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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

October 7, 2018 | Delusional

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.

Gerald is a psychiatrist, semi-retired. “So,” I said last week, mocking him, “how does it make you feel, Gerry? Angry, hurt, bitter, resentful? Let it all out. You can share with me, in this safe space.”

“I’m pissed,” he said. “Now knock it off.”

We were talking about Comrade Premier Horgan’s plans to steal $3,600 from his retirement nestegg in 2019, and then $9,000 annually thereafter. You see, Gerald has a small practice and a condo in Calgary (where he is licensed), but spends about eight months a year at his place in Kelowna. He and Debra bought it in 1998 (she passed two years ago) for just over $400,000. Now BC Assessment tells the doctor it’s worth a tad more than $900,000.

“But that’s not my fault,” says the doc. “I can’t help it if the market goes up. How does that possibly, in any way, shape or form, make me a speculator?”

So here’s the problem. In days BC will legitimize a ‘speculation tax’ designed to Hoover money from people who own a second property in major populated/tourist areas. They can be BC residents who have a vacation home or any owner with a principal residence in Alberta, Ontario (or anywhere else in Canada). And those evil foreigners, of course, who already have to pay a 20% head tax for the right to purchase in the province.

The lefties running the government in Victoria are adamant, doctrinaire and ideologically insufferable. “There’s a housing crisis in British Columba,” says the finance minister, Carole James. “The public wants us to address it. It’s going ahead.”

Despite that, most local politicians are apoplectic. Nanaimo, Kelowna, the Local Mainland Government Association, as well as the local business organizations, are warning that this could be a kiss of death for development. The message it sends to guys like Gerry is clear: Bug off. You’re a second-class citizen. You will be penalized for investing in our community.

The rationale is that by forcing people with two houses to bail, or rent them out (for at least six months a year), house values will fall and affordability rise. Half right. The entire market will be brought down, equity for everyone will diminish, recent buyers will be crushed, and prices will fade. But that doesn’t mean homeownership will rise, since sales always collapse in declining conditions. It’s already happening, with Vancouver transactons at the lowest point in decades.

The tax is punitive. In 2019 it will be 0.4% of the assessed value of a property, rising to a full 1% the next year for out-of-province owners and 0.5% for locals. (Non-Canadian owners, or even Canadian citizens who belong to ‘satellite’ families, will pay a huge 2%.) To avoid it, owners have to sell (good luck with that) or rent for at least half the year (good luck finding part-time tenants).

“I stay in my place way more than half a year,” Gerry tells me. “It’s my spiritual home – the place I will retire to in five or six years. Renting it with all my stuff in it for six months is a joke. So this tax is extortion – taxation without representation. Arbitrary. Pure discrimination.”

Of course. This is also an envy tax. A levy on wealth since in BC, owning land/property/house is equated with being rich. The place is now run by a government doing nothing about true speculation, flipping or unearned capital gains, instead applying classic leftist logic to a social problem: tax the poop out of it.

So the speculation tax will join the foreign buyer tax, the Van vacant homes tax and the luxury property tax in a concerted government effort to crash the real estate market. This is concurrent with the mortgage stress test, rising mortgage rates as bond yields spike, and at least three looming Bank of Canada interest rate increases. No wonder sales have tumbled across the province and prices have already been pared by a third in areas like the tony Westside. Now average homeowners across the Lower Mainland, in the Okanagan and on the Island can also see their equity sucked off.

The dipper retort: “When a property owner holds onto vacant homes and benefits from rising property value, that is speculation. This behaviour is taking homes out of the housing market, driving vacancy rates lower, and making it harder for British Columbians to find a place to live.”

Of course Gerry’s house is not ‘vacant.’ He spends months there. Pays local property taxes, plus feeds more into the pockets of neighbourhood utilities, repair guys, gardeners and merchants. He has no kids in local schools and consumes no healthcare. But he pays for it. And if his house rose in value, well, he had no hand in that. Mr. Market did it. He took no taxable gain, and the market may well erase the increase. Finally, how many locals are there who want to spend $900,000 on a house in Kelowna and can’t buy one now? There are 110 for sale at the moment in exactly that price range.

Apparently most BCers support this delusion. But that won’t last too long.

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October 7th, 2018

Posted In: The Greater Fool

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