June 27, 2021 | In the Bag

Five months before Covid crashed into us, the nation had an election. Remember that? It was Trudeau vs Scheer, with the Bloc and Dippers as sideshows and Mad Max uselessly sucking off about 300,000 votes from the Tories.

The results (in order of popular vote):

Cons 34.3%
Libs 33.1%
NDP 16%
BQ 7.6%
Greens 6.5%

So Jag backed Justin and Trudeau became prime minister. The Tories ate Scheer and O’Toole took over. The Greens lost Liz May and are disintegrating with a weird new leader. Now we’ve had two years of minority government, a once-in-a-century pandemic, a deep recession and burgeoning recovery and a federal deficit that was $19 billion in 2019 and $354 billion in 2020.

When the last election happened the average national house price was $508,000. That crashed to $497,000 during Covid and today is $688,000. The increase in one year is 38% and it’s 35% since we voted. In a lot of places – mostly secondary markets – the jump has been far more. Suburban and rural homes far distant from urban cores now trade at city prices.

This has led to anger, disruption, generational warfare and fed the disruptive social narrative currently ripping the country. On one hand, a majority of families who have benefitted from the escalation. On the other, a huge cohort of younger people who are locked out. Household debt has inflated wildly, thanks to cheap rates (caused by Covid) and housing frenzy.

  Governments seem not only unable to tame the real estate beast, but are actually unwilling. This Tweet by Lib MP Adam Vaughan (Parliamentary Secretary to the housing minister) on Friday caused another social media crapstorm:

For avg..Cdn homeowners..in fact the vast majority..the principle in a home is the bedrock of their financial stability..no govt should hurt one group to help another..nor do we need to..speculators are a different story..govt policy should not protect investments over people

In other words, he suggests the feds will take no action to corral prices because real estate has become “the bedrock of financial stability” for the “vast majority.” Too bad, kiddos. You can rent. By all means let’s protect the unearned, windfall 38% one-year, tax-free gain of others, and shut you out.

So here’s the point. There’s an election coming. Count on it. Parliament rose for its summer break last week and is unlikely to resume siting on September 20th since we’ll be in the middle of a campaign. Will real estate be a big issue? Does that huge group of under-40 voters who supported the Libs last time care most about (a) the deficit, (b) First Nations, (c) sexist soldiers or (d) the fact they can’t get a house?

It’s (d), of course, rightly or wrongly. If that’s the case, what choice do these people have? The Liberals have allowed property prices to inflate as never before while making mortgages harder to qualify for. The shared-equity mortgage is a joke, and taxing foreigners 1% of property values won’t bring house prices down by a dime. The Tories also want to hurt non-Canadians who are a non-issue and bring back the Harper-era 40-year mortgages that helped inflate real estate by creating more demand. The NDP are just nuts, thinking ‘the government’ can build houses and give them to lower-income people while ignoring the middle class.

In short, there’s no champion. No vision. And no politicians who truly have the guts – as Adam Vaughan admitted – to reduce existing homeowner equity by jacking mortgage rates, increasing minimum down payments or start taxing those fluffy out-of-thin-air profits.

But politics in Canada is not about solutions. It’s all about blame. Parties are not voted in. They’re voted out. We don’t support. We punish.

When T2 was elected a house cost $433,000 nationally. Now it’s $688,00.  A detached house in Mississauga was $757,000 when Justin was elected and now sells for $1.3 million. Average prices across Vancouver were $641,000. Today that number is $1.17 million. Detacheds average $1.8 million. Toronto prices crossed the $1 million mark this year and a SFH averages $1.4 million. In 2012 the price-to-rent ratio of the average GTA house was 20. Now it’s 36. Wage growth, meanwhile, has been about 2% annually. No wonder people buying have had to absorb Herculean debt.

So this week a note came in from a high-flying couple in YVR. He’s a senior airline pilot. She’s a doc. They make $650,000 a year and have $900,000 in savings. They rent a house worth $3 million (for $5,000 a month) and really want to buy. With $700,000 down, that would cost about $11,000 a month. Understandably, they balk. He asks me…

My question to you is this: why do our politicians not care about affordability for every day Canadians? If my wife and I are scratching our heads and feeling like we will rent for ever, how would the average guys feel? Surely buying a house would seem completely insurmountable. Also, not every family can afford to pay $5k in rent each month, so are cities like Vancouver just going to become ghost towns? Is there anything we can do as citizens (aside from voting and sharing your blog) to help nudge this country along in the right direction?

With the pandemic ending, three-quarters of Canadians vaxed, life normalizing and the economy reopening, you can be sure the Trudeau Liberals think this election in a few months is already in the bag.

Do you?

Garth Turner June 27th, 2021

Posted In: The Greater Fool

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