Trust

sheep

Scotiabank sent the following email blast to realtors, intending they pass it along to the nation’s property virgins – those unfortunate social misfits, financial losers and shame of mothers-in-law everywhere, known only by the doleful and piteous term, ‘renters’.

Most of us dream of the day when we own our home outright.
Turn your rent payments into ‘own’ payments
When you add it all up, there’s really no better time to purchase your first home than right now.
Renting an apartment is like borrowing a home from someone else – it’s never really yours. In contrast, owning a home allows you to experience the pride of ownership, and the satisfaction of knowing you’re making a smart investment. Buying doesn’t necessarily cost more than renting. And since a home is something that can increase in value over time, the sooner you become a homeowner, the sooner you can benefit.

Banks, natch, are in the business of pumping mortgages. So they have to pump real estate. But in doing so, the very trustworthy financial titans that control the financial system and dominate the economy by  their systemic importance, are no better than Ben Dover, the local Re/Max humper. Just think about that message – given credibility merely because it flows from a $575-billion corporation.

There’s really no better time to purchase your first home,’ is false. No dewey young virgin should be jumping into real estate, at least not in urban BC, Alberta, the delusional bits of Saskatchewan, Winnipeg, the GTA or Montreal. Prices are at or near historic highs, while sales have been inconsistent, condos are wobbling, the economy stifled and rates elevated. Every credible economist has been forecasting some form of correction. Including those at Scotiabank. Check out the bank’s last major housing report:

Record prices combined with incremental regulatory tightening are reducing affordability and the housing market’s earlier momentum, notwithstanding the lowest borrowing costs on record. Pent-up demand has been effectively exhausted after a decade-long housing boom, with Canadian home ownership at record levels. Canada’s housing market is expected to avoid the sharp downturn witnessed in the United States and Europe. However, the downside risks to domestic housing activity are increasing. The full impact of the slowdown may not become fully visible until mid-decade. Affordability will be increasingly strained for existing and potential homeowners when mortgage rates eventually drift up.

And this is the most recent analysis:

Underlying fundamentals are less conducive to further gains in the latter half of the year. Any remaining pent-up housing demand has likely been satisfied with sales now moving back in line with historical averages. Affordability remains a challenge for many buyers, particularly those in high-priced markets such as Vancouver and Toronto, and will be further strained as interest rates inevitably drift higher.

See what I mean? Bank economists clearly underscore the inherent risks of jumping a house right now – weaker fundamentals, deteriorating affordability, exhausted demand and a negative outcome the extent of which may not be known for several years. So how can Scotiabank in conscience say ‘there’s really no better time’ to buy? It can’t. The hypocrisy is breathtaking.

Then there’s the reference to ‘knowing you’re making a smart investment’ when a first-timer buys. If the bank said this of its Scotia Canadian Growth Fund, for example, the regulator would ream it. Funny how a 22-year-old is warned of risk when putting $1,500 into a mutual fund, but when  borrowing $300,000 to buy a condo in a troubled market is told, “the sooner you become a homeowner, the sooner you can benefit.

By the way, the average first-time buyer is 29 years old and will purchase a house worth $443,000 in Vancouver or $347,000 in Toronto. The downpayment will be a combination of savings, the Bank of Mom and cash mortgage incentives. The mortgage will average between 85% and 90% of the purchase price, with 46% locking in to a fixed-rate loan and virtually everyone requiring costly CMHC insurance because of the high-ratio borrowing.

Of course, there’s nothing wrong with buying or owning real estate. I have some myself. But this is now a vaguely deflationary world, where anything can happen (like the US government shutting down this week). We all know interest rates will rise, and a half-decade of cheap money, specking, flipping and house lust have swollen prices painfully.

Owning does not cost the same as renting, as this blog’s often shown. And how’s it responsible in a world of diminished job opportunities and intense competition among the over-educated to push mortgages when what young people really need is mobility? Isn’t the bank being a self-serving, rapacious, uncaring and greedy monolith?

Of course it is. And the kids love it.

Their boomer parents taught ‘em well. They live for mortgage payments; to be moist little versions of their wrinkling, greying, expiring elders.

I have no idea why I keep this up. We’re doomed.

138 comments ↓

#1 T.O. Bubble Boy on 09.29.13 at 6:31 pm

And since a home is something that can increase in value over time, the sooner you become a homeowner, the sooner you can benefit.

… unless you buy at the peak of the market, when interest rates are at historic lows and have nowhere to go but up.

#2 Sebee on 09.29.13 at 6:33 pm

I am so tempted to be baaa-irst!

#3 EI Dude on 09.29.13 at 6:34 pm

You keep doing this to help lowly renters like me from making a huge financial mistake. The pressure to buy is intense, but I will be strong. Must… hold… on.
Thanks Garth.

#4 RateHikes on 09.29.13 at 6:34 pm

First!

#5 DJB on 09.29.13 at 6:39 pm

As an idle mortgage broker and as my wife just became unemployed as a silver bullion dealer for a Canadian pubco we have cashed her options, sitting on 200k in a dividend portfolio, renters and now enjoying Spain as it pours rain in Vancouver.

If we plowed that cash into a home we would be f**ked. Glad to be a renter the dividends almost pay our rent.

#6 frythedevil on 09.29.13 at 6:39 pm

first baby, first

#7 visorman30 on 09.29.13 at 6:43 pm

It’s a point you’ve brought up before about advisors having an entirely different set of standards between real estate and other investments. In your opinion, what needs to occur in order to prevent this type of behaviour in the future?

#8 cc on 09.29.13 at 6:44 pm

Another great post, keep it up Garth.

Wanna be the mayor for Toronto next yr

No. — Garth

#9 father on 09.29.13 at 6:44 pm

who will get slaughtered first

#10 Smoking Man on 09.29.13 at 6:47 pm

I have no idea why I keep this up. We’re doomed-Garth

Cause your a friken writer first and for most, aside from your Financial advisory shtick, you need .
to eat I understand.

You love typing in perfect letter combos on your keyboard. You don’t know shit, or you do know shit but have know better that getting it all out.

You can’t help yourself, Your a phyco, I have been bitten by the same Miskito.

However, I’m a gambling man. With balls the size of china.

But my writing sucks, I cant get whats in my head out so the schooled can understand.

My school and degree, University of Google, masters in key word searches. It’s on my link in.

Yesterday I announced to the world on linked in. The official can I suck up to the machines crotch.

“Why does no one say I’m shit faced.” I’m shit faced and happy about it. I even chirped Richard Branson, why? cause everyone kiss his ass. You can be any religion, color, or cred. You want my respect, don’t kiss ass.

My employer will not give me what I’m worth unless I black mail them. It’s business.

Can you imagine the bosses back at the tax farm slave camp reaction to my post?

I’m a smoking man first, a balls bouncing on my chin not in my vocabulary.

It is what it is……

#11 Paul on 09.29.13 at 6:49 pm

Noticed in Surrey that rental adds for homes and condos are staying longer on the market and some landlords have dropped their asking price.

#12 father on 09.29.13 at 6:50 pm

finally we get such a beautiful pic rather than seeing those other pics of too much sausage like the other dawg would say

#13 Garthmaster on 09.29.13 at 6:51 pm

“I have no idea why I keep this up. We’re doomed.”

Keep up the great work Garth, your blog postings are helping a huge number of people avoiding costly mistakes. You are a saint!

#14 Victoria Real Estate Update on 09.29.13 at 6:59 pm

In August, the total number of single family home sales in Victoria was 29% lower than the average of the last 3 years that showed price gains (09, 07 and 06), without population adjustment (which would make things look even worse).

So far this year, total SFH sales are on pace to equal 2012’s total which was the lowest total since 1982 (without population adjustment).

Sales in 2012 were 30% less than the average from 1985 to 2009 and 43% less than the average from 1988 to 1992 (again, without population adjustment).

What’s worse is that sales totals this summer were boosted by the rate hold buzzer beater crowd. There is no doubt that they have pulled future sales forward. We will see the result of that (lower sales) in the coming months.

The local real estate board, realtors, mortgage brokers and the media have tried to convince the public that sales were strong this summer. As I have shown, there is no truth in that at all. Don’t rely on sources that depend on higher house prices and stronger sales for their livelihood. You will always get a biased view of things and the important information will likely be withheld.

Of course the Canadian median always avoids comparing the Canadian housing bubble to the 2006 US housing bubble that burst and crashed. Canada’s housing bubble is bigger than the 2006 US housing bubble was. Victoria and Vancouver are the two most bubbly cities in Canada. Let’s compare their bubble price run-ups to some of the biggest price gainers of the US housing bubble.

Victoria: +142%
Vancouver: +156%

San Francisco: +118%
Las Vegas: +135%
Phoenix: +128%
Los Angeles: +173%
San Diego: +150%

US composite: +107%

Vancouver is currently the second least affordable city in the world and Victoria isn’t far behind.

