There were a few more dents on the housing market fuselage this week. Condos are taking a hit, for example. Major property insurers, like Aviva, have made it known they’re pulling out of the business of covering these concrete sky boxes – and for reasons that should moderately terrify any recent buyers.
Lackluster building techniques and walls built out of windows which are pretty much guaranteed to fail in a decade or so are the stuff that keep insurance guys up at night. Aviva says most condo corps don’t have enough reserve funds on hand to deal with major issues, and now that we’ve got endless buildings full of marginal hipsters who bought with 5% down, how can owners afford fat special assessments?
In Vancouver, meanwhile, some condo owners are being forced to accept deductibles as high as $100,000 because of the looming potential for leaks. In Quebec more than half of all condo owners have changed insurers trying to escape rising premiums and in Toronto the cost of insuring a one-bedder in a glass tower has soared.
No wonder. They’re built to fail.
Remember what architecture prof Ted Kesik told me last summer?
“Most of these buildings are going to have serious problems in the next ten years,” this pathetic and alarmist blog reported. “First owners will get special assessments for $15,000 or $25,000 delivered to them, which they have to pay by law, to fix these air and water problems. But that’s only a bandaid solution for five or ten years. Then it all comes back.”
Eventually, says Kesik, all these glass condo buildings will have to be reskinned, which not only costs w-a-y more than the recaulking and sealing process, but requires they have to be evacuated. Even if done on a floor-by-floor basis, condo owners will have to move themselves and their stuff out for at least a month.
And this is the easy part. Worse is the financial hit.
“The best case scenario for these owners is that they would, over time, maybe get their money back,” the professor says. “But more likely, values will spiral lower since nobody wants to buy leaky units. So when people can’t sell, they’ll start to rent them out, and that’s when the spiral really begins. I tell my students these are the places their grandkids will be going to buy crack.”
Now, it’s one thing for an academic to says such things. You can ignore guys who wear too much corduroy and smell like beagles. But it’s quite another when your insurer pulls out, and your mortgage won’t be renewed without coverage. Then this stuff gets real.
Meanwhile there’s some tough news for the virgins from CMHC. Anyone putting down less than 10% of the price of a property (which includes most first-timers) will soon be paying a higher premium for mortgage insurance – about 15% more. The increase comes into effect this summer. Already it costs 3.15% of the mortgage’s face value if you have a 5% down payment (and 3.35% if you use a cash-back bank bribe to finance it). On a modest $300,000 loan, that’s serious coin – almost $10,000 – which is why almost 100% of all borrowers just add it to their debt. But this means the premium is amortized, and over the life of the mortgage will double.
Do the kids care? Nah. Just tell ’em the monthly payment.
Well, maybe we should also tell them condos could turn out to be a spectacularly bad investment, especially the weensy little ones where you can have a shower and watch dinner cook at the same time. BMO economist Robert Kavcic’s latest report points out that in hot markets like Toronto detached houses have increased in value 2.5 times faster than condos – and things could get worse fast, with thousands of new units sitting in the pipeline.
The condo market, says he, “faces a prolonged period of stagnation or very sluggish growth.” This has nothing to do with the fact they’re slapped together in haste and sheathed in gossamer panels, but because the universe of potential buyers is shrinking. Remember demographics, Kavcic says, because the hipsters are aging by the minute. The cohort of 25-to-34-year-olds who once thought it was cool to live in a tiny loft with concrete floors and exposed pipes are now thinking about diapers and chintzy plastic backyard swing sets. So, on they go. And who will they sell to? The impoverished, snowflake millennials still living in the basement and nourished by mom?
By the way, what’s the worst-performing kind of housing in poor Calgary these days?
Yup. Condos. The price decline is twice that of detached houses.
So, there you go. Warn your daughter. If it’s okay to live with a guy without getting married, why buy a condo when you can rent? The BF’s cheaper.
160 comments ↓
hello good picture
First?
you know I just received a message from a friend that BMO is restarting its mortgage program for foreigners. Seems desperate to loan their money out to anyone that would take it.
People are not ‘foreign’ when they move here. — Garth
The “quality” of BC buildings is dismal. I challenge anyone to find a comprehensive online list of leaky condo buildings. Unable? I thought so. There were some attempts to build a database, and I leave it up to you folks to figure out what happened to those.
http://www.pbs.org/newshour/making-sense/why-canadas-economy-may-be-headed-off-the-cliff/
Muricans are laughing at us
“So when people can’t sell, they’ll start to rent” Ted Kesik
I’m waiting for the GTA sales data. In the meantime I have my 6 city chart up of rental ads via Craigslist, Kijiji and Airbnb:
http://www.chpc.biz/6-canadian-metros.html#Rentals
Available Montreal rental ads are up 18% M/M in March
Ted Kesik’s Condo Conundrum:
http://www.cbc.ca/toronto/features/condos/pdf/condo_conundrum.pdf
CMHC needs to do a lot more than raise premiums 15% on the most marginal borrowers.
Oh well. Kiss your tax dollars good bye.
So condo sucks and SFH unaffordable. For couples that want to start a family and have children, Toronto is between a rock and a hard place. 905 SFH price is catching up fast too. Let’s load those suckers up with debt and see them work their butts off for 30 years to pay it off. In the meantime they will miss something called a life.
“….in Toronto the cost of insuring a one-bedder in a glass tower has soared. No wonder. They’re built to fail……..”
_________________________
Lamb chops for Easter….mmm…good.
“You can ignore guys who wear too much corduroy and smell like beagles.”
HA!
I have noticed that some individuals on this board have taken exception to my pleas for Canadians not to continue to make the same mistakes that us Americans made (and learned from) ten years ago, and to my opinion that Canadians are, generally speaking, very stupid when it comes to personal finances. While one can easily Google terms like “Canadian consumer indebtedness,” or “Price-to-income ratios for Canadian real estate,” and find all sorts of data to support my argument, very few of you appear to have done that. Had you done that, you likely would have concluded that my criticisms of Canadians and their lack of financial intelligence don’t go far enough.
This chart though, which I believe is based on a rigorous scientific analysis of all relevant variables, summarizes my point in a way that words cannot:
http://postimg.org/image/eu35wfdj5v
Americuh!!! God bless the U.S. of A.!!! Woo hoo!!!
I still don’t get the concept of buying something that costs as much in fees each month as your mortgage. Move to Victoria and put up a tent in a park.
My mistake:
http://postimg.org/image/eu35wfdj5/
#12 Leroy Washington on 04.02.15 at 6:21 pm
_________________________
It’s not your message…it’s the delivery.
Has Smoking Man been photographed? Kind of like that old sasquatch footage from the 60’s.
I work with a few young people who had the lust and bought condos because they couldn’t afford houses and couldn’t stand the shame of being renters. They’re all underwater and one has been listed since last summer with only one “joke” offer. Poor bastard bought at the top and now everyone and his cousin from Surrey is trying to flog condos. I’ve warned them all, once they get a taste of those “special assessments” their little kitten eyes will be forced open. Being right is a pyrrhic victory as these are good people who have been seriously misled.
The insurance problem looks interesting. My guess is that the government will step in and insure those condos a la CMHC. In for a penny, in for a pound.
@#12
Leroy you da man!
Dont pay attention to those jealous Canucks that secretly WISH they were you…. You got it ALL.
So flaunt it. Obamacare, Hillary or Jeb as the next Prez, Mexican drug cartels on your border, “Minute men” patroling those borders to keep the farm workers out, Area 51, water rationing in California…..in April, cities in bankruptcy, Justin Beiber applying for citizenship……
Yup, USA rocks!
Most of these condos will be ghettos in 10 years with legions of debt renters stuck with underwater condo values and exploding fees and taxes
We are almost guaranteed to be in the 2 nd inning of what will be a record setting decline and all the issues such as job loss and anger that come with it. Look for the army of broke debt slaves to get handouts from desperate and corrupt politicians until the final stage where everyone finds out that no one is there to bailout corrupt and broke governments. The practice of considering government bonds as “safe” will be proven horribly wrong
JO
As someone who grew up in a solidly built bungalow in Toronto, I find construction standards in BC a joke. The two weeks or so every winter in Kelowna when the temperature drops below 10C we have to crank up the heat to levels that would fry an egg in a typical Toronto house. Mind you, we rent a luxury condo. Lesser buildings are much, much worse.
Luckily, we’re so heavily subsidized by the landlord that the extra hydro costs are nothing compared to the nosebleed amounts of money we save every month.
Have I said how much I love renting lately? As the Kelowna RE market spirals downwards I reach for the popcorn.
