The noble goal

If you’ve even remotely thought about ordering a yellow vest or voting NDP, please leave now. The following will make you crazy.

Elizabeth is a 1%er. Unapologetically. She’s also homeless, so you can guess where she and her husband hang out.

“We’ve saving for a few years hoping to buy a house in Vancouver. After reading your recent postings on mortgages being goosed I thought I would highlight the contrast at the high end. We didn’t realize what lenders do for non-CMHC mortgages and how restrictive it can be for higher income people.”

While this may seem like a deep dive into First World problems (which it is), there’s more to the story. It follows on yesterday’s post about how a politically-diddled real estate market ends up punishing everyone. In YVR, that’s the case in spades. Moisters are locked out by high prices and the stress test. Homeowners are losing equity and precious net worth thanks to anti-property taxes. And now, as Liz details, lenders are turning their backs even on those with high incomes, fat downpayments and house lust.

“I know a lot of people on the blog might roll their eyes, but this is not a ‘woe is me’ moment and should not be construed as such,” says Liz, “I simply wanted to highlight the contrast between the lower priced mortgage market and the higher end market. We are looking for a house between $2-2.5M and are not pleased with what we see offered in that price range. That being said the bank refused to qualify us for that much. We have a $450K downpayment and both have excellent jobs that are well within the top 1% of income earners.”

The bank qualified this couple for a purchase price of $1.7 million – which buys a nice garage on the Westside, despite having enough income to support a far larger loan. “Basically the bank requires a 50% downpayment on any financing amount over $1.25M. So essentially for that $2M house we are looking at a $625K downpayment. So this is effectively over 30%!”

Why would this be the case, when some kid with barely 5% to put down can borrow a big multiple of his income at the bank’s best-possible discounted rate?

Simple. CMHC insurance. First-time buyers with minimal cash pose no risk to the lender since the federal agency will backstop defaults. “[email protected] also told us that we were a “unique” couple since most of her clients buy condos and have CMHC so it’s ‘less complicated.’ Interestingly,” Liz adds, “she also mentioned that the bank enforces this rule pretty strictly because they have had an increasing number of higher income properties in Vancouver with owners who either have recently taken off out of the country when prices started to drop or who ran into financial difficulties and the bank was not able to sell the house for the value of the outstanding mortgage.”

“With prices the way they currently are in Vancouver, even the properties at the lower end of ridiculous are around $4M (in the nice areas) and according to this “sliding scale” requirement that would mean a downpayment in the millions of dollars is needed even if your income can support the payments! We were shocked at how conservative the bank was being because a few years ago anyone with a pulse was being qualified for large loans. What gives?”

It’s all about risk, E. The banks well understand what big new taxes and crashing affordability levels can do to a market. Condo buyers with small deposits and insured loans are safe bets given that the feds will cover losses if they walk. But wealthy people with 20% or more down borrowing a million or two are now suspect, given the assault on high-end properties. So this drying up of credit at the top end just exacerbates the crash now taking place in hoods once considered untouchable. The biggest victims are those who may have bought since values peaked three or four years ago. The losses in some cases are staggering. And mounting.

Dippers and yellows applaud this, of course. The destruction of capital is a noble goal, so long as it’s not their capital. BC’s tax regime, including that of Vancouver’s lefty mayor, is designed to bleed the rich in a country where the top income tax rate is already over 50% in a majority of provinces. As the country drifts, market intervention is seen as a good thing. The playing field is merely being levelled, people say. Wealth inequality is wrong. And these days real estate is wealth.

But, there’s always a but. Home ownership is no more a right than possessing a car. And there are lots of affordable places people can go to live. Deliberately manipulating a housing market to defeat existing conditions, as politicians love to do, carries its own set of risks. When pendulums swing, they seldom return to neutral. The seeds are being sown – by government – for a truly unfortunate social situation. When that occurs the 1%ers will be fine (they always are). The masses, 70% of whom own houses and have their wealth stored there, not so much.

When the elite and overlords have trouble getting loans from banks which fear defaults, what does this tell us? Well, for starters, we have a debt crisis. Unless the loan’s insured by the government or far below the value of the property, no deal. We all know the debt-to-income ratio is 450% or better for the majority of buyers of $1 million+ homes in the GTA and LM. Scary.

Second, major lenders are bracing for a far greater erosion in real estate values. That’s just prudent. So, as Liz discovered, they have Greater Fool rules in place. Third, the plop in sales in the largest markets is a leading indicator of economic conditions. When two-thirds of our GDP comes from consumer spending, it says something. Like, whoops. A housing crash will bring lower employment and falling incomes. Real estate prices do not decline while everything else (like your ability to buy) stays the same.

So the federal budget is tomorrow. Another opportunity to witness political manipulation. This time to encourage borrowing, debt accumulation and spending. There’s even talk of shared-equity mortgages.

No help to Liz, of course. One percenters don’t get no respect.

 

162 comments ↓

#1 Hanny on 03.18.19 at 5:18 pm

Greeting blog dogs – several of you have messaged me asking when my site would be updated. Here it is:

https://TorontoRealEstateCharts.com

#2 Victoria Real Estate Update on 03.18.19 at 5:19 pm

STILL HAVING PROBLEMS GRASPING JUST HOW MASSIVE VICTORIA’S HOUSING BUBBLE IS?

The fact of the matter is – 8 years ago in 2011 – Canada’s housing bubble was already bigger than the 2006 US bubble. And in 2011 Victoria was among Canada’s bubble leaders – with extreme housing price gains simply dwarfing income gains for several years leading up to 2011. That was 8 years ago. Since then Victoria’s bubble has grown from big to completely off the charts.

If you think San Francisco had a massive bubble in 2006, then you haven’t compared it with Victoria’s in 2018/19. Victoria’s price run-up since 2000/02 isn’t far behind Vancouver’s. This (second) chart compares San Fran’s bubble price run-up to Vancouver’s (from 2002-2019). Absolutely unreal. (Awesome chart Wolf).

From 2000 to 2006, house prices in San Francisco skyrocketed, more than doubling (2.2 times) (Case-Shiller Index).

Did incomes there skyrocket (an equal amount) and more than double (2.2 times) – over the same period – to support price gains in order to prevent overvaluation? No – incomes barely moved in comparison. This left San Fran with a major problem – a housing bubble.

From 2000 to 2018, house prices in Victoria skyrocketed, almost quadrupling (3.5 times) (Teranet’s Index).

Have Victoria incomes skyrocketed (an equal amount) and almost quadrupled (3.5 times) – over the same period – to support price gains in order to prevent overvaluation? No – incomes have barely moved in comparison. This has left Victoria with a housing bubble much bigger than San Fran’s in 2006. A major problem indeed.

And history has proven over and over again that only one basic thing can happen with a housing bubble. And it isn’t exactly nice.

SOUND FAMILIAR?

West coast city, a strong economy, running out of land, foreign buyers, warm weather, the government won’t let it happen, a growing city, dense population, demographics, plenty of construction, “they” were wrong, rich locals, everybody wants to live here… Sound familiar? The list of reasons cited by San Fran realtors in 2005/06 that guaranteed higher prices year after year was long.

And realtors there (on blogs and elsewhere) quickly attacked those who questioned their hype – pointing to recent price gains as proof that realtors would always be right – and that “doomers” would always be wrong. Those who provided facts to prove that a bubble existed were met with anger in the form of ridicule and name-calling by realtors who had no facts to counter (sound familiar?).

Continued…

#3 drydock on 03.18.19 at 5:20 pm

DELETED

#4 yorkville renter on 03.18.19 at 5:24 pm

interesting post.. is the bank forecasting 40% drops, hence the massive downpayment requirements?

#5 Victoria Real Estate Update on 03.18.19 at 5:25 pm

In San Fran in 2005/06 owning a mortgage meant that you owned a piece of the pie and that you would automatically be wealthy. Things got to be so twisted that owning a mortgage (massive debt) actually became a status symbol. For many owning a (fat) mortgage separated the “haves” from the “have nots”. Renters were considered failures by some, destined to be poor.

GOLDEN REALITY

But – as is the case with all housing bubbles – it was always a case of “when“ Mr. Market would arrive in the Golden City – and not “if”.

In 3 short years (after 2006) house prices in San Fran corrected – 45%. (Case-Shiller Index)

The “it’s different here” mantra disappeared. The media stopped pumping real estate. Realtors went quiet. Many of them shut down their websites. Tons ended up living in their cars after losing almost everything. Neighbours who used to chat over the fence about how much their houses were worth no longer had a reason to chat.

Dreams of financial freedom through taking on a hefty mortgage at sky-high prices turned into real-life nightmares of losing everything for many as prices inevitably went south.

Many of the “haves” became the “have nots” and realized they never actually “had” anything, that owning massive debt is dangerous and that their realtor’s promise of wealth was just a sales pitch.

Some began to regard realtors with the same level of disgust and contempt that they had previously directed at renters, before prices turned. On the other hand, renters – who had waited it out – were suddenly looked at as intelligent and well-informed. Indeed many renters/savers became the “haves”.

That renters had every opportunity to buy property at a fraction of the cost was entirely predictable. It’s what happens with bubbles. Prices had naturally fallen back to San Fran’s long-term price to income ratio, pretty much guaranteeing higher prices in the years to come for those who would decide to buy.

As always, waiting out the bubble proved to be golden. No bankruptcy. Plenty of (safe) opportunity. What happened in the Golden City is the norm with housing bubbles, not the exception.

BUBBLES ALWAYS BRING TROUBLES

The bigger the bubble, the bigger the correction. Just how massive will Victoria’s price correction be?

History shows that adding more stimulus to a housing market that is already in a bubble (think Canada in 2019) can potentially move prices higher, but any advances are always temporary and lead to an even bigger price correction.

Mr. Market is going to have fun with Victoria.

#6 Armpit on 03.18.19 at 5:27 pm

Just like the 1% bikers on this blog

#7 messy market on 03.18.19 at 5:30 pm

Liz’ story is a pretty accurate depiction of the mess this market has turned into. The top cannot get enough leverage to buy suitable homes, the bottom is goosed with incentives and driving up prices in that dreadful and deplorable “townhouse” segment higher. Chicken coop style boxes with barely 1300 sq ft shouldn’t cost more than 400k max – no matter where in suburgatory. Asking 600k or more for that crap is taxing low and median income families into near poverty.

However there’s a silver lining. If the discrepancy continues the logical consequence should be that eventually cash buyers call the shots and RE prices will crater across the entire spectrum.

Liz, wait this out. Your 450k down will eventually get you the dream property on the North shore.

#8 Shawn Allen on 03.18.19 at 5:30 pm

Want a Mortgage over $1 million? Get Outta Here!

Canadian Western Bank’s CEO on latest conference call mentioned that they have no personal mortgages over $1 million.

And they cater to business owners, a good number of whom would be high net worth people.

Over $1 million personal mortgage is a no go zone for this bank – presumably for the reasons Garth mentions.

#9 Smartalox on 03.18.19 at 5:46 pm

I’d be more alarmed about the numbers of expensive houses that are HELOC’d up, before the ‘beneficial owners’ decide to flee the jurisdiction.

I don’t know if anyone is keeping track, but the long-term parking lot at YVR is regularly full of vehicles – even when it isn’t March Break (or Golden Week, as the case may be).

I recall hearing stories of cars abandoned in the car parks of airports all over the UK, during the crash in 2009.

It seems that many were bought on credit by ‘guest workers’ from the Continent, and when the economy turned, they drove to the airports and boarded flights home, leaving the cars behind to be repossessed.

Looks like there’ll be some big bargains coming to those with cash to spend and time to wait.

First, West Side houses going for 40% off. Then, a quarter or two later, bank shares going for about the same.

#10 Azashi on 03.18.19 at 5:51 pm

I have to say, Garth, you do wear the horse blinders regarding the market to such a strange extent. You decry the market’s failures – you address them time and again in post after post here – yet as soon as the government takes action, you start calling it out.

Let’s establish a few things:

1. There is no such thing as a free market for a number of reasons:

a). Money. Backed by a government.
b). Regulation and enforcement. Even if you take money out of the equation by reverting to barter, even if you remove all people on the planet except the two doing the deals, someone has an advantage of power in this situation. Someone can force the deal to go through fairly or unfairly. Someone is stronger. In the absence of that oh-so-deplorable elected government, you will get corporate, fascist, or armed mob rule. There is ALWAYS a government, and no market can exist without it.