Prices in Victoria and Vancouver have corrected a little so far, but nothing in comparison to the total correction that these two cities will experience in the future.

Girls and guys, it would be a huge mistake to buy a house in Victoria right now. Interest rates have stopped falling. Since 2008, 5-year fixed mortgage rates in Canada have steadily declined from 5.89% to 2.65% (historically low). This has kept house prices from correcting/crashing in Victoria. The days of declining interest rates are over and house prices will fall.

Hold off from buying until prices correct significantly. Don’t buy near the peak as so many Americans did. Millions of US families will continue to face financial hardship for many years as a result. Don’t put yourself in that position.

Until next time – Cheers!

#15 Doug in London on 09.29.13 at 7:04 pm

Their boomer parents taught ‘em well you say? I’m a 52 year old boomer, soon going on to 53. In those years I have seen 2 across the board real estate busts in 1982 and early 1990’s, as well as local real estate busts in many markets. Add to that I’ve also seen real estate go bust in the United States (yes we’re overwhelmed with information about our nearest neighbour, our biggest trading partner, and the biggest economy in the world) as well as Europe over the last 6 years. How can these boomer parents, having seen these events unfold in their lifetime, give their kids such bad advice?

#16 A dedication for an anal RE agent on 09.29.13 at 7:04 pm

She is a champion of character assasination. For those who have time, you can learn about how anal she gets when she hates someone by searching her posts on RedFlagDeals. For those who don’t have the time all you need to know is that she hates Garth and character assassination is her preferred weapon.

Her brain is a two gear machine. In first gear her brain detects the enemies,then she becomes obsessed with researching their past and she digs to the end of Internet to find her enemies’ weakest points. Next she proceeds to demolishing the person not their arguments
When her brain detects RE bullshit the second gear kicks in and the brain shuts down shortly after that. In this gear she has just two lines: “conspiracy theories” and “only RE agents know about Real Estate”.

A couple of days ago, when the Vancouver kid revealed that even CREA is fudging the numbers (on top of what the local RE boards do) someone around here reminded her she is full of smelly stuff. Here is licenced beating her chest with her fists like a true RE Tarzan and proclaiming that TREB and CREA do not lie and saying that Garth’s readers are idiots.
And here is she again going mild on CREA’s lies revealed by the Vancouver kid.

She did not like the above and proceeded again with what she does best. Character assassination. However she is barking at the wrong tree.

It is strange how someone who pretends to be a honorable person becomes so interested in keeping accountable an anonymous person who posts something on a forum but she is not so interested in something like a national fraud and manipulation revealed by emails of the head of CREA.

Anyway, there is a lot to say about this character but …let be constructive here, let’s not do what she does the best. Since I feel sorry for her I decided to support my old statements with data.
So here we go, …below is a picture that worth 1000 words. In this picture you can see that indeed the central areas of Toronto, the most expensive ones, are tanking, sales down and very high end properties are now selling driving the Avg price for SFH in Toronto up.

The same goes for the entire city Toronto. If we remove the sales above $1M we see a flat market
If we look only at sales above $1M we see a dramatic increase in prices and a dramatic decrease in sales
That explains only if high end properties are being discounted and they finally sell .
And that is a sign of topping market!

This is very much consistent with my predictions digged up by the anal lady over here

http://forums.redflagdeals.com/canadian-real-estate-boom-defying-naysayers-1351104/99/#post17500677
(the above compilation mixes my predictions with ‘recharts’ conclusions

At the time when I made those predictions (April to June) I hardly had any data. Today the story is different.
Here you have extensive charts

http://img28.imageshack.us/img28/2007/kr2j.png

and here is the area that I considered that it will collapse first.

http://img716.imageshack.us/img716/5843/h0bk.png

If you use MLS’s “draw area” feature and restrict the search to houses (SFH) above $1M you will find around 683 of them in that area and a total of 826 in Toronto. No wonder that the area sets the tone (and the psychosis) for the entire Toronto. Yet the sales are very low (~5/day). That leads to a buyers market by VREB’s definition

Bottom line: dear licenced, bug off!

Bonus
The charts include the current situation (Avg,Med prices and AvgSales per day) for Toronto and GTA. That is a bonus for you :-) since you had to read about all the above.

#17 Smoking Man on 09.29.13 at 7:05 pm

#13 Garthmaster on 09.29.13 at 6:51 pm
“I have no idea why I keep this up. We’re doomed.”

Keep up the great work Garth, your blog postings are helping a huge number of people avoiding costly mistakes. You are a saint!
……………………………………………….

My work never ends……ah

Have some self respect, you want bash RE write it yourself.

O Gartho your my saviour. Thank you ,Thank you.

I need to puke.

Why do people have no self respect?

#18 Ralph Cramdown on 09.29.13 at 7:11 pm

Something looks a little off about the one that’s out in front in the picture. Is that Brad Lamb dressed as mutton?

#19 ripped on 09.29.13 at 7:23 pm

Is there anywhere in Canada where you haven’t become richer beyond your wildest dreams flipping real estate?

Brother just came back from Regina, same story there. His bearded drum buddy has flipped 3 of them there, $90K has been his number on each one.

#20 chopper on 09.29.13 at 7:26 pm

Don’t grow weary Garth you are doing your country a great service with this blog. I have been transformed in my mind about things financial and the way the world runs. I have learned so much here that I no longer make money mistakes I used to make before finding this blog.

I also enjoy reading Smoking Man’s posts he has a lot of wisdom about the world.

Thanks Garth.

#21 Observer on 09.29.13 at 7:30 pm

By the way, the average first-time buyer is 29 years old and will purchase a house worth $443,000 in Vancouver or $347,000 in Toronto.

Jobs being outsourced and at the same time, invite big U.S. and overseas mega-corporations in under more favourable terms than the home grown incumbents.
Add to that ridiculously expensive housing. Are we trying to incubate family formation in urban Canada or abort it?

#22 Denise#1 on 09.29.13 at 7:31 pm

#17 Ralph: The lamb in the front is the old “wolf in sheep’s clothing”. Have a look at that face, especially the eyes “wolfen”.

#23 Daisy Mae on 09.29.13 at 7:33 pm

“Canada’s housing market is expected to avoid the sharp downturn witnessed in the United States and Europe…”

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

Yeah, right. That’s why our government is prorogued until January. Need to come up with a plan to undo the damage they’ve caused.

#24 Notta Sheeple on 09.29.13 at 7:44 pm

#10Smoking Man on 09.29.13 at 6:47 pm
I have no idea why I keep this up.
=========================

Ironic isn’t it? The same thought crossed our minds once or twice.

#25 HAWK on 09.29.13 at 7:57 pm

<<<<<>>>>>

Well the scripture does say……….”if ye save one, we shall treat it as if ye had saved the whole of mankind”.

#26 Raginnn on 09.29.13 at 8:07 pm

Why owning a home is bad for you

Efforts to promote home ownership have had troubling and unexpected side effects, distorting the economy and taking an unexpected toll on our minds and bodies
by Charlie Gillis on Sunday, September 29, 2013 7:00pm

http://www2.macleans.ca/2013/09/29/the-housing-trap/

#27 Retired WI Boomer on 09.29.13 at 8:10 pm

Everyone saw what the US went through with our financial crisis.

Why don’t the “regulators” in Canada draft rules on the minimum down payment acceptable on a CHMC mortgage (like 18%) and limit the amortization factor to 15 or at most 20 years?

If the Sheeple can’t -won’t- protect their own interests, at least protect the tax payers who are on the hook in a default. Takes effort to change people perceptions.

Yes, it takes brass cahones to tell the RE industry they will be selling into a hard finance market, but that’s easier than asking taxpayers for an additional 6% in a decade to pay for all the crapo mortgages.

No, do we HAVE any such politicians in power?

I just wish interest rates would go up, maybe I’ll get my wish shortly

#28 takla on 09.29.13 at 8:15 pm

for those of us that a debt free this will be like watching reality tv from the comfort of our payed off totl lazyboy.lets see channel 1-u.s debt ceiling fiasco,channel 2 -canadian houseing crash,channel three-stock market reset……….

#29 el cheapo on 09.29.13 at 8:17 pm

cheap money will be with us forva hell of a long time
because rhats what the puppet masters want….
assest inflation to proetect the rich.

garth plwase start talking some sense….
the powerful dont screw their own….

#30 TakingResponsibility on 09.29.13 at 8:22 pm

“If the bank said this of its Scotia Canadian Growth Fund, for example, the regulator would ream it.”

The two-faced bank communiques reek of criminality. I have always leaned towards non regulation but have come to reason that banks along with other organized real property collectives need to be regulated.

Bravo to those who expose this type of fraud. Standing on ethical principles takes courage – Contrarian Extraordinaire(s).

