Dr. Blog

Hear Garth in Halifax
Tuesday, 7 pm @ the Westin. Free admission.

heavy house

Herr Doctor is IN. First patient, please.

Dear Garth: I follow your blog with great interest and admiration. I’m writing in the hope that you might have a word or two to share about my unusual situation.

I am probably a fool of  different sort to the crazy real-estate junkies out there, but I want to know your opinion on my situation: I’m a 40 year single woman, an ex-corporate lawyer with roughly $1mm in assets, of which $500k is just cash sitting in a savings account, the rest is various ETFs. I have zero liabilities. I pay $24k in rent annually as I live in a nice 2bdroom condo in Toronto downtown. I’m currently off work and do not plan to return to law. I will eventually transition into a dramatically different vocation (such as teaching) which will also not be nearly as lucrative. But I’m ok with that because I had grown utterly disillusioned as a corporate lawyer, and I want to spend the second half of my life engaged in doing work that nourishes my soul more than my ego.

I eventually want to own property in Toronto, but can’t digest the idea of buying something right now at the peak of the market. I should’ve bought 10 years ago, but was not wise enough. Am I still an utter fool for not buying today or should I wait a year or two?

Many thanks, Maya.

A 40-year-old successful single female urbane millionairess exuding cash and self-confidence looking for a chance to express herself? And who says this blog is just for basement-dwelling losers from Kelowna?

Well, obviously you have one screwed-up portfolio. Half is in a savings account doing nothing, and the other half is invested in exchange-traded mutual funds likely pacing the market, which has just advanced 25% in six months. Are you as wild as your investment choices?

You need some help, Maya. That million should be earning a steady 8% in tax-smart income, like dividends or capital gains, while providing some balance to ensure you can withstand the inevitable stock market pullback, interest rate advance and possible second leg down of this economic mess. That means a portfolio of short bonds, preferreds, cash equivalents and equities in sectors like financials and energy.

You’re wise to wait this housing market out instead of spending this capital on an asset more likely to decline. We  should all be as foolish as you. Email me for more. Send photos.

Next!

Hi Garth,
I’m hoping you can advise those of us who already bought a house back in the hayday (mid 2007). My wife and bought a 400K house with  20% down and a VRM of prime minus 0.9 for 5 years, we also amortized over 25 years and are making accelerated weekly payments.  We like the house and don’t plan to flip it anytime soon.  But with all the chatter about the impending housing market collapse, I wonder whether it makes sense to stay in the home or to sell and rent until the worst passes.

Things are good for now, our mortgage  payments are very low (for the moment), and the extra income we have is going towards paying off other debt, i.e. student loans and car payments.
our combined gross income is just over 100K.

what should we do? Keep the house and pay as much debt as possible while the interest rate is good? or sell the house and downsize so we can live frugally on 1 person’s income, a contingency plan in case one of us loses their job or wants to go back to school

If we do sell the house and rent instead, our monthly payments will be comparable to what we’re paying as mortgage right now, no special advantage there.  But on the flip side, we would be able to pay off all our debts and have some money left over to invest. — Famod

Can’t comment much without knowing what the house is worth today, and local market conditions. But this much is obvious to me: We’re at the top of the curve. So if homes around you have been going in bidding wars, and you can make a semi-serious non-taxable capital gain on the $80,000 you invested, why not?

Besides, it sounds like you’d have a hard time getting by if mortgage rates shot higher or one of you lost an income. Caution is always good. And never moreso than now. On the other hand, you’re doing a lot better than 90% of the newbies who’ve bought in the last two years, so you don’t need advice from me. Next!

Garth: I’m 27 years old, no debt and I have managed to save and budget well. I’m lucky to be living with with a family member. I’ve been wanting to leave the nest for years now but right when I finally had the means (out of school and working full time) the real estate in Vancouver went insane!

To be honest, in Vancouver right now everyone I talk to seems to think that since it’s “booming” again that it will never go down. My buddy just listed his condo (500 sq ft) at $399,000 he had 20 offers and it sold for $425,000. I told him I was happy for him, but that it’s just not sustainable….his response to me was “Vancouver has changed man, you have no idea how much money is in this city, plus we have the mountains, ocean, olympics and rich Asians…real estate can never go down! You missed the boat dude”

Any predictions for if and when Vancouver specifically will ever stop? I refuse to believe Vancouver won’t correct harshly soon…..but with locals all thinking that the world will move here after the olympics, that if they don’t buy now they’ll be “priced out forever,” and the sick fact that people are USED to making $425k offers on 500 sq ft condos with no view and a curved wall in the living room even I am starting to worry that my waiting is just going to screw me in the end. Meanwhile I just keep saving and saving and getting further and further behind, that 3.85% 300k mortgage is looking pretty good right now. –  Jim

Dude. Relax. You’re right to come to the clinic today because this pandemic is spreading something crazy. Vancouver has been infected, and most people have no idea what the outcome will be. Trust me, there are not enough smart, rich Asians floating around to bail out the Lower Mainland now. The only vaccine is common sense. And we’re still waiting for a shipment from Ottawa.

In the meantime, bring out yer dead!

BTW, here’s why Van is screwed. In the medical sense.

Van prices

94 comments ↓

#1 [email protected] on 10.04.09 at 6:23 pm

Garth, where I live near Milton, Mississauga Rd. and Queen St. the house prices keep going up. Houses start at low 700k and up – So many negative things have happened in the market – recession, loss of jobs etc., don’t know what else to wait for except nuclear warfare – waiting for when prices go down.

#2 mooncake on 10.04.09 at 6:34 pm

My advice to all that want to buy right now is wait a year or two at least. As Garth has stated, 90% of us don’t have common sense and have indeed become the greater fool. Don’t be a follower, but a leader. A house should not be treated as an investment but as luxury lifestyle change.

#3 crashcow on 10.04.09 at 6:40 pm

“…should be earning a steady 8% in tax-smart income…”

Garth – please elaborate on this point. I am very interested

#4 jess on 10.04.09 at 7:17 pm

…seems like the same conversations that go on today were the topic of the thirties. It was thought that banks should have 100% reserves and do away with deposit insurance.

http://books.google.ca/books?id=izO25SyQU9QC&pg=PA184&dq=henry+simons+irving+fischer+and+the+chicago+plan+1930#v=onepage&q=&f=false

The Chicago plan & New Deal banking reform By Ronnie J. Phillips foreward by hyman p. minsky.

#5 Firma on 10.04.09 at 7:58 pm

Garth: “Are you as wild as your investment choices?”

Man, you have great sense of humor :)

#6 Onemorething on 10.04.09 at 8:19 pm

Miss 40 ex-corp law – you are so money right now. World is your oyster and I mean WORLD! Park the cash safely as the G-man recommends, teach anywhere in the globe, travel, find self, reap rewards!

Mid 07 400K house – sell, rent, breathe!

Vancouver Guy – Asians are moving to SE Asia, Westerners are moving to SE Asia. Collapse in Vancouver market is imminent, so much, it may be the last place you wanna live! Oh yeah, get new friends la!

#7 jealous taxpayer on 10.04.09 at 8:25 pm

Houses in BC will always be worth more because of the ”grow up” premium.
I work in the paper industry and yesterday I just discover that two of my friends have grow ups in their basement since 5 years.
I could not beleieve it so they showed it to me. It is truely amazing. In an aera of less than 70sqt they grow up seevral plants that bring close to 20000 cad every 6 weeks.
I dont know how to feel about it, I keep working for years and today make 60000/year and if you consider taxes I pay, that makes it less than 40000 a year. And some money I have in the bank is earning less than 1%.
Those guys make more than that in 3 months.
I am seriously considering doing the same thing, it seems everybody is doing it and there is no much harassement from the police for small size grow ups. Am I wrong? What is going on here I dont understand?

