Aliens

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“You sure won’t find any bidding war here,” says a guy who’s sold real estate on the silk side of Victoria for the past three decades. “Forget that stuff CREA’s telling you. In a normal month this time of year we should have a thousand sales. We’re running at half that.”

Actually 609 properties changed hands in the suffocatingly smug little burg by the sea last month. Up 12% from last year says the local board, but still 40% behind levels last seen eight years ago. In fact, as this blog has shown enough times to be serially catatonic, outside of 416, Van and Testo City, real estate’s sliding into a swamp of failed expectations and jilted buyers.

Detached homes and condo sales slumped in Montreal. Nova Scotia is a mess. So’s Regina. In Winnipeg sales are down 12% while listings have bloated 59%. The number of deals is down in Durham, Cambridge, Fredericton, Kingston, and Milton. In Edmonton sales of detached homes are off 15%, and for condos the decline’s 20%. Of course some markets have improved (Fraser Valley, Barrie, London), but overall there are reasons to be scared if you’re 66 with way too little in your portfolio and a backsplit on the market for five months.

Now even the bankers are on it – a ‘false sense of optimism’ based on year/year price increases which completely mask current trends and market momentum. Here’s BMO’s chief egghead, Doug Porter:

“Canada’s housing market remains healthy and well balanced overall, albeit with sizeable disparities across regions. The major potential flashpoint is that prices in the three hottest cities—Calgary, Toronto and Vancouver—are rising faster than family income, further straining affordability… Meantime, the seemingly calm exterior on sales and prices masks a deepening divide between large cities and small, and West and East. On the sales side, almost half the major markets (12) reported declines last month, with double-digit drops in Halifax, Sudbury and Winnipeg. Similarly, so far this year, precisely half of Canada’s cities saw sales drop, with 8 of the 9 cities east of Ontario down, while only 1 of 8 in the west fell.”

Bummer. In half the places the bank probed, sales are sliding. And in the three spots where enough delusionally horny fools remain, it’s not a boom but instead a “flashpoint.” Meanwhile the Bank of Canada has stopped yapping about a soft landing for the national housing market because it looks increasingly unlikely there can be one. With most of the country already soggy, with US interest rates set to rise in a few months, with bond yields backing up, with incomes stagnant and household debt levels rising, and 52% of people saying one missed paycheque would down them, how does this end gently?

Well, it doesn’t. And not even the aliens can save it.

A major meme on this pathetic blog among the house-humpers has been that unbridled immigration will keep house prices aloft in places like Vancouver and the GTA. Of course, there’s no hard evidence anyone other than lusty Canadians are responsible for million-dollar hovels, but the country’s apparently full of xenophobes who want to blame outsiders. Now the Vancouver mayoral race is being shaken by a long-shot dipstick candidate who wants to tax people who buy houses but don’t live in them.

Even the sitting mayor, Gregor Roberston, is joining the stampede, saying, “We have real concerns around empty homes, and affordability.” So does he question CMHC policies, voracious bankers, kids buying with 100% leverage, condo speckers, sleazy marketers who lie to the media or crazy mortgage rates which have indebted BCers like no other citizens in the country?

Nah. Too hard. Diss the Chinese, instead.

Michael Ward isn’t so sure. The North American CEO of a major forex company, which wealthy immigrants often use to convert cash into Canadian dollars, told this to the Financial Post:

“We’re not real estate experts, we don’t advise [on real estate]. But there a lot more people asking ‘is this going to burst? What are you hearing?’. I think people are nervous, they didn’t see the Canada crash in 2008 like a lot of other markets. It’s stable but you can’t continue to have an upswing. I do think some people who are doing the research or reading the news and seeing the insights are starting to go ‘is the Toronto market’ overbought’?”

Hmm. More wily immigrant-investors wanting to flee Canada than put money here? Maybe they’re not as dumb as the people running for Vancouver council. Hey, perhaps that’s how they got rich in the first place – buying when it made sense, then selling when the local fools rushed in to pay top dollar.

Meanwhile trying to keep foreign buyers out never works. Canadians still snap up Florida digs despite being slapped with a property tax penalty. Central London is peppered with non-Brit owners despite residency restrictions. Australia’s just seen a 45% jump in alien investment (mostly Chinese) despite banning foreigners from owning resales and forcing them to sell when they moved offshore.

In country after country lazy, rabble-rousing, morally bankrupt politicians have won office and changed laws by catering to the lowest common denominator of public opinion – immigrant-bashing. Few have the guts to lay blame where it belongs. Their entitled voters.

No wonder they hated me in Ottawa.

208 comments ↓

#1 jas on 09.16.14 at 7:03 pm

So funny…

#2 Victor V on 09.16.14 at 7:15 pm

AND IT WENT FOR – 327 Windermere Avenue – SWANSEA

http://themashcanada.blogspot.ca/2014/09/and-it-went-for-327-windermere-avenue.html

Two weeks ago, I posted this 3 bedroom, 2 bathroom house on a 25.5 x 91.83 foot lot at 327 Windermere Avenue in Swansea.

There were things that I didn’t love about it like the fireplace stone, the kitchen floors, and some of the paint choices, but I thought this was a good option in a neighbourhood that didn’t have a lot of turn over.

And though house I compared it to that sold for $803,000 was a much better house, it was also only a 2 bedroom house.

This place was listed at $889,000. I thought it would sell closer to $965,000….

Until someone pointed out that this house had already been on the market for a month!

So…it wasn’t selling for almost $100,000 over.

But it did finally sell…for $860,000.

#3 Roman on 09.16.14 at 7:17 pm

is the Toronto market’ overbought’?

Ya ainta say…

#4 claudio on 09.16.14 at 7:23 pm

my name is first!

#5 prairie person on 09.16.14 at 7:24 pm

I dunno. 609 sales seems pretty good. I sold a big place in 2010 and downsized to a bungalow. If I’d known about t his blog, I’d have rented and waited. However, presenting 2010 as a model of what should be isn’t a good idea. Places were turning over in days, not weeks, prices were crazy, and the h ouses I looked at to downsize to were crap. They needed to be torn down. There were and probably still are a lot of houses in Victoria that need to be bulldozed. People retire, buy here, stay in the house without bothering with maintenance, either because they don’t have the money or because they’re staying until they die and don’t care what happens after they’re gone. I don’t think the peak of the market was a h ealthy market for anyone except speccers. Buy it, throw some paint on it and flip it. I think the current situation is much better for everyone except the speculators and flippers. Maybe housing will go back to being homes instead of a get rich quick scheme. Yes, I’ll lose some money on the bungalow but I made a bundle on the mansion and my loss won’t be any more than if I’d been paying rent. In the meantime, I’ve got a nice house, a great neighbourhood, a good city in which to live. I’ll pay for that. Unfortunately, RE agents and speculators don’t think of the housing market as providing homes but as a casino where they have a chance of making a killing.

#6 Tony on 09.16.14 at 7:26 pm

We all know what Janet will say this Thursday but of course the opposite will happen in due time. Has it ever been any different in America?

#7 totalinvestor.com on 09.16.14 at 7:30 pm

Do they hate you only in Ottawa?

http://postimg.org/image/hjovfh0kn/

#8 Rainclouds on 09.16.14 at 7:33 pm

Irvin Leroux (round 2)https://www.indiegogo.com/projects/road-to-justice-and-accountability-phase-ii

How about morally bankrupt CRA……..trying to bleed the poor sod. 800K of your tax dollars spent to defend their vindictive incompetence

Pretty Sure Garths original post and a lot of blog dogs put him over the top for the court transcripts. Now its go time………

#9 Squatter on 09.16.14 at 7:36 pm

Yeah…normal people are so idiot.

#10 pravchaw on 09.16.14 at 7:40 pm

Hey Garth – How can we make money of this? Any ideas on how to short this real estate market?

#11 JSS on 09.16.14 at 7:42 pm

Is it reasonable to assume that out of the three cities – Vancouver, Toronto, and Calgary – that Calgary has the most chance of rising house prices?

From what I’ve heard, Calgary has the lowest unemployment rate, and most white collar jobs in Canada. And I think most head offices too. Maybe even more diverse economy as compared to GTA and Van city?

#12 screwed on 09.16.14 at 7:43 pm

– “with US interest rates set to rise in a few months, with bond yields backing up, with incomes stagnant and household debt levels rising, and 52% of people saying one missed paycheque would down them, how does this end gently?” –

What you’re describing is going to be the raison d’etre for the next round of QE which will include Canada.

China started SLF, ECB is about to unleash QE and the Yanks are banging the war drums.

CBs all over are on a roll to devaluing currencies to avoid systemic collapse of the entire liability and debt complex, aka the greatest ponzi ever.

It is never going to end.

#13 Realties.ca » Aliens on 09.16.14 at 7:45 pm

[…] Source: http://www.greaterfool.ca/2014/09/16/aliens-2/ […]

#14 Mark on 09.16.14 at 7:46 pm

” Any ideas on how to short this real estate market?”

Sure, buy shares in the big-5 Canadian banks. Their portfolios are structured to be effectively ‘short’ the Canadian housing market.

#15 Mark on 09.16.14 at 7:51 pm

“Is it reasonable to assume that out of the three cities – Vancouver, Toronto, and Calgary – that Calgary has the most chance of rising house prices? “

Ratios aren’t as inflated in Calgary, but as the cyclical rotation away from housing, and towards non-housing asset classes occurs, Calgary is the proverbial ‘home’ to a lot more in terms of value than you see in Toronto.

Calgary housing, at the margin, competes with the shares of firms such as Suncor, Talisman, Canadian Natural, and a whole plethora of other oil and gas firms, pipelines, etc., for investment dollars. Unlike the Toronto-based banks, most of the O&G sectors’ equity is still trading at levels below that of even 2008.

Calgary really doesn’t have that big of a ‘white collar’ sector, and nothing like Toronto/Vancouver. Strip out the narrow O&G industry, and the various EPCM’s that support them, and there’s not a lot else in those Calgary office towers. Employment in the O&G industry is known to be notoriously cyclical, and the lower house price / higher CAD$ environment can be quite problematic for the sector.

So yeah, even though all three of Calgary, Vancouver, and Toronto have seen price declines in the past year or two when you adjust the numbers for a consistent sales mix — I’d still probably agree with you that Calgary is a bit less riskier than Vancouver/Toronto. Although not significantly so. One-trick-pony towns will always trade at a discount!

#16 A Yank in BC on 09.16.14 at 7:53 pm

Sure, blame the politicians for exploiting the widely held belief. But they sure aren’t the ones who created that belief. Local Realtors did that (yellow helicopters for instance), and did so for their own personal aggrandizement. Lets give them all the credit they deserve for ruining a once nice little city that the average Joe could afford to live in.

#17 Dirty Debtor on 09.16.14 at 7:54 pm

Guide to living Millenially in the Fraser Valley:

1. Get a trade (lifetime backbreaking labor at $30/hour)

2. Get a 40 grand payment plan on a gas guzzling truck (you’ll need something nice to sit in traffic for 3 hours a day)

3. 5 years later, once the truck is finally paid off, replace the car payment with a shoebox payment

4. Fill shoebox with furniture on payment plans

Don’t forget to rack up the credit card on the way!

#18 Smoking Man on 09.16.14 at 7:56 pm

Well, it doesn’t. And not even the aliens can save it-Garth

No need for me to intervene, the spring dandelions is all it takes.

The Herd Gartho..
416 = DECADANCE.

Superficial show offs. Competition for bragging rights.
I’m important, I’ve made it. Home owner ship is the only way the schooled can express themselves.

They will fight for those things to the bitter end..

You give it no weight in your analysis.. Wage vs Price,

They only anyalize price vs rent… Rents are going up.

#19 I'm stupid on 09.16.14 at 7:58 pm

Let the party begin. The fed, Scotland, Alibaba. I smell a buying opportunity coming in the market.

#20 Nemesis on 09.16.14 at 8:02 pm

#”DontRun!”… #”WeAreYourFriends!” #SpoilerAlert:HidingInYourTrailerParkIsFutile:

http://youtu.be/ngqOmNWVke0

[NoteToGT: Just between the two of us… in the end, it was this guy what VanquishedTheInterGalacticMarauders and saved the world: http://youtu.be/0FhQxZnSqc0 – I’m not sure what happened to his horse, though.]

#21 FleetwoodBoy on 09.16.14 at 8:05 pm

Quick update from Fleetwood Surrey. A property which was first listed at $829 (maybe $849 even) has just come back on the market for $749. It was on for about 18 months, but was off most of this year. It was over-priced before, still probably a bit heavy in this market.

#22 Smartalox on 09.16.14 at 8:08 pm

I don’t have a problem with a vacancy tax in Vancouver. If these un-occupied properties are owned by off-shore parties, or speculators, and either rented for profit(?) or marketed for part-time occupancy through services like ‘AirBNB’, local businesses suffer from reduced patronage, while continuing to pay commercial property taxes.

If property speculation is Vancouver’s biggest industry, it should be treated like Vancouver’s other businesses, and taxed at a higher rate.

Land transfer taxes only generate revenue when properties are transacted. Buy and hold investors aren’t paying enough.

Besides, haven’t you heard? BC municipal employees wages have increased over the past 12 years at a rate more than double the rate of increase for provincial workers.

Somebody’s got to pay for all that lucre, and I’d rather have it be the Air BnB next door, than my pub down the street. Or my employer, who could easily move to a jurisdiction with a lower commercial tax burden, and a longer commute for me.

#23 NEVER GIVE UP on 09.16.14 at 8:10 pm

Garth:
I beg to differ on the issue of foreign Hot Money Flowing to our real estate market.
Yes you are entirely correct that our self serving government lowered interest rates to pump up the market and it seems to have gotten them out of a jam 4 years ago and got them elected in majority.
But the tipping point is the foreign Hot money.

I believe it must be difficult for you and many others who don’t live in Vancouver to understand the FEELING of what it is like to be unable to afford a home.
Your are comfortable in your bunker and I believe you don’t see the anecdotal evidence that is in our faces every day.
Our city has become a casino for Foreign Hot Money. Most of which is “Hot Asian Money” as you call it.
It is the straw that broke the camels back.

Homes should not be, through government policy a highly leveraged futures exchange with the taxpayer as the guarantor of failure.

England has got it right. Welcome the foreign investment for HOUSING only and tax the hell out of speculators.

We should only do the same. If the issue comes up in the next election I will throw my vote to anyone who is in favor of heavy taxation of foreign capital gains and to a lesser extent local capital gains.

With this policy in place there may be a hope for our kids to own their own homes.

It is not racist to want to tax foreign investment.

#24 Taxc on 09.16.14 at 8:10 pm

http://www.huffingtonpost.ca/2014/09/16/td-ceo-ed-clark-mortgage-lending_n_5830056.html

#25 JSS on 09.16.14 at 8:11 pm

#14 Mark on 09.16.14 at 7:46 pm
” Any ideas on how to short this real estate market?”

Sure, buy shares in the big-5 Canadian banks. Their portfolios are structured to be effectively ‘short’ the Canadian housing market.

=====

How would buying shares in the Big 5 Canadian banks benefit with a declining house prices and rising interest rate environment?

#26 NEVER GIVE UP on 09.16.14 at 8:23 pm

As for more appropriate foreign investment I believe our government should make tax free zones to attract the investment that we WANT.

Vancouver is a tax free zone for shipping companies. WE have attracted tons of them with our beautiful scenery and tax favored status.

We should welcome any country to bring factories here tax free and hire locals who pay tax.