#31 Ahead of the Curve on 09.29.13 at 8:25 pm

I have no idea why I keep this up. We’re doomed.

#32 Canadian Watchdog on 09.29.13 at 8:26 pm

U.S. Commercial Real Estate Attracts Foreign Investors (Canadians)

Canada continues to dominate the foreign capital buying market in the U.S. for all commercial property types. Canada accounts for one-third of the total foreign investment sales that have occurred year-to-date as of Sept. 1, according to RCA. Other top countries that have topped the $1 billion mark this year include Singapore, China, Germany, South Korea, Israel, Switzerland and Australia.

Investment strategies vary widely. Florida, for example, has seen an uptick in acquisitions from Canadians buying apartments. Canada’s multifamily investment activity in Florida rose 8 percent during the first half of the year to reach more than $163 million in sales, according to RCA. “We see a lot of people from Montreal and Toronto coming here because it is on the East Coast,” adds Stone. Investors want geographic diversity, and they also are finding better returns than what they can get at home, he adds. More

I don't know where this money is coming from, but it's beginning to appear as though Canada (via the big six ) is the new proxy for dirty capital flight.

#33 Ahead of the Curve on 09.29.13 at 8:28 pm

“I have no idea why I keep this up. We’re doomed.”

Garth,

You do this, because this is who you are. The herd will always be the herd, and Smoking Man will always be, well… Smoking Man.

If one tenth of one percent pay close attention to what you are saying, society will be a little better off.

So keep it up. It’s called herd mentality for a reason!

#34 nonplused on 09.29.13 at 8:31 pm

“I have no idea why I keep this up. We’re doomed.” – Garth

For love I hope. But whatever the reason the world needs people of insight to share their vision, so keep up the good work. I haven’t followed all of your advice but I follow most of it.

For example I didn’t rebalance my portfolio when gold was at $1900, and now it has rebalanced itself. I was just being lazy, or greedy, or whatever but I won’t make that mistake again!

So here is a plug for rebalancing, one of the rules you introduced yesterday. It works! And one of the fine things about it is you never really miss out on further upside. You aren’t selling your whole position, just the amount necessary to rebalance. Dollar-wise your remaining position is still in the game if whatever stocks, gold, bonds, etc. keep marching higher.

So I resolve to be less lazy about rebalancing in the future. Establish a balanced portfolio, fade the rallies and buy the dips in each asset class. I think doing that alone can double the long term yields in today’s environment.

I am using ETF’s (iShares mostly) as per your advice for the most part. I have some individual stocks, mostly tiny positions. In the end that’s just for fun. I don’t bury bullion in my garden, I use CEF for that portion of the portfolio (more liquid and convenient). Although I do have some silver coins I bought at antique sales. But really there isn’t any real money in there. They have gone up 4 times but it still won’t buy me a new car (of the type I would fancy). It’s a hobby.

This is all old news, you have explained it many times. But the best evangelists are new converts.

So Garth, you are getting through to some of us. Keep up the good work.

#35 Young and wealthy on 09.29.13 at 8:34 pm

Here is some food for thought:

– An entire generation of boomers who cannot afford to retire and are forced to continue working well into their “golden years”

– An entire generation of boomers who also have to support their own grown children who cannot find jobs because all the jobs are still occupied by their boomer parents who never saved for retirement

– An entire generation of x and y gens who ultimately are now screwed due to the ignorance of their own parents – and we all know how the apple never falls far from the tree..

#36 Something on 09.29.13 at 8:35 pm

It’s time cash out my stocks this Monday. Looks like a huge sell off is coming in the next 3 weeks. Will be buying them back on dips again later. Good luck to everyone.

P.S. Gold holders. it’s your chance, looks like the gold is going up again. Sell it on top while you can.

#37 Suede on 09.29.13 at 8:35 pm

Smoking Man,

Do they have graduate degrees at the UoG for Herdonomics? lol

What a sad life I live when i get more entertainment from GF comments than from SportsCentre.

We need a poll for favourite comment blogger and pot stirrer.

Cdn Watchdog
Turner Nation
Vlad
Ralph
Big Rider
etc..

and maybe a “Best banned poster” award

Ego’s would go through the roof here.

#38 Smoking Man on 09.29.13 at 8:38 pm

Have I died and gone to heaven, WTF

Even Harpo is afraid of me..

Let the good times roll………………:)

http://www.theglobeandmail.com/news/national/federal-government-to-launch-billion-dollar-free-market-in-medical-marijuana/article14590161/

#39 I'm stupid on 09.29.13 at 8:44 pm

#200 espressobob

You should read the full conversation before commenting. Let me recap it for you because your obiously can’t be bothered. Instead you add your 2 cents in like a child who always needs to say something just to feel important.
The argument was related to a previous comment by a poster saying that the majority of the market was controlled by algos and day traders. Shawn simply added the difference between day trading and buy and hold investing. I tried using BofA that it was impossible for day trading and algos to be significant portion of the market.
I understand you day trade and have done so since 83 but you have to admit that Shawn’s argument was correct. You cannot make money day trading without some losing. It’s a zero sum game. Just like if you buy and you lose money the person who sold made the difference. It’s very simple. Now I understand that if your good at it you can have more winners then losers.

#40 Musty Basement Dweller on 09.29.13 at 8:45 pm

That Scotiabank ad is totally REPULSIVE!

I wouldn’t care so much if I wasn’t backing the many ill fated borrowers and the banks, by being a Taxpayer and letting CMHC put me at risk for more and more money every day.

#41 Ann on 09.29.13 at 8:49 pm

19 ripped on 09.29.13 at 7:23 pm
Is there anywhere in Canada where you haven’t become richer beyond your wildest dreams flipping real estate?

Brother just came back from Regina, same story there. His bearded drum buddy has flipped 3 of them there, $90K has been his number on each one
*******************************************
And all tax free I bet tell him to keep a look out for Rev Canada they are coming

#42 George P on 09.29.13 at 8:53 pm

Check out the top line in the latest total household credit numbers from the Bank of Canada (to the end of August 2013). The rate of increase in the total household credit numbers is really starting to slow down.

http://credit.bankofcanada.ca/householdcredit

#43 Musty Basement Dweller on 09.29.13 at 8:53 pm

A little off topic of todays post but my brother and I were talking today. We are both boomers.

Every single one of his 4 closest boomer friends is screwed in terms of supporting themselves after retirement. Basically all of them won’t be able to retire. No pensions and peanuts for savings. They will all have to work until they die.

They all own houses and are having a challenge keeping up with the cost and effort of that. No question they will be forced to sell at one point. Hopefully some hipsters will be able to afford to buy their places but I’m not sure about that.

About half of mine are in the same boat.

The demographic shifts we are seeing will definitely be causing some interesting situations. Just one of many factors affecting the investment aspect of residential real estate in the market today.

#44 AK on 09.29.13 at 8:54 pm

#36 Something on 09.29.13 at 8:35 pm
“It’s time cash out my stocks this Monday. Looks like a huge sell off is coming in the next 3 weeks. Will be buying them back on dips again later. Good luck to everyone. ”
====================================

“Our stay-put behavior reflects our view that the stock market serves as a relocation center at which money is moved from the active to the patient.?” : Warren Buffett

#45 Thoughts on 09.29.13 at 9:02 pm

Why I read this blog. I came across this blog because I just couldn’t understand how house prices kept going up a couple of years ago. The fundamentals still don’t support it. The flippers don’t get it. There are so many people however who are just in lala land and believe whatever they are told that keep driving the market. The long term fundamentals do not support so many million dollar plus homes. The property taxes alone will be the end for many people. It’s the number one complaint that I hear from friends right now with high end homes. When business is slow its tough to make all those payments. House, insurance, high end car payments. It’s a crazy world out there. There is something satisfying about living under the radar. I think it confuses people. They know you can afford to go but you stay and just live comfortably under the radar. Watching te money grow in other formats. Keep up the good work Garth.

#46 Victor V on 09.29.13 at 9:03 pm

http://www2.macleans.ca/2013/09/29/the-housing-trap/

Indeed, the real estate sector accounted for $196 billion of GDP in April, compared with a combined $131 billion for oil and gas extraction and mining. That includes rental and leasing. But the lion’s share derives from the buying and selling of houses. Add in the $111 billion generated by construction, and wealth created by the financial side of the business, and you have a juggernaut accounting for more than 27 per cent of the country’s GDP (the historical average: about 23 per cent). “That doesn’t sound like an alarming increase,” says Rabidoux, “but consider the impact of a four-point reduction in GDP. I mean, the U.S. industry was at about 24 per cent when it peaked. It fell back down to 20, and look what happened. We’re way ahead of where they were. This is major.”