#8 Bob on 10.04.09 at 8:33 pm

October: the death of Canadian real estate

#9 TheFirstRick on 10.04.09 at 8:36 pm

#7 jealous taxpayer on 10.04.09 at 8:25 pm
*************
I’ll say it for the 100th time; BC is the Narco state of the north and the “invisible tenant” is the largest single contributing factor to BC’s out of wack real estate prices.

#10 double mike on 10.04.09 at 8:37 pm

1. I rent a 3 br townhouse in Mississauga near Oakville border for 1500/month. The rent hasn’t changed since I moved in 4 years ago. Historically price to rent ratio is 100 to 120. Let’s be pessimistic. 120 * 1500 = 180K. A unit in the same complex went this spring for 285K. 100K difference.

2. An average gross family income in Mississauga is around 75K. Historically price to gross ratio for the upper border or affordability is something like 3.5.
3.5 * 75K = 262500. You won’t find a livable detached house here for less than 400K.

Have I mentioned that I rent 5 minutes drive from work? I guess I have…

#11 taylor192 on 10.04.09 at 8:40 pm

To the 27yo dude from Van:

I moved to Van from Ottawa a year ago and find the housing market here crazy. I have enough for 10% down on a $500K condo, yet choose to wait this out.

Lets tackle this in 2 ways: Financial and Personal

Financial:
I am renting a 2bdrm condo in Kits for $1900/mn worth ~$500K. Now do the math:
$500K – 10% down = $450K mortgage
$450K mortgage @ 4% over 25 years = $2000/mn
$500K x 0.6% property tax = $250/mn
$300 condo fee
==
$2550 owning vs $1900 renting

The $650 I save each month is more than the $500 principal being paid down on the mortgage.

Personal:
Why do you want to own?
– To avoid having to move? Most landlords like good long term tenants.
– Cause “owning” gives you a nice warm fuzzy? Get some Vancouver bud, its a better high.
– Cause you want to personalize your “own” place? Condos don’t allow for very drastic renovations, so I personally don’t see the need to own. If you want a nicer place, rent a different place! $500 to move vs $Ks to renovate.
– Cause you want to build equity? We addressed this earlier, I’m saving more than any recent home buyer.
– Cause everyone else owns a 500 sqft closet in Yaletown? Go jump off a cliff with the rest of the lemmings. Oh, and my 2bdrm condo I’m renting is 1000 sqft, much bigger than most new condos being sold.
– Cause everyone made big $$$ and you feel you missed out? I always justify this by noting they haven’t actually made any money unless they cash out and move to the burbs or away from the GVA, and most won’t, they’ll be here when the market crashes from inflation, or slowly deflates with deflation.

#12 Shawn Allen on 10.04.09 at 9:02 pm

The career-transitioning girl is in an unusual situation. A pot of money but no employment income.

Garth is correct, invest in dividends. With no other income I understand the one can make quite a lot of money with dividends before any taxes are paybale and even once you start paying taxes, they are way lower than normal income taxes.

So, stay clear of interest income. favor dividends and some capital gains.

Subscribe to the Money Letter at Investment Reporter, MPL Communications

http://www.adviceforinvestors.com/

or look up what Gordon Pape has to offer

http://www.buildingwealth.ca/Newsletter/index.cfm

And don’t buy a house because maybe your next carrerr will be outside Toronto…

#13 Boombust on 10.04.09 at 9:12 pm

I think that “millionairess” is a phony; HOWEVER, your advice about Vancouver is bang on, as usual.

I have lived here all of my life. I have seen the boom years of the 1960’s, the superboom of 1973-74, the colossal boom of 1981 (that popped spectacularly!), the 1989 boom, the flatlining of the 90’s…

Some people just don’t get it.

Oh, and by the way, contrary to the myth that Vancouver prices are going up day by day, instead, I’m seeing REDUCTIONS and longer days on the market in the immediate suburbs. (Coquitlam, Port Moody, etc.)

Overall inventory is rising, too.

For example”investors” are losing their shirts in a brand new high-rise, “The Nahanni” in Port Moody.
The builder, Polygon, is trying to flog about 8 unsold two bedroom/bath units in the low 500K range.

The local “RealtyLink” site has the SAME units listed in the 360K range. Go figure.

It’s all a load of nonsense.

As a matter of principle, every letter posted here comes to me as they are presented. — Garth

#14 bill on 10.04.09 at 9:35 pm

jealous taxpayer I am having a little trouble with your story. The numbers do not add up to my limited knowledge of the biz.
First off ,if a jealous neighbour rats you out, expect a visit from police,the fire dept and the bylaw officer.
Second ,a look at the size of a commerical greenhouse gives some clues to how much space you need.
70 square feet is not enough room. Each plant will occupy as much space as a tomato plant in a commercial greenhouse. And you will need a clone room and a mother plant room each with its own group of lights. Basically it is the entire basement in a regular house. Each 1200 watt lamp will consume around a hundred bucks a month in electricity because you are not jumping hydro, are you?Those lights will have to be replaced every 3 or 4 months as the amount of light in the correct wavelengths will diminish. Not to mention the pig farm grade de-odourizers to kill the smell of your crop.
Then there is the art of hydroponic farming.Not an easy skill to learn I hear.
I dont want to give a blueprint for a grow op so suffice to say there is a lot to it.
And where are you unloading your weed? Got lots of friends that will consume the product? If you dont it would probably mean you are selling to certain kind of person who belongs to a motorcycle fraternal organization. Those guys dont pay top dollar.
I would give the mortgage helper grow op a miss. There is a lot of downside.
Hey Garth, Any chance the liberals would legalize it and get rid of the aformentioned bikers money stream? I am sure a reasonable tax on the product be acceptable by those concerned about such matters. Why should criminals get the money?

#15 homeless on 10.04.09 at 9:56 pm

Garth,

Have you stopped forecasting time line for RE correction? I thought your first patient was asking about when.

#16 S. on 10.04.09 at 10:16 pm

Back in 1982, when I returned to Alberta from a brief trip to Vancouver, an oil patch friend of mine said: “…Yeah, Vancouver used to be a nice, affordable place to live in. Then rich Arabs moved in and begun to buy up real estate. They drove the prices up so high that average Canadian just can’t afford the place anymore… “ (I assumed that by rich Arabs he meant Iranians escaping Khomeini’s revolution.) Aside of the “rich Arabs” becoming “rich Asians” the story hasn‘t changed much… We can all speculate about the reasons or what the final outcome will be, but is seems that Vancouver for decades now has been considered unaffordable and yet prices continue to creep up with occasional modest pullbacks. As I am not invested there I watch with amusement the ongoing debate as to what will come next. To me history is the best teacher. But hey, anything could happen…

#17 HouseBuster on 10.04.09 at 10:28 pm

Once the olympics are over you will see a crash in Vancouver housing. Until then, party like it’s 1999.

#18 Burls on 10.04.09 at 10:32 pm

Garth:
I’m hoping you can give us some advice about this gorgeous little house we found on Marine Dr. in Vancouver.

http://www.realtor.ca/propertyDetails.aspx?propertyId=8056330

My better half, Matilda, has just got her heart set on it.
We’ve got just enough to make the 5% minimal down payment and we got a 5-Year Closed 35 Year Variable Rate Mortgage from President’s Choice at 0.20% above Prime.
The monthly mortgage payments will start at $9810.75, which I can just manage.
The only problem is that if the Prime interest rate goes up we’ll have to sell.