2. You would praise and cheer rising home prices in an in-demand area. When property owners want more for that land, and developers want more for the condos they build there, and landlords want more rent to pay for the expensive condos on the expensive land, you see all as good. Supply and demand. Yet the moment government engages in supply and demand – taxing in-demand areas higher than less-demanded ones, you lose your shit. Why? Having spent my youth in the lower mainland and having commuted to UBC from Surrey day after day, I can think of nothing better than taxing the desirability of West Van to improve the shit-tier infrastructure that allows those of us going to school or work there to actually get there. If Richie McBillions (or more likely these days, Zhang Moneymang) wants to buy a ridiculously expensive concrete box and pay high taxes on it, let him. Especially if he has no intent of ever residing there, but is hiding money from the communist party (you hate actual communists, right? not just NDP that you label communists?)

3. One moment you’re making fun of idiots buying homes at inflated values, the next you’re decrying the loss of inflated equity in concrete boxes that were way overpriced to begin with.

I love your blog. I learn from it daily. I abandoned Vancouver years ago and am currently enjoying cheap rent and watching property values fall in Alberta. But man, I really feel like you not only have blinders, but you selectively choose when to put them on.

All due respect, much love, keep on blogging.

#11 meslippery on 03.18.19 at 5:55 pm

The one percent should pay cash for the home and with the money earmarked for the mortgage can now be invested.

#12 expat on 03.18.19 at 5:57 pm

That smug bureaucrat Wernick resigned.
If you recall I said he’d resign two weeks ago. One could see how deep he was in the crap when he testified using language like assassination as a redirect.

It shows very clearly now how deep this thing goes.

The Clerk of the Privy Council is the most high bureaucrat in the system. The role is to serve government non-politically. To keep the government between and during government change.

It was never to meddle in affairs.

Boy, it clearly shows how corrupted the Canadian system has become.

Oligarchies and massive bureacracies were a Russian staple. Now they are part of the Cdn maple.

An RCMP investigation is really the only way to clear the air. Put those involved in illegal activities on trial and let the courts decide.

The rule of law is greatest gift of the WEST!

It matters because the economy and politics in Canada are linked due to yoru socialist beliefs.
Many of you haev said Canada is a blend. This case clearly shows it isn’t.

The STATE! decides legal outomes now. An impartial legal system was a balance of that power. Not anymore.

When the government is corrupted it shakes the foundation of the economy. Foreign capital looked to our legal system as a risk off. It is a risk on scenario. Deals are now not protected form politics.

Once can expect economic fallout from this in the short term and possibly long term. How can one do business when some are more equal than others.

Thus we see oil companies running from Canada at any price for their assets.

When the core of the economy is ripped apart – families are affected which then afects housing even more.

As I’ve said, and flamed for it, Canada’s socialist economy is at very serious risk.

Capital flight for the last two years has been huge. Jobs go with it.

#13 This is Your Pilot Speaking on 03.18.19 at 6:01 pm

Put your heads down and prepare for the ride of your life.

#14 patty twinkle toes on 03.18.19 at 6:01 pm

Still don’t know what any of these real estate posts have to do with people who don’t live in the LM or GTA….i guess its nice to be informed….nevertheless, i enjoy reading your blog everyday Gartho.

#15 USA on 03.18.19 at 6:03 pm

I think Canadians are fools for not moving to the United States of America. The housing is cheap, the weather is warm, and taxes are low!

Canada is no longer a viable place to live if you are 45 or under and quality of life is significantly lower.

#16 Justin on 03.18.19 at 6:04 pm

Liz is right. But it is good for Liz because in a little while those 2m dollar homes will cost her less. So whats the problem? Enjoy living w ma and pa, spend some cash money on important stuff now and then buy a place with a main floor bedroom later so you can return the favour some day.

#17 Smoking Man on 03.18.19 at 6:07 pm

Disaster looming

New Car Sales in Canada. This is the result of negative wealth effect when it comes to Real Estate.

Real Estate recovery is looking Grim.

https://tradingeconomics.com/canada/car-registrations

#18 The Wet One on 03.18.19 at 6:09 pm

Do you have a cite for this statement?

“Dippers and yellows applaud this, of course.”

I haven’t noted such myself, but I don’t see everything.

A wee little link would be handy.

Thanks!

#19 X on 03.18.19 at 6:10 pm

I initially thought your story was really going to go in the direction of whether it was financially better in the long run to buy a 2-2.5M home with a mortgage (avoid cashing out of investments, avoid capitals gains on those funds by keeping the money invested, and getting a mortgage at a low rate of 3%) or to buy the same home outright (cashing in investments, paying taxes on gains, yet getting a HELOC to re invest money, with tax deductable interest) to really irritate the orange voters.

#20 TurnerNation on 03.18.19 at 6:11 pm

Is this a payoff game?

Option 1: put 35% down and mortgage the balance with 3% cost of funds.

Option 2: put 100% down then borrow back 65% LTV @ 3% and invest into a balanced portfolio.

#21 Dolce Vita on 03.18.19 at 6:17 pm

“The following will make you crazy.”

YA, IT DID.

-Buonanotte Garth, Ciao d'[*]Italia.

—————————————————-

*
http://www.rainews.it/dl/rainews/articoli/italia-recessione-pil-quarto-trimestre-in-calo-02-per-cento-0c5a5a22-7687-4f1f-b04e-25a4aafcd53e.html

#22 Figure it Out on 03.18.19 at 6:18 pm

“When the elite and overlords have trouble getting loans from banks which fear defaults, what does this tell us?”

That things are getting back to normal.

Old school question: Does the property carry the note? If they were to default on their 70% LTV mortgage and the bank had to evict them and rent out the property, would the net rents cover the contracted loan repayments? Because if not, it was a money losing proposition, just as much as lending to a small business whose income from operations couldn’t support the note.

Destruction of capital? The land and buildings ARE the capital. Salting the land and burning the buildings destroys capital. As does leaving the land fallow and the buildings vacant and decaying. People who want a guarantee that their wealth measured in the numeraire of the realm never decreases should instead buy government bonds.

#23 Mean Gene on 03.18.19 at 6:18 pm

So a 1%er couple can only afford to purchase a Vancouver Special in the armpit of the city… okay, there is something wrong here.

#24 Trojan House on 03.18.19 at 6:19 pm

Why people think or even believe we live in a free market society is beyond me. The government tries to manipulate every little thing and it usually comes out for the worse.

#25 Frank on 03.18.19 at 6:20 pm

DELETED

#26 jess on 03.18.19 at 6:21 pm

HMRC wins battle to tax Lehman Brothers interest payments

HMRC has won a longstanding legal challenge over whether or not PwC as administrators to collapsed bank Lehman Brothers International (Europe) (LBIE) should deduct income tax from some £5bn of interest payable to creditors, after the Supreme Court ruled in its favour

https://www.accountancydaily.co/hmrc-wins-battle-tax-lehman-brothers-interest-payments

https://www.euractiv.com/section/economy-jobs/news/eu-tax-haven-blacklist-triples-to-include-15-countries/

#27 Graeme on 03.18.19 at 6:22 pm

Agree. Government shouldn’t be insuring mortgages.. or bank deposits. Let ’em fail. Or (God forbid), individuals conduct their own due diligence. Stupid is supposed to hurt.

#28 The real Kip (Ret) on 03.18.19 at 6:25 pm

Wow. 1%ers scrambling to get eyeball deep in debt. I guess it would be absolutely unthinkable for Liz to live in a sub-million dollar home. Yup, first world problems alright.

#29 CROOKED JASON KENNEY - LOCK HIM UP!! on 03.18.19 at 6:25 pm

Albertans, if you are so stupid as to vote for this liar and scammer you deserve every bit of misery you get.

Canada is watching. It’s Rachel for another round, or Alberta is toast.

And if you elect this kind of scumbag and his party, you don’t deserve to stay in our country.

https://edmontonjournal.com/news/politics/ucp-leader-jason-kenney-dismisses-new-details-in-emerging-kamikaze-scandal

#30 Dolce Vita on 03.18.19 at 6:28 pm

#17 Smoking Man

Click on “10Y”.

It’s cyclical.

2019 trough not the lowest.

2019 peak 1 of the 2 best.

#31 Nonplused on 03.18.19 at 6:30 pm

One other thing the banks might be looking at when setting the down payment so high on super large mortgages is that being a 1%er is not a stable thing. Maybe if you are a doctor or a lawyer with an established practice it might be, but most people go through winning and losing streaks just like a sports team.

For example, the typical career path for an engineer in Calgary who makes it to the 1% looks like this: Graduate (4 years). Start first job and get P.Eng. (4 years). Promoted to senior (6 years). Promoted to manager (4 years, now low end of 1%). Company divested and all managers severed (1 year, severance is good for 1%). Unemployed. (2 years, back to 99%). So this guy has spent 19 years in the workforce but only 5 of them were in the 1%, and now he’s back where he started only facing a recession in the oil industry and ageism in the workforce, nobody will hire him. He resorts to consulting gigs to pay the bills. This scenario is quite common.

The banks know this, which is why they are reluctant to lend millions to even the 1% without big down payments. Many if not most of the 1% are only a reorg away from dropping back to the 99% and may stay there for a long time, if not permanently. If they don’t have significant assets when that happens, there is no way they are going to service their supersized loans. And $4 million dollar houses are a lot harder to sell than $400,000 houses.

There are lots of careers that can be affected by this up and down seesaw action. Real estate agents, traders, car salesmen, house builders, restaurant owners, anyone owning their own business really, oil rig workers, “VP’s”, the list goes on and on. Even someone who has significant investments in real estate can be 1 major tenant away from dropping out of the 1% and possibly facing bankruptcy.

The 1% are more like the 4th line of a hockey team, earning $750,000 a year (minimum wage in the NHL) for 2 years and then unemployed. But since the government took half of that, the $750,000 they got to keep has to last a lifetime. Even in the NHL there are very few Jerome Iginla’s with staying power and $6 million dollar contracts. And the plight of the back benchers is extremely bleak, as they have spent their whole lives on hockey and their parents have invested considerable sums (up to $100,000 in most cases, after tax) and have no other skills to fall back on. It’s off to trade school when you hang up your skates. I know this because worked (and played hockey!) with one of them. After his hockey days were over he became a run of the mill corporate accountant. But most of them take too many hits to the head to do that.

I’m not trying to ask for sympathy for the 1%, only to point out that it is not a fixed caste as we often imagine it. There is a constant rotation. The truly rich, the 0.01%, are much more stable, it being difficult to break into those ranks and also hard to fall that far, as they own everything. But the 1% are here today and gone tomorrow.

That’s one reason I hate the changes Turdeau made to corporate taxes so much. Many professionals use to use retained earning to smooth the high and the low years. (I did.) They still paid taxes, but it would be more reflective of their average earnings. Now you have to pay at a 50% rate in the year the cash was earned but the following year you pay zero if there is no cash but the over all rate is 50% when it might have been 25% if the income was smoothed or averaged. It’s really quite a catastrophic change for people who work in the gig economy.

Anyway, my point is that it is a mistake to assume that the 1% are in anyway secure in their positions. They are the first ones who get skidded when the economy turns south. Also, luck may find you in their ranks for a while. So when you talk of “taxing the rich”, realize you are either extremely pessimistic or talking about taxing your future self out of all the rewards of your hard work during the limited window you may have to capitalize on a lifetime of effort.

So ya, if I were a banker I would not lend a bunch of money to a hockey player.

#32 Remembrancer on 03.18.19 at 6:33 pm

#20 TurnerNation on 03.18.19 at 6:11 pm
Is this a payoff game?
——————————————–
No game, at least not in the sense I think you mean. It is game theory though…

Option 1 – risk is mine
Option 2 – risk is yours

#33 Jimbob on 03.18.19 at 6:34 pm

This story shows the massive distortion of the market and misallocation of risk caused by CMHC (which ultimately means you and me as taxpayer underwriters).
Without CMHC the banks would never grant such large mortgages with minimal downpayments to new buyers.

Let’s hope the market doesn’t collapse such that CMHC is on the hook to the banks for billions in shortfalls

#34 the ryguy - In cabo on 03.18.19 at 6:37 pm

I have a pretty good idea of what the deleted comments are today, lol… oh dear.

#35 renter in Surrey on 03.18.19 at 6:38 pm

There is no free market in RE.
Government indirectly controls prices by interest rates, CHMC insurance, stress test, etc.

“BC’s tax regime, including that of Vancouver’s lefty mayor, is designed to bleed the rich”.

Federal government decided to enslave those who did not get into the market 15 years ago with enormous debt by inflating RE prices to the crazy high levels.
All the policies were setup to inflate RE values, nothing else mattered in Canada.