#47 45north on 09.29.13 at 9:07 pm

Funny how a 22-year-old is warned of risk when putting $1,500 into a mutual fund, but when borrowing $300,000 to buy a condo in a troubled market is told, “the sooner you become a homeowner, the sooner you can benefit.”

the news is leaking out, the $300,000 condo is now worth $280,000 but the people in Woodbridge who paid $600,000 for their houses still think they’re worth $600,000.

I have no idea why I keep this up. We’re doomed.

maybe you are like Moses who led his people through the desert. He saw the promised land but did not enter it.

Victoria Real Estate Update: Don’t rely on sources that depend on higher house prices and stronger sales for their livelihood.

that is such good advice

#48 TurnerNation on 09.29.13 at 9:08 pm

Just logged in to check futures. Interesting but not unexpected – results.

I see some posters are Hair today, gone tomorrow. Exiled to Smoking Man’s blog.

#49 takla on 09.29.13 at 9:11 pm

re #22,your right denise,bankerss and their henchmen {realtors},all wolves in sheep clothing,leading the flock to slaughter.

#50 Realtor # 1 on 09.29.13 at 9:14 pm

Mid decade before the bottom and no US crash.
Can someone tell me why anyone would wait four years
To buy a home for the same price. I don’t get it! your leader has declared several time to expect a 15% decline and no crash. You guys lost, never try to time the market. The bigger question is at what levels do you really think it will go down too? At this point you would need 25% to go down to 2009 levels. What were you thinking?

#51 Nemesis on 09.29.13 at 9:21 pm

@WatchDog/#32

…”…it’s beginning to appear as though Canada (via the big six ) is the new proxy for dirty capital flight.”…

Actually… it all started with Imelda, WatchDog – and subsequently, the remnants of the PeacockDynasty/Diaspora [speaking of which, have you heard about the latest developments in the continuing saga of BC’s “EthnoGate” – something to do with a SpecialProsecutor and a RedCoatEnquiry. By the time that wraps, I wouldn’t be at all surprised if more than a few ‘OneWays’ to Tehran were purchased. TeeHee!]

@SM/#10…

TeaBagging! YouScoundrel. Apart from the implied visuals…. RatherEntertaining. Have a JD on me.

@Ralph/PriorThread re: ‘PresidentsChoice’

Galen’s actually a pretty cool dude, RC. Very JohnSlattery/RogerSterling viz. MadMen [how I do I know that? We were introduced by a ‘MadMan’ named ArnoldSaks in ’89. So to speak].

And now… on to far more important matters viz. Trust/Capability…

“I have no idea why I keep this up.”

PishPosh, AuldPol! That’s easy!

Because you never squandered the PublicTrust… and it takes a Wolf… to catch a Wolf[ves]. I should know.

[Caution: SaltyLanguage]

http://youtu.be/Ktv9cY2RR00

#52 Joe Calgary on 09.29.13 at 9:26 pm

Was lectured yet again by friends at a party last night about how renting is bad and buying is good, and everyday I rent I risk further appreciation of real estate. I said ‘that’s funny, because I see buying at the top of a market as a risk’, I basically got laughed out of the party. Can’t wait to say ‘I told you so’.

#53 John Dowin on 09.29.13 at 9:27 pm

Don’t offend the animal/the sheep.

It has more integrity than many people I know.

#54 Julia on 09.29.13 at 9:42 pm

You know your message is becoming mainstream when Macleans is writing about it.
http://wwhttp://www2.macleans.ca/2013/09/29/the-housing-trap/
But what the heck is a 23-year-old doing considering buying half million dollar real estate anyway? The world has gone mad!

#55 a prairie dawg on 09.29.13 at 9:42 pm

So how can Scotiabank in (good) conscience say ‘there’s really no better time’ to buy?

– — –

Classic left hand right hand analogy.

Their left hand economist side doesn’t talk to their right hand mortgage lending side. Completely different agendas in 2 departments of the same company.

aka “The left hand doesn’t know what the right hand is doing.”

An all too common occurrence in most large companies.

#56 Victor V on 09.29.13 at 9:50 pm

Want to have a little harmless fun? Send a thank you note to the host of the party and say how it was great seeing the gang, copy all those that were part of the chatter. Add a PS to your email saying you enjoyed the real estate discussion and thought they’d like to read the latest piece from Macleans.

Then include this link:
http://www2.macleans.ca/2013/09/29/the-housing-trap/

They might laugh at you publicly, but articles in the mainstream like the one above are harder to refute.

#57 FATHER on 09.29.13 at 10:01 pm

@52 what is going to happen to RE if US & Iran make up and oil comes gushing out, lower cost of barrels

#58 not 1st on 09.29.13 at 10:04 pm

Why would the banks want more exposure to this market? Do they really believe people can’t or won’t default in Canada?

#59 Dr. Bunsen Honeydew on 09.29.13 at 10:16 pm

How ironic – the bank hires a guy called Ben Dover to financially screw a bunch of dewy-eyed young sheeple. Lol.

Now this blog is really scaring me. — Garth

#60 young & foolish on 09.29.13 at 10:18 pm

“It’s a point you’ve brought up before about advisors having an entirely different set of standards between real estate and other investments.”

Correct, and there is a difference … a house is not an investment, but shelter. Someone in the future will need it after you. You will likely sell it at a reasonable price for the times (inflation considered).

Investments are more like placing your money in the future earnings/growth of an economy. Faith is required. Unlike housing, investing is non-compulsory.

Banks will tell you to buy now and get on track to ownership, and to forget about “timing the market”.

#61 dienekes on 09.29.13 at 10:18 pm

Harper is smart. He has developed a Weapon of Mass Destruction, the state of RE
He will loose the weapon right before the next election which they likely will lose into the lap of the winner.
A housing crash.

#62 dienekes on 09.29.13 at 10:21 pm

#58 not 1st
I see you post here, but do you never read?
CMHC is the exposed one, not the banks.
The insurance is for the banks!

#63 Waterloo Resident on 09.29.13 at 10:21 pm

Since most new home buyers are earning in excess of $125,000 per year in their jobs, I don’t see how the $347,000 average price of a house in Toronto should be of any problem.

Lot at it this way.
It is NORMAL for a person to buy a house that is from 3.0 to 3.5 times their annual income. So if two singles get together, their combined income is a quarter of a MILLION dollars per year. Multiply that by 3.5 and you get a reasonable spending target of $875,000.

So if new home buyers in the 20 to 30 age category are searching for a new house, and BOTH of them are earning well over $125,000 per year (as is common in Toronto), then that $347,000 is a BARGAIN.

Sure. All 20somethings earn $125,000. On which planet? — Garth

#64 casual observer on 09.29.13 at 10:33 pm

A couple of edits that Scotia should consider:

And since a home is something that can decrease in value over time, the sooner you become a homeowner, the sooner you can lose.

and

You’re poorer than you think.

#65 John in Mtl on 09.29.13 at 10:33 pm

Funny you mention ScotiaBank. I had my mortgage there before I sold my condo last year. They still think I’m a customer. A few weeks ago they sent me an “invitation” to participate in an anonymous online survey on mortgage products and services. It said that survey participation was ‘essential’ for the success of their project.

Hum… what project?

Anonymous? Doubt it especially when they said that I should follow a “personalised link” that should not be shared or given to anyone.

Someone is fishing for something…

Did anyone else get this?

PS: Garth, keep preaching – we hear you!

#66 Snake on 09.29.13 at 10:45 pm

1)Owning a million-dollar stucco bungalow while you intern as a busboy.

Read more: http://www.vancouversun.com/business…#ixzz2gJcT3gNA

2)How Many ‘Greater Fools’ Does It Take to Make a Bubble?

http://blogs.wsj.com/moneybeat/2013/…make-a-bubble/

3)A young renter’s dilemma: Buy now or wait?

http://www.theglobeandmail.com/globe…ticle14577678/

#67 lee on 09.29.13 at 10:46 pm

Waterloo Resident,

Why don’t you apply for a job in Toronto?

See what happens.

#68 Max Jones on 09.29.13 at 10:50 pm

Hmmm, encountered a real estate agent selling his own house this weekend. Wonder what that means?

#69 Snake on 09.29.13 at 10:55 pm

How Many ‘Greater Fools’ Does It Take to Make a Bubble?
http://blogs.wsj.com/moneybeat/2013/09/27/how-many-greater-fools-does-it-take-to-make-a-bubble/

An upscale porta-potty for $5,000 a night are u F**king kidding me

http://www2.macleans.ca/2013/09/26/an-upscale-porta-potty-for-5000-a-night/

#70 ripped on 09.29.13 at 10:58 pm

Chinese ex-banker sentenced to prison for amassing 45 houses under several IDs

http://www.vancouversun.com/business/Chinese+exbanker+sentenced+prison+amassing+houses+under+several/8974114/story.html

#71 young & foolish on 09.29.13 at 11:00 pm

“By the way, the average first-time buyer is 29 years old and will purchase a house worth $443,000 in Vancouver or $347,000 in Toronto.”