Do you think we should quit being so apprehensive and just take the bull by the horns here?
We look forward to hearing your advice, Garth.

Burls and Matilda

#19 nonplused on 10.04.09 at 10:47 pm

If you are getting dividends right now, it’s all risk premium. While I agree with Garth’s investment advice generally, I think it’s too early to climb out of the bunkers. Let’s wait and see how the economy does sans stimulus and wade in a bit at a time rather than jump off a bridge.

I just cannot get it through my head that Canada is going to be the only country in the world that does not have to reckon for the recklessness. Why are we immune?

And Maya, rrrooww. Smart woman. But why abandon the horse that you rode so far, just because of a bit of disillusionment? Maybe there is another area of law where you feel you could make a better contribution to society maybe serving sectors that need the help, but can’t pay quite as much? There are many worthy causes, and some of them are even in law.

#20 nonplused on 10.04.09 at 10:57 pm

PS to Maya,

For example, there are going to be a large number of Canadians foreclosed on and suffering from the “recourse” nature of our mortgage laws after all of this preditory lending by CMHC, should rates ever tick up just a bit and threaten an upward trajectory or if for some other reason the bottom falls out of the market. Why not retrain to be a bankruptcy lawyer on the defendant’s side? No one wants to do that and it doesn’t pay really well comparitively, but I think it’s going to be a booming market in the next few years.

When interest rates just simply “normalize”, there will be many people out of thier homes with CMHC coming after thier RRSP’s, even if they haven’t lost thier jobs. Having someone around to make the case that CMHC facilitated and implemented preditory lending on a national scale will be what we need.

Stick it too them on a technicallity like some of the US judges are doing. There are judges in the US throwing out cases because the paper trail isn’t sufficient through all the securitization. We need brave legal people like that here too.

Part of the reason there are rising numbers of people up to 2 years behind on thier payments US side. The banks are afraid to foreclose.

#21 homeboi on 10.04.09 at 11:11 pm

This is a new paradigm if you don’t buy now you will be priced out forever.

10 years from now, we will have tent city for you renters. A starter home will cost 1,000,000.

The gain in real estate is permanent.

#22 Honey on 10.04.09 at 11:22 pm

Uh wow…i feel like the world just left me behind…datz such an interesting use of a basement….hmmmm….

#23 Lucky C on 10.04.09 at 11:38 pm

Again with the rent versus buy talk… One thing that everyone is forgetting is that this whole debacle is going to unfold V E R Y s l o w l y . I for one am more than happy to continue to rent the 2 acre property with 2000 sq ft house (including hot tub and sauna) for 2k per month while the owner (a developer from Cow Town) haggles with the local council as to whether or not the will allow his zoning app for high density. Let’s suppose my wife gets up the courage to tell her SOB boss to go pound sand and finds a great job opportunity that requires a re-location…. 30 days later we can go. So I’ve ‘missed out’ on seeing my 400k worth of conservative RRSPs take a 50% hit in the last year like a co-worker, at least I was blowin high dough finding out what not to do, retaining the capacity to try again and building GREAT stories for ye olde rocking chair at the end of the road. Did I mention that Vancouver Island is just as delusional as the lower mainland? My landlord supplies this utility to look after the place. Perhaps I could use it to grow ‘up’.

#24 West Coast on 10.04.09 at 11:50 pm

I would like to see actual statistics of who is buying in Vancouver

– because people certainly are buying.

I know anecdotally from some architects in town that a lot of the sales on the west side – MOST (near UBC) are being built for independently wealthy foreign families (they don’t have “jobs”). A lot of the laborers are also imported foreign workers for the sole purpose of cheap labour – which seems strange during a recession but that’s a whole other discussion.

The point of this post is not to single out any racial group: purchasers and labourers come from all over the world but the one thing they have in common is that they are not from Canada. Do some looking around it’s pretty astonishing.

The point of this post is to ask whether other people have the feeling the game is fixed in Vancouver. Those of us that grew up here even us professionals have little hope of entering the housing market without unrealistic debt but that seems to be having little or no impact on housing sales. So what is the point of graphing Canadian incomes vs housing prices if it is not Canadians buying? Shouldn’t we be considering first WHO is actually purchasing and then deciding if the housing market is at its peak?

I have the sense that the real estate market in BC is a world market rather than a Canadian one. But I don’t have the facts to back this up.

If you know the numbers please tell me how wrong I am. At least if the purchasers are Canadians reaching idiotically past their means – the rest of may have some hope in 5 – 10 years…

#25 Gord In Vancouver on 10.05.09 at 12:18 am

“Vancouver has changed man, you have no idea how much money is in this city, plus we have the mountains, ocean, olympics and rich Asians…real estate can never go down! You missed the boat dude”
_____________________________________

Where were these rich Asians when sales dried up and prices dipped in late 2008? The theory of “speculating” Asians who are taking advantage of low interest rates for a quick flip makes more sense.

Mountains,ocean ? If this relates to the “prices are high because of lack of land theory”, I don’t buy it as Squamish, Penticton, and Kelowna also face developing constraints but still encountered significant real estate price corrections.

#26 Future Expatriate on 10.05.09 at 12:58 am

#9 – And I’ll say it again; BC’s narco economy will be going into the toilet very shortly when California legalizes pot to survive.

BC’s narco economy is perhaps the biggest bubble of all.

And if you want to hasten it, all it takes is a single phone call, with addresses.

#27 ted on 10.05.09 at 1:08 am

I keep on hearing about the grow op premium. I do understand that the police are too busy and there is no political will to aprehend most grow ops. But since almost every other person is doing it shouldn’t the price of pot come down. I don’t use the stuff so I don’t know. But its simple supply and demand. Who the hell is buying all this stuff to keep this criminal industry thrivng?
Anyways for the poster who has no morals about doing it keep this in mind, you will also be a potential target for home invasions if you have a grow op and others find out. Its not worth it.

#28 VCR Guy on 10.05.09 at 2:10 am

Every second house in VCR has a suite, many people supplement their income with foreign students. The who place is addicted to cheap credit and the revenue side is maxed out in my opinion.
There is a huge crime problem with many rentals taken out of the market and occupied with grow ops further artificially propping upi the market.
Many rich easterners from everywhere from Montreal to Calgary seem to come here and retire.
Between the Carbon tax and HST etc are climbing on a consistent basis. You have to pay to park in the Provincial parks! We will soon be paying the medicare costs of the baby boomers who will soon be 1/3 of the population and in their most expensive years. The revenue side is maxed out for RE consumers and the tax burden is growing steadily and we have not seen the worst. Wait until the 2010 Olympic bill comes and there is no longer the optimism of this event occurring in the future. In a jurisdiction that is Canada’s retirement home and a tidal wave of aging and a population used to getting what it wants BC and VCR are in for a major correction in my opinion. Love it here but you pay for it.

#29 Jeff Smith on 10.05.09 at 5:35 am

Hi Onemorething, where did you get this idea that Asians are moving to SE Asia? I thought if they are heading to asia, they would be going to East Asia (shanghai, shenzhen etc). Last I check SE Asia is more like cambodia, thailand, vietnam etc (i.e. impoverished nations). So when you said SE Asia did you actually mean East Asia?