“The biggest victims are those who may have bought since values peaked three or four years ago.”
Nobody put a gun to their heads. They made a choice, they now face consequences.
Should have followed 3-4 times annual income rule.

The biggest victims are those who were working their arses off, paid 50% of income tax and has been priced out forever out of own country.

I say BC gov did not go far enough yet.
Set foreign dudes tax to 100%. Nobody is entitled to own RE in Canada, right?
Get rid of IIP, 99.99% of their business is RE holding/flipping.
Tax satellite families as local residents are taxed – I mean 50%+ income tax on “gifted cash”.
Can’t afford it? There are lot’s of affordable places in the world, move there.
Enforce tax laws on flippers.
Go after criminals laundering money in Canada.

Stop kicking this can down the road.
It has to burn to the ground.
We will survive the crash if it happens.

#36 akashic record on 03.18.19 at 6:46 pm

Second, major lenders are bracing for a far greater erosion in real estate values. That’s just prudent.

Other possibility, of course, is that the same major lenders risk-taking greed was too big.

Maybe the same major lenders are now overloaded with potentially non-performing mortgages, due to overestimating how rich their customers were, regardless of the erosion of real estate values.

#37 Remembrancer on 03.18.19 at 6:47 pm

#28 Nonplused on 03.18.19 at 6:30 pm

Well thought out, detailed though concise thoughts keeping to the topic, relevant and obvious knowledge of the subject matter. Well said sir.

https://youtu.be/q5pESPQpXxE

The only thing I’d add is that the end result of this morality play depends on their relationship with money. Did they save for a rainy day too, realizing some day the jig would be up and the good times over or did they spend it all on house, cottage, toys and epic Facebook and Instagram posts thinking it would last forever?

#38 ImGonnaBeSick on 03.18.19 at 6:49 pm

The banks are changing all kinds of rules lately. Now you can’t do personal payee bill payments of more than $50,000/day total… Makes payroll very annoying.

#39 Figmund Sreud on 03.18.19 at 6:51 pm

ICYMI:

Inflation adjusted Canadian real estate prices since 1999 in relation to other countries – active plot:
https://mobile.twitter.com/vsualst/status/1107324656762130433

Best,

F.S. – Calgary, AB.

#40 Nonplused on 03.18.19 at 6:58 pm

I probably beat this to death already but let’s look at 2 more cases the bank is considering adding to it’s mortgage portfolio.

Case 1 is an investment banker who got a $500,000 bonus last year because he was involved in a very successful deal. He’s asking for a $2,000,000 mortgage.

Case 2 is 5 different plumbers earning $70,000 a year asking for $400,000 mortgages.

Which do you think is more risky?

Even though the investment banker is looking for only 4 times income and the plumbers are looking for 5.7, the correct answer is that the loan to the investment banker is far more risky. In the case of a job loss, the plumbers are far more likely to be able to get another job at or about their current wage. And there are 5 of them so they are not likely to all lose their jobs at once. And their houses are cheaper so easier to sell in foreclosure. Thus, the plumbers represent a far more resilient loan portfolio than the investment banker does, despite the higher ratio.

And I didn’t even include the CMHC affect in the banker’s thinking. Once you add in CMHC, the plumbers are far and away the better choice for the bank, even though they have to now paper 5 loans instead of 1.

#41 akashic record on 03.18.19 at 6:59 pm

Michael Wernick, clerk of the privy council, the highest-ranking position in Canada’s civil service and a key aide to Justin Trudeau, announced his retirement Monday. Trudeau named Ian Shugart, currently deputy minister of foreign affairs, to replace him.

In a scathing letter to Trudeau, Wernick said that “recent events” led him to conclude he couldn’t hold his post during the election campaign this fall.

So… how does this work in Canada? Is there any way for any public political institution to get all people involved, including the prime minister, under oath – like in the US?

#42 jess on 03.18.19 at 7:01 pm

risk?

More than £100bn of UK property is secretly owned
Analysis by Global Witness shows 87,000 properties – 40% of them in London – are anonymously owned by firms registered in tax havens

Global Witness investigations have repeatedly shown how criminals and corrupt politicians can use the UK property market to hide or clean dirty cash, and to secure safe haven for themselves and their families. And they’ve shown how London can be used by anyone wanting to hide their identity behind complex networks of companies and properties.

In 2015 the anti-corruption NGO revealed how the mystery owner of a £147 million London property empire owned via a network of offshore companies could be linked to a former Kazakh secret police chief accused of murder, torture and money-laundering.

Parliament is reviewing a draft law that could force these secret owners out of the shadows. We’re calling on the Government to table this legislation as quickly as possible, so we can find out who really owns so much of the UK.”

https://www.globalwitness.org/en/press-releases/100bn-of-property-in-england-and-wales-is-secretly-owned-estimates-show/

https://www.theguardian.com/uk-news/2019/mar/17/100-billion-of-uk-propert-secretly-owned-anonymous-firms-tax-havens

#43 AGuyInVancouver on 03.18.19 at 7:01 pm

Gee, sure sucks that the Capitalist Running Dogs at The Bank wouldn’t give Liz a loan. Maybe she should run with her problems to BC Liberal Leader Andrew Just-Sucked-A-Lemon Wilkinson. He’s a fearless champion of the priviliged uptrodden.

Or maybe she should just find a nice character house for $1.6 mil near The Drive or in Riley Park where she would get to know neighbours who actually lived in their homes and didn’t just steal in under cover of night, leaving only dusty Xmas wreaths behind on their doors for months.

#44 Penny Henny on 03.18.19 at 7:04 pm

Me tinks Liz should try another bank

#45 Penny Henny on 03.18.19 at 7:07 pm

It seems only fitting that today’s blog should be titled
‘The Noble Golden’, not the The Noble Goal.
I’m talking about the picture

#46 islander on 03.18.19 at 7:14 pm

Garth,
Your blog isn’t called ‘greaterfool’ for nothing. This crap shoot in YVR is going to expose quite a few ‘greater fools’ and let’s not say they haven’t been warned.
However, the sad reality is that the tax payers will be paying for this fiasco for a long time to come.
No one emerges from these debacles unscathed.
Long time reader – thanks.

#47 jess on 03.18.19 at 7:21 pm

golden visa programs

…”But the problem is that no matter how strongly golden visas are regulated within the EU and UK, these markets are still open to the corrupt and the criminal if countries to whom they grant visa-free travel continue to sell citizenship with few questions asked.

After all, the risks of doing business with such individuals is not contained within the issuing country – lack of residency requirements and low due diligence mean that these schemes pose a risk to all countries they offer visa-free access to.

But what does this risk look like? Over the past two years investigative journalists have newspaper exposed how golden visa schemes in Europe sold residency to executives linked to the Brazilian ‘Car Wash’ scandal, relatives of an Angolan politician accused of bribery, and Ukrainian and Russian oligarchs.

The Caribbean schemes meanwhile have been caught up in scandals related to Chinese fugitives, an Indian ‘diamantaire’ facing extradition, and a Canadian accused of being a ‘dark-net mastermind’.

The Canadian government has already taken action against the jurisdictions, cancelling visa-free travel for Antigua & Bermuda in 2017, citing risks associated with the lack of a residency requirement and concerns about poor due diligence. …

https://www.globalwitness.org/en/blog/every-day-commonwealth-day-if-youre-looking-golden-visa/

Commission reports on the risks of investor citizenship and residence schemes in the EU and outlines steps to address them

Brussels, 23 January 2019

For the first time, the Commission has presented a comprehensive report on investor citizenship and residence schemes operated by a number of EU Member States.

In fact, golden visas were basically invented in the Caribbean. St Kitts & Nevis established the very first citizenship-by-investment programme in 1984 and was followed quickly by many of its Commonwealth neighbours.

Today, some of the cheapest and most attractive fast-track schemes are offered by Antigua & Barbuda, Dominica, Grenada, Saint Kitts & Nevis, and Saint Lucia. Vanuatu also has skin the game, recently toying with the idea of ‘bitcoin’ citizenship.

For these small islands, golden visas are a lucrative business and for buyers, they open the door to ease of travel and tax ‘efficiency’. Often, there are no taxes and no residency requirements – with as little as $100,000 you can enjoy the many benefits of visa-free access to the EU, UK, Hong Kong, and over 120 countries.

These schemes have expanded dramatically over the last two decades, but recently concerns about the risks posed by lax checks on the wealth and background of applicants have put the schemes in the spotlight.

http://europa.eu/rapid/press-release_IP-19-526_en.htm

#48 Tony on 03.18.19 at 7:32 pm

Liz is living proof of the old adage ‘A fool and his money are soon parted’. If Canada follows the lead of New Zealand and freezes out all foreign buyers Vancouver will fall at least another 50 percent.

#49 Nonplused on 03.18.19 at 7:34 pm

#37 Remembrancer

First, thanks for the compliment, although I don’t think I was concise. Brevity actually takes a lot of time.

On to your question or comment:

The 0.01% are a different animal and not like the rest of us. They all have a Garth Turner investment team helping them with every decision. You might miss a $1000 tax deduction because you forgot to fill out a box in Turbo Tax. The 0.01% hires accountants that make sure no such mistakes occur. So let’s leave the 0.01% out and just look at the other 99.99%

I think most people, even the 1%, spend it as it comes, and borrow as if the last few years are a good basis to predict the rest of their years. So does the 99%. But not all of them. I lived through my dad going broke in 1982 and having to move twice in 6 months while I was in high school. My grandparents had lived through WWII in Europe and were thus hoarders. My grandmother use to say all the time “10% to God, 10% to your savings, and you can spend the rest”. My grandfather was adamant that waiting for a sale was the key to successful shopping. I think there are many people in the 1% and the 99% who use similar logic or people like Garth wouldn’t have many customers outside the 0.01%. But the statistics that Garth has shown us, and he didn’t make them up, would indicate that “many” is not “most”. The “most”, if I can coin a term, appear to spend every penny and borrow a little bit more, assuming the future will somehow save them from the present.

I think it’s a hard-wired human trait, as with almost all animals save maybe squirrels. The pressing demands of putting food on the table today are much more relevant in our minds than what might be the situation in 20 years. We evolved to eat what we killed or harvested today as there was no refrigeration, and then as there weren’t many options for long term preservation of extra labor, we went and sat around the fire. I think that translates directly into the current tendency of of the 99+1% (oh another new term, and I like that one!) to spend their bonus money on a wake-boat.

99+1%. I think that one will have traction, as long as people realize I am rounding out the 0.01%. As Red Green used to say, “I’m pulling for you, we’re all in this together.”

#50 Jay Currie on 03.18.19 at 7:38 pm

Friend of mine works at one of the big five banks on the commercial side. A top dude from TO HQ was out to talk to the troops. Along with the usual bluster he let slip that the bank views 2020 as a major reset year for its residential lending operation. Apparently, a lot of the three and five year term mortgages in the bank’s portfolio are up for renewal and none are going to be renewed without a serious look at the value of the property and the credit worthiness of the customer.

Should be interesting.

#51 Tony on 03.18.19 at 7:38 pm

Re: #44 Penny Henny on 03.18.19 at 7:04 pm

Liz needs financial advice or lessons in economics not another bank.

#52 Arctic Gringo: Qalunaaq on 03.18.19 at 7:39 pm

Decades of debt or to live without much at all. Who would you rather be? 150 square feet for 5 persons, one bed, washer, and dryer. My gosh.

https://www.cbc.ca/radio/docproject/this-family-of-five-lives-in-a-laundry-room-a-sign-of-nunavut-s-housing-crisis-1.5048497

#53 Mattl on 03.18.19 at 7:53 pm

This is not surprising and really blows away the myth that upper middle class Canadians or moisters were buying all those 2MM homes in YVR. It never made any sense that people were buying homes at 6 or 8 times leverage – anyone that has gone for a montage knows that the banks weren’t lending 1MM to a couple that has 125K income.

So if you can’t get a 1.4MM mortgage with 500K down and 500K in income (2 1%r jobs) who was buying all these 1.5MM to 5MM places? Either families with a ton to put down, or cash buyers.

When the government finally gets to true beneficial ownership data I think we will see that the influence of foreign buyers and laundered money in the most expensive places in YVR was significant – like 20-30%.

And before anyone calls me a xenophobe I don’t care who is buying homes and am for an open market. I think the foreign buyers and spec taxes are a joke. But lets be real about who was pushing the most expensive homes in YVR into the stratosphere. It wasn’t moisters making 150K taking out mortgages at 10x leverage. And this will all come out in time.

#54 akashic record on 03.18.19 at 7:53 pm

#47 jess on 03.18.19 at 7:21 pm
golden visa programs

Citizenship + diplomatic status issued in a foreign country is what’s cool.

