

Finally, this pathetic blog can report some good news – recognition of one of the true reasons why real estate’s unaffordable in a market of six million people. It’s speculation. Over 50% of all condo sales are to speculators, investors and amateur landlords. Houses are bought and then sold within months, sometimes with multiple closings on the same day.

So what can be done?

let the flippers flip and let the market correct

CMHC could do this tomorrow – if the purchase price is 20% over the assessed value then it could simply decline to insure the mortgage. What it doesn’t know what the assessed value is? the purchase price?

Mark Hanson has an article on flipping in the US:

https://www.mhanson.com/3-20-hanson-flipping-back-10-year-high-uh-different-time/

#73 Smoking Man on 03.20.17 at 10:37 pm

Why can’t we all get along.

https://youtu.be/NLlOeGeVih4

#74 dr. talc on 03.20.17 at 10:42 pm

souza and morneau want to fix things,
can you believe it?

why not end provincial and federal tax breaks for hgtv? –
flip or flop
masters of flip
vintage flip
its all
goverment(taxpayer)sponsored

these hypocritical politicians have no
shame and no credibility
they should do stand up comedy

#75 IHCTD9 on 03.20.17 at 10:53 pm

…For example, building contractors or house renovators who follow a pattern of living for a short period of time in a home they have built or renovated, and then selling it at a profit, may be subject to tax as ordinary business income on their gains.” The CRA rule is whatever the CRA rules. — Garth

Holy Moly, this practice is an actual career out my way. I know a few on their 15th+ house. The understanding out here is, if you live in it for a year, you’re good to go. No one I know of has ever had a problem.

Things might be coming to a head from the looks of it. If the CRA goes after the guys I know doing this, they will be financially destroyed for life with no chance of ever paying the tax bill.

#76 Smoking Man on 03.20.17 at 10:53 pm

Done on bay st.

https://www.youtube.com/watch?v=5DuRVp3S2Gc&sns=em

Evolution. ..

#77 me again on 03.20.17 at 10:55 pm

#71 NOTHING SURPRISES on 03.20.17 at 10:24 pm
The only escape from capital gains is to actually have dwelled in the property as your principal residence (not just for a few months, but years), then claim the exemption on your annual tax return – Garth.

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

There is no rule in the Income Tax Act stating the length of time one has to live in a house to name it as your principal residence…….Period!!

Taxpayers have submitted tax returns having only lived in a home for short periods of time declaring it their principal residence and received fully 100% taxable gains exemptions.

The CRA have many, many, cases over the years showing this. However, they will not identify or provide any information quantifying these cases.

The CRA does not publicize this

From Grant Thornton tax guide: “Just because you live in a house that you own doesn’t automatically qualify it as a principal residence. For example, building contractors or house renovators who follow a pattern of living for a short period of time in a home they have built or renovated, and then selling it at a profit, may be subject to tax as ordinary business income on their gains.” The CRA rule is whatever the CRA rules. — Garth


if you have to respect the law
the law must be clearly posted
you need to know what the law is
before you act
cra site is full of lingo like
‘generally’ ‘in most cases’
‘if we think it was your intention’ etc.

As I stated. Short-term owner? Expect scrutiny, or an audit. — Garth

#78 acdel on 03.20.17 at 10:56 pm

#67 acdel
————————————————

Hey Ryan, thanks for posting the truth the other day, no response from Garth on my question this evening (Monday), good-luck bud; I know where I am heading!

#79 Yanniel on 03.20.17 at 11:03 pm

“Keep 20% of the overall portfolio is US$” – Garth.

Does that mean the whole US equity portion of the portfolio should be in USD denominated ETFs?

Please, clarify this. Thanks.

#80 Smoking Man on 03.20.17 at 11:08 pm

To my dog

https://youtu.be/Jl5vi9ir49g

#81 Newbie on 03.20.17 at 11:22 pm

To#61:
“Principal residence and other real estate
When you sell your home, you may realize a capital gain. If the property was your principal residence for every year you owned it, you do not have to report the sale on your income tax and benefit return.”

You do now. — Garth

#82 Newbie on 03.20.17 at 11:24 pm

Important notice

On October 3, 2016, the Government announced an administrative change to the Canada Revenue Agency’s reporting requirements for the sale of a principal residence. For more information, go to Reporting the sale of your principal residence for individuals (other than trusts).

