All stress, all the time

When the feds imposed the mortgage stress test, realtors and housing bulls scoffed. Yet more tinkering, they cried. Won’t matter!

Well, it did. In 2018 prices dropped nationally for the first time in memory. Sales have cratered in most cities, and the sales mix has altered drastically. Cheap properties have been pushed higher by increased demand while detached houses are suffering. Overall credit has been nicked by about 20% and tens of thousands of would-be first-time buyers are buyers no longer. In short, the result has been dramatic.

For example, in east-end Toronto where Dan toils as an agent, the pace of deals has crumbled. “Wow, it’s correcting , crashing, or slow because of all the snow?” he says. “Oh wait, no snow!” That’s right. Just frozen realtors.

The tale of the sales in East-end Toronto

Source: Royal LePage, Toronto Real Estate Board. Click to enlarge.

Well, it’s apparently about to get worse. Flooding through the industry on Friday was word Ottawa wants to push the stress test – which now applies only to bank mortgages – everywhere. That would include sub-prime brokers, private lenders, MICs (mortgage insurance corporations) and eventually provincially-regulated credit unions.

The reasons are obvious. Before the stress test came in, only 5% of loans were being made by private lenders who are not regulated by the feds. Now that market share has doubled. Borrowers who were rejected by the banks and couldn’t pass the test have increasingly ended up in the clutches of those who will lend money at rates of anywhere between 10% and 20% (as opposed to conventional 3.5% five-year fixed-rate mortgages). If you’ve ever seen ads for private mortgage companies willing to pay investors 6-8% annual returns, this is exactly what they are funding. High-cost loans to high-risk people, secured by residential real estate.

The fear is a deterioration in mortgage quality as risk is transferred from the banks to the alt-lenders. If the real estate market turns (and it seems to be) these lenders lack the capital reserves or the insurance to prevent collapse. The alt guys also typically lend out more money relative to a property’s value, accentuating that risk. The feds fear if things start going south, this could turn a correction into a crisis. Price declines would explode.

So the Department of Finance, the regulators and CMHC have been discussing how to make the stress test universal. Private lenders would then be forced to prove clients could pay their exorbitant rate plus another 2%, or no loan.

The impact of this, according to the mortgage industry, would be dire. In fact, says broker and blogger Rob McLister, it could deny funding to 250,000 to 350,000 families. It would be traumatic for those who own real estate, must restructure debt, can’t pass the banks’ stress test and need private money.

“One thing is clear, however. Stress testing borrowers at private lending rates, which routinely exceed 6-8%, would drastically slow such lending.

That, in turn, would result in:

  • Slowing housing demand (not necessarily a bad thing) particularly in private-heavy regions like Toronto and Vancouver
  • More rental demand, further fuelling fast-rising rental rates
  • A spike in housing supply from homeowners forced to liquidate because they can no longer consolidate their debts
  • A surge in high-interest unsecured debt
  • A drastic slowing or end of RRSP-funded private lending
  • Rising insolvencies.”

To pull this off, federal legislation would have to change, bringing private lenders under the regulator’s umbrella. Or, Ottawa could work with the provinces who oversee both MICs and credit unions, to see the stress test is adopted. Already some major CUs are operating under this assumption.

So, there ya go. More confusion.

One day Bill Morneau says Ottawa will make it easier for moisters to buy houses. The next day comes change to deny funding to even more people. Government sucks. Government blows. What a shock.

77 comments ↓

#1 Victor V on 01.25.19 at 5:31 pm

“One day Bill Morneau says Ottawa will make it easier for moisters to buy houses. The next day comes change to deny funding to even more people. Government sucks. Government blows. What a shock.”

What benefit politically do the Liberals get from this apparent contradiction? I’d say their aspirations for re-election would trump all other considerations?

#2 yorkville renter on 01.25.19 at 5:35 pm

yesterday I saw a place for rent for $4500… I dug a little deeper and saw that it sold in October for $2mm even (plus double land transfer tax for Toronto).

What were these people thinking?

Take out property tax and the rent covers about $700k of mortgage… did they put down $1.3mm + closing costs to just cover tax and mortgage?

The insanity has to stop… people need to be helped from themselves. I say bring on the regs!

#3 Brian Ripley on 01.25.19 at 5:36 pm

Sales have cratered in most cities… Garth

And this is happening as Peak Consumption arrives in Canada.

My brief post today centers around 3 charts showing
1) the collapse and a new low in Canadian Household Savings,
2) Consumer Spending spiking to new highs (one has to fill those condos up with furniture) and
3) Canadian Retail Sales Y/Y Momentum which is plumbing the lows and heading towards the 2008-09 capitulation event.

http://www.chpc.biz/history-readings/peak-consumption

As consumption drops so will employment. Make sure your household income contracts match the amortization length on your debt.