>#6 Onemorething on 10.04.09 at 8:19 pm
>Vancouver Guy – Asians are moving to SE Asia, >Westerners are moving to SE Asia. Collapse in >Vancouver market is imminent, so much, it may be the last place you wanna live! Oh yeah, get new friends la

#30 Jeff Smith on 10.05.09 at 5:37 am

Nah, don’t do it jealous_taxpayer. I mean it probably won’t be good for your conscience.

#7 jealous taxpayer on 10.04.09 at 8:25 pm
Houses in BC will always be worth more because of the ”grow up” premium.
I work in the paper industry and yesterday I just discover that two of my friends have grow ups in their basement since 5 years.
I could not beleieve it so they showed it to me. It is truely amazing. In an aera of less than 70sqt they grow up seevral plants that bring close to 20000 cad every 6 weeks.
I dont know how to feel about it, I keep working for years and today make 60000/year and if you consider taxes I pay, that makes it less than 40000 a year. And some money I have in the bank is earning less than 1%.
Those guys make more than that in 3 months.
I am seriously considering doing the same thing, it seems everybody is doing it and there is no much harassement from the police for small size grow ups. Am I wrong? What is going on here I dont understand?

#31 Frugalistas on 10.05.09 at 6:01 am

to the woman in the article. come to Halifax. your standard of living will be very high and you will enjoy quality of life. housing is cheap out here.

#32 Alex on 10.05.09 at 7:02 am

Why does the graph compare ‘average’ housing prices (I assume average=mean) with median income? Does using median housing prices change anything?

#33 heather on 10.05.09 at 7:21 am

Vancouver real estate is not being propped up by foreigners. If it was, then it would have crashed last fall. Look at Dubaii.

#34 Clobbered on 10.05.09 at 7:34 am

What did I say?

Money worship is BACK people.

So… months ago everyone was upset about instability in the economy due to capital markets, and best selling literature was popping up everywhere to explain how a financial sector on steroids had taken over GDP, and come to dominate our collective future.

We also learned that real estate agents and banks worked in tandem to produce mortgage backed securities and derivatives soaked in toxic levels of risk, And that, in the end, the risky mess had to be sopped up by our national balance sheet. In other words, we were being filched again.

And now a post where an ex-corporate lawyer laments that she wasn’t wise enough to buy real estate, and that by having zero investment sense, she has accumulated a mere million dollar liquid net worth.

Please. The irony.

What does a corporate lawyer do? Might they work on deals in the areas of:

Equity
IPOs
Securities
Structured Finance and Securitization

That million dollars came from the same beast that has been gutting pensions, crushing US real estate, and inventing ever more exotic baskets of risk to bake into our collective economic pie. Don’t worry, being on the right side of that game has paid dividends already.

Yet somehow, as we imagine such folks sitting on a mountain of money, we fall over ourselves with admiration, even ascribing confidence and success to a person who can no longer make it work?

Greed is good again, friends. Don’t forget it when you consider what is going to happen to Canadian real estate. If there’s a party going on, it may not be worth missing. There are other corporate lawyers that need to forge a million-dollar war chest, and we are the fuel for the oven. Again.

#35 Toronto C9 Renter on 10.05.09 at 7:39 am

Re: Toronto ex-Lawyer girl….

You’re smart to hang onto your cash. As others have said, let your investments work for you (for example plenty of rock solid corporations out there paying 6%+ in dividends (even higher if the market pulls back). Enough to pay your rent + put cash in your pocket indefinitely while you figure things out.

Alternatively, if you buy now you’ll overpay for a crappy Toronto house, not to mention throwing away the legal fees, land transfer tax, moving expenses, etc etc.

Side note, what the heck does “utterly disillusioned as a corporate lawyer” mean anyway? How does one make it through law school and not know what’s in store? Your parents put you through private school for this??

#36 Denis on 10.05.09 at 7:51 am

For those on the fence re: fixed vs variable mortgages:

Moshe Milevsky, the professor behind Canada’s most quoted mortgage study, says he never anticipated the credit markets of the last year when he completed his original research.

Financial Post writer, Garry Marr, says Professor Milevsky is now “leaning somewhat in favour of the five-year closed fixed-rate mortgage.” (http://bit.ly/oCpz4)

That’s a contrast to the theme Milevsky echoed in his 2001 report, Floating Your Way to Prosperity (http://bit.ly/ekWMS). It does, however, correspond to the sentiments Moshe expressed in his discussion here (http://bit.ly/157u35) last February.

Milevsky told Marr, “At some point, people have to ask themselves if they can afford the fact that eventually [rates] are going to go up.”

Marr goes on to assert: “Consumers getting into variable rate products are facing the risk that the discounts they negotiate today will look pretty ugly in a few months.” (In other words, he’s saying that bigger discounts to prime may be coming for variable-rate mortgages.)

Source: CMT.com – Milevsky on Fixed Rates (http://bit.ly/qnhRX)

#37 jess on 10.05.09 at 8:14 am

“CMHC coming after thier RRSP’s, even if they haven’t lost thier jobs.”
http://www.bankruptcycanada.com/PropChngsBIA.htm
All registered retirement savings plans and registered retirement income funds will be exempt from seizure in a bankruptcy. Currently only employer sponsored plans and retirement savings plans offered through insurance companies are exempt from seizure.

To prevent abuse, contributions made in the year prior to bankruptcy will not be exempt from seizure.

Student Loans will be eligible to be written off in a bankruptcy if the student has terminated his studies seven or more years ago. This is a decrease from the current ten-year wait. In cases of undue hardship, a bankrupt may apply to court to obtain a discharge of the student loans after five years.

#38 CTM on 10.05.09 at 8:31 am

Hey sister, What’s your number?!?

;-)

#39 Dan on 10.05.09 at 8:37 am

#21 Homeboi

That’s so cute! House prices go up forever. Incomes don’t keep up. Of course that’s sustainable. Of COURSE the gain in real estate is permanent, and there will be tent cities for all the renters. Here in Australia house prices double every 7 years. Assuming incomes grow by 5% every year (pretty generous), in 20 years our average house will cost 3.46 million and be 19.7 times the average wage. In 40 years houses will cost 25 million and be 53 times the average wage. It’ll take you 300 years to pay off. You’ll have to put your great grandchildren on your mortgage! No great grandchildren? Go live in a cave for 100 years while you save the deposit!! BUY BUY BUY now before you miss out!!! In fact, you should buy several houses. Buy one for your girlfriend. Buy one for your dog, one for your cat and one for your canary. Houses always go up, buy before you’re priced out forever!

:-) I hope for your sake that was a joke. Really tickled me. Good luck with your comedy career….

#18 Burls

Is this another joke? Is this some deadpan question waiting for Garth to tear you a new one? 5% down, $9000 per month which you can “just afford”, if the interest rates go up you’ll be “forced to sell”, are you serious?

Deflation you lose badly. Inflation you lose badly. What do you think all the other hugely overleveraged idiots will be doing when interest rates go up?? Trying to sell into a flooded market with rising rates, and being forced to cover an enormous mortgage, would be absolute hell. You have good odds of losing your and your wife’s respective shirts, not just your deposit. I sympathise, it’s hard to hold off the nesting instinct, but what would you prefer? Rents are linked to income. If there’s a recession your rent will go down (can’t get a loan to pay rent, if unemployment rises average income goes down, and rent with it). Your mortgage will stay the same, or even go up if interest rates go up. If you save (and very very carefully invest) the difference between buying and renting, you’ll be able to afford holidays, new clothes for the kids, school excursions, occasional dinners out. Buy and it all goes to the mortgage. If you rent and you get laid off, you can move back in with the folks/with friends/move to where the work is. If you buy you have huge costs to move, and odds are you’ll be underwater when you sell. Don’t do it man.