#83 Smokedsable on 03.20.17 at 11:29 pm

DELETED

#84 Ronaldo on 03.20.17 at 11:30 pm

The CRA rule is whatever the CRA rules. — Garth
————————————————————
Yep. Just ask Irvin Leroux.

http://globalnews.ca/news/2443608/b-c-man-pays-revenue-canada-10-after-19-year-battle/

#85 Marius on 03.20.17 at 11:35 pm

Garth, what do you think about robo advisers such as Wealthsimple?

If you are young, with limited assets, no need for tax advice or financial planning and count pennies, go ahead. But it’s a machine. Don’t look for advice or empathy. — Garth

#86 Newbie on 03.20.17 at 11:36 pm

The CRA on selling primary residence:
Sale of your principal residence
When you sell your home or when you are considered to have sold it, usually you do not have to pay tax on any gain from the sale. This is the case if the property was solely your principal residence for every year you owned it. Starting in 2016, if you sold your principal residence, and it was your principal residence for every year you owned it, you do have to report the sale on page 2 of Schedule 3, Capital Gains (or Losses) in 2016.
The question is: “usually you don’t have to pay tax on any gain on the sale…. “This is the case if the property was solely your principal residence for every year you owned it” means the full year, calendar year, tax year? Bought in July 1,2014, need to keep it till July 1,2015 or Dec31 2015 to be tax excempt?

#87 Ch on 03.20.17 at 11:37 pm

“Chinese dudes are 20+ % of the vancouver and adjoining suburb market. This number has been out for a while. This 5% number you’ve latched onto is dead wrong. You’re right that it’s mostly locals causing this bubble but when you have loose foreign capital rushing into the high end of every maket, it’s a big deal, you look foolish hammering the BS 5% number. Come out west for once and see for yourself…

#88 Not 1st on 03.20.17 at 11:38 pm

Garth do you know if private citizens can invest in the govts infrastructure bank? Do you recommend it?

#89 Newbie on 03.20.17 at 11:49 pm

Interesting points on defining primary residence:
Second: You and your family must “ordinarily inhabit” the dwelling during the year. Despite what’s been written to the contrary, the Canada Revenue Agency has not declared a specific amount of time that a home must be inhabited in order for it to qualify as a principal residence. Instead, the CRA will look at all evidence—including length of time in dwelling, primary income sources and patterns of buying, living, moving and selling. In fact, just because you live in a house you own doesn’t mean it automatically qualifies as a principal residence. For example, building contractors or house renovators who follow a pattern of living for a short period of time in a home they have built or renovated, and then selling it at a profit, may be required to pay ordinary business tax on the sale of that house, rather than capital gains tax (which is usually applied to the sale of property) or an exemption under the principal residence rules.

Fourth: The exemption is limited to a dwelling and no more than one-half hectare (or 1.2 acres) of land. That means if lived in a home on 10 acres of land and sold this property for a profit, you would have to pay capital gains tax on the profit portion of 8.8 acres of land but would be exempt from paying tax on the appreciable profit of your dwelling and 1.2 acres of land. That said, you can get an exemption for more than 1.2 acres of land, but you will have to prove to the CRA that the additional land was required for your use and enjoyment of the property.

http://www.moneysense.ca/save/taxes/use-the-principal-residence-exemption-to-save-on-taxes/

#90 Newbie on 03.20.17 at 11:56 pm

Just claiming the sale of the principal residence removes the 3-year limit on starting the audit.
4. Is there a penalty for not reporting?
There is no immediate financial penalty for failing to report the sale of your home, however, much like other omissions, if the CRA audits and finds the sale you could be subject to interest on taxes owed, as well as penalties.

“For most Canadian residents, the new proposed requirement to report the sale of a principal residence will be a compliance exercise, but an important one,” says John Sliskovic, private client services tax leader at Ernst Young LLP. “If the sale is not reported, the Canada Revenue Agency could reassess the tax return in regards to the sale at any time. And there will be a penalty for those who file their principal residence designations late.”

What this means is that the three-year limit for when the CRA can start an audit has now been removed for anyone claiming the sale of a principal residence. Put another way, the reassessment period “will now be extended indefinitely,” David Davies, partner at Thorsteinssons, a tax law firm operating out of Vancouver and Toronto, explains in a recent brief.

#91 Long-Time Lurker on 03.20.17 at 11:59 pm

#64 Will

My call: Toasted Kim Jong-Un in three years.

The US isn’t going to move all that hardware there and not use it.

Red China doesn’t want ROK on their border.

The best thing that could happen is Kim abdicates or a bloodless coup.

