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September 26, 2016 | Worry Time

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.


Four giant men in red track suits jammed onto the small elevator, and all looked down at the same time. Bandit looked up. ‘Vut nationality ees dog?” one of them asked.

“Chow,” I responded. “Chinese breed.”

“Oh, China.” They all grunted in approval, and reached way down to give the pooch a pet. Four hours later these players for the Russian national hockey team were skating off the Air Canada ice in defeat. The bomb-sniffing dogs had finished checking out the big bus parked outside the door Bandit and I use, and they were airport-bound. Just another day in the downtown hotel where we hang out.

Actually Dorothy, mutt and I occupy a condo here, in the beating heart of the city, a few steps from the ungodly-tall office tower where I’m often held captive. The historic hotel has three floors of condo conversion, a lobby full of marble downstairs, plus employees who are paid to pretend you matter. And monster hockey players. Room service and maids, too, if you want.

Anyway, I rent here. The monthly cost is 50% of what ownership would entail. Condo fees and taxes alone on my little unit add up to $1,300 a month. But I don’t pay them, plus there’s no equity on the table. No financing. Full mobility. Lease as long as I want. No risk.

I mention this because we’re entering a tough time for real estate, whether it’s in the Toronto core, in Vancouver, or the outlier boomlets of Victoria, Hamilton or the 905. More people should rent. Fewer should assume the past will have much to do with the future.

Here are four things homeowners should worry about:

Chinese Dudes Tax, Ontario Edition

Bad enough the BC government slapped a 15% tax on the value of all properties being bought by non-Maples, without consulting the industry, and then chortling about the crash that resulted – but other politicians are applauding the move. Finance Minister Bill Morneau likes it. Ontario premier Kathleen Wynne likes it. And we are likely just weeks away from it being implemented in that province or, at the least, in Toronto and the GTA.

As you probably know by now, the BC tax sent out a message strong enough not only to scare off the foreigners responsible for about 10% of all trades, but to shut down the locals, too. Once the irrational fear of being priced out of the market by house-horny Chinese was removed, sales collapsed. Prices followed. A market that was already seeing huge cracks was given the push it needed to rupture. This is what happens to assets in a bubble. It ends with a mess. Everyone gets wet.

The “Hey, we were Only Kidding’ Mortgage

So, remember this picture that a blog dog snapped a few weeks ago, which was then featured here on this pathetic site?

STUDENT modified

Sure you do. It was those fun bankers advertising the fact they’re happy to give out residential mortgages to foreign students (and other non-nationals) so long as they have a chunky 35% down payment. And no income verification required. Honest.

Well, not any more. After pressure was applied to the feds, and Minister Morneau made a few phone calls, the banks are taking it all back. “We’re pleased,” he told reporters on Monday, “that they are taking a look at the risks that they have in the market and taking action that they think is appropriate.” So add it up – fat taxes on non-Canadians buying property here, an abrupt reversal on long-standing lending practices to foreigners, and now a tax in Vancouver on people who buy homes and don’t occupy them. Gasbag, meet pricks.

Coughing it up in the GTA and VYR

On Friday the country’s top financial regulator dropped a hammer on the mortgage insurance business, taking special aim at the delusional locals in Vancouver and Toronto. If proposed changes happen (they will) then come the first of the year, mortgage insurers must beef up capital requirements to deal with the added risk inherent in those markets. It means borrowers will be under increased scrutiny over creditworthiness, including details of the loan size, credit score, outstanding debts and the time left to repay the mortgage – as well as the location of the home.

Think you always automatically qualify for mortgage insurance if you qualify for a home loan? Think again.

This is the cream of the USA?

The Hillary-Donald slugfest Monday night is a precursor to weeks of angst for the most important country in the world. The Dow had a triple-digit dump just thinking about it. The odds of more volatility between now and election day are probably 100%. If the Trumpian forces win, then the period from November 8th to the inauguration on January 20th – which will include a key Fed rate decision (Dec. 14) – could be a wild one for investors and markets. This includes the real estate market. Yes, in Canada.

At no time in modern history have Americans faced such a difficult choice between a political hack with trust issues and a scary billionaire rebel who thinks in Tweets. Uncertainty means more risk, especially with a president threatening to rip up our key trade agreement. Could be a rotten to time to have the bulk of your net worth in one asset, with an epic mortgage, in a country best known for house porn TV series.

So, think about it. Renting’s always a risk-free option.

By the way, Bandit was rooting for Ruskie victory. And room service. He got neither.

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September 26th, 2016

Posted In: The Greater Fool

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