Happy Easter!
[…] Source: http://www.greaterfool.ca/2015/04/02/built-to-fail/ […]
Short article with 5 charts. Check out:
4. House Price-to-Income Ratio
5. House Price-to-Rent Ratio
http://www.imf.org/external/research/housing/index.htm?hootPostID=9bd82d5b6303120824be077f6999f2f0
#16 whitey on 04.02.15 at 6:34 pm
Has Smoking Man been photographed? Kind of like that old sasquatch footage from the 60’s.
……..
Just for you whitey.
Answer is yes.
http://dyslexicsmokingman.blogspot.ca/2015/04/for-witnee.html?m=1
You’re right, Garth, it goes from academic theory to practical concern when it starts to affect your life. Rather telling that the insurers are pulling out entirely vs. just charging exorbitant premiums (suggests they don’t think they can charge a premium high enough to recoup their claims expenses. They can spread risk through reinsurance, so if they are entirely refusing it says they’re completely sure the costs coming will be crippling.)
Heard an anecdote about a couple selling their recently purchased house. Seems it’s no fun working extra jobs to pay a huge mortgage and lying awake at night worrying you’ll lose the house if the slightest thing goes awry, because you’re totally financially overextended. IMO, there are enough worries in life, you don’t need that burden to carry around, too. Glad they are getting out before getting eviscerated.
Big demand coming up for those who are P.Eng. with experience in facility evaluation and building envelope assessments.
MILLENNIALS NOT BUYING IN THE US
Heard a interesting piece on Seattle talk radio the other day – unfortunately I started listening part way in so did not get any references.
It was two economists being interviewed about why Millennials in the US are not buying houses in the numbers they should be, given past history.
One of the eggheads had done a survey of Millennials to try to figure out why – he thinks it comes down to;
1) awareness of costs of maintaining a home – taxes, upkeep, utility bills.
2) mobility of the Millennial labour force – Millennials are estimated to be 20 to 30 percent more mobile than Gen X – and most expect to relocate in 4 to 6 years. So they do not want to get tied into a house.
3) fear of housing meltdown – Millennials saw what happened to the previous generations’ home equity and are fearful of another housing meltdown.
One of the profs figures this has ushered in a new era of renting rather than owning and remain this way long-term.
The other prof is of the view that its short-term phenomena and Millennials will be piling into the US housing market over the next decade.
………of course Millennials in Canada do not need to take the 3 above items into account because prices always go up in Canada.
Speaking of “built to fail”, the ACES (Alberta Centennial Education Savings) plan is closed, as of March 31, 2015.
Interesting reason why the program was cut:
“Additionally, evaluations of the program show it is ineffective at helping lower income Albertans save for post-secondary education as accessing the grants require a higher level of financial literacy and engaging with banks or financial advisors.”
I wish someone would just release stats on overseas investors. I hear it everywhere and it’s really annoying and always anecdotal. Either the real estate industry doesn’t want us to know because it’s BS, or they don’t want us to know because it’s true and restrictions would significantly impact their bottom line.
Either way, it’s all I hear about constantly. Why can’t people talk about any other topic in Vancouver other than real estate! I liken Vancouver’s unfriendly reputation to the fact that everyone in the city who owns a SFH thinks they’re a millionaire (despite the obvious fact that owning a $1M house with a $985k mortgage does not make it so…..) hence the nose in the air attitude.
The solution to our economic woes! All we have to do is open up the immigration floodgates!
“Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tost to me,
I lift my lamp beside the golden door!”
The 21st century can be the Canadian century! Syrian refugees, Central African refugees, North African refugees, non-het U.S. refugees, climate change refugees from Bangladesh and the Pacific…welcome one and all…
If Canada had 100 million in population by the end of this century, those neighbours to the South might actually pay attention to us :-)
BREAKING: Netanyahu tells Obama: World nuclear deal with Iran ‘would threaten the survival of Israel.’
……..
Lmao, at NutAndYahoo
Perhaps humiliating the President of the United States of America in Congress last month was a bad idea.
This is entertaining, the phyco demented neocons vs the mentally insane tree huggers.
Makes for watching MSM fun again.
The bull shit will be flung fast and high from either camp..running up to the presidential elections..
Can’t wait.
#19 Ogopogo: “The two weeks or so every winter in Kelowna when the temperature drops below 10C we have to crank up the heat to levels that would fry an egg in a typical Toronto house….”
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How stupid is that? Kelowna is mild. We had one snowfall that lasted a week…and was gone. Exaggerate much?
The builders & their bosses are too busy niffed at cyclists wearing workman vests to care about the lousy job they’re doing. Lets hope those F150’s are lemons.
Canada Mortgage and Housing Corp takes aim at homebuyers with less than 10% down
http://business.financialpost.com/personal-finance/mortgages-real-estate/canada-mortgage-and-housing-corp-takes-aim-at-homebuyers-with-less-than-10-down
Insurers pushed away by concerns over shoddy condos in Canada
http://business.financialpost.com/personal-finance/mortgages-real-estate/insurers-pushed-away-by-concerns-over-shoddy-condos-in-canada
@#24 JSS
“Big demand coming up for those who are P.Eng. with experience in facility evaluation and building envelope assessments.”
++++++++++++++++++++++++++++++++++++
Puh-leez.
These are the self same idiots that designed these leaky, mouldy monstrosities.
And now you want to pay them again to fix their screw ups?
Who was it that once said, “If you lined up all the engineers in the world they still couldnt reach a conclusion”?
Probably a contractor that had to deal with their overly inflated egos.
Where do you live?
I live in the Toronto Projects
you know I just received a message from a friend that BMO is restarting its mortgage program for foreigners. Seems desperate to loan their money out to anyone that would take it.
People are not ‘foreign’ when they move here. — Garth
———-
What are they called when the come here, pay cash, then go back to China to work? My wife has three friends in this boat. one of them now has mother+daughter coming this summer so daughter can go to top high school….
So what? — Garth
So I just got back from Florida. Feels like the bubble again down there, rapid increases with no matching income or rent increases. 5 years ago we were buying 65-86k homes that rented for 700-850. The 1% rule. I just esigned for a brand new 3/2/1677sf for 208k that will rent for about 1600. Still pretty good and easily carries, but the phenomenal deals are gone. Last time all cash, this time 50% leverage each through RBC usa.
WE use the rent from down there to pay the rent up here and live free, with about 150k invested.
Or we could buy the bung around the corner, just listed for $698 and no offers so far….
I rent next door to several condos in Burnaby, BC. Several of them have been reskinned and no one had to move. They were, however, completely covered in blue bags for many months while the work went on. Cost each owner more than $60,000.
#1 Ogopogo: “Have I said how much I love renting lately? As the Kelowna RE market spirals downwards I reach for the popcorn.”
******************
You are a real piece of work. Go away.
Imagine no one wanting to insure your abode because it is a poorly built piece of crap. And you’ve already bought it before you found out it is a piece of crap. Crappy leaky poorly built condos have been making headlines in Canada for decades. And don’t ever think buying a SFH is the answer to all of these problems.
There is only one solution. If you don’t have any money, act like it. No exception. I always put Freedom First.
I recently heard of insurance companies pulling back Directors and Officers (D&O) insurance for condo boards, meaning the owners would be on the hook if the condo corporation gets sued. The reason they are giving is that if the board does not do its due diligence, the insurance is null and void. And who decides if the board has done its due diligence? The insurance company.
Even though most condo docs say the corporation can’t sue itself, I’ve yet to see a set of condo docs that says individual owners can’t be sued if the insurer pulls the D&O insurance.
Condo insurers seem to be backing away quickly in as many ways as they can.
“The cohort of 25-to-34-year-olds who once thought it was cool to live in a tiny loft with concrete floors and exposed pipes are now thinking about diapers and chintzy plastic backyard swing sets. So, on they go. And who will they sell to? The impoverished, snowflake millennials still living in the basement and nourished by mom?”
For starters, the 25-34 year olds ARE millennials to begin with (born between 1980 – 2000). Some were wise to buy a condo they could afford, in the 416 of course, with or without mommy’s help. Nothing wrong with that. Impoverished don’t have money to rent let alone own, so they are a non-factor. When the time comes, millennials will swap their 600sqft condos for their parents’ 2000sqft suburban homes in great enough numbers than people can imagine. It just makes sense. Only the greatest fool would sell their condo at a loss, in the 416 of course.
