Finally

SUCKS modified

Everyone coming to this pathetic blog loves predictions, especially ones about the future. Here are a few of the latest.

Interest rates will rise later this year in the US, at least once. Twice is possible, but that depends on what the polls are looking like for the Presidential election in November. Next year is another whole story, when everybody should expect several increases. The implications for Canada are not cool.

Why would the Fed do this? Simple, growth. The economy is expanding sufficiently, corporate earnings are stable enough and the labour market’s in great shape. In fact, look at this:

JOBLESS

Chart by Bloomberg. Click to enlarge.

The unemployment rate is currently 4.9% and has plunged from the oh-my-gawd days of 2009. But from here on in, the number of new monthly hires is expected to diminish, because America has reached what the central bankers consider “full employment.” That’s when most of the people who want to work are working – also called the long-term natural jobless rate.

So next up is inflation – in part from upward wage pressure as economic expansion makes labour more valuable. Containing and controlling that inflation is what the Fed is now focused on, even in a world where many countries are struggling with a battle against deflation. So, rate increases are a certainty.

Yeah, Canada will follow suit. But not until next year.

Meanwhile (here’s another one), oil is in for some rough times. Crude is slumping again towards $40 a barrel, and the world is awash in gasoline this summer. Refiners are freaking out, and the big oil majors which were hoping retail operations could save their bottom lines, now see that’s not gonna happen.

“It’s been a difficult year for consultants in Alberta,” says a life-long energy guy who bought a big spread of ranch land two years ago, “like a perfect storm, really, if you consider our political climate and if, like me, you are 1) in Oil and Gas, 2) work on projects and 3) contract out your services. As your last blog entry says – Alberta is pooched (until oil rebounds AND the socialist are gone, I think).”

The decline in Calgary real estate, and the decline in Alberta’s economy, could be remarkable over the coming year. Even cowboys can’t stay in the saddle forever.

Meanwhile, predictably, we’re heading for the housing wall in many places. CMHC’s historic warning this week, coming days after the bank cop ordered stress testing and the BC government created a giant tax, “to discourage foreign investment in the residential real estate sector” should not be ignored. After all (unlike the rest of us) those CMHC guys see the numbers. All of them. They know the quality of the loans, the volume and the locations.

The agency says 60% of major cities are dangerously inflated with problematic conditions – caused by overbuilding, overvaluation, overheating or price acceleration. At the top of the list is Vancouver, next is Toronto, and further down are Calgary, Saskatoon and Regina. “Price acceleration” is also advancing throughout the GTA and the Lower Mainland, spreading like an evil fungus from the urban plant.

We all know the reasons. People have bought beyond their means and financed those real estate purchases with historic amounts of mortgage debt. Meanwhile incomes have remained dormant and the economy is struggling. Now given the threats of rate increases imported from the south, weaker commodity values, an Albertan crash, a Trumpian surprise or sustained job losses, it won’t take much to push this sucker over. The feds understand, which is why a real estate task force was hastily mashed together last month.

The BC Chinese Dudes Crash Tax is likely this catalyst. Bad enough when it was arbitrarily introduced, it’s even worse today with confirmation is will apply to all legal transactions that have been negotiated, but may be months away from closing. The market interference is epic. The damage done to Vancouver, BC, the Canadian real estate sector and to our image as a stable, modern country is severe. After wobbling so incredibly high, the market has the potential to shoot lower – posing a dramatic equity shock in YVR, and helping make CMHC’s national 9-1-1 warning prophetic.

Seventeen days ago this blog delivered the final “get out” warning. The last of many. Too late now.

194 comments ↓

#1 Victor V on 07.28.16 at 6:07 pm

Chinese-language media up in arms over B.C. foreign buyer tax

http://www.theglobeandmail.com/news/british-columbia/chinese-language-media-up-in-arms-about-bc-foreign-buyer-tax/article31150727/

Vancouver’s surprising new property-purchase tax for foreigners has generated a storm of coverage in Chinese-language media both in Vancouver and in China itself, with articles warning of dramatic new costs, analyzing the political motives of the B.C. Liberal Party and predicting a host of negative outcomes.

“The new tax is nothing but the ruling party of British Columbia soliciting votes for the election held next spring. It won’t cool down the enthusiasm of foreign buyers,” Ou Lyu wrote in the Global Times, a Beijing newspaper affiliated with the Communist Party-owned People’s Daily,

#2 White Crock BC on 07.28.16 at 6:12 pm

Like Trump, you’re great at pointing out the problems, but you offer no solutions, save for telling millennials to stop lusting over granite and stainless steel.

If you were the PM Garth, what would you do?

I’m doing it. — Garth

#3 Ready for it all! on 07.28.16 at 6:17 pm

Burn baby burn, let the real estate market crash and burn. Sorry Garth, but this is a good thing for those not belonging to the one percent. I make decent money, have no debt, invest but still can’t buy a house in my city without a blow your brains out mortgage, which I refuse to do. So bring the crash on, us financially responsible people will be there to scoop up a house in line with normal incomes when the crash happens.

#4 Harbour on 07.28.16 at 6:19 pm

DELETED

#5 don on 07.28.16 at 6:19 pm

Hey Garth, you going to the Hip concert? It’s gonna be a good one!

#6 Ponzius Pilatus on 07.28.16 at 6:20 pm

Christy Clark just erased any creds she might have enjoyed. It was a Third World move. — Garth
————————–
No surprise here.
Canada is well on it’s way to Third World status.

#7 Axehead on 07.28.16 at 6:21 pm

Related to the comment ‘Alberta is pooched’, statistics Canada released the 2015 Crime Severity Index numbers for 2015. Alberta had the highest percent change of all provinces of 17.89% with Red Deer leading the pack at CSI of 182 (Calgary, which is over 12 times the size has a CSI of 77).

#8 Ponzius Pilatus on 07.28.16 at 6:23 pm

Garth,
Christy stiffing a few rich Chinese dudes is not so bad.
Just remember what F. did to thousands of pensioners when he cancelled the income trusts in 2006.

#9 Dave on 07.28.16 at 6:26 pm

If you own a single home in Vancity mortgage free, should you sell and cash out. Let it crash and buy cheap later on?

#10 Old Man Too on 07.28.16 at 6:27 pm

No worries. We’ll just declare bankruptcy:
http://edmontonjournal.com/business/local-business/alberta-consumers-struggling-with-mounting-debt-as-insolvencies-spike-in-may

#11 TRUMP on 07.28.16 at 6:29 pm

Well you have yourself a Happy long-weekend too !!

#12 common sense on 07.28.16 at 6:29 pm

#2 White Crock BC

Yes, Mr. Turner is doing a PUBLIC service while the msm follows suit..finally.

Though I still do not believe the USA is doing as well as claimed….numbers can be massaged to show what they want to show.

No rate increase if Hillary is in, 1 if Donald wins in December unless he is leading the polls by a lot before November then as Mr. T claims 2 in order to scare the sheeple.

Any thoughts anyone on the oil floor? I’m taking $36 this time.

#13 Ponzius Pilatus on 07.28.16 at 6:30 pm

Here we go.
The Chinese media is in a feeding frenzy, playing the race card.
Well, let’s remind everyone again that Canadian Citizenship is a priviledge and not a right.
So act accordingly and blend in.

#14 Ronaldo on 07.28.16 at 6:31 pm

I expect that the “Bank of Ma and Pa” will be heading for a stress test in the not too distant future. Going to be a lot of equity disappearing into thin air methinks. Better get that basement suite ready Ma, we can’t afford this place anymore. Sorry bout you having to postpone your retirement Pa.

#15 Allgood on 07.28.16 at 6:32 pm

Sold house in Surrey over asking price – check
Rented house in awesome hood $2500 – check
Wife is happy – check
Family and friends think we are nuts for not buying another house right away – check
Listened to Garth – check and check
Time for a holiday!

#16 Rates on 07.28.16 at 6:32 pm

I cannot believe you still think the FED will be raising rates. Don’t you realized they have you and economist fooled over and over again. For how many years will this continue to go on?

All they do is talk about raising rates but not raising them. It is tightening through talking. I though this would be obvious to anyone by now.

#17 Ronaldo on 07.28.16 at 6:35 pm

If you were the PM Garth, what would you do?

I’m doing it. — Garth
—————————————

Good answer Garth. The reason you got turfed right?

#18 mouldy in YVR on 07.28.16 at 6:35 pm

It ain’t over ’til the fat lady sings………

#19 Michael King on 07.28.16 at 6:40 pm

Nate Silver has recently published an interesting analysis of the last 11 US presidential elections. That takes us to Nixon in ’72. The candidate leading in the polls after the conventions were completed went on to win the general election every time. I’m no fan of Trump but things are looking good for him.

Re: #2. Fellow readers, please remember that Mr. Turner hosts and writes this blog for FREE. His opinions and advice are of great benefit to us all. Please maintain some respect for him always. That’s fair.

#20 Self Directed on 07.28.16 at 6:42 pm

Seventeen days ago this blog delivered the final “get out” warning. The last of many. Too late now.

I think the first thing we will see in YVR is homes taken off the market, so they can relist them at a lower price point. Especially the homes that are trying to get future prices. That won’t work. Flipper down the street has been sitting on the market now almost 2 months trying to sell at 1.4M. I predict a price reduction there.

Lower priced homes will be the start, hoping to still attract multiple bids.

We will probably see prices level off from this, at least until consumer confidence and FOMO return.

I still don’t know about interest rates. Some smart folks in the US are predicting the FED is all talk and will do nothing.

http://www.cnbc.com/2016/07/27/when-it-comes-to-rate-hikes-the-fed-has-no-stick-peter-schiff.html

#21 White Crock BC on 07.28.16 at 6:42 pm

If you were the PM Garth, what would you do?

I’m doing it. — Garth

——————————————–

Telling people to “get out” is the same as telling people to look for a “greater fool”. Great for your readers (maybe), not so great for Canada.

Is that really a solution?

Should T2 be holding a press conference telling people to “get out”?

This blog is a daily course in financial literacy. Stop misrepresenting my efforts. — Garth

#22 crowdedelevatorfartz on 07.28.16 at 6:51 pm

This real estate correction is long overdue.
Now we’ll see how crazy it gets.

#23 Smartalox on 07.28.16 at 6:54 pm

The BC Liberals Real Estate Crash Tax is missing one important feature: payments should be deductible against one’s Income Tax (even limited to BC provincial income tax, if the Feds don’t get on board).

That would achieve the goal of taxing foreign investment in real estate, but compensate those foreigners who come here and actually earn income.

15% on a $600 000 condo ($90 000) could cover 10 years of provincial income tax assessments for someone making $100 000 a year in this province.

#24 Cory on 07.28.16 at 6:55 pm

Comments like number 2 are why your efforts, Garth, while excellent for the few who listen, fall on deaf ears a large portion of the time.

I don’t agree with everything that’s been written but there has been more written that has been helpful to us than not by far and the education is free. Can’t complain.

#25 Basil Fawlty on 07.28.16 at 6:58 pm

The 4.9 ℅ unemployment rate in the US is a joke. How anyone believes that figure is beyond me. They replace a full-time position with two part time jobs and then say the unemployment rate is down. One only has to look at the labor participation rate to realize how many are out of work.
Corporate profits are another joke, as sales continue to decline. Look at Caterpillar, 43 months in a row of falling sales. The big corporate profit scam is corps borrowing money cheap and then purchasing their own shares, which increases profit per share, but is just a gimmick.
People are not looking beyond the propaganda.
Interest rates going up? They have been telling us that since 2009, yet we have seen one increase in 7 years. Why? Duh, because the economy is too weak. That’s why they did not increase yesterday.

#26 WUL on 07.28.16 at 7:06 pm

Garth:

You offered the $40 handle on WTI and the struggles of refiners/retailers of petrol as two reasons for the prospects for Alberta dimming.

The people in North Battleford, Prince Albert and Melfort (Saskie towns) having lost the ability to drink and bathe in H2O and the ability to take the F150 to the carwash, will not be so inclined to lend support to pipelines out of Alberta.

So the lack of takeaway capacity of bitumen will continue to hamper the ability of cowboys to stay in the saddle.