#55 Rico on 03.18.19 at 7:56 pm

This story makes me happy.
Banks should be conservative with our money. The new bail-in rules mean that depositors are backstopping their risk and the last thing I want to see is an individual bank taking on risk with even a 25% drop in equity. CMHC at least has the volume of most/all insured mortgages.

#56 Media Watch on 03.18.19 at 8:04 pm

More on SNC-Lavalin

https://www.globalresearch.ca/snc-lavalin-site-c-bulk-water-export/5671247

If the courts don’t get Trudeau, the voters have to.

#57 Re-Cowtown on 03.18.19 at 8:05 pm

#29 CROOKED JASON KENNEY – LOCK HIM UP!! on 03.18.19 at 6:25 pm
Albertans, if you are so stupid as to vote for this liar and scammer you deserve every bit of misery you get.

Canada is watching. It’s Rachel for another round, or Alberta is toast.

And if you elect this kind of scumbag and his party, you don’t deserve to stay in our country.

https://edmontonjournal.com/news/politics/ucp-leader-jason-kenney-dismisses-new-details-in-emerging-kamikaze-scandal
__________________________________________

BFD.

Rachel’s killing pipelines, destroying the oil industry daily and now has her sights on quadrupling electricity prices in Alberta and you’re worried about some backroom political shenanigans? Puhleeze…..

Using your ruler for righteous indignation Hillary should be in SuperMax for what she did to Bernie.

Kenney is not my cup of tea but he’s better than someone who’s idea of good judgement is hiring regulators who are openly hostile to and in the pay of American groups who profit from the destruction of Alberta’s economy.

Give me unseemly backroom politics over openly stupid socialist incompetence any day.

Your ticket to the workers paradise of Venezuela awaits. Don’t let the door hit you on the a$$ on the way out.

Oh, BTW, Ex-Cowtown is now Re-Cowtown.

We’ve abandoned the Socialist Paradise of the Left Coast and moved home. You can only put up with stupid for so long, even if the weather is nicer. I hear it’s nice in Venezeula too. Pity.

#58 the Jaguar on 03.18.19 at 8:07 pm

Classic. All about the price point they ‘want’ and the down payment they ‘have’. Did they miss the memo on ‘affordability’? Maybe they only qualified for 1.7mm because that was the amount they could afford based on their income and other payments. Banks don’t make loans to seize assets. CMHC used to insure homes over one million. They stopped in 2014 even if you had 20% down. Stopped insuring rentals as well. Too bad all the horses had already escaped the barn at that point. Every regulatory change has been too little, too late. Don’t have to tell you who’s coming home to roost now. It’s surprising how otherwise seemingly intelligent people cannot resist the urge to buy housing on a scale that is well beyond their needs, often ugly in a conspicuously consumptive kind of way, and just as often as a distraction from some other more relevant issue happening in their lives. Kids leaving the nest, fear of getting reacquainted with the guy across the room. The one who when the kids came along began to be served hamburger so the kids could be served steak. What’s his name again and what are his passions and interests? Oh never mind. Let’s just go out and buy a new house to show off to our friends so we can feel we’re high value people. Mercy.

#59 Not 1st on 03.18.19 at 8:11 pm

Sorry Liz no self respecting 1%er with an ounce of brains would be getting entirely into the stupidest market on the planet in a country that’s about to load both debt barrels and unload into our collective faces. But you keep chasing that west side home. The smart money goes over the border everyday.

#60 Rexx Rock on 03.18.19 at 8:19 pm

#2 Victoria Real Estate Update.

High house prices and high rents in Victoria,Vancouver and GTA represents the amount that people who live there can afford.An abundant amount of high wage earners and investors is why these cities are out of reach for low skilled workers.You have to choose a city or town in which your income will give you the ability to have a rich and fullfillily life.The need to save for retirement is also a big factor.I’m sorry if you don’t have both of these,I think it is wise to leave.Just common knowledge,its not rocket science.

#61 Not 1st on 03.18.19 at 8:26 pm

Media Watch on 03.18.19 at 8:04 pm

——

NAWAPA is the best thing that could ever happen to our country. The spin off activity would be massive and the country would finally get some real capital injections.

#62 Robert Ash on 03.18.19 at 8:29 pm

Sadly folks, that have saved and worked hard, generally are being punished for their important commitment to the Domestic money supply, and our Economy. Any smart younger folks, with some business training, understand the importance of this foundation of a nations economy. That is not favored any longer, with no return on savings, for anyone, other than Investment strategies. Coupled with the continuous and immature policy of the Politics of Envy, many well off Canadians, are choosing to live in other countries. That is not going to improve the future of the current young Canadians who are being conned by our current Group of Activist Leaders, Provincial and Federal.

#63 Linda on 03.18.19 at 8:39 pm

I’ve read a couple of articles now regarding high end BC properties being sold for literal millions less than the original ask. In neighboring Alberta, a Millarville woman has launched a ‘write a letter’ contest to effectively sell her 1.6 million (or 1.7 – news articles vary) home that she has been trying to sell in the conventional manner without success – no offers or so lowball she can’t afford to take the offer. Anyway, a $25 fee & a letter saying why you should win the home is her way of trying to get her money out of the property. She only needs 64,000 entries!

IF the crush of the high end BC housing market continues, could be ‘E’ & partner will score a very nice property indeed. Alternatively, why not try writing to the lady in Millarville? The bank did say E & partner could get 1.7 million & who knows? They might be the lucky winner for a mere $25 (talk about a bargain). And while Alberta also is NDP, it hasn’t as yet emulated the BC property tax regime.

#64 yvr_lurker on 03.18.19 at 8:40 pm

This article reads like one written by Conrad Black where cherry-picked “facts” are conflated to put together dubious conclusion, with big leaps of faith thrown to link unrelated ideas.

First of all, in contrast the ithe provincial NDP has zero to do with the stress test that was imposed federally. This test is a central issue in reducing credit for homeowners at all levels (including those who are getting into the market), and given that interest rates are not likely to rise in the near term should perhaps be moderated by the FEDS. Nothing to do with the NDP. If this moderation occurs, with decreasing condo prices now being recorded entry level places in YVR places WILL be cheper.
Secondly, 2.5 years ago the 2.2M place in YVR was about 2.8M, 2.5M was well over 3M on the west side. This couple wouldn’t even be in the BALLPARK for buying something a few years ago, and would be competing with hordes of offshore people in bidding wars for places in van west, west van, north van, richmond etc… If they only qualify for 1.7M due to CMHC and most likely stress test, there are lots of nice places in good east van neighbourhoods, or in big pockets of North Van where you could buy a really nice place. Even these were essentially becoming out of reach 2.5 years ago. Look it up on http:/www.realtylink.org

On another note, something with this article does not make sense. “We have excellent jobs that are well within the top 1% of income earners.” Does this mean that each has a 230K + salary for a total of 440K per year, and with a 450K downdpayment. I can’t imagine the bank not giving allowing them to purchase a place at 4 * 400 + 450 = 2.05M place. My sense is that their combined income is lower and hence 1.7M is not out of line with the income.

Upshot: With 1.7M you can buy something decent in good iast van neighborhoods, north van (lonsdale, but perhaps not Edgmont village).

If you want west side of YVR just wait a few more years, and save tons. Your day will likely come.

The blog never suggested the stress test is provincial. Keep your shorts on. – Garth

#65 LostInSpace on 03.18.19 at 8:44 pm

Azashi on 03.18.19 at 5:51 pm

Garth has admitted that his ability to time the “greater fool” story has not been his strong point. Had I drank the “kool-aid” when the blog started over a decade ago, I would have given up enormous wealth that only a lifetime of “toil and trouble” could have equaled … despite the fact that I came close to taking a “sip” on occasion. As it turns out, we bought really low (2004) and sold really high … think March 2017 Toronto prices high. You do the math …

It is only in the past few months that I have revisited this pathetic blog after years of never reading a post. Though I have politely suggested on numerous occasions that Garth implement “threaded” comments on this website, he has steadfastly refused. That being said, I think my days on this blog are numbered once again. When and if the impending implosion occurs, I will be there to help mop up the mess.

#66 Paul on 03.18.19 at 8:46 pm

#4 yorkville renter on 03.18.19 at 5:24 pm
interesting post.. is the bank forecasting 40% drops, hence the massive downpayment requirements?
————————————————————————————————
The banks are not forecasting a 40% drop.
But why take any chances, one mortgage at 4 million the bank has 100% of the risk. Four one million C.M.H.C insured mortgages the back has 0% risk.

#67 n1tro on 03.18.19 at 8:50 pm

#10 Azashi on 03.18.19 at 5:51 pm

I love your blog. I learn from it daily. I abandoned Vancouver years ago and am currently enjoying cheap rent and watching property values fall in Alberta. But man, I really feel like you not only have blinders, but you selectively choose when to put them on.

All due respect, much love, keep on blogging.
——————
Learning daily from a flawed master or are you still not getting it and insulting someone how genuinely cares for folks even though they don’t deserve so?

I take it when you were commuting to UBC, it wasn’t for an economics degree. We are living in a free market. The opposite of what we are living in would be a command economy which China has. Money is a medium used to facilitate exchange of goods. Our government (unlike China) isn’t forcing farmers to grow crops to bring to market to feed the masses. The farmers do it because they get paid good money to do so.

As for no market can exist without government…have you heard of black markets ie. Distribution of weed before Trudeau came in? They seem to run quite well without the government involvement.

Garth hasnt praised or cheered areas where idiots keep prices up because of some belief it is in demand. Nor does he rejoice when the overall market turns and moisters lose their equity.

The message has always been to not over leverage and that speculation is fueled mostly by house horny locals. Therefore taxing the rich, the Chinese, or rich Chinese from China isn’t going to do squat for financially illiterate UBC grads who can’t afford housing.

#68 Paul on 03.18.19 at 8:52 pm

#6 Armpit on 03.18.19 at 5:27 pm
Just like the 1% bikers on this blog
————————————————————————————————
We have other ways of obtaining funds, slightly higher rates though, lol

#69 Nonplused on 03.18.19 at 8:53 pm

#57 Re-Cowtown

Rachael Nutely is currently running adds on YouTube using tax payer money taking credit for the fact that Alberta has the lowest rates of child poverty in Canada. As if she had something to do with it. She seems to be unable to see the point that the province in Canada that has the highest average wage would also pretty much by default have the lowest rates of poverty. She inherited that, she didn’t make it. People talk at end about Trump taking credit for things Obama probably did, but this is far, far worse. She’s taking credit for things Lougheed and and Klien did. It’s about as despicable as it can get. She hasn’t reduced the rate of anything in the province except maybe oil exports, all she’s done is increase unemployment. She’s an absolute AOC, all ideology, no system to make it work. We’re dealing with a 5th grader being asked to draw pictures of how a manned trip to Mars might work. What you get when she’s done is a bad sketch of a rocket ship.

Let me state that again, in case you missed it. Nutely is a 5th grader who happened to win class president. Our future is all buying PlayStations on credit cards until she is gone.

#70 Ronaldo on 03.18.19 at 9:00 pm

Let’s go for a ride on the Vancouver real estate roller coaster once again.

https://www.youtube.com/watch?v=hqOn5XEm86A

#71 Alessio on 03.18.19 at 9:04 pm

Who wants to buy a house and live in a place that hibernates 8/12 months of the year due to dark frigid cold wind snow and ice? If you do decide to I then suggest you load up on the vitamin D pills or it’ll cost you your health being sun deprived and working night and day to pay your mortgage. Enjoy that $2 million bungalow in Etobicoke!

Don’t get out much, do you? – Garth

#72 Bottoms_Up on 03.18.19 at 9:07 pm

She answered her own question…in her question.

And they only need another $175,000 for their downpayment….no worries there.

#73 tccontrarian on 03.18.19 at 9:23 pm

“When pendulums swing, they seldom return to neutral. The seeds are being sown – by government – for a truly unfortunate social situation. When that occurs the 1%ers will be fine (they always are). The masses, 70% of whom own houses and have their wealth stored there, not so much.”
———-

Whatever Governments do now is akin to an ill-trained pilot trying to fight the AutoPilot Software in a Boeing 737 Max 8. The ‘programming’ wins and everyone onboard…well, you know – they don’t.

TCC

TCC

#74 Gambino on 03.18.19 at 9:28 pm

“The bank enforces this rule pretty strictly because they have had an increasing number of higher income properties in Vancouver with owners who either have recently taken off out of the country when prices started to drop or who ran into financial difficulties”

But, but, but I thought foreign owners were basically non-existent in Vancouver.