Businesses never pay tax anyway. Only people pay tax.
Any tax on the business is passed on to people anyway.

Asian countries have tax free enclaves in many places and they are quickly filled up with businesses.

Pudong in China was so overwhelmed recently with free trade zone applications that they had to stop accepting them.

The old Naval base in Subic Bay Philippines is now a thriving Free trade Zone.

#27 Kenchie on 09.16.14 at 8:24 pm

#11 JSS on 09.16.14 at 7:42 pm
“Is it reasonable to assume that out of the three cities – Vancouver, Toronto, and Calgary – that Calgary has the most chance of rising house prices?”

Highly dependent on the oil price remaining high.

“From what I’ve heard, Calgary has the lowest unemployment rate, and most white collar jobs in Canada. And I think most head offices too. Maybe even more diverse economy as compared to GTA and Van city?”

Lowest unemployment rate: Yes. Most white collar jobs in Canada: Nope. Most head offices: Nope. More diverse economy as compared to GTA and Van: LOLOLOLOL Not even close. Calgary is a one-trick pony town. It all depends on a word that starts with an “o” and ends with an “l”. The majority of those white collar jobs will disappear if the oil gushing slows. That said, Vancouver has the most diverse economy of the three, as per the Hachman Index, because it isn’t dependent on any particular industry. Toronto, while close to being as diverse as Vancouver, is heavily weighted to FIRE industries. I have the data at work, and will post it tomorrow.

#28 Dirty Debtor on 09.16.14 at 8:27 pm

Regarding the housing market in Victoria- I can’t believe anybody was foolish enough to believe that market was ever on an upswing.

A mediocre university, couple hundred gov jobs, and a sea of broke wrinklies on social assistance, living in mouldy old apartments does not a thriving economy make.

#29 stage1dave on 09.16.14 at 8:29 pm

Nuthin’ wrong with bein’ hated in Ottawa; probably why you’re so popular elsewhere!

Having transformed into an apartment dweller the last year, I’m now surrounded by people who trash the real estate market (both the REAL & IMAGINED, there is a difference) so I get to preach to the choir.

However, I must be careful not to get too involved & start uttering truths…like, how few peeps qualify for a mortgage while on AISH, EI, Social Assistance, (or Security-both of these are oxymorons, but one may be truer than the other) or a gig at the local WalMart. Most people in houses have other sources of income…

C’est la vie…

My main focus this summer has been on why Judas Priest hasn’t played any shows west of Sarnia…WTF? They seem to be hitting all the U.S. markets; why not western Canada? I don’t want them setting a bad example here, like; so the next time Iron Maiden tours those guys think just playing Montreal & Toronto is ok, y’know? I’ll make up for it by checkin’ out Airbourne, I guess…

(I can’t leave that thought alone without wondering what a large group of children (grandchildren?) in Sarnia were thinking when their parents (grandparents?) came home drunk at 2am sporting JP tour t’s…hahaha…”hey mom, unhhh…what’s with the leather?”)

Btw, nice job on yesterdays pic…stepdaughter works there, & I’ve never noticed that context in the aisle markers before!

People in AB seem to be more fixated on politics than RE lately; the PC party has a new boss (probably same as the old boss) so lots of attention focussed on soon-to-be-rendered meaningless promises rendered by an organization that has been in power longer than any eastern European dictatorship.

Lotsa people seem to think lotsa stuff should change in a hurry, but I can’t see how any of them would be comfy with it. I’ve been so busy this year haven’t had much time to engage, but most I talk to thinks their houses will be worth even more money next year!

Except in a local thrift store last week…a retired welder (with a free n clear dwelling & a good pension) mentioned he was considering voting for Trudeau (liberal!) in the next election…this comment was heard by another retiree who had apparently not forgiven Justin’s father for political transgressions in the 70’s & 80’s. I got to referee a minor FU contest & wrestling match between two aged journeymen who probably couldn’t have moved a coffee table TOGETHER…that was priceless!

I go there looking for vintage Guns n Roses stuff, not to deal with this BS; but it’s funny how some people never forget…anything…real or imagined.

Maybe the Aliens could help us out with that?

#30 Son of Ponzi on 09.16.14 at 8:29 pm

Hey Garth – How can we make money of this? Any ideas on how to short this real estate market?
—————
Rent!

#31 Mark on 09.16.14 at 8:30 pm

“How would buying shares in the Big 5 Canadian banks benefit with a declining house prices and rising interest rate environment?”

Rising spreads on account of housing being a riskier asset class. Vibrancy in the investment banking/capital markets end of the banking business. And a rotation in the overall broader markets away from housing as an investment asset class, back towards common shares.

In the 1990s, if you took your housing downpayment (ie: 25%) and invested it all in the big-5 Canadian banks — a decade later, you would have had enough in your account, including re-invested dividends to purchase an entire house outright, without a mortgage.

But seriously, individuals shouldn’t invest in individual sectors, or even in single stocks. Go look up Garth’s various posts on diversified portfolios, and talk to a professional about setting up a financial plan.

#32 mortgagebrokeron on 09.16.14 at 8:30 pm

I have to say from my observation that sales are really really slowing down.

had someone that bought a house in the country conditional on sale of their own home…. well their own home hasn’t sold … and the house they want to buy is going to go off the market … because no one is able to buy it…

Way too many people think their home is worth more than it really is…..

I think spring is going to kill off a lot of realtors, for crying out loud, a fixed rate now is 2.89 and there are people struggling to make their payments…

And now the “equity” in their homes is disappearing

#33 mark on 09.16.14 at 8:36 pm

Put all the regulations on you want. They’re only window dressing to cool the public down.

There’s never any enforcement of such laws so there are no penalties. Just means it goes further on the D/L.

#34 Longshorebore on 09.16.14 at 8:36 pm

What you think all the HAM is gona panic and sell at once? Cause I what a forex trader says? You think they are thinking short term ? 40000 people move into vancouver proper every and they’re at no new ravine lots going up for sale. Pretty cool how the two markets with legs are the two with the most culturally deverse populations how can you argue that?

#35 Mark on 09.16.14 at 8:38 pm

“Guide to living Millenially in the Fraser Valley:”

Forget the Fraser Valley, that’s how it works in Calgary and (with the numbers somewhat scaled higher) Fort McMurray.

#36 triplenet on 09.16.14 at 8:38 pm

#22 smartalox

A review of the municipal taxation processes will help you with your concerns.
A rental residence probably pays more property taxes than a primary residence owner (in BC). I wouldn’t call them investors however.

#37 Banjopete on 09.16.14 at 8:41 pm

Most diverse economy and Calgary? ha ha, ha ha. Ahhh, good one. I’m in Edmonton and rarely do you need to go beyond a friend to speak of someone in O&G. One way or another you’re involved out here, supporting, working in, working for, tied to etc. Not a bad thing but there’s a reason head offices are here, it’s because they’re head offices of oil and gas companies. That’s pretty much it.

Still, well played, I see what you did.

#38 Freedom First on 09.16.14 at 8:45 pm

My God. 52% of people say that missing one paycheque would down them. That tells me that any kind of emergency/extra expense they have has to go on credit, to people who are probably maxed out on credit already. This is at both record low interest rates and stagnating wages for years. Without a doubt, this 52% figure itself is truly ball breaking news.

About Garth’s last part of today’s Post. For myself, I have found that blaming others for anything in my life, especially the financial area, or the wallowing in self-pity, are both very self defeating behaviors which serve 0 value to me. Without a doubt, no one or nothing that has happened has caused me anywhere near the problems I have had to deal with than my very own decisions. However, I have been very fortunate, and feel very grateful to be where I am today, an 11.5%er so to speak. Ignorance is not bliss. It really is a self destroying character flaw of an out of control Ego.

#39 Kenchie on 09.16.14 at 8:45 pm

#21 FleetwoodBoy on 09.16.14 at 8:05 pm
“Quick update from Fleetwood Surrey. A property which was first listed at $829 (maybe $849 even) has just come back on the market for $749. It was on for about 18 months, but was off most of this year. It was over-priced before, still probably a bit heavy in this market.”

Can you please pass along the listing id? Thanks!

#40 omg on 09.16.14 at 8:46 pm

DON’T GET TOO EXCITED, HOUSING BEARS

I HAVE SAID IT BEFORE and will say it again – NO HOUSING CORRECTION until interest rates go up in a meaningful way.

BTW – a 10 to 15% pull back is not a “correction” in a market that has ROARED over the past decade – its just sad little blip.

WHY NO CORRECTION, let me count the ways.

1) Canadians love real estate and think it can’t go down – so any small correction will bring sideliners into the market jumping on all the “bargains”.

2) People have a lot of fat they can cut before having to dump their house – the $180 cable package, the $140 cell phone plan, the two late model Toyotas in the driveway.

3) Mom and dad will always help out – nothing more embarrassing than your kid in foreclosure.

4) We do not have the same type of outright mortgage fraud in Canada that happened in the US, so people that have mortgages can generally pay them until rates increase significantly. And by SIGNIFICANTLY I mean 4%-5% increase in rates. A rate increase of 2% will do squat because of items 1 to 3 above.

#41 Ray Skunk on 09.16.14 at 8:47 pm

About immigration…

Stats from Migration Watch UK show that in the year ending March 2014, 560,000 moved to the UK. This is legal immigration, and does not include illegals which is a huge issue in the UK, as you would know if you follow European news. (Note I have deliberately excluded emigrant stats, as the pumpers here never discuss emigration, funnily enough).

The UK is a country a fraction of the size of Canada, with a population nearly double. You’d figure that house prices there would be insane given what’s happening here.

My parents live in the UK. 3 bed house. 2h30m from London, 30m from Birmingham (second city), 1hr from Manchester. Basically, not in the middle of nowhere.

The value of their home and others in their immediate area have remained pretty much static for the past five years.

How can this be with so many immigrants arriving in an already overcrowded country and interest rates also bordering on nothingness?

Garth pretty much nails the difference:
CMHC policies, voracious bankers, kids buying with 100% leverage, condo speckers, sleazy marketers who lie to the media

#42 JSS on 09.16.14 at 8:49 pm

Where’s Edmonton in all of this? Similar to Calgary? More or less stable?

#43 Mike T. on 09.16.14 at 8:49 pm

My favorite name for a girl is Jennifer.

#44 earthboundmisfit on 09.16.14 at 8:49 pm

Mr. Turner, I don’t think anyone in Ottawa, except perhaps the Harpocryte, hated you. They were afraid of you because you spoke the truth. That’s something most politicians wouldn’t recognize if it jumped up and bit them on the cojones. I think that most of us would still like to see you in Parliament, despite what the Worst. Prime Minister. Ever. has made of it.

#45 Don Derc on 09.16.14 at 8:50 pm

Greetings from sunny Toronto – there are enough national sales meetings here to choke an over bearing micro managing Canadian corporate president (who lives in the usa of course). Buddy boy in the elevator recognizes my club colours and says he used to distributie my wares 5 years ago but left when the power transmission game “softened”. “Are we hiring” he asks. I take his card and will pass it on. He’s in sales so he’s “safe” but his plant in TO shuts down the first quarter of 2015 – 1200 jobs off to the usa – he also says the Harper Gov’t pays cdn corporations $2K per employee that is laid off – not sure how to follow up on that one but dinner out tonight wasn’t so fun anymore. Are the usa rates really going up this year? Yikes.

#46 Vancouver-1st-hand on 09.16.14 at 8:52 pm

These are not immigrants Garth. They are exporting their funds to a ‘safe’ jurisdiction. Next year they will move it to a London bank or buy any other assets that they can.

Some vancouver buildings are 50% empty.

It is not a race thing. They can be white Russians as much as any other race.

I see it first hand. I live in Vancouver and I am an immigrant.

Great blog BTW

#47 carlosthedwarf on 09.16.14 at 8:55 pm

” Australia’s just seen a 45% jump in alien investment (mostly Chinese) despite banning foreigners from owning resales and forcing them to sell when they moved offshore.”

There hasn’t been one prosecution in eight years by the board set up to oversee foreign property purchases in Australia. It’s just lip service.

http://www.macrobusiness.com.au/2014/09/8-years-and-not-one-firb-foreign-property-prosecution/

#48 Cranky on 09.16.14 at 8:55 pm

Which will be greater?:

A)The rate at which boomers will die off?
B) The rate at which wealthy immigrants/foreign investors buy up residential property?

#49 Kenchie on 09.16.14 at 8:57 pm

#23 NEVER GIVE UP on 09.16.14 at 8:10 pm

“I believe it must be difficult for you and many others who don’t live in Vancouver to understand the FEELING of what it is like to be unable to afford a home.”

Interesting point. In a what’s app chat group I’m in, my buddy said watching “Million Dollar Listing” makes him depressed in his non-luxurious shoebox in the sky. I told him to stop being so house horny (he didn’t appreciate it, and I think it was the first time he heard the phrase).

That got me thinking. Have I been away from Vancouver (4 yrs) for too long that I have forgotten how ridiculous it is there? But then again, I lived in Hoxton/Shoreditch area of London (not inexpensive) in between living in Vancouver and Toronto. My second thought was that there’s a simple solution: stop having FEELINGs!

#50 Frustrated Kiwi on 09.16.14 at 9:02 pm

#23 NEVER GIVE UP
I know where you are coming from. A colleague is looking to buy here in Auckland and was interested in a fixer-upper on a great section (not subdividable but very nice). Government valuation (2011) of $740k, went to auction with an accepted bid of $880k, sold at auction for $1.2m, where all three key final bidders needed translators – absolutely no way to tell if they are buying for themselves or investment purposes, but the general perception is the latter. Needless to say my colleague came into the office very depressed. I gently nudged the stop looking advice but can’t push it too hard because who knows how long this bubble will last.

#51 Fed-up on 09.16.14 at 9:02 pm

Meanwhile trying to keep foreign buyers out never works. Canadians still snap up Florida digs despite being slapped with a property tax penalty. Central London is peppered with non-Brit owners despite residency restrictions. Australia’s just seen a 45% jump in alien investment (mostly Chinese) despite banning foreigners from owning resales and forcing them to sell when they moved offshore.
————————————————————————–

Maybe so, but it would still be prudent to tax the s^&t out of them and line our public’s pockets instead of giving them the same accessibility to real estate and interest rates as all other Canadians would be privy to.

Canada is just dumb in this regard, plain and simple.

#52 Mark on 09.16.14 at 9:03 pm

“B) The rate at which wealthy immigrants/foreign investors buy up residential property?”

A few thousand immigrants/investors bringing actual money a year versus hundreds of thousands of boomers divesting a year? Is this some sort of joke even asking the question?

#53 Kenchie on 09.16.14 at 9:03 pm

#26 NEVER GIVE UP on 09.16.14 at 8:23 pm
“As for more appropriate foreign investment I believe our government should make tax free zones to attract the investment that we WANT.”

Much better idea than your previous one. Trying to curb resi investment is very difficult. The way foreigners got around it in the UK is that they incorporate the property in an “envelope” company in the Channel Islands, and then just sell the shares of the company to the new buyer. No record of transfer of ownership with the Land Registry. Then Gideon had a good idea to charge an annual tax on “envelope” companies. Don’t know how well that achieved its goal though.

#54 gladiator on 09.16.14 at 9:06 pm

Garth, this is why Europeans vote far-right radicals:
http://m.youtube.com/watch?v=rcsG-u2GtZE

Immigration is good when immigrants wish to integrate.
Do you want to say we’d be a better society with such fellow citizens?