#92 CPM on 03.21.17 at 12:08 am

Hi Garth,
Quick question that I can’t seem to find an answer to and I’m hoping you can help! I’ll break it down for you. Purchased a 1 bedroom condo in 2011 – Moved into a rental house last year to enjoy more space – a killer rent to own ratio- kept the condo and rented to tenants starting Jan 2016. Was not trying to ‘get rich quick’, the plan was to hold for many years but things change. They are moving out in the spring and I’m planning to sell. Is my situation unique? Will I be subject to capital gains tax if I sell while renting? Should I move back and leave my wife at our current rental and have a man cave for the summer then sell:) thanks

#93 paulo on 03.21.17 at 12:23 am

#70

The IRS in the states has a auditing tool called a means test, when you get hit with one of them they study your entire life and assets you had better be able to prove you had the reported taxable income to support your lifestyle

#94 NOTHING SURPRISES on 03.21.17 at 12:38 am

From Grant Thornton tax guide: “Just because you live in a house that you own doesn’t automatically qualify it as a principal residence. For example, building contractors or house renovators who follow a pattern of living for a short period of time in a home they have built or renovated, and then selling it at a profit, may be subject to tax as ordinary business income on their gains.” The CRA rule is whatever the CRA rules. — Garth

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

I agree “The CRA rule is whatever the CRA rules”.
This is a mother & apple-pie statement applying to whatever you care to submit in your income taxes.

The point missed – “There is no rule in the Income Tax Act stating the length of time one has to live in a house to name it as your principal residence…….Period!!”

Own a house for whatever period as a principal residence and you are legally able to claim the principal residence taxable gain exemption ( the new form is required starting in the 2016 taxation year).

The CRA disallows…….. challenge the assessment or reassessment. If still disallowed apply to the TCC, research prior cases and you’re successful.

Another scenario.
You own two residences e.g. a home and cottage. You sell one. You are able to declare the one you sold as your principal residence achieving the capital gains exemption. Just prove residency (again, no length of time is specified in the ITA). The second property you cannot sell in the same year without paying tax on half the taxable gains at your mandated rate.

If you’re a builder/contractor you are selling product not a personal residence. You pay taxes as applicable.

Different situations!!

#95 Rook on 03.21.17 at 12:39 am

I am so confused why most are denying foreign money one of the top reasons house prices have been rising so insanely in the last few years. (Yes, house horniest being one of the top reasons as well.)
Take a look at Chart 9,10
https://www.td.com/document/PDF/economics/special/GTAHousing_Mar2017.pdf

How are you still denying this Garth?

#96 Steve French on 03.21.17 at 12:39 am

Yo Garth:

Frenchie from Down Under here! Transplanted Canuck mate.

How can one minimise USD exposure when the Australian market is so small and not that many ETFs are available on my Aussie bank platform?

To get the ETFs I want, I have to buy them from New York, but that means too much USD exposure.

Thanks mate!

AaAAaaaaaaaaaaaAussie Aussie Aussie Oi Oi Oi!

#97 Steve French on 03.21.17 at 12:41 am

ps: Smoking Man… I’m reading your book soon mate.

Don’t get your knickers in a knot.

#98 diharv on 03.21.17 at 12:44 am

Too much credence given to a N. Korea threat . Their rockets probably couldn’t hit the ocean if they were on the beach and toppled over , let alone Japan. Threat to N. America ? Not a chance. The only danger is them getting nuclear material in the hands of wacko extremist groups.

#99 april on 03.21.17 at 1:25 am

According to the Auzzy man, Lowermainland bc condos are increasing in price. Ross Kay says”crash” at about the same time the election is happening May 9th. Auzzy has something to gain from increasing prices, Ross Kay not. Who’s right?

#100 Doug in Rotorua, NZ (not London) on 03.21.17 at 3:24 am

So, it looks like all this time I’ve been gone, not a lot has changed back home. In other words, I haven’t missed much. While some of you have that last sleep before T2 slaps around investors (including myself) it will already be tomorrow here so rather than worry I’ll just take in more sights to see here on the North Island. Or, maybe I’ll just go for a nice soak in geothermal heated water, which is quite plentiful around here.

Just like my hiatus last year, did anyone here miss me? I didn’t think so.

#101 BobC on 03.21.17 at 5:00 am

Mirror image right down to the description of those against it.

http://www.reuters.com/article/us-canada-immigration-poll-exclusive-idUSKBN16R0SK?il=0

#102 Wrk.dover on 03.21.17 at 6:39 am

#108 Wrk.dover on 03.20.17 at 6:21 pm
http://thechronicleherald.ca/business/1451477-solar-for-farms-on-the-horizon

Can’t understand the premise of this one, other than being an offer of something for nothing

I was really hoping the pihranas on this site would sort out the tax incentive in this story, but not enough real estate in it I suppose. And contrary to the title, no farm either.