The largest Millennial one-year cohort is now 23. — Garth
Maybe the hipsters/GenX/GenY/Y2K group will have their tiny boxes scooped up by Baby Boomers wanting to get out of the oversized detached they are too decrepit to keep up any longer. Aren’t all these condos supposed to be close to amenities aging Boomers will be looking for? Maybe the Boomers can swap their huge house for the tiny condo, plus if they have equity left over the buyer can pay them the remainder during what is left of their lives. As for the special assessment of the aging condos, if the Boomers have bought presumably they’ve the cash to keep those condos up.
#26 Smudgekin on 04.02.15 at 7:26 pm
The builders & their bosses are too busy niffed at cyclists wearing workman vests to care about the lousy job they’re doing. Lets hope those F150’s are lemons.
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Hahaha where did that come from? Did someone make fun of you on your Schwinn ? Niffed? Lemme guess your English
#12 Leroy Washington
“I have noticed that some individuals on this board have taken exception to my pleas for Canadians not to continue to make the same mistakes that us Americans”
——————————-
It’s not that at all, Leroy. It’s your tendency to quote pieces of irrelevant and inane scripture that puts us off.
RE sales must be getting nervous.Now, they are appealing to fear If we can’t seduce you into using us, we’ll frighten you into using us. Can you imagine a full-service brokerage using this tactic. See what happened when this guy used a discount broker.
A couple discovers that selling their house without a REALTOR® has taken them somewhere they never wanted to be. They may have saved a few dollars, but now t…
Shoddy construction? YOU CAN’T HANDLE SHODDY CONSTRUCTION!!!
“The knock came just after midnight, nearly four years ago, for Terri Conner and her husband. At their door was a firefighter with an evacuation order, giving them 15 minutes to leave the condo they’d owned and lived in for years.”
http://www.theglobeandmail.com/news/alberta/fort-mcmurray-condo-owners-view-demolition-with-bittersweet-emotion/article22480342/
I’ve never understood why people would buy a condo. I remember when I was trying to get my Realtor’s license (don’t worry – I failed the final exam), the teacher himself said that condos are the worst investment you could make. I agree now more than ever.
I love houses. Just make sure you get your first cheap shack paid off before you invest in another. You never know when you’ll need to crawl back into the box that you own outright to eat your rice and beans.
I have never declared bankruptcy and only have heard of a few people who have. So really do not know the ins and outs, penalties, social stigma , if any, etc But this makes me wonder if the newer generations see it in a different light than what I do. I have heard comments from some of the young owners of all the neat toys they bought over the last few years that if the bank wants them back they can have them. Not too much bothers them.
I believe that bankruptcies cannot be declared on student loans but not sure about anything else. Can anyone comment on what could happen if things got so bad that bankruptcy is the only way out of some of the debt that people have incurred? And what and can and cannot be include in a bankruptcy if declared? And could Canada as a whole may be headed in that direction?
“By the way, what’s the worst-performing kind of housing in poor Calgary these days?
Yup. Condos. The price decline is twice that of detached houses.”
Comparing what to what? According to CREB, comparing March 2013 to March 2014 the median price drop was 3.6% and 4.73% for Detached and Apartments respectively.
YTD 2015 declines. — Garth
My previous comment.
That should have read 2014 to 2015…..
US rocks, Canada suck, no Canada rock US sucks….stop this nonsense, you guys have no idea of what world have to offer. Most of US and Canadians live and die in malls, all you know is to line up to coscto, watching CNN and licking walls and cement. Stop worring too much and spend the money on yourselves. You cannot buy your time back. Work like Canadians but live like Europeans. In the end all you get is 2 meter square.
Brian Ripley
thanks – interesting chart:
http://www.chpc.biz/uploads/9/7/9/5/9795010/1912872_orig.png
Do you have year on year as Montreal rentals will be seasonal due to “moving day” on July 1st.
Sub trade guy at work just bought a North Van house for 1.4 mil. Bought it with his fiancée. Hopefully she’s a Doctor or something. Wants to pay it off in ten years. Said if interest rates rise he’s hooped. All I could think of was Garth’s blog. Didn’t mention it though, too late he’s all in. I think he put over 20% down because I mentioned he must have saved a bundle on CMHC insurance. He liked that.
Living large in Van. Yikes!
Speaking of insurance, I recently received a letter from my home insurance company asking for permission for my credit rating. It’s good, but I don’t think it’s their damn business to know it. The company is trying to entice me by saying I could save some money. I asked about the range of possible savings, which they cannot give me supposedly until I give them permission to access the rating. Probably if it wasn’t a good rating, I’d see an increase, which the company of course doesn’t mention. Any suggestions, or should I just keep the status quo?
If “built to fail…” is really as common as Garth claims, eventually the issue will grow into a class-action suit against provincial or federal authorities, created to regulate and oversee the construction standards and inspections.
Since the large number of condo owners left screwed are also happen to be voters, politicians will cave and initiate bailout programs.
http://www.cbc.ca/news/canada/british-columbia/medical-marijuana-dispensary-upsets-vancouver-condo-neighbours-1.3018714?cmp=rss
The woman in the above article is upset because a medical marijuana dispensary is going to open on the ground floor of her building. What should really be getting her goat (and probably is), is the scaffolding and big blue tarps which will cover her building for the next year or two. Now that really brings your property value down.
Every single high rise in her neighbourhood has been under a tarp at some point during the past 5 years. It’s just a fact of life here. ‘Built to code’ in reference to a Vancouver highrise is a euphemism for ‘good for 20 years’. After that you take your chances and pay your money. If you get away with $20,000 in minor repairs you’re one of the lucky ones. Much more realistic to budget for $100,000 per unit. Sometimes all you get for your money is a few windows replaced, a few exterior panels removed, some balcony work and maybe an exterior vent or two replaced.
This situation is criminal. I don’t know how CMHC or the banks can justify supporting such a scam. (oh yeah….people still buy bank still lend, so the game continues…..)
Of course, investing in trinkets or trinket-making wealth-producing apparatuses would have resulted in the exact same outcome (it actually did, which is why the FIRE sector was the inevitable step to keep the compound equation working). The exponential math of compounding is not different if you lend based on gold (the interest is still a promise that cannot be kept -“promised non-existing gold”-) or if you take the loan to manufacture trinkets instead of houses and trinkets for houses. The compound equation does not care that the loan is based on wampum, gold, or seashells (as long as they are scarce and the interest is non-redeemable) and what the loan is used for.
Exponents are always Built To Fail.
People think success is pulling out a ledger, methodically we plan out the future, the monthly check , yes we are on track. High fives for all.
Success is being equipped to handle the unexpected with no plan B
Sadly my oldest son has been picked up by the hand of fate, and slammed down hard face first into the cement.
He got married not two years ago, wife the bitch from hell, she leaves him. Three months later. Hes depressed and sad.
The plot thickens.
They reconcile over the Internet, she flies back to Nova Scotia last week.
She’s in hospital with what may be a brain tumor or MS. Can’t see out of an eye, no feeling in one leg.
I speak to him tonight he’s crying, I listen.
I ask trying to change the subject , how were sales today.
He says , while balling his eyes out.. 4 for 4.
Ah
Did something right as a father.
Shit , not a week ago, im hating her guts.. Wishing a bus would crush her to pieces for hurting my son..I now love her, trying to figure out what to do to help
Life Is complicated..
That’s why I’m here, to figure shit out.
God gets a kick out of fking with me. Obviously a depraved smoking man fan.
Good grief, the whole world seems to be in a downward spiral! It’s not just the kids that will lose there’s also the investors. The pension funds the mutual funds. Is there any hope? Can even a balanced portfolio keep up?
What spiral? The balanced portfolio was up 4% in Q1. — Garth
Garth, have you written on your idea of a balanced portfolio? With your shrewdness I assume it’s built off low-fee funds. If so, where can I find it?
#30 Daisy Mae on 04.02.15 at 7:23 pm…
I believe Ogie was commented on the construction standards of the condo, not the Kelowna weather.
#39 Daisy Mae on 04.02.15 at 7:48 pm…
Have to add our hat to the ring, we love renting – costs much less than owning the same condo.
And as followers of the market in Kelowna for almost four years, it is in a downward spiral, slower now than in 2010, but still going down.
It may hit bottom later this year, but that’s doubtful.
The great Canadian housing bubble, the great Canadian household debt bubble, the Canadian youth unemployment crisis, condomania, etc., and the yet to come unemployment and currency crises . . . are not acts of God, divine caprice, or natural phenomena like the weather.
How’d you people get this way? (I say YOU because this Canadian bears zero responsibility.)