#55 Smoking Man on 09.16.14 at 9:06 pm

Attention Scotland…

Yes yes yes…… Is the only choice for logical minds.

Don’t listen to Mommy and Daddy at Westminster try and talk you out of leaving your comfortable job at the factory and start your own business downtown.

Plus, you got all the damn oil…

#56 BT on 09.16.14 at 9:12 pm

CMHC is the biggest culprit in creating the distorted housing markets because of the moral hazards they’ve created. When banks are willing to offer loans (i.e. mortgages) at 3% to housing virgins with little income to buy non-cashflow producing homes, but 7-8% to high net worth individuals to invest in positive cash-flow investments or 10%+ to business to invest in their operations and hire more people; something is seriously wrong with this picture.

The only winners in this equation are the banks (which is why they are good investments), regional governments (due to transfer & property tax) and real estate industry (due to fees). Losers are the housing virgins (by taking on unsustainable debt), businesses (because banks will rather loan to the housing virgins) and taxpayers (if CMHC fails).

#57 Cato the Elder on 09.16.14 at 9:16 pm

I think we should be inviting capital to this country, not scaring it away with high confiscatory taxes. Wealthy people benefit everyone in a society (they have to spend that money ultimately, which creates jobs).

Where I think complaints are legitimate are when immigrants DON’T assimilate. If you come here, respect our culture. Respect our rule of law. Respect freedom of speech. Learn to speak our languages. Don’t spout hatred and divisiveness by saying you’re ‘offended’. If that’s the case, leave – they obviously came here for a reason (it must be better than where they’re running from). If we continue to cater to them through politically correct NONSENSE then the very foundations that made this country great will disappear – and it’s already happening.

This is our house.

#58 Kenchie on 09.16.14 at 9:18 pm

#40 omg on 09.16.14 at 8:46 pm

“2) People have a lot of fat they can cut before having to dump their house – the $180 cable package, the $140 cell phone plan, the two late model Toyotas in the driveway.”

Cutting expenditures to other services and goods leads to lower demand for those goods, duh. That, generally-speaking, often leads to job cuts. That, generally-speaking, leads to less spending and, potentially, defaults on debt obligations.

“3) Mom and dad will always help out – nothing more embarrassing than your kid in foreclosure.”

This is highly dependent on their ability to bail out their kids. Willingness is one thing, but it doesn’t matter without the ability side of the equation.

#59 Cynic of Marxism on 09.16.14 at 9:18 pm

“A major meme on this pathetic blog among the house-humpers has been that unbridled immigration will keep house prices aloft in places like Vancouver and the GTA.”

The prospective immigrants are finally waking up that Canada’s immigration system is a system of indoctrination and a Ponzi scheme.

You can thank those womens rights protestors back in 2011 for showing the true colours of “hotter” cities such as Toronto, Vancouver, et al.

What a scam for a tourist to believe that Canada is a “welcoming” country which upholds family values.

Ever went to a public school or university in Canada? One of my friends said that the schools are more interested in kinky stuff than the 3 basic R’s of reading, writing and arithmetic.

End of rant. Immigrants are not falling for Canada’s immigration scam like they used to, so only the refugees and low-income immigrants are arriving in Canada en-masse these days.

#60 Cato the Elder on 09.16.14 at 9:31 pm

Regarding self-entitled voters, there was a prediction made a while back about how long democracy would last in the west. It would last until voters realized they could vote themselves other peoples things.

There’s no way to stop it now. It’s in an infinite feedback loop:

voter wants goodies > politicians promise goodies > voter votes for politician that promises goodies > voters receive goodies > repeat (until the productive, wealth earning people are de-incentivized to the point of no longer producing ‘goodies’)

This is the road to serfdom, and I’m afraid we are on it. I have no faith that a massive collective mob will come to it’s sense. Why would someone that is living off the labours of another vote for a true statesman that would force them to provide for themselves?

It’s going to take a massive crisis, and a lot of backbone. One which is sure to happen, and another of which happens I am not sure.

#61 Nemesis on 09.16.14 at 9:34 pm

#There’sMoreThan… #OneKindOfMarauder. #CompletelyOT… #&[email protected]:

http://youtu.be/BfgoiYu9EUE

#62 Kenchie on 09.16.14 at 9:35 pm

#55 Smoking Man on 09.16.14 at 9:06 pm

“Attention Scotland…

Yes yes yes…… Is the only choice for logical minds.

Don’t listen to Mommy and Daddy at Westminster try and talk you out of leaving your comfortable job at the factory and start your own business downtown.

Plus, you got all the damn oil…”

Smoking Man must be hammered again. He’s mistaking logic for emotion, which happens often whilst inebriated.

PS: Oil output has been shrinking annually since 1999… current estimate is that Scotland’s first year as an independent nation would still have a fiscal budget deficit of 6.4% even with 91% of the UK’s North Sea oil. Alex Salmond’s a lying megalomaniac, trying to put his name beside William Wallace and Robert the Bruce in Scottish history by risking Scotland’s stable, developed and integrated economy with the UK for his own personal legacy.

#63 Smoking Man on 09.16.14 at 9:36 pm

If your an Fx trader stay away from cable, less of course you’re insane… :)

Betting on a yes vote….

#64 Cato the Elder on 09.16.14 at 9:40 pm

Oh and something I’ve been wanting to get off my chest for a while: you don’t go to school to get educated, you go to get indoctrinated. Most of the people I know, even good friends of mine, that all went through higher education, have NO CLUE about managing money.

Even simple things like paying off your credit card on time. Or purchasing things in bulk to save money on a per item basis (buy 50 rolls of toilet paper instead of 10 at a time). These are CRITICAL THINKING skills that are obviously not being developed at these ‘higher learning’ facilities. You know why? Because they make you write essays about nonsense. Because they make you memorize facts instead of understanding the REASONING behind why the ‘fact’ is correct. The thinking that takes place in the pursuit of SOLVING A PROBLEM is more important than the answer itself. If you can think properly, you can come to the correct conclusion on almost any issue. But that is not taught.

I’m not sure if it’s a conspiracy or not. But then you look at how many people are in debt, and if they figured it out, it certainly would hurt the profits of some very big institutions.

#65 Kenchie on 09.16.14 at 9:42 pm

Continued:

#55 Smoking Man on 09.16.14 at 9:06 pm

“Attention Scotland…

Yes yes yes…… Is the only choice for logical minds.”

http://www.theguardian.com/politics/2014/jun/04/scotland-deficit-first-year-independence-ifs-oil-revenue

This article says 5.5%, but I have seen estimates as high as 6.4%…

#66 Sherk on 09.16.14 at 9:44 pm

Get yer bagpipes on Scotland an vote Yes!

#67 Kenchie on 09.16.14 at 9:47 pm

Continued:

#55 Smoking Man on 09.16.14 at 9:06 pm

This one says 8.3%…

http://www.ibtimes.co.uk/scottish-independence-country-faces-1bn-extra-debt-tax-hike-1465540

Moreover, if this independence happened before the GFC, Scotland would have had a similar crisis as Ireland, except stuck to sterling rather than the euro, with higher corporate taxes and less exports. And probably a similar amount of emigration.

#68 Timmy on 09.16.14 at 9:51 pm

“Now the Vancouver mayoral race is being shaken by a long-shot dipstick candidate who wants to tax people who buy houses but don’t live in them”

That’s the most sensible thing I’ve read on this blog. Why let people speculate and not contribute to the community or the tax base? THis also reduces the number of units available for others. Finally someone had the sense to suggest this. We all know foreign investors are responsible for driving up prices in Vancouver. Even if Garth denies it out of political correctness, it is obvious to anyone who lives in Vancouver . How else would you explain that the Vancouver and TO continue to appreciate while most other areas are declining? Where do the international investors put their money? Certainly not in small town Canada.

Over 90% of all sales are from locals to other locals. Look in the mirror. That’s the problem. — Garth

#69 Timmy on 09.16.14 at 9:53 pm

“Even the sitting mayor, Gregor Roberston, is joining the stampede, saying, “We have real concerns around empty homes, and affordability.”

Paver Robertson doesn’t give a shit about affordability. His biggest campaign contributor was a big developer and he has done everything he can to encourage rampant development.

#70 IceFlows on 09.16.14 at 10:00 pm

#22 Smartalox on 09.16.14 at 8:08 pm

You raise some valid concerns (reduced business) but, I don’t think they address one of the issues (targeting empty foreign owned units) and the conclusion is false.

The city actually benefits from empty foreign owned units. Not only the property tax as a (significant) one time injection but, ongoing tax and utility bills while not providing services.
And, they still contribute to local businesses in many ways. They are buying insurance, legal services, and maintenance costs. And, if its a strata unit they are subsidizing everyone in the building and probably spending even more on all of the above. If you want to start counting the use of municipal services like parks and limited road, transit and parking, the advantages to society start to add up.
They don’t use scarce public resources either but, continue to pay for them.
The merchants arguably suffer from reduced traffic but, traffic is a lease/value issue and the city has little business or revenue there. Besides, much of the traffic isn’t local in many areas of Vancouver.

You could conclude that people using the unit as a business should pay commercial taxes but, the income from renting would be earned income, which means the fed and prov are already getting their piece (if people follow the rules.)
Also, the solution wouldn’t be to tax foreign owners. It would be requiring business licenses of all rental/income generating properties and probably charging a yearly fee for the license.
At that point I guess you could tax the earnings but, I think it’s excessive taxation and foreign owners already have an advantage of (possibly) having few other earned incomes the fed and prov are taxing (like the rent is taxed for locals.)
I don’t know what they are pitching in Van but, the license system seems to be the effective approach to rental/vacancy problems. The city just checks the records of who is paying the home ownership grant on their property taxes (a grant for your primary residence.) Any home that didn’t claim the grant gets a letter saying they have to buy the license if they are renting it out or generating income. That’s what they did in my city. They even called me, hundreds of KMs away, to ask if I was renting it out and to how many people. They can check where your drivers license is registered!
If the down town vacancy is the real problem, I think that is more of a strata issue than a municipal issue. Maybe the city should pass a law stating all stratas must to have a vacancy clause with strict limits. That would probably be the easiest, cheapest and most effective way.
Stratas have a lot of power to charge unit holders $ (and collect.) Perhaps more effectively (and certainly cheaper) than asking the city to do it.

#71 Mark on 09.16.14 at 10:02 pm

“1) Canadians love real estate and think it can’t go down – so any small correction will bring sideliners into the market jumping on all the “bargains”.

At 70% ownership rates, there is no “pent-up demand”. The sideliners, as few of them as there are, probably are heavily committed to other investments. Few of them, especially in light of better performance in their ‘other’ investments, will be selling to buy housing.


2) People have a lot of fat they can cut before having to dump their house – the $180 cable package, the $140 cell phone plan, the two late model Toyotas in the driveway.

Resale on cars is generally quite poor, and the cell phone plans and Internet packages generally aren’t really all that discretionary. And even at that, we’re talking about not a lot of money compared to the cost of housing on a monthly basis. What’s the carry on a $400k house @ 8% + maintenance + taxes, around $45k/year? Enormous compared to a couple of Toyotas and cell phones.


3) Mom and dad will always help out – nothing more embarrassing than your kid in foreclosure.

With what money? If they have to lighten up their own personal RE holdings to ‘help out’, that just makes the supply situation in RE worse.


4) We do not have the same type of outright mortgage fraud in Canada that happened in the US, so people that have mortgages can generally pay them until rates increase significantly.

But we have enormous leverage to the construction industry in the Canadian economy. Fraud wasn’t really a problem in the USA as long as house prices went up. And if you look at subprime, $900B of Canada’s market , at the time of origination, was subprime. There wasn’t anything near $9T worth of subprime loans in the United States prior to its collapse if you use the traditional 1:10 ratio.


And by SIGNIFICANTLY I mean 4%-5% increase in rates. A rate increase of 2% will do squat because of items 1 to 3 above.

You’re naïve if you think that a doubling of retail mortgage rates isn’t anything but a landmine going off in the RE industry and on the personal balance sheets of mortgaged Canadians.

#72 Habs76-79 on 09.16.14 at 10:03 pm

#64 Cato the Elder.

About education, yes most of what you say is correct. Once you learn the basics in school, math, English, basic science, history, the rest is a all about indoctrinating you to be more a schooled follower.

I know a guy who works in road building etc. He has a great quote about the real value in higher education. He calls these white shirted guys who come out to the work site with such education as “Educated Dummies”. They are totally book smart, can spout off facts and figures but have limited critical thinking and adaptation to what is reality in front of them.

Ability to critically think, reason out issues and put possible solutions in place are what separates those that do from those that follow or worse believe the world owes them and others must look out for them and their own interests.

Though the higher education that I received has a place in my life, it was only as a thin base foundation from which I use all my critical thinking abilities to deal with issues and problem solve with a possible solution. Yes, I too though do make mistakes, it’s only human, but I at least try and do not look only for others to bail me out.

#73 Smoking Man on 09.16.14 at 10:05 pm

#65 Kenchie on 09.16.14 at 9:42 pm

Come on, MSM. The Guardian, please.

#74 devore on 09.16.14 at 10:07 pm

Well, taxing vacation properties higher than occupied properties is already standard practice around the world, and even in Canada, but not in BC. Higher rates for non-Canadian owners and non-residents (as defined by CRA for taxation purposes) is just fine, to be honest. Overseas vacation property owners can easily afford extra taxes. The thing is Vancouver has a policy of keeping residential property taxes crazy low, and makes up the difference jacking up business taxes. Residential taxes are low, so that people can easier afford to live in the city (of course, that’s not how things work, but that’s another story). If they’re not living here, they shouldn’t get a discount.

#75 TO Renter on 09.16.14 at 10:20 pm

#57 Cato the Elder on 09.16.14 at 9:16 pm
Where I think complaints are legitimate are when immigrants DON’T assimilate.
———–
From the indigenous peoples, French explorers then settlers, British colonials, European homesteaders, Americans and Chinese… ah right, they all ‘assimilated’ themselves into the group that came before to become one big homogenous indistinguishable bunch (sarcasm)… and I’ve only gotten to 1850.

People group themselves together in ethnic clusters and preserve what they know and are familiar with. Its been the same story for 100s of years around here. That’s why Canada is described as multicultural and a pluralist society. Last I checked, the 1970s, before this became official policy, was a while ago, might want to catch up with the news.

So what do you count as our ‘foundation’ and history?

#76 Blowback on 09.16.14 at 10:29 pm

Christy Clark settled the teachers strike in B.C. today,
because she dropped 5 points in the polls.

She was perceived to be a hard assed bully.

Blowback was inevitable.

In the end the teachers strike was profitable for the provincial government.

The real question now is “How do we spin this real estate disaster?”

#77 NostyVlad the Snugglebombed on 09.16.14 at 10:31 pm

Aliens or politicos / lobbyists? Aliens (from space) can be trusted, as no one knows them. The latter cannot because they are known. At least the kiddiewinks are back at school next week (no thanks to the politicos).
*
#134 Blacksheep on 09.16.14 at 2:03 pm — “I’ve realized you don’t need to find out who’s steering the ship, you just need to get on board, as to which way the ships heading and enjoy the ride.”

Absolutely. Offhand, some may be familiar with Lord Shiva, one of Hinduism’s trilogy of gods. Shiva is the destroyer.

Accordingly, mark this date, as the rebirth of Shiva has happened. Well, maybe not but everything happens for a reason. Pan- Epidemics, viruses, wars and more wars, is Yellen about to bolster rates? Stay tuned! As Blacksheep says, life is too short for this fuddle duddle of a mess.