#27 paulo on 07.28.16 at 7:09 pm

hey garth where is the “Dawg”

so we now have draconian stupidity and a massive tax grab in yvr and yes i agree with you this 15% tax in foreign investment looks like a 3rd world style cash grab
i think a few 2 legged dogs should be put in the pound over this

any idea as to what the denzies in yvr intend to do with the interim win fall they will reap?

my best guess is that many will be surprised and many a politico embarrassed
The devil is always in the details time to get the blood hounds out your faithful blog readers will be waiting

p.s. Thanks for your hard work and Common Sense Advice Cheers

#28 45north on 07.28.16 at 7:10 pm

The BC Chinese Dudes Crash Tax is likely this catalyst. Bad enough when it was arbitrarily introduced, it’s even worse today with confirmation is will apply to all legal transactions that have been negotiated, but may be months away from closing. The market interference is epic. The damage done to Vancouver, BC, the Canadian real estate sector and to our image as a stable, modern country is severe.

severe!

http://www.merriam-webster.com/dictionary/severe

Christy Clark thinks that Vancouver real estate only goes up. Thinks is not a strong enough word: she fundamentally believes in Vancouver real estate. Fundamentally. She doesn’t know that her only chance of re-election is if Vancouver real estate keeps on going up. When Poloz says the pace of price increases in Vancouver is unlikely to be sustained he means it’s going down!

http://www.theglobeandmail.com/report-on-business/canadas-big-banks-could-withstand-a-severe-housing-crash-moodys/article30531315/

The BC Crash Tax is going to go a long way towards eliminating foreign buyers. In Canada. They may be only 5% of the market but when they’re not there it’s gona hurt.

#29 Erick on 07.28.16 at 7:13 pm

Any predictions on a future correction in the condo market in Montreal :
– 5% -10% -15% -20% … ?

#30 Debt's Dark Embrace on 07.28.16 at 7:28 pm

Some countries have laws that prohibit foreign ownership of land because foreign ownership can cause bubbles like the one in Vancouver which prices local residents out of the market.The Philippines is one such country and the local population are quite happy with the status quo because if it were otherwise rich foreigners would own all the land and locals would own nothing.

#31 Love this Blog on 07.28.16 at 7:31 pm

Thanks to you Garth I have been able to keep my daughter out of the Saskatoon market . Cracks are showing heavily in the Saskatchewan economy . Mosaix Colosay ha shuttered their mine, 330 people laid off . I keep telling myself daughter to stay out and wait … Thank God she did .

There is a fire sale coming in less than a year . I think it is going to be worse than any of us imagined

Thanks for everything you do Garth.

#32 Damifino on 07.28.16 at 7:32 pm

#21 White Crock BC

Telling people to “get out” is the same as telling people to look for a “greater fool”.
———————-

“A rose by any other name would smell as sweet”

#33 Donald Watson on 07.28.16 at 7:32 pm

Alberta uses the market value based standard each July to determine residential property value – I suspect it is now the common method. Edmonton gets 56% of its revenue this year from this source. This years INCREASE on July 2015 assessment is 3.4% city and .7% school tax. There are various Alberta home price drop projections (Calgary Real Estate Board projects down 3.4% this year). 2017 residential tax rates in Alberta are going to be a financial shock to many home owners – or a shock in reduced services. The downside of the property market value based standard? And will the NDP will find a way to justify a provincial sales tax – UofC prof projects potential $4B annual revenue – and of course we should not forget the average $2B (over 5 years) annual new carbon tax. Challenging financial times ahead in Alberta – spend wisely!

#34 Gregor Samsa on 07.28.16 at 7:33 pm

Garth, didn’t you learn anything last year? You also said all year last year about how rate hikes were coming, then we got ONE, count it ONE, tiny rate hike at the last possible second in December, just so Yellen could save a bit of face.

This year is the exact same. The chances of rate hike prior to the U.S. election is exactly 0 / ZERO / nadda.

That leaves the possibility of one, and only one, tiny rate hike again in December of this year, and that will be it for another year. And I have serious doubts we even see that.

There are two narratives being peddled these days. Narrative A, espoused by the mainstream media, corporate elites, billionaires, wall street, and the Democratic party / Obama / Clinton is: “everything is awesome!!”

Narrative B, espoused by Donald Trump, and pretty much all alternative media and journalists on the internet is that “things are bad and getting worse.”

So the question is, which experience is the common man feeling these days? Is he partying it like a wall-street billionaire or are times tough? Answer that question and you’ve answered the rest.

#35 nonplused on 07.28.16 at 7:39 pm

#28 45north

“The BC Crash Tax is going to go a long way towards eliminating foreign buyers.”

And not just foreign investment in BC. If a Canadian government can target a particular sector in such a discriminatory manner, who says any foreign investment in Canada is safe? What’s to stop Nutley from imposing a foreign capital tax on the oil patch? What’s Husky going to think about that? This development is very disturbing.

The problem when it comes to taxes is that governments are very capricious and it’s never enough. They see the tax base as limitless and take every opportunity they can to impose some more taxes. They are also “monkey see, monkey do”, so BC imposes a carbon tax and pretty soon even Alberta wants one and not long after the federal government wants in on the action.

Also I think this action in BC could wind up in court because it is a pretty big assault on property rights. All taxes are an assault on property rights but are generally easier to accept when they are applied equally to everybody.

#36 45north on 07.28.16 at 7:42 pm

Ronaldo: the “Bank of Ma and Pa” will be heading for a stress test in the not too distant future.

yeah it will

Self Directed: We will probably see prices level off from this

you don’t understand: 90% drop in prices is quite possible: the fundamental house price is where the average man can afford an average house but in a crash prices swing below fundamentals. A lot of people are gona get hurt, probably better off in the futures market.

#37 Pale Ale on 07.28.16 at 7:52 pm

#19 Erick

Montreal would need to correct around 32% to return to the mean. I wouldn’t doubt those shoe box condos would fall even more as they become less desirable when competing against more spacious, better located dwellings whose prices will become attractive once the correction settles.

#38 waiting on the westcoast on 07.28.16 at 7:53 pm

Garth – while I often feel like a fool for missing out on one of the biggest trades ever, I remind myself that I won’t be caught swimming without my suit when the tide recedes. Thanks for all of your shrewd advice on this blog even through we were far too early on the call.

Blog dogs – sorry for the delay getting my June numbers out….

Australia came in at +19%

Overall US grew by +23%
– Westcoast US at +37%
– Central US at +28%
– NE US at + 15%
– SE US at +19%

Canada grew by 4%
– BC at +3%
– Praries at 0%
– Central and Eastern at +7%

As I mentioned last month, Canada is unraveling. What these overall numbers are hiding are some of the significant declines in AB and SK.

The US is exhibiting strong growth but watch the NE number as that was a leading indicator in the 2008 recession. The slower growth there may be signalling a slowdown in the US next year. And like last time, we were flying on the westcoast even while the NE was slowing down.

On an aside, Oregon just upped it’s minimum wage to $10 per hour. That’s up $2 per hour over 2 years (25% gain). We are losing employees to other opportunities and have provided higher base wages and an enriched bonus program to keep people.

Also, I had to fire a few guys for stealing revenue and claiming the customers cancelled… they are getting brave!

#39 iRent on 07.28.16 at 7:59 pm

Hi Garth,
The crash that is being forecast is due to the tax. Can there be further damage when interest rates rise next year?

#40 Frank on 07.28.16 at 8:01 pm

it’s even worse today with confirmation is will apply to all legal transactions that have been negotiated, but may be months away from closing.

You feel bad for people who made offers with no subjects? Boo hoo.

That was beyond stupid. A condition on a tax that was unknown? — Garth

#41 liqudincalgary on 07.28.16 at 8:02 pm

WUL on 07.28.16 at 7:06 pm
Garth:

You offered the $40 handle on WTI and the struggles of refiners/retailers of petrol as two reasons for the prospects for Alberta dimming.

The people in North Battleford, Prince Albert and Melfort (Saskie towns) having lost the ability to drink and bathe in H2O and the ability to take the F150 to the carwash, will not be so inclined to lend support to pipelines out of Alberta.

So the lack of takeaway capacity of bitumen will continue to hamper the ability of cowboys to stay in the saddle

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

saskatchewan is actually more energy rich than alberta. an alberta pipeline out helps them, as they would piggyback their production in those same pipelines

#42 Andrew Woburn on 07.28.16 at 8:03 pm

#123 WUL on 07.27.16 at 11:35 pm
According to Statistics Canada, only 2% of Albertans that own pickup trucks, actually need pickup trucks.
======================

They needed a survey to find this out? The surveyors must all live in Ottawa.

As usual they’re asking the wrong questions. The most important thing is you can’t hang truck nutz off a Kia.

Does anyone really “need” a Harley? Why even ask?

#43 Victoria the original on 07.28.16 at 8:10 pm

I wonder how Victoria rates as inflated market. I didn’t see any mention in the CMHC article. I would assume highly over priced.

Any thoughts please?

#44 Happily renting in Van on 07.28.16 at 8:15 pm

OPEC will not slow down the pumps because even they recognize climate change is real and they don’t want to be sitting on a bunch of oil no one wants as the world shifts to alternative energy sources.
So cheap oil is here to stay!
Thank you Garth for bettering my financial literacy!
Really man, you rock.
Your dog too!

#45 ROCK BEATS PAPER on 07.28.16 at 8:17 pm

As YVR goes down, the GTA will rise further allowing many to declare how it is different in the GTA than anywhere else.

“…those CMHC guys see the numbers. All of them. They know the quality of the loans, the volume and the locations.”

Thank God Canadians are smarter than Americans. The CMHC is not Fannie May or Freddie Mac!

#46 Andrew Woburn on 07.28.16 at 8:19 pm

We’re from the International Monetary Fund and we’re here to help you.

“The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory.

This is the lacerating verdict of the IMF’s top watchdog on the Fund’s tangled political role in the eurozone debt crisis, the most damaging episode in the history of the Bretton Woods institutions.”

http://www.telegraph.co.uk/business/2016/07/28/imf-admits-disastrous-love-affair-with-euro-apologises-for-the-i/

#47 prairiegopher on 07.28.16 at 8:30 pm

Regina is way over priced. They could likely shave off 30-40%.

#48 Chopper Dude on 07.28.16 at 8:39 pm

I’m out…. and looks like at the top!!! Thank you Greater Fool!

SWEET!!!!

#49 MD on 07.28.16 at 8:43 pm

250000 baby boomers retiring every month in USA that’s the main reason for their employment growth and Canada will soon follow the same employment growth pattern. I work in specialized trade and the average age group at my work place is 58 years so we are expecting lots of retires in the coming decade.

#50 Ronaldo on 07.28.16 at 8:53 pm

#28 – 45 North

”The BC Crash Tax is going to go a long way towards eliminating foreign buyers. In Canada. They may be only 5% of the market but when they’re not there it’s gona hurt.”

Agree, and will take care of the flippers as well at least in Vancouver. By fall, we will have a good read on this move. I suspect things will go dead and we will see an instant 10% drop in prices followed by many more as flippers and speckers try to unload their inventory.

#51 BIG EARS on 07.28.16 at 9:04 pm

Garth, for years you have been calling for housing market crash and nothing has happened. In that time i have been able to sneek into the real estate market, buy and hold for 3 years and make a wonderful profit. Your predictions are too macroeconomic, the storm is comming, but there is still a chance to take a risk and make some $$$$$$

#52 Ferry Man on 07.28.16 at 9:12 pm

I loved the Chinese investment. We sold out of North Vancouver six weeks ago and bought waterfront for 1/3 the price south of Nanaimo. Taxes are half price. There’s no 15% tax sales tax. Weekends are like going to Mexico with the family on our own beach. We plan to buy back into Vancouver in a few years. If not, we will just retire young.

#53 Trojan House on 07.28.16 at 9:13 pm

I agree with Basil. The 4.9% unemployment rate is just propaganda, completely manipulated by the US gov’t to look good. Easily enough to do if you are the ones gathering the stats. Just like the inflation rate where they change the basket of goods when one item gets to expensive – steak is too expensive? No problem, replace it with ground beef!

http://www.shadowstats.com/article/c810x.pdf

#54 Joe2.0 on 07.28.16 at 9:14 pm

Seems to me you have been recommending people sell for the past 5 yrs?

I have recommended balance. — Garth

#55 Dispatches from Under the Bridge on 07.28.16 at 9:15 pm

Hi Garth,

I have read most of your posts. However I have poor comprehension skills and don’t get the message. Perhaps you could just write stuff that fits with my preconceived notions, which I base on absolutely nothing by the way, then I could agree and the whole world would be happy and peaceful…….except all those people that don’t look just like me. There is obviously something wrong with all of them.