There was something fin de siecle-ish about the lugubrious fed finmin announcing a late budget date in a foreign-owned garment factory which puts out stupid-lookin’ and overpriced overcoats. Shortly thereafter, thank goodness, thousands of young men and women, et alia, are out in the streets of Montreal again screaming for change.
GT suggests that academics who wear too much corduroy smell like beagles. Perish the thought.
Canada itself is in advanced state of economic rot. It’s not as if foreign observers hadn’t noticed the stench.
#57: West Coast.
I have always said that I never build down to the code level. Not even worth building something that poorly.
Re::
#56 They’re built to fail…… on 04.02.15 at 8:37 pm
If “built to fail…” is really as common as Garth claims, eventually the issue will grow into a class-action suit…
To answer your first thought; NOPE ! Really on your own as a group/strata/or citizen. Government and/or regulatory bodies legislated their own protection and are excluded from lawsuits and responsibility.
To continue:
Since the large number of condo owners left screwed are also happen to be voters, politicians will cave and initiate bailout programs.
Again, NOPE. They don’t care about You. Being unable to receive recourse or compensation from class action etc, your very much on your own. Warranties on condos and homes are more like 30 day, 90 days and if really lucky at 1 year end. Pretty much covers only the emergency fire equipment .
In conclusion:: the fact that insurers are now directly working to escape future risk tolerance is indicative of where this is really going. Wow, the exposure to risk of a condo is now massive! I have direct professional insider knowledge that every engineer or architect signing off on repairing solutions is protecting their own financial position foremost: not yours.
Ouch , but that’s the reality we see and it is reading the tipping point of sorts.
Regards all
#53 Ben on 04.02.15 at 8:31 pm
Brian Ripley
thanks – interesting chart:
http://www.chpc.biz/uploads/9/7/9/5/9795010/1912872_orig.png
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Do you have year on year as Montreal rentals will be seasonal due to “moving day” on July 1st.
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Good call Ben, I was going to suggest the same thing!
There goes the move-up market.
“What are they called when the come here, pay cash, then go back to China to work?”
“statistically insignificant and almost non-existent”
Leroy Washington – I seem to agree a lot with . We Canadians are poodles. As for people buying property here and not in your country is beyond me ?!?!? Gosh I miss FL, Vegas and NY.
#49 experienced.optimist
I have not declared bankruptcy either, however I do know a few who have. As I understand it, here in BC if you declare bankruptcy:
– A mortgage is full recourse (in BC), which means you cannot default on mortgage debt. The bank can legally seize your home, sell it, and if they don’t recover enough to cover the outstanding mortgage obligation, you are required to pay the difference. They can apply to garnish wages, tax refunds, and I believe, EI and government assistance as well, until the debt is satisfied. It continues accruing interest I believe as well, during this period.
– Funds in savings/chequing accounts, and TFSAs can be seized, RRSPs cannot. I’m not sure whether funds in RESPs can be seized or not?
– Student loans must still be paid in full, I believe the same aforementioned garnishing options can be used to satisfy the debt owing. You cannot currently default on student loans in BC.
Not many seem to realize these are the rules here if you default on debt. To be able to file bankruptcy also requires that you have the means to repay into the bankruptcy trust on a pre-determined, regular basis. I.e. you must have a steady job, or reliable source of income (ironically), or you cannot file for bankruptcy in the first place I believe. If you lose your house as a result of losing your job, you would need to get re-employed asap to even qualify for bankruptcy.
There in no “jingle mail” option here in BC, you cannot EVER walk away from a mortgage without having to pay the difference in the final sale price of the home and the debt owing on it. Same principle for student loans. It has been set up so the bankers get their pound of flesh no matter eventually, no matter what your financial situation is. I am often amazed how few YVRrs are aware of this.
If I am incorrect on some of these points dawgs, please feel free to chime in.
When the tide turns, those who are highly leveraged into a declining asset risk all their “equity” being wiped away in even a 5% – 10% correction, but the debt will follow you, (and possibly your estate) when you leave this sphere, until it is repaid.
too many hilarious but true lines to quote tonight Garth, thanks for the many laughs!!
#155 Godth
Paul Craig Roberts-Inflationary Depression Coming
————————————-
Finally got a chance to watch the link you provided.
Dr Paul Craig Roberts is a smart man who knows what he is talking about, and with great insight to the inner workings of Washington. For those who can connect the dots… Well, you can easily see how the pieces fit
Care to comment Leroy?
#56 They’re built to fail…… on 04.02.15 at 8:37 pm…
In BC the problem was too big, even with a lengthy review by former Premier Dave Barrett there was little support for the condo owners.
Although the builders were partly to blame, changes to the building code by government were mainly the problem – ie. building standards for dry, cold climates being used in wet, mild ones. Hence the leaky condo issue in BC.
A bailout in the area of billions isn’t on any governments’ radar, nor will it ever be.
We like the condo lifestyle, but the risks of ownership, especially with new condos, outweigh any benefits – renting is much safer!
smokey unveiled
http://i.imgur.com/5fJqWAt.jpg
Ah I’m ….
Think my pain killer is a bit strong tonight.
I had a great thought a moment ago , it was amazing ,its gone, gone for ever.
hate it when that happens.
It was good
#65 Spectacle
———
We basically have an entire generation boxed into a purposely or negligently “built to fail…” trap.
Will that screwed generation really react with a polite Canadian “ouch”? Or will it be more like a tipping point?
For sweeping political radicalization? Far left, far right political party emerging?
Or radicalization leading to straight civil war?
Far fetched? Just as much as the current situation is unprecedented.
Happy to live in a downtown Vancouver condo. Not at all interested in buying one.
Heaven can be found by clicking my name, good night.
#49 experienced.optimist on 04.02.15 at 8:17 pm
I have never declared bankruptcy and only have heard of a few people who have. So really do not know the ins and outs, penalties, social stigma , if any, etc But this makes me wonder if the newer generations see it in a different light than what I do. I have heard comments from some of the young owners of all the neat toys they bought over the last few years that if the bank wants them back they can have them. Not too much bothers them.
I believe that bankruptcies cannot be declared on student loans but not sure about anything else. Can anyone comment on what could happen if things got so bad that bankruptcy is the only way out of some of the debt that people have incurred? And what and can and cannot be include in a bankruptcy if declared? And could Canada as a whole may be headed in that direction?
I think you may be right that younger people don’t think the same about bankruptcy as older people. A young relative had massive student loans (for useless education that she never graduated from) and managed to flip them to some kind of line of credit/bank loan. Then went bankrupt. She doesn’t seem to care, it’s all about gaming the system, see?
Her father was upset, – she didn’t give him a chance to help out. I suppose he should be grateful she’s “independent”.
Will Harper renege on his 10k TFSA promise ?
I have always asked myself what type of insurer was exposing itself to the Vancouver’s DANGEROUS condos.
When I see all those boxes with gas fire places and gas stoves, I think that somebody Must be crazy in BC.
The main issue that BC insurers don’t seem to understand is that Vancouver’s BIG one is overdue – when that earthquake hits – and it’s a matter of when, the gas is going to be more dangerous than the earthquake’s kinetic energy. The insurers are the ones that are going to get hit the most….
When people think of condo risks (assuming that they do!!!), it’s only the windows leaks and special assessments on their sky boxes, but the worst is cooking beneath the earth right now…
doing the masonry on a 8 story concrete{cast in place} building at the moment in Vancouver{where the ducks even fly by holding umbrella’s} and the building envelope architechs keep a keen eye on us you can be assured!,Window /door jams,exterior vents ,all opening are carefully blue-skinned and mastiked.
Not a window guy but they get the royal 1 hr direct spray treatment and any failures are remediated.
I personally would NOT buy into any woodframe or concrete hirise unit,not because of potential building problem,but because of the strata costs and I couldn’t live in a rabbit hutch!
Giambattista Vico, The New Science (1725)
http://historyguide.org/intellect/new_science.html
But if the peoples are rotting in that ultimate civil disease and cannot agree on a monarch from within, and are not conquered and preserved by better nations from without, and are not conquered and preserved by better nations from without, then providence for their extreme ill has its extreme remedy at hand. For such peoples, like so many beasts, have fallen into the custom of each man thinking only of his own private interests and have reached the extreme of delicacy, or better of pride, in which like wild animals they bristle and lash out at the slightest displeasure. Thus no matter how great the throng and press of their bodies, they live like wild beasts in a deep solitude of spirit and will, scarcely any two being able to agree since each follows his own pleasure or caprice. By reason of all this, providence decrees that, through obstinate factions and desperate civil wars, they shall turn their cities into forests and the forests into dens and lairs of men. In this way, through long centuries of barbarism, rust will consume the misbegotten subtleties of malicious wits that have turned them into beasts made more inhuman by the barbarism of reflection than the first men had been made by the barbarism of sense. . . . Hence peoples who have reached this point of premeditated malice, when they receive this last remedy of providence and are thereby stunned and brutalized, are sensible no longer of comforts, delicacies, pleasures, and pomp, but only of the sheer necessities of life. And the few survivors in the midst of an abundance of the things necessary for life naturally become sociable and, returning to the primitive simplicity of the first world of peoples, are again religious, truthful, and faithful. Thus providence brings back among them the piety, faith, and truth which are the natural foundations of justice as well as the graces and beauties of the eternal order of God. . . .