Meanwhile, back at the ranch and entertaining aliens, these have or are happening — Good for the Bilderbergers and NATO; ISIS = Israeli Secret Intelligence Service; Energy Revolution, Ebola Cuba sends docs., the US sends troops; Scotland’s Wealth and Domino effect; Bill Gates and the Rockefellers (vaccines and depop.); Russian sanctions.

#78 Smoking Man on 09.16.14 at 10:35 pm

Over 90% of all sales are from locals to other locals. Look in the mirror. That’s the problem. — Garth

Why don’t you grow a set Garth, come out swinging against the educational industrial complex… The root of our problems.

But then again, your out there naked with full frontal real name. Us cowards can hide behind a fact name..

Never mind…

What was I thinking…

#79 Casual Observer on 09.16.14 at 10:39 pm

Sure, buy shares in the big-5 Canadian banks. Their portfolios are structured to be effectively ‘short’ the Canadian housing market.

They why are all the analysts downgrading our banks on the basis that they will be negatively impacted if and when the housing market goes down?

Is there something they’re not getting?

What analysts? Nobody is downgrading banks over real estate exposure. — Garth

#80 devore on 09.16.14 at 10:42 pm

Really, it’s not about keeping foreigners out, it’s about taxing them. Why? Why not.

#81 Lou on 09.16.14 at 10:49 pm

#50 Frustrated Kiwi

You are absolutely right, the HAM is everywhere…. I heard the same story happened on your side.

#82 CrackHead Conservatives on 09.16.14 at 11:01 pm

Just on CP-24.

TD bank CEO say HARPER government should tighten lending rules to avoid future debt problems to Canadians.

WOW. Canada is in bigger trouble then anyone can imagine. Canada is a house of cards built on debt via CHMC. Without it and Canadian housing bubble would crash 50-70%. I know it and every realtor , mortgage broker on this blog knows it. The CEO of TD is looking at the numbers saying WOW that crack head Harper has built a 1,400,000,000,000.00 housing bubble that’s backed by taxpayer. That’s 1.4 TRILLION dollars to the high school uneducated realtors and mortgage brokers. Good job you crackhead conservatives. What a crazy party bent on bankrupting Canada

#83 CrackHead Conservatives on 09.16.14 at 11:02 pm

There is no HAM just realtor made up lies. it’s the 1.4 TRILLION DOLLARS of taxpayers money. Realtors and Harper are scum of the world.

#84 SWL1976 on 09.16.14 at 11:05 pm

Haha nothing wrong with being hated in Ottawa Garth, after all the most of them are a bunch of phoney schmucks anyways. Too bad they’re driving the bus though, I am concerned for the sleeping passengers who haven’t a clue of the bumpy road ahead…

I always wondered how people who make considerably less than I do manage to live the life they do, but wait… If 52% can’t afford to miss 1 pay… That’s right they can’t

Off topic, I was working with some very smart people today responsible for providing answers and a path forward on how to fix something I seen as a simple problem, hence simple solution. However, I was simply amazed that despite all of their book knolegde not one of them knew how to simply fix the problem. Now the problem for me is, I knew how to simply fix the problem, but the way the system here is set up I need their blessing to fix the problem, so it becomes a delicate act to convince all parties to get the problem solved. I have never been involved in government, but I am thinking its much the same, only far worse.

I sense this is not limited to my line of work

#85 3s on 09.16.14 at 11:07 pm

Forget Ottawa mate – here, have some love from down under:)

#86 jeff on 09.16.14 at 11:08 pm

Cynic of Marxism on 09.16.14 at 9:18 pm
“A major meme on this pathetic blog among the house-humpers has been that unbridled immigration will keep house prices aloft in places like Vancouver and the GTA.”

The prospective immigrants are finally waking up that Canada’s immigration system is a system of indoctrination and a Ponzi scheme.

You can thank those womens rights protestors back in 2011 for showing the true colours of “hotter” cities such as Toronto, Vancouver, et al.

What a scam for a tourist to believe that Canada is a “welcoming” country which upholds family values.

Ever went to a public school or university in Canada? One of my friends said that the schools are more interested in kinky stuff than the 3 basic R’s of reading, writing and arithmetic.

End of rant. Immigrants are not falling for Canada’s immigration scam like they used to, so only the refugees and low-income immigrants are arriving in Canada en-masse these days.
—————————————————————-

If you are an educated immigrant with money Canada will be your last choice. What immigrant with money is going to pay top dollar to live in horrible weather Canada? They will goto half price USA and pick the climate they want.

#87 Goldie on 09.16.14 at 11:10 pm

I think you enjoy getting some of us riled up with HAM denial posts regarding Vancouver. I know it works on me.

#88 Helen on 09.16.14 at 11:14 pm

Vacant properties should be taxed. They are breeding grounds for rodents and criminals. Builders who dump condos on the market should also be taxed for the units they create and can’t sell.

#89 Helen on 09.16.14 at 11:19 pm

How’s this for alien? I was talking to a Vancouver women who just bought/mortgaged a small vacation property in Whistler. She’s university educated, works full time, and lives in her parent’s basement. She’s 22.

#90 Shawn on 09.16.14 at 11:20 pm

Smoking Man’s Ramblings

Smoking Man at 78 said:

Why don’t you grow a set Garth, come out swinging against the educational industrial complex… The root of our problems.

********************************************
Weird comment when Garth has never been afraid to say exactly what he thinks and to do so publicly. He is just about the only one who is not anonymous on this blog.

#91 StatsFreak on 09.16.14 at 11:21 pm

You may think the dumb-dumbs Ottawa hate ya, but I LOVE YA, Garth!!!

Keep up the good (& important) work.

#92 NotAGreaterFool on 09.16.14 at 11:23 pm

“Meanwhile the Bank of Canada has stopped yapping about a soft landing for the national housing market because it looks increasingly unlikely there can be one.”

No soft landing now, Garth? Is the same as a slow, thaw/melt? I forget…

#93 Smoking Man on 09.16.14 at 11:25 pm

#82 CrackHead Conservatives on 09.16.14 at 11:01 pm

Welcome back laughingcon.

People this is the real laughingcon.

Dude you have an imposter… Defend your turf.

#94 Mark on 09.16.14 at 11:31 pm

“They why are all the analysts downgrading our banks on the basis that they will be negatively impacted if and when the housing market goes down?”

Some analysts just haven’t done their homework. I’ve personally read entire dozen+ page “research” reports on the Canadian banks where a simple “Search” using Acrobat doesn’t reveal the acronym “CMHC” even once. With CMHC subprime mortgage insurance-backed loans being such a significant part of Canadian banks’ portfolios, it is amazing that any analyst could do a proper job of ‘researching’ Canadian banks without mentioning, and more importantly, understanding and commenting on the role of the CMHC.

With that in mind, there is a significant amount of political risk inherent to Canadian banks. Just like Paul Martin’s rejection of bank mergers significantly dented the bank stocks in the late 1990s, political events could, at least at some point, rear its ugly head on the activities of the banks. That is why it is important to follow Garth’s advice and have a diversified portfolio.


Is there something they’re not getting?

Yeah they don’t seem to understand that CMHC insured mortgage = the same as sovereign debt risk-wise. With the potential upside of being able to renew at a higher interest margin. Interest rate risk is practically non-existent in the Canadian banking system because Canadian banks run duration-matched books.

Being repaid at 100 cents on the dollar, guaranteed, in a deflationary environment, is profoundly valuable. Especially with the optionality that is available to owners of CMHC insured subprime mortgages (ie: every CMHC insured subprime mortgage effectively carries a put option).

Also, on top of all of the above, there’s significant upside available in the investment banking and even retail brokerage ends of business at the big-5. As investing in financial assets comes back into favour versus “investing” with Realtors. Opportunities should be abound to acquire failed Credit Unions in the Canadian environment at relatively attractive terms (I personally believe that the Credit Unions have been some of the most aggressive risk-takers in the recent housing bubble, my local credit union offering 0% down mortgages long after the CMHC and the chartered banks banned them!). A strong Canadian dollar resulting from housing deflation will crimp foreign profits of Canadian banks, but will present the opportunity for the banks to acquire foreign institutions on an accretive basis.

#95 Helen on 09.16.14 at 11:37 pm

A big difference between the US housing crash and what’s coming to CAN is Canadian mortgages are FOREVER. US mortgages can be forgiven (it’s relatively easy). In Canada you’re stuck with the mortgage until you pay the whole thing back with interest. Those in the US who lost their homes also lost their mortgage debt. That wont be the case here.
http://www.irs.gov/uac/Newsroom/Important-Facts-about-Mortgage-Debt-Forgiveness

#96 Mark on 09.16.14 at 11:45 pm

“Vacant properties should be taxed. They are breeding grounds for rodents and criminals. Builders who dump condos on the market should also be taxed for the units they create and can’t sell.”

They are taxed. Taxed heavily in terms of opportunity costs as capital effectively sits there dead, instead of earning 10%+ invested in real, in-demand investments.

The real travesty is that the CMHC has, through the pledge of future taxation of the public to pay for defaulted loans, facilitated a RE bubble in which suppliers of RE have over-produced. $900B of subprime loans (at the time of issuance) fall under CMHC insurance. Amazing to me is that the CMHC actually denies being involved in subprime when their activities meet every reasonable definition (except their own) of being a subprime mortgage guarantor.

#97 Mark on 09.16.14 at 11:47 pm

TD bank CEO say HARPER government should tighten lending rules to avoid future debt problems to Canadians.

Tightening lending rules = higher retail interest rates. Of course TD’s CEO will say that. Its now time to supercharge bank profits and convert “home equity” to “bank equity”. The slogan is no longer “you’re richer than you think”, but rather, “the bank is richer than you are.”

#98 WalkingRichmondinSeptember on 09.16.14 at 11:48 pm

DELETED

#99 High Plains Drifter on 09.16.14 at 11:52 pm

I loved my Pop even knowing he would have thrown me out before I finished my second year of grade twelve. Trouble was, that was the year I paid the mortgage payment. Then mother came back and threw him out for ten years til he got over house selling fever.

#100 Casual Observer on 09.16.14 at 11:53 pm

What analysts? Nobody is downgrading banks over real estate exposure.

Morningstar analyst Dan Werner:
Canada’s banks in trouble when ‘housing bubble’ pops: report
“A new report from Morningstar says investors in Canadian banks should start worrying about a potential housing market downturn that could be triggered by an eventual rise in interest rates.”
https://ca.finance.yahoo.com/blogs/balance-sheet/canada-banks-trouble-housing-bubble-pops-report-162811862.html

They were downgraded by Moody’s last year because of real estate exposure.

“Moody’s downgrades Canadian banks”
“Today’s downgrade of the Canadian banks reflects our ongoing concerns that Canadian banks’ exposure to the increasingly indebted Canadian consumer and elevated housing prices leaves them more vulnerable to unpredictable downside risks facing the Canadian economy than in the past.”
https://www.moodys.com/research/Moodys-downgrades-Canadian-banks–PR_264767

They are currently being downgraded by S&P because the gov’t is not planning on bailing them out if they go into the tank.

“S&P Downgrades Outlook for ‘Big Six’ Canada Banks”
“Standard & Poor’s Ratings Services is downgrading its outlook for Canada’s six biggest banks, making it the latest credit-rating firm to cite concerns about Ottawa’s plans to create a so-called “bail-in” regime for troubled lenders.”
http://online.wsj.com/articles/s-p-downgrades-big-six-canada-banks-1407537495

(a) Morningstar is not a ratings agency. (b) Moody’s is more concerned about this: “The open, commodity-oriented economy is exposed to external macro-economic risks, which if they arise would have significant ramifications for the Canadian economy, and consequently its banks. (c) S&P was reacting to federal legislation, not the housing market. Nice Googling, though. — Garth

#101 Setting the Record Straight on 09.16.14 at 11:54 pm

Google the Muslim Day Parade , New York Sept 14, 2014

#102 Retired Boomer - WI on 09.17.14 at 12:01 am

Interesting article in our local paper here today. The article pointed out the pressure on local governments as tax receipts are down. Blamed it upon the “unequal distribution of income.”

Interesting, but it did not define whose income was not being taxed, or fairly taxed. Article went further to say local governments would have to cut spending to meet the lower income being received from the taxes that are generated.

No shit Sherlock! When incomes have been flat for several years (not keeping up with inflation, or maybe no more than that) what do you think the taxed people have been doing? Does this come as a “surprise” to any working class person?

A related article says the top 1-10% have been doing better. Does that surprise anyone? No, the upper income earners have gained more income from capital gains, or dividends, which if reinvested are not immediately taxed.
DUH! Why not strive to make a larger percentile of your income the same way? Seems simple enough to me. Maybe I’m just an idiot who doesn’t get it, but it sure feels good, and I am nowhere near the top 10%. What I can save for tax free income later has proven a whole lot more valuable over time.

Getting back to the implied lesson in the story… don’t be shocked when tax rates are proposed. No government has ever really tried to ‘cut back’ similar to consumers who don’t cut back, they just goose up the credit card usage, and resultant debt. Admittedly, sometimes circumstances can not be foreseen, but that usually is a temporary issue.

#103 Kenchie on 09.17.14 at 12:02 am

#60 Cato the Elder on 09.16.14 at 9:31 pm

“voter wants goodies > politicians promise goodies > voter votes for politician that promises goodies > voters receive goodies > repeat (until the productive, wealth earning people are de-incentivized to the point of no longer producing ‘goodies’)

This is the road to serfdom, and I’m afraid we are on it.”

Read this (substitute Briton for Canadian or American):
http://www.economist.com/news/leaders/21578660-young-britons-have-turned-liberal-both-socially-and-economically-politicians-need-get

#104 Humpty Dumpty on 09.17.14 at 12:11 am

Right from the horses mouth….

Central banks inflating ‘elevated’ asset prices: BIS

The BIS feels markets may be getting too complacent and therefore vulnerable – and therefore ill-equipped to a shock.

http://www.reuters.com/article/2014/09/14/us-markets-bis-idUSKBN0H909C20140914

why is he wearing womens shoes…

#105 Kenchie on 09.17.14 at 12:18 am

#73 Smoking Man on 09.16.14 at 10:05 pm
#65 Kenchie on 09.16.14 at 9:42 pm

“Come on, MSM. The Guardian, please.”

Considering the entire UK has had large deficits for the past 5 years (topping 10% in 2010), and that Scottish receive about £3,000 per head more from the central gov’t than the rest of the Brits (even more per capita than Quebec!), they will be utterly futt-bucked for a very long time. The funny part is that austerity right now isn’t even happening in the UK, as per the rampant fiscal deficits they’ve had.

“Full-year borrowing as a percentage of GDP fell from 7.4% in 2012-13 to 6.6%, which was the lowest since 2007-08 according to the figures from the Office for National Statistics.”

http://www.theguardian.com/business/2014/apr/23/uk-deficit-lowest-financial-crisis-osborne-budget

The Guardian is left-leaning, without a doubt, but it’s journalistically superior to the majority of the English language newspapers in this world.

#106 Just sold Vancouver on 09.17.14 at 12:38 am

Now Reuters is also posting racist articles about HAM in Vancouver
http://uk.mobile.reuters.com/article/idUKKBN0H60A620140911?irpc=932

…sad, wouldn’t you say Garth. They also seem to have something against astronauts;)

“In most cases, these are “astronaut families” where the husband keeps working in Asia flying back and forth, while the wife establishes an education base for the children in Canada.”

