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January 4, 2016 | The Kids

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.


Jason (not his real name since he’s a lawyer and can sue my shapely bottom off) is a Millennial. One of the first. Now in his early thirties, he has a wife and lots of clients he advises on tax matters. But being a tax lawyer and a fool are not mutually exclusive, so Jason almost lost it when it came to Becoming An Adult and buying real estate.

“I nearly blew the bank doors open to take on a $520,000 mortgage!” he says, thinking about that $750,000 semi he coveted – before discovering a certain pathetic, mind-altering, addictive blog. “I woke up from my temporary insanity and reflected on the situation with truly sober thinking. Purchasing that, although very nice home, would have been insane. I looked around me here in Toronto and thought to myself….this is literally terrifying.”

Good word for it. As in Vancouver, Jason’s generation is gambling on properties as no other did in the past. Several reasons why. First, Millennials outnumber Boomers and compose the largest demographic – and we all know what those crazed hippies did to real estate. Second, this is a group which decided to spend 85% of its collective life so far in school, which meant delayed financial adulthood, and a big pent-up demand now for spouses, spawn and back yards. Third, they hate cars. And commuting. The 401 or Highway 1 scare the Mio water enhancer right out of them. They think cars are for renting, and probably never heard of a Magic Bus. Fourth, houses have never cost this much, so buying one is beyond serious. Fifth, the kids are urban. And that’s their downfall.

The fixation with being in a city, ideally within hoofing or biking distance of work (the rebels among them may opt for a pink Vespa), means competition for condos, slanty semis, townhouses and entry-level detached houses has hit a crescendo. Thus we’ve seen prices in the 416 or inner-604 rocket ahead of the rest of the regions, reaching a new and unparalleled level of unaffordability.

Jason offers this observation:

“As a tax lawyer, I see people who are in rough shape for a living but I can tell you that it is getting worse. I see it in my clients. A lot are only stopped from homelessness because of the miracle of ridiculously low interest rates and the ability to borrow against newly created equity in their homes. (On a side note, I’d be happy to give a comment in your blog about CRA auditing real estate in Toronto. CRA is capitalizing big time on the increase in the real estate market in Toronto).”

Well, the kid gave up the big mortgage idea, bought a condo for one third the price and hunkered down to pay off his $95,000 in student loans. Jason even bought a car and has started to invest. “I have gotten to the point where I will be maxing out both mine and my wife’s TFSAs at the end of January. Your blog and common sense brought me back to sober thinking. You are doing a public service.”

Now, to give this some context, let’s remember that our moist little lawyer here is the exception. There are 1.5 million other Millennials in the Toronto region alone – fully a quarter of the entire population of six million – all of them hitting the peak real estate lusty years. Given this anti-car, clumping, clubbing, vaping, pedaling urbanity so much in evidence, it does not bode well for the suburbs or, for that matter, the rural areas beyond.

For example, as of last month it cost 33% more – or an additional $256,245 – to buy a detached house in urban 416 rather than suburban 905. This is attributable not only to fewer properties being available in the built-up areas but also the fact there’s more demand by Millennials. They just don’t want those streets where minivans, and souls, go to die.

Will this continue, even as the era of emergency interest rates comes thudding to a conclusion? As higher down payment requirements click in, or the commodity-dependent economy flirts again with recession? Yeah, probably. Such is the power of peers and evolving work preferences. I mean, have you ever encountered a sub-30 who wanted to live in the suburbs, drive a Kia Sedona and sell things for a living? I rest my case, your honour.

Well, it’s just too bad the Boomers passed on all their house-horny genes. What built the wealth of that generation now has the potential to blow this one up. Nice hair, though.

By the way, here’s a year-ender I recorded for an online radio program. It’s Millennial-free.

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January 4th, 2016

Posted In: The Greater Fool

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