#103 NewGuy on 03.21.17 at 7:19 am

“For all you xenophobes, the bank also says a Chinese Dudes tax in Ontario would have no effect because there aren’t enough foreign buyers.”

Garth, don’t pull this Tim Hudak gibberish.

1. China already restricts foreign ownership of Chinese real estate.

2. 5% is a joke of a number. Anyone in the development industry will tell you it is much higher.

3. It will work. Even if foreign buyers are only 5% of the market they are almost certainly the marginal buyer in most of the transactions they are involved with. Eliminate the marginal buyer and prices will drop.

Speculation is a more greater influence than a small number of foreign buyers, almost half of whom settle here. — Garth

#104 A Reply to #44, #52 Economystical on 03.21.17 at 7:36 am

As you travel down the Road to Wigan Pier, you’ll come across Animal Farm on your left, sometime around Nineteen Eighty-Four. Keep the Apidistra Flying.

#105 Renter's Revenge! on 03.21.17 at 7:42 am

So, this assumes that if I have 30K cash I should plunk the whole 30K into the aforementioned percentages in a single day (or a few days) and not add to any positions until rebalancing is due after 6 or 12 months?

What is the recommended approach for those who don’t have large chunks of cash handy but are able to “contribute” to a diversified portfolio every 2 weeks?

Thanks!

So, keep contributing and maintain the weightings that way. — Garth

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

Nothing personal to the OP (because the same question has been asked multiple times), but if this is something you can’t figure out on your own, then you should be paying someone for financial advice.

#106 Chris on 03.21.17 at 7:49 am

Garth I think you are over complicating things regarding a suggested portfolio. A three ETF portfolio will work for most people and is far simpler. 20% Canada, 40% global excluding Canada and 40% bonds. You think 3% emerging markets is going to move the needle? Multiple bond holdings? Just complicating things for dummies who can’t even open a TFSA.

A 40% bond weighting is ill-advised. — Garth

#107 Ferrari321 on 03.21.17 at 8:24 am

thought u might like this

https://onbeyondinvesting.com/blogs/blog/i-attended-the-top-of-the-canadian-housing-market-so-you-didnt-have-to

#108 Bark on 03.21.17 at 9:01 am

I would speculate that offshore buyers aren’t buying and selling the rest of the market, they are buying and holding. If 4.9% of the market is a faction that is buying and holding year after year it will dramatically boost prices long term.

#109 NoName on 03.21.17 at 9:37 am

I would like for Canada to be more like Switzerland, is that to much to ask.

https://www.youtube.com/watch?v=R9hAAaXQaZ0

#110 traderJim on 03.21.17 at 10:00 am

The mighty buck continues its dramatic drop after Yellen RAISED rates. Her wildly dovish talk (I guess the idea of a quarter point raise, the 3rd in 11 years, scared her) after the fact lead to Goldman saying the overall effect of the Fed’s move was equal to a quarter point REDUCTION in rates (yields falling across the board etc)

Ahh, such incompetence in an important role is rare indeed. Oh, wait a sec, no it’s not.

Expecting her to send out the troops soon to start talking rates back up and cover up her mistakes.

Might be time today to re-establish a loonie short, but I just think we might get another cent more before the dollar reverses.

And I am in no rush. Patience is the key, I have learned the hard way.

#111 Skeptic on 03.21.17 at 10:00 am

Hmm….To dampen volatility! Bonds usually move in the opposite direction of equities, Garth is this an axiom or the theorem?

#112 Penny Henny on 03.21.17 at 10:03 am

#94 CPM on 03.21.17 at 12:08 am
Hi Garth,
Quick question that I can’t seem to find an answer to and I’m hoping you can help! I’ll break it down for you. Purchased a 1 bedroom condo in 2011 – Moved into a rental house last year to enjoy more space – a killer rent to own ratio- kept the condo and rented to tenants starting Jan 2016. Was not trying to ‘get rich quick’, the plan was to hold for many years but things change. They are moving out in the spring and I’m planning to sell. Is my situation unique? Will I be subject to capital gains tax if I sell while renting? Should I move back and leave my wife at our current rental and have a man cave for the summer then sell:) thanks
========================

If you lived in the condo starting 2011 then for years 11,12,13,14 and 15 it was a principle residence. For 2016 and 17 it was not. Google the tax for it will explain.