#107 Kenchie on 09.17.14 at 12:45 am

To all those talking about “education” somehow correlating with money management skills, you’re just poopin’ on other people (probably due to some form of jealousy) for no reason.

An education does not mean students learn about all things under the sun. In fact, if you’re not in a certain faculty, say Science or “Education”, you’ll rarely converse with someone in the business or economics faculty because a) they are geographically in different spots (if the school is big enough), b) people’s interests are usually not similar, c) therefore they generally stick to hanging out with people in their own faculty and remain friends with them after graduation. In other words, university is just a bunch of segregated bubbles.

Even you you give the benefit of the doubt that all business students have learned a modicum of money management skills, the business faculty (at least at my university) barely made up 15% of total undergrad population, at the very maximum.

It’s my opinion, that money management skills are predominantly taught by parents. So if your parents are terrible at money management, chances are that the kid will be too, and vice versa with good management skills. Hence, the rich teach their kids to be rich, and the poor teach their kids to be poor. Obviously, there are exceptions to the rule (like my bro: he’s barely above those 51%ers). In addition, IMO, the other main factor in money management skills is the trials and tribulations experienced by the individuals during their formative years. And this includes how the friends handle money too during this period.

For example: if during high school, or university, or even just after graduation, the kid doesn’t experience cash flow issues and learn from those troubles in these formative years, the kid will never learn them. And that kid will grow into a monetarily irresponsible adult, and be afflicted with the disease eloquently described by GT as “House horny”.

#108 Son of Ponzi on 09.17.14 at 1:23 am

FYI,
http://www.bloomberg.com/news/2014-09-16/chinese-developer-buys-first-canadian-condo-tower-amid-boom.html

#109 k on 09.17.14 at 1:42 am

Claudio don’t you feel kinda dumb when you post FIRST when you are FORTH ! And does it really matter ?

#110 Aaron - Melbourne on 09.17.14 at 1:49 am

“Australia’s just seen a 45% jump in alien investment (mostly Chinese) despite banning foreigners from owning resales and forcing them to sell when they moved offshore.”

BAHAHAHAHAAAA

Good one Garth. Our Foreign Investmentn Review Board is asleep at the wheel. Nobody’s ever been “banned”. The online application process was proven to be a joke with the approval of a fictional Mr Chodley Wontok. It’s a bloody free-for-all!

http://www.macrobusiness.com.au/2014/09/8-years-and-not-one-firb-foreign-property-prosecution/

#111 Son of Ponzi on 09.17.14 at 2:29 am

Strange story:
http://www.bbc.com/news/business-29227907
————-
Chinese business men go AWOL

#112 dangeresque2 on 09.17.14 at 2:49 am

#40 omg

I think you’re right on your points, people are too proud of their status symbol houses and are emotionally attached. They would cut costs in other ways, just like you say, to stay in their house!

#113 Sask on 09.17.14 at 3:01 am

Garth, please write a little about Saskatoon. I’ve noticed a few of the listings I’ve been looking at on point 2 homes have dropped the price by a decent amount.

#114 M on 09.17.14 at 3:50 am

oh Garth…the as old as time relation between people and it s leaders :)
In the century of “self”.
People are not equal some are dumber than others some better looking than others, some are wiser than others…and the ++ tend to accumulate into the 10-20 percentile which is normal since the distribution of goodies follow a power law.
“tza people” is very much like “tza children” these days. If not educated in due time, their actions of later years will exact the educational price.
The beauty of the market is that even when distorted, it s always stronger than the forces that distorted it in the first place. Bond yields will move, canadian housing will leave a smoking hole in the ground and tza people will reconsider what “value” is. Especially when a bank or two will fail showing that in the end…banks are just businesses like anything else.
In Canada will be proven the “too big to save” dictum.
..and better mark down these words of wisdom :) Makes me feel good like the arrogant bastard that I am :)
If I would make a bet..I’d say Scotia will be the first to fail in a few years.

Peace

#115 Mark on 09.17.14 at 3:55 am

“And you think that Americans will buy Canadian made products at $1.50 instead of substituting for domestic production or other nations’ products?”

Of course they won’t. That’s why Canada’s manufacturing sector is toast over the medium term unless it can somehow take advantage of proprietary ingenuity which may exist in certain sectors, or a very low cost of capital compared to that of the chronic importers/weakening currency nations.

Eventually Canada will run big trade deficits as the result of a high CAD$, much like the US has done the same over the past few decades. And the CAD$ will weaken from such an elevated level during a subsequent leg of the cycle. $1.5 would be overshoot, much like $0.63 was overshoot to the downside for the CAD$.

#116 I'm stupid on 09.17.14 at 6:03 am

I was listing to Olivia Chow speak and she says she’s going to raise the land transfer tax on homes over 2million to pay for new subways. Hahaha it will take 500 years to get enough money from 2million+ home sales. How many actually change hands on a yearly basis? What a moron!

http://globalnews.ca/news/1538928/mayoral-candidate-olivia-chow-makes-a-campaign-announcement/

#117 I'm stupid on 09.17.14 at 6:15 am

You want to feed kids… Send lower income families money so they can feed their kids. It’s cheaper to just give lower income families $200 a month per kid for food than it is to pay a bunch of managers, cooks, drivers, etc to feed them. I agree that no child in Canada should be hungry but Olivia Chows plan is not a very efficient way to accomplish it. Politicians make me sick (no offence Garth). She knows she’s behind in the polls and will say anything for a boost even nonsense. How stupid does someone have to be to think what she’s saying actually makes sense and why hasn’t the MSM bashed her ideas?

#118 Led on 09.17.14 at 6:26 am

12k free groceries when you purchase a condo in MTL
http://www.lavenuecondos.com/en/?utm_source=montreal%20gazette&utm_medium=tall%20box&utm_campaign=L%27Avenue

#119 Tripp on 09.17.14 at 6:45 am

#57 Cato the Elder on 09.16.14 at 9:16 pm

“If you come here, respect our culture. Respect our rule of law. Respect freedom of speech.”

Cato, although I agree with the principle of what you wrote, something comes to mind: luckily for your ancestors, the Natives didn’t think the same way… Even if they did, they were few, with worse weapons and weaker immune systems.

Respect is a big word, vaguely defined and widely interpreted. Obviously everybody must obey to the rule of law and freedom of speech is part of it (constantly eroding, but that’s another discussion). But when you say “culture”, what do you exactly mean? As an immigrant myself, I believe Canadian healthcare is at the end of the developed world, our houses are overpriced and poorly built and timmies coffee tastes really bad. Does that mean I don’t “respect” the culture of the land?

#120 Noone on 09.17.14 at 7:09 am

“No wonder they hated me in Ottawa”

or perhaps the City boys didn’t like much your “scottish temper”

#121 Cato the Elder on 09.17.14 at 7:37 am

# 75 TO Renter

Regarding Culture:

If we emigrate to these countries around the world, they will NOT put up with us trying to change their systems for our benefit. They will kick us out. And rightly so.

My ex-girlfriend’s mom (who was an immigrant from 30 years ago herself) was a dental hygienist. She said that NEW immigrants that hadn’t paid a penny into our social systems were getting free dental care. FREE. Why aren’t Canadians that have been here for generations getting free dental care? Now, I don’t think ANYONE should get free dental care, but why the disproportionate treatment?

Nothing wrong with people that look different. But respect our rule of law. Quit trying to change our culture (they’re not called ‘holiday trees’, they’re called CHRISTMAS trees).

If you come here, it is for a reason. We must have something that is SUPERIOR to where you came from. It is to be respected. My grandparents on BOTH sides were immigrants. Guess what they did when they got here? They kissed the ground, learned english, and worked hard. They didn’t complain and stick their hands out and expect others to front the bill.

Regarding ‘native’ Canadians and all that – it’s a ridiculous point to make. Even ‘native’ Canadians immigrated from Africa, if you go far enough back. I’m talking about the realities of who we are as a nation today. Oh, and in case you’re one of those people who think natives around the world lived in a utopia before westerners came, look up the ‘myth of the noble savage’. The truth is that archeologists have uncovered burial sites from these time periods that demonstrate a perpetual state of war, in which often times up to 50%+ of the male populations would kill each other. Not exactly the way Hollywood likes to depict.

As a nation today, we have wealth because of: property rights, contract law, impartial judiciary, and personal liberties. Many immigrants from third world countries are coming here and trying to undermine and change those laws to their benefit, not realizing (or perhaps not caring) about how it negatively impacts others around them.

At least Quebec has one thing right: assimilate and adopt OUR culture, or go home.

#122 Cato the Elder on 09.17.14 at 7:48 am

#116 I’m Stupid

Re: Feeding kids

Remember the clairvoyant rule:

Anything the government promises to do will become more expensive and decrease in quality.

Feed a man a fish he’ll eat for a day, teach a man to fish and he’ll eat for a lifetime, start a fishing business and he’ll feed the world.

We need to LOWER TAXES on everything and decrease regulations across the board. Why don’t they eliminate consumption taxes (GST, etc.) on groceries and foodstuffs? That might go a long way towards feeding children. It would lower costs for EVERYONE. No, the leeches (government) would rather siphon it all off, then create ‘programs’ so that they can appear to be the benevolent masters that they think they are.

I hate unproductive people trying to limit and hold back others. Government is the ultimate cesspool of them.

#123 liquidincalgary on 09.17.14 at 8:02 am

WOW.

Mark is really coming out of his shell.

last line of his post #15 is a joke…AND exclamation point

#124 Brandon on 09.17.14 at 8:10 am

I’m not surprised when you say the London market has improved. I bought my 1400 sq ft side split (+1000 sq ft underground) in 2010 from the original owner. 45 year old house, updated kitchen and bathroom; new windows. 210k.

#125 Cato the Elder on 09.17.14 at 8:20 am

Re: #118 Tripp

By culture, I’m not talking about the state of our economy. Much of the problems in our economy are directly attributable to government policy.

What I mean by culture is:
1. Rule of law
Many third world countries are haphazardly run, corrupt, and bribery ridden. Hardly an environment conducive to building a strong economy or society. How do you build a house on shifting sand? A nation should be run by the rule of law, not the rule of men (dictators).
2. Property rights
Your property is yours. You shouldn’t have to fear confiscation once it accumulates value. Many third world countries are run down because there is no incentive to materially improve property – they know that they don’t truly own it and that it can be taken from them at any time.
3. Impartial judiciary
Many third world countries have citizens who receive unequal treatment under the law. Bribery and corruption often influence court cases. This leads to an unstable environment in which businesses and business owners are afraid to invest because they are unsure of the future.
4. Personal freedoms
Freedom of speech is sacred. Without it, we can’t divulge problems openly without fear of retribution. Even when ALL of society is ‘offended’ by something someone has to say, they need to be able to say it. Galileo was imprisoned for saying the sun was the centre of our solar system because it ‘offended’ many powerful people in his day. This is EXACTLY the way many third world countries are run even today! It’s also why political correctness and those that enforce it are leading our country into totalitarianism.

I say these things as a descendent of recent immigrants myself. See, the difference is they respected this country for what it was. It doesn’t mean they wouldn’t have wanted to see improvements. But they DIDN’T start demanding we dismantle the very FREEDOMS that they came here for in the first place.

You know, I don’t blame them for trying to get the most they can. If there’s handouts to be had, of COURSE rational people are going to try to get them. What we need to do is get government out of the business of handouts in the first place, and this will end rapidly.

#126 eddy on 09.17.14 at 8:32 am

Olivia Chow? Toronto City Hall is a communist cesspool, Olivia is typical.

Even the fringe is scary-

http://www.underhillformayor.com/platform/

#127 Cato the Elder on 09.17.14 at 8:33 am

A great way to see the differences between our country and those from which people are fleeing is their view of the police. Most people around the world don’t trust their police forces. Why do you think that is?

We are lucky that the impartiality we have tried to ensure means we don’t have to fear (most of the time) cops acting extra judicially (of their own accord).

This impartiality is under constant attack. People want special treatment because they belong to some group of people. No, you receive your rights because you are and INDIVIDUAL HUMAN BEING. Not because you belong, or don’t belong, to a particular group.

#128 David W on 09.17.14 at 9:01 am

Hey Garth,

Housing is toast, let’s get back to talking about investing where there still might be hope for some of us. E.g., what sectors are down that we should be buying into? Thanks for all your great advice.

#129 Retired Boomer - WI on 09.17.14 at 9:14 am

#122 Cato The Elder

“We need to LOWER TAXES on everything, and reduce regulations across the board.”

Boy that is SO Broad, as to be stupid!

First, income to government must equal the “spending plan” of that government, be it local state, provincial, Federal. If the revenue is short, you have only 2 choices, cut spending, raise revenue. (you could ‘borrow’ but you are only postponing the day of reckoning).

Second, would I want to see industry free to exploit the natural resources like fishing, timber, mining with NO limits? NO. Why you ask, because of the history of over fishing, over cutting over doing things to the extent it destroys renewable resources. Unfettered capitalism is by definition a very destructive force.

Societies are by definition, men’s agreeing to abide by common rules for THEIR collective good, not a single man’s enrichment.

Sorry I do not fully agree with your tenants here.

Practical rules, sustainable policies, progressive taxation, equal taxation of all forms of income. Don’t agree, then we agree to live in different political spheres, or countries. Not a problem.

#130 Yanniel on 09.17.14 at 9:16 am

You should run in the federal elections once more Garth. Bunch of people here will vote for you.

I wonder how much impact your blog’s readership could make in giving you some voting advantage.

Still, I don’t see any of the current federal parties welcoming to its caucus.

Maybe you should start your own party.

#131 Debra on 09.17.14 at 9:25 am

The younger crowd that works with me says interest rates will always be low and it doesn’t cost them anything to borrow so why not.

How long have interest rates been low?

Five years. The kids have a big surprise coming. — Garth

#132 Rational Optimist on 09.17.14 at 9:44 am

The neighbour behind me just listed his two-bedroom house- they have been there only two-and-a-half years. I remember, when they moved in, he told me that they had been renting in the neighbourhood, but the mortgage payment was cheaper than the rent. Uh-huh… Early thirties, underemployed (I think she was some kind of fitness instructor, and something else).

Anyway, they bought in February of 2012. Good on them for purchasing in the winter. They have spent nearly every damn weekend since then working on the backyard, or in the house. New deck, new patio, lipstick on the stucco, made a window smaller to allow for a new kitchen cabinet, so on and on. I can count the number of times I have seen the guy actually have a beer or dinner on his deck. Once, I ran into him at the Home Depot (naturally), and joked that it’s almost time to start enjoying the place, and he repeated something that someone had taught him to say about “sweat equity.” Christ.

Now, the place is listed for forty percent more than two years ago. Good on them again, and especially as I expect this will be the last hurrah to convince idiot millennials that it’s a sage financial move to buy a house when you could rent a bigger one down the street for thirty percent less, and convince the landlord to get someone to mow the lawn for you. But back-of-the-paper-towel calculations tell me they are likely to be ahead no more than 60,000 once they pay the commission and fees and property taxes while they wait for close. This not including any costs to the “improvements” (I don’t know what those costs might be) but, most importantly, the cost of spending two years at that age inhabiting a neighbourhood with lots of cool things to do, and preoccupying yourself with “work on the house.”

By the way, I always learned from my parents not to buy a two bedroom house as there’d never be anyone as stupid as you to buy it later. But my younger colleagues seem never to have heard this rule of thumb and don’t see an issue with only having two bedrooms. Maybe this is no longer applicable?

