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April 23, 2018 | Tale of Two Cities

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.

For me John Tory will forever live as a disembodied voice coming from my chunky ‘90s cell phone. Tory was running the backroom election campaign for Prime Minister Kim Campbell (remember her?) and I was a cabinet minister traveling the country trying to save a sinking Conservative ship.

“But John,” I argued, “this is a disaster. You’ve gotta pull that ad. It’s ugly, crass and pissing people off.”

But he refused. The ‘face’ TV spot continued to air for days more, showing close-ups of Liberal leader Jean Chretien’s puss, contorted, drawing undue attention to his mild deformity. Almost from the moment it was first broadcast, phones lit up across Canada (and in my riding) with people expressing disgust. The needle was pushed for many from ‘undecided’ to ‘anybody-but-a-Tory.’

On election night the Conservative vote collapsed, with the party seat count dropping from 156 to 2. So long, Kim. The Libs romped to majority government. Among the casualties was me. I got the third-highest vote count. Close, no cigar. And thus I went on to become a billionaire blogger spending his nights fighting anonymous xenophobes, dissing hipsters and making fun of wrinklies and realtors. What a career path.

Well, John Tory survived, because he had nothing to lose. Today he’s still a political force, now running Toronto (scene of today’s tragic event). This week he gave a speech revealing the big thrust of his campaign for re-election. No surprise. It’s affordable housing.

Well, notice a trend here? Provincial and civic governments in BC and Ontario are obsessed with real estate, and have dragged the feds into the fray. The rumours are that Tory’s bid for prolonged power will involve a GTA copy of Van’s ridiculous ‘empty house tax’ and perhaps even a version of the BC speculation tax. It’s all part of the Moister Politics – catering to the huge Millennial cohort where the meme is that Boomers stole all the houses (and the good jobs) and need to be spanked. Of course Ontario also has an anti-foreign-buyer tax, which no statistical base to justify it. But there ya go. In public life perception is reality. Just ask Chretien.

Meanwhile there’s an elephant in the room. Doug Ford, combative brother of the new-deceased rebel, crack-smoking mayor Rob, is leading in the provincial polls and might well be premier by the middle of June. He’s a rabid right-winger, at least in fiscal terms, and says he’d scrap the 15% go-home tax as discriminatory and ineffective. Barring an asteroid strike on his Escalade, that’s probably going to happen.

The impact? Bullish.

Remember ‘Capitulation Week’ (not my descriptor) recently on this pathetic blog? That’s where I underscored several GTA hoods in which 25-30% price declines had occurred and sellers were forlorn, lonely and unloved. A great example came with our heroic/hated blog dog Derek who sold for $2.25 million to buyers who walked (and got sued & lost), then sold again months later for $1.7 million in a changed market.

Anyone who thinks these price drops will double over time – that houses in 2020 will command half what they did in 2017 – is being unrealistic. It’s not happening in the GTA. If Ford is elected, locals might even expect a mini-Trump effect, with renewed buyer confidence and another headlong plunge into the debt pool. It’s hard to predict sentiment, but a year from now lots of people may regret not having tried a good vultch in April. Remember, a 30% decline in prices wipes out a 50% gain.

But I’m starting to have serious second thoughts about YVR and the LM. All of BC, in fact. Yesterday’s blog some hard numbers on current sales, some historical context, then 200 hysterical comments from NDP supporters who crave seeing my head on a stick outside the Vancouver Art Gallery. So many people have swallowed the ridiculous line that higher taxes will reduce house prices by 60%, restoring affordability to the homeless masses who will flock in and buy.

None of that will happen. Yup, the market will croak, sales will crater. Thousands of people will be forced into underwater real estate, owing more than their homes are worth. But cheap houses will get more costly with higher demand. Unaffordable ones will drop hard, but still be out of reach. Families, meanwhile, will be struggling to borrow and buy in a declining economy, where lenders are far more skittish.

More profoundly, the reputation of BC within the federation is starting to stink. The war with Alberta is incredible and bitter. The collapse of the Trans Mountain pipeline project has led to hostility in the oil patch, and even a threat that the cowboys will turn off the energy taps to the greenies. The BC ‘speculation tax’ left coast politicians have imposed on all other Canadians who have owned property in that province for years or decades is seen as capricious, unjustified and punitive. Which it is.

These other Canadians are not hurting BC, but rather helping support it. They pay school taxes but send no children. They pay property taxes year-round but live there far less. While in the province they spend heaps of money earned elsewhere, providing income and jobs for their neighbours. These are the kind of people American states court. Now, at the stroke of a pen, they face a retroactive tax that is, in many cases, massive. Just like the anger and anti-BC sentiment it is creating.

Add it all up. Money’s heading East.

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April 23rd, 2018

Posted In: The Greater Fool

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