Thanks for your co-operative understanding and compliance. Us really, really smart people like you and I and Donald J. Trump have to stick together, believe me. I know more about this than anyone, believe me. I don’t think you’ve been treating me fairly with all of this writing stuff that doesn’t re-enforce my beliefs. Now excuse me while I rush back and read my comment so I can reaffirm how brilliant I am. I’m very, very smart you know, I went to Warthogs.

That about sums up a number of the comments.

#56 David W on 07.28.16 at 9:22 pm

Ottawa seems overdue for a 10-20% haircut in home prices. I just read a stat that condo prices have gone down about 11% over the last 3 or so years. Single Home prices have gone up about 4% over the same time so relatively flat. Still, I don’t see how a young adult can afford to buy unto the market without mortgaging their life away and spend a significant percentage of net pay Lon housing watch month.

#57 wait_and_see on 07.28.16 at 9:31 pm

The BC government was asleep at the wheel for the past decade with unchecked and untaxed foreign capital driving the residential real estate market to dizzying heights far beyond the reach of average Vancouverites. It is not surprising that they have now been forced politically too take a hard turn away from the cliff. Although we have a paid for home, we welcome a strong downards correction to the market that will allow the next generation to hopefully be able to stay in the city. Was at lunch today with two CEOs of high tech startups (one from gaming industry and the other from clean energy) who very much WELCOME a market correction, as they have been unable to offer high enough salaries to attract highly skilled to either come to Vancouver or stay here (due to abysmal housing situation). The upside is that perhaps a market correction will be highly beneficial to growing the local economy and creating opportunities. The 15% tax, and (hopefully) the upcoming correction, may have really positive consequences. Bring it on!

How can rational people possibly believe a sliver of 5-10% of buyers can “drive the residential market to dizzying heights”? A market is a market. The 90% set prices. — Garth

#58 Smoking Man on 07.28.16 at 9:37 pm

Trending on Twitter North Korea just declared war on USA.

Bahahaha what’s this the hundred time.

Hey Thanks for the kind words yesterday re my dad everyone. Got some words on my blog now. Not my best work.

#59 TurnerNation on 07.28.16 at 9:47 pm

Counting the days untill Firecracker and Eunuch buy a home. “Cause you know like Gartho is a bit grizzled and our parents support us and we’re in it for the long haul fk yeah! It’s all about balance right?”.

#60 WUL on 07.28.16 at 9:53 pm

#42 Andrew Woburn on 07.28.16 at 8:03 pm

My quoted stat on the need for pickup trucks in AB was bullshit. I get my daily chuckle each morning from the Twitter site Stats_Can (or something like that) which is a spoof on the Real McCoy StatsCan.

For example:

“85% of all Canadian romantic relationships start with a lost mitten.”

Check it out.

#61 WalMark of Sadkatoon on 07.28.16 at 9:53 pm

Got some words on my blog now. Not my best work.

No caveats. Own it

#62 wait_and_see on 07.28.16 at 9:55 pm

How can rational people possibly believe a sliver of 5-10% of buyers can “drive the residential market to dizzying heights”? A market is a market. The 90% set prices.

——-

First of all, the influence of this foreign capital has almost surely been more than 10%, as this is an underestimate by the power brokers in government who refused to even collect data for the last 10 years (and does not count all the proxy people buying in slick creative ways). The real estate board has long-held vested interests in keeping the ball rolling.

The influence of whatever percentage it was on the top on people with local salaries was to drive the locals to push way beyond a reasonable level of risk to buy at least something (condo, townhome, etc…), which then catapults the market even higher. This is how a “smallish” group can trigger a much wider problem. In the language of game theory, they are called “defectors”, and their strong influence on all sorts of network models have been well studied scientifically.

The lunch today was a brainstorming forum with CEOs, university people, and industry liaisons to attract and retain recent grads to stay in Vancouver. The housing crisis here was one of the top factors mentioned.

#63 TurnerNation on 07.28.16 at 9:58 pm

Smoking man I remember I was taking shelter outside downtown last night.
How about Stevie Ray Vaughan’s “The sky is crying”.
Crank it to 11.

#64 Cici on 07.28.16 at 9:59 pm

#27 paulo

IF you are dumb enough to believe Crusty Clark and her coherts (which most people in Vancouver and on the Island undoubtedly are), they are promising to use the Crash Tax money grab to build “affordable housing projects” for “British Columbians First”…as promises her new election-campaign slogan…

https://www.thestar.com/business/2016/07/28/bcs-foreign-buyer-tax-set-to-help-fund-metro-vancouver-housing-projects.html

So if my predictions are correct, she’ll play the xenophobia card to winover the locals with promises of affordable housing (that will probably never come to fruition)…also covering her own a$$ for any impending crash by establishing a false causal link to “foreign” activity/involvement.

It’s so easy to get elected in Canaduh!

#65 Fed-up on 07.28.16 at 10:00 pm

#15 Allgood on 07.28.16 at 6:32 pm

Sold house in Surrey over asking price – check
Rented house in awesome hood $2500 – check
Wife is happy – check
Family and friends think we are nuts for not buying another house right away – check
Listened to Garth – check and check
Time for a holiday!
———————————————————————————-

Ouuuuuuch you have a wife.

:p

#66 Victor V on 07.28.16 at 10:01 pm

A top-selling real estate agent in Vancouver who sent out an email advertising how to circumvent the new foreign purchasers’ property transfer tax is being investigated by the Real Estate Council of B.C.

http://business.financialpost.com/personal-finance/mortgages-real-estate/top-vancouver-realtor-rapped-for-trying-to-avoid-new-15-property-transfer-tax

He was doing his job. Totally legal. BC is turning into Animal Farm. — Garth

#67 Victor V on 07.28.16 at 10:11 pm

Barry Appleton: B.C. just violated NAFTA with its foreign property tax — and we could all pay for it

http://business.financialpost.com/fp-comment/barry-appleton-b-c-just-violated-nafta-with-its-foreign-property-tax-and-we-could-all-pay-for-it

#68 crowdedelevatorfartz on 07.28.16 at 10:20 pm

“BC is turning into Animal Farm. — Garth”
********************************************

No.
That happens next May when the NDP get into power….and the Ministry of Truth is established…..or was that 1984?

#69 God Emperor of Mankind Trump on 07.28.16 at 10:21 pm

The future Sovereign of Terra, Trump was a gift to humanity, to protect us from the dangers of chaos and the cosmos.

The Emperor Protects.

#70 Tudval on 07.28.16 at 10:21 pm

I agree with at least one thing: that the new head tax is going to be a blow to Canada’s image.

But talking about ‘full-employment” in the US is a big stretch. There are tens of millions of people who’d want to work, but they’ve been out of work for so long that it’s going to be difficult to be brought back. But that has to happen before we can talk about a healthy economy there.

Furthermore, one rate increase and even more so if there are two will push USD higher and cause any number of problems in the global economy that will give the Fed something to think about. I still see QE coming back before too long.

The big thing this time will be the biggest of all: China. Depending on who wins the WH, it may be bad or worse. If USD goes up, the yuan will either be depreciated which will cause friction with US, or it will not be, which will created a number of other problems.

Either way, capital outflows will continue and Canada will remain a destination if other jurisdictions are going to learn the lesson that Vancouver is going to offer.

#71 Poloz on 07.28.16 at 10:30 pm

He was doing his job. Totally legal. BC is turning into Animal Farm. — Garth

Wow. Twisted logic. Pathetic comment.

#72 Fed-up on 07.28.16 at 10:32 pm

How can rational people possibly believe a sliver of 5-10% of buyers can “drive the residential market to dizzying heights”? A market is a market. The 90% set prices. — Garth

——————————————————————————–

Didn’t 8% cause a total meltdown down south 8 years ago?

It takes a small push to topple a weakening market. Significant forces are required to create a dizzying one. — Garth

#73 TurnerNation on 07.28.16 at 10:41 pm

How life can change in a moment eh. I remember it now, last night I’d left the Ritz and due to rain which just then began I hopped into the underground PATH. Glanced at my phone to time the walk to my office building for pit stop. My phone said 7:16.

#74 cantthinkofaname on 07.28.16 at 10:45 pm

Now that is interesting…. there actually is somebody who believes those “statistics” coming out of that US of A…. what’s next, there are real “elections” in that same US of A? Read my typing….there will be no interest rate increases in that US of A. Matter of fact is…. QE, bigger and better than ever will be baaaaack.
Stock market and housing markets will go up forever…. buy gold and/or derivatives, if you know what you are doing.

#75 Doug in London on 07.28.16 at 10:46 pm

A lot of stocks and ETFs have rallied recently and thus aren’t on sale anymore. One of the few assets that are still on sale are those preferred share ETFs. Time to load up on more CPD and XPF!

Basil Fawlty, post #25:
They replace a full-time position with two part time jobs.
————————————————————
What’s wrong with that? As technology and outsourcing overseas got rid of old jobs faster than new ones were created, there should have been a move to a shorter work week at least 30 years ago. I’m pretty much retired now but in my working years I would LOVE to have worked a 20 to 30 hour week.

#76 Mark on 07.28.16 at 10:58 pm

“First of all, the influence of this foreign capital has almost surely been more than 10%”

If the bubble was foreign-capital driven, why is bank credit and leverage through the roof? Why have prices stagnated over the past 3 years on identical properties in the wake of the Flaherty 2013 CMHC crackdown? Why is the multiple between prices and rent at an absolutely insane level?

None of the evidence points to ‘foreign’ capital being involved. Which is why, at best, surveys can only find foreign participation at 5% or less, with most of that being US citizens.

But talking about ‘full-employment” in the US is a big stretch. There are tens of millions of people who’d want to work, but they’ve been out of work for so long that it’s going to be difficult to be brought back.

Well all the employers need to do is pick up the phone and start hiring. There’s no skills shortage amongst the unemployed. There’s simply not enough reasonable qualify jobs relative to the supply of labour out there. I think the people who run around claiming that the long-term unemployed can’t be re-employed really are exaggerating the problems (usually they are trying to curry favour for either publicly subsidized job retraining programs focusing on proprietary skills, or they’re trying to justify their businesses’ failures in the recruiting/hiring process) . A beautiful thing about computers and the Internet being ubiquitously and universally available is that people are less apt to lose their skills than they were in times past.

#77 fleabitten monkey on 07.28.16 at 11:04 pm

#43 Vic the original – work it out mate, Victoria is the third most unaffordable market in the Country after Van and TO. I’m sure it doesn’t get mentioned because it’s so much smaller than TO and Van and in the shadow of Van, given its proximity. Lump it in with the lower mainland.

#78 Self Directed on 07.28.16 at 11:08 pm

#32 Damifino on 07.28.16 at 7:32 pm

#21 White Crock BC

Telling people to “get out” is the same as telling people to look for a “greater fool”.
———————-

“A rose by any other name would smell as sweet”

——————————–
Pretty sure Garth means “Get out… and stay out”.

#79 conan on 07.28.16 at 11:08 pm

I will put on the predicto hat for a minute and call lower rates in England. North America will stay flat with warnings of more lowering.

Probably time to take some profits on the market side and shift to bonds. Wait for the next correction. So a 10- 20 % shift in your current portfolio is prudent.

ISIS wants Trump to win the US election. So expect a more aggressive terror agenda from them.

#80 Ronaldo on 07.28.16 at 11:13 pm

#52 Ferry Man on 07.28.16 at 9:12 pm
We sold out of North Vancouver six weeks ago and bought waterfront for 1/3 the price south of Nanaimo.
————————————————–
You are one of the smart ones. Good for you.

#81 Underhoused on 07.28.16 at 11:13 pm

The American guy working and living in Vancouver for two years and waiting for PR in this CBC article has three options: 1) close ASAP; 2) walk away from his deal, made before the tax passed, and forfeit his $30K deposit; or 3) pay an extra $90K.

http://www.cbc.ca/news/canada/british-columbia/working-immigrants-foreign-tax-1.3698362

The fine print of the tax information sheet also notes that the tax applies to transfers between related individuals and transfers to surviving tenants:

http://www2.gov.bc.ca/assets/gov/taxes/property-taxes/property-transfer-tax/forms-publications/is-006-additional-property-transfer-tax-foreign-entities-vancouver.pdf

Will people who take financial hits because of this tax that they had no means to foresee have recourse in the courts?

#82 Chaddywack on 07.28.16 at 11:17 pm

@67 Victor V

I don’t know a lot about NAFTA, but I’m not certain that residential real estate is covered by it. It seems NAFTA provisions apply against commercial dealings, trade, etc.

If this were the case, Mexico has had outright foreign buyer restrictions (not just taxes) against foreigners in certain areas of the country for years and these seem to still be held up.