#133 Kenchie on 09.17.14 at 9:53 am

As promised earlier:

The Hachman Index of Economic Diversity for Canada’s cities (higher the more diverse, lower the less diverse):

Vancouver
2001: 0.93
2012:: 0.96

Calgary
2001: 0.84
2012: 0.80

Edmonton
2001: 0.95
2012: 0.92

Toronto
2001: 0.91
2012: 0.91

Montreal
2001: 0.95
2012: 0.95

Ottawa
2001: 0.67
2012: 0.59

Halifax
2001: 0.90
2012: 0.92

So, Calgary is definitely not as diverse as Vancouver or Toronto, in terms of employment by sector.

As for cities that are most dependent on Construction as compared to national average (as determined by employment by sector):
Edmonton and Calgary top the list at 1.57x and 1.23x national average, respectively. Toronto, believe it or not, is only .82x (below national average). But FIRE (finance, insurance, and good ol’ real estate) is 1.59x national average.

#134 James on 09.17.14 at 10:00 am

The word dipstick is both abusive an inappropriate.

#135 truthseeker on 09.17.14 at 10:10 am

Refute this Garth. If you can!
As you can see in the attached link house prices are booming. Stop trying to justify your silly position for the last 5 years. The study was done by BMO>

http://www.huffingtonpost.ca/2014/09/16/housing-market-canada_n_5830892.html

I referenced this report. It shows half of Canadian markets are stagnating or in decline. Try reading all the little words that come after the big ones. — Garth

#136 Funny that on 09.17.14 at 10:11 am

#104 Humpty Dumpty on 09.17.14 at 12:11 am
why is he wearing womens shoes…

Why do you think it’s a he?

#137 Kevin on 09.17.14 at 10:25 am

@Mark (#71)

Resale on cars is generally quite poor, and the cell phone plans and Internet packages generally aren’t really all that discretionary. And even at that, we’re talking about not a lot of money compared to the cost of housing on a monthly basis. What’s the carry on a $400k house @ 8% + maintenance + taxes, around $45k/year? Enormous compared to a couple of Toyotas and cell phones.

Right, but all we’re talking about is the difference between their current payment, and the new payment after rates go up. They’re already affording the maintenance, property taxes, and current payment, so any “sacrifices” they make only have to cover the increase in their payment.

$400k @ 8% is a $3,100/month payment. The same mortgage at 3.25% is a $1,950 payment, a difference of $1,150/month. Trimming the data plan off their cell phones and ditching one of the cars could easily free up at least $500/month, leaving them only $650/month short. Clip a few coupons and skimp a little here and there for another $150, and it’s only $500.

And when the the time comes to refinance that mortgage at 8%, if they really cannot come up with that extra $500/month, then they can just reamortize it back to 25 years. After 5 years of payments, their balance would be $370,000. Financed at 8% for 25 years would make their new monthly payment $2,800. Now the shortfall is only $200/month. And if the economy has roared back so ferociously that rates have skyrocketed to 8%, then I’d say it’s probably safe to say that after 5 years, their salaries have increased at least a little, certainly enough such that an extra $200/month is a non-issue.

#138 Blacksheep on 09.17.14 at 10:26 am

“In country after country lazy, rabble-rousing, morally bankrupt politicians have won office and changed laws by catering to the lowest common denominator of public opinion – immigrant-bashing. Few have the guts to lay blame where it belongs.”

“Their entitled voters.”
———————————————————–
Gifts from corporations / sectors buy some politicians favour on cheap, but turn into very expensive liabilities for the Cattle. Rules change, allowing unfettered abuse of the working stiffs, while the ‘democratically’ elected A-****’s smile and wave.

Eventually shit goes sideways and the herd is told: Sorry voters, you picked the wrong guy, it’s your own fault. Next time, make better choices, or better yet get elected yourself to affect real change.

Democracy is for the ignorant.

Disclaimer: Garth, I do not group your tenure in the above scenario, If I did, I would never waste my time here.

#139 Cato the Elder on 09.17.14 at 10:39 am

Re: #129 Retired Boomer – WI

Regulations are primarily a way that big business prevent competitors from entering the market place. Small/medium sized businesses can’t afford the lawyers to comply. Why do you think big businesses pay such exorbitant amounts of money for lobbyists? Why are some of the biggest polluters on the planet PROMOTING ‘climate change’ legislation (their less wealthy competition can’t comply with environment regulations). A strong understanding of private property would be all we would need in terms of laws to regulate resource management. You can’t pollute your neighbors land, water, or air, without their permission. If you violate their property rights, you must pay for it. This is not the system we have today because the government supersedes private property rights by granting ‘permits’ to polluters.

Regarding the environment, the worst environmental records in the history of the world have come from countries with the biggest governments and NO private property rights (look at the Soviet Unions environmental record to see what I mean).

Private property owners have the biggest incentive to take care of their land. The problem that we have arises when governments issue ‘Permits’, which, as the word suggest, PERMITS companies to pollute! That’s right, the GOVERNMENT grants permission to big businesses the right to pollute your air, your water, your land! Think ‘privatize the gains, socialize the losses’ when governments get involved in property related matters.

Fisheries are a difficult matter because fish transcend borders. It’s very difficult to establish ‘private property’ over a communal resource like that. Quotas are a decent way of handling it. I haven’t researched it entirely but I’m sure there are great free market solutions out there.

Something I will never understand, which I guess is human nature, is people’s belief that they have the ‘divine solution’ to our problems. Everything I have talked about have been proven in reality. They are also not my ideas, but have been hashed out by the enlightened genius of great thinkers. Human nature doesn’t change, and we need to build a society that reflects that understanding – not a naive, childish fantasy of how we want people to be. People are inherently self interested (some call this greed). Free markets harness this self interest and REQUIRE that in order to acquire wealth, one must SERVE OTHERS by providing value in the form of goods or services.

Right vs left is a made up battle used to distract people. Freedom vs authoritarianism is the true fight, and so few people are aware of it.

#140 Kevin on 09.17.14 at 10:43 am

@Helen (#95)

A big difference between the US housing crash and what’s coming to CAN is Canadian mortgages are FOREVER. US mortgages can be forgiven (it’s relatively easy).

Unless you live in Alabama, Arkansas, Colorado, Delaware, District of Columbia, Florida, Georgia, Hawaii, Illinois, Iowa, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Montana, Mississippi, Missouri, Ohio, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, Oklahoma, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, Wisconsin, or Wyoming. Those are what are called “Recourse states.” That means after they foreclose on your home and sell it, you’re still liable for any shortfall between the sale price and the outstanding mortgage. In Canada, CMHC covers that deficit, but in any of the states listed above, YOU pay it. If you don’t, they sue you, and win, and take out a judgement against you, and start seizing assets until either a) they’re paid in full, or b) you’re bankrupt.

Tell me what part of that is “relatively easy?”

#141 Victor V on 09.17.14 at 10:53 am

TD Bank CEO says Ottawa should tighten lending rules to avoid future troubles

https://ca.finance.yahoo.com/news/td-bank-ceo-says-ottawa-tighten-lending-rules-182147539.html

TORONTO – TD Bank (TSX:TD.TO – News) chief executive Ed Clark says the federal government needs to do more to ensure Canadians aren’t taking on more debt than they can handle.

The 67-year-old executive, who retires in November, says he remains concerned about the effect the Bank of Canada’s low interest rate policy is having on spending habits.

He said Ottawa should be reacting more strongly to household debt to income ratios.

“Where these issues have been dealt with successfully is governments who lay out a framework for an industry,” he said in an interview before delivering his final speech as CEO to the Empire Club of Canada…

…Clark said the government needs to take the lead because individual banks aren’t able to “change the world” by encouraging consumers to spend less.

“It’s not possible (in a) competitive capital system,” he said.

#142 Casual Observer on 09.17.14 at 11:05 am

(a) Morningstar is not a ratings agency. (b) Moody’s is more concerned about this: “The open, commodity-oriented economy is exposed to external macro-economic risks, which if they arise would have significant ramifications for the Canadian economy, and consequently its banks. (c) S&P was reacting to federal legislation, not the housing market. Nice Googling, though. — Garth

(a) You’re right. Morningstar is not a ratings agency, they are a research firm (stocks, ETFs, Mutual Funds), but does that mean we should ignore them?

(b) Moody’s SUMMARY RATINGS RATIONALE says, “The open, commodity-oriented economy is exposed to external macro-economic risks…”, but the first sentence “High levels of consumer indebtedness and elevated housing prices leave Canadian banks more vulnerable than in the past to downside risks the Canadian economy faces” explains why they think the banks are more vulnerable to these downside risks.

(c) S&P was reacting to the “bail-in” legislation, but the reason why a bank would need to be bailed out/in would be either due to loan losses or a liquidity crunch.

Even if the banks don’t lose a penny on their insured mortgage book, the impact of a housing downturn could have a negative ripple effect on the economy.

I think that’s what these analysts are warning about. If the economy contracts, the banks could face losses in their other lines of business as a result of the contraction.

I point back to the fact that CMHC had to bail the banks out during the US sub-prime crisis, and Canadian housing hardly went down at all.

It all depends on whether we get an economic contraction or a liquidity crunch along with the housing downturn. They seem to think we will.

#143 Cato the Elder on 09.17.14 at 11:08 am

Re: #141 Victor V

This is a great example of how the government DISTORTS free markets. What the TD CEO is saying when he says:

“It’s not possible (in a) competitive capital system,” he said.

Is that the GOVERNMENT’S policy of low interest rates compel his company to give loans to otherwise risky borrowers. If he DOESN’T, his competitors will (invoking shareholder outrage). Because the government creates this speculative debt bubble, they must in turn regulate it.

In a true free market system, banks would loan out relative to the amount of reserves they had on hand. The most diligent, safe, and honest banks would be able to make consistent and sizable profits. Unscrupulous, spendthrift, risk taking banks would quickly find themselves in trouble and would only jeopardize themselves and their idiot shareholders.

#144 TD RAISES RATES on 09.17.14 at 11:11 am

2 year up 25 bps

4 year up 12 bps

5 year up 5 bps

#145 Bottoms_Up on 09.17.14 at 11:21 am

#140 Kevin on 09.17.14 at 10:43 am
————————————-
LOL good one!

#146 Holy Crap Wheres The Tylenol on 09.17.14 at 11:22 am

As long as the immigrants are holy warriors who cares!
Let em come and bring their cash!

http://www.mississauga.com/news-story/4862634-twitter-jihadist-unmasked-as-mississauga-man/

#147 Bottoms_Up on 09.17.14 at 11:28 am

#136 Funny that on 09.17.14 at 10:11 a
—————————————–
Let me guess…the broad shoulders, ginormous hands, ginormous feet, sitting open legged etc. If that’s a woman I’ll be damned!!

#148 LaughingCon on 09.17.14 at 11:32 am

And in another surprising news the Shanghai Gold Exchange goes live tomorrow Sep.18 (11 days earlier than the planned Sep.29 launch)
http://www.resourceinvestor.com/2014/09/16/shanghai-gold-trading-platform-given-surprise-laun

perhaps in response to the FED actions/unactions this afternoon.

#149 Smoking Man on 09.17.14 at 11:34 am

#144 TD RAISES RATES on 09.17.14 at 11:11 am

Do you think the herd knows or cares. It’s what MSM feeds them that counts…

My prediction, yellen backs off…

#150 Bottoms_Up on 09.17.14 at 11:43 am

#40 omg on 09.16.14 at 8:46 pm
————————————-
Not sure I agree with you on your points.

1) I know many people that think prices can go down. In fact Garth just quoted a survey that shows ~%60 believe they’re not going up. And, there are already ‘bargains’ relative to the past few years, yet sales are still way down. Where are all these people ‘jumping in’?

2) Many people I know have already trimmed ‘the fat’. No cell phones, no tv or netflix etc. They don’t go out to eat. And yes they have big mortgages.

3) Many people I know have parents that are struggling just as they are. Where are all these people that have wealthy, giving, parents?

4) I do agree that lending has been more prudent in Canada (I’ve made this point often), so ultimately I do agree it will take an interest rate shock to really dampen prices.

#151 Kenchie on 09.17.14 at 11:52 am

“We’ll be bigger than US Steel” – Hyman Roth, The Godfather Part II

Doesn’t seem to be that difficult nowadays…

http://www.thespec.com/news-story/4864313-reaction-u-s-steel-move-not-good-news-for-hamilton-/

#152 Mark on 09.17.14 at 11:55 am

Unless you live in Alabama, Arkansas….

In addition, in the so-called “non-recourse” states, only a very limited number of mortgages truly were non-recourse. Non-recourse only applied to purchase money first mortgages.

Almost everyone who ended up defaulting in the wake of the US housing bubble had:

a) Refinanced at least once during the increase in equity values.

b) Took out a HELOC or similar as a 2nd mortgage.

c) Taken out a so-called “80/20” loan at the time of origination — a 80% Fannie Mae conforming loan, and a 20% second loan.

#153 Mark on 09.17.14 at 12:03 pm

“Even if the banks don’t lose a penny on their insured mortgage book, the impact of a housing downturn could have a negative ripple effect on the economy.

But the opposite could be true as well. Deflation tends to be far more positive for the banks than inflation over the long run. Is risk elevated in the banks because of a housing downturn? Sure. Is a bank that hypothetically will be subject to the usual process of resolution, a debt to equity conversion, hypothetically riskier than one that receives unlimited taxpayer bailouts? Absolutely. But we’re talking about extremely small risks here, which should not be blown out of proportion.


I think that’s what these analysts are warning about. If the economy contracts, the banks could face losses in their other lines of business as a result of the contraction.

That’s true, but they could also be presented with new opportunities as the result of a contraction. Especially as another “headline” sector emerges from the ashes. There’s nothing wrong with pessimism, but it should be pointed out that the bond raters generally have a fairly serious credibility problem in the wake of the 2008/2009 financial crisis that largely hasn’t been rectified.

#154 gut check on 09.17.14 at 12:04 pm

isn’t it so convenient to have the racism word, and the ‘immigrant-bashing’ slogan? ‘Cause then when the government caters laws and policy to anyone not WASP-y and the people object it can be ridiculed as Xenophobia, hate-mongering and white power-ism.

Intelligent people, however, know there’s a difference between knee-jerk racism and considered observation of trends even when those trends differ by skin colour or country of origin.

I can say: There are more people who have contracted ebola in Africa than in Sri Lanka. More in Africa than in Canada. This doesn’t mean I dislike, am afraid of, or otherwise raise an eyebrow to people of African descent.

We have to be able to talk about all issues or what’s the point of talking about any of them, really?

#155 Londoner on 09.17.14 at 12:10 pm

#18 Smoking Man

“You give it no weight in your analysis.. Wage vs Price”

It’s surprising how little weight it’s given in any analysis. Speak to Americans and Brits that have lost money in housing and you’ll be surprised to see how many still believe that buying real estate is the only way to go.

#41 Ray Skunk

Sorry to tell you dude but the midlands are basically the middle of nowhere as far as UK immigrants are concerned. Low wages and few job prospects.

#156 ozy: go Markham or C15 buddy on 09.17.14 at 12:15 pm

go Markham or C15 buddy, o yeah, and that it’s in GTA not Vancouver

then we talk

#157 ozy: hyper inflation will save the bust on 09.17.14 at 12:19 pm

hyper inflation will save the bust

BANKS WILL save their backs… making $$$$ out of thin air….just double the pumping rates and dropping mortgages to 1.5% fixed 5 years

They can and will do it, since they’ll borrow only ten percent of it with 4% from the bond market.