#40 Makeorbreak on 10.05.09 at 8:39 am

http://www2.macleans.ca/2009/10/02/why-the-recession-is-here-to-stay/

#41 disilusionedinGTA on 10.05.09 at 9:19 am

Hi Garth

3 years ago I moved from small twn north ontario to be with my wife in TO. Since then, we have been frustratingly looking for a house in the east end. The market dropped “just a smitten” last winter, then took off like a firestorm afterwards (I know, “because of low interest rates”). We are very frustrated!!!
I know…you’ve heard it all before but here’s the thing. My wife owns a nice little house in Scarbaria (1950s bungalow, deep back yard) and I have offered to buy out the remaining mortgage, which is ½ (about 150 thou). I have cash from a previous sale 2 yrs ago up north. We are early 40s both professional (accnt, technologist).
I really would like to commit myself to live further out of city (more space and privacy) but can’t buy due to current conditions.
The big problem here is her sister is a real-estate agent who keeps saying we will be shut out of market!!! She also is pressuring my straight headed accountant wife into buying a condo investment. (Finch/Young not built yet til-2013!) because it is sure to go up in price by then (2013). Wife has ethnic origins and her family feel, rich immigrants will power real estate boom. Canada is a nice country…maybe so..
My question is two fold:
• Are the GTA prices ever going to fall in time to save me/us from huge real estate pressure and fear tactics? Please say this winter!!!
• Is there an ounce of truth that immigration and foreign investment will fuel the condo prices in some areas of T.O. like Finch and Young. Or what can go wrong with this scheme?

Help me, as my wife and I are pretty responsible people but the pressure to “buy” from her side of family is becoming relentless. My wife will not wait much longer.

Graham

DisillusionedinGTA

#42 Hiteclowtec on 10.05.09 at 9:26 am

Re: Vancover
They must all be smoking a lot of BC bud. They all seem to have forgotten the leaky condo fiasco. A lot of people lost their shirts at the hands of criminal contractors and crooked politicians. The amount of crying in the media was incredible. Lots of Lawyer jobs should be available out there during the next tidal wave.
Rent to stay mobile and invest AAA for liquidity and safety.

#43 Nostradamus jr. on 10.05.09 at 9:26 am

simple question friends

…Do RE Prices match incomes in Zurich, Paris or London?

…Do RE Prices match incomes in Moscow or Sydney?

Vancouver is the smallest from the above, but sits in the most strategic location in the world.

(btw, the Canton of Zurich has 1.3 million citizens which is @ equal to Vancouver)

Nostradamus jr.

#44 Onemorething on 10.05.09 at 9:40 am

#29 Jeff S,

Yes, you know where SE Asia is? Do you think the closure of 100,000 factories in Southern China is good for business?

And Shanghai, well I’m sure the 30% and growing empty office space means business is good too!

Take a guess on how many jobs were repatriated back to the western world in the last 24 months? And those jobs are not coming back to Hong Kong or China!

And those repatriated went back to RE that is under water!

Many are choosing to manage their Asian growth from SE Asia! It makes good sense!

But then again, its only my opinion living in HK and China for 8+ years and doing business throughout the whole region and global for over 20 years.

I now live where the Big Mac Index is $1.32! That will give away my new home!

#45 jess on 10.05.09 at 9:49 am

With all the investigations of fraud going on with bonds and tax free schemes ,bid rigging etc. How did those cities get value? What does protectionism really mean?

The news article ” Buy America” -By Allison Jones, THE CANADIAN PRESS, cp.org, Updated: October 4, 2009 5:48 PM

The North Bay Mayor Victor Fedeli says,”seeking the best bid from companies in North America and not just Canada ensures better value for the taxpayer.”

=========
http://www.nytimes.com/2009/01/09/business/09insure.html?pagewanted=all

“It’s rare to sell a Senate seat, but it’s not rare to sell a bond deal,” said Charles Anderson, who retired as manager of tax-exempt bond field operations for the Internal Revenue Service in 2007. “Pay-to-play in the municipal bond market is epidemic.”…

Christopher Taylor, who retired in 2007 as executive director of the Municipal Securities Rulemaking Board, said the evidence amassed so far included tape-recorded phone calls, in which the independent specialists who are supposed to help local governments pick their bankers could be heard telling bankers: “We want you to bid on this deal, but you’re not going to get it — you’re going to get the next one. We want you to submit a sloppy bid.”

Unsuspecting governments then accepted the recommended bids, and paid too much, he said. Mr. Taylor also cited evidence of banks being paid in cities where they did no work at all, apparently to reward them for throwing the business to their rivals.

The business is lightly regulated, with rules governing the conduct of companies set by the municipal securities board. Municipal bond underwriters are prohibited from making campaign contributions to “buy” the business of bringing bonds to market. But no such rules govern the conduct of a type of professional who appeared in the industry about a decade ago — specialists who work with financial derivatives, like swaps and options.

#46 Lawrence on 10.05.09 at 9:49 am

OK people keep talking about 6-8 % returns I have yet to find them. Please enlighten me. I live in Kelowna there is a bank ordered foreclosure almost every day. I’m fortunate as we purchased in 94.

#47 Rural Rick on 10.05.09 at 10:14 am

#7 Imagine my surprise the other day when a car being pulled over by police drove into my drive way in the country. They suspected drug involvement and I got to meet the canine units drug sniffing dog. He’s a nice doggie. Good nose. He found the stash and if I had a grow op I am sure he would of found that too. It is the little things that get yah. Don’t forget lawyers fees, jail time, a criminal record, and loss of insurance coverage. Maybe you want to think about how well you would do in lockup.
If you have that high a tolerance for risk maybe you should buy a condo in Van instead.

#48 Toronto C9 Renter on 10.05.09 at 10:36 am

#46 Lawrence

Yes you can easily get 6%+. Not with a zero-risk GIC of course. But one simple example is a stable stock like utility or telecom. Even better go with preferred shares as Garth has often mentioned.

Random example, as of now (11:12 EDT Oct 5), BCE common shares are yielding 6.20 %, Manitoba Tel is yielding 7.84%.

If this is still too risky for you, you can always go with preferred shares in the same types of Co.s, also the banks (although the upside from capital appreciation is more limited)

#49 Inside a deluded city(Calgary alberta) on 10.05.09 at 11:19 am

#7 jealous taxpayer

What price is your freedom dude? You want to risk prosecution over money? How stupid are you? The other problem with that cash-how are you going to account for it? If you have lots of cash and you are living above your means of what you have for a real job, you make yourself a target. So you are always looking over your shoulder. There’s a lot of this going on in seedy Nanaimo, on Vancouver Island. Many people consider Vancouver Island some kind of paradise. The reason it is so laid back is cause people hold onto their measly jobs for dear life cause there isnt any work-so if they got uptight they would implode. As a consequence the Hells Angels are big in Nanaimo-in fact they run most of the city. So dude, if you like that lifestyle that is fine, I wouldnt recommend it. At least in Canada you probably would get less hard time in the USA-there you would likely be locked up-for life.

Even in Calgary-where housing is the most ridiculous on the planet(outside of Moscow Russia)-its not worth sinking to a new low by getting involved with using or selling any types of drugs. You want to get involved with legal hassles and idiots who do nothing but harass criminals all day? Why fuel their paycheck or career?