Or are these Canadians leaving Canada for good because they screwed up on the house buy?

#75 Derdie McFlatche on 03.18.19 at 9:29 pm

Move to Manitoba! We have cheap rent and housing, and great hockey and farming!

#76 Bald Eagle on 03.18.19 at 9:34 pm

Liz sounds like a doctor who you would not want as a doctor, financial advisor, life coach.

No sir.

But to help out, you can buy my Vancouver house at a discount – 1.8M. I paid 435k in 2008 for it. Comes with original 70s carpet. Bit of black mould in the crawl but who cares. You can live the dream in Vancouver. Long live Horgan.

#77 Dogman01 on 03.18.19 at 9:36 pm

#31 Nonplused on 03.18.19 at 6:30 pm

Great synopsis of how things actually occur.

When the new entry 1%er does get downsized it is unlikely they will get the chance to get back in the club, they are not seen as new, fresh and one to watch anymore.

It think Tony Clement once floated the idea of having your first $500K of lifetime income un taxed. Allowing you to get schooled and start a life and get established first.

#78 Bad Start to Rutting Season in BC on 03.18.19 at 9:42 pm

Numbers are looking ugly. This could be the real slowdown happening in BC real estate.

I am talking smaller areas outside of Vancouver here.

Recession is baked in. Hours worked has reversed and dropping. Buckle up. Dummies won’t see what I am talking about for another 11 months.

#79 pay your taxes on 03.18.19 at 9:43 pm

Dippers and yellows applaud this, of course. The destruction of capital is a noble goal, so long as it’s not their capital. ”

And the suppression of wages and rising asset prices are noble goals, so long as the 1%’s wages aren’t suppressed and their asset prices continue to rise. And thanks to Elizabeth for being so candid in her letter. If ever there was an argument for the abolition of the loan guarantee arm of the CMHC this is it.

You do come across like a bit of a cry baby capitalist in this entry. We are force fed the mantra that the rich are rich because they’re smarter, better looking, and work harder, but more especially because they’re willing to take risks while the mere peasants quake in their boots at the thought of it.
The rich have enjoyed the fruits of asset appreciation ever since QE began, and at the expense of the working class (rising prices and wage suppression). Welcome to the down side of that risk. Can’t handle the heat? Rent and buy brain dead GICs. The owners of capital have enjoyed a free ride for a very long time now. Don’t worry, they’ll still win.

In this instance the destruction of capital is very important because it’s dead, speculative capital. Perhaps the next time around it will be put to p uses that produce something tangible and creates employment (besides the fire sector).
.

#80 j.s. on 03.18.19 at 9:46 pm

Azashi, #10
I HEAR YOU AND AGREE 100%.
GARTH DOES SEND MIXED SIGNALS… HMMM…

Want consistency, regardless of facts? Here you go. – Garth

#81 TurnerNation on 03.18.19 at 9:49 pm

#17 Smoking Man counterpoint to that.

18,000+ new office jobs in Downtown Toronto. No car needed. Rent/buy and live in the core.
Basic newer condos $1000 a square foot. The new norm.

https://graphicmatt.substack.com/p/city-hall-watcher-10-toronto-employment

Toronto gained 26,940 jobs last year — 15,580 full-time gigs and 11,360 part-time.

That loss was more than offset by the addition of a whopping 18,800 office jobs in the core, and downtown continued to post stronger growth figures than the rest of the city, as it has for the past five years.

#82 young & foolish on 03.18.19 at 9:59 pm

“Looks like there’ll be some big bargains coming to those with cash to spend and time to wait.” — Smartalox

You bet … If the banks won’t lend to 1%ers for RE, well you know that unsecured debt is now risky.

Howard Marks says: “Now is a good time to have dry powder”.

#83 Vitamin D on 03.18.19 at 10:06 pm

#71 Alessio – The Vitamin D pills won’t work well because its a hormone. Buy instead a bottle of Cod Liver Oil from Norway, and take no more than 2 tablespoons a day because the Vitamin A must not go too high. All depends on your age, and obtain good quality oil with the correct ratio of D to A.

#84 Renter's Revenge! on 03.18.19 at 10:07 pm

What?? The banks stopped handing out enough rope for people to hang themselves with? How dare they!

#85 NoName on 03.18.19 at 10:08 pm

When the elite and overlords have trouble getting loans from banks which fear defaults, what does this tell us? – GT

This reminds me of this.

War was waging full blast i was a teenager and i had this girlfriend that i spent most of the time with. We were inseparable for years. Whats funny abiut that her dad ever time he woud see us together he told us same story (fictional or not dont know) over and over, i mean every time. (Maybe we/me were slow learners…)

Here is a story, pre ww2, Italy.

Italian king at the time was very disturbed by what is happening so he addressed a parliament or something like that, and talked abou dark days that might be coming in future. After he was done he was aksed what he will do about it, on what he replied, i dont know, but i am lucky that my daughter likes risotto…

I do remember him explaining it to us, risotto part, and we knew what was story all about, but full understanding and magnitude of risotto for me took years to comprehend, girl probability got it after first time, she was, steel is a lot brighter than I.

Hey Dolce Vita, any truth to this risotto story???

#86 Gordon on 03.18.19 at 10:08 pm

If all she’s got is 450K she’s hardly one percent except in her dreams, chump change these days.

Another resignation by the very partisan Privy Wernick, down goes the $C because and election is a long wait for nervous investors. Expect more resignations by way of MP who announce they’re not running. Trudeau is under watch by the OECD for corruption. No one is going to lend this country support, except maybe Trudeau’s new found friends in the dark corners of hell.

https://www.bloomberg.com/news/articles/2019-03-18/fidelity-s-wolf-sees-loonie-testing-62-cent-low-as-economy-fades

Foreign capital is running away from Canada under Trudeau hence zero buying of $C and it’s floating down without support. Poloz and Trudeau tries propping it up with phony jobs numbers but that’s over. They sold the last of the gold at exactly the wrong time. Moroneaus budget is billions more in the red, that only makes the IMF mad and ready as hell to put Canada on notice. While Poloz might cut rates before the election the recession is already here and he’s howling at the moon.

#87 young & foolish on 03.18.19 at 10:16 pm

Hey Blog Dogs …. you guys pining for “honest money” and respect for “savers”. The train has left the station long ago. You may not see higher rates for another generation.

If you think this is bad, just wait until they roll out MMT.

#88 Sask to AB on 03.18.19 at 10:31 pm

re: #31 Nonplused on 03.18.19 at 6:30 pm
Thanks for your comments–they are appreciated.

#89 AB Boxster on 03.18.19 at 10:32 pm

#29 CROOKED JASON KENNEY – LOCK HIM UP!! on 03.18.19 at 6:25 pm

Albertans, if you are so stupid as to vote for this liar and scammer you deserve every bit of misery you get.

___________________
Rachel and the NDP will be kicked to the curb when she finds the gonads to call the next election.

Albertans would rather vote for the canine in the GF daily picture than vote for the NDP.

While other oil producing jurisdictions are prospering at today’s prices, Notley has run investment out of the province and saddled citizens with her insane deficits and ideological stupidity.

Kenney? Who cares. FFS, Ed the sock could do a better job than the NDP idiots.

#90 Lorne on 03.18.19 at 10:33 pm

Dippers and yellows applaud this, of course. The destruction of capital is a noble goal, so long as it’s not their capital.
…….
Too bad your Conservative friends implemented 0% down and 40 year amortizations to ignite the RE market. Talk about the “destruction of capital”….from those prudent souls who refused to pay exhorbitant prices for a home and decided to actually “save” at ridiculously low rates. How has that worked out for them? Isn’t that “destruction of capital”? But no, you are far more concerned about all the speculators who fanned the flames, and are now finally seeing their purchases go down in value. I do not understand!

#91 crowdedelevatorfartz on 03.18.19 at 10:49 pm

@#75 Derde ( great name by the way)
“We have cheap rent and housing, and great hockey and farming!”

+++++

You left out mosquitos, blackfies, epic floods, and epic cold…… did I miss anything else?

#92 Stan Brooks on 03.18.19 at 10:51 pm

CMHC.

A bankrupt agency on the back of a bankrupt taxpayer backing up a bankrupt nation for the profit of the banks.

————————–

Loonie Testing 62-Cent Low Amid Slowing Economy.

https://ca.yahoo.com/finance/news/fidelity-sees-loonie-testing-62-090000644.html

A 17 percent drop from current levels of around 75 U.S. cents…

Did I mentioned that for the demented idiots at BoC and statistics the inflation is sub 2 %?

A man-child PM who takes every opportunity to perform drama crying acts in front of increasingly stupid-er low IQ audience in order to gain popularity. Travelling circus.

A horse face french villa guy who kills small businesses and introduces idiotic budgets while giving his friends in big business free ride passes (offshore tax heaven scandals, SNC, pipelines, price fixing scandals with no consequences whatsoever)

Enjoy the ride and those indexed pensions.

#93 living in AB on 03.18.19 at 10:54 pm

Assuming 30 year amortizations are backed by CMHC is it safe to assume avg houses go up (value) and top 2% houses come down…..as a result of stress test and CMHC cap?

#94 Alex from Edmonton on 03.18.19 at 11:02 pm

Funny how when you remove the moral hazard of CMHC insurance the banks are a lot less willing to offer huge mortgages on property with massively inflated prices.

#95 Craig on 03.18.19 at 11:16 pm

Re #15

The US is the only first world country without universal healthcare , has more guns than people ( when you have to consider arming school teachers with hand guns something is terribly wrong ) and a current president that is an embarrassment to the human race its enough to make me feel quite fortunate to live in Canada.

#96 Barb on 03.18.19 at 11:22 pm

Fabulous photo again today.

#97 Yellow Vest on 03.18.19 at 11:28 pm

renter in Surrey on 03.18.19 at 6:38 pm
There is no free market in RE.
Government indirectly controls prices by interest rates, CHMC insurance, stress test, etc.

“BC’s tax regime, including that of Vancouver’s lefty mayor, is designed to bleed the rich”.

Federal government decided to enslave those who did not get into the market 15 years ago with enormous debt by inflating RE prices to the crazy high levels.
All the policies were setup to inflate RE values, nothing else mattered in Canada.

“The biggest victims are those who may have bought since values peaked three or four years ago.”
Nobody put a gun to their heads. They made a choice, they now face consequences.
Should have followed 3-4 times annual income rule.

The biggest victims are those who were working their arses off, paid 50% of income tax and has been priced out forever out of own country.

I say BC gov did not go far enough yet.
Set foreign dudes tax to 100%. Nobody is entitled to own RE in Canada, right?
Get rid of IIP, 99.99% of their business is RE holding/flipping.
Tax satellite families as local residents are taxed – I mean 50%+ income tax on “gifted cash”.
Can’t afford it? There are lot’s of affordable places in the world, move there.
Enforce tax laws on flippers.
Go after criminals laundering money in Canada.

Stop kicking this can down the road.
It has to burn to the ground.
We will survive the crash if it happens.

==========

I am a happy renter of a big house with a pool in metro Van for cheap. I was out on the deck today getting rays. And I APPROVE of this posters message.

#98 Azashi on 03.18.19 at 11:34 pm

#67

I take it when you were commuting to UBC, it wasn’t for an economics degree. We are living in a free market. The opposite of what we are living in would be a command economy which China has.

———-

I have a poli sci/econ double major. I’m focusing on political economy.

I 100% assure you that we do not live in anything resembling a free market, because there is no such thing as a free market. I’m going to be nice and give you – even though this is objectively false across numerous examples – property rights as a God-given right, where no government is needed to enforce their existence.

Patents, copyright, trademarks, regulations (which often favour large business, not consumers, and definitely not small business), eminent domain, fiat money AND gold-backed currency, fractional reserves, insurance – none of this exists without government intervention. None.

The free market is a myth. It’s like libertarianism or communism. It doesn’t exist, you can only get a butchered approximation of the thing.

Which brings us to China.

China is not a command economy. China as a whole has functionally not been a command economy since the 90s. China has had market characteristics for 40 years now.

#99 Exurban on 03.18.19 at 11:40 pm

“she also mentioned that the bank enforces this rule pretty strictly because they have had an increasing number of higher income properties in Vancouver with owners who either have recently taken off out of the country when prices started to drop …”

Music to my ears. Sweet sweet music.

#100 Moh on 03.19.19 at 12:03 am

I can’t understand as a millennial why the concept of saving money doesn’t exist. Whatever happened to working hard, saving and watching that money train go! It helps with sleep at night folks.