So anything above 0.5 is PURE PROFFIT FOR THEM

YOU’VE READ IT HERE

WANNA BET

Of course. There will be no hyper-inflation. Worry about deflation. — Garth

#158 Ron on 09.17.14 at 12:27 pm

Todays headlines further prove interest rates are going nowhere, and so R/E in Toronto will remain strong.

Will rent prices steadily increasing, more people will find that 4 years worth of rent down the drain is equivalent to a sudden 15% R/E correction.

Eventually everyone will come to the conclusion owning is better than renting.

Which headlines? — Garth

#159 Rational Optimist on 09.17.14 at 12:43 pm

“124 Brandon on 09.17.14 at 8:10 am ”

What part of town?

#160 45north on 09.17.14 at 12:45 pm

Detached homes and condo sales slumped in Montreal. Nova Scotia is a mess. So’s Regina. In Winnipeg sales are down 12% while listings have bloated 59%. The number of deals is down in Durham, Cambridge, Fredericton, Kingston, and Milton. In Edmonton sales of detached homes are off 15%, and for condos the decline’s 20%.

up to now, CMHC will insure any property anywhere. A couple of days ago, the idea of a deductible was proposed. Which would mean that the banks would have more skin in the game. Which would mean the banks would be reluctant to lend in regions where sales are down!

Now the Vancouver mayoral race is being shaken by a long-shot dipstick candidate who wants to tax people who buy houses but don’t live in them.

actually dipstick does not offend me. I suspect the City of Vancouver does not have the right to impose such a tax. I’m pretty sure that in Ontario, the OMB would simply declare such a tax “ultra vires”

http://legal-dictionary.thefreedictionary.com/ultra+vires

Mark : You’re naïve if you think that a doubling of retail mortgage rates isn’t anything but a landmine going off in the RE industry and on the personal balance sheets of mortgaged Canadians.

it would be end of life as we know it. Except for parts of Toronto and Vancouver, the price of houses would be cut in half – vast numbers of people would be underwater. Mark Hanson says the number one predictor of default is percent equity. People that don’t pay their mortgages don’t pay their municipal taxes either.

We need to prepare for such an eventuality.

#161 Cato the Elder on 09.17.14 at 12:49 pm

Re: #149 Smoking Man

Do you think the herd knows or cares. It’s what MSM feeds them that counts…

My prediction, yellen backs off…

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

I agree. Also, people mistakenly believe we live in a representative democracy – we don’t. We live in an oligarchy run by big business. Low rates benefit them the most, therefore inflationary pressures destroying the middle class will be ignored for as long as possible. As well, no government wants to be the one to ‘pop’ the bubble. They will be blamed for it and get voted out of office. That’s why democracies are flawed – the tough RIGHT decisions are ignored in favor of short term feel good policies that invariably lead to destruction.

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

Re: #157 Ozy

Inflation is already here:

http://www.shadowstats.com/alternate_data/inflation-charts

They just stopped being honest about the statistics back in the 1980s. All you need to do is apply the same formula to prices today and you can see that we’re running at 10% a year since the 2000s. Yes, that means 10% of you wealth is confiscated from you on a yearly basis by a destruction of your purchasing power.

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

Re: Garth

Of course. There will be no hyper-inflation. Worry about deflation. — Garth

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

Deflation isn’t a bad thing. It means prices are too high and they need to come down to stimulate demand again. It’s beneficial for those that did NOT take excess risk and saved. It’s beneficial for RESPONSIBLE people. Inflationary monetary policies are great for big government, big business, war-profiteers, banks, and spendthrifts. It hurts savers, pensioners, manufacturers, and labourers.

Houses are NOT assets unless they are generating an income. Therefore they shouldn’t be rising in price because their UTILITY is not increasing. If prices have to come down (deflationary), then that is beneficial because they shouldn’t of been that high in the first place.

Maybe all that capital will flow to where it should be: in productive goods producing businesses.

#162 Cici on 09.17.14 at 12:51 pm

The part of the TD article that caught my eye was strategically placed at the very end:

Meanwhile, Clark said Canada’s resilience to many of the global economic challenges that played out several years ago has made the country more vulnerable in the future.
“The risk that comes out of doing extraordinarily well is that you become complacent,” he said.
“Canada is not immune (to) a lot of these global changes that are going on.”

#163 Mark on 09.17.14 at 12:59 pm

“up to now, CMHC will insure any property anywhere. A couple of days ago, the idea of a deductible was proposed. Which would mean that the banks would have more skin in the game. Which would mean the banks would be reluctant to lend in regions where sales are down!”

Exactly, which would just deepen the decline. The CMHC was a great thing, at least for the RE industry, when the bubble was inflating. But the CMHC’s recession from the market is almost certain to make the downfall worse. Not only in terms of credit availability, but also due to the severe amounts of oversupply thus induced.

Since there hasn’t really been a city in Canada unaffected by price declines over the past year or two, it is really doubtful whether the CMHC would implement any sort of policy by region though, as opposed to a blanket “deductible” on all new CMHC subprime mortgage insurance. The cost/risk of which, of course, will be borne by future and even present CMHC subprime borrowers in the form of higher risk premia.

#164 Ron on 09.17.14 at 1:15 pm

#158; Garth

For one:

CNBC: “U.S. consumer prices fell for the first time in nearly 1½ years in August and underlying inflation pressures were muted, which could lessen the urgency for the Federal Reserve to raise interest rates.”

Then there’s China injecting liquidity to the market to combat a declining R/E market. Theres EU deflationionary pressures, and EU countries BACK in recession.

This is why I believe Canada will not raise interest rates any time soon. We’ve been listening to this same unrealized tune for 5 years.

#165 Rifles on 09.17.14 at 1:17 pm

Unfortunately there is an element that supports an empty condo tax because of who they think it is targeting but regardless the idea is not as bonkers as you suggest. First, it was proposed by a Chinese (HK) born candidate so does not come with the race baggage you attribute and second given vacancy rates in some areas (ie allegedly 25% in Coal Harbour) it clearly speaks to a problem. Mayors and city councils do not have power over interest rates or immigration policies but they can influence civic outcomes and that is what this proposal is supposed to do. Of course an empty home tax has the whiff of populist politics to it but if it stimulates debate and smokes out a few bigots in the process all the better. If, as you suggest, it has no effect on capital inflows then who cares? It generates additional tax revenue for the citizens of Vancouver without hitting them up for it. Win/win. At any rate this city badly needs a discussion on these issues – something more level-headed than the offshore investment deniers such as you at one end and the racially motivated filth at the other.

(a) Xenophobic sentiment is often very strong among more established immigrants. No surprise there. (b) An empty-house tax will do zero to lower real estate values. What a dumb idea. — Garth

#166 Rational Optimist on 09.17.14 at 1:21 pm

#137 Kevin:

“$400k @ 8% is a $3,100/month payment. The same mortgage at 3.25% is a $1,950 payment, a difference of $1,150/month. Trimming the data plan off their cell phones and ditching one of the cars could easily free up at least $500/month, leaving them only $650/month short. Clip a few coupons and skimp a little here and there for another $150, and it’s only $500.”

The average Canadian household earns $70,000 a year. So, no, expenses going up by $13,800 is not going to be manageable for them. There’s a fair chance that your Canadian with the $400,000 mortgage is living in a house that makes a car necessary to get to work, so getting rid of it is not an option. Anyway, how long is someone willing to endure a $6,000 annual household deficit (in your scenario), all while taking the bus to work and skimping (whatever that means), just to live in a particular house?

#167 miketheengineer on 09.17.14 at 1:49 pm

Garth et al:

Why is the consumer screwed? Why can’t people save some bucks for emergency….? Not because we don’t want to, see how the prices have increased 88% in 5 years…that is more than you standard 2% inflation. Check out this:

“Just five years ago, in August 2009, the average price for a pound of ground beef was $2.134, according to the BLS. The price has since climbed by $1.879 per pound—or 88.1 percent” … ground beef rising to $4.013 per pound. OUCH!

This is a USA based site…

http://cnsnews.com/news/article/ali-meyer/new-record-pound-ground-beef-tops-4-first-time

#168 Victor V on 09.17.14 at 2:19 pm

Federal Reserve to keep interest rates near zero for ‘considerable time’

http://www.theglobeandmail.com/report-on-business/fed-announcement/article20640384/

The U.S. Federal Reserve on Wednesday renewed a pledge to keep interest rates near zero for a “considerable time” and repeated concerns over slack in the labor market, standing firm against calls to overhaul its policy statement.

Many economists and traders had expected the central bank to alter the rate guidance it has provided since March, given generally improving data on the economy’s performance.

But the Fed repeated its assurance that rates would stay ultra-low for a “considerable time” after a bond-buying stimulus program wraps up. In a statement after a two-day meeting, it announced a further $10-billion reduction in its monthly purchases, leaving the program on course to be shuttered next month.

The policy-setting Federal Open Market Committee also repeated its assessment that a “significant” amount of slack remains in the U.S. labor market, a further sign it is no rush to raise benchmark borrowing costs.

“On balance, labor market conditions improved somewhat further; however, the unemployment rate is little changed …,” the FOMC said in its statement.

No change. Higher Fed rates in 2015. — Garth

#169 Bottoms_Up on 09.17.14 at 2:25 pm

#165 Rational Optimist on 09.17.14 at 1:21 pm
———————————————–
There is no way a $70,000 income household has a $400,000 mortgage (5.7:1 ratio) unless of course they have substantial savings or have already had to refinance due to lack of financial management. Or divorce.

#170 Kenchie on 09.17.14 at 2:27 pm

Uh-oh…

http://www.bloomberg.com/video/china-japan-citizens-expect-war-in-near-future-~b5co68xQRqCjXDBFH~69Q.html

#171 Retired Boomer - WI on 09.17.14 at 2:28 pm

#139 Cato The Elder

The Soviet Union is a great example of certain people enriching themselves at the extraordinary expense of the vast majority of the population. The inner circle got the gold, the rest got the shaft. Do you believe China is much different? I do not. Both are environmental disasters.

The U.S. system imperfect as it may be, is the best system man has yet out into play.

As for pollution via “permits” better than pollution via NO permits. Your comment on property rights is good -as far as it goes. What say I own the property next to a large coal burning power plant, or oil refinery. Should I be able to shut both down because both emit noxious emissions?
Should “I” be able to put humanity in the dark, cause transport to cease?? Hardly

The municipalities sewerage treatment plant’s effluent is discharged into the river flowing by my newly built retirement home. Should I be able to shut it down because it discharges effluent into this river? If untreated, or inadequately treated sewerage, dam straight, or be able to force the municipality to improve treatment.

Advanced societies bring pollution. 1900 we had horse shit in cities, 1950 we had auto pollution in cities. 2014 we still have it (but lower numbers than 50 years ago).

Polluters come in all forms, private equity, joint stock ownerships, partnerships, government owned. ALL should be limited in their noxious discharges to the greatest extent fiscally possible. We only have one earth, shit on it too much and it might cease to support life.

That’s why we have clean water acts, clean air acts, land use zoning, farm policies etc. They ARE complex, they ARE expensive. This creates natural ‘moats’ around some corporate enterprises, deal with it. Better complexity with purpose -hardly infallibility here- than simplicity of the illusional ‘free market.’ YES, we have lost some industries because of pollution control, or they relocated elsewhere.
Yes, we lost some industries because of outdated physical plants. They may have built new facilities elsewhere with state of the art pollution abatement, or maybe elsewhere spewing the pollutants as before. (Never studied this factor).

Solutions are complex, and costly. Lobbyists are employed mainly to ‘extract favors’ from government in whatever method they can achieve. That’s WHY they are there! Suspect they would do the same with landowners before their clients erected the new plants were your system to rule.

#172 Kenchie on 09.17.14 at 2:29 pm

For those interest-rate-increase-naysayers:

http://www.bloomberg.com/news/2014-09-17/fed-officials-predict-fed-funds-rate-to-rise-to-1-375-end-2015.html

#173 Bottoms_Up on 09.17.14 at 2:30 pm

#155 Londoner on 09.17.14 at 12:10 pm
—————————————-
Buying real estate is a fine long-term proposition. Eventually you own the asset. You also get to live in it while you pay it off. It’s not too hard to understand. Buying real estate is not a sin. Our gracious host owns real estate. He buys and sells all the time. His main message is be careful, don’t be burned, and be balanced. Not too difficult to figure out, and everyone is in a unique situation where buying may or may not make sense.

#174 gut check on 09.17.14 at 2:42 pm

“… (b) An empty-house tax will do zero to lower real estate values. What a dumb idea. — Garth”

I don’t see why it wouldn’t. If you had to pay for land you weren’t using would you keep it LONGER, or would you either try to use it or sell it instead?

I would like to see something like this imposed on vacant, deteriorating commercial / industrial / institutional properties as well.

Do you figure it would make any positive difference in local communities to impose a vacant / disused land tax? Keep in mind that I don’t give a flying duck who owns these empty places so this has zero to do with race / religion / class / canadian residency status.

Additional taxes make real estate more expensive, not less. Give your head a shake. — Garth

#175 Kevin on 09.17.14 at 2:43 pm

@Rational Optimist (#166)

The average Canadian household earns $70,000 a year. So, no, expenses going up by $13,800 is not going to be manageable for them.

Right. But we’re not talking about them going up by $13,800 today. We’re talking about 5 years from now, when they renew, and rates have normalized to 8% (which is actually slightly above normal, but I’m going with it for the sake of argument). And 5 years from now, the average household income won’t be $70,000. It will be higher. Maybe not $13,800 higher, but enough to at least partially mitigate the increased mortgage payment.

There’s a fair chance that your Canadian with the $400,000 mortgage is living in a house that makes a car necessary to get to work, so getting rid of it is not an option.

Recall that in the hypothetical scenario we’re talking about, the household had 2 cars. I was only suggesting dumping one. Whoever has the more favourable commute can take the bus/carpool/bike/walk/whatever.

#176 Mark on 09.17.14 at 2:54 pm

“There is no way a $70,000 income household has a $400,000 mortgage (5.7:1 ratio) unless of course they have substantial savings or have already had to refinance due to lack of financial management. Or divorce.”

The 8% I quoted was a blended cost of equity and debt. Of course there are tons of households which have less than $70k in income, yet are sitting on a $400k asset that has to be debt and/or equity financed. Most senior citizen-headed households fall into this category.

If you figure $400k @ 8% = $32,000/year, plus another $8-$12/year in maintenance, taxes, etc. — does a $150/month cell phone bill, does cutting back on newer-model Toyotas, or ditching cell phones really move the needle that much? No. Which is why the whole thesis of Canadian homeowners magically being able to cut back in order to preserve the artificially high housing prices is a bunch of nonsense.

#177 Smoking Man on 09.17.14 at 2:56 pm

#172 Kenchie on 09.17.14 at 2:29 pm

Ketchup stop following MSM, get yourself a tin foil hat, make a bowl shape by placing it over your head, then invert it. You can then contact to the UCC, make big bets and get rich…..

Rate hikes with 1/3 of the Population on food stamps..

Give your head a shake..

#178 Mark on 09.17.14 at 3:04 pm

“Right. But we’re not talking about them going up by $13,800 today. We’re talking about 5 years from now, when they renew, and rates have normalized to 8% (which is actually slightly above normal, but I’m going with it for the sake of argument). “

The cost of debt today is cheap, but the cost of equity right now is expensive. As it stands, homeowners are already paying somewhere in the order of 8%, if you blend the average cost of debt financing, with the expected return on equity that is leveraged as much as home equity is.