Calgary sucks, the housing and traffic situations are horrible, but not enough to forfeit freedom.

#50 dave99 on 10.05.09 at 11:21 am

#18 Burls,

Although I appreciate your humour, I an curious about this hypothetical $28m+ mortgage costing a rather specific $9810.75 a month. At your stated mortgage rate of 2.45% (prime +.2%), this payment covers less than 1/6th of the interest payment alone.

If you are going to post a joke to mock those those who are financially illiterate about RE, perhaps you should get your math correct. :-)

#51 jess on 10.05.09 at 11:34 am

Why aren’t the tv shows called flip this company?

YEAH, AND HOW ABOUT THOSE “SPECIAL DIVIDENDS” tied to those predaa…..whoops sorry i meant to type private equity firms (flippers) are these not the true job killers. “building a brand for the future,” indeed!
http://www.nytimes.com/2009/10/05/business/economy/05simmons.html?pagewanted=1&_r=1&hp

#52 Suzukimum on 10.05.09 at 11:36 am

6-8% returns. Are these high risk investments? Will some one please enlighten me? We were once burnt by our financial advisor who made $$$ off us while we lost $$$$$. Now, my husband doesn’t trust any one, and chooses to sit on our cash that is earning less than 3%.

#53 Kurt on 10.05.09 at 11:36 am

People, you don’t *have* to live in Vancouver. If it’s too expensive to buy the house of your dreams there, *leave*. I left when I graduated in 1985 and have never looked back. (I remember being positively joyfull as I crossed the Port Mann bridge for the last time.) Or if you don’t *want* to move, don’t whine about real estate prices (though laughing behind the backs of suckers or right in the face of NDJ is permitted.) Very few people *can’t* move, they just don’t want to badly enough.

#54 S. on 10.05.09 at 11:56 am

Not that long ago, and only out of curiosity, I attended a condo pre-sale in Vancouver. It was one of Concord Pacific’s projects in False Creek. Best that I could tell practically everyone there was an investor looking to buy and flip. As I meandered through the crowd I was able to identify several different languages being spoken. One bedroom plus den units were selling for low to mid 200K, two bed, two bath plus den went for mid 500K. Now that the project is completed I see many of these units offered for sale. The one bed flats are listed for mid to high 400K, the bigger units are a mill plus. I don’t know how they’re selling but assuming that some kind of panic is about to ensue and asking prices are reduced by, say, 30 percent I suspect that many buyers would step forward. Even at those hypothetical reduced resale prices the flippers would not be hurting, easily beating the 6 to 8 percent annual return so often advocated by investment advisors.
Personally, I believe in portable and liquid assets, a criterion that disqualifies real estate. I stayed out of the housing mania. Still, those who invested in RE (using their big heads) appear set to do alright.

#55 Jeff Smith on 10.05.09 at 11:58 am

There are probably lots of people who have over a million. I know for the ordinary folks like us who don’t have that kind of money that it seems like an unattainable amount. But I do personally know quite a few people who do have that kind of money.

>#13 Boombust on 10.04.09 at 9:12 pm
>I think that “millionairess” is a phony; HOWEVER, >your advice about Vancouver is bang on, as usual.

#56 Burls on 10.05.09 at 12:05 pm

[i]#18 Burls,

Although I appreciate your humour, I an curious about this hypothetical $28m+ mortgage costing a rather specific $9810.75 a month. At your stated mortgage rate of 2.45% (prime +.2%), this payment covers less than 1/6th of the interest payment alone.[/i]

Oops, my bad. I missed a decimal point there dave99.
The mortgage payments for our dream home will be $98,107.50 a month for 35 years. That’s if prime stays at 2.25%. If it goes up, Matilda is going to have to get a paper route if we want to be able to keep making those mortgage payments. And 35 years is a looooooooonnng time.
Burls and Matilda

If you are going to post a joke to mock those those who are financially illiterate about RE, perhaps you should get your math correct.

#57 Chaostrology on 10.05.09 at 12:26 pm

Maya dear, time to find a new tribe. Your old tribe is making you sick! I’m quite frankly surprised that you haven’t come down with a terminal case of cancer.

You are smart chick, you’ve pulled the plug on the insanity. Don’t go back in the water, the shark is still there.

You are on the road to enlightenment. You will not find what you need in TO. Take your time, the universe will provide the teachers that you need. You’ve already made the brave decision, now you need to learn how to live with the freedom that you have won for yourself. Rock on sister!

Jealous, give your tiny head a shake, illegal activity amounts to a very stressful life. Stress kills and if the stress doesn’t kill you , somebody else will.

#58 Soju on 10.05.09 at 12:29 pm

Nice chart regarding Vancouver. If everyone could read a chart and come up with a proper conclusion we’d all be rich by now.

#59 nonplused on 10.05.09 at 12:38 pm

More evidence that Garth’s deflation theory is playing out at least state side.

http://howestreet.com/articles/index.php?article_id=11021

I still think it’s inflation long term as that is the only thing that can happen in a fiat currency, but it sure looks like these collapsing asset bubble are going to cause deflation in areas associated with them for some time.

Also note the huge revision to the jobs numbers mentioned at the end of the article. The cover is coming off the coverup.

Got stocks? I suggest at trailing stop.

#60 Barb the proof reader on 10.05.09 at 1:17 pm

re: patient #3

Jim,

Vancouver real estate goes up and down, just as sure as the sun. Timing is everything. It’s almost high noon. Wait for the sun to set, it always does.

#61 dd on 10.05.09 at 1:28 pm

#43 Nostradamus jr.

…Do RE Prices match incomes in Zurich, Paris or London, Moscow or Sydney, Vancouver…

No they don’t. What is why there is more downside risk in these cities when deflation takes hold.

#62 lgre on 10.05.09 at 1:31 pm

“OK people keep talking about 6-8 % returns I have yet to find them. Please enlighten me”

6%+ returns are out there, but not of it is secure, especially if you need the money sometime in the next 12 months. If you want 6%+ returns in this environment you might as well day/week trade rather then buy and hold. It’s worked well for me.

That is untrue. Bank preferreds give this return and are 100% liquid. There are several similar investments, relatively low-risk, high-yield and high-liquidity. — Garth

#63 lgre on 10.05.09 at 1:45 pm

#41 disilusionedinGTA on 10.05.09 at 9:19 am

“The big problem here is her sister is a real-estate agent who keeps saying we will be shut out of market!!! She also is pressuring my straight headed accountant wife into buying a condo investment. (Finch/Young not built yet til-2013!) ”

I have a good idea, buy the condo with your sis in law, have her put her money where her mouth is..let us know how that works out. NEVER listen to an agent, even if its your mother…some actually believe their own BS.

#64 Barb the proof reader on 10.05.09 at 1:45 pm

#41 disilusionedinGTA

Graham,

Stick with your gut. You know darn well the sister-in-law is partially under her peer group’s trance.
Don’t fall under their spell, it’s obviously contagious and alluring, but too dangerous.
Most importantly remember that condos are the 1st segment of the market to go down in price when real estate prices begin to go south. Don’t “invest” in condos particularly not now. Even if Toronto prices go up for a few more months or years, will you know when the “top” is? Toppy is toppy. It’s too easy to teeter and fall when the market is expected to top out or decline.