#101 Vampire Studies on 03.19.19 at 12:37 am

2 VREU – ahh you are actually feeding the realtors.

From the second link, they can correctly claim

“Canada’s 3 largest real estate markets provided a better return on investment over the period of the last
17 years than San Francisco”.

Also, the second commenter provided the following chart. Wolfie may wish to use the suggested starting point:

https://i.imgur.com/J7yXxwe.png

I also agree with 60 Rexx Rock on one point – you should get out of Victoria. I don’t think it’s doing you any good staying there. You can move back if and you can afford it.

#102 Gordon on 03.19.19 at 1:28 am

DELETED

#103 Nonplused on 03.19.19 at 1:52 am

#77 Dogman01

Yes, an important idea. But not exactly how socialist see it. The way socialist see it is more like if your kid scores a goal, everyone scored a goal.

So the concept of the first $500,000 not being taxed? It won’t happen because only those with money can be taxed. There is no point taxing the broke. They don’t have any money, and most of them never will. The government makes every effort to tax those who have an extra penny, they couldn’t care less about the rest.

#104 Warren Buffett on 03.19.19 at 4:55 am

Been going on for centuries….

Never stopped buffett from getting rich!!!

#105 NEVER GIVE UP on 03.19.19 at 5:18 am

“As the country drifts, market intervention is seen as a good thing.”

Garth, was it not market intervention that made the bubble in the first place?

Our Government just uses market manipulation as another election tool!

#106 NEVER GIVE UP on 03.19.19 at 5:32 am

#10 Azashi on 03.18.19 at 5:51 pm

Insightful.

#107 NoName on 03.19.19 at 6:50 am

Now that I slept and rereed my post from last night i can se how wrong conclusion can be made so to save you from wandering around with wrong conclusion for next 20 yrs like i did, l’ll tell moral of the story right here right now,

If royal family will come down to have rice often for their meals, now imagine how devastating future will be for regular family.

What we have here is great decoupling of 1%-ers from “1%-ers”. Interesting very interesting…

#108 Captain Uppa on 03.19.19 at 7:09 am

Never have I known that the uber wealthy have to endure such hardships.

I haven’t cried this much since watching Rudy.

A couple with $450K saved, earning 1% incomes ($250k+) are not the ‘uber wealthy.’ If they were, we’d be in a lot more trouble. – Garth

#109 Steven Rowlandson on 03.19.19 at 7:17 am

I think it is time for the 1% solution. Offer one cent on the dollar as purchase price and not as a joke bid but as a serious bid on real estate. It is time to make Canada affordable for Canadians again. Those who don’t like that can pack their bags and emigrate and stay there. One way trip.

#110 jess on 03.19.19 at 8:03 am

billions in losses

https://www.abc.net.au/4corners/the-uber-story/10912940

#111 crowdedelevatorfartz on 03.19.19 at 8:16 am

@#94 Alex from Oiltown
“Funny how when you remove the moral hazard of CMHC insurance the banks are a lot less willing to offer huge mortgages on property with massively inflated prices.”

+++++

Yep.
CMHC needs to be curtailed.
Its skewed the market, lending, etc.
A half million dollar limit on all mortgages would make the Banks do a blink and gulp.
Next stop ?
Forcing the Real Estate cartels to tell the truth about sales, prices, days on market, etc.
After that?
Sit back and watch housing prices drop even faster…..

#112 Liberals Save Canada Today on 03.19.19 at 8:34 am

Watch out for a truly enlightened economic program today that will prevent a housing crash, allow deserving Canadians to own homes more easily and strengthen our economy overall.

Andrew Scheer – what will you try to distract Canadians with now, you pathetic nobody.

#113 Captain Uppa on 03.19.19 at 8:36 am

>>A couple with $450K saved, earning 1% incomes ($250k+) are not the ‘uber wealthy.’ If they were, we’d be in a lot more trouble. – Garth>>

Fair enough, Garth.

Quick question hot shot; are you the uber wealthy? If so, what’s it like?

The servants are often uppity, but it’s all good. – Garth

#114 NoName on 03.19.19 at 8:56 am

Elizabeth Press play !!!

https://www.youtube.com/watch?v=YoBlp6qvFqg

#115 Captain Uppa on 03.19.19 at 9:01 am

>>The servants are often uppity, but it’s all good. – Garth>>

I’ve noticed that about the servants these days.

#116 Tater on 03.19.19 at 9:12 am

#113 Captain Uppa on 03.19.19 at 8:36 am
>>A couple with $450K saved, earning 1% incomes ($250k+) are not the ‘uber wealthy.’ If they were, we’d be in a lot more trouble. – Garth>>

Fair enough, Garth.

Quick question hot shot; are you the uber wealthy? If so, what’s it like?

The servants are often uppity, but it’s all good. – Garth
—————————————————————–
Workable definition, wealthy is liquid net worth 25x your annual spending needs, uber wealthy is 100x

#117 dharma bum on 03.19.19 at 9:22 am

Real 1%ers don’t worry about monthly payments or mortgages.

Liz (and her ilk) are just wannabe 1%ers.

If a real 1%er wants an expensive house, they simply quietly buy it.

For a real 1%er, the super expensive house represents a mere fraction of their total net worth. It’s no big deal.

Only morons (aka: greater Fools) dump every penny they have into a fractional down payment for an expensive house they cannot really afford, then commit their life to repaying a fat loan for the balance owing.

it’s just stupid, typical consumerism.

“I want that new toy!”

“I can’t afford that new toy, so I will liquidate everything I have, and borrow the rest, because I WANT THAT NEW TOY!!!”

Can’t afford it? No problem. Just effin FINANCE IT!

https://www.youtube.com/watch?v=w8VhraZQZuE

#118 PastThePeak on 03.19.19 at 9:24 am

Anyone who makes more money than me is rich, doesn’t deserve it, and should be heavily taxed to pay more of their fair share.

A new Canadian motto to replace “from sea to sea to sea”…

#119 IHCTD9 on 03.19.19 at 9:43 am

I think the rope will be turning under the strain if Trudeau gets in again.

Lib policy pushing house prices higher while rates drop and stagnate. Economy and wages sluggish. Eventually consumer spending is going to tighten up – Trudeau has already seen to scaring off anyone interested in doing anything productive at all here in Canada.

Where are the Libs planning on getting their ever increasing revenue requirements?

It won’t be from taxes that used to come from big manufacturing/resource industries as the Libs have already told those folks to bugger off and stay gone. It won’t be from a growing GDP – the budget won’t balance itself this time either. Raising the CCB sure won’t help, neither will raising taxes in general. I think RE is about gassed out – if the Libs pump any more air into it – it might blow with disastrous consequences on the revenue front. If the loonie keeps sinking he can kiss consumer spending goodbye too. Same if Canadians suddenly realize they better actually start paying something against their HELOC principal. He better not be planning on consumption taxes – it could be all gone by morning.

I’s love to know what the plan is…

#120 Gordon on 03.19.19 at 10:08 am

Trudeau’s choice for Treasury proven American Goon.

https://mobile.twitter.com/i/topics/news/e-1723090280?cn=ZmxleGlibGVfcmVjc18y&refsrc=email

#121 Alistair McLaughlin on 03.19.19 at 10:10 am

@#119 IHCTD9,

Where are the Libs planning on getting their ever increasing revenue requirements?

This Neil MacDonald article might be a clue:

https://www.cbc.ca/news/opinion/debt-retirement-1.5061948

He quotes an email he received from a “government economist” chastising him for his concern about growing government debt:

“As the issuer of currency, the Government of Canada can never run out of money and can fund every single social requirement it faces, including free education. It is impossible for there to be a limit on the capacity of a sovereign government to pay debts denominated in its own currency.”

Said government economist is obviously a devout MMT adherent. If that’s the type of person getting hired into senior policy advisory positions today, then we can guess where Trudeau is planning to get the money from.

Since he/she was not identified, it’s also possible the quoted “government economist” is just some middling bureaucrat with no influence. Let’s hope so.

#122 PastThePeak on 03.19.19 at 10:26 am

@#120 Alistair McLaughlin
@#119 IHCTD9

Unfortunately, we are hearing ever more noise on this MMT front from the US Democrats – and the fact that the Republicans don’t seem to care about the US debt either (although they would not claim to be MMT followers).

I am getting more concerned that his is not just a passing theoretical debate.

Some point to China as an example of how this can work, but given the lack of transparency there, I think it is quite premature to say that it does. China is really only now starting to get the pushback from other countries to “start to play be the rules”.

Fundamentally, printing money will devalue the currency creating all manner of other (worse) problems. The US being a global reserve currency can get away with it for longer than others, but the end result is still the same.

I can’t believe I am saying this, but if there is a global move for printing money ala MMT, does that mean precious metals are a legitimate part of portfolio (at least for a period of time)?

#123 n1tro on 03.19.19 at 10:44 am

#98 Azashi on 03.18.19 at 11:34 pm
#67
———-

I have a poli sci/econ double major. I’m focusing on political economy.

I 100% assure you that we do not live in anything resembling a free market, because there is no such thing as a free market. I’m going to be nice and give you – even though this is objectively false across numerous examples – property rights as a God-given right, where no government is needed to enforce their existence.

Patents, copyright, trademarks, regulations (which often favour large business, not consumers, and definitely not small business), eminent domain, fiat money AND gold-backed currency, fractional reserves, insurance – none of this exists without government intervention. None.

The free market is a myth. It’s like libertarianism or communism. It doesn’t exist, you can only get a butchered approximation of the thing.

Which brings us to China.

China is not a command economy. China as a whole has functionally not been a command economy since the 90s. China has had market characteristics for 40 years now.
———————————
I’m not disagreeing with your points in that the text book definition of free market (as with other terms like Communism or Freedom) isn’t “real”. However, the current state of what we have is closer to free market than what other countries have going.

I think most agree that governments have too much involvement in things that they need not meddle in. The invisible hand of the past is now something that is in your face slapping you repeatedly.

One of those things is trying to keep the housing prices inflated and punishing a segment of society that has little impact on what was essentially a mess that the government originally created.

For those who like to pick and choose on what Garth has said in the past, ask yourself this. If you didn’t buy in 2004 and are now blaming Garth for you lost gains….tell the rest of us what your portfolio is worth? Because the same time Garth was saying to not over leverage, he was saying to have a diversified portfolio.

Looking in the rearview, it is obvious that buying a Vancouver house in 2004 and selling in 2017 outperformed a balanced portfolio but if you had been consistently been putting money in each month since then, are you that much worst off?

I think a lot of the nit picking bitterness is coming from people who probably couldnt handle a +$500K mortgage in 2004 sitting on the sidelines while not investing and now venting that others who bought or invested are richer than them.

Hopefully you aren’t one of them.

#124 Howard on 03.19.19 at 10:58 am

Seems like this MMT thing came out of nowhere. Never heard of it until two weeks ago (yes I know it’s just “money-printing to inifinity”, but never heard this new title for it), but in those two weeks I’ve heard and seen it mentioned from at least 4 or 5 different sources.

#125 Another Deckchair on 03.19.19 at 11:09 am

Listen to our friend #117 Dharma Bum

He knows how it works.

Personally – we live off way less than 50% of our income, buying anything we want is easy – just buy it.

Thing is, if you enjoy life, who cares about tons of material junk? A huge house? why?? Honestly, why?

Life is for living, not worrying about having to get another cleaning lady, as the 6 toilets are dirty, and half of them don’t work, and three of the cars need oil changes, and they all need winter tires removed, and traffic is nuts and getting help is difficult and …

Just go for a walk and enjoy the gift of every day.

#126 Patricia on 03.19.19 at 11:10 am

I’m sorry for hitting a nerve Garth. Maybe you could touch on this subject in one of your future blog posts.

No nerve. The source is not credible and nobody can make a 20-year equity prediction. – Garth

#127 Brett in Calgary on 03.19.19 at 11:16 am

Great point.
————————————-
#31 Nonplused
“So this guy has spent 19 years in the workforce but only 5 of them were in the 1%, and now he’s back where he started only facing a recession in the oil industry and ageism in the workforce, nobody will hire him. He resorts to consulting gigs to pay the bills. This scenario is quite common.”

#128 Ronaldo on 03.19.19 at 11:33 am

#124 Another Deckchair on 03.19.19 at 11:09 am

Just go for a walk and enjoy the gift of every day.

==================================
Too bad more people don’t look at it that way. Life would be much simpler.