#4 The Greater Cauliflower on 01.25.19 at 5:37 pm

When I lived in Saskatoon, My favorite RealEstate website was NormFisher. Charts, Graphs & market commentary.

http://normfisher.com/saskatoon-real-estate-week-in-review-for-january-13-19-2019/

#5 Midnights on 01.25.19 at 5:40 pm

RBC mortgage clients say errors cost them due to extra interest

https://www.theglobeandmail.com/business/article-rbc-scrambles-to-fix-mortgage-errors-some-clients-say-cost-them-extra/?utm_medium=Newsletter&utm_source=Top%20Business%20Headlines&utm_type=text&utm_content=TopBusiness&utm_campaign=2019-1-25_17&cu_id=dabTBZKGPqs0yoo6MbC5ew%3D%3D

#6 Goop on 01.25.19 at 5:41 pm

This is great news!
Canadians clearly need their hands held through this looming crisis. I think we can all agree that what this is, no?
Maybe middle and secondary schools in Canada should start teaching students the implications of debt, and how to do their taxes. This might spare the future generation of Canadians from the problems that “keeping up with the Jones’s” has wrought.

#7 dakkie on 01.25.19 at 5:42 pm

Half of Americans and Canadians On the Brink of BANKRUPTCY! Debt Fiasco!

https://www.investmentwatchblog.com/half-of-americans-and-canadians-on-the-brink-of-bankruptcy-debt-fiasco/

#8 Smartalox on 01.25.19 at 5:43 pm

So how will the stress test be applied to Reverse mortgages? I mean, apart from vapourizing liquidity?

Are those companies that advertise “make no payments ‘for as long as you own the home'” going to start asking debtors to make payments? Even if interest only?

#9 Sales Down on 01.25.19 at 5:55 pm

https://www.youtube.com/watch?v=6OFdaRBWh6g
LOL

#10 adee on 01.25.19 at 6:00 pm

if “tens of thousands” of first time buyers are not buying, and if the people who are still buying can borrow 20% less money than before, then why would house prices go up? the entire market moves up or down the ladder in unison …

#11 Where's The Money Greedeau? on 01.25.19 at 6:02 pm

For everyone, and especially Ontarians with Gordon Campbell’s fingers in their gov’t pie now: https://nationalpost.com/news/canada/former-b-c-premier-will-lead-doug-fords-independent-inquiry-into-liberals-past-spending-in-ontario, the key word here “independent”.
A history on the previous BC Liberal gov’ts from 2001-May 9, 2017 that had Campbell’s and his insider’s fingerprints everywhere:
(https://thetyee.ca/Opinion/2017/04/03/BC-Liberal-Campbell-Falsehoods-Scandals/).

#12 Mortgagebrokeron on 01.25.19 at 6:04 pm

It would be a disaster if private lenders and borrowers need to pass a stress test

Liquidity in the marketplace would dry up

Massive problem then as many more bankruptcies and sale of houses will happen

Would make the housing market crash

#13 Debtslavecreator on 01.25.19 at 6:19 pm

Our software was made B20 compliant about 6 months ago even though we don’t yet follow it when there’s 20% equity or DP
It’s just a trial balloon by the feds
I think you’ll see targeted easing for young / first time buyers (RSP HBP increase and forgiveness on paying back if hime is bought within certain time, or a massive one time tax credit for first time buyers or some loan program )
Ironically the stress test simply destroyed affordability of the formerly cheap housing that the mills and first timers used to be able to afford – condos and towns
My oh my the irony
90 % of our financial and social problems are the direct result of the junk monetary policy followed by govt intervention to artificially increase demand through subsidized credit or tax programs

#14 Reximus on 01.25.19 at 6:21 pm

all this says is what I’ve known all along…OSFI screwed up the market, again. Just like Wynne’s idiot ‘fair housing’ nonsense

#15 Catalyst on 01.25.19 at 6:37 pm

The question they should be asking, is why allow a private market to begin with. If you cant qualify for a 3.5% loan, you shouldnt be going to get a 10% one.

#16 Reximus on 01.25.19 at 6:39 pm

#10 adee on 01.25.19 at 6:00 pm

if “tens of thousands” of first time buyers are not buying, and if the people who are still buying can borrow 20% less money than before, then why would house prices go up? the entire market moves up or down the ladder in unison …

—-

The real reason 10k/year ‘missing’ property transactions have not happened, compared with the ‘normal’ volume of the last 12 years in 416, is that people have been (smartly) waiting to see if the big interest rate moves that were commonly promised would change the marketplace, price-wise…so if you still think rates are moving higher, you wait to see what happens, and maybe you save some meaningful money…

But rates seem to have peaked…and prices havent changed much…so

#17 Credit Unions on 01.25.19 at 6:46 pm

Pull your funds out, because many of them are not properly insured. I believe in Ontario they are insured by the Deposit Insurance Corporation of Ontario. Many of them have been funding risky mortgages, and the bigger they are the harder they fall.