#65 T.O. Bubble Boy on 10.05.09 at 1:54 pm

Canada doesn’t make it in this Economist story, but the article does provide a global perspective.

http://www.economist.com/businessfinance/displayStory.cfm?story_id=14573531

#66 hal smith on 10.05.09 at 2:12 pm

#46 Lawrence

Try Pembina pipeline income fund, IPL, and Crescent Point Energy………

#67 van house hunter on 10.05.09 at 2:25 pm

#24 West Coast – who is buying in vancouver? I know of a family of 7 living on a delivery drivers salary ($12-14/hr max) and wife is a homemaker who qualified for a $400K mortgage and purchased just last month (with an $80K deposit), I have friends who put in offers of $900K for a house in East van and didnt get the house because the offer was too low (worked out to about $40K below asking) Another person I know is a millionairess just purchased a 2.3 million penthouse in downtown. Everyone is jumping in from the working poor to the elite.

#68 Smart on 10.05.09 at 2:28 pm

There was line up to buy condos at Steels& Bathurst last week; people was at the sale office at 4 am;
before the sales office opens they jump up prices by $ 10-15 k per condo unit. There were many chineese people in the line …. It is either last agony or RE market in Toronto continue going up….

#69 Bob Bentley on 10.05.09 at 2:42 pm

Lawrence #46 OK people keep talking about 6-8 % returns I have yet to find them. Please enlighten me. I live in Kelowna there is a bank ordered foreclosure almost every day. I’m fortunate as we purchased in 94.
_________________________________

I too live in Kelowna and if you have information on daily foreclosures in the Okanagan even please send the link or your point of info. A good deal is a good deal. Most bank analysts, managers and investment portfolio managers I talk to either return the house to the market at what the market will bear or close to it and avoid the use of foreclosure on listings. Some realtors here are using the word Foreclosure on their listings to get your attention but when you check BC Assessment site for taxable value they are usually way above market.

#70 The Gonz on 10.05.09 at 2:45 pm

Garth,

I have read your blog for many months, so thank you for your guidance, it has helped me stay away from overvalued real estate.

My question today is, do you think income properties are overvalued to the same extent? I am sure low interest rates and CMHC insurance have played a role here as well, however buyers do not fall in love with income properties, hence I would expect prices to closer to fair level.

This is segway to my second question. Is there an income multiple you can suggest to ballpark reasonable value for an income property?

Thanks in advance,
The Gonz

#71 Toronto C9 Renter on 10.05.09 at 2:48 pm

# 58 Hal,

I like your picks.

On PIF.UN, agree the yield is great (10% +) but the big question is when to get out, since the 2011 tax rules will change the playing field as you know.

While we’re on the subject of income trusts, there are many, such as Aliant and Yellow pages. (I know YLO is on shakey ground but at 15% yield, perhaps a good idea to have a little bit nevertheless!)

#72 Jim on 10.05.09 at 2:49 pm

Re #24
It is definintely rich immigrants-many who don’t contribute to the local economy that have propped up this market. I make almost $100K and have $100k for a downpayment, and I can’t get into the market-unless I want to buy a little leaky condo and pay $300 month in maintenance fees. Our government doesn’t have the balls to stand up to this and require foreigners to reside here and contribute to the local economy. In countries like Thailand, you cannot own property unless you have a local business. If we enacted similar legislation, the young local Vancouverites wouldn’t be disenfranchised and wouldn’t have to move east to other cities that are more affordable. The Vancouver school district has declining enrollments. If it is the best place to live, why can’t they attract families here? Because they can’t afford to live here. Garth is calling for a correction, and I’d assume there will be, but I wouldn’t bet on a huge one, as there are so many people in the market who are retired and or don’t work for a living, so the demographic is quite unique.

#73 West Coast on 10.05.09 at 3:17 pm

#71 Jim

“Our government doesn’t have the balls to stand up to this and require foreigners to reside here and contribute to the local economy.”

This is where I begin to get confused. Consider many other beautiful coastal locales, parts coastal Mexico, Costa Rica, California – the people that live there are not working stiffs – they are “independently” wealthy.

“you cannot own property unless you have a local business”

Sounds like socialism through the lens of a world economy.

Is it a question of balls?

#74 Future Expatriate on 10.05.09 at 3:22 pm

Vancouver and BC are headed for a nasty surprise come March 1st, when the “Olympics Bounce” proves to be nonexistent and the spring thaw sales upticks don’t arrive as usual. That will be the first indicator that the boom is bust.

The second indicator will happen overnight when California legalizes pot to survive and the US removes pot from the war on drugs to survive, and utterly destroys BC’s narco-economy.

ANYONE who buys in BC, NOW, are the greatest fools of all time. Expect grow-op foreclosures in every neighborhood for as far as the eye can see. Ghostown.

The writing is on the wall for Vancouver and BC for anyone with intelligence enough to see it.

#75 Grumpydawgs on 10.05.09 at 3:30 pm

Garth, where do I find this deal?

“That million should be earning a steady 8% in tax-smart income, like dividends or capital gains, while providing some balance to ensure you can withstand the inevitable stock market pullback, interest rate advance and possible second leg down of this economic mess. That means a portfolio of short bonds, preferreds, cash equivalents and equities in sectors like financials and energy.”

#76 Men With Hats on 10.05.09 at 3:32 pm

Cost a fortune to heat that sea side shanty .
How much in yearly land taxes ?
I recommend Buy ! Buy ! Buy !
How can you go wrong servicing a massive interest load ?
You have plans to be cryogenically frozen so they can raise you from the dead to keep paying the mortgage .

#77 Future Expatriate on 10.05.09 at 3:37 pm

Looking ahead to BC’s narco-economy future once California legalizes pot, folks MIGHT want to get into the habit of making anonymous phone calls now, before that peaceful well-kept quiet grow-op next door turns into a loud, noisy, gun-filled rundown slum crack house.

Which it absolutely will if neighbours continue to keep silent.

At least have the number handy?

#78 TJ on 10.05.09 at 4:06 pm

Calgarians bought 38 of 40 unsold condominiums in B.C.’s Columbia Valley at an American-style auction in Calgary Saturday.

Developers are calling the real estate auction, for properties in southeastern B.C. near the Alberta border, a Canadian first.

Developers held the auction in Calgary since it is mostly Albertans who have vacations homes at Lake Windermere in Invermere, B.C.

Calgary accountant Fern O’Neil, one of the buyers at the Windermere Pointe development, said she has been on the hunt for a vacation home for the past year.

Completed just as the recession hit in 2008, sales at the luxury condo development didn’t meet expectations, so the developers decided to auction off the unsold condos.

O’Neil said with the economy strengthening, it’s a good time to buy, and the auction was the perfect venue.

More on this INSANITY

#79 TJ on 10.05.09 at 4:10 pm

Interest Rate Hikes On The Table? U$D Devaluation Ahead.

“A year ago,” said law professor Ross Buckley on Australia’s ABC News last week, “nobody wanted to know the International Monetary Fund. Now it’s the organiser for the international stimulus package which has been sold as a stimulus package for poor countries.”

The IMF may have catapulted to a more exalted status than that. According to Jim Rickards, director of market intelligence for scientific consulting firm Omnis, the unannounced purpose of last week’s G20 Summit in Pittsburgh was that “the IMF is being anointed as the global central bank.” Rickards said in a CNBC interview on September 25 that the plan is for the IMF to issue a global reserve currency that can replace the dollar.

“They’ve issued debt for the first time in history,” said Rickards. “They’re issuing SDRs. The last SDRs came out around 1980 or ’81, $30 billion. Now they’re issuing $300 billion. When I say issuing, it’s printing money; there’s nothing behind these SDRs.”