I probably don’t say it enough: for all the hoopla about Vancouver house prices, condos have been a terrifically underwhelming investment. You’re lucky if you’re breaking even on price, over the last 6-7 years or so. Only people who made (a small amount of) money are the ones who flipped a pre-construction unit. Seems there’s little less sexy than a used condo.
It’s not just the young who don’t care about going bankrupt it’s almost the majority of Canadians. The debt to income ratio proves that. Canadians will borrow until they go bankrupt and now we wait for just that. Sales are weak across the board as tapped out home borrowers pay almost everything they make just to service this months mortgage payment. As the saying goes Alberta is finished and the GTA is walking dead. Places like liberty village are future gettos. Condos could fall as much as 70% of today’s value over the next few years. If you want a condo rent it. Low ball the rent as landlords can’t sell it and need you more then you need them.
Leroy, what happened? #12? You are slipping dude. You damn near had me convinced that you are a canuck as your tardiness resembles our Prime Minister.
Hiding in the closet with his cat, pissing in his pants and watching the Leafs lose another one.
Maybe you need to think about coming out of that closet.
#37 -=jwk=-
Prices got lifted by people like you. Investor buyers with cash. When prices fall after a bubble, they tend to undershoot, exposing great value for people in a position to scoop up the deals.
I say the real millennial’s were born on 1983 or after. The important reason is those born earlier were at an age where they able to buy before the previous downturn when prices were much more in-line with income.
Also, if you’re born in 1980 or before, you grew up old fashion, having to often call your friend (no computers as much), lining up physically to sign up for class in university, although alot changed during that period.
Main thing is they at least grew up with more patience, and understanding of the old ways. Not this “Everything is easy” and “Look at my selfie” attitude.
#55 Editrix on 04.02.15 at 8:36 pm
——————————————-
I like your approach, don’t tell them unless they give you details what it means for you.
#73 Snowboid
“Although the builders were partly to blame, changes to the building code by government were mainly the problem – ie. building standards for dry, cold climates being used in wet, mild ones. Hence the leaky condo issue in BC.”
Not according to COLCO and the Barrett Commission report. According to the report, there was nothing wrong with the building code; the problem was the code wasn’t followed (which thus implies the blame rests with the builders and the inspectors):
http://www.myleakycondo.com/bcode.htm
#27 Chaddywack on 04.02.15 at 7:20 pm
—————————————————
There has been a survey that showed foreign investment in Canadian real estate is on the order of low single digits. However, for ‘high end’ real estate in Vancouver, an economist on The National a few days ago quoted a 40% foreign investment. So if anyone should be complaining, it should be the 1%’ers.
#52 lala on 04.02.15 at 8:22 pm
I’ll fore go my 2 sq. meters, couldn’t care less once the breath leaves the body and the electricity has gone out. Burn the body, throw it to the wolves, or in the land fill. It’s just sunshine, earth, and water.
#83 Godth
Holy Crap, man; that’s heavy stuff…thought I was reading Slayer lyrics until I realized there wasn’t any 64th notes pounding away in the background!
Chief Sealth figured if we couldn’t find our place in the natural order of things, & insisted on trying to conquer the world instead of trying to live within it; we would all suffocate in our own waste. He also was quite eloquent in explaining why the beasts were just as important as man…as he put it, what was man without them?
(I’ve always wondered why people who’ve spent their entire lives living off the land, & have never been to school; seem to possess more wisdom than a bevy of Ivy-League educated pooftas with incredible vocabularies…& are more fun to listen to)
As my age increases my love of brevity & succinctness increases…as does my fondness for paragraphs.
I will start practicing all this soon…maybe…well, the brevity part right now…
bravo Garth
And the purse strings get a little tighter one small project at a time. Note at the bottom of the second article (published last year) a “clarification” to the story by the cbc. When? When the news the project wasn’t funded?
http://www.cbc.ca/m/news/canada/thunder-bay/topstories/federal-commitment-was-for-convention-centre-only-greg-rickford-1.3018181
http://www.cbc.ca/m/news/canada/thunder-bay/thunder-bay-event-centre-gets-1m-boost-from-government-1.2545270
Vancouver housing prices still going up.There is alot of wealthy people still buying at these high prices.The average Vancouver couple must make at least $160,000 to afford a house.Vancouver homeowners will have a great retirement.
It’s not just the liability insurers that balk at leaky condos!
When I sold my leaky condo ahead of a looming special assessment, my realtor informed me that our building was on CMHC’S “blacklist” which meant that prospective buyers couldn’t get CMHC insurance on their mortgages, so any buyers needed a full 20% down payment in order to get their mortgage.
That black list isn’t something that CMHC publishes, but it’s absolutely real, and made a dramatic difference in the number of moist and horny virgins who could bid on our property. Didn’t see THAT one coming.
Eventually we sold, but only when the buyer’s father fronted the full down payment.
Don’t forget, if the condo owners have been bought up by asians investing in canada. They will be faced with an option, either fix it up cheap of fix it properly.
Because they don’t live in the darn thing they will opt to fix it cheap, just buying time.
It happened in the leaky condo age and will be a replay. Owner who don’t live in the buy don’t give a dam. And they will have lots of voting rights which will eventually win in a Strata Vote
Why did I start laughing as I read today’s blog when really I should have been crying?
Never buy a condo. Ever.
You’re better off livin’ in a van, down by the river.
A colleague told me a story about his rental condo unit. It is located in a multi-building development in SE Calgary – a couple of hundred units in total.
They had a number of failures in the hot water heating system in the last two winters. Significant water damage occurred in a number of units, plus the adjacent and downstairs units. What happened? People would leave their balcony doors or windows open because it could be as hot as Hades and radiant heat control is neither timely nor exact.
So someone decides to check on the common failed components – the solenoid valves. The valves had been failing as the seals were cracking when the temperature dropped. It turns out the valves were actually meant to run in a glycol heating system, not a water heating system. The builder put in a component of inappropriate specification.
Since the complex is almost a decade old, it’s the condo board’s responsibility to find a solution. The simple technical answer is to swap out the valves. This creates a cost to be borne by the unit owners. Nobody wants to pay so they need to find another solution. This comes in the form of a bylaw that occupants are not allowed to open windows or balcony doors when the temperature is below zero. They also try to push through a $10,000 deductible per unit in the event of a future valve failure.
Let’s say that it costs upward of $1,000 per unit to do a valve swap. Say $250 for the materials and remainder for time to block, drain, install, and test. They said no to this? Your complex had more than 1% component failure and the aggregate damage is well into the six-figures. Even the threat of potential damage to your unit and its contents, never mind the common facilities that you’d ultimately pay for with your increased strata fees, won’t move you to action? I shake my head.
I won’t even get into the commentary from my cousin who is one of the principals at one of the largest structural engineering firms in the country about how he’s finding rot after 5 years that they’d typically expect to see after 15 to 20. Or how they’re finding more and more concrete foundations and walls that will be remediation nightmares in two decades as they disintegrate.
Modern housing isn’t constructed. Modern housing is configured. You can have the best of engineered material components and it won’t matter one bit if they are installed or used improperly or are subjected to a larger cost-cutting exercise.
Everyone else’s mileage may vary.
#5 canucbuck
His quote was on the National tonight. :-)
Posting late as I fell asleep earlier & woke up. So glad we owe zilch to anyone.
Oh wow an extra 15% to from 3.15% to 3.6%. With moves like CHMC is definitely some balls for adding $5 a month to everyone’s mortgage.
Let’s face it CHMC isn’t going to do squat, they want the status quo and hope that the housing market won’t implode, and although I’ve been a bear for a long time. I highly doubt the market is going to implode anytime soon now. Especially when the gov’t keeps on wanting to keep the party going.
I am glad where I am right now and I love the last paragraph (y)
..Still going wrong strong!
Keep it up!