#18 Russ on 01.25.19 at 6:47 pm

That pic made my day!

#19 Not 1st on 01.25.19 at 6:47 pm

If only trump could run Canada too. MACA

#20 crowdedelevatorfartz on 01.25.19 at 6:56 pm

Election year or not.

It seems Canadians will be dragged kicking and screaming into facing their debt obligations.
One can only hope Trudeau will wear some of it come Oct. 21st….

#21 Mike in Cow Town on 01.25.19 at 7:12 pm

I thought HELOCS are the ticking time bomb?

I think some people will be surprised at the risk they took investing with Bill Good to get their +7% returns. Those commercials can’t end soon enough on BNN.

#22 Out Of Work CEO, Will Travel on 01.25.19 at 7:21 pm

Ya know dos bankers likes to clean thems plates. R ya trying to kid us tonite Garth? It worked.

#23 akashic record on 01.25.19 at 7:33 pm

or
debt forgiveness
or
drastic wage growth
or
pitchforks

Ideas are plenty.

#24 Timmy on 01.25.19 at 7:35 pm

Re#11 Where’s the money Greedau?

Gordon Campbell was another disgrace to the people of British Columbia. Now he’s leading an inquiry? What next? Rich Coleman investigates the police force? lol

#25 Barb on 01.25.19 at 7:40 pm

That, in turn, would lead to: (one more item)

* 250,000 to 350,000 families that won’t be first to file bankruptcy.

It stunned me to learn that families went to private lenders after the banks had denied their application!

i.e. how could they qualify–and presumably, repay–a mortgage they weren’t eligible for at lower rates?!?

#26 Damifino on 01.25.19 at 7:40 pm

Dogs, seals… same animal, really.

#27 When the Whip Comes Down on 01.25.19 at 7:48 pm

Well, so much for the talk of removing the stress test. I guess the developers and mortgage brokers will have a lot more moaning to do now and may have to try a new approach.

#28 BobC on 01.25.19 at 7:57 pm

People keep voting for more and more government. What idiots. Imagine if government stayed completely out of real estate and it was a free market system.

#29 Can't stop private lenders on 01.25.19 at 8:10 pm

#1 .. who’s gonna stop Joe private lender from registering a mortgage on a property? Maybe the government can do this with Mics but not individuals and there’s tons of those willing to lend at 10% yield….

#2 this is a stupid move by the government, private lenders provide liquidity and the market needs it…

#30 yorkville renter on 01.25.19 at 8:16 pm

#25 – usually its a short-term loan and the owner tries to refinance at a bank.

#31 Paul on 01.25.19 at 8:28 pm

#15 Catalyst on 01.25.19 at 6:37 pm
The question they should be asking, is why allow a private market to begin with. If you cant qualify for a 3.5% loan, you shouldnt be going to get a 10% one.
———————————————————————————————— It’s called free enterprise. If you have saved your money would you lend it out at at 3.5% and have the government take 30 to 50 percent off of you in tax? Then have inflation run at two or three percent.

#32 Vlad the inhaler on 01.25.19 at 8:34 pm

Q: What’s the difference between Bill Morneau and the average Canadian?

A: To the average Canadian, a Swiss Chalet is a restaurant.

#33 Renter in Surrey on 01.25.19 at 8:35 pm

Another “last straw” supposed to brake camel’s back.
There have been so many, I lost count.

Probably will have the same effect as previous ones – nothing will change.

#34 Smoking Man on 01.25.19 at 8:57 pm

DELETED

#35 prairie person on 01.25.19 at 8:58 pm

Garth, yesteday there was a report of the shooting of Toni Magi.I’m sure his sins were many but he was involved in real estate deals, at least one big one, that did not work out. Some people tried to get their money back. Didn’t happen. These are not people who just walk away and say too bad. A lot of “private” lenders are akin to Friday loan sharks. The amazing thing is that the Canadian govt. is so casual about the private lending structure that underlies the visible structure of the banks, credit unions, etc. The tolerance for illegal or semi legal activity in Canada is surprising.