What did the average 29 year old spend in 1993? For sure it was less, as was the purchasing power of the dollar. Are we so far removed from the “normal” when inflation is taken into account? And what is normal anyways. Can you remember what downtown Toronto looked like back then? How can we attribute an honest value to such a changed landscape? Is it not like trying to predict what Google shares will be worth 5 years out?

#72 Canadian Watchdog on 09.29.13 at 11:00 pm

Chart: Canada Average Retail Prices YoY Growth % – Items List

That folks is called deflation — a central banker's nightmare. The red lines are Bernanke U-Turns, of which the half-turn is about to be injected with another dose of QE shortly.

See these guys here? They're betting the USD going to plunge and running into CAD assets already.

Ever wonder what Canadian RE is going to look like in a few years? 1% CASH DOWNPAYMENT VIP – FREE EVERYTHING – 1.99% MORTGAGE – JUST SIGN HERE

Ever wonder what Canadian RE is going to look like in 20 years? Here's one country that tried ZIRP for too long and since then has never pulled itself out of deflation. Chart

I hope I'm wrong for the better of society and future generations.

#73 Canadian Watchdog on 09.29.13 at 11:02 pm

Corrected:

Chart: Canada Average Retail Prices YoY Growth % – Items List

That folks is called deflation — a central banker's nightmare. The red lines are Bernanke U-Turns, of which the half-turn is about to be injected with another dose of QE shortly.

See these guys here? They're betting the USD going to plunge and running into CAD assets already.

Ever wonder what Canadian RE is going to look like in a few years? 1% CASH DOWNPAYMENT VIP – FREE EVERYTHING – 1.99% MORTGAGE – JUST SIGN HERE

Ever wonder what Canadian RE is going to look like in 20 years? Here's one country that tried ZIRP for too long and since then has never pulled itself out of deflation. Chart

I hope I'm wrong for the better of society and future generations.

#74 ILoveCharts on 09.29.13 at 11:19 pm

Re:
I have no idea why I keep this up. We’re doomed.
– Garth

I didn’t care much about real estate until this year. I assumed that the market would have ups and downs and I knew that Vancouver would be more expensive than the boonies but that’s about it. Then we decided that it was the right time to enter the market (based on our personal situation.)

This blog provided me with some excellent information that ultimately led to me “failing” to buy a place.

Thank you for for that.

We’re definitely in a tricky spot now. The boom has been going on for so long now that many of the people who engaged in crazy bidding wars, have gone on to sell and realize their gains. The bubble has to deflate but many relatively innocent people will be hurt in the process. Seeing this, the government can use tools to keep the bubble alive. No one wants to be in the wheelhouse when the ship sinks. Just look to the UK to see how far a government will go to keep prices high.

#75 young & foolish on 09.29.13 at 11:24 pm

“cheap money will be with us forva hell of a long time
because rhats what the puppet masters want….
assest inflation to proetect the rich. ”

Many have written about the connection between cheap money and expensive assets … like RE, and stocks. Seems like the markets need fuel. Consumers need spending power. Pull the plug on debt and what do you get?

#76 Cici on 09.29.13 at 11:24 pm

I have no idea why you keep this up either Garth, but thank God you do! You have saved a few butts belonging to people I know, cherish and love. Also, this blog is highly entertaining, fun and motivational.

Certain family members of mine used to pressure me to buy; but now they’ve stopped, and think I might just be wise.

Renting can suck at times, but for the most part, it’s a Godsend. I love having the freedom to move, and a worry-free lifestyle. When I do buy, it’ll be without CMHC insurance, and hopefully on waterfront.

Thanks to this blog, I’m no longer desperate. I’m willing to wait for the best, and be subsidized in the meantime.

#77 al on 09.29.13 at 11:28 pm

@#70 ripped

http://www.economist.com/news/china/21586883-wealthy-politicians

i forcefully demand that my people’s party member 2nd uncle immediately get in touch and send me the appropriate support measures.

i also demand corruption to be made legal and obligatory for any productive member of the society.

#78 Keith in Calgary on 09.29.13 at 11:28 pm

Well, I just spent a week in Kelowna.

Meh.

Hmmmmmm……meh.

Gurgle, snort……meh.

There’s nothing there to live for. And everything is way overpriced.

#79 crazed and a little confused on 09.29.13 at 11:28 pm

Hi garth,

You do this because you just tired of the bullshit being tossed around by ” professionals” who received their designation for 9 week course.
I was out bidded twice in Lower mainland BC 2 Bedroom townhouse For 194 K up to $ 205 K. in 2004 now its worth is $329k simiar to the other sold in less than 2 days. similar with the other place

now based on rent versus buy . if your not to picky you get 1 bedroom for $750/ month clean but old. mortgage now $ 1300/ monthmbefore tax and maintenance. my salary gown up maybe about 11% since then but housing over 70 % .

the best mortgage rate in 2004 was 3.79 %.

just crazy.

by the way who do italk to about mortgage rrsp . is it rea estate lawyer or finanvcial advisor at a bank?

#80 wallflower on 09.30.13 at 12:04 am

It would be revealing to see property tax remittance information by municipality across the country – are there increases in rates of overdue, unpaid? what about rates of utility bill by overdue, unpaid? I am guessing both would show increasing rates of overdue and unpaid.

#81 Snake on 09.30.13 at 12:06 am

macleans housing bubble fables

http://roseth.blog.ca/2013/09/27/maclean-s-housing-bubble-fables-16462658/

#82 Freedom First on 09.30.13 at 2:50 am

Garth, bad things happen when good men say nothing.
Keep up the good work. Thank you, Freedom First.

#83 Future Expatriate on 09.30.13 at 6:46 am

Ah, lovely photo of lovely Alberta, where men are men and sheep are nervous…

#84 Buy? Curious? on 09.30.13 at 6:57 am

Wow Garth! Did you read that Maclean’s article? Imagine, a reporter doing some work on a story that affects every Canadian? That sound that you are all hearing is not the pop of a bubble but slow gurgling of the water being let out of the tub. You see, things like don’t happen over night. All job losses are beginning to add up, lack of investment from government and an aging population is going to bring this country to its knees!

The only way to save Canada? Elect Justin Trudeau so he can legalise marijuana!

http://www.youtube.com/watch?v=N5f0RD4u_IM

#85 Nimoucha on 09.30.13 at 7:15 am

I am reposting this from a few days ago, since I got no reply (posted late in the day, so I guess only a few read it). What number should be taken into account when calculating Garth’s rule of 90 for a couple? And do you factor in kids, and how?
Thank you!

Kids or a spouse do not affect net worth. — Garth

#86 Stickler on 09.30.13 at 8:01 am

The more you buy the MOAR you save!

#87 Kalergie on 09.30.13 at 8:11 am

Great post, Garth. Another reminder that one should own Canadian banks, not use their services!

#88 Buy? Curious? on 09.30.13 at 8:14 am

Why is the Twitter bus following those sheep?

#89 Squatter on 09.30.13 at 8:23 am

#85 Buy? Curious? on 09.30.13 at 8:14 am
Why is the Twitter bus following those sheep?
—————————————————–
Hey Garth, there are subliminal messages in your pic!!!

#90 Renter's Revenge! on 09.30.13 at 8:25 am

#45. Speaking of property taxes killing people. The property tax on a 2500 sq ft house ($500k) in a new development in Winnipeg is about $5000 a year. I’ve heard property taxes are much lower in other cities in Canada. Does anyone have any idea why they’re so high here?

#91 maxx on 09.30.13 at 8:31 am

“Then there’s the reference to ‘knowing you’re making a smart investment’ when a first-timer buys. If the bank said this of its Scotia Canadian Growth Fund, for example, the regulator would ream it. Funny how a 22-year-old is warned of risk when putting $1,500 into a mutual fund, but when borrowing $300,000 to buy a condo in a troubled market is told, “the sooner you become a homeowner, the sooner you can benefit.””

Great post Garth- the real economy is in for a serious redressing no matter how long this ponzi scheme is allowed to exist.

I wonder if this highly damaging and misplaced permissiveness in market manipulation would be allowed to persist as long as it has, were it not for the Christmas tree of taxes and fees associated with the purchase of RE: legal services (tax), welcome tax (yummy!), municipal taxes (double and triple yummy!), moving expenses (taxed), permanent repairs and upgrades, fill in your own blank, etc.
Plus, people are being forced to be more mobile due to the increasingly flagging economy and the associated job migration, so we have a super-waste of after-tax money servicing an enormous tax load.

#92 Pr on 09.30.13 at 8:40 am

Its amazing! The number of sales will be higher this month, compare to the same month last year(QC).
Nothing said from: Carney, Turner, Flaherthy, etc. will stop them from buying.
Nobody!Nothing!