#83 Dunn Like Dinner on 07.28.16 at 11:21 pm

Hi Garth,
I’ve been coming ti this blog for quite a while now but never felt to post. Out here on the coast there is no end in site for insane RE. I thought this bubble would have popped years ago. The politicos step in with a 15% dud that will only fuel the fire in other locations. Buying Canadian’s homes and renting to them is reaping much larger returns than the banks or stock market offer. This market looks like it won’t end…. literally ever. Better that I take a monster mortgage and die brutally than be milked for rents in the 1000’s. I’m on your side but we are dealing with a new era of global inflation, fund-a-mental economics died years ago with the free market. Say hello to helicopter money and the end of the middle class Canadian lifestyle. Hold on for the ride because we are done.. like.. dinner.

#84 Tudval on 07.28.16 at 11:23 pm

Another sharp correction is coming to the stock market. Happens every election year and this one will be even more problematic. I don’t see a third rate hike with all the troubles in Japan, China, Europe, South America.. can you count how many countries are in big big trouble? But if there should be a third hike next year, you should look at how markets perform in the following months. Tank every time. No rate hike for a year after, though depending on how deep it is we can see cuts again and QE. Gold heading higher also tells you preference for hard assets is not shifting. Real Estate will continue to be a good investment in many locations, and in Canada you know which are the ones (cross Vancouver off the list).

Equity markets do not tank during Fed tightening cycles. You made that up. — Garth

#85 Smoking Man on 07.28.16 at 11:23 pm

Funny that pic
if you Translate dad’s name to English it reads Michell. The UCC I’m thinking.

If your board and want to understand plasma fliers and gravity. Start here.

https://youtu.be/p2QmEcDydzQ

#86 Nobody on 07.28.16 at 11:24 pm

At least it is fighting the scourge of job growth. We just hired an American sales manager to lead our expansion into the US = lots of Canadian jobs.

He is now rushing to finish paperwork on the condo out in Burnaby which is all he can afford on our pitiful Vancouver wages. He can’t afford an extra 15% and we don’t have the lawyers to hide the sale in some complex trust.

#87 Let the crying begin on 07.28.16 at 11:24 pm

https://www.change.org/p/the-bc-provincial-government-the-bc-government-needs-to-exempt-all-current-transactions-from-the-15-purchase-tax?recruiter=579270659&utm_source=share_petition&utm_medium=facebook&utm_campaign=autopublish&utm_term=mob-xs-share_petition-reason_msg

#88 Kenchie on 07.28.16 at 11:28 pm

“How can rational people possibly believe a sliver of 5-10% of buyers can “drive the residential market to dizzying heights”? A market is a market. The 90% set prices. — Garth”

Actually, it’s the “Marginal Buyer” who sets the prices. If you and I are the exact same in all respects, except my parents give me $50k and you get no help from your parents, when we both bid, I will win and the price will be set higher for no other reason. In another example, if we are the same in all respects, except that I have a better credit score that allows me to qualify for 2.59% mortgage and you qualify at 2.84%, I will be able to borrow about 2% more than you. As a result, I will win and the prices will be set higher. Repeat this thousands of times per month for years on end, and you have Vancouver and Toronto. This is particularly acute in an environment of extremely inelastic supply, such as real estate.

Real estate is not a proper, efficient market in which overvaluations get quickly brought back down by sharp short-sellers that can spot the inefficiencies. Furthermore, short-selling creates extra supply for the excessive amount of buyers to transact at, which depresses prices more than the scenario in which no short-sellers intervene.

If the government or the smartest guys in the private sector could figure out a proper, legal way to bet against the actually housing market rather than proxies, such as publicly traded alt lenders and banks, then the world would be a more stable place. Perhaps encouraging Sale and Leasebacks? Or regular leaseholds to young couples for 5 to 15 years that gets registered on title? Get on it Garth!

#89 Freeman on 07.28.16 at 11:30 pm

Most families have based their entire future plans with the premise that their housing will rise in value 10%+ per year for eternity.

Garth is 100% correct: What a shock most people are in for !

#90 Victor V on 07.28.16 at 11:41 pm

Home Capital Drops Most Since Facing Mortgage-Fraud Pain in 2015

http://www.bloomberg.com/news/articles/2016-07-28/home-capital-drops-most-since-facing-mortgage-fraud-pain-in-2015

#91 Joseph R. on 07.29.16 at 12:00 am

“He was doing his job. Totally legal. BC is turning into Animal Farm. — Garth”

I would reserve that comment to describe the modern GOP: “We are all Americans but some of us are more American than others.”

#92 Robert on 07.29.16 at 12:16 am

Hmm, just another property tax loophole to seek out, just like these enterprising expat entrepreneurs who see that tax evasion is just tax avoidance with a minimal risk of minor penalties. http://www.theglobeandmail.com/real-estate/the-market/foreign-investors-avoid-taxes-by-buying-real-estate-in-canada/article26683767/

Why play the game by the rules when our tax laws are so easily circumvented and laxly enforced? Welcome to the big leagues CRA; must be too busy taking down restaurant staff for undeclared tips.

#93 Bram on 07.29.16 at 12:19 am

Seventeen days ago this blog delivered the final “get out” warning. The last of many. Too late now.

Too early to call, imo.
Let’s at least see two consecutive months with teranet HPI down, month over month.

And if you are that desperate for a buyer: a price 10% below last month’s market value will always find you a willing party: lower demand doesn’t mean zero demand.

#94 Bram on 07.29.16 at 12:35 am

#57
How can rational people possibly believe a sliver of 5-10% of buyers can “drive the residential market to dizzying heights”? A market is a market. The 90% set prices. — Garth

I wondered about that…
And honestly I don’t know how it works, because:

In an auction between 100 buyers, by definition, the price is set by the 2%.
Comprised of the winner, and runner up.

Bram (likes to think he is rational.)

#95 20% not 10% on 07.29.16 at 12:38 am

Ok, so since Poloz put last January market in yvr seen double transactions.
In Burnaby and Richmond foreigners are 17-19% in a normal market they will be double 34-38% there you have the implications…
15% it’s a jerk reaction because will tank the market in months but is well overdue. Also rate hike in September is coming big time, and probably Trump
It is a time when everybody will get poorer

#96 DON on 07.29.16 at 12:42 am

He was doing his job. Totally legal. BC is turning into Animal Farm. — Garth
***************

We prefer “Banana Republic” Animal Farm is the name of our current government.

All eyes are on our premier and finance ministers to see when they list their properties, finance minister has 9 properties and 7 are mortgaged. As soon as the BC liberals came into power insiders started to buy properties in Van as they knew about the coming developers paradise.

As for the 10% vs 90%. It appears that Realtors used the arrival of the 10% to fear the 90% into becoming priced out for ever (ten years to some is forever). You are right, the 90 set the price but the 10 may be the catalyst.

As for the comments mocking our host…sad, sad, sad. Like Holy shit batman, insert brain before leaving house.

#97 WUL on 07.29.16 at 12:42 am

Hint to young Canadian lawyers wanting a career in litigation borne out of real estate deals gone bad.

Move to Vancouver.

Litigation galore. $650/hour.

Oasis.

#98 Goofy2shoes on 07.29.16 at 1:33 am

#33 Donald Watson

My understanding is Market Value assessment does not mean property tax is calculated on your market value. A change in market value of your home relative to other homes is what increases or decreases your property tax (outside of other things like an increase in tax rate levied). So a big drop in market value will not equate to an equal size drop in property tax.

#99 Ponzius Pilatus on 07.29.16 at 1:37 am

Suckers.
Smoking Idiot suckered you again.
When will you learn?

#100 macroman on 07.29.16 at 1:39 am

DELETED

This is not a gold blog. The asset is 100% speculative, volatile, unpredictable and completely unsuitable for almost all portfolios. — Garth

#101 Blobby on 07.29.16 at 1:59 am

So what happens to USA interest rates if the orange guy gets in?

#102 Mark on 07.29.16 at 2:55 am

“He is now rushing to finish paperwork on the condo out in Burnaby which is all he can afford on our pitiful Vancouver wages. He can’t afford an extra 15% and we don’t have the lawyers to hide the sale in some complex trust.”

What’s wrong with this individual renting? I’d personally have trouble hiring an executive in Vancouver who wasn’t able to work through, for himself, the logic of renting vs. owning, and the financial considerations — and coming to the conclusion that Garth has extolled. The gap between valuation of RE and that of other assets is so wide that you can drive freight train through it.

Seriously. Would you want someone working for you, in any sort of business critical capacity, who didn’t have the smarts to figure out the obvious?

On one final note, if he can’t afford the extra 15%, then can you imagine how much he’ll be complaining when prices go down 50-70%? What might be the impact on his performance in your business when that happens? When he realizes he’s been ‘snookered’ by the Vancouver “economy” (or what’s left of it)?

“If the government or the smartest guys in the private sector could figure out a proper, legal way to bet against the actually housing market rather than proxies, such as publicly traded alt lenders and banks,”

Canadian banks are in the business of betting against the housing market all the time. As investors, they have the choice whether to invest in mortgages, or invest in actual housing itself (or a plethora of other asset classes). They invest in the mortgages, effectively selling a house to the borrower in exchange for a promise of future repayment, at interest.

Now, if houses were undervalued relative to the returns on mortgage paper, then rationally investors should be acquiring houses.

So effectively the big-5 are “short” the housing market, and, if the 1990s repeats itself, will help themselves to outsized gains as housing prices fall. Remember that 1990-2000, the average Canadian bank’s stock price more than tripled.

So a long position in the big-5, is effectively a short position on the housing market if you have a long enough time horizon. Of course, I don’t give investment advice, and there may be other countercyclical sectors which will perform better (as the tech sector did in the 1990s when it played that role). But the banks are definitely not a proxy for house prices in Canada and have actually been very poor returners relative to housing as an asset class for the amounts of leverage typically employed.

#103 Mark M. on 07.29.16 at 3:13 am

“Interest rates will rise later this year in the US, at least once. Twice is possible, but that depends on what the polls are looking like for the Presidential election in November. Next year is another whole story, when everybody should expect several increases.” – Garth

None of this will happen. Rate cuts and QE are next. Garth continues to mistake a bubble for a recovery, and when the next recession happens, it will be far worse than 2008.

#104 Gerry Handle on 07.29.16 at 4:38 am

DELETED

This is not a gold blog. The asset is 100% speculative, volatile, unpredictable and completely unsuitable for almost all portfolios. — Garth

#105 Zen Headspace on 07.29.16 at 6:43 am

Re: #36 45 North

“A lot of people are gonna get hurt, probably better off in the futures market.”
——————————————————————–
You are correct:

https://www.youtube.com/watch?v=VopC0g5UViM

#106 Zen Headspace on 07.29.16 at 7:12 am

Re: #56 David W

“Still, I don’t see how a young adult can afford to buy unto the market without mortgaging their life away…”
——————————————————————-
They can’t. They are doomed.

http://www.mrmoneymustache.com/2015/07/27/rent-vs-buy/

#107 Matt on 07.29.16 at 7:49 am

Garth, if US economy is in such great shape as you claim why is the Fed terrified of hiking rates by quarter percent? 0.25℅!!!!!??????

US stock market is in a bubble, profits are fake, bonds yields at all time low, owning stocks &bonds here at this point of bull market terrifes me. Everything is a bubble, a byproduct of Central banks madness. Awful feeling to watch your money power evaporate. What to do? I see no end to it, rather than complete destruction of money. Japan is getting ready to print helicopter money, Europe is doing the same, it’s coming here soon. When crash happens it’s still better to own tangible assets

#108 Sheane Wallace on 07.29.16 at 8:01 am

Absolutely fantastic news!

the new BC foreign buyers tax applies to all deals negotiated but with closure down the road!

Pass the Vaseline!

#109 robert james on 07.29.16 at 8:04 am

http://globalnews.ca/video/2855002/quebec-immigrant-investor-program-impacts-b-c-real-estate

#110 Bottoms_Up on 07.29.16 at 8:10 am

#94 Bram on 07.29.16 at 12:35 am
——————————–
I think a definition of the context of the argument is needed. I, like you, believe a 10% foreign influence does affect prices. But I think another way to look at Garth’s argument is that if you removed that 10% influence, things wouldn’t look all that different (perhaps a bit cheaper, but still bubble land, and unaffordable to the masses).