#36 Fish on 01.25.19 at 9:00 pm

Motor fuel prices
Get the current Ontario price for unleaded gas, diesel, auto propane and other types of fuel.

https://www.ontario.ca/page/motor-fuel-prices#section-1

#37 paracho on 01.25.19 at 9:09 pm

Reply to # 25 Barb

This always perplexed me and I got my mortgage agent license in Ontario . But never worked as one !
It was way to shady to begin with . Hidden agendas and so forth .
When the stress test came out I thought it was a welcome relief to those fanatical to but a place without the income and funds to do so .i still beleive the stress test is saving many from themselves and a future bankruptcy .
Then an irony comes into play via private lenders . I still get the mortgage brokers newsletter . Private lending has especially increased since the stresss test . How can they get and pay down a mortgage that has an effective rate double or triple the bank rate …. when they failed the stress test in the first place ???? When the gds and tds ratios are not favorable ?
Seems like a loophole that can only hurt the Ffamily who took out the mortgage . I understand this mortgage is added risk and needs a higher rate to compensate for this risk ( like a lower quality bond that pays a higher rate due to increased risk of default ) .
But I did not see why the stress test would not apply to these higher risk mortgages also. Those most sensitive to a decline .
I applaud the government in taking steps to regulate credit union and private mender mortgages . Too many horror stories out there that will eventually come out in the near future .

#38 Robert Ash on 01.25.19 at 9:11 pm

The Housing Market potential for a Crisis, is being explored and documented, and most what if scenarios are being explored. The issue that got my attention the most was a report that stated Canada’s TSX listed businesses are leading the World in Companies with Losses.. Red Ink… The Globe and Mail article suggests more than 75% of Canada’s Stock market participants, are in profit losing territory. Now that is certainly going to impact the Economy and everything associated with the Economy if there are continuing losses… Jobs will be trimmed, no wages .. no income, … I have to admit that Statistic… alarmed me.

#39 expat on 01.25.19 at 9:28 pm

What you are seeing really isn’t politician induced stress testing……

It’s the fcentral banks tightening. They are creating a liquidity trap…

This feedback loop from QE is now coming back to haunt everyone….

The FED puked a few weeks and lightened up the interest rate noise and the markets settled.

There isn’t enough liquidity to go around though and what we are seeing is the beginning of a deflationary spiral.

Usually its commodities, stocks, houses, goods and services in that order….

What is really gonna shake your nookies is when one quiet Monday afternoon you can’t cash your money market fund….

then it breaks a buck…..

Everyone looks up from their cubicles after calling their spouses and asks if anyone has cash for a coffee…….

#40 fishman on 01.25.19 at 9:49 pm

Damifino: Now how would anyone on a dog blog know dog & seals are the same thing? Unless they’ve been attacked by a dog & tried cutting a trapped seal out of a net. At least its a no brainer for the course of action.
And on the R/E front out west. Our guru is right. The sub-prime lenders I know are very wary. Acting like their around a trapped seal.

#41 Sun gracing the delusional on 01.25.19 at 9:57 pm

So….
Is the rest of Canada envying the “delusional” yet?

This one will make you wish you were here:
https://dailyhive.com/vancouver/vancouver-sunset-photos-january-25-2019

#42 Stan Brooks on 01.25.19 at 10:01 pm

So the Department of Finance, the regulators and CMHC have been discussing how to make the stress test universal….

It is good to know who is regulating the housing market and will be hold accountable when the unraveling unfolds.

While rates are low there will be demand for debt in one way or another.

So instead of addressing and trying to remove the symptoms of the disease why not address the disease directly (i.e. the low interest rates)?

This increase of private lending shows that first people have no money and second that market interest rates (cough cough inflation….) is much higher than the ‘official’ rate.

————————————–

Shawn Allen yesterday stated that credit is the grease of the economy.

Grease of the economy is the informational revolution, oil/fossil fuels and the open world trade.

Credit is grease for over-consumption, to what extend that drives ‘an economy’ is questionable, specially when that credit is not based on savings (as Shawn wrongly keeps stating) and normal market risks.

#43 History Revisited on 01.25.19 at 10:16 pm

What is happening today or about to happen is nothing new in the Real Estate and Mortgage market. Greed, corruption, fraud, and speculation all took place during the 1970’s and 1980’s bust outs. This time the bubble is much bigger, and you haven’t seen nothing yet. All hell will fly when the panic button is triggered. Those with substantial liquid assets need to get into a balance portfolio administered by a fee based advisor to ride out the coming storm.

#44 Ronaldo on 01.25.19 at 10:28 pm

#1 Victor V.

They know not what they’re doing.

#45 NFN_NLN on 01.25.19 at 10:28 pm

#29 Can’t stop private lenders on 01.25.19 at 8:10 pm
#1 .. who’s gonna stop Joe private lender from registering a mortgage on a property? Maybe the government can do this with Mics but not individuals and there’s tons of those willing to lend at 10% yield….