#113 Citizen on 03.21.17 at 10:05 am

Garth,
Do you get to participate in the budget lockup?
I would think this great blog would qualify you as a journalist.

Thanks for this blog!
Citizen

No pathetic bloggers allowed. — Garth

#114 traderJim on 03.21.17 at 10:09 am

I can’t help but notice that the ‘solution’ to every problem noted here (RE prices being the prime example) is always, I repeat: always, TAX something!

I really despair for humanity when I see the constant cry for government to solve the problems it created by doing even more stupid, s…tuff.

Higher taxes and more spending are not the answer to everything. Shouldn’t have to say that after 50 years of ever-bigger failures in this regard, but I guess you can’t un-teach what folks learn in University, unfortunately.

As Garth noted, some people even believe the Vancouver market imploded on its own as prices got too high. Imagine that, markets work when left alone.

Of course, they’d work a lot better if they really were left alone and asset bubbles weren’t constantly created by central banks and government policies and agencies (like CMHC).

But, I might as well be talking to a wall.

Only real solution is to go on strike so at least I don’t have to pay for the idiocy going on. Check.

Then I have to stop watching MSM so I can regain faith in humanity. Check.

Only thing left is to drop social media totally. Seriously considering it. But so far I can still handle a little bull…oney each day.

#115 traderJim on 03.21.17 at 10:14 am

#94 CPM

Sorry, but it’s hard to think of a dumber idea than owning a property that you rent out and then renting yourself.

I’m sure you have a long list of reasons why it just had to be done.

Going to be an expensive decision.

#116 traderJim on 03.21.17 at 10:22 am

#94 CPM

Hope I don’t have to point out to you that the rental income is taxable, and that the rent you paid is after-tax income and not deductible from the income you earned from the rental?

(Actually, now I think of it, you could probably make a good case that the rent you paid IS or should be deductible, although most people presented with the scenario would question why anyone would ever want to do it in the first place).

#117 NoName on 03.21.17 at 10:50 am

I know why trupm is stressed out now days, got nothing to do with new responsibilities or msm attacks.


“Rather, Trump’s net worth is down because about 40 percent of his wealth comes from real estate he owns in Midtown Manhattan, including Trump Tower and eight other buildings within about a mile.”

https://www.washingtonpost.com/news/business/wp/2017/03/20/trump-drops-220-spots-on-forbes-list-of-billionaires/?utm_term=.d6e21ff4d824

#118 PPP on 03.21.17 at 11:00 am

CRA could recoup tens of billions of $$ if they wanted to. Link provincial land registries with them and develop an algorithm to catch real estate Cap Gains Tax evaders.

But wouldn’t catch those with multiple passports/identities that are coming in now.

Multiple identities? You’re watching too much TV. — Garth

#119 PPP on 03.21.17 at 11:32 am

Not really. Biometrics system was to be put in place by 2018 as per CSIS. T2 shelving plans. Wonder why??

This and 10 yr visitor visas = priceless.

https://www.google.com/amp/s/www.thestar.com/amp/news/immigration/2015/06/04/stephen-harper-announces-more-money-for-csis-spy-agency.html

#120 fantastic on 03.21.17 at 11:34 am

bearish engulfing pattern developing on the qqq’s on HUGE volume. The day is young

been looking for an entry point, finally a downleg

#121 Damifino on 03.21.17 at 11:36 am

Terence Corcoran writes of government innovation in this morning’s Financial Post. Here is his summary illustrating why there’s no hope with the Liberals:

“In summary, as gleaned from government documents, the Innovation Agenda aims to, ahem … strengthen innovation networks and clusters by getting stakeholders to work together and collaborate within supply chains to fill information gaps and establish linkages to catalyze private sector dynamism and scale up to generate greater value from public investments and enable the pursuit of ambitious initiatives that bring a critical mass of stakeholders together and connect their clean and green ideas to the marketplace.

What an absolute crock! I’d have been fired on the spot for just cause if I’d ever written anything like that. It’s manager-speak bumf written by bureaucrats without meaningful jobs and no idea what’s going on. The target audience is other chair warmers in the next office.

#122 cramar on 03.21.17 at 12:07 pm

Why Americans are broke and fat!!

https://moneyish.com/splurge/this-is-why-americans-are-broke-and-fat/

———–

Forget iPhones — many Americans can’t pay a $100 medical bill

http://www.marketwatch.com/story/forget-iphones-many-americans-cant-pay-a-100-medical-bill-2017-03-21

#123 Josh in Calgary on 03.21.17 at 12:17 pm

#94 CPM,
You should have had a market assessment done by a realtor when you moved out and it ceased to be your principle residence. That way you would have a valid opinion of what capital gains occurred while you were living there vs. when it became an investment property.