According to the CBA, the average amount of home equity is 66%:

http://www.cba.ca/en/media-room/50-backgrounders-on-banking-issues/548-household-borrowing-in-canada

Hence, the average Canadian borrower is 1/0.66 = 1.5X leveraged.

The stock market is currently priced to imply a cost of equity of around 12%/annum (P/E = 14, 4% annualized earnings growth). Let’s assume that 1.5X leverage into a house is the same as 1X leverage into common stocks of large Canadian businesses.

11%/annum * 66% + 3% * 33% = a blended cost of debt and equity financing for a house of 8.25%.

So on the average $400k house, it costs the average Canadian family over $32k in finance charges and equity opportunity costs alone, plus maintenance, taxes, etc. Rounded up, closer to $40k, after-tax.

#179 joblo on 09.17.14 at 3:05 pm

C’MON Yellin, jack those rates, let the fun begin.
Pull the trigger so the savers WIN and borrowers LOSE.
It’s time, wait what?
The Machine won’t let you,?

#180 Cato the Elder on 09.17.14 at 3:07 pm

Re: #171 Boomer

We are in agreement on pretty much most things. I too think the USA is the closest we got to true freedom – it’s too bad since JFK was taken out in a coup d’etat that things have gone south down there. People think fascism was defeated in Europe, when really it just went across the Atlantic.

Regarding shutting down coal plants etc. that clearly isn’t the solution. However, dismissing the legitimate complaints of property owners because big polluters have ‘permits’ or make large political donations also isn’t the answer.

Basically what I’m saying is, no permits should be issued. Plants should get permission from property owners first. I’m sure there are plenty of communities that wouldn’t mind receiving a stipend/allowance/royalty from plants that pollute in exchange for their permission of being there. But I don’t think the permission should be issued by politicians because there is a possibility for corruption. Overall, I’m not sure what the best solution is. All I know is that private property is the basis of a free society. Without private property, you can’t own a printing press, website, or anything else to disseminate ideas. Private property is as sacred as freedom of speech (which is why property taxes are so worrying).

I agree that some government is needed. I think the largest form of governments should be local though, and they should progressively get more limited as the distance increases (federal smallest, provincial medium, local largest). Problems are difficult to solve thousands of miles away, so it should be done locally. That’s why Canada and the US have worked out pretty well because we generally have a system of devolved powers. It’s only been the past few decades with an ever increasing federal government that things have progressively gotten worse.

#181 Ken Lovegrove on 09.17.14 at 3:13 pm

Hi Garth.

I would be very interested to hear your thoughts (assuming you have any) on digital / crypto currency (bitcoin etc).

http://Www.coinmarketcap.com

Cheers

Ken

Even writing about it is a waste of time. — Garth

#182 TorontoBull on 09.17.14 at 3:19 pm

“An empty-house tax will do zero to lower real estate values. What a dumb idea. — Garth”
but it may encourage owners to rent these properties out, which could alleviate some of the contraints on housing supply. The lack of affordable housing stock is hurting Vancouver’s prospects of attracting human capital.

#183 Retired Boomer - WI on 09.17.14 at 3:20 pm

#180 Cato The Elder

Yes, I do believe we generally are in alignment.

I to agree with the ‘inversion’ of the power structure: local 1st, then state (provincial), then federal with provincial and federal being the least powerful (as regards local interests).

Now, if we both only had “truth telling” candidates for the myriad of public offices, I would be satisfied!

#184 Cato the Elder on 09.17.14 at 3:26 pm

#182 Boomer

I know, it’s unfortunate. I wish there was an option to ‘opt out’ of all this. I would gladly go without all these government services etc. if it meant I didn’t have to pay in.

I’m young. I’m still finding it hard to move up or make a decent living. Which is why knowing all this is so tragic because it really doesn’t help me in any way. It actually makes it more difficult because I know how much easier it would be for me and people my age if we just adopted more free market principles.

“I’m still finding it hard to move up or make a decent living.” Would that have anything to do with posting here every 16 minutes? — Garth

#185 Cato the Elder on 09.17.14 at 3:28 pm

On a side note, UKIP and Nigel Farage in the UK, as well as people like Rand Paul in the US are starting to gain traction which is nice. Maybe we will catch on – it’s too bad we rarely if ever set consensus and have to wait to catch up to the world here in Canada. We’re too apologetic and ‘go along to get along’ even when things don’t make any sense.

#186 MP on 09.17.14 at 3:35 pm

So the FEDs are estimating the funds rate to rise to 1.375% by 2017. Hardly an increase that start of Canadian RE by next summer as you are predicting.

Low rates for a long time.

The Fed funds rate is estimated to be 3.75% by the end of 2017. Fat increase. — Garth

#187 Cato the Elder on 09.17.14 at 3:46 pm

Re: Garth

“I’m still finding it hard to move up or make a decent living.” Would that have anything to do with posting here every 16 minutes? — Garth

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

I love it. Smoking man I just got chirped by Garth! :)

#188 Nomad on 09.17.14 at 3:47 pm

Watched the fed live. They sees weakness in the economy and isn’t raising rates. Bond market could move on its own, but right now bond yields aren’t moving.

Good conversation on BNN:
http://www.bnn.ca/Video/player.aspx?vid=443265

#189 Herb on 09.17.14 at 4:07 pm

#187 Cato,

now ask Smoking Man to explain the difference between “chirped” and “skewered” to you.

#190 Son of Ponzi on 09.17.14 at 4:19 pm

#121
At least Quebec has one thing right: assimilate and adopt OUR culture, or go home.
———–
or go to Vancouver, where every Dick, Tom and Harry and their extended families are welcomed.

#191 rosie "moving forward" in the knowledge that, "this won't end well" on 09.17.14 at 4:22 pm

The last 4 numbers are telling.

http://www.cbc.ca/news/canada/hamilton/news/u-s-steel-bankruptcy-by-the-numbers-1.2769347

#192 enzcav on 09.17.14 at 4:25 pm

Garth, did you consider these other 800 LB macro-economic tipping points;
1) CDN private sector created zero new jobs in 2014
2) Prem Whatsa – Fairfax Financial says there is a monstrous property bubble in China, he is actually short the S&P 500
3) Kyle Bass – is equally very concerned with CDN housing
4) CDN housing component of GDP exceed levels last seen in US before they crashed

It’s not a matter of if but “when”.

Regards,

enZ

#193 Setting the Record Straight on 09.17.14 at 4:40 pm

@retired boomer
“#122 Cato The Elder

“We need to LOWER TAXES on everything, and reduce regulations across the board.”

Boy that is SO Broad, as to be stupid!

First, income to government must equal the “spending plan” of that government, be it local state, provincial, Federal. If the revenue is short, you have only 2 choices, cut spending, raise revenue. (you could ‘borrow’ but you are only postponing the day of reckoning).

Second, would I want to see industry free to exploit the natural resources like fishing, timber, mining with NO limits? NO. Why you ask, because of the history of over fishing, over cutting over doing things to the extent it destroys renewable resources. Unfettered capitalism is by definition a very destructive force.

Societies are by definition, men’s agreeing to abide by common rules for THEIR collective good, not a single man’s enrichment.

Sorry I do not fully agree with your tenants here.

Practical rules, sustainable policies, progressive taxation, equal taxation of all forms of income. Don’t agree, then we agree to live in different political spheres, or countries. Not a problem.”

There is so much wrong with your missive I cannot address all points.

Take for example equal taxation of all income. This is a cover for double taxation. If I receive income, which is taxed, then save or invest and receive additional income via dividends, interest, or capital gains, why should that be taxed year after year?

If on the other hand I take my income and go to ?Mexico,
I am basically tax free. And will qualify for welfare when I am older.

#194 Bill Gable on 09.17.14 at 4:45 pm

Great piece, Garth.

Here in Vancouver we call Gregor Robertson “Mayor Moonbeam”, for a reason.

Oy, vey.

#195 screwed on 09.17.14 at 4:46 pm

#190
My sentiments exactly.

Our family won’t stay here. Actually, the Scottish option looks inviting!

#196 Victor V on 09.17.14 at 4:49 pm

Rebuilding of Canada’s export sector will take a decade and lower loonie: CIBC

https://ca.finance.yahoo.com/news/rebuilding-canadas-export-sector-decade-lower-loonie-cibc-183030946.html

MONTREAL – The falling Canadian dollar is starting to boost exports but it will take a decade and an even lower loonie to rebuild the country’s export sector, CIBC’s chief economist said Wednesday.

“I think it’s going to take a still cheaper Canadian dollar — somewhere in the 85 cents US range — to restore enough of our lost competitiveness to really get that capital spending in gear as a second driver of growth,” Avery Shenfeld said while providing his economic outlook at the bank’s annual institutional investor conference.

#197 devore on 09.17.14 at 5:03 pm

An empty-house tax will do zero to lower real estate values.

It’s not to lower house prices or drive out foreigners, although I am sure some element believes that will be the result. It’s just to generate more revenue into the city at no expense to the local residents.

Then what is the fairness test of such a tax? — Garth

#198 Shawn on 09.17.14 at 5:06 pm

Double Taxation

193 Setting the record straight at 193..

I agree proposals that all taxes be lowered are so broad as to be stupid.

But you say:

Take for example equal taxation of all income. This is a cover for double taxation. If I receive income, which is taxed, then save or invest and receive additional income via dividends, interest, or capital gains, why should that be taxed year after year?

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

So you are suggesting no tax on dividends, interest and capital gains. That seems highly unfair.

In Canada we generally try to tax all net income, be it from working, from land rents, from realized capital gains, from dividends, from interest.

The dividend tax credit deal with double tax at corporate and personal level.

Already there are FAR too many tax breaks and lower tax rates for us richer folks.

If we cut out a lot of existing tax breaks we could lower the tax rates substantially.

#199 Shawn on 09.17.14 at 5:09 pm

We tax interest, dividends and capital gains year after year for the same reason we tax income from working every year. The government needs to money. It’s fair to tax ALL sources of income.

#200 Mark on 09.17.14 at 5:15 pm

“Rebuilding of Canada’s export sector will take a decade and lower loonie: CIBC”

In other words, its not going to happen. Especially not with a large amount of housing price and debt deflation occurring.

#201 I'm stupid on 09.17.14 at 5:17 pm

Cato The Elder

I can tell by the way you think that you are young and naive. You complain about taxes and wanting to opt out of services but you don’t understand that the safety net provided by things like welfare, unemployment, OAS etc is the reason we don’t have more crime. Extreme poverty creates instability and breeds violence. Common criminals are the poorest people in society. Imagine what would happen if welfare was eliminated.

#202 devore on 09.17.14 at 5:38 pm

#193 Setting the Record Straight

Unfettered capitalism is by definition a very destructive force.

And who owns all the land and natural resources this “unfettered capitalism” is supposed to be destroying? Oh, what’s that, no one, you say? That’s not very capitalistic, is it?

I’m the last guy to be arguing for “unfettered capitalism”, but you’re building a strawman out of a boogeyman.

If you’re gonna go around setting the record straight, at least provide facts. Start with definition of “unfettered capitalism”, so that we know what you are talking about. Saying something is “by definition” doesn’t impress anyone, if there is no definition.

#203 bdy sktrn on 09.17.14 at 5:51 pm

#134 James on 09.17.14 at 10:00 am
The word dipstick is both abusive an inappropriate.
—————————————————-

don’t be such a pc pansy dipstick.

real men still check their own oil level.

#204 bdy sktrn on 09.17.14 at 5:56 pm

and btw our ‘dipstick’ mayor wannabe who is going after HAM house taxes (racist?) happens to be a chinese (hk) immigrant herself, who is rumoured to check her own oil too.

#205 Cato the Elder on 09.17.14 at 6:26 pm

Re: #201 I’m Stupid

There’s nothing naive about what I’ve been saying. Countries with lower tax burdens are typically wealthier, regardless of resource wealth. The reason being that governments don’t create wealth, and entrepreneurs do.

Taxes destroy jobs. Therefore, the very taxes used to provide social programs are actually what cause them being needed in the first place. This is not naive, this is factual. Where do you think taxes come from? They come from the profits that businesses would have INVESTED into their companies had they not been taken (more inventory, building new plants, new stores, hiring employees, etc.). Do you think they would have just sat on their big piles of cash to keep their rear ends warm? Businesses would have invested the money productively, which is something the government doesn’t do. The government doles out money for political reasons and it often gets wasted.

Unemployed people don’t have much to do and get desperate. In a truly capitalist system, unemployment would be incredibly low and living standards would be improving constantly. Take a look at Luxembourg to see how things SHOULD be done in this country. The average person there is 4 times richer than here. Their politicians work on a PART TIME basis (less time spent passing laws destroying their own country). Low unemployment and virtually no taxes.

No, I don’t want to pay into these social systems because:
1. I recognize they’re hurting my chances in the job market by destroying wealth creating businesses
2. I recognize that TAX is THEFT and inherently immoral, even if the funds are used for good purposes. And before you harp about how we would fund government, there are plenty of other models that don’t require wealth confiscation (user fees, low tariffs, royalties on resources, etc.).
3. I don’t want to pay into a system that I will never get to benefit from. Old age pension is not going to be there when I go to collect, and yet I have to contribute to it my whole life? And yes, it WON’T be there. It’s HUGELY underfunded and the baby boomers have only barely begun to retire. Even if I do get to collect SOMETHING in the future it will be a pittance that will barely be worth anything. I’d rather invest the contributions with Garth.

#206 gut chekc on 09.17.14 at 7:20 pm

“#174 gut check on 09.17.14 at 2:42 pm
“… (b) An empty-house tax will do zero to lower real estate values. What a dumb idea. — Garth”

I don’t see why it wouldn’t. If you had to pay for land you weren’t using would you keep it LONGER, or would you either try to use it or sell it instead?

I would like to see something like this imposed on vacant, deteriorating commercial / industrial / institutional properties as well.

Do you figure it would make any positive difference in local communities to impose a vacant / disused land tax? Keep in mind that I don’t give a flying duck who owns these empty places so this has zero to do with race / religion / class / canadian residency status.

Additional taxes make real estate more expensive, not less. Give your head a shake. — Garth”

Me? Me give my head a shake? This is ECON101, sir.

If people were discouraged from hoarding houses via an increase in the carrying cost of same then more houses would be on the market. If more houses were on the market supply/demand forces dictate that prices will fall.

If you’re worried about rich people maintaining lightly-used houses a little tax will have no effect. This is a complete waste of time. — Garth

#207 gut chekc on 09.17.14 at 7:21 pm

tee hee I misspelled my own screen name. And I did it again purposely this time. :)

#208 JuliaS on 09.17.14 at 7:40 pm

Taxing vacant properties? How about extra-taxing retailers that don’t get any foot traffic, for taking up all the valuable space and preventing competition from moving in? How about extra-taxing drivers who buy cars and don’t drive them?

Taxes, tariffs are knee jerk reactions that create problems instead of addressing key issues.

The key problem in Canada is government involvement in the housing market via CMHC and Bank of Canada’s loose monetary policy which rewards asset speculation and punishes saving.

The fact RE agencies run the media business doesn’t help either. Instead of persecuting faux statisticians for misinformation and jailing realtors posing as homebuyers on national television, the government turns a blind eye, as long as the money keeps pouring in through taxation, building permits and good old fashion bribes.