Would you lend against a house as collateral right now… even at 10%?

#46 Fish on 01.25.19 at 10:34 pm

Weekly Prices — Forest Products – Province of British Columbia

https://www2.gov.bc.ca/gov/content/industry/forestry/competitive-forest-industry/forest-industry-

economics/weekly-prices Weekly Price Report –

January 18, 2019 (PDF); Weekly Price Report – January

11 , … Weekly Price Report – May 25, 2018 (PDF); Weekly

Price Report – May 18, 2018 … Unmanufactured timber

plays a key role in B.C.’s coastal forest economy.

#47 MF on 01.25.19 at 10:51 pm

#112 Ubul on 01.25.19 at 1:30 pm

I saw that post also. Was going to respond but was too busy all day.

That kind of thinking is usually par for the course for people who are paranoid, easy manipulated, and unsuccessful in their lives. The formula is simple: just watch some YouTube videos, and then blame some invisible force for all your failures while taking zero responsibility. It’s always “their” fault. Easy.

To be fair, The poster usually posts somewhat decent articles about the RE industry, but I guess he/she let it slip. No surprises though….

MF

#48 Victor V on 01.25.19 at 11:16 pm

Pattie Lovett-Reid: Morneau should be cautious in helping millennials buy homes

https://www.bnnbloomberg.ca/pattie-lovett-reid-morneau-should-be-cautious-in-helping-millennials-buy-homes-1.1204149

#49 Ponzius Pilatus on 01.25.19 at 11:28 pm

All this Ubber talk.
Nietzsche had it right over 100 years ago.

#50 Wise Gal with a point or two on 01.26.19 at 12:45 am

The future of Stress Test qualifications? I have to point out here a scarier problem. The big Big 6 Banks have been in a game together, with Regulator allowing all the big Banks to push Collateral Mortgage Products onto their good trusting Customers. Maybe you could expand in a future blog the can of mushrooms created of the Banks disguising their Mortgage Products, in essence disasterous Collateral Lines of Credit. The Big Banks and the Regulator should be shamed! Garth please expand on this topic…when these Collateral Lines of Credit get Registered as a Collateral Charge against Title, the monetary amount is pulled out of the sky by the Banker for whatever makes his day brighter(and not the actual mortgage amount). Once the Banks have the Customer in their clutches they continue to hand out another individual “Line of Credit” underneath the ballon of the Collateral products, and additionally, adding Credit Card Debt, and other Personal loans, all part and parcel of the Bank’s default penalty scheme to hang or corner each Collateral Mortgage Borrower. Shame Shame Shame! A Customer might have trouble finding a Bank willing to hand out an old fashioned Conventional Mortgage for the actual monies borrowed! Borrowers should be screaming at their Bankers who set out to corner naive Customers Smart folks like us dodged borrowing or going beyond our means even while money was dirt cheap….it is the small print that is dangerous for those that do not bother to read! Why is it no one is paying attention to this bigger picture Real Estate debacle??? What is described here is what will eventually bring the Real Estate bubble party to a clatter!

#51 Smoking Man on 01.26.19 at 1:07 am

DELETED

#52 adee on 01.26.19 at 1:15 am

The other day this blog theorized that the stress test would be decreased. Today the theory is that the stress test will be extended to more lending sources. Tomorrow?

When all is said and done the stress test:
– allows the BoC to keep lending rates low to encourage more/new business activity, while
– setting a higher for real-estate purchases
– without actually increasing the interest rate on real-estate.

Its an intelligent approach to deal with the house horny you are complaining about ….

Government obviously needs to allow a lot more construction of multi family buildings to occur, owned or rented …

#53 islander on 01.26.19 at 1:19 am

Got nothing to do……check out Calgary foreclosures.
https://jerrycharlton.com/calgary-foreclosures-for-sale-bank-owned-property-foreclosures-list-free.html

At least in Alberta and Saskatchewan you can (sometimes) just walk away from your mortgage and hand over your keys to the bank (good old jingle mail)!
“In Alberta eligible people are those with a loan without mortgage default insurance backed by the government.
In Saskatchewan the rule is limited further to and doesn’t allow people with renewed mortgages, as well as no government backing, to walk away.”

https://business.financialpost.com/personal-finance/mortgages-real-estate/you-can-walk-away-from-your-mortgage-if-you-live-in-alberta-but-should-you

#54 Realtor Rick on 01.26.19 at 1:41 am

@ #2

Dear Yorkville Renter
Are you that clueless? There is no mortgage on that property. Cash purchase my friend.
The buyer didn’t buy to get cashflow. The buyer bought to stow away their money. They fear the red dragon currency and million dollar real estate dumps in their homeland will collapse one day.
Plus they have a daughter who will likely start school at UofT in 18 months so she’ll have a place waiting for her.