#111 Ace Goodheart on 07.29.16 at 8:44 am

Just for fun went on Realtor.ca this morning and tried to find a freehold house (any style) in Toronto for $400,000 or less. This is what came up:

https://www.realtor.ca/Residential/Map.aspx#CultureId=1&ApplicationId=1&RecordsPerPage=9&MaximumResults=9&PropertySearchTypeId=1&PriceMax=400000&TransactionTypeId=2&StoreyRange=0-0&OwnershipTypeGroupId=1&BedRange=0-0&BathRange=0-0&LongitudeMin=-79.64435577392582&LongitudeMax=-79.12731170654301&LatitudeMin=43.583872634638126&LatitudeMax=43.75572101568015&SortOrder=A&SortBy=1&viewState=m&Longitude=-79.3858337402344&Latitude=43.6698583295497&ZoomLevel=10&CurrentPage=1&PropertyTypeGroupID=1

Basically nothing. Three years ago this would have been a full search with lots of houses.

#112 WallOfWorry on 07.29.16 at 8:50 am

hahahaha…what a shocker…US GDP Q2 numbers are out. Care to revise your prognostication for higher interest rates? The US has a $20 Trillion dollar debt and cannot sustain debt service payments if rates go up unless we return to more normal levels of growth. This isn’t rocket science people. All those doomsayers who are so excited to see our little asset bubble called real estate to have a major correction will be waiting quite a bit longer I am afraid. The currency wars are just starting to crank up….we are going to see higher oil prices, higher gold prices before we see higher interest rates. Just watch…..

#113 crowdedelevatorfartz on 07.29.16 at 9:02 am

@#74 cantthinkofaname

I believe “Klingons in Uranus” is still available…….

#114 common sense on 07.29.16 at 9:02 am

#85 Smoking Man and all blog dawgs…

I just read your beautiful eulogy for your father that you posted on your blog. What I find so familiar is in any eulogy or remembrance of one who passed is the complete absence ALWAYS of one’s money or net worth.

Instead, people always recall the person’s CHARACTER.

Was he or she a good person? A kind person? A helpful person?

I enjoy this blog and having money as much as the next person but always remember when you die, your net worth, how much you made, etc. is never mentioned. Yes prepare to assist your loved ones but we are taking nothing out of here when we leave.

Have a Great day everyone!

#115 common sense on 07.29.16 at 9:06 am

Dearest Gold Bugs Deleted…

Remember this is Garth’s blog always and he does control the content, based on HIS experience and financial beliefs.

He doesn’t have to be here and like all of us is sometimes not right based on events out of all of our control – USA interest hikes.

Take his advice for what it’s worth but in the end it’s YOUR MONEY AND YOUR CHOICES on what you do with it.

Why waste time blaming anyone? Hey, we are all are HUMAN. No one is perfect.

#116 Tudval on 07.29.16 at 9:25 am

Violates NAFTA? No problem, they’ll change it so it will only apply to the Chinese, which is what the target was in the first place. Or they’ll apply it to eastern Asians so nobody dare call it a head tax!

#117 B on 07.29.16 at 9:39 am

There are a lot of people who are pissed that they can’t afford a home, and will welcome this tax no matter what the collateral damage. Then there are people with homes who will feel that the government is responsible for taking their equity away via the tax, despite the fact that government supported their equity gains up to this point in many ways. Add in some underwater people who feel the tax is meant to placate lazy poor people who just didn’t work hard enough to get a house in the first place, and you have a recipe for some serious social tension.

#118 Tom Fawcett on 07.29.16 at 9:41 am

Yesterday I sold my home in GA for $430,000 CDN. It is 4500 sq feet with an attached 1100 sq ft attached inlaw house, parking for 5 cars, a boat and covered parking garage for a large motor home and boat, pool, 5 acres, cook house, a long tree lined concrete driveway. It was stunning folks. Yesterday I checked and every house, condo and gopher hole listed on point2homes in Vancouver was more expensive. Vancouver is nice, but you should see the fall/winter/spring in the South. The summer is hot which sucks, but the rain ain’t great either. I can afford to live pretty much anywhere I want in Vancouver, but I wonder if the average “Quality of Life” in the south is vastly superior to that enjoyed by most folks in Vancouver. That’s really what this debate needs to be about. Vancouver does not need to be a huge city and this should be discouraged. In fact, Canada does not need to have a huge population either. It’s time to re-think our priorities.

#119 Entitled on 07.29.16 at 9:43 am

I read that Globe & Mail article posted in the first comment about Chinese media being up in arms about Vancouver’s new tax on real estate purchased by foreign nationals.

There is just one word that goes through my mind over and over again: ENTITLED!!!

Those people in China complaining about this tax are ENTITLED!!!

Why do they think they are ENTITLED to purchase real estate in Vancouver? Why do they feel ENTITLED to not have to pay this tax?

This real estate bubble has harmed my, my family, my friends, and my community in innumerable ways–I won’t bother delineating all the negative impacts this has had on the people around me–let’s just say there has been a lot of hardship due to high housing costs for people who have lived and worked here all their lives and for people whose ancestors built this country and fought for this country. In just about any online forum where I have tried to talk about this, I have been shut down by other commenters who say I am acting like I think I am ENTITLED, like I think I am ENTITLED to live in the community my family has lived in for generations. I have been told over and over again that I am not ENTITLED to live in Vancouver and that I should just move.

Well I would like to say those Chinese people in China complaining about this tax in that Globe and Mail article, those people are showing a great deal of ENTITLEMENT and I would like to call them out for ENTITLED!

By the way, I am ENTITLED to live in Vancouver because this is the only home my family has known for generations.

They say in the article the tax won’t work. Well then I guess it’s just not high enough, or we need to go further and ban foreign ownership altogether, or go even further and confiscate real estate in Vancouver that is owned by foreign nationals and turn it into social housing for the locals. Whatever it takes to take this country back for Canadians, those who are truly ENTITLED to live in Vancouver.

What a sad, angry person you are. BTW, foreigners did not create the bubble. — Garth

#120 darkselling on 07.29.16 at 9:58 am

Thoughts on this:
http://business.financialpost.com/fp-comment/barry-appleton-b-c-just-violated-nafta-with-its-foreign-property-tax-and-we-could-all-pay-for-it

That BC’s tax is a violation of NAFTA?

#121 jess on 07.29.16 at 10:22 am

#10 Old Man Too on 07.28.16 at 6:27 pm

“sewer service” ?
…” courtrooms have been glutted with millions of collection lawsuits, many of which are backed by thin documentation. And tales of abuses — like robo-signed affidavits filed in bulk, or aggressive collection efforts on erroneous debts — are rife.”
Debt Collectors’ Abuses Prompt Consumer Agency to Propose New Rules
By STACY COWLEY
http://dealbook.nytimes.com/2012/08/12/problems-riddle-moves-to-collect-credit-card-debt/
The Consumer Financial Protection Bureau proposals aim to strengthen federal efforts to clamp down on collectors

#122 BOOM! on 07.29.16 at 10:29 am

What I find fascinating are the knock-on effects to certain businesses and most pension funds of low to no interest rates.

Insurances, pensions, rely on the strength of bond incomes to price products, maintain profitability etc.

Funding pension funds, that rely on the return of both fixed incomes as well as some market investments, is starting to show they can start going broke one fund at a time.

While government has never been a big help in downplaying many pension managers overly rosy return expectations, lately those returns are showing ominous signs.

I get a chuckle, half of Canadians can only fret over the value of a pile of OSB board, and a bit of concrete.

Sure, we’ll be all right…. just ask any politician, or banker.

#123 FIRECracker on 07.29.16 at 10:41 am

#59 TurnerNation on 07.28.16 at 9:47 pm

“Counting the days untill Firecracker and Eunuch buy a home.”

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

HA! Keep counting, buddy…

Met another early retiree/Financially Independent person yesterday. His house in Raleigh, NC cost him only $108,000..the price of a parking space in Toronto. Price to Rent ratios there are less than 10, compared to over 20 here. To him we just look crazy. Anyone who buys a house in Vancouver or Toronto is getting screwed.

#124 Tooldtocare on 07.29.16 at 10:50 am

Not so fast,the BC Chinese Dudes Crash Tax may be illegal under NAFTA free trade agreement…………….

http://business.financialpost.com/fp-comment/barry-appleton-b-c-just-violated-nafta-with-its-foreign-property-tax-and-we-could-all-pay-for-it

#125 Alex on 07.29.16 at 10:51 am

major cities are dangerously inflated with problematic conditions – caused by overbuilding

I do agree that it’s a slippery way to put all eggs in one RE basket, but can you elaborate how overbuilding can cause price hike? It supposed to do the opposite.

Moreover, there is NO overbuilding in GTA – like in Burlington they build about 500 condos and 1000 SFH (and no semis or TH at all) in last 5 years…with 180k population…to rent a 3 bdr townhouse (no such apts here) is 2k, and very few available, house likely 2.5k. 2bdr apts will be 1500-1700.

#126 Mark M. on 07.29.16 at 10:52 am

That’s a very impressive GDP number out of the US, I think we’re getting the four rate hikes this year. What do you guys think?

US growth (annualized) +1.2%. Canada growth (annualized) -0.6%. I think we have more to worry about than Americans. — Garth

#127 Guy Fawkes on 07.29.16 at 10:55 am

#15 Allgood on 07.28.16 at 6:32 pm
Sold house in Surrey over asking price – check
Rented house in awesome hood $2500 – check
Wife is happy – check
Family and friends think we are nuts for not buying another house right away – check
Listened to Garth – check and check
Time for a holiday!
—————————————–
I sold 14 days ago in Niagara. Your checklist is mine exactly. What a feeling!

SM, My condolences.

#128 oldfaithful on 07.29.16 at 10:57 am

Garth, I love your blog. Can you please give us your perspective on real estate in other major cities like Toronto, Ottawa, Montreal in your blogs too? Everything is about Vancouver with a few side mentions about Toronto. Us non-Vancouverites would greatly appreciate it.

#129 Smoking Man on 07.29.16 at 10:57 am

#123 FIRECracker on 07.29.16 at 10:41 am
#59 TurnerNation on 07.28.16 at 9:47 pm

“Counting the days untill Firecracker and Eunuch buy a home.”

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

HA! Keep counting, buddy…

Met another early retiree/Financially Independent person yesterday. His house in Raleigh, NC cost him only $108,000..the price of a parking space in Toronto. Price to Rent ratios there are less than 10, compared to over 20 here. To him we just look crazy. Anyone who buys a house in Vancouver or Toronto is getting screwed.
…….

Don’t know about BC but not Toronto. Salary stats are not reflective of who the buyers are. Lots more poor folks than well to do which brings the average down giving you the scense people are put of there mind.

If you can’t prove Income you can’t get a mortgage.

#130 Eks dee sipal on 07.29.16 at 10:57 am

Theresa May is played by the same actor that played Lady Di. And she is Camilla’s sister. Thank you.

#131 tkid on 07.29.16 at 10:57 am

#117 B, hard times always bring out the worst in us. But they can also bring out the best in us.

Let’s hope for more of the latter and less of the former.

But this foreign person tax, this is the most cunning play I’ve seen out of the Federal Liberals yet. They needed the real estate market deflated, yet it had to be done in such a way that they couldn’t be blamed for it. So along comes BC, and in a remarkably clumsy manner, puts in a tax that just may negatively impact all of Canada.

And if the real estate market collapses, who’ll get blamed for it? The BC Premier. They won’t blame the bank of mom and dad, they won’t blame buyers in a state of frenzy, they won’t blame greedy sellers, they won’t blame the feds past or present, they’ll blame that “idiot broad” out in BC. And I would have blamed her too, if not for the education received from this blog.

#132 CJBob on 07.29.16 at 10:57 am

The agency says 60% of major cities are dangerously inflated with problematic conditions – caused by overbuilding, overvaluation, overheating or price acceleration. At the top of the list is Vancouver, next is Toronto…
____________________
So it might turn out there is overbuilding of condos in the GTA, but there certainly aren’t enough new single family homes being build.

I’m amused by ‘overvaluation, overheating or price acceleration’. This is three separate things? Prices are high, we get it, but demand > supply and with no rise of interest rates coming it will stay that way for now in Toronto.

Record traffic as the airport as the population increases and economy continues to do well:

https://www.thestar.com/news/gta/2016/07/28/as-air-traffic-booms-pearson-passengers-pile-up.html

People who say prices will ‘never’ fall here are of course nuts, but there’s no signs that it will be soon.

#133 Neil Armstrong on 07.29.16 at 10:59 am

DAILY DOSE OF DISRUPTION. Poor Alberta, indeed.

