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October 4, 2017 | Really?

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.

Some days ya just don’t know who’s zooming ya. On Wednesday, for example, Globe & Mail readers were jolted with this: “Toronto home prices rebound sharply after short slump, sales drop.” Sharp rebound! You could feel the collective sigh of relief from 45,000 realtors like a warm spring zephyr.

“The market recovery last month was driven primarily by buoyant sales of detached homes in the City of Toronto,” the story said. “Bouyant!” How could that be ambiguous?

But over at Bloomberg, where nobody’s ever allowed to be relieved or happy, a different take: “Toronto Housing Prices Fall for a 4th Straight Month.”

Huh? So what is it? A sharp rebound? A slump. Up or down?

The reality is detached home sales in 416 did not rebound, and they were as buoyant as a fat brick. In the whole city just 642 singles changed hands, down year/year by 41%. In the entire region (six million souls) there were 6,379 transactions of all kinds in September – traditionally one of the best months of the year for real estate hormones. That compares with 9,830 last year. The buoyant difference: – 35.1%. Yup, sales plopped by almost a third.

So, demand was down sharply. How about supply?

The number of properties listed has been swelling like a lovestruck blowfish. The official real estate cartel count is 16,469 listings – up about 9.5%. But as of Monday realtors could peer into their screens and see more than 26,900 properties on MLS. Meanwhile we know (as of Tuesday) that the new universal mortgage stress test is a go, and will be in place early next year. We also know there’s a 98.5% chance (say the markets) of another US interest rate increase in a few weeks, and that the Bank of Canada will likely follow. We know the economists at Scotiabank, whose track record is about 100% lately, say interest rates will rise a full 1% in the next twelve months. Put it all together and, yes, we know anyone buying a house will have to qualify for a loan at 5-6% in 2018.

But at the real estate board (and the Globe), it’s all ponies and sunshine. Says the boss there: “The improvement in listings in September compared to a year earlier suggests that home owners are anticipating an uptick in sales activity as we move through the fall.  Consumer polling undertaken for TREB in the spring suggested that buying intentions over the next year remain strong.  As we move through the fourth quarter we could see some buyers moving off the sidelines, taking advantage of a better-supplied marketplace.”

Polling in the spring? When prices were frothing higher 30% a month? Is there a whiff of desperation in the air, or did Bandit just have an accident?

This week a veteran real estate lawyer in the west end of the GTA let it be known he has 15 active cases of buyer default on his desk at the moment. “In all of the last ten years, I’ve only had a total of five,” he said. The conclusion’s obvious. Market sentiment is negative overall, and sane people are staying away in droves. The reckless and naïve are not.

Time for a Wild Bill update. I hear he’s rattled. The finance minister never expected the organized and noisy push-back he received to his lame idea of taxing small business operators by abruptly changing long-standing rules. His communications nerds totally bombed by calling two million law-abiding entrepreneurs tax cheats and loopholers. Bill Morneau never expected critics of his thrust to seriously attack the retirement savings of farmers, drywallers and family doctors with his family firm’s work to create tax shelters for the corporate rich.

So, politics being what it is, where being popular is more appealing than being principled, change is coming. In this case, good change. Maybe. “Changes are going to be required,” he said in a media interview Wednesday. “We need to make sure we take into account people’s points of view. That means reviewing what we’ve received, making sure we fully understand it and responding accordingly.”

By the way, the feds got 22,000 submissions – closely paralleling the number of blogs posted here on the subject. So now Morneau says they may well be reviewing plans to limit income-splitting between business owners and family members (who are shareholders), or raising taxes to as much as 73% on income from retained earnings. It’s smart politics, since the broad coalition of those angry with the very notion that the risk-taking creators of jobs should be whacked, or doctors encouraged to leave, is huge and growing. It even includes a few brave Lib MPs, some provincial premiers and virtually every major business group.

But this is ominous.

On Tuesday evening the Department of Finance issued a statement on next steps. Here’s one of the five key actions to be taken:

Conduct a gender-based analysis on finalized proposals, to ensure any changes to the tax system promote gender equity. About 83 per cent of passive investment income is earned by Canadian-controlled private corporation owners making more than $250,000. About 70 per cent of these individuals are men.

Do you make more than $250,000? Are you now, or ever have been, a man? Big mistake. Run.

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October 4th, 2017

Posted In: The Greater Fool

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