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February 19, 2018 | Curb the Enthusiasm

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.

 

It was a bust. Of course.

When it comes to being pissed about unaffordable houses, it’s a lot easier to Tweet than it is to show up and, like, wave a sign. So a protest in Vancouver expected to “draw thousands” this weekend attracted about two hundred, at least half of them organizers. Included was the Green Party boss (propping up the current socialist government) who wants any non-BC person banned from owning property there. Xenophobia comes in many hues.

The event was meant as a pressure tactic on the NDP in advance of tomorrow’s big budget, urging the Dippers to make this a housing crisis document which, by all accounts, is just what’ll happen. So expect the usual government drivel about creating affordable units over the years to come, changing zoning laws to allow densification (ie – more ridings with NDP supporters), cracking down on money laundering (zero impact on real estate) and – the big one – a spec tax.

In BC things are getting truly messy. Yes, a local real estate bubble has developed making average houses unattainable to average families, but that’s a global urban trend. Instead of accepting it, as has happened in Toronto, New York or San Francisco, in YVR the locals won’t give up clinging to the 80s. They think children should be able to move into the same hoods their parents chose, and could afford, four decades ago. Quaint.

So when monetary policy, economic expansion or demographics make that impossible, YVRers moan, whine and elect socialists to fix it. Meanwhile in Toronto, crickets. No protests. No placards. No hating immigrants. Yet, look at this…

So here we are. In Van, a 15% anti-foreigner tax. An empty houses tax. Rising property tax. Talk of a non-resident ban. Soon (maybe) a speculation tax. All co-mingling with higher mortgage rates and a borrower stress test. And some people think Amazon’s going to open a new mega-HQ there. Like, seriously?

What happens if Premier Comrade Horgan brings in a spec tax on Tuesday? Let’s look at history for a clue.

On April 9th, 1974, after the average Toronto house price had catapulted 30% in a year, the provincial government (a Conservative one, no less) imposed a speculation tax without warning. The toll was 50% of all profits made on land transactions. Notably exempted were owner-occupied principal residences and family-owned farms.

The impact on the entire industry was immediate and overwhelming. Deals blew up overnight, sales withered and the market croaked. Prices tumbled since buyers fled. The same aggressive-Con administration later shocked everybody by blocking the sale of thousands of apartment units involved in a massive corporate deal – then slapped on rent controls. The market choked for a couple of years, before forming an historic bubble which collapsed into a smouldering heap. It would take 15 years for prices to recover.

The moral? Never, ever look to politicians to ‘fix’ the real estate market. On one hand they punish, tax, surprise and ream people legally profiting from it while, on the other, they use public money to subsidize buyers and create more demand. Suck, blow. Bubble, bust.

By allowing voters, locals and people waving signs to think they can turn back the clock and make houses cheap again, the horde running BC’s a fraud. The latest version. We keeping electing liars. They keep lying. Booting out foreigners, collaring realtors, raising taxes or jailing land criminals won’t change the price of property. Only Mr. Market can do that, which rising interest rates and epic household debt are hastening.

Worry about those things you can control in life, kids. This ain’t one of them.

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February 19th, 2018

Posted In: The Greater Fool

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