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July 17, 2017 | Softly

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.


First off, what’s with Bill?

Out of the blue Monday afternoon came word of a major announcement by our millionaire federal finance minister, Bill Morneau. Here it is..

Minister of Finance to Take Next Step in Providing Fairness for the Middle Class

Minister of Finance Bill Morneau will hold a press conference on Tuesday, July 18, 2017 regarding the next steps of the Government’s plan to improve fairness for Canada’s middle class.

We know this is probably Something Big since the department of finance has arranged a full-blown ‘technical briefing’ for journalists to begin an hour prior to the ministerial press conference at 11:40 am DST (Daylight Selfie Time) in Ottawa. Besides, the event will be held in the National Press Theatre – the primo location for doing things like, oh, unveiling details on further ways to fleece the rich. It looks like Tuesday will be the beginning of some bad days to earn your income through a small business corporation.

Recall that ‘anti-doctor’ measures were actively considered for the March budget, but rejected last-minute because of the Trump Factor. They did not go away. And here we are – a war on retained earnings and on family businesses. (Say, did anyone notice Bill Morneau went to work in his dad’s company and ended up owning big equity?)

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Of course more taxation in our little Maple paradise is exactly what the housing market doesn’t need right now. Governments have been brutalizing the real estate market with regularity while the central bank abruptly raises interest rates, new regulations threaten all buyers with a stress test, and the cost of mortgages jumps as bond yields flutter higher. Worse, there are thousands of deplorables who don’t read this blog and own multiple properties they thought could be flipped in a heartbeat to a horny Millennial. Now the market has died, and they’re desperate. Big price declines on the way.

In fact, they’re already here…


Source: Bloomberg

Look at this chart. Amazing. The 14.2% plunge in average prices in Toronto over the last 90 days is the steepest dive on record. Right back to 1988 when Boomers first discovered they could scratch out average and median monthly stats on their cave walls. If this experience is repeated over the next 90 days, this real estate correction will be the steepest, swiftest one in modern Canadian history.

The average Canadian home has given up 10% of its value – or about $50,000 – since April. There are 7.3 million detached houses in this country, so it looks like families just became $366 billion poorer than they think.

In the Toronto region, home to six million people, only 5,977 properties changed hands last month, the lowest level in seven years – right back to the credit crisis. The price decline mentioned above is the fastest on record, and the ratio of sales to new listings has crashed to a level not seen since the disaster of 2009.

Sales in the GTA plunged 15% last month and more than 11% across Canada, year/year. Prices in Oakville and Milton (where there are over 500 listings and 75 empty open houses last weekend alone) fell 3.6% last month. Yes, you read that correctly – a 43% annualized dip. Just one month from now the price of an average home in Canada will be less than it was at the same time a year ago. Add in the huge costs associated with buying, financing, maintaining and selling a property, and this is looking like a loser asset class.

Across the nation, house sales are declining in 70% of all markets. In Vancouver sales were off 4% last month to barely more than 3,000 units. The average price ($1.04 million) has given up 3.2% in a single month – a massive decline in thirty days.

And what do the economists say? Here’s TD’s Diana Petramala, reading from the bank script and trying not to throw up: “The Canadian housing market is now in its third month of what is expected to be a soft landing.”

Can markets really shrug off increasing rates, more costly mortgages, new borrowing restrictions, higher taxes, bulging supply, waning demand, speculation levies, new rent controls and epic levels of unrepayable debt?

Let’s wait and hear what Bill’s got to say. Then we can go nuts.

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July 17th, 2017

Posted In: The Greater Fool

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