#55 Economystic on 01.26.19 at 2:12 am

All of this can be solved with a carbon tax. As Garth pointed out yesterday, most households are $200 dollars a month away from insolvency, which means they have $200 a month more than they need. Multiply that by the approximately 12.5 million households in Canada and we find that a $2400 per year carbon tax could bring in $30 billion a year without unduly affecting households. It’s money they don’t require to stay solvent anyway! That’s way more than the deficit. But then consider, Economysitics would say continue the deficit, debts are not to be paid off only serviced, so we could be looking at $40 billion in extra spending! Think what the government could do with that!

Remember, the goal of economystics is a free lunch for everyone and no one working in the kitchen. That $200 of unneeded money is the answer.

#56 JM on 01.26.19 at 6:52 am

I got my mortgage at Harold the Jewelry Buyer. He has a beautiful office with an inviting reception area!

#57 MACA? on 01.26.19 at 7:01 am

#19 Not 1st on 01.25.19 at 6:47 pm
If only trump could run Canada too. MACA

******
So close, try again.

#58 Dolce Vita on 01.26.19 at 7:39 am

#33 Renter in Surrey

Nero fiddling while Rome burns.

#59 Dolce Vita on 01.26.19 at 7:49 am

Too little, too late.

Damage already done from 2008 to 2018.

Any new Gov, OSFI measures cannot unravel that.

Much Ado About…

#60 dharma bum on 01.26.19 at 9:30 am

Borrowers who were rejected by the banks and couldn’t pass the test have increasingly ended up in the clutches of those who will lend money at rates of anywhere between 10% and 20%. – Garth
——————————————————————–

And when that money dries up, all the consumeraholics can just go to this level of borrowing:

https://www.youtube.com/watch?v=90kn32tC8Lk

Easy Money!
The well will never run dry for the house horny desperados and consumption addicts.

#61 Remembrancer on 01.26.19 at 9:39 am

#56 JM on 01.26.19 at 6:52 am
I got my mortgage at Harold the Jewelry Buyer. He has a beautiful office with an inviting reception area!
———————————————————
Who needs institutions like a Central Bank or CMHC when you can have mortgages backed by pawned Rolex watches and aunties’ old brooches?

#62 not 1st on 01.26.19 at 10:14 am

Anyone under 35 or anyone recently set foot in Canada does so with a giant set of invisible shackles.

Not only will you be taking on the giant debt obligations of this aging country at time when our economic drivers are under siege, but the previous generation are also actively selling their homes and businesses and investments to this group and liberating their capital from the system. At the same time time that group will be paying CPP/OAS and health care as well.

No wonder Trudeau fawns over kids and newcomers. They are taking on all of Canadas not so distant future problems.

#63 Millennial Realist on 01.26.19 at 10:40 am

What I see here is the Liberals are staking out ground on both sides of the issue, to try to expand their possible scope of action whatever happens.

Good old cynical Liberal politics, for sure. But it will work. Bet on it, it almost always has.

Why?

The NDP is in a downward spiral. Jagmeet is clearly too much of a rookie for now, and many in the party are distancing themselves from him already.

https://calgaryherald.com/news/politics/recent-comments-by-thomas-mulcair-has-some-wondering-if-he-is-attempting-to-undermine-jagmeet-singh/wcm/0bf7861f-f7f1-4f20-b5f6-814208240065

The Cons are now realizing they are going to be cannibalized by Maxime, big time. All you have to do is read some of the irrational comments on this blog by Paleo White Male Boomers to realize how attractive the People’s Party of Canada will be with its straightforward, simplistic approach to tough or sensitive issues.

Probably half of the Paleo White Male Boomers on this blog will vote PPC in the end. (Not including you, Garth, you’re much more a sensible moderate). Enough to tip many ridings back to the Liberals, and undermine Conservative strongholds in the West.

Net result? The Liberals are no longer thinking of 2019 in terms of fear, only strategy.

They will have much more wiggle room on economic issues like the housing bubble problem as they watch their opponents implode. So they are testing out positions in light of changing date now, even if it seems contradictory. Widening the scope of their future options.

Opaque? Yup. Cynical? At least a bit, sure.

But the Liberals now see that they will have a straight shot at victory against the divided conservative movement, filled with people who believe in chemtrails and think climate change is a hoax, and feminism is Nazism, like so many of the Paleo Boomers who submit comments here.

(OK Paleo Boomer Trolls, get to work and start tearing down this entitled SJW Millennial, LOLOLOLOL!)