Last year, immediately following the mortgage rule change, was a dead zone. Remember to put year/year comparisons in context. — Garth

#93 Susan From the London area on 09.30.13 at 8:41 am

Liked your investing 101 Garth but you mentioned that you own real estate, what proportion of your assets should be allocated to it. Could you please reiterate. Thanks

My Rule of 90 applies. The percentage of your total net worth in residential real estate should equal 90 less your age. — Garth

#94 jess on 09.30.13 at 8:53 am

tax loophole’s unlevel playing field

Executive-Pay Tax Break Saved Fortune 500 Corporations $27 …ctj.org

SimilarApr 23, 2013 – Apple & Facebook Biggest Beneficiaries of Stock Option Loophole … Apple alone received 12 percent of the total excess stock option tax

http://www.ctj.org/corporatetaxdodgers/CorporateTaxDodgersReport.pdf

FAS 123R option expensing regulations
http://www.investopedia.com/articles/06/fas123r.asp

=======
small b vs big b

http://mainstreetalliance.org/wp-content/uploads/2013/06/Straight-Talk-Fact-Sheet-SBW2013-Small-Business-and-Tax-Reform-FINAL.pdf

Small businesses … don’t have the resources to hire armies of tax lawyers to dream up creative accounting schemes to avoid our tax responsibility. Frankly, we’re proud to contribute our fair share. We know that in order to build strong local economies, we need to invest in an educated workforce, reliable roads and bridges, and a healthy middle class customer base.

While we’re proud of Microsoft’s homegrown success story, we’re deeply disappointed that instead of standing with American small businesses in making these investments, Microsoft has joined in coalitions with other big corporate interests lobbying for a permanent tax amnesty on offshore profits.

==========================
Microsoft issued a statement, saying:

Microsoft complies with tax laws in every jurisdiction in which we operate. Last year, Microsoft paid $3.9 billion in income taxes worldwide and our effective tax rate was 19 percent. We are proud of our company’s positive economic impact. According to a recent study, Microsoft has been Washington state’s single largest contributor to economic growth since 1990, accounting for more than 31 percent of the total gain in state employment. …

#95 Fan of the Bearded Mystic Oracle on 09.30.13 at 9:06 am

“I have no idea why I keep this up. We’re doomed.”

Garth, Garth, Garth. You do this because you were put on this little blue dot as the bearded mystic oracle, all knowing, all wise, all seeing, financial prognositcator without equal, crystal ball gazing, tea leaf reading, Karnac of all matters financial, Harley riding badass with a crew of Amazons to protest and bath you, fierce denouncer of all parliamentarian peckerheads and peckerettes, NYTimes bestselling author, guest speaker at the SASTPGFBDCParty, lone voice of financial reason crying out in the financial wasteland of Canada and last and certainly not least, an all round jolly good fellow!

#96 Toronto_CA on 09.30.13 at 9:20 am

#71 young & foolish on 09.29.13 at 11:00 pm
” Is it not like trying to predict what Google shares will be worth 5 years out?”

Did you REALLY just compare Toronto to Google? I have to laugh when people try to compare Toronto as another NYC or Paris or Shanghai or London when trying to justify the increases as having anything to do with something besides cheap, easy credit– but that takes the cake. Yes, Toronto is the Google of cities. (lord have mercy on the young and foolish)

#97 Cow Man on 09.30.13 at 9:31 am

#90 Renters Revenge;
A $700,000 water front property in Owen Sound ON (the middle of nowhere, and the end of the road) has property taxes over $8,000 per annum. Water rates and garbage pick-up are on top of that. With firefighters, police constables, and school principles getting over $100,000 every where there is no end in sight to property taxes forcing people out of their homes.

#98 John Smith on 09.30.13 at 9:40 am

Garth,

My Rule of 90 applies. The percentage of your total net worth in residential real estate should equal 90 less your age. — Garth

So someone who is 40 years old should have 50 percent in real estate… that means being mortage free and having the same amount as the house is worth in liquid assets ?

It does not mean you ‘should’ have 50% of net worth in a house – that is the maximum amount. Whether you have a mortgage or not depends on your overall assets. — Garth

#99 vim on 09.30.13 at 10:11 am

Hey Garth,

Not all of us are doomed. The info published here daily is very helpful and convinced my wife and I to go liquid and invest in a a balanced portfolio.

Keep up the posts.

#100 broadway skytrain on 09.30.13 at 10:13 am

Kids or a spouse do not affect net worth. — Garth
—————————————————–

says a man who has likely never seen an orthodontist’s invoice ;)

I think you know what I mean. (And it’s all about choices.) — Garth

#101 Daisy Mae on 09.30.13 at 10:28 am

“….but the lion’s share derives from the buying and selling of houses.”

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

Can you imagine the Land Transfer taxes collected across Canada, especially in Toronto (buying/selling), being deposited into government coffers?

#102 Steve on 09.30.13 at 10:31 am

#59 Dr. Bunsen Honeydew on 09.29.13 at 10:16 pm How ironic – the bank hires a guy called Ben Dover to financially screw a bunch of dewy-eyed young sheeple. Lol.

Now this blog is really scaring me. — Garth
_____________________________________________

the variable reading comprehension exhibited here always scares me.

Ben was referred to as a realtor, not a banker, although today’s ‘reading’ was indeed about getting screwed by banks selling you on housing so [email protected] can ‘help’ you with a mortgage.

#103 Ralph Cramdown on 09.30.13 at 11:03 am

#94 jess — [quoting an article] “Small businesses … don’t have the resources to hire armies of tax lawyers to dream up creative accounting schemes to avoid our tax responsibility.”

This is often played as a small business vs. big business thing, but that’s oversimplifying. Yes, the majority of cash held offshore waiting for another US government tax amnesty is held by large corporations. But the differentiator for any given corporation is whether it does business worldwide, or mainly in its domestic market. Home Depot and Chrysler have very little opportunity to hold IP offshore or engage in transfer pricing tricks, while General Electric is said to have the best tax avoidance department, bar none. I know someone who worked for a small (several hundred employees, mostly in Canada) software development shop that sold worldwide, and its IP holdco was domiciled in one drawer of a lawyer’s filing cabinet in a Caribbean tax haven.

#104 recharts on 09.30.13 at 11:08 am

416 and 905 Sept Condo sales estimates:
Year 416 905
2012 934(-29%) 395(-22%)
2013 890 346

Expect 100 and 30 more sales to be added to Spet numbers in the next two days. Very close to last year and Sept 2012 was worst in 9Yr (see guava.ca)

416 Condos avg: 361K (-5%)
905 Condos avg: 287K (+1%)

Other than the above no notable news. Prices rising like crazy for To Semi and Detach

Judging by the price increase for Detached and Semis in To we are going to see some problems in the coming months. Condos will go down the drain this winter as more inventory is added to the supply.

#105 Ralph Cramdown on 09.30.13 at 11:30 am

The property tax on a 2500 sq ft house ($500k) in a new development in Winnipeg is about $5000 a year. I’ve heard property taxes are much lower in other cities in Canada. Does anyone have any idea why they’re so high here?

A $700,000 water front property in Owen Sound ON (the middle of nowhere, and the end of the road) has property taxes over $8,000 per annum.

Property taxes aren’t hard to understand, but everyone seems to have trouble with them. The city has a budget to pay for roads, infrastructure, and emergency services. Sprawling, low density cities cost more per household for services than dense ones do.

Most of a municipality’s income comes from three sources: Residential property taxes, commercial property taxes and development charges. Developer fees can be significant in a building boom, and cities can vary the percentage split between residential and commercial. Some cities have a lot more commercial activity and real estate value than others.

So council takes the budget, subtracts out devel charges, figures out how much it will charge commercial properties and subtracts that, and comes up with the remainder by setting the mill rate on the assessed residential tax base to the right value. Property owners are assessed pro rata according to the guesstimate of what the property is worth.

Say property values double. Does the cost of running the city double? What if property prices drop by half? Not much of an effect either way. Costs are mainly affected by the services provided, and how spread out the municipality is.

A $500,000 property in the Winnipeg area is in about the top 10% of stuff currently for sale there, and a $700k property in greater Owen Sound is in the top 5% of stuff currently for sale there. So yeah, you’re going to pay taxes like a rich man.

#106 young & foolish on 09.30.13 at 11:37 am

“Did you REALLY just compare Toronto to Google? ”

No, I did not … perhaps my post was not clear enough.
My point was about valuation in a shifting landscape …. TO regarding land use, Google regarding tech. Not so long ago downtown was underused industrial land, now it is being remade into desirable living space. Valuation is up. Similarly, people were using alta-vista as a search engine. And tomorrow a new form of algorithm may render Google as the new Blackberry.

