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September 27, 2019 | The Bribes

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.

Do people lie to pollsters, just to mess with their heads?

Maybe. But if the latest numbers hold, the T2 Libs are headed for a majority. This is astonishing to those who wondered how he could survive the Lavalin mess. Or the defection of Jody and Jane. The ethics charges. The godawful India trip.  Overspending, deficits and financial fibs. A tax assault on small biz. Blackface and coverup.

But there’s barely a word of such things in the campaign. Instead, this is all about giving stuff away. Bribes. Buying votes. And at the center of the vote-sucking is real estate. In the last few days, for example, the governing party says it will hand out $40,000 interest-free loans for house upgrades. That comes atop the enhanced downpayment/RRSP limit, the shared-equity mortgage and a new tax on non-maple buyers. The Tories have tried to keep up with a return to 30-year mortgages, a gutted stress test and retrofit cash.

Now that Mills form the single biggest voting block and in their house-horny years, politicians can’t help themselves. As mentioned here a few days ago, all this will end up making houses cost more, increasing debt and goosing risk. But our leaders care not. The kids lust for houses. They crave power.

Maybe it’s time we paleos just rolled over and accepted the fact nobody under 40 cares about fiscal sustainability, ethical leadership or less government. Federal deficits and national debt are remote, icy concepts. The big issues of demographics, pensions and productivity are pffft. Instead younger leaders catering to younger votes focus on wants and desires. At the top of the list, weirdly, is property.

So no wonder we’re seeing the kind of crap reporting that’s flooded social media lately. It reinforces the meme that moisters are screwed, implying Boomers are the screwees. A great example comes from the online real estate portal Zoocasa where the kids decided to find out how long it would take houseless Millennials to afford the average home in major cities. The conclusion was shocking – in Vancouver the typical household would need 52 years. Toronto was a bargain. Only 32 years.

The fake news even came with a snappy chart…


(Click to enlarge, but why bother?)

Why is this the wrong data on which to base national housing policies? Simple. In demand markets  where average prices are seven figures, nobody should expect to jump from no real estate at all to a detached house with three bedrooms and shiny taps. The notion of a ‘property ladder’ has even more validity in big cities where single-family homes are in limited supply. Families buying mid-priced real estate are usually trading up based on equity earned by selling cheaper properties. Maybe if a 30-year-old had traded her parents’ comfy basement and laundry service for a cheesy starter home in the burbs there’d be less moaning. Just a theory.

Second, the Zoocasa elfs took the average salary in YVR or 416, figured out how much mortgage borrowing that would bring (not a lot) then calculated the downpayment required to make up the difference. Bizarrely, that equaled a down of 76% in Vancouver, or about $750,000. Hence the 52 years needed to save up such an amount. Unfair!

See how moister math works? It’s awesome.

Today here are 379 active listings in Greater Van asking $600,000 or less. There are 180 asking five hundred thousand, or less. To buy one of these with 5% down would require about thirty thousand in cash and a household income of a hundred grand. Not every family in the region brings in that kind of income, of course. But we also don’t have 100% home ownership – never will, nor should we try. Real estate costs a lot of money to own, and in many cases (almost all, actually) renting is a cheaper option.

But, alas, it’s a losing battle. With the Trudeau re-election, taxpayers will be spending more than $2 billion a year subsidizing private mortgages, while a smorgasbord of homeowner incentives makes houses less affordable, and debt enhanced. By jacking its shared-equity loan limit to $800,000 in Toronto and Vancouver the Libs made a statement. More is more, they said. You deserve it.

But as the nation encourages greater household debt and more personal net worth shifts into a single asset, there is less capital for innovation, invention and advance. Concessions today. Consequences tomorrow. Things will change when Greta runs the world.

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September 27th, 2019

Posted In: The Greater Fool

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