SFD in Toronto and Vancouver keep going up up up…
Vikram Mansharamani is a US base economist with an interesting view on Canada. It’s not a positive one either ….. Dominoes anyone?
Isn’t it nice to know the rest of the World thinks were out of our ******** minds?
http://www.mansharamani.com/so-what/crazy-canadian-credit-confronts-crude-eh/
Epic fail setup by harpster&co, gonna be lots of fun after the election.
#98
“Don’t forget, if the condo owners have been bought up by asians investing in canada. They will be faced with an option, either fix it up cheap of fix it properly.
Because they don’t live in the darn thing they will opt to fix it cheap, just buying time.
It happened in the leaky condo age and will be a replay. Owner who don’t live in the buy don’t give a dam. And they will have lots of voting rights which will eventually win in a Strata Vote”
I think it’s inaccurate to say that it is “owners brought up by asian investing in Canada”. Plenty of greedy, cheap owners/flippers out there out to make as much money as possible so cutting corners. Happens with landlords, owners wanting to do a quick facelift to sell and house flippers too, no matter what country of origin.
US jobs number just wiffed. No rate hike in 2015.
DOW up 500 points next week.
The assumption you make is the same thing marketers do when they lump everyone into something called 50+. Because Nana in 1965 behaved a certain way, that means that a 55 year old in 2015 will behave exactly the same.
Just because a person in 1975 settled down in the suburbs does not mean that a 34 year old will decide to do the same thing. Most of the people living downtown are actually those that grew up in the suburbs and many of them are starting to raise kids in small units, the same way couples do in Manhattan.
Past performance does not necessarily predict future results. I’m never going to get a curly pubic hair perm although my elderly neighbours all sport that look. I’m not deferential to the medical community like they are either, grateful for whatever crumbs you give me. So yeah, I can guarantee we will have private health care options in less than ten years too as the system implodes with the weight of the boomers. We don’t all morph into clones of the people who come before us.
Just a heads up on the full lunar eclipse tomorrow — April 4th — not a good day for financial decisions or real estate investments.
http://cosmicconvergence.org/?p=9776
Why Solar And Lunar Eclipses Have Been Considered ‘Birds of Ill Omen’ For Millennia
“@ #61 PM on 04.02.15 at 8:54 pm
Garth, have you written on your idea of a balanced portfolio? With your shrewdness I assume it’s built off low-fee funds. If so, where can I find it?”
*** *** ***
Right here:
http://canadiancouchpotato.com/model-portfolios-2/
America slowing down again.
Americans Not In The Labor Force Soar To Record 93.2 Million As Participation Rate Drops To February 1978 Levels
We warned yesterday that the “whisper expectation is for a NFP print that will be well below consensus, somewhere in the mid-100,000s if not worse now that the bartender hiring spree is over”, and we were right: moments ago the BLS reported that in March a paltry 126K jobs were added, nearly 50% below the 245K expected, and the lowest monthly increase since March 2013.The unemployment rate was unchangned at 5.5%. The January and February data was also revised significantly lower, and subtracted a grand total of 69K jobs. – Zero Hedge
Who is carrying the water in America? Only about 14% of the working population between the ages of 18-65. King Dollar! LOL
Is the guy in the photo Smoking Man?
Oh by the way, this is old news, but for those who haven’t yet heard it: Sculley and Mulder are making a comeback with the X-Files!!
“Places like liberty village are future gettos. Condos could fall as much as 70% of today’s value over the next few years. ”
Trends change and do so in all areas of the economy. Housing is no different. Parkdale used to be a rich people enclave, until they built the Gardener Expressway and cut-off easy access to the lake.
27 year old Vancouver-bred millennial here. Was telling a 24 year old co worker today about my brief experience in home ownership. He recently bought his first condo with new wifey, new baby and 5% down. He was thrilled.
I told him how I bought a beat up east van condo for 216k in 2009. Sold it in 2013 for 270k. 54k profit for 4 years, right, he says? Wicked! Nice investment, he says! He plans on doing the same.
I bought with 5% down. Around 12 grand. 30yr mortgage. Monthly payments were 1600, half of which was interest. Total monthly costs around 2k if we include strata and taxes and other fees. That ate up about two thirds of my total income.
Lets take that 54k “profit”, minus 15k for the audi-wranglers at remax. Minus 1k for assorted legal pencil pushers Down to around 40. Minus 6k to put a new roof on the place in 2011, 2k for new plumbing. Down to around 32k. Minus 2k for the renos. Lets generously say I clear 30.
Now imagine if I had put 12 grand into a balanced portfolio in 2009, along with making regular monthly payments of 1600. With a very modest return of 6%, id have 100k by 2013 when I sold, or 150k today.
So where do you live now, he asks? Mom’s basement, I say. Paying 300/mo for rent.
#40 Freedom First: “Crappy leaky poorly built condos have been making headlines in Canada for decades…”
**************************
…and I know one senior who took out a Reverse Mortgage to cover her coastal ‘leaky condo’ assessment. Very sad.
” I’m never going to get a curly pubic hair perm although my elderly neighbours all sport that look. ”
Never say never, Detalumis
You know why they get those, don’t you? Straight hair, when thinning, looks worse. The curls cover the scalp at a time when arthritis makes it impossible to curl your own hair. At 44 I’ve had to drop the curling iron a few times due to sudden bouts of it. I can’t imagine what it’s like at 84.
#62 Snowboid: “And as followers of the market in Kelowna for almost four years, it is in a downward spiral, slower now than in 2010, but still going down.
It may hit bottom later this year, but that’s doubtful.”
*****************
No better, no worse, that the rest of Canada….
#113 Marcus
Did ZH ever stop to think that perhaps because Boomers ARE retiring the ‘labor force participation rate’ might be down?
Do the math. Born in 1946 ? Age69 are they working?
birth year / age
46 69
47 68
48 67
49 66 eligible for FULL social security
50 65
51 64
52 63
53 62 eligible for reduced early social security
Lots of gray haired, and no hairs clogging the eating places now…more to come. Anybody who wants to work here has little difficulty finding employment. It may not be your “dream job” but it would be enough until that dream job comes trotting along.
ZH is usually incorrect about dire predictions!
#99 Syd: “Why did I start laughing as I read today’s blog when really I should have been crying?”
*********************
Because the mess we Canadians have created made you hysterical? ;-)
@604sam
Good post. Glad to see someone else writing about local purchases of over inflated house prices.
All this talk of foreign home purchasing in Vancouver is becoming nauseating.
To think everything is rosy back in China is incorrect.
http://www.businessinsider.com/analyst-chinas-economy-just-touched-the-governments-chilling-red-line-2015-4
If Chinese Nationals are forced to sell, or take a big hit on their property back home, will they hold on to their foreign purchases? Doubt it. They may take a hit here and home and have to sell here. Adding more inventory and taking some of the glazing off of the “buy now or never” mantra of the real estate cartel.
They are but one factor in the inflated price syndrome in Van. As my previous post points out locals are buying as well especially if they’re newly hooked up with wifey fiancée and baby on the way.
Living the dream, high on the hog, not in hogtown in the 604, with easy credit, no credit, no problem.
Pick from many Bank designer programs to carry that weighty mortgage. “You’re richer then you thunk”
Happy Easter,
Cheers.
No Country For Young Workers: Only Americans 55 And Older Found Jobs In March – Zero Hedge
You would be surprised at how many “retired” people in the USA now absolutely need to work to survive. Savings rates are abysmal and competition between the 20 somethings and the retirees is over. The retired ones get hired. They don’t complain and they have better manners.
With a birth rate of about 1.2 children per couple and the incredible restructuring of 20-40 yer old relationships, (Men not wanting marriage anymore) there is a demographic reckoning on the horizon.
No kids = retired folk will work till they drop.
Well if we cannot defeat Leroy Washington, let’s join in the cheerleading!
U-S-A U-S-A
Where half of all the residents register between obese and morbidly obese.
Maybe we should skip that one
U-S-A U-S-A
Where a disproportionate percentage of the economy is founded upon building, selling, and dropping bombs, to promote PEACE no less
Hmm, that seems a little misguided.
If USA is #1, as a Canadian I will take the extreme distal end of that line….
Ok, If we know that these “condo towers” are going to die, WHO OKed them ?????? and to what standards do they stand????
I watched the “Leaky condo fiasco” in Vancouver (from the Island) and kept asking, When will they come out with new and “wet coast” standards. To my knowledge “they” still have not.
It is still “business as usual” for the contractors and buyer beware for the moist and covetous.
Do I dare raise the “conspiracy” word?????