You could still base this off your tax assessment I suppose.

#124 TurnerNation on 03.21.17 at 12:18 pm

Shopify on TSX or SHOP.US is so bloated and distended. Kaputs.

#125 Ace Goodheart on 03.21.17 at 12:30 pm

RE: #3 Ray Skunk on 03.20.17 at 6:39 pm

Apparently 15,000 people attended. 15,000 x 150 = $2,250,000.00

Apparently how you get rich in real estate is to hold seminars ;)

#126 westcdn on 03.21.17 at 1:03 pm

These are interesting times to be a Canadian Equity investor. I am waiting for T2’s budget announcement before I take any actions. I think raising the capital gains/losses inclusion rate is a dumb idea and reducing the Dividend Tax Credit is more idiotic. I may end up spitting after saying Trudeau. The big question I have now is how far the Fed will raise rates because I can’t dodge them.

I am okay with automation. I would not mind using robot financial advisors or doctors as they would inform me of things I don’t know. They would not be authorized to do anything on my behalf. I need an app to let people know I have died – looking. Until that day arrives, I am concentrating on sustainability projects.

I came across the rocket stove – I like. The principal reminds me of the stoves I installed in Guatemalan villager homes (shanties actually). http://sustainablog.org/2011/09/how-to-build-a-rocket-stove/ These are simple models. There are bigger and more complex models.

#127 Cici on 03.21.17 at 1:07 pm

So Garth, your team is against a flipper/specker tax?

https://www.bnn.ca/let-s-not-start-monkeying-around-money-manager-scoffs-at-ontario-s-call-to-target-home-flippers-1.702046

“Let’s not start monkeying around with increasing the capital gains inclusion rate, that has huge ramifications for investments whether it be real estate or stocks or bonds,” said Ryan Lewenza. Makes sense to me. There are other ways to spank speckers. — Garth

#128 Leo Trollstoy on 03.21.17 at 1:17 pm

Canada is BOOOOOMING!

As I stated here many times, real estate will remain strong in toronto as long as the Toronto/Ontario/Canadian economy remains strong. And those economies are strong. Jobs are plentiful. Money is inexpensive. Toronto boomers are rich.

https://beta.theglobeandmail.com/report-on-business/canadian-retail-sales-jump-22-per-cent/article34360496/?ref=http://www.theglobeandmail.com&service=mobile

#129 Leo Trollstoy on 03.21.17 at 1:18 pm

It’s going to be a dog fight between he CAD and USD. Both economies are strong.

Inflation going up folks. Rates too.

#130 TurnerNation on 03.21.17 at 1:25 pm

C’mon guys our ruling elites have been dangling these thing over our heads for half a century now: North Korea threat. Middle east peace process.

A trillion dollar USA defence budget and you want peace? Ha ha ha. Learn from the past.

#131 Ole Doberman on 03.21.17 at 1:38 pm

Looks like Garth had made the right suggestion:

http://www.bnn.ca/ontario-calls-on-ottawa-to-change-tax-rules-to-curb-real-estate-speculation-1.701644

#132 SCD on 03.21.17 at 1:43 pm

I wonder if increasing the capital gains tax would decrease housing supply in the market and have the unintended consequence of increasing house prices. Of course the capital gains tax does not apply (at this point) to a primary residence but anyone holding on to a rental property might delay selling it hoping for a capital gains tax reduction by the next government. A cornered squirrel tends to hold on to it’s nuts.

#133 Jesse Wierz on 03.21.17 at 2:19 pm

Sample Garthfolio?

ZAG 7% (federal bond etf)
ZPL 7% (provincial bond etf)
ZHY 16% (US corporate bond etf)
ZPR 20% (preferred share etf)

VTI 20% (Total market etf in US$)
VCN 15% (Canada equity etf)
VRE 5% (Canada REIT)
VXC 20% (World ex-canada equity etf)

#134 rainclouds on 03.21.17 at 2:31 pm

Here you go Smokey, “souljacker” not sucker and from this century too!

https://www.youtube.com/watch?v=PNEVbhqkKhY

#135 rainclouds on 03.21.17 at 2:53 pm

Is it possible lil Potato and wild Bill have actually formulated a credible long term housing decoupling strategy? Subtly shifting the blame from the politicians who are reluctant to do anything substantive, and foisting it on CRA

-Declaration on income tax (check).
-As sales take place over time the foreign owners, spekkers, landlords, underground basmt suite owners must report (check)
-The CRA henchmen get to work beating the tax out of the non principal res prop owners. (check)

Long end game, but Lil Potato and Billy Bob desperately trying to avoid housing price rollover (like 2006-06) Instead, spread it out indefinitely.
Howls from the taxed will engender O sympathy from the plebes…….politicians can point to the impenetrable CRA for answers. None will be forthcoming.
20 yrs of housing capitulation ensues.