#129 Tater on 03.19.19 at 11:34 am

#123 Howard on 03.19.19 at 10:58 am
Seems like this MMT thing came out of nowhere. Never heard of it until two weeks ago (yes I know it’s just “money-printing to inifinity”, but never heard this new title for it), but in those two weeks I’ve heard and seen it mentioned from at least 4 or 5 different sources.
—————————————————————-

MMT isn’t money printing to infinity, it is more like money printing until we have inflation.

Kevin Muir has a good intro here:
https://www.themacrotourist.com/posts/2019/01/23/mmt/

#130 Dennis Moyer on 03.19.19 at 11:44 am

Any other comments on possibility of shared-equity mortgages?! Scary….

#131 Shawn Allen on 03.19.19 at 12:01 pm

A 62 cent Canadian dollar? (Mr. market disagrees)

So, predictions of huge fall in the Canadian dollar were in the news yesterday.

Meanwhile the yield on 10-year Canadian bond is 1.71%.

The U.S. ten year government bond yield is substantially higher at 2.60%.

5 year Canada 1.60%, five year U.S. way higher at 2.42%.

If investors had a choice between U.S. and government bonds and thought that there was a big fall in the Canadian dollar coming, it is clear they should choose the U.S. bond. On that basis those investors i.e. (“the market” does not seem to be forecasting any decline in the Canadian dollar.

And, what does the low yield on the ten year Canadian bond tell you about inflation in Canada? It would seem to be suggesting very low inflation indeed and a lower-for-longer interest rate scenario.

In any case as has been said: Predictions are hard, especially when they involve the future.

Don’t bet the farm on a lower Canadian dollar.

#132 Gordon on 03.19.19 at 12:01 pm

#125 Patricia…..lovely name BTW. Garth says no one can make a 20 equity prediction. Wow, I’m really sorry we didn’t get on TD Bank twenty years ago..

BTW Garth, I’ll take that bet. I’m so positive the world isn’t coming to an end in the same….as communism failed in our lifetime, because of what Adam Smith best described as “Animal Spirits” , that I’ll even pick a stock for you that’s guaranteed to be worth more in twenty years than it is today.

Overall, unless you believe that Trudeau will succeed in turning Canada into Venezuela, the fantastic future for Free Enterprise is in our DNA. Guys like Trudeau and Castro are mother nature’s way of building our endurance against adversity.

#133 Alistair McLaughlin on 03.19.19 at 12:19 pm

@124 Howard, it’s been around forever, but was considered a cult by most mainstream economists. It’s still a cult, but it has reached something of a critical mass of late. (If you don’t believe it is a cult, go ahead and try to post a contrary opinion on any forum where MMT is the accepted philosophy – you’ll instantly be branded a “sound money advocate”, which constitutes a vicious insult in the MMT world. If you make them really angry – and you will if you dare to warn them about inflation – they’ll call you a “Friedmanite” or a “monetarist”, which in MMT-land are the rough equivalents of “fascist” and “Nazi” respectively.)

I suspect its acceptance has come about largely due to the excessive printing of central banks over the past decade, which allegedly “proves” that printing does not cause inflation. In fact, if you include asset prices, it has caused plenty of inflation, but inflation indices don’t even include house prices (let alone equities) so of course no inflation is seen by those don’t wish to see it. If you include the inflation that has happened in the third world due to money printing in the US and Europe (i.e. exported inflation) then the inflation becomes even more obvious.

@129 Tater, it means printing and taxing to infinity. Because taxes are used to control inflation under the Magic Money Tree framework. Now of course they’ll argue that only enough printing and only enough taxation will be used, because a government working within the MMT framework will be very disciplined and very responsible. If we can’t count on central bankers to be disciplined with the money supply, certainly we can rely on politicians, right?

Let us remember that economics, at its heart, is the study of resource allocation under the presumption of scarcity. Any theory that claims to make scarcity irrelevant cannot be taken seriously.

#134 Name It on 03.19.19 at 12:32 pm

#132 Gordon – You must have a magic globe because I cannot predict a stock for next year. Tell me any stock that will be guaranteed to be worth more in 20 years.

#135 Jimers on 03.19.19 at 12:42 pm

Nobel goal?

The lawyers who took on Big Tobacco are aiming at Realtors and their 6% fee

https://www.marketwatch.com/story/big-name-lawsuit-could-upend-realtors-and-their-6-fee-2019-03-19

#136 expat on 03.19.19 at 12:46 pm

#129 MMT

Tater Martin Armstrong is far better source of opinion on this matter.

He would be a far better expert on all things economic.
https://www.armstrongeconomics.com/armstrongeconomics101/economics/the-fallacy-of-mmt/

#137 Tater on 03.19.19 at 12:50 pm

#133 Alistair McLaughlin on 03.19.19 at 12:19 pm
@124 Howard, it’s been around forever, but was considered a cult by most mainstream economists. It’s still a cult, but it has reached something of a critical mass of late. (If you don’t believe it is a cult, go ahead and try to post a contrary opinion on any forum where MMT is the accepted philosophy – you’ll instantly be branded a “sound money advocate”, which constitutes a vicious insult in the MMT world. If you make them really angry – and you will if you dare to warn them about inflation – they’ll call you a “Friedmanite” or a “monetarist”, which in MMT-land are the rough equivalents of “fascist” and “Nazi” respectively.)

I suspect its acceptance has come about largely due to the excessive printing of central banks over the past decade, which allegedly “proves” that printing does not cause inflation. In fact, if you include asset prices, it has caused plenty of inflation, but inflation indices don’t even include house prices (let alone equities) so of course no inflation is seen by those don’t wish to see it. If you include the inflation that has happened in the third world due to money printing in the US and Europe (i.e. exported inflation) then the inflation becomes even more obvious.

@129 Tater, it means printing and taxing to infinity. Because taxes are used to control inflation under the Magic Money Tree framework. Now of course they’ll argue that only enough printing and only enough taxation will be used, because a government working within the MMT framework will be very disciplined and very responsible. If we can’t count on central bankers to be disciplined with the money supply, certainly we can rely on politicians, right?

Let us remember that economics, at its heart, is the study of resource allocation under the presumption of scarcity. Any theory that claims to make scarcity irrelevant cannot be taken seriously.
————————————————————
And money that can be printed for free is considered scarce?

#138 expat on 03.19.19 at 12:53 pm

Real 1%er’s don’t buy 2 million dollar houses at the peak of cycle with 400K down payments.

1%’ers bought in 2000 and sold in 20178/18.
They would also have different asset classes like stocks, bonds, and physical assets.

It is a laughable what people call 1% now.

1%’ers also typically have no debt other than revenue producing debt like business loans, etc.

1%’ers never mortgage their primary properties, if they do they are broke.

#139 James on 03.19.19 at 1:06 pm

#81 TurnerNation on 03.18.19 at 9:49 pm

#17 Smoking Man counterpoint to that.

18,000+ new office jobs in Downtown Toronto. No car needed. Rent/buy and live in the core.
Basic newer condos $1000 a square foot. The new norm.

https://graphicmatt.substack.com/p/city-hall-watcher-10-toronto-employment

Toronto gained 26,940 jobs last year — 15,580 full-time gigs and 11,360 part-time.

That loss was more than offset by the addition of a whopping 18,800 office jobs in the core, and downtown continued to post stronger growth figures than the rest of the city, as it has for the past five years.
___________________________________________
And were waiting for the drunken Old Man rebuttal from Smoking Man still………………………..crickets…………
Wow he sure has a lot of negative things to say about a city and a nation in which he does not currently reside in nor does he care about.
Old Man be concerned with your own backyard first, then lean over the fence to chat with us.

https://www.dailynews.com/news/crime/
https://abc7.com/tag/crime/

#140 bdwy sktrn on 03.19.19 at 1:07 pm

#134 Name It on 03.19.19 at 12:32 pm
#132 Gordon – You must have a magic globe because I cannot predict a stock for next year. Tell me any stock that will be guaranteed to be worth more in 20 years.
——————
not a stock but the sp500/dow since inception has a 100% track record of being higher 20 yrs later.
1968 seems about the very worst time you could have ever got it, but was up by 1982. 14 years.

nothing else close.

98% of the time it was up after 10.

#141 Figure it Out on 03.19.19 at 1:31 pm

“For those who like to pick and choose on what Garth has said in the past, ask yourself this. If you didn’t buy in 2004 and are now blaming Garth for you lost gains….tell the rest of us what your portfolio is worth?”

$2mm. Don’t feel like arguing your points right now, but will leave this here as a marker.

#142 The Real Mark on 03.19.19 at 1:37 pm

“not a stock but the sp500/dow since inception has a 100% track record of being higher 20 yrs later.”

Better check your numbers, particularly after the peak of 1929.

#143 Alistair McLaughlin on 03.19.19 at 1:39 pm

Tater, money is free. The goods and services we buy with money are scarce. Printing more money creates more money, not more services or more stuff. Yet MMTers make exactly that argument with statements like this:

“As the issuer of currency, the Government of Canada can never run out of money and can fund every single social requirement it faces, including free education. It is impossible for there to be a limit on the capacity of a sovereign government to pay debts denominated in its own currency.”

Note how they conflate unlimited free money with unlimited free social services. The former does not lead to the latter.

#144 n1tro on 03.19.19 at 1:47 pm

#141 Figure it Out on 03.19.19 at 1:31 pm
“For those who like to pick and choose on what Garth has said in the past, ask yourself this. If you didn’t buy in 2004 and are now blaming Garth for you lost gains….tell the rest of us what your portfolio is worth?”

$2mm. Don’t feel like arguing your points right now, but will leave this here as a marker.
—————————-
What’s there to argue? My point was if you went all in on a house or invested in stocks, you’d be doing alright as you have shown. It’s the people who did neither that are playing the blame game for their situation.

#145 Blacksheep on 03.19.19 at 1:50 pm

Alessio # 71,

“I then suggest you load up on the vitamin D pills”
—————————
I know this is sarcasm, but there’s a Golden Nugget of truth in your words.

All peoples Canadian, should be tossing back 5,000 IU daily, just like my family and I have for the past 10 years. The dose goes to 10,000 IU a day, if any hint of a cold is detected. Forget vitamin A,B,C,- E, F, G, ect.

Don’t believe?

Try it for 3 months and I guarantee, you will be taking it for the rest of you life, or at least until you can move to Cabo 12 months a year…

#146 Average on 03.19.19 at 2:04 pm

The average dose should be in a liquid form, and depending upon age and weight 600 IU becomes the norm. The ratio between A/D is critical because too much A can have serious health consequences, thus 5,000 IU daily is much too high. Nevertheless, direct sunlight is the best to trigger the hormone, and standing by the inside window will not help because it must be direct sunlight over the skin, and just 20 minutes a day will be a daily dose.

#147 Smoking Man on 03.19.19 at 2:19 pm

James on 03.19.19 at 1:06 pm
#81 TurnerNation on 03.18.19 at 9:49 pm

#17 Smoking Man counterpoint to that.

18,000+ new office jobs in Downtown Toronto. No car needed. Rent/buy and live in the core.
Basic newer condos $1000 a square foot. The new norm.

https://graphicmatt.substack.com/p/city-hall-watcher-10-toronto-employment

Toronto gained 26,940 jobs last year — 15,580 full-time gigs and 11,360 part-time.

That loss was more than offset by the addition of a whopping 18,800 office jobs in the core, and downtown continued to post stronger growth figures than the rest of the city, as it has for the past five years.
___________________________________________
And were waiting for the drunken Old Man rebuttal from Smoking Man still………………………..crickets…………
Wow he sure has a lot of negative things to say about a city and a nation in which he does not currently reside in nor does he care about.
Old Man be concerned with your own backyard first, then lean over the fence to chat with us.

https://www.dailynews.com/news/crime/
https://abc7.com/tag/crime/
……
You want crickets.?

Here.

Those Jobs pay 1/2 of what you make in the USA
Those jobs pay more in income tax than in the USA

Canadians are taxed to death and broke. That’s why Helocks at an all time high.

I dont see a recovery in Toronto Real Estate unless real wage gains happen and lower taxes come into play.

BOC can take rates to zero. Housing is too expensive vs disposable income.

#148 jess on 03.19.19 at 2:21 pm

#129 Tater on 03.19.19 at 11:34 am

maybe you should read up first before concluding.