Maybe “campaign contributions” ?????
We do know that that happens far too often.
Once worked with a fellow who sold his house and bought a condo to retire in out here in 604. All was rosy until the building started leaking. Even though his unit was dry all the owners had to pony up. The owners got multiple quotes for repairs and were each assessed $60,000.00. This was probably 20 years ago. But the kicker was … NONE of the re and re companies would guarantee against further leaks. Talk about stress.
There were a few more dents on the housing market fuselage this week. Condos are taking a hit, for example. Major property insurers, like Aviva, have made it known they’re pulling out of the business of covering these concrete sky boxes – and for reasons that should moderately terrify any recent buyers.
CBC did an excellent documentary “Condo Game” that is germane but it’s not available! What the hell!
http://www.cbc.ca/player/Shows/Shows/Doc+Zone/2013-14/ID/2419796099/
but it is on youtube
https://www.youtube.com/watch?v=hFb9TUw9A5s
one of the points is that the Ontario Municipal Board undermines Toronto City Council. MPP Rosario Marchese argues that Toronto should have authority to govern its own development.
Andrewski on 04.02.15 at 6:15 pm
Ted Kesik’s Condo Conundrum:
http://www.cbc.ca/toronto/features/condos/pdf/condo_conundrum.pdf
This is a MUST read for ANYONE contemplating a condo purchase……..
I have repositioned it from above just in case anyone missed it, or did not read it there.
It is the best commentary that I have seen for what I just posted about the “wet condo” dilemma.
Freedom 55 Achieved
On May 20 I will turn 55. And on that very day I will retire from my job.
Yes, as most will suspect it’s a government position.
But I only have 25 years in the pension plan and would have been eligible for a significantly larger pension if I stayed for on for a few more years and a far larger pension if I stayed until I had the maximum 35 years in the plan. And, I am giving up a very attractive package of wages and benefits by leaving. (I might have become self-employed years earlier if the job paid less.) Very few of my co-workers will even consider retiring at age 55. Despite the pension, they can’t afford to give up the wages.
I have additional income and investments that, along with the pension, make this possible.
I have basically been planning for this since about age 28. It was my goal and through some combination of luck, skill and planning I made it happen.
Thoughts?
#101 Another Albertan
Your problem is that you make far too much sense. It’s the same problem that often plagues Garth.
You can’t ‘move people to action’ with carefully considered cost/benefit analyses and technical explanations of improperly specified components.
If you want to quick remedial action, start a rumor that the heating system as currently configured causes a significant increase in cancer.
@ The American
A few facts about FATCA.
If you have dual citizenship ie (insert foriegn country here)/American passports and have never worked in the US and have lived in a foreign country since the age of 2……
You must file an annual IRS tax statement.
Any “foriegn” tax refunds or breaks are not recognized by the IRS.
Failing to file a US tax statement may incur penalties greater than the taxes owed.
Your “foreign” employer must inform the IRS of your income.( Non US companies are now rethinking hiring US employees)
Your “foreign” bank must inform the IRS of your account holdings.(non US banks are now refusing US customers)
Your “foreign” investment broker must inform the IRS of you holdings.
Failure to comply can result in fines and or jail upon return to the US or any of its territories.
Renouncing your citizenship will not occur until all back taxes or fines have been paid.
An “exit tax” for renouncing US citizenship is usually 30% of all holdings( with a $650k exemption).
Or your not a US citizen but are married to one?
Hopefully the house, the bank account, your pension, your business isnt all in both your names….cause the IRS considers that property of the US citizen.
http://www.google.ca/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=6&cad=rja&uact=8&ved=0CD0QFjAF&url=http%3A%2F%2Fthehill.com%2Fblogs%2Fcongress-blog%2Fforeign-policy%2F313775-fatca-simple-premise-gone-terribly-wrong&ei=hMseVa-VGNGrogSC24HIDQ&usg=AFQjCNHtIQuUe9snAUuUrN0hHno_bSVOpA&bvm=bv.89947451,d.cGU
#93 stage1dave on 04.03.15 at 12:28 am
Heavy metal lyrics from a book written in 1725. That was a paragraph I quoted from the link provided.
https://www.youtube.com/watch?v=0Z760XNy4VM&app=desktop
http://www.cbc.ca/news/business/housing-prices-up-in-edmonton-stable-in-calgary-in-march-1.3019218
Anecdote: I’ve heard young people talk about declaring bankruptcy the same way we talk about dollar cost averaging – it’s a financial strategy. “So, like, if the SHTF, you can just declare bankruptcy and start over.” Why would there be any social stigma for a generation that’s never accumulated enough assets to rise above the zero-line?
As an [email protected], I’ve seen outstanding student loans on the books and notes saying they can’t find the debtor. If it’s true that you can’t default on student loans in BC, then I guess they got sold to collections agencies.
…..”I tell my students these are the places their grandkids will be going to buy crack.”
Incredible post again, Mr. Turner.
My coterie here in “Delusion Central” (Vancouver) – include a few that have MULTIPLE glass Condos, as ‘investments”. Most of them are dealing with multiple issues.
The stress must be incredible.
The building we RENT in, had to be re-plumbed, 6 years after it was built – and now all the windows are failing.
The place is 1/2 empty, and a one bedroom sells for about $1.2 million.
Anecdotally – noticing a LOT of small business’ going dark, here.
I also note that big Box stores are struggling.
There is a soupçon of fear in the air. It’s just about palpable.
USA job creation crashes by 50%.
Rates now likely to only go up 0.25%, a token advance.
Our dollar just shot up.
Looks like low rates for years to come. We will inflate our way out.
# 129 SHAWN ALLEN
Congrats!! A job well done (and well planned).
I retired at age 60 from Govt service (U.S.) as well.
Not because the pension was so “Grand” it is not. I retired because my outside investments, and having all our crap for allowed me to do it. My wide took her social security at 62 I at 63 because we wanted to do it. Neither of us come from long lived stock, and who really gives a shit after say age 75, as most are to feeble for much.
Well Done!! Enjoy your “new life” but be aware, you will not have near as much free time as you might think!
#123 Marcus
Apparently, all those dollars spent on higher education has been pissed away. Too bad those 20 somethings who are unemployed -with student loans-must pay them back eventually, or your old age pension gets dinged for them with interest.
No good deed here goes unpunished.
#129 Shawn Allen on 04.03.15 at 12:59 pm
Freedom 55 Achieved
I have basically been planning for this since about age 28. It was my goal and through some combination of luck, skill and planning I made it happen.
Thoughts?
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Yeah … congratulations Shawn. Surely you must be among the last people to do this. My guess is that you will not be replaced, and some unlucky young’n wont be getting your job or your chance. Enjoy your retirement and keep your health …
So a crappy U.S. jobs report of 126,000 for March-2015 compared to the 248,000 jobs most economists, analysts prediction.
This is not bad enough, January-2015, February-2015 jobs reports were revised downwards by 69,000.
A total of 191,000 jobs that were supposed to be created and were not.
Wages are not rising much either in the last U.S. jobs report too.
Bloomberg is already stating that the Fed is likely to delay raising rates again.
What can one say?
http://www.vancouversun.com/business/real-estate/Barbara+Yaffe+Vancouver+home+buyers+unfazed/10942158/story.html
@ #116 604sam on 04.03.15 at 10:05 am
In my experience, it doesn’t matter how you break it down for people to understand, they just don’t get it. Hard facts, math, logic, you name it. It simply won’t go through.
I just don’t bother anymore and frankly, I don’t care.
Out of curiosity, did your coworker get it? Thought so….
Best,
HD
“Why would there be any social stigma for a generation that’s never accumulated enough assets to rise above the zero-line?”
In the short term, sure. But I personally read a lot of prospectuses from Calgary junior oil and gas companies, and it is quite surprising how many of the principals involved have declared personal and/or corporate bankruptcy at some point in their lives. It is something that follows a person for the rest of their lives and will always elevate the cost of capital either to their personal finances, or that of the businesses they eventually come to run. Additionally, although bankruptcy may ‘dissappear’ from an Equifax record after a certain number of years, it exists in perpetuity in the proprietary records of involved lending institutions (which seem to be consolidating all the time!). The question, “have you previously declared bankruptcy” has to always be answered truthfully. Even the mere use of subprime lenders after discharge from bankruptcy is something that many high-spec lenders stigmatize these days, and increasingly so into the future (even for the credit-worthy, keep this in mind before you take that no payments for a sofa for 2 years deal!!).
@#129 Shawn Allen on 04.03.15 at 12:59 pm
Congratulations Shawn!