#136 common sense on 03.21.17 at 2:55 pm

#131 Leo

Your the best!

#137 Lee on 03.21.17 at 3:23 pm

#138, Jesse

Figures you like your portfolio so much, it adds up to 110%. Isn’t that cheating?

#138 Cheap Houses on 03.21.17 at 3:33 pm

So what exactly has Trump been lying about on Twitter?

Because YES the Trump Tower was being surveilled and NO there is zero evidence of Russian Hacking the election (the story the fake news will not let die).

Funny. — Garth

#139 Tudval on 03.21.17 at 3:39 pm

Another article in the series ‘tax somebody else and this free-marketeer will cheer as long as it’s not me’. Of course most will cheer as well. Taxing somebody else is almost as good as me getting a tax break. Note that nobody is proposing taxing institutional flippers of IPOs, that is legit shafting of the little guy (perhaps the same little guy who’s trying to make a few bucks flipping a condo after being burned in the stock market).

The fact is, in the detached home segment in Toronto there’s not much speculation to speak of. Most investors renovate or rent out and sell either down the road or value-added. Some who find themselves sitting on good profits after just 1 year, sell without doing anything. Everybody hates them for making money, even if, when you think of it, they bought one, they sold one – net effect on the market = 0, but for the govt = mucho taxes. + It’s their loss, it would be much better if they held on for longer and get much better risk/return ratio. Which is what a new tax will force them to do. You must be nuts to thing that with turnaround costs >100k for any detached, anybody buys to turn it within one year. Another solution looking for a problem.

To some it up: if the government interferes (again) it’ll backfire nicely (ummm, again).

The only negative impact (if any) will be in the condo market – but that’s somebody else, not me, so go for it.

#140 Herb on 03.21.17 at 4:15 pm

So greedy would-be homeowners and upgraders wandered the streets in the dark, and government beheld that this was not good, and arranged for lenders to park trailers full of ripe money everywhere so that all could gorge on mortgages and satisfy their house lust.

And lenders and governments lived happily ever after, or at least until problems appeared, when they were able to absolve themselves and blame those who had yielded to the temptation to help themselves to the easy green.

#141 Waiverless on 03.21.17 at 4:21 pm

#142 Lee, #138 Jesse Wierz

“Figures you like your portfolio so much, it adds up to 110%. Isn’t that cheating?”

Probably a typo with ZHY – must be 6% not 16%

#142 Johnny Boy on 03.21.17 at 4:24 pm

#35 Smoking Man on 03.20.17 at 8:08 pm

#1 NoName on 03.20.17 at 6:34 pm
Hey, smoking man can you reach out to flop and sea what’s up with him, didn’t post for a while.
…..
I noticed that…Probably has his reasons.
I’m winding down my twitter. I’ve removed all political posts from facebook. Removed everything from Linkin. Sensing a witch hunt for deplorables in the near future.
Never realized how powerfull these globalists are. The have a mental case herd that they easy control.
Trump hasn’t gone after anyone yet. He’s weak.
Things are polarizing as Garth pointed out on top. Brown shirts are coming…
Time to shut up.
_________________________________________

Now thats a joke after you posts another 5 or 6 blog posts.
BTW dumb ass the brown-shirts were the Nazis! And why are you worried about deleting everything when you’ve posted your name, address and vehicle type on here. You had better go dark now Smokie!

#143 Cheap Houses on 03.21.17 at 4:32 pm

#143 Cheap Houses on 03.21.17 at 3:33 pm
So what exactly has Trump been lying about on Twitter?

Because YES the Trump Tower was being surveilled and NO there is zero evidence of Russian Hacking the election (the story the fake news will not let die).

Funny. — Garth

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

Yes hilarious. Almost as funny as the MSM saying Clinton was a shoe in.

http://www.independentsentinel.com/trump-tower-server-surveilled-obamas-january-eo-expedited-leaking/

By the way you will never see anything from the MSM about Trump Tower Surveillance now so please do not bother asking for “links”. This is why the MSM is dying a slow death.