What is Modern Monetary Theory, or “MMT”?
Posted on March 11, 2013 by Devin Smith | 109 Comments

By Dale Pierce

Introduction

http://neweconomicperspectives.org/2013/03/what-is-modern-monetary-theory-or-mmt.html

book in 1998 (Understanding Modern Money—the first academic book on MMT

Modern Monetary Theory explained by Stephanie Kelton
2:54 PM ET Mon, 4 March 2019

Modern Monetary Theory (MMT) is gaining traction in American politics, energizing the progressive left and roiling deficit hawks. Stephanie Kelton, who advised Bernie Sanders’ 2016 presidential campaign, explains the basics.

https://www.cnbc.com/video/2019/03/01/stephanie-kelton-explains-modern-monetary-theory.html

https://www.nakedcapitalism.com/2019/02/randy-wray-response-doug-henwoods-trolling-mmt-jacobin.html

#149 Tater on 03.19.19 at 2:24 pm

#143 Alistair McLaughlin on 03.19.19 at 1:39 pm
Tater, money is free. The goods and services we buy with money are scarce. Printing more money creates more money, not more services or more stuff. Yet MMTers make exactly that argument with statements like this:

“As the issuer of currency, the Government of Canada can never run out of money and can fund every single social requirement it faces, including free education. It is impossible for there to be a limit on the capacity of a sovereign government to pay debts denominated in its own currency.”

Note how they conflate unlimited free money with unlimited free social services. The former does not lead to the latter.
—————————————————————
You’re missing the important caveat that MMT puts out: until inflationary pressures arise. No serious proponent of MMT advocates the government spending to be everything in an economy, rather that if an economy has sufficient slack that there is no or low inflation, you can increase productivity by increasing government spending until you start crowding out the private sector.

#150 Darren Simpson on 03.19.19 at 2:57 pm

We are content with our $480,000 in GIC’s, RRSP GIC’s, TFSA GIC’s at 3.75% compounded for 5 years, March-7-2024 really 4.041% with compounding, $20,200 a year interest, $101,000 after 5 years total interest.

Since we are retired, both retired accountants, we figured we are in a lower tax bracket so with all personal tax amounts, pension tax credit, disability tax credit etc., we get to keep roughly 90% of all our interest, paying only $2,020 income taxes per year or $10,100 total incomes tax in 5 years.

Since we are debt free and don’t have huge debt loads at low and higher rates like most Canadians, we are managing well this way.

Fluctuating investments are not for everyone. I know this comment will be knocked but we only do what is comfortable and right for us. GIC’s fully deposit insured.

This is why accountants are such fun. – Garth

#151 Tater on 03.19.19 at 2:59 pm

#148 jess on 03.19.19 at 2:21 pm
#129 Tater on 03.19.19 at 11:34 am

maybe you should read up first before concluding.

What is Modern Monetary Theory, or “MMT”?
Posted on March 11, 2013 by Devin Smith | 109 Comments

By Dale Pierce

Introduction

http://neweconomicperspectives.org/2013/03/what-is-modern-monetary-theory-or-mmt.html

book in 1998 (Understanding Modern Money—the first academic book on MMT

Modern Monetary Theory explained by Stephanie Kelton
2:54 PM ET Mon, 4 March 2019

Modern Monetary Theory (MMT) is gaining traction in American politics, energizing the progressive left and roiling deficit hawks. Stephanie Kelton, who advised Bernie Sanders’ 2016 presidential campaign, explains the basics.

https://www.cnbc.com/video/2019/03/01/stephanie-kelton-explains-modern-monetary-theory.html

https://www.nakedcapitalism.com/2019/02/randy-wray-response-doug-henwoods-trolling-mmt-jacobin.html
————————————————————-
What conclusion do you assume I’m making?

I’m not a proponent of MMT, per se, but just annoyed that the counter-arguments tend to be along the lines of “derp, it’s just print money forever, derp”

#152 PastThePeak on 03.19.19 at 2:59 pm

@#149 Tater

And as Alistair notes earlier, then you really have to get into the definition of “inflation”.

Is it the current CPI that excludes many things, and uses multiple adjustments to account features, substitutions, etc that do not track pure price increases? Should it not include the main asset categories (real estate, financial instruments, perhaps even stocks), which have been shown to rise along with cheap / new money?

I suppose a country like Canada could try this (in that CAD$ is not a reserve currency, so it won’t f*ck up the world), but you can be sure that the loonie vs. other currencies will fall over time based purely on supply vs. demand.

How would doing this in the US, with the worlds reserve currency, not wreak havoc on the global economy (which ultimately also affects the US)?

I will be monitoring this closely, and perhaps 5% of portfolio in precious metals isn’t an expensive insurance policy.

#153 James on 03.19.19 at 3:02 pm

#147 Smoking Man on 03.19.19 at 2:19 pm

James on 03.19.19 at 1:06 pm
#81 TurnerNation on 03.18.19 at 9:49 pm

#17 Smoking Man counterpoint to that.

18,000+ new office jobs in Downtown Toronto. No car needed. Rent/buy and live in the core.
Basic newer condos $1000 a square foot. The new norm.

https://graphicmatt.substack.com/p/city-hall-watcher-10-toronto-employment

Toronto gained 26,940 jobs last year — 15,580 full-time gigs and 11,360 part-time.

That loss was more than offset by the addition of a whopping 18,800 office jobs in the core, and downtown continued to post stronger growth figures than the rest of the city, as it has for the past five years.
___________________________________________
And were waiting for the drunken Old Man rebuttal from Smoking Man still………………………..crickets…………
Wow he sure has a lot of negative things to say about a city and a nation in which he does not currently reside in nor does he care about.
Old Man be concerned with your own backyard first, then lean over the fence to chat with us.

https://www.dailynews.com/news/crime/
https://abc7.com/tag/crime/
……
You want crickets.?

Here.

Those Jobs pay 1/2 of what you make in the USA
Those jobs pay more in income tax than in the USA
Canadians are taxed to death and broke. That’s why Helocks at an all time high.
I dont see a recovery in Toronto Real Estate unless real wage gains happen and lower taxes come into play.
BOC can take rates to zero. Housing is too expensive vs disposable income.
_________________________________________
Old Man your chirping again, now get in your own backyard. We have our problems and they are our problems. NOT YOURS!
Here is one of your problems back Old Man, just wait until the bill come in.
https://nationalpost.com/news/the-utterly-unbelievable-scale-of-u-s-debt-right-now

#154 James on 03.19.19 at 3:07 pm

#147 Smoking Man on 03.19.19 at 2:19 pm
Damn it Old Man your just like Trump. It doesn’t take much to get you triggered. Now go and compare hair styles with Donald!
P.S. How is the house hunting going in Newport Center? Did you buy one yet? Your a millionaire right?

#155 Blacksheep on 03.19.19 at 3:14 pm

IHCTD9, Alistair, PastThePeak, Howard, Tater, Expat,

All the buzz about MMT is funny, like it’s some new thinking. This video from Professor Stephanie Kelton, was one of many from her I viewed, circa 2012-13 on MMT.

The big revelation happening, is the open / public discussion taking place on how MMT actually works. Everybody’s talking like this is something sovereigns should now consider adopting, when the fact is many Sov’s in control have long operated stealthy in this matter and never worried about national debt.

https://www.youtube.com/watch?v=Yiw8Lyw1XGc

A few personal thoughts MMT:

1) When Obama or Harper, stood on the podium and claimed: “We have to run the countries finances / budgets with fiscal restraint, just like you do with your household finances”, was LYING his ass off.

2) What real value can Precious Metals hold, in a world were money creation can happen with out necessarily generating, massive inflation? Sampled by 2009-2019 PM values?

3) Sovereigns creating $’s in unison globally, is just a soft, yet ongoing variant of what seems like a debt jubilee, everything’s covered, no one defaults in Sovereign $’s, ever.

4) This has been kept on the down low because an enlightened and angry population will of course be asking: “Why the hell has the population been forced at treat of incarceration, to pay such god dammed high tax rates?”

6) Remember, every $ collected from the tax farm, is an additional $ that can be misallocated into the out of control, US military budget that dwarfs all other budget spending by ridiculous %’s.

7) Come on now, did anybody actually believe the USA was going to somehow pay off its 22 trillion $ national debt?

8) Learning about MMT supported my personal liquidation of Metals held up till early 2013.

It’s a brave new world…

#156 YVR Renter on 03.19.19 at 3:36 pm

#23 Mean Gene, that is correct. We are a 1% couple, and since moving here on a work transfer promotion, sadly, during the insanity of 2016, we have not come close to affording to own a home in LM. We had beautiful homes in the burbs of Toronto on large lots. (no one believes it till they actually move to Vancouver and see it). AND we could afford to save, give ou kids good private school and then university educations through post-grads. Now, we are challenged to pay the rent, the fricking ICBC and the gas at $1.52/L. We know we cannot afford to retire here, who can??? So are currently looking for a way out. Price drops will be way too late for us. Don’t understand how the prices are still defying the principles of economics. Going to fall off a cliff suddenly is all we can think. But, BTW, the multitude of open house signs in our ‘hood of tony Dunbar (on the West side in Point Grey) were almost blinding last weekend. Every corner, multiple signs, both Saturday AND Sunday, the same signs doing multi-open houses. Empty building lots from teardowns are just abandoned, as are partially completed reno’s. Such a different place from the multiple offers over asking, no conditions craziness of 2016-2017+.

#157 Darren Simpson on 03.19.19 at 4:20 pm

For some reason, Garth Turner is afraid of information 3.75% to 4.0441% 5 year GIC rates and low taxes on it is which applies to the majority of Canadian depositors getting on a public forum. This is why he deleted my comment.

Your comment was published when read. Apologize. (Sounds like you have an agenda…) – Garth

#158 Cindy Snow on 03.19.19 at 4:24 pm

This is why going to see a financial advisor and dealing with bankers, the financial industry is so much fun.

#159 Shawn Allen on 03.19.19 at 4:42 pm

GIC Income Tax Fact Check on Aisle 3!

#150 Darren Simpson on 03.19.19 at 2:57 pm
We are content with our $480,000 in GIC’s, RRSP GIC’s, TFSA GIC’s at 3.75% compounded for 5 years, March-7-2024 really 4.041% with compounding, $20,200 a year interest, $101,000 after 5 years total interest.

Since we are retired, both retired accountants, we figured we are in a lower tax bracket so with all personal tax amounts, pension tax credit, disability tax credit etc., we get to keep roughly 90% of all our interest, paying only $2,020 income taxes per year or $10,100 total incomes tax in 5 years.

Since we are debt free and don’t have huge debt loads at low and higher rates like most Canadians, we are managing well this way.

Fluctuating investments are not for everyone. I know this comment will be knocked but we only do what is comfortable and right for us. GIC’s fully deposit insured.

This is why accountants are such fun. – Garth

******************************************
That’s impressive but I am skeptical on the claim of a 10% tax rate.

Well, it’s zero in the TFSA so if much of it is in TFSA, that may explain it.

Tax in the RRSP is likley to be far higher than 10%.

Let’s see it’s 20% marginal tax rate in Ontario if you are under $44,000 per person taxable income and rises after that. So maybe if half is RRSP and half is TFSA you get to 10% average tax rate. By the way the lowest marginal tax rate in Alberta is 25% and applies on first $48,000 of taxable income.

Unlikely half is TFSA here, but okay if they both have taxable incomes under about $44,000 total all-in (not great but not bad and quite better than average) then maybe they can be at the 10% tax rate. And in most cases all the income is taxable, the personal exemption does not reduce taxable income but does eliminate the tax on the first $15k or so.

And they likely got refunds a good bit higher than 20% in contributing to RRSPs and so the actual tax on their share of the RRSP that they funded net of refund is clearly negative. So much for the theory that RRSP is not for retirement and so much for RRSP bashers.

In which case, well done. 3.75% is not looking so bad these days. Most would try for more but to each his own.

#160 Darren Simpson on 03.19.19 at 8:40 pm

DELETED

#161 Sid on 03.19.19 at 9:45 pm

Hi Garth…Just purchased a house with $25K out of my RRSP and same from my wife’s. Can we still withdraw another $10K each based on the new budget that now allows for $35K withdrawal?

#162 Gordon on 03.19.19 at 11:33 pm

#140 Bdwy Skytrn, shhhhhhh, don’t let the straights in on our secret. Of course the markets will pay us handsomely over the next twenty years. I bought (added to positions) in my growth portfolio yesterday ) for just that reason. One in particular had a sale on after retail morons sold off on news of a 400 million dollar transaction. That’s chump change for this company so I got a $7 discount, yay.

BTW, re yesterday’s comment about buying TD twenty years ago, I did. Wow. It’s been one of those sticks I wish I’d bought a lot more of. After the splits, dividends and appreciation. I could afford an average persons retirement just in that one issue alone. I have 60 superstars in my portfolio of various profiles in the five pillars if your economy. TDis a super stock. Long may they reign as a dividend king.