Finding true value in a shifting landscape is very tricky.
Live long and prosper!

#107 bigtown on 09.30.13 at 12:16 pm

As a boomer well into my 50’s our family are in no position to buy real estate but have chosen RELIGION instead or PAYING ALL THE BILLS AND HAVING NO DEBT. I know we are a dull set with old out of style hair and outfits and furniture but we worship at the alter of NO BILLS or no debt. having no credit cards to lavish unaffordable purchases on ourselves is a choice and we realize we don’t fit in to the real world but I guess we will be on the outside looking in to all those fancy stores and houses which we will never ever ever afford but on the bright side do we really need all that overpriced merchandise and housing?

#108 Ralph Cramdown on 09.30.13 at 12:18 pm

#71 young & foolish — “And what is normal anyways. Can you remember what downtown Toronto looked like [29 years ago]? How can we attribute an honest value to such a changed landscape? Is it not like trying to predict what Google shares will be worth 5 years out?

Finding true value in a shifting landscape is very tricky.”

Price is what other people are willing to trade an asset at. Value is what I’m willing to pay. My value expectations for residential real estate are anchored in price:income and price:rent ratios. Will Toronto prices keep rising at the rate they have been since the last bottom? I don’t think so, because things that can’t go on forever eventually stop. Meanwhile, I’m renting, with my capital deployed elsewhere (not “on the sidelines” as many a realtor is wont to say). Apparently my sense of value isn’t too poorly calibrated, because I keep getting made offers I can’t refuse… KEYreit, Primaris REIT, CML Healthcare, General Donlee and, today, Petrominerales. I’d have been perfectly happy if these companies had just kept mailing me money regularly, so I spent no time trying to predict/calculate what somebody else would be willing to pay for them at some future date.

#109 fred funder on 09.30.13 at 12:29 pm

Toronto parents of young adults can expect their kids to be living at home a lot longer given the bleak employment picture in Canada’s largest city.

A new report says the employment rate for people aged 15 to 24 is 43.5 per cent in Toronto, the worst of any region in Ontario.

It’s also higher than American states such as Indiana, Minnesota, Ohio, Pennsylvania and Wisconsin. Illinois and New York are worse off, with youth unemployment rates of around 18 per cent, the report says.

What’s more, younger workers are the first to be laid off in a market downturn and competing with older workers that are staying in the workforce past planned retirement dates.

That has an impact on the overall economy, particularly given that young people without a job aren’t buying homes, cars or other big-ticket items that help to drive economic growth.

“The big story is that five years after the Great Recession, youth remain largely shut out of Ontario’s slow economic recovery,” writes the study’s author, University of Waterloo doctoral candidate Sean Geobey.

http://ca.finance.yahoo.com/blogs/balance-sheet/ontario-youth-unemployment-rivals-eu-u-rust-belt-142637734.html

#110 Mr Darwind on 09.30.13 at 12:34 pm

Garth, Im starting to think you might
Be wrong. I was out at my moms house
in Coquitlam last night. All the houses that
were up for sale had sold stickers. Also
alot of old homes had been torn down and mega
mansions are beeing built. Also there are alot
of empty homes in my Vancouver neighbourhood. I think alot of people from over seas who just want to hold and have so much cash and they cant be bothered to rent it out. I’m also starting to think interest rates will never go up. You might be doing this blog in vain. I think there is alot more $ out there than you think. Especially under the table HAM.

#111 Nathan on 09.30.13 at 12:49 pm

Realtor fired for telling the truth

first:
http://www.youtube.com/watch?v=u03UN4_nnvE

Then…
http://www.youtube.com/watch?v=2zMTHIkv-n8

#112 fixie guy on 09.30.13 at 12:53 pm

@#81 Snake re: macleans housing bubble fables

I only glanced at Roseth’s rebuttal but saw no point going further than: “We did have a severe housing price collapse in the late eighties, when house prices dropped as much as 40% in the GTA, and in Vancouver, where the price deflation was even more pronounced. ”

Vancouver saw a single year boom-bust around 1982-83, after which it rose into the mid Nineties until Hong Kong immigration slowed with the Repatriation. After a ~25% real decline lasting to the early 2000’s it started on a tear until this day. Sauder data below:

https://connect.ubc.ca/bbcswebdav/institution/UBC_Vancouver/Sauder/Sauder_Events/CUERE_2013/CUERE%202013%20Q1/Residential%20Real%20Estate/Housing%20Prices/housing-pri-vancouver.pdf

None of it is sustainable of course but if Roseth can’t confirm such trivial details his blog fully meets the ‘sucks’ criterion.
Nice Muslim and racing baiting on that site BTW. Stay classy.

#113 DM in C on 09.30.13 at 1:07 pm

$17Mil condo project went up in smoke this weekend in Deadmonton.

http://www.calgaryherald.com/news/alberta/Firefighters+sift+through+ashes+million+condo+fire+people/8977177/story.html

#114 Canadian Watchdog on 09.30.13 at 1:52 pm

#110 fred funder

Don't worry, Kathleen Wynn will take care of the youth with your money.

Ontario Government to Launch Youth Employment Fund This Fall

Premier Kathleen Wynne unveiled new details about the Youth Employment Fund at Operation Springboard in Scarborough today. Ontario will provide up to $7,800 to cover a range of supports and services for each eligible young worker under the fund. That includes up to $6,800 to help employers cover wages and training costs, and up to $1,000 to help young workers pay for job-related costs like tools and transportation to work.

#115 young & foolish on 09.30.13 at 2:13 pm

“Price is what other people are willing to trade an asset at. Value is what I’m willing to pay. My value expectations for residential real estate are anchored in price:income and price:rent ratios. ”

OK, you collect dividends from companies which you hope will continue to makes profits in the future, and will be of good value to people willing to buy them from you. Price to earnings factored in, like cape rate for RE.
Both investments demand faith in future earnings.

#116 Old Man on 09.30.13 at 2:16 pm

#15 Doug in London – this has to be the best comment I have seen, as owned a property in your parts, and saw it coming, so did a listing ahead of time – too late, and was trapped for a small loss of just $15,000 to bail out. Now when I went to the big law firm for a final closing pointed out the fact with the documentation that my name was spelled wrong. The lawyer put his head on the table, and said wtf, and blamed his assistant, as the cheque that was to be made out to me was all wrong, as could not legally be banked, so this became a huge problem in more ways than one.

#117 Snake on 09.30.13 at 2:22 pm

Slowing housing market puts pinch on reno projects

http://globalnews.ca/news/872361/home-reno-spending-set-to-taper-over-next-few-years-report-says/

#118 Mister Obvious on 09.30.13 at 2:22 pm

#112 Nathan

“Realtor fired for telling the truth”
—————————–

No, Nathan… realtor fired for being an idiot.

It’s old news anyway. Try to keep up.

#119 RiverCross on 09.30.13 at 2:28 pm

BTW, what HAM means?

#120 Old Man on 09.30.13 at 3:02 pm

#117 Old Man – I want to place this all within context has held the Power of Attorney for my Dad, as sold one home to buy another for him all in cash, so when he passed away the title came to me which rented out, and blew it off, as saw ahead of time a crash coming, but was too late, so took a bath for $15,000, and only deal with a top law firm with a senior partner, but on closing the middle name was wrong, as looked at all documents before any closing, and said this is a screw up, as the cheque was being made out to my dad with his middle name, and not mine; not to mention that all the closing documents were wrong. :)

#121 Evangeline on 09.30.13 at 3:06 pm

#107 “Similarly, people were using alta-vista as a search engine. And tomorrow a new form of algorithm may render Google as the new Blackberry.”

Google now returns results based on what it thinks is your “intent” not on the specific words, even the ones you’ve enclosed in quotation marks, in the search box. Your desired search term will be basically ignored, because you know, they know better than you do what you are looking for.

If Apple wants to kill Google it should come up with a better search engine. I’ve tried many alternatives to Google, but all deliver about the same mediocre results. The best was Scroogle which unfortunately is no more.

#122 Sebee on 09.30.13 at 3:16 pm

I had a conversation about renting recently with a friend who had a neighbour with a barking dog in his nicely managed complex.

You know what he did? Had 5 people sign onto his letter about the barking problem. The neighbour was given 30 days to retrain the dog/address the issue, or be evicted. Can you do that to an irresponsible neighbour living next to your $1.2M Toronto semi who has not given his dog the attention and training he requires? I think not. It’s you that has to move and hope the problem is not repeated.

He clearly made a strong positive point about renting. Mind you, you have to rent from a reputable landlord to have your interests properly represented. Can you get same protection from some condo-investor-landlord? Ahh..likely NOPE! No only that, Condo owners can kick you out anytime they want to sell. And as Garth educated everyone here a while back if I recall correctly, condo landlords can jack your rent up as they please and are not subject to increase regulation.

