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February 20, 2018 | ‘We Lost’

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.

“I just wrote a first blog post,” says Matt, the successful video gamer-engineer guy, “called ‘So Long, Toronto’. I realize you may be the only Canadian who reads it. If you find anything worth quoting or mentioning in your blog, it’s all good with me. If not, that’s cool too.”

Matt’s blog is worthy, and you can read it here. “The battle to make it in Toronto lasted 7 years,” he writes. “At last, it is over: we lost. Time to retreat.”

So the Millennial, his spouse and his child are on the road from the Big Smoke to Quebec City (a town of almost a million where the average house price is $286,000.)

“We took a step-back. Are we trying to fight a battle we can’t win? Is it even worth fighting this battle? Why not move to Quebec, where houses are much cheaper?

  • The mortgage on a detached house would be $700-$1400 per month.
  • Government subsidized private schools for under $6000 a year.
  • Montessori for $800 per month or daycare for $14 a day.

Taxes are higher, but wow, the balance sheet certainly looks better! Off we go. We’re out of here.”

How did Toronto eat Matt? Simple. Real estate. Can’t buy where he wants. Can’t rent what he wants. Prices are insane while demand seems insatiable. As part of a cohort that intensely wants an urban lifestyle, hates commuting, disdains the burbs yet can no longer afford a SFH near work, he hit the wall. Either stay, get screwed over and Hoovered clean, or split and find a life elsewhere.

In light of today’s all-housing-all-the-time BC budget and the pissy discussion we had on this site yesterday, Matt’s first blog post has relevance. The moister generation has reached a key moment, now entering family-formation, root-sinking years, wanting to turn into their parents but economically prevented from doing so. The lashing out has been epic – at politicians, realtors, central bankers, immigrants, Boomers, temporary foreign workers, bankers, regulators and, of course, the Chinese.

And, yes, facts are facts. Millennials in general are not on a roll. People now in their early thirties (says the Resolution Foundaton) earn 4% less than GenXers did at the same age. In the UK it’s reported that Mills have a 33% homeownership rate compared to 60% for Boomers then. In the US, the ownership rate among those under 35 has just risen to 36% (from 34.7%), but still pales compared to their parents’ experience.

The report calls it, “a ‘boom and bust’ cycle where significant generation-on-generation gains for older generations have come to a stop for younger people.” Another report (also British) found tech workers in London are now ‘Generation Rent’ and by 2025 more than half of all people under 40 will be tenants.

In Canada we’re off to a dismal start. Stats Canada reports 35% of those aged 20 to 34 are living with their parents (up from 30% two decades ago) – unprecedented. In Toronto the proportion of musty moister basement dwellers surges, to almost 48%. Concurrently, household formation is falling – down from almost 50% (for this age group) to about 42%.

So, there ya go. In Canada’s two bubble cities, where a million bucks buys crap, saving a down payments is impossible, rents are escalating, incomes are pedestrian and having a kid in a 600-foot apartment is a real bad idea, it’s fight, flight or capitulate.

Meanwhile a University of Alberta researcher spent time proving the obvious: the longer the Mills stay with mom, afraid to seek their own shelter, the more the family is debilitated. Michelle Maroto concluded that parents’ financial assets and savings were reduced by about a quarter when adult children refused to go. They don’t get married. No children. No independent home. Just more school and another degree.

So, clearly, the easily-offended, gender-sensitive, over-educated, socially-engineered lefties we call Millennials got the short straw. Growing up in a low-rate, low-growth, low-inflation world they have to contend with inflated asset prices (thanks to cheap money) and deflated incomes (thanks to a slow recovery). Too bad. But moaning won’t fix it. Or voting NDP. Or blaming yellow people. Or more taxes.

Real estate values will inevitably moderate as the cost of money rises and household debt goes from critical to moronic. But nobody should expect 40% declines in YVR or the GTA, especially in the urban areas always in demand. Even at that level, most people would find it unattainable without committing 100% of their net worth to a single asset. Unwise.

Matt, on the other hand, is a genius. Quebec City. Halifax. Kingston. Montreal. London. Edmonton. Nanaimo. Regina. Charlottetown.

Move. Or shut up.

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February 20th, 2018

Posted In: The Greater Fool

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