SDRs, or Special Drawing Rights, are a synthetic currency originally created by the IMF to replace gold and silver in large international transactions. But they have been little used until now. Why does the world suddenly need a new global fiat currency and global central bank? Rickards says it because of “Triffin’s Dilemma,” a problem first noted by economist Robert Triffin in the 1960s. When the world went off the gold standard, a reserve currency had to be provided by some large-currency country to service global trade. But leaving its currency out there for international purposes meant that the country would have to continually buy more than it sold, running large deficits; and that meant it would eventually go broke. The U.S. has fueled the world economy for the last 50 years, but now it is going broke. The U.S. can settle its debts and get its own house in order, but that would cause world trade to contract. A substitute global reserve currency is needed to fuel the global economy while the U.S. solves its debt problems, and that new currency is to be the IMF’s SDRs.

#80 hal smith on 10.05.09 at 4:17 pm

#79 Toronto C9 renter
It has already been converted to a corporation and the dividend is safe.

#81 thecomindepression on 10.05.09 at 4:37 pm

I really don’t quite get why people here actually believe we are in a deflationary period. Once you have completed Chris Martenson’s Crash course you will then understand we are in an INFLATIONARY Era. Chapter 13 basically explains it all in a nutshell. ITS FREE online VIEW it. Garth Turners view of “deflation” will be debunked immediately.

#82 Evangeline on 10.05.09 at 4:54 pm

Garth

((That is untrue. Bank preferreds give this return and are 100% liquid. There are several similar investments, relatively low-risk, high-yield and high-liquidity. — Garth))

Yes, preferred shares are liquid, but if the markets are down on the day you need your money, wouldn’t you have to your sell preferred shares at a loss? My financial advisor advised me to buy a bunch of preferred shares in Great West Life and some other companies. I let him buy some, not nearly as much as he wanted to, and I regret letting him buy any.
The shares have gone down in value and personally I prefer capital preservation to income in this economy.

I said banks. — Garth

#83 OttawaMike on 10.05.09 at 5:53 pm

Re Growops:
Nobody has mentioned the new laws in BC. Hydro will permannetly disconnect your power if convicted in running a growop. try selling a place powered by diesel gen.
also the city has gotten on board in Van by requiring the owner to bring the building up to 2009 building code standards when the house has been branded as a growop with the usual mold/humidity damage. See how much that costs on a 40 year old house.
Supposedly these 2 measures have put a bigger dent in the trade than any other enforcement.
This info was supplied by a BC friend that works in the business and I don’t mean on the law enforcement side.

#84 Men With Hats on 10.05.09 at 6:14 pm

Rich Girl :
Consider Philanthropy as your mission .
You can open a school in Africa and educate the young women .Attach a medical clinic for treatment of Aids etc . Drill a water well .
You will be well satisfied .You could work miracles if you choose .

#85 Soju on 10.05.09 at 6:30 pm

Sure start your grow-op and get shot. Nice return! By the way, Values of most investments go up and down every day, month and year. Even the great dividend paying ones. At least I can still take a crap in my place even if the value have gone down for a few years. I guess you can wrap up your crap in your paper trades. For those renters, pretty clever to see you guy’s say your getting ahead by just saving the difference between what your mortgage would be and your rent is, but only a few of you do. The rest of you just waste the money just like you do when paying rent. Can’t wait to see you guy’s paying rent all through retirement.

#86 unbalanced on 10.05.09 at 7:03 pm

# 46, # 52, # 62.

Read Garth’s Blog for September 22 , 2009

#87 Vancouver Old-timer on 10.05.09 at 7:16 pm

I live in the Arbutus area and currently there are 6 rental properties on my side of the block, 2 have been empty for quite a while. I don’t know who owns the houses but do know that the grow-op business has died down on my street after the police busted four in a matter of months. The one next door to us (we were between two) was rehabbed at a cost of $27,000 to just do the bare minimum. The city requires re-wiring, a new furnace and hot water tank and anything else that strikes their fancy. The house on the other side of me was fixed up to minimum standards and sold for $834,000 three years ago, and after many repairs and a frequently leaking basement the owners bailed and sold last month, barely breaking even after spending more that $100,000 to just stay dry and warm. The grow-op business seems to be most profitable if you can use someone else’s house to do it in. If California does legalize marijuana I do think there will be a lot of screwed would-be property moguls.

#88 andrew on 10.05.09 at 7:39 pm

#75 Grumpydawgs and others

Hey, I know a guy who can give you a deal like that, maybe a bit better, even around 12%. The thing is that the guy is out of town now but if you want I can get you in touch with him. If i remember correctly, Bernie will be back in about 150years :)

#89 Onemorething on 10.05.09 at 7:44 pm

#41 GTA Disillusioned

The fact that you are reading this blog and havent made the case for renting means you are loosing the battle bro!

As mentioned to previous posters in this dilemma, test the strength of the relationship by renting!

Better yet, have your Sis in law and wife read this blog. I agree, if the condo is such a great deal then have good ole sis in law buy it and rent it to you.

In the future, Investment Bankers and RE Agents will never own up to their previous employment it will be that bad.

Tough Love from Onemorething!

#90 Jeff Smith on 10.05.09 at 8:34 pm

I tell ya, learn something new everyday. I was under the impression that the factories over there in Guangdong are only idling temporarily. Repatriated jobs; now that’s another matter and an eye opener.

According to this chart, the closest Big Mac index # to the one you listed is at $1.52 which places your location in Malaysia.

http://www.economist.com/markets/indicators/displaystory.cfm?story_id=13055650

>#44 Onemorething on 10.05.09 at 9:40 am #29 Jeff S,
>
>Yes, you know where SE Asia is? Do you think the >closure of 100,000 factories in Southern China is good >for business?

>And Shanghai, well I’m sure the 30% and growing >empty office space means business is good too!

>Take a guess on how many jobs were repatriated back
>to the western world in the last 24 months? And those
>jobs are not coming back to Hong Kong or China!

>And those repatriated went back to RE that is under
>water!

>Many are choosing to manage their Asian growth from
>SE Asia! It makes good sense!

>But then again, its only my opinion living in HK and
>China for 8+ years and doing business throughout the
>whole region and global for over 20 years.

>I now live where the Big Mac Index is $1.32! That will
>give away my new home!

#91 Dan in Victoria on 10.05.09 at 8:57 pm

Austrailian real estate agents to face one million dollar fines for fake bids. I wonder how that would play out in Canada? http://www.theage.com.au/national/agents-to-face-1m-fines-for-fake-bids-20090718-dozy.html?ref=patrick.net

#92 casanova on 10.05.09 at 9:02 pm

I agree with jealous taxpayer, it is clear that there is no will from the BC goverment to stop the grow ups here. It is big business for everyone and the goverment profit indirectly from it.
I can eradicate this business in a matter of one month, just take a helicopter with an infrared camera and find all the heating spots and bust them. Why cant the police do it?

#93 Men With Hats on 10.05.09 at 11:08 pm

Why cant the police do it?

Illegal . Police need a probable cause warrant before they can do a fly over looking for heat signatures . SCC ruled on this years ago .
The big grow ops are well insulated and produce no tell tale heat .Big ones are underground .

#94 Evangeline on 10.06.09 at 11:51 am

Garth

((I said banks. — Garth))

So the value of bank preferred shares are static and and never go up or down?

Same as your age. — Garth