Scheer is in a quandary now about how extreme he has to go to preserve his base from the PPC, and realizes he cannot without sacrificing any other possible gains.

Great discussion snippet of this today on CBC Radio’s The House, (about the halfway mark – podcast available on Sunday). Basically, the pundits both agreed, left and right, that Scheer is toast. He is in a true dilemma. Catering to the PPC supporters to win them back will only decimate his middle-of-the-road supporters whom he desperately needs in order to challenge Trudeau.

https://www.cbc.ca/radio/thehouse/about

Overall, the coming Liberal victory will be a better, middle-left solution for what Canada has to face in the future.

Thank you SO MUCH, Paleo Boomers! :) :) :)

#64 Ace Goodheart on 01.26.19 at 11:43 am

Government mostly sucks:

https://www.theglobeandmail.com/canada/british-columbia/article-warning-signs-bc-politicians-shocked-by-spending-scandal-missed/

If you have an hour or so, and you want to read up on what really happens to your tax dollars after they are extorted from you by various levels of government, on pain of jail time and asset confiscation, read about this latest exposure of public service spending.

Every so often, these dudes, who already were earning multiples of six figures per year, would authorise themselves a “retirement allowance” (even though they weren’t retiring) to be paid in a lump sum (most recent one was $258,000.00 in cash).

They also seemed to spend public money like a recent lottery winner, all of which was of course, tax money.

So when people in BC wonder why the government has to tax their cottages as speculation properties, even though they weren’t speculating, just remember where the money is actually going (to public servants to pay out huge retirement packages, when they weren’t actually retiring).

Your tax dollars hard at work…..or not.

Makes me wonder what all of the “carbon tax” money will be spent on. Maybe a bunch of civil servants in Ottawa need lump sum payments, expensive vacations and padded expense accounts?

#65 not 1st on 01.26.19 at 11:52 am

#63 Millennial Realist on 01.26.19 at 10:40 am
—–

MR, there is no need to respond to you. Wheels are already in motion. The anchor is being passed to you and you are voting for it. Perfect. I will probably switch my vote to Trudeau now just to seal the deal.

I advise you to watch the show No Country For Old Men. Great line in there. “You cant escape whats coming” Neither can you. Enjoy your anchor. Smart money moves while you sleep.

#66 Vampire studies on 01.26.19 at 12:17 pm

42 Stan – good morning. I’ll go with Shawn’s view that credit is the grease. I think the components you list are
more like ‘fuel’. Still needs an engine and a driver.

I try to keep in mind too that ‘credit’ doesn’t just mean the cards in my wallet or the mortgage on my house, but also the cheques in my book and the number on my bank statement.

#67 crowdedelevatorfartz on 01.26.19 at 12:57 pm

@#63 Millenial Surrealist
“Great discussion snippet of this today on CBC Radio’s ….”
+++++

Bwahahahaha.
The CBC… the socialist Left’s echo chamber.
I only listen to their endless, nauseating, politically correct screeching because….my taxes pay for it…
Withdraw the taxpayer funding and the CBC would fold like a cheap carny tent.
And then who would pay for the employee pensions? ???
The “Corpse’. Increasingly irrelevant in the real world of “competition”.

Keep dreaming my misguided Millenial.
Liberals elected in a majority?
You still misguidedly assume your cohort actually lift their collective heads from texting long enough to vote?
A week is an eternity in politics….and T2 has 9 months to go……..

Dont be too smug yet
Trudeau has been shuttling around from one safe photo op to another.
Eventually his zoo handlers will have to let him back into the real world to deal with real issues. Like budget deficits.
But you keep voting for a “overspend now, and tax the children (of Millenials) 20 years later”.

It worked for us Boomers :)

#68 MF on 01.26.19 at 12:58 pm

62 not 1st on 01.26.19

That goes for all first world countries though. A lot of immigrants are escaping extreme corruption, poverty, violence and tribalism. You think they are thinking about price/rent ratios and interest rates in that situation?

MF

#69 Steven Rowlandson on 01.26.19 at 1:01 pm

It is doubtful that governments or the bank of Canada is serious about curbing the excesses of the real estate market. It quite likely is just a game of let’s pretend.

Bold talk and weak action does not work. Never has , never will. My guess is that both governments and banks are restrained by their own exposure to the consequences of curbing the real estate market.
Mortgage insurance losses, higher interest rates on bonds, property tax losses for governments, loan losses for banks, having a glut of hard to sell properties plus the political losses at election time. Not exactly something governments or bankers would enjoy. The shock to other markets might not be a small matter either.