#144 Cici on 03.21.17 at 4:50 pm

So Garth, your team is against a flipper/specker tax?

https://www.bnn.ca/let-s-not-start-monkeying-around-money-manager-scoffs-at-ontario-s-call-to-target-home-flippers-1.702046

“Let’s not start monkeying around with increasing the capital gains inclusion rate, that has huge ramifications for investments whether it be real estate or stocks or bonds,” said Ryan Lewenza. Makes sense to me. There are other ways to spank speckers. — Garth
____________________________________________

OK, I get it…thanks for the clarification ;-)

#145 mike from mtl on 03.21.17 at 4:53 pm

#138 Jesse Wierz

ZAG has a bunch of long duration bonds, beware of that.

VXC contains more than 50% US so that adds up with VTI.

Workable just be aware of what you’re buying.

#146 Mortgage broker FRAUD on 03.21.17 at 5:30 pm

Euro Observer on 03.21.17 at 2:01 pm
http://www.zerohedge.com/news/2017-03-20/i-attended-top-canadian-housing-market-so-you-dont-have

The sad reality of giving face to and allowing braggers, the likes of the ‘The Çondo king’ to openly acknowledge widespread fraud in mortgage lending without any repercussions whatsoever by the ‘watchdogs’and ‘regulators’ and the incompetent at BOC who observe their own little tiny dicks (with a magnifying glass)
with no balls whatsoever.
—————————————————————–

Amazing how they openly admit to wide spread mortgage fraud but this is no secret. I know countless people who’s “mortgage broker” bent the rules . I would guess at least 50% of Mortgages are total frauds and do not meet requirements. Mortgage FRAUD has been going on for many years

http://www.theglobeandmail.com/real-estate/the-market/mortgage-fraud-on-the-rise-among-brokers-trying-to-help-clients-qualify/article27051297/

http://www.huffingtonpost.ca/2017/01/11/mortgage-fraud-canada_n_14103764.html

How does the Government allow CMHC to continue when taxpayers are on the hook for FRAUD. Let the banks take the risks and you will see these fraud mortgages stop.

#147 Lee on 03.21.17 at 5:33 pm

#146, Waiverless, #138 Jesse,

I figured there was a typo somewhere. I was just kidding around bringing the 110% to Jesse’s attention.

#148 Jesse Wierz on 03.21.17 at 5:45 pm

Sample Garthfolio 2.0

ZAG 7% (federal bond etf)
ZPL 7% (provincial bond etf)
ZHY 6% (US corporate bond etf)
ZPR 20% (preferred share etf)

VV 21% (US Large Caps in US$)
VCN 16% (Canada equity etf)
VRE 5% (Canada REIT)
VIU 18% (Developed ex N.America etf)

*not my portfolio, just trying to visualize the paragraph in OP.

-I don’t know what “plus a little slice of high-yield debt (paying about 7%)” means. Care to expand, Garth?

-Are corporate bonds essentially more tied to the stock market then in exchange for higher yield?

#149 Jesse Wierz on 03.21.17 at 5:47 pm

Alternative with one extra etf because 2.0 doesn’t include emerging markets

Sample Garthfolio 3.0

ZAG 7% (federal bond etf)
ZPL 7% (provincial bond etf)
ZHY 6% (US corporate bond etf)
ZPR 20% (preferred share etf)

VV 21% (US Large Caps in US$)
VCN 16% (Canada equity etf)
VRE 5% (Canada REIT)
VIU 15% (Developed ex N.America etf)
VEE 3% (Emerging Markets etf)

#150 A Reply to #148 Cheap Houses on 03.21.17 at 5:51 pm

If the mainstream media is dying a slow death, it’s only because nobody wants to pay for investigative journalism anymore.

Don’t you think that reporters and journalists get into journalism because they want to get at the facts and to unearth the truth?

The fourth estate is protected by the First Amendment of the U.S. Constitution.

“Where the press is free and every man able to read, all is safe.” — Jefferson

“Four hostile newspapers are more to be feared than a thousand bayonets.” — Napoleon

#151 Cheap Houses on 03.21.17 at 6:11 pm

#155 A Reply to #148 Cheap Houses on 03.21.17 at 5:51 pm
If the mainstream media is dying a slow death, it’s only because nobody wants to pay for investigative journalism anymore.

Don’t you think that reporters and journalists get into journalism because they want to get at the facts and to unearth the truth?

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

Your wrong on so many levels….

“During a lively discussion centered on fears that President Trump is “trying to undermine the media,” MSNBC’s Mika Brzezinski let slip the awesome unspoken truth that the media’s “job” is to “actually control exactly what people think.”