“The solar revolution is upon us, and yet many still don’t get it.”

http://cleantechnica.com/2016/04/15/why-energy-experts-are-still-shocked-by-the-rise-of-solar-the-fall-in-costs/

#134 Victor V on 07.29.16 at 11:01 am

Couple has gone all-in on B.C. real estate, but a secure retirement will mean getting out at the right time

http://business.financialpost.com/personal-finance/family-finance/couple-has-gone-all-in-on-b-c-real-estate-but-a-secure-retirement-will-mean-getting-out-at-the-right-time

#135 The Wet Coast on 07.29.16 at 11:03 am

I support the 15% tax. But the people caught before Aug 2nd need to made whole. In fact, I am confident they will be. Because doing the right thing is s big part of what defines Canada as a nation.

#136 Yuus bin Haad on 07.29.16 at 11:05 am

and everyone’s telling me Trump’s the connard.

#137 Londoner on 07.29.16 at 11:18 am

Or maybe oil struggles to maintain the gains made earlier this year. The BOC panics and cuts rates. US Fed decides political uncertainty and slowing global growth are the bigger concerns than rising inflation.

#138 maxx on 07.29.16 at 11:23 am

#45 ROCK BEATS PAPER on 07.28.16 at 8:17 pm

“Thank God Canadians are smarter than Americans. The CMHC is not Fannie May or Freddie Mac!”

Yeah…..we smarted ourselves back down to ~70 cents on the dollar.

Real smart. With more to come.

#139 salonist on 07.29.16 at 11:34 am

this is what mr turner did as a kid, rented one of these places
and you gotta know mr. turners neighbors, the smith’s next door knew a thing or two about making a dollar

http://www.mansionglobal.com/developments/newyork/18-carlton-house?mod=home_hero

#140 AB Boxster on 07.29.16 at 11:55 am

I understand that in the world of balanced portfolios that gold is not very fashionable.

Gold is not an investment, it is a hedge.

The sad fact is that through history, fiat currencies come and go. (Buy hey, what can we learn from history, right?)

The interesting fact, is that the current policies of
massive government spending, artificially low interest rates, huge government interventions in the global economy, etc, etc, etc, are a massive unknown experiment in economics.

Never heard of negative interest rates? – You have now.
Don’t know what helicopter money is? – Get ready for this.

In 2008, the world came within a whisker of having the entire financial system crash. Prior to that, all governments and economists would never have dreamed that 2008 could happen.
All was fine, economies were sound, system is great, blah, blah, blah. Greenspan had your back baby.

So here we are 8 years later.
No global growth.
Continued QE in most of the world.
Many countries essentially bankrupt. (But being propped up by central banks)
Huge, (never to be repaid) national debts by the world’s countries.
Huge individual debts.

And hey, this is not even doomer stuff.
The doomer’s don’t even have to make this up anymore.
They make up far worse stuff.

As I said, if you look at gold as an investment then Garth is 100% correct when he says owning the TSX index is enough exposure.

But read ‘The New Empire of Debt – (Will Bonner, Addison Wiggin, Agora)’
At the very least it is a fascinating historical overview of the history of currency and money and its relationship to economics and trade.

Then decide if you should own some gold. (physical gold) Not as an investment, but as a hedge.
(Oh, and perhaps some land. Real land, not a condo in the city)

Or, you can ignore it all and hope it works out.
(Like buying an home in Vancouver- Everyone is doing it and what can go wrong?)

Or maybe just continue to have faith that the ‘experts’ know what they are doing.

As I said, what can we learn from history?

#141 Noel on 07.29.16 at 11:56 am

#128 oldfaithful on 07.29.16 at 10:57 am
Garth, I love your blog. Can you please give us your perspective on real estate in other major cities like Toronto, Ottawa, Montreal in your blogs too? Everything is about Vancouver with a few side mentions about Toronto. Us non-Vancouverites would greatly appreciate it.
________________________

Garth’s predictions on real estate have been quite good for non-Toronto, non-Vancouver cities in Canada. Just read some of his old entries, its all in there.

#142 Self Directed on 07.29.16 at 11:56 am

#15 Allgood on 07.28.16 at 6:32 pm
Sold house in Surrey over asking price – check
Rented house in awesome hood $2500 – check
Wife is happy – check
Family and friends think we are nuts for not buying another house right away – check
Listened to Garth – check and check
Time for a holiday!
——————————————-
What suburb did you rent in? $2500 for whole house could be Langley…. maybe. But Whole House is super hard to come by these days. Of course $2500 is easy to spend on an apartment or townhouse.

#143 WallOfWorry on 07.29.16 at 11:59 am

The fact that the stock market is at all time highs while GDP growth is barely above 1% tells you what is going on in the financial markets: BOJ, Europe et all will continue to provide stimulus, lowering value of currency, and the US to remain competitive will follow suit. No interest rate hikes this year….the currency wars will continue unabated. This means that oil is going up, not down. We will not see sub $40 oil again.

#144 Sheane Wallace on 07.29.16 at 12:02 pm

Lie after lie after lie

https://ca.finance.yahoo.com/news/gdp-figures-expected-show-economic-080003509.html

On Friday, Statistics Canada’s latest reading for real gross domestic product showed a contraction for the month of 0.6 per cent, a number that revealed the extent of the economic fallout caused by the blazes that roared through the heart of oilsands country.
The dip in the economy was a little deeper than expected. Economists had predicted real GDP to recoil 0.4 per cent, according to Thomson Reuters.
The number, Canada’s worst monthly figure since real GDP fell 0.8 per cent in March 2009, supported the already-dismal growth prospects for the second quarter.

GDP is failing due to the simple fact that we are at peak credit. Period.

We have been increasing credit irresponsibly for 10+ years which now reaches degree of insanity and requires government intervention and guarantees as no lenders in their right mind would lend the ultra-subprime-mortgages that we enjoyed in the last 10 + years to poor people if they, the lenders were on the hook for the loans.

What follows is simple: either severe contraction in economy to the degree of prolonged severe depression or boom of ‘fiscal stimulus’ and destruction of the currency.

Probably both. Combined with diminishing incomes in depreciating currency.

We are fast and irreversibly becoming a place not to live in for the next 10-15, maybe 20 years.

And we can sense that we are approaching the cliff by that fact that the blame game is starting.

How predictable and Oh-So-Canadian!

#145 Ole Doberman on 07.29.16 at 12:03 pm

Garth with home ownership in the US at it’s lowest in 51 years how can the Fed even consider raising rates?:

http://www.news1130.com/2016/07/28/us-homeownership-rate-of-62-9-per-cent-matches-a-51-year-low/

It’s impossible.

Why is that a negative? — Garth

#146 Patricia Mills on 07.29.16 at 12:05 pm

Why can’t our stupid gov’t just forbid foreign ownership. Why make it a cash grab. It is going to make them seep elsewhere. They are looking for a safe place to park their money cause they cannot even breath the air in their own country. It’s too late . Just take the brakes off immigration. There is a lot of breeding going on. I wonder if the gov’t is monitoring these statistics. for every birth subtract one immigrant. The govt cannot legislate love for everyone who comes into our country We have all taken to whispering. this is dangerous.

Too much breeding? Hope you are refraining. — Garth

#147 WallOfWorry on 07.29.16 at 12:18 pm

Garth is quite right that gold is mostly an inappropriate investment vehicle for most investors. However…every investor should be stepping back and assessing the larger macro environment. We have over $10 Trillion in sovereign debt with negative rates….the overall low yield in the bond market is forcing investment into the equities market. Thus, you have a distortion of risk/reward at play right now. You have currency wars, with never ending stimulus. In that environment, gold is the only safe play as a hedge. If you look at a proper balanced portfolio within the context above, every investor should have 5 – 10% in gold. The TSX represents less than 1%.

Gross over-weighting in a speculative asset paying no interest or dividends. Stop pumping bullion on this blog. — Garth

#148 Nemesis on 07.29.16 at 12:30 pm

“The market interference is epic. The damage done to Vancouver, BC, the Canadian real estate sector and to our image as a stable, modern country is severe.” – HonGT

#”VoxPopuliVoxDei”…

[CBC] – 9 in 10 Vancouverites support foreign home-buyers’ tax, poll finds: Lower Mainlanders support the new tax, but doubt it will solve the problem

…”Vancouverites widely support the new 15 per cent tax on foreign home-buyers in B.C., according to a new poll, but many don’t believe it will be effective in making housing more affordable.

The Angus Reid poll found that 92 per cent of Greater Vancouver residents — about nine in 10 — support the new tax, designed to discourage foreign speculators from driving up housing prices in Metro Vancouver.

But 42 per cent believe the tax will be either not very or not at all effective in cooling the market, and 71 per cent believe it will be too easy for buyers to find loopholes in the law. Eighty-two per cent say the government should have done something sooner.”…

http://www.cbc.ca/news/canada/british-columbia/vancouverites-support-tax-poll-1.3700421

#149 Nemesis on 07.29.16 at 12:44 pm

#HonkyTonkRoustabouts,Or… #Modernity?Stability?…

[CBC] – Vancouver shelters overflow, mostly out-of-work Albertans: Increase in out-of-province shelter seekers reported; many out of work oil patch workers

…””It’s been striking in some cases, how busy we’ve been right through the summer months,” said spokesperson Jeremy Hunka.

“Last year in July we estimate we turned away about 50 individuals… this year that number has jumped to 150,” he said.

It’s a familiar story at the Salvation Army….

…Hunka said he’s noticed a significant rise in the number of people staying at the UGM that are not from B.C.

“We’ve been seeing a 50 per cent increase in number of people coming to us from out of province — mostly from Alberta. And that has a lot to do with the downturn in the economy,” said Hunka.

He notes many are oil patch or construction workers.”…

http://www.cbc.ca/news/canada/british-columbia/vancouver-shelters-busy-summer-1.3699066

#150 Old Man Too on 07.29.16 at 12:48 pm

#121 jess on 07.29.16 at 10:22 am

You Quote an American article from 4 years ago? Totally irrelevant.

#151 Mark M. on 07.29.16 at 12:49 pm

DELETED.

This is not a gold blog. — Garth

#152 Noel on 07.29.16 at 12:55 pm

#145 Ole Doberman on 07.29.16 at 12:03 pm
Garth with home ownership in the US at it’s lowest in 51 years how can the Fed even consider raising rates?:

http://www.news1130.com/2016/07/28/us-homeownership-rate-of-62-9-per-cent-matches-a-51-year-low/

It’s impossible.

Why is that a negative? — Garth
_____________________

Homeownership has a high correlation with personal wealth creation.

Harvard study:
http://wh/sites/jchs.harvard.edu/files/hbtl-06.pdf

NYT article:
http://www.nytimes.com/2014/11/30/opinion/sunday/homeownership-and-wealth-creation.html?_r=0

“Renting can make sense as a lifestyle choice or because of income constraints. As a means to building wealth, however, there is no practical substitute for homeownership.”

Funny, but consistent with your stance as a housing pimp. Home ownership = debt. — Garth

#153 NEVER GIVE UP on 07.29.16 at 1:01 pm

#23 Smartalox on 07.28.16 at 6:54 pm
The BC Liberals Real Estate Crash Tax is missing one important feature: payments should be deductible against one’s Income Tax (even limited to BC provincial income tax, if the Feds don’t get on board).

That would achieve the goal of taxing foreign investment in real estate, but compensate those foreigners who come here and actually earn income.

15% on a $600 000 condo ($90 000) could cover 10 years of provincial income tax assessments for someone making $100 000 a year in this province.
—————————————————–
I think this is a great idea!
In fact another idea presented recently was with regard to the dark windows tax on empty homes.
That too should simply be a tax on all citizens and deleted when an income tax return is filed.
If you are earning an income or receiving a pension then no one need be peering into your windows to see if you are home.
This is a default on success tax.

#154 Mark M. on 07.29.16 at 1:03 pm

151 – DELETED

Fine Garth, just respond to the first part, forget gold. Tell me why you can’t see this “recovey” for the bubble it really is?

Tell me why US equities are at all time highs while their economy is barely growing?

Tell me why you continue to cling to the rate hike narrative when it’s absolutely clear the Fed’s next move is a cut?

#155 Shawn on 07.29.16 at 1:05 pm

The Non Sequitor on Bonds Yield and Equities

#147 WallOfWorry on 07.29.16 at 12:18 pm said:

We have over $10 Trillion in sovereign debt with negative rates….the overall low yield in the bond market is forcing investment into the equities market.