I have no idea WHY on earth people would rent Condos, just like I would never rent from anyone not in the business of running a properly managed rental property complex.

#123 Crashing Yuppy on 09.30.13 at 3:23 pm

DELETED

#124 recharts on 09.30.13 at 3:31 pm

A new report says the employment rate for people aged 15 to 24 is 43.5 per cent in Toronto, the worst of any region in Ontario.

Tell that to idiot who said it is OK in TO to have the prices going up since most of the graduates make lots of money.

With this report you have to start asking yourself who the heck bought all those condos they have built lately

#125 Evangeline on 09.30.13 at 3:50 pm

#116 “OK, you collect dividends from companies which you hope will continue to makes profits in the future, and will be of good value to people willing to buy them from you. Price to earnings factored in, like cape rate for RE.”

S&P calculates a fair value rating that estimates how much of a premium is attached to each stock they analyze. Some high premium stocks are rated as strong buys, some as buys and some as holds, meaning it is *too* pricey. (The ratings are based on an estimated 12-mo total returns.) Ko has been rated as a |”strong buy” since 2007, but the ratings are in daily flux.

Like everything else, S&P’s ratings and reports are best viewed though a lens shaded with skepticism, but the S&P reports are definitely one resource that should be checked out before buying a U.S equity or equities that are dually listed on both Canadian and U.S.A. exchanges.

#126 pinstripe on 09.30.13 at 4:00 pm

Garth, you are in a NO-WIN situation when dealing with teaching financial stuff to the newbees.

Too many seasoned investors are fully aware of the financial processes and how the market is FIXED.

OTOH, you deserve a lot of credit in bashing the real estate processes.

#127 Canadian Watchdog on 09.30.13 at 4:10 pm

British Columbia consumer proposals soars by 28% y/y in July. chart

Quebec consumer proposals soars by 32% y/y in July. chart

Canada consumer proposals increased by 9% y/y in July. chart

The good news is many these folks still own their homes, but, as mentioned by Moody's in paper on Canadian debt titled Cautious Optimism for Canadian Credit Cards:

Theoretically, distressed borrowers whose incomes drop should forego payments on their credit cards first before risking a foreclosure or vehicle repossession. As has been observed in the United States, a dramatic reduction in home equity can turn this relationship on its head as borrowers who are hopelessly under water on their loans may decide to stop throwing good money after bad on their home mortgages. Still, sudden changes in credit card activity can indicate overall financial stress.

Well, not really good money after bad, rather throwing devaluating fiat money after accumulating debt-bearing interest loans, a game that is mathematically assured to end with many many defaults and foreclosures.

#128 Musty Basement Dweller on 09.30.13 at 4:20 pm

young & foolish on 09.29.13 at 10:18 pm
“It’s a point you’ve brought up before about advisors having an entirely different set of standards between real estate and other investments.”

Correct, and there is a difference … a house is not an investment, but shelter. Someone in the future will need it after you. You will likely sell it at a reasonable price for the times (inflation considered).

Investments are more like placing your money in the future earnings/growth of an economy. Faith is required. Unlike housing, investing is non-compulsory.

Banks will tell you to buy now and get on track to ownership, and to forget about “timing the market”.
————————————-
But a lot of people buy houses as “investments” and they and their Real es agents justify it that way. It is not necessary to own to have shelter or generate wonderful memories.

A better description of the house might be a bit of wood, sand. Cornflakes and oil products.

#129 Old Man on 09.30.13 at 4:24 pm

I was involved with a mess in Florida years ago that involved a class action law suit, and they had money for me, and sent me documentation. I took one look and it was all Chinese to me, so had no clue what to do in the least, as was all USA stuff. I heard about this lawyer that lived in a mansion by himself, so drove in the back parking lot and walked in to his office; no receptionist; and no legal secretary. I showed him want I needed, and was a man with few words, and looked into a book, and turned to a massive computer system with codes that he entered, and documents were printed out. He said this is what is needed, but who are you, so show me some identification before I sign which I did. All was done and USA accepted this all with a nice cheque, and before I left his office asked him how much, he said $50.00 in cash; now that was a deal!

#130 Smoking Man on 09.30.13 at 4:28 pm

So youth unemployment is bad, it’s not like jobs don’t exist, but they are deemed not worthy, for the cube hunting, gamers.

How about sales, ha what kid wants to do that. Commission only are you out of your mind.

Hunters will prosper and cube dwellers will be fighting for a dwindling supply of cubes in a global market.

Learn to sell grasshoppers, your best shot at property.

#131 AfterTheHouseSold on 09.30.13 at 4:46 pm

#108 bigtown
“paying all the bills…”

We too worship at the alter of NO BILLS, NO DEBT. We sold our farm last summer, purged our “stuff” from the house and 3 outbuildings down to 7 utility shelves now stored in my MIL’s basement. (While packing we filled a “memory treasure chest” of baby book, school pics for each of our two launched kids). This blog affirmed what we were already thinking; this was a windfall that fell in our laps, know when to hold em’ know when to fold em’. So we did, removing half million from the table and easing that money into a balanced, diversified liquid portfolio which we are still building. Thanks Garth. The dividends now augment our previous savings and our meager $1200. monthly pension that we took 8 years early in exchange for our freedom from the “slave tax farm”. We are also free of property taxes, house insurance and utilities.
There’s nothing like burying your parents and getting bumped to the “front of the line club” to realise two things: you’re not taking it with you and you’ve got more years behind you than you do in front of you. Since selling the dry walled storage container and throwing off the shackles of “stuff” we have chosen to travel while we have our health. We have been short term renting our way around via kijiji, last winter in Florida, this summer in Newfoundland, currently spending the fall renting an off season cottage in the Kawarthas for $750 per mth all in, where the fishing is good and the fall colours beautiful. Our mthly rental costs have averaged $750.per mth, approximately one third the cost of maintaining our former mortgage free house. Our only other fixed costs are our smart phones, post box rental and vehicle insurance.
Up for consideration in the new year: going south for the winter. From there, heading to Europe on a cruise ship that’s finished the season in Florida. For a fraction of the cost you can ride these otherwise empty ships as they return to Europe to begin the season there.
Perhaps house sit our way across Europe. Don’t know yet, just going to let life unfold. What we do know is that there is life after real estate. And life is good!

#132 straight 6 on 09.30.13 at 5:20 pm

The sad reality is, does anyone believe anyone any more?
EVERYONE is a dissembler! shamelessly championing their own agenda.
ok, everyone that is except Garth..
and THAT is why we are doomed.

#133 Nemesis on 09.30.13 at 6:14 pm

@RiverCross/#120

HyperactiveAutodidacticMillennials

@ATHS/132

WellPlayed!

#134 Doug in London on 09.30.13 at 6:56 pm

@pinstripe, post #127:
The market is fixed you say? Yes it is fixed, in such a way that certain investments go on sale and that’s the time to buy them. It’s the last day of the month, and I get great pleasure from watching the dividends roll in from those REITs, preferred share ETFs, and utility stocks that I bought which have been on sale since June. Hurry, hurry, hurry, get them while they’re still on sale now!!!!!!!! The market IS fixed, and that’s good news if there ever was!

#135 Smoking Man on 09.30.13 at 6:57 pm

#20 chopper on 09.29.13 at 7:26 pm
Don’t grow weary Garth you are doing your country a great service with this blog. I have been transformed in my mind about things financial and the way the world runs. I have learned so much here that I no longer make money mistakes I used to make before finding this blog.

I also enjoy reading Smoking Man’s posts he has a lot of wisdom about the world.
…………………………………………..

Dude I’m a raving loon, who drinks way too much.

Please do yourself a favor and don’t take my words to seriously.

I’m un-schooled, un-disciplined, and fearless, it don’t work for most people.

I’m just lucky..

#136 Derek R on 09.30.13 at 7:03 pm

#131 Smoking Man on 09.30.13 at 4:28 pm wrote
Learn to sell grasshoppers, your best shot at property

Sounds like a plan! They’re supposed to taste just like chips.

Grasshoppers on the menu

You think there’s a big market, then?

#137 straight 6 on 10.01.13 at 1:21 am

Shawn rebutted with..
.. we are all better off when we each pursue our own good.
Smith (possibly Smoking Man’s forebear) thought the greatest danger was from *those who pretended to trade for the public good. Those were the people not to be trusted.

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

This underscores my point. *dissemblers! Not to be trusted.
eg. your run of the mill politicians.
(To disguise or conceal one’s real nature, motives, or feelings behind a false appearance).
To gain ground through deception.

re Garth incarnate..
Garth: leave me out of it.

#138 TurnerNation on 10.01.13 at 3:15 pm

Ingot we trust? Not today.

And I do suspect they are turning us all into a 2nd World country. Working on it, gutting our largest trading partner, to the south.