#70 Leo Trollstoy on 01.26.19 at 1:11 pm

Millenials are irrelevant cuz they’re poor

#71 Exurban on 01.26.19 at 2:05 pm

#52 Adee

There was a tax break in the 1970s and early 80s called MURB (for multi-unit residential buildings) which financed the construction of scores of large purpose-built rental high-rise apartments in the Vancouver area. They are all still standing, as they were built to last and professionally managed. A few have been converted to strata title and sold as condos, but most are still renting. They are serious money machines for the owners now.

The MURB tax break ended sometime in the 1980s when RE values were low and vacancy rates relatively high. In retrospect, it should have been cut back somewhat but not ended. The legacy buildings from the MURB age are a lot more use to society than the thousands of junk condos pumped out in this century.

#72 Stan Brooks on 01.26.19 at 2:12 pm


#66 Vampire studies on 01.26.19 at 12:17 pm
42 Stan – good morning. I’ll go with Shawn’s view that credit is the grease. I think the components you list are
more like ‘fuel’. Still needs an engine and a driver.

I try to keep in mind too that ‘credit’ doesn’t just mean the cards in my wallet or the mortgage on my house, but also the cheques in my book and the number on my bank statement

Credit could be good if:

1. It is not excessive, i.e matches increase in wages and savings

2. Stimulates productivity and increases competitiveness of the economy

3. Used only when needed, i.e. in times of economic problems. Credit is basically pulled up consumption from the future while savings is deferred consumption/investment into the future.

Our credit is excessive by all measures, it spiraled out of control in supposedly good economic times, is not supported by wage gains and is accompanied by absolutely diminished savings.

If credit was based on savings how could it grow so much at the same time when savings were literally eliminated (gone down to 0/8 % of income)?

95 % of the money in Canada is created through private lending, these was an article on Wikipedia on the topic that was at some point taken down.

There is an wonderful article by Bank of England on how money is created through lending, not trough deposits, google it.

Our credit was driven mostly by consumption, our productivity sucks and cost of living has skyrocketed due to the credit boom.

I personally don’t care what a credit junkie (it is a disease, an addiction) would do with his/her/zer life, but in the part that concerns others through government, money, inflation, theft from future generations I do care, so should you.

By expanding credit that is not based on deposits/savings, through loans, banks gain control over economy and assets and can at some point in time backed by spineless central bank claim it all, there is nothing you would be able to do about it.

Go and check ‘other deposits’ section on each bank’s balance sheet and how it grows over time.

#73 @careeraftschool on 01.26.19 at 2:42 pm

Not surprised this is happening. A couple of years ago everyone in Vancouver was talking about flipping real estate. In the past year I noticed more and more people becoming alternate lenders charging interest rates north of 12%. They noticed people are becoming more desperate and willing to pay higher rates. They say this is an easier way to make money with lower transaction costs then flipping real estate. So far they are making money.

#74 HowDeepThe Pain? on 01.26.19 at 2:59 pm

It would seem they have to invoke some stress test measures on the non-bank mortgages.

1. I’m sure the banks are not happy about losing mortgage business.

2. When the non-bank money dries up (and it will) there will be definite forced selling when the non-bank borrowers have no where to go.

A little pain now Vs massive pain later.

#75 yorkville renter on 01.26.19 at 3:29 pm

#54 Cash purchase my friend….The buyer bought to stow away their money… they have a daughter who will likely start school at UofT in 18 months so she’ll have a place waiting for her.

That’s very specific information there Rick… how are you so sure? You must have specific information to call me clueless.

so – whats the address we’re talking about?

#76 Reality is stark on 01.26.19 at 3:29 pm

The politicians are masters at obfuspeak. Since 2008 public servants have been 25% overpaid.
That should have been corrected immediately. A decade of kicking the can down the road has cost us dearly. The longer we wait the worse it gets. By propping up the housing market we disguised the real issue.
We will all die a slow death from being so stupid as the country bankrupts itself.
All these other economic distractions avoid the elephant in the room.
Cut costs or die, we are in a deflationary world reality.

#77 Steven Rowlandson on 01.26.19 at 4:25 pm

“Cut costs or die, we are in a deflationary world reality.”

That is the only way out short of a all destroying Wiemar style hyperinflation. Cutting costs in a meaningful way?
There is no political will to do that. Paul Martin tried to cut debt for a while and knocked the debt down from 570 billion more or less to the low 400 billions. May be 430 billion. Those good works were expunged by the following conservative and liberal governments. Western countries are so addicted to government profligacy and real estate hyperinflation that any kind of serious recession or depression or anything that jacks up interest rates too high risks bankrupting both government and real estate investors/ homeowners.
This would cause big time financial and political problems that are not easily or painlessly dealt with.

All debts do get paid though. Either by the debtor or by the creditor.