I am too a public servant. My plan is very similar to yours. Not planning on working the full 35 years of service and will most likely pull the plug earlier or work very part time.
At 31 years old, I have a decent amount invested in a balanced portfolio already (205K). If all goes well, I should be in a very good position in about 10 years from now.
Again, good job and enjoy the well-deserved break.
Best,
HD
#143 Mark
The question:
…“have you previously declared bankruptcy”…
************************************
Wait until your creditors petition you into bankruptcy and you can forever answer “No” to this question.
Ergo bingo.
#9 Chris on 04.02.15 at 6:18 pm
“Let’s load those suckers up with debt and see them work their butts off for 30 years to pay it off. In the meantime they will miss something called a life.”
Yes…and also, the difficulty in holding onto a job/jobs for 30 uninterrupted years at an equivalent salary. The job market in Canada is not headed in that direction. Not the private sector and certainly not the super-bloated public sector. Not for a long while.
Pity those who, tragically, are “hanging on” to rapidly melting values in their re. They could have been less arrogant, sold and loaded up on U.S. $.
Next stop: reverse mortgages at 30% and drooling over travel brochures whilst dining on tuna melts. Again.
Fed growth rate for quarter 1 a big fat ZERO! Odds that there will be a rate hike? What do you think? Do changing parameters alter your prediction?
http://247wallst.com/economy/2015/04/03/us-growth-forecast-chopped-to-zero/
Same happened in Q1 last year. Same reason – weather. US rates will be higher by the end of 2015. — Garth
#14 Leroy Washington on 04.02.15 at 6:24 pm
My mistake:
http://postimg.org/image/eu35wfdj5/
LW, you’re an enfant terrible!
That is actually quite funny.
…and true, inasmuch as the average Joe here is programmed to believe that re always goes up and based upon the extent to which re prices in Canada have decoupled from reality.
Hormones rule here and don’t tptb and FIRE know it!
P.S.: the first link was also a chuckle.
Uh oh. Here comes the public servant bashing.
“Pity those who, tragically, are “hanging on” to rapidly melting values in their re. They could have been less arrogant, sold and loaded up on U.S. $.”
Out of the hot water and into the frying pan, as the saying goes. US real estate and US assets more broadly are not some sort of magic refuge against the sort of deflation that is now upon us in Canada. Quite the opposite, they have quite a bubble down there which is now into the process of popping.
Only prudent balanced asset allocation will really save them. We will most definitely, at some point, see a re-run of the very low US housing prices experienced during the 2008/2009 freak-out. Additional over-capacity has been stimulated in droves in that sector, and nothing has been cleaned up.
dining on tuna melts.
———————————
Ugh! How awful.
#33 Victor V on 04.02.15 at 7:33 pm
Insurers pushed away by concerns over shoddy condos in Canada
http://business.financialpost.com/personal-finance/mortgages-real-estate/insurers-pushed-away-by-concerns-over-shoddy-condos-in-canada
Can’t recall if I had posted this, but a few years ago, I walked past a new condo build. A concrete worker was smoothing out a floor in a wide, circular movement. He stopped, cleared his throat noisily (I could hear him from about 100 feet away), spat directly into the cement and carried on smoothing. Gross. This told me all I needed to know about the attitude that goes into the rickety builds of today.
To be fair, perhaps spittle and other fluids of that ilk are the new “bio-engineered” compound additives, designed to increase wear and reduce costs. Gotta reduce those costs, at any cost. These new compounds are perfect in combination with pressed cornflakes.
#129 Shawn Allen on 04.03.15 at 12:59 pm
Serious congratulations!
I suspect you’re also taking the opportunity to melt down some of your huge RRSP at low tax rates. Smart.
For those lamenting that early retirement is impossible, consider Mr. Money Mustache’s advice (I see he has an interview currently featured in the Globe and Mail.) You need diversified, income-producing assets equal to 25-30x your annual spend. You can get there faster by earning and investing more and/or decreasing your expenses (yeah, I know not everyone wants to live in Lillooet, but focus on the math of the equation.) Once you give up your main gig, have another source of minor income as a safety buffer.
Certainly, a government job and pension makes it an easier path than unstable contract work with no pension, but the reality is we can’t all be public servants. Figure out what you, specifically, can do to accumulate more wealth and to require less money to fund your lifestyle. It is more productive to pursue the outcome you desire than to take no action but complain about the challenges you face in achieving your goal.
What do you think the odds are that the Dow will drop over 1,000 points when it opens on Monday, due to this TERRIBLE U.S. jobs report?
Do you think the market will crash, fall just a few hundred points, or just stay basically flat?
If anything, the market will advance on the expectation (misguided) that a lower jobs number means more air before the first rate hike. — Garth
@crowdedelevatorfarts #131 re: “Or your not a US citizen but are married to one? Hopefully the house, the bank account, your pension, your business isnt all in both your names….cause the IRS considers that property of the US citizen. ”
Thanks for the reminder regarding the dangers of marrying a ‘US person’ while living a life outside the land of the free.
Unless he/she is really special, its not worth the financial headache, risks, and constant looking over the shoulders. However, hormones being what they are, and kids and retirement seemingly like a distant dream, the young ones don’t always listen to the warning.
My oldest daughter is in a long distance relationship with an American. She has already told her possible future spouse that any marriage is contingent upon her significant other’s renunciation of US citizenship (daughter would never move to USA, so her spouse would then have to move to Canada thus screwing up their ability to invest like normal Canadian residents).
#56 They’re built to fail…… on 04.02.15 at 8:37 pm
If “built to fail…” is really as common as Garth claims, eventually the issue will grow into a class-action suit against provincial or federal authorities, created to regulate and oversee the construction standards and inspections.
Since the large number of condo owners left screwed are also happen to be voters, politicians will cave and initiate bailout programs.
******************************************
Amen brother.
Real Estate at allllll COST!!
So much for the US jobs growth numbers.
A record 93 million out of work.
Should be an interesting Monday.
#129 Shawn Allen on 04.03.15 at 12:59 pm
Freedom 55 Achieved
On May 20 I will turn 55. And on that very day I will retire from my job.
Yes, as most will suspect it’s a government position.
But I only have 25 years in the pension plan […]
Thoughts?
Yeah. If you made it to 55 and have significant financial employment momentum still going for you, you’d be an idiot to quit regardless of money on the side. Keep going to the end of the line, or at least until it looks like they’re about to bring out the ax to a bunch of people.
When you’ve been a wage-slave in an institutional setting from a young age, that will be substantially all you know. Especially if you’ve been roped into some domestic situation where you’ve squeezed out a few pups and paid bills for decades to support it.
You won’t be going out kite-surfing with Denni Parkinson, or motorcycle racing or pursuing the fine arts or collecting a fine set of single friends or completing significant higher education, etc just because you finally cleaned out your locker. You’ll probably be disoriented, shell-shocked, and confused or resentful that the rest of the world doesn’t work the same outside the main gates during working hours as it does inside. I’ve seen that numerous times in 30+ year lifers.
Unless you put up with such miserable political intrigue, or other mental repression on a daily basis that you’ll get a coronary from it soon, the pattern you’ve established so far in life will be what you can comfortably relate to. Work is a great thing for older folks. It keeps the mind and hands occupied, and maintains momentum of thought and spirit.
For most, earlier retirement just gives a short-lived mental pop from all the resentment built up over the years that you could have been doing something more interesting than paying the bills and taking shyte from a string of bosses.
Do the extra 10 years, catch the whole 35 years of benefits, then buy a big lawn somewhere with a riding mower. And maybe a garden in Arizona to grow tomato plants in.
#90 Herf on 04.02.15 at 11:33 pm…
Thanks for pointing that out. Either way the problem is still too big for a government bailout.
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#119 Daisy Mae on 04.03.15 at 11:20 am…
Kelowna is comparable to Victoria, with the peaks from 2009-2010 still unmatched, and won’t be for a long time.
Compared to the rest of Canada, Kelowna has fared much worse.
Republic_of_Western_Canada: Do the extra 10 years, catch the whole 35 years of benefits.
guilty as charged
Unless you put up with such miserable political intrigue, or other mental repression on a daily basis that you’ll get a coronary from it soon, the pattern you’ve established so far in life will be what you can comfortably relate to.
In my career there were two completely separate cases where I was in danger of running head on into the man who was my director. The probable result would have been humiliation. I’d say very probable. Fortunately in both cases my immediate supervisor protected me. As I said the cases were completely separate – there were two different directors and two different supervisors. Where there was protracted stress, it was voluntary. I knew what was in store.