*****************************************
That sounds logical, but is it? It is true that some individual investors will choose a stock market (S&P 500) with a trailing P/E of 24 (earnings yield of 4.2% and where the earnings will grow over time) instead of negative or low bond yields where the yield on a given bond is fixed and will not grow.

But overall negative yields on bonds indicate a virtual stampede to bonds. The market as a whole is not pushing money into equities. Investors seem to be loving bonds so much that they have pushed yields to record lows. So how is that forcing investment into equities?

#156 NEVER GIVE UP on 07.29.16 at 1:10 pm

#146 Patricia Mills on 07.29.16 at 12:05 pm
Why can’t our stupid gov’t just forbid foreign ownership. Why make it a cash grab. It is going to make them seep elsewhere. They are looking for a safe place to park their money cause they cannot even breath the air in their own country. It’s too late . Just take the brakes off immigration. There is a lot of breeding going on. I wonder if the gov’t is monitoring these statistics. for every birth subtract one immigrant. The govt cannot legislate love for everyone who comes into our country We have all taken to whispering. this is dangerous.

Too much breeding? Hope you are refraining. — Garth
————————————————————–
BREATHTAKING!

#157 liqudincalgary on 07.29.16 at 1:15 pm

Garth, now’s your chance:

http://www.harley-davidson.com/content/h-d/en_CA/home/2016-promo-pages/warning.html?source_cd=banner_20160701

check out that finance rate!

even a po’ boy like you could swing that

#158 cramar on 07.29.16 at 1:17 pm

#114 common sense on 07.29.16 at 9:02 am
#85 Smoking Man and all blog dawgs…

I just read your beautiful eulogy for your father that you posted on your blog. What I find so familiar is in any eulogy or remembrance of one who passed is the complete absence ALWAYS of one’s money or net worth.

Instead, people always recall the person’s CHARACTER.

Was he or she a good person? A kind person? A helpful person?

I enjoy this blog and having money as much as the next person but always remember when you die, your net worth, how much you made, etc. is never mentioned. Yes prepare to assist your loved ones but we are taking nothing out of here when we leave.

—————
True… or should be!

Years ago I attended a large funeral for my wife’s brother-in-law at a Macedonian Orthodox church. The priest was up there giving a eulogy in Macedonian. All I understood was, “Blah, blah, blah, Jimmy. Blah, blah, blah, Jimmy.”

I whispered to my wife, “What is he saying about Jimmy?”

“He’s saying how wonderful Jimmy was because he gave so much money to the church.”

#159 Shawn on 07.29.16 at 1:17 pm

Mark on Banking at 102:

Canadian banks are in the business of betting against the housing market all the time. As investors, they have the choice whether to invest in mortgages, or invest in actual housing itself (or a plethora of other asset classes). They invest in the mortgages, effectively selling a house to the borrower in exchange for a promise of future repayment, at interest.

Now, if houses were undervalued relative to the returns on mortgage paper, then rationally investors should be acquiring houses.

So effectively the big-5 are “short” the housing market, and, if the 1990s repeats itself, will help themselves to outsized gains as housing prices fall. Remember that 1990-2000, the average Canadian bank’s stock price more than tripled.

So a long position in the big-5, is effectively a short position on the housing market if you have a long enough time horizon.

******************************************
These are bizarre assertions.

Bank regulations allow bank capital to be highly leveraged if the invested assets consist of loans secured on houses (including CMHC guarantees).

To suggest that the banks could instead simply purchase (invest in) houses is truly misinformed. Bank regulators would not allow anywhere near the same leverage, if any leverage.

To suggest that a bank lending money on the security of a house is going to benefit if the house prices fall is very bizarre indeed.

Banks are in no way “short” the housing market in Canada.

In any case, “investors” should never attempt to short houses or anything else. Shorting is pure speculation by definition. Investing, done properly is not speculation. Investing is a positive sum game as money flows from customers to owners. Speculation is a zero sum game.

#160 NEVER GIVE UP on 07.29.16 at 1:25 pm

#133 Neil Armstrong on 07.29.16 at 10:59 am
DAILY DOSE OF DISRUPTION. Poor Alberta, indeed.

“The solar revolution is upon us, and yet many still don’t get it.”

http://cleantechnica.com/2016/04/15/why-energy-experts-are-still-shocked-by-the-rise-of-solar-the-fall-in-costs/
——————————————————-
Pure Quackery.
Wind power was the biggest government scam in recent years. Now no one is behind it because it is way too expensive.
Ontario’s industrial base is leaving for Southern States in Droves due to the most expensive power costs in North America.
Wind power was another thing that was presented with statistics that were simply fantasy Blah Blah Kilowatts Blah Blah cents per KW.
When they built them they perform at less than half of expectations. Don’t people know when a salesman opens his mouth he is lying to you?
Solar is showing promise but never should a public dollar be put into these quack claims. If you need public money it is not sustainable.

The reason Ontario’s factories are working at 100% capacity is because every owner is just milking the old infrastructure until it collapses and then they move and build new in the USA where the power is cheaper. Virtually no one is improving factories in Ontario.

#161 Ace Goodheart on 07.29.16 at 1:27 pm

#152 Noel:

“Renting can make sense as a lifestyle choice or because of income constraints. As a means to building wealth, however, there is no practical substitute for homeownership.”

This is not really accurate. The practical alternative to home ownership is contrarian venture capitalism (ie, investing against the market).

For me, home ownership makes sense because I need somewhere to live and I happen to be able to afford to purchase such a place (and I’m handy so I don’t need contractors). For someone who cannot afford a house, and buys with a huge mortgage and a 25 year long term plan, it is a nutty and illogical proposition.

The quickest way to liquid, long term wealth is venture capitalism. What I mean by that is purchasing securities and ownership units issued by public companies. In that way you are capitalizing going concern businesses.

While it is not the safest way to long term wealth, it is safer than trying to make your money off a house. It also can be done a lot more intelligently because it is simpler. Just dig into your chosen company and figure it out.

You will find that valuations of companies are usually wrong. That is why I say never buy anything that is popular or on the upswing. Always be a contrarian. Because if the valuation is wrong (which it almost always is) then if you buy when it is not popular, after you have investigated and found the mistakes in the valuation, and you have determined it is a better deal than people think, you make money.

Now you can do this with houses too. But people don’t seem to be doing that. With houses, you are looking for three things: (no, not location, location, location). You are looking for an unpopular location, a building that looks crappy on the surface but is actually in pretty good shape, and you are looking for the “bet” (the most important of the three things). The “bet” is what is going to happen to make the house worth more.

For example (from my own life) “I think they might build a new subway stop directly in front of this crappy, cockroach infested, crack head tenanted rental building”

That’s the “bet”. You need that if you are still insisting that making money in real estate is the only way to go.

What has happened in our real estate market and what is so concerning to those in the know, is that there is no third thing (the “bet”) anymore. There is a nervous anxiety as regards to ever-increasing prices and lack of listings, which is making everyone believe that house prices will go up forever. That is dangerous. That is not a market that you want to buy into. It is the “BRE-X” syndrome: “Get in now or you never will”.

That is why I keep saying, if you have to buy a house right now, buy in a not so prime neighbourhood, get a good solid building with good bones (no, that does not mean granite counter tops and hardwood, it means new wiring, new plumbing, an updated heating system and a good foundation, good roof, etc), and make a “bet” on something other than anxiety.

#162 Lea on 07.29.16 at 1:32 pm

#2 White Crock BC

Garth has been telling people not to invest in overpriced real estate. This is one solution. If fewer people stop acting on their house lust, demand will decline. If supply remains constant, prices should return to equilibrium. It may not happen on your timetable, but it will happen.

The problem is the mania. Way back when in Holland people were spending a year’s salary on tulips. We laugh at this now, but putting all your savings and future earnings into a house is the same thing.

I’ve told this story before. Here in my neighborhood in Los Angeles, my old neighbors bought at $999,000 and sold $699,000 18 months later. It was one of those exotic loans with artificially low interest rates for a period. When prices dropped and the payments increased, they could not afford the payment and could not refinance.

Follow Garth’s advice. Do not use all your assets in real estate during a bubble. If you don’t believe him, come take a look at the modest cars in my neighborhood. People still remember the crash eight years later.

#163 Basil Fawlty on 07.29.16 at 1:50 pm

Real estate prices are not set by the 90%, as a much smaller portion of the market actually sells in a particlar amount of time.
For example, a house sells in 2015, for $800,000 and an appraiser finds 3 to 4 comparable sales to justify a mortgage at this price. Similarily, the assessors go through a similar valuation process to set new assessed values.
If the same house sells in 2016 for $880000, the appraisers and assessors go through the same value justification process, using a very small sample of the entire market.
The bottom line is in real estate and economics in general, prices are established at the margin, not based on 90% of inventory turnover.

#164 Nelley on 07.29.16 at 1:51 pm

$148Nemesis-you can’t get 92% of the public to agree on anything-yet residents of Vancouver realize the problem-I guess the feeling is Screw Democracy-global money should always get what it wants.

#165 NotAGreaterFool on 07.29.16 at 1:54 pm

Is Vancouver really imploding (already)? Ross Kay thinks so even before this 15% tax.

http://talkdigitalnetwork.com/2016/07/this-week-in-money-56/

#166 Victor V on 07.29.16 at 1:58 pm

The foreign buyer tax leaves us with the wrong kind of speculator

http://www.theglobeandmail.com/report-on-business/rob-commentary/the-foreign-buyer-tax-leaves-uswith-the-wrong-kind-of-speculator/article31199781/?service=mobile

#167 NEVER GIVE UP on 07.29.16 at 2:04 pm

#119 Entitled on 07.29.16 at 9:43 am
——————————————-
Angst and Gnashing of teeth.
I feel your pain.
Our government does not.
Foreign tax not enough.
Finish the job and bring prices down to Brian Ripleys Plunge o meter +3 to 4% per year for inflation.

#168 Vamanos Pest on 07.29.16 at 2:04 pm

These comments are hilarious. It’s not that hard:
-interest rates are going up
-house prices are going down
-if you own, sell, if you rent, wait
-if you have assets, diversify them and be careful to avoid overexposure to Canada

Once the above is done, take your dog for a walk, make love to your partner, crack a beer, do something nice for someone else, LIVE YOUR LIFE, ignore the noise. And for the love of god, stop over complicating things.

#169 jess on 07.29.16 at 2:05 pm

#150 Old Man Too on 07.29.16 at 12:48 pm

four years ago is relevant today since it takes time to prosecute maybe that is why some would like the statue of limitations extended? Did you go to the long list and read the case files?

https://www.sigtarp.gov/pages/investigations.aspx
https://www.sigtarp.gov/Pages/home.aspx

https://www.sigtarp.gov/pages/investigations.aspx

#170 Vamanos Pest on 07.29.16 at 2:08 pm

PS-

#52 Ferry Man

You, sir, are my hero.

Congrats and well done.

#171 WalMark of Sadkatoon on 07.29.16 at 2:13 pm

The US economy rocks. The Canadian economy got rocked.

http://www.marketwatch.com/story/heres-why-the-us-economy-is-better-than-you-think-2016-07-29

#172 WallOfWorry on 07.29.16 at 2:16 pm

Garth…I respect your perspective on post 147. A balanced portfolio as you have pointed out ensures proper risk management. However, I am curious as to why you would not see the need to adapt to present circumstances? Surely you would acknowledge that with $10 Trillion of sovereign debt in negative territory these are not normal conditions? Also…would you not agree that the bond market is driving some degree of irrational exuberance into the equity market as investors search for yield? It would seem somewhat myopic to me to counsel people on same old in these extraordinary times?

#173 Alvina Knows on 07.29.16 at 2:33 pm

There was a book I once rented. (Why own a book when you can rent it.)

The up and coming author stated the he would “rather owe the bank a million dollars than have a million dollars in the bank.” Or perhaps the quote was “I can’t wait to owe the bank a million dollars.”

Now I might have paraphrased a bit, but perhaps the author recognizes his work.

But any debt in these times, be it for home ownership, investments, a Porsche or a Harley is not for those without deep pockets.

#174 Sheane Wallace on 07.29.16 at 2:48 pm

The cost of chocolate bars (snickers, mars etc) at a vendor’s machine near by just want up from 1.00 to 1.15, 15 % increase.

They call it a deflation.

——————

As for the interest rates: They will not go up any more, maybe once and then will go crashing down.

Increasing rates is a myth.

We will see NIRP.

The scenario will be like this: Central Bankers will let Canadian housing market crash and then will this as an excuse to introduce NIRP. It surely will work. And when the inflation shows up they will lie about it.

