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September 28, 2017 | Scary

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.

A strange thing seems to have happened between Re/Max and the media.

Early yesterday Canadian Press filed a story based on the latest press release this over-hyped company churns on a regular basis. But unlike the usual buy-now-cuz-prices-are-exploding fare, this release was all about a market correction. Yes, some unexpected realism from an industry giant.

TORONTO – Even luxury real estate buyers are holding off in Toronto and Vancouver, watching and waiting after recent government measures aimed at cooling off the hot housing markets, according to new figures.

New numbers from Re/Max show that between January and July of this year, sales of luxury properties with a price tag of $3 million or more slipped 40% in Vancouver and 14% in the GTA, compared to a year ago. The number of $3-million-plus properties that changed hands in Vancouver in the first seven months of the year fell to 499 from 838 in 2016, Re?max says. In the Greater Toronto Area, the number of properties sold between January and July fell to 738 from 860 a year earlier.

Christopher Alexander, Re/Max’s regional director for Ontario-Atlantic Canada region, says would-be buyers moved to the sidelines after the introduction of government measures aimed at cooling the market, including a foreign buyer tax.

Too bad it didn’t last. Blog dog Prash noticed that, weirdly, the negative story appeared for only a few hours before being spiked. “Earlier Wednesday there were some online pieces in the Toronto Sun, Global News, HuffPo, etc saying luxury real estate sales have dropped,” he says. “These articles appear to have now been taken down, although I was able to scrape some cached content from Google. The numbers themselves aren’t surprising (Jan-Jul luxury sales down 40% in Van and 14% in GTA). There however does appear to be a concerted effort to minimize negative news on the internet.”

While it’s possible to ferret out a copy from some obscure sites, the piece is gone from Global, CTV, CBC and the fading Suns. A reader in Vancouver even heard a radio announcer comment that Re/Max had contacted the station to have the piece pulled.

Maybe it’s nothing. Maybe it’s something. It’s understandable Re/Max might have second thoughts about spooking the market. But it’s unconscionable that media would censor. Even this blog doesn’t stoop that low.

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Speaking of media and messaging, the embattled finance minister will be live on Facebook Friday morning in an orchestrated Town Hall meeting in upscale Oakville defending and selling his proposals to pulverize small business owners. It’s being staged at the highly convenient time of 5:30 am PT, or 8:30 am ET, with the media being told to be in place shortly after the cocks mount the yardarm. If you’re available, here’s the address:

And here’s your smiley minister’s promo for the event. (Dig the hastag, #TaxFairness. Right up there with #puppies.)


Reader Matt wrote his Toronto-area MP in protest to the changes and to add his voice to the sham consultation period which ends Monday. John McKay (who I know well and thought was a reasonable guy) replied, categorically, saying this:

  • If you are paying a dividend to your spouse or adult children who have not provided reasonable services to your business, you could be affected;
  • If you are holding profits inside your corporation for retirement, you could be affected.

So, as suggested here, it’s a done deal. People who played by all of the rules will be whacked. Husbands and wives who together invested time and capital to build a business will no longer be able to share income, even if they’re both shareholders, solely because they’re married. Professionals without pensions who scrimped for years so they could amass a retirement nest egg inside their corps will, in fact, soon see them taxed away. And two million people who did absolutely nothing wrong will have been labeled tax cheats and manipulators by their own government. All for political advantage. Shame, Mr. Speaker. Shame.

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Back to real estate (it’s safer), it’s rumoured we’re now just a month away from the new universal stress test taking effect. Property bulls are shirking it off. But the mortgage dudes are trembling. The overall effect, says the lending industry, will be a drop in available credit of approximately 18%.

The major impact will be in markets where prices are highest and wages have barely budged over the last few years – obviously YVR and the GTA, including all of the Lower Mainland and southern Ontario. Less damaged will be Halifax, Montreal and other places where the pricing lunacy did not hit, and houses don’t cost 10 or 12 times the average household income.

At about the same time will come the third Bank of Canada increase so far in 2017, tripling the benchmark rate and raising the bank prime to two whiskers below 3.5%. Cheapo five-year fixed mortgages that were 2.2% in the spring are a full 1% higher now, and will be 1% higher again by this time in 2018. Add in 200 basis points for the stress test, and borrowers with 20% or more to put down will have to prove they can carry a loan today at over 5%. That’s an effective 300 basis-point change from April.

Maybe Re/Max was right. This is just too damn scary.

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September 28th, 2017

Posted In: The Greater Fool

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