But once inflation accelerates….

#175 Mark on 07.29.16 at 2:50 pm

“If you look at a proper balanced portfolio within the context above, every investor should have 5 – 10% in gold. The TSX represents less than 1%.”

The TSX has a ~8% weighting to gold and silver equities (ie: ABX, AEM, GG, KGC, SLW, FNV, EGO, etc.). Miner equities are usually said to be around 3-5X leveraged to the price of gold/silver. So a 30% weighting of the TSX in your portfolio (ie: probably the sort of weight a Canadian should have if they’re doing a 60/40 split between equity and bonds) gives you a 2.4% equity weighting, which, through leverage, has you up to roughly 10% effective exposure to the price of the precious metals.

Hence, Garth is right, even a relatively small portfolio allocation to the TSX *is* a pretty significant overweight on gold and silver in the whole global scheme of things.

““Renting can make sense as a lifestyle choice or because of income constraints. As a means to building wealth, however, there is no practical substitute for homeownership.””

At the right price, sure, I agree 100%. But with Canadian housing at a P/E of 35 (ie: $400k average), and the stock market at a P/E of 15, there not only is a practical substitute for home ownership, but such substitute is poised to dramatically outperform housing going forward.

The example I have given here often is that of the 1990s. A smart person who merely took their down-payment funds in 1990, invested it in all in ETFs at the time (or TIPS as they were called at the time) — a decade later had enough in their brokerage account for a paid-off house. Their counterpart, who bought the house on a mortgage, meanwhile, spent a decade paying the mortgage and didn’t have anything to show for it.

They are looking for a safe place to park their money cause they cannot even breath the air in their own country.

It would be nice if foreign money actually was showing up in Canada to buy RE. But there’s little to no evidence of it happening. What there is evidence of is lots, and lots of debt. Debt taken on by our domestic actors, as well as by the few “foreign” participants in Canada’s RE market (said to be around 5%).

#176 No Dominos on 07.29.16 at 2:53 pm

Why does everyone think that a tax in metro van will increase prices in the rest of the Province? The surrounding markets on the island and interior were only going up because of Vancouverites cashing out and fleeing Vancouver. It was a domino effect from foreign purchades in Van. If those dry up from the tax, prices will actually recede in those surrounding communities – not go up! Foreign capital, namely Chinese like to live amongst their established ethnic enclaves. There are noethnic enclaves in the rest of BC outside of metro van. Its not rocket science…

#177 TurnerNation on 07.29.16 at 2:57 pm

Why often I use term Kommunist Kanada. …if it’s not daily beatings by State officials then it’s false confessions.
Whatever it takes to support the glorious Party and Sunshine list.

http://www.cbc.ca/beta/news/canada/british-columbia/nuttall-and-korody-to-be-freed-after-b-c-judge-issues-stay-of-proceeding-in-terror-entrapment-case-1.3700599

#178 eaglebay on 07.29.16 at 2:57 pm

#152 Noel on 07.29.16 at 12:55 pm
“Renting can make sense as a lifestyle choice or because of income constraints. As a means to building wealth, however, there is no practical substitute for homeownership.”

Germany, Austria, Switzerland and many other strong and healthy countries have powerful economies. Guess what, the majority of their citizens are renters. I see large numbers of them here in Victoria and in Vancouver. Whoever wrote those articles are obviously not very knowledgeable. You’d believe anything.

#179 Ace Goodheart on 07.29.16 at 3:04 pm

RE: “Funny, but consistent with your stance as a housing pimp. Home ownership = debt. — Garth”

Only if you don’t buy the house.

There is an interesting way of looking at our current situation. In the past (way, way back) those with money, were in charge. If you wanted to be a King or a Queen, you needed a basement full of Gold and Silver.

The only folks right now who have basements full of precious metals are Banks.

We are in a situation where most of the world’s wealth is held by a small group of banks and individuals.

These banks and individuals are not governments. Governments are heavily in debt. So are most middle class and lower class persons.

So who is really in charge?

If you want to win an election, who would you ask to fund your campaign?

If you want to buy votes, who would you go to for the debt financing necessary for all of the expensive social programs you will need to fund, to do this?

Who really has all the power? And are you voting for them? Or can you actually vote for a bunch of banks and a small group of individuals?

Food for thought.

#180 Renter's Revenge! on 07.29.16 at 3:17 pm

#118 Tom Fawcett on 07.29.16 at 9:41 am
#123 FIRECracker on 07.29.16 at 10:41 am

Examples like those just go to show that housing is a black hole for capital in Canada. Look at the calibre of companies the US produces (Apple, Google, Amazon, IBM, Microsoft, General Electric, Cisco, Oracle, Pfizer, Merck, Intel, Tesla, etc. etc. etc.) vs. what Canada produces… *crickets*

#181 salonist on 07.29.16 at 3:18 pm

not sure this belongs here
but if the elephant moves..then so does canada’s economy

hrc vp Tim Kaine (Va.) 2009–2011 was past chairman of the dnc who voluntarily resigned and suggested his replacment, which just happened to be hrc’s 2008 campaign manager. Debbie Wasserman Schultz (Fla.) 2011–

then at last nights dnc, some nasty convention tactics

on youtube

https://www.youtube.com/watch?v=srC1nJDJZlE

#182 Tudval on 07.29.16 at 3:48 pm

“Equity markets do not tank during Fed tightening cycles. You made that up. — Garth”

I have to expand here a bit. The market tanked every time I looked at, when the pace of tightening caused an inverted yield curve. I suspect this would happen if they tighten 2 more times in the next (say) 7-8 months, given the policies of other Central Banks.

#183 Mark on 07.29.16 at 3:50 pm

“To suggest that the banks could instead simply purchase (invest in) houses is truly misinformed. Bank regulators would not allow anywhere near the same leverage, if any leverage. “

Well let’s compare a bank, to a REIT for a moment. REITs borrow and invest in RE. Banks borrow and invest in loans.

Both are perfectly permissible activities. The “bank” can access lower cost financing due to CDIC insurance — something which is not available to the REIT borrowers. But the point nonetheless stands, that banks and their investors have a whole plethora of possible investment decisions and can directly or indirectly switch between investing in ownership (equity) versus investing in debt (mortgages).

By investing in the mortgage-backed loans, rather than in RE itself, the banks are effectively short the RE market. By CMHC-insuring all mortgage loans meaningfully at risk, they’re effectively investing the short sale proceeds into sovereign bonds (with the assumption that the CMHC will pay up as they are legally obligated).

Let’s review what a short sale is for a moment. When you short sell a stock, you borrow a stock, and you sell it into the market. The proceeds are invested by your broker into liquid collateral, such as T-Bills, and the short sale P/L is marked to market.

If the price of the security goes down, as an investor, you’re allowed to withdraw some of those T-Bills from your brokerage account.

If the price of the underlying security goes up, as an investor, you’re obligated to encumber additional collateral. Or the position is subject to a margin call.

Similar deal at the banks when they write a mortgage loan in exchange for providing a house to a borrower. If the price of the house goes up, the bank is stuck with a note which doesn’t appreciate along with the house. e.g. they suffer an opportunity cost. If the price of the house goes down, the bank has a note which is worth, referenced to houses, more than the bank originally paid for it.

Additionally, if the house price goes down, chances are, its because the interest rate (either policy rate or the risk premium attached to such) has risen. So the bank additionally collects.

If the extreme case, ie: Canadian RE crashing 50% occurs, banks will be holding notes that have a legal obligation of repayment of significantly more than the market value of a single house. Again, the bank essentially has created, through their lending, a short position on the housing market. And the CMHC *guarantees*, with the full backing of the sovereign, the repayment of the full note, even with vastly depreciated underlying collateral.

So basically put, falling house prices are good for Canadian banks in their mortgage lending operations. We saw this in the 1990s. The big risk to the overall strategy is that the CMHC somehow is able to alter its legal obligation to redeem defaulted insured mortgages at full value.

#184 Barb on 07.29.16 at 4:29 pm

Today’s picture reminds me of a joke about a 93-year old man: “Oh F**k, a bus”

Love your blog and its photos!

#185 cramar on 07.29.16 at 5:05 pm

The U.S. economy might be going in the right direction, but it is only going at half speed:

http://www.marketwatch.com/story/second-quarter-gdp-rises-just-12-well-below-forecast-2016-07-29

#186 45north on 07.29.16 at 5:14 pm

Federal Public Service Pay System:

Nick Faris:

Let me take you back to 2009. Public Services and Procurement unveiled a plan to replace Canada’s archaic regional payment system with a centralized setup, run out of Miramichi, N.B.

The Miramichi centre was to be more efficient: only 550 advisers were hired to direct payment for the public service as a whole. Just think of the savings! The Conservatives did: they expected to save $70 million annually by 2016.

http://news.nationalpost.com/news/canada/canadian-politics/phoenix-explained-why-federal-civil-servants-arent-being-paid

wow save $70 million every year! here’s another project to save money based on the idea of centralization. Centralization.

I really think that centralization is over sold. I think the real selling point is control. Control. Here you’re going to have a big important thing and you’re going to control it. Except if it doesn’t work in which case it’s the civil servants and the private contractors who need to fix up their own work.

I worked for the Federal Civil Service for 40 years, and I always got paid. The old system worked.

#187 45north on 07.29.16 at 5:19 pm

Donald Trump:

Michael Den Tandt: Bloomberg Wednesday offered the most devastating takedown of Trump I have yet heard, making a case essentially that the latter is neither competent nor sane.

http://www.ottawacitizen.com/news/national/trump+demagoguery+midwifed+powerful+moment+clinton+simple/12089317/story.html

#188 cramar on 07.29.16 at 5:24 pm

Entitled Millennials!

http://www.marketwatch.com/story/is-this-the-most-entitled-millennial-in-america-2016-03-01

But that is America! Our millennials in Canada are far more mature and financially literate.

Related: Canadian millennials still stuck in the basement. . .

http://business.financialpost.com/news/economy/canadian-millennials-still-stuck-in-the-basement-as-youth-unemployment-surges

#189 Metaxa on 07.29.16 at 6:04 pm

@ #188 cramar
But that is America! Our millennials in Canada are far more mature and financially literate.

Related: Canadian millennials still stuck in the basement. . .

Funny how a link or something in the media is bullshit when you disagree with it but gospel when you agree, eh?

My son’s are millennials, they co-own a revenue positive duplex home in a good neighborhood and are both middle management in a local firm that is expanding. (Twins…what can I say, they even work together!) Their aggressive TFSA’s are outperforming their Mom’s and mine!

The millennials who recently bought the house next door to me, paying half down, the rest on a 20 year amortization, are busy putting in a basement suite so Mom can stay at home with the kids. He works as a red seal carpenter and after hours and on weekends he is building a little handyman side gig.

The millennial who I fronted start up money 5 or 6 years ago paid me back within the first year and drops off a +/- $20,000 cheque every year since. She isn’t living in anyone’s basement. She also won’t buy me out or even entertain the idea of keeping more money for herself…apparently I “earned” this return by loaning her the (little bit) less than 20 grand to start.

I could go on if I expand my circle a bit but you get the point, no?

Look for the doom and you will find it, look for the good…and that is too much to ask?

#190 Smoking Man on 07.29.16 at 6:22 pm

At my God daughters wedding. Putting on a show. Pops is in the freezer. Not feeling good about it.

We haven’t told anyone in the family yet.
Tomorrow I will. Hope they don’t hate me. And if they did. Something else to write about.

He’s getting a great send off on Tuesday…

What can you do…..

#191 Tony on 07.30.16 at 2:09 am

Re: #188 cramar on 07.29.16 at 5:24 pm

As interest rates turn negative in Canada and America more and more retired seniors will come out of retirement and join the ranks of the working class. Employers will jump at the chance to hire someone 55 to 65 rather than hire someone 16 to 24. It will only get worst and worst for millennials. The millennials of course brought this upon themselves with their laziness attitude towards work and generally everything else.

#192 Farris Sabbagh on 07.30.16 at 9:26 am

#20 Self Directed, if you consider Schiff smart then you are about to lose money. He has been calling for a crash forever. Whenever you see his name, close the web page.

#193 Farris Sabbagh on 07.30.16 at 9:42 am

DELETED. This is not a gold blog.

#194 Doug in London on 07.30.16 at 10:42 am

@Tony, post #191:
So what parallel universe do you live in, and how did you find your way into this one? I find the exact opposite, that there is a lot of prejudice against older workers. I’m 55 now and am sure glad I had the common sense and presence of mind to build up my portfolio when I was younger.