Alberta budget news

[1stLand]

I think Redford should raise Royalties.
This will balance the budget. We need our fair share! (to pay for our governments fiscal mismanagement)

[Rerun]

Originally Posted by Slava

Well surely you're counting the 20 years of mortgage payments though?

Yes I realize that... but you are getting a bigger bang for your buck because your return is based on a $150,000 asset not a $15,000 asset.

There are very few low risk assets, other than property, that in 20 years you can sell for such a large return on your original investment.

[chemgear]

Originally Posted by Rerun

I don't want to sidetrack too much, but here is something similiar overlain with the US where prices corrected back to fundamentals in the last few years. For what it is worth though - I'd imagine household debt in Canada can keep piling higher than the Americans for a while longer yet. I believe it is even worse in Norway - 200% of income or something like that?

[chemgear]

Originally Posted by 1stLand

We need our fair share!

[Tinordi]

Housing is not low risk. Just ask our neighbours about their experiences, or even better, ask our fellow Canadians 5 years from now after the reckoning that's on the doorstep.

[bizaro86]

Originally Posted by NuclearPizzaMan

Yeah, but if we just use all the gas money to buy houses and keep our taxes low, and the values of our homes increase forever, we won't even need an economy!




Alberta has a regressive flat tax and no pst, so it is no wonder that the first 100k is taxed more heavily here.

Sales taxes are about as regressive as a flat tax, maybe more. Although "necessities" are excluded and rebates paid, that only gets you to parity with having a personal exemption on the flat income tax.

At the high end of the brackets especially, a huge amount of income can go to savings/investments and/or is spent outside the province and on travel. Those dollars would attract income tax but not sales tax.

[Slava]

Originally Posted by Rerun

Yes I realize that... but you are getting a bigger bang for your buck because your return is based on a $150,000 asset not a $15,000 asset.

There are very few low risk assets, other than property, that in 20 years you can sell for such a large return on your original investment.

Ok, let me explain this:

You pay $15k down.
Then you pay $12,280/year in mortgage payments for that $150k home. I based this on 20 years at 11% which was below prime in 1988. I know rates have fallen since, but we're really just screwing around here anyway. Add that to your $15k and you have $260,600 that you paid. You sell that house for $325k now and make a total net profit of $65k (rounding).

Not counting insurance, maintenance, fees or anything else that equates to a total return of 25%....but thats over a 20 year period. My 3.5% compounded was purely based on the $150k to $300k and didn't even count interest.

The reality is that this as an investment (and granted the time frames here somewhat selective) give an annual return that is not impressive at all. Its positive, but behind inflation in this scenario.

[bizaro86]

Originally Posted by Slava

Well surely you're counting the 20 years of mortgage payments though?

I have people called tenants who pay my mortgage payments on my real estate investments.

Of course, if you're talking about a principal residence that's a forced savings vehicle, not an investment, imo.

[Jacks]

Originally Posted by Slava

The reality is that this as an investment (and granted the time frames here somewhat selective) give an annual return that is not impressive at all. Its positive, but behind inflation in this scenario.

You gotta live somewhere.

[Slava]

Hey, I own a house as well, so I'm not saying people shouldn't buy houses. I'm just amused that Rerun thinks that buying a house is amazing as far as investing goes. A return of 3.5% compounded annually, and taking into account the enormous jump in housing through the 2000's isn't anything to write home about.

[bizaro86]

Originally Posted by Slava

Hey, I own a house as well, so I'm not saying people shouldn't buy houses. I'm just amused that Rerun thinks that buying a house is amazing as far as investing goes. A return of 3.5% compounded annually, and taking into account the enormous jump in housing through the 2000's isn't anything to write home about.

You'd have a hard time finding someone more pro real estate investment than me, but I don't see owning a personal residence as an investment. Sure, it'll eventually be paid off, but if you'd rented something comparable and saved and invested the difference you'd be just as well off. This is more true on larger houses where the rent wouldn't cover the mortgage/taxes/insurance on a comparable house. If you're comparing buying versus renting a small condo or townhouse the numbers work differently.

IMO the big benefit for most people is they'll defer their savings for a trip or a new car, but the mortgage payment doesn't get skipped. So since the principal portion of the mortgage is savings they're forced to save.

[Slava]

Originally Posted by bizaro86

You'd have a hard time finding someone more pro real estate investment than me, but I don't see owning a personal residence as an investment. Sure, it'll eventually be paid off, but if you'd rented something comparable and saved and invested the difference you'd be just as well off. IMO the big benefit for most people is they'll defer their savings for a trip or a new car, but the mortgage payment doesn't get skipped. So since the principal portion of the mortgage is savings they're forced to save.

I agree with you, but anyway this thread was about something totally different. I just couldn't resist posting about that graph.

[crazy_eoj]

Originally Posted by Tinordi

Uhm, reality? Hello?

Wild Rose was proposing to do something even frickin worse. It was going to just transfer back any surplus as a cash payment to citizens. A stupider policy to handle oil and gas revenues you could not fathom.

For someone claiming to be so smart you sure spout a lot of nonsense.

The Wildrose Party was going to put 50% of surplus dollars back into the heritage trust fund. 20% was to be paid directly back to Albertans as a dividend cheque. And the remainder was earmarked for health/education/municipalities.

I know you hate all things conservative but there's no reason to outright lie to support your points.

[Rerun]

Originally Posted by Slava

Hey, I own a house as well, so I'm not saying people shouldn't buy houses. I'm just amused that Rerun thinks that buying a house is amazing as far as investing goes. A return of 3.5% compounded annually, and taking into account the enormous jump in housing through the 2000's isn't anything to write home about.

Please show me where I can get a better, and relatively risk free, return on my initial investment of $15,000.

I will gladly sell my house, rent, and invest all my money there.

[Senator Clay Davis]

Originally Posted by Rerun

Please show me where I can get a better, and relatively risk free, return on my initial investment of $15,000.

I will gladly sell my house, rent, and invest all my money there.

You are not investing $15,000...you are investing $260,000. Slava shows you that clearly and you still don't understand. So maybe never investing would be the right call?

And for comparable, at 3.5% annually, go buy government bonds.

[Slava]

Originally Posted by Rerun

Please show me where I can get a better, and relatively risk free, return on my initial investment of $15,000.

I will gladly sell my house, rent, and invest all my money there.

You're not only investing $15k though. You're investing $260k and paying $15k upfront. The rest of that is financed and I picked a rate which might have been sort of accurate for the first five years (or more/less depending on your term).

Not only that, but 3.5% compounded starts to look like historical GIC rates. Maybe today you can't buy a GIC that pays you 3.5%, but when prime was 11% you could've!

[para transit fellow]

Wow!!! more cuts and my work is still struggling with the cuts Klien made 15 years ago.

I dunno why people are so surprised at the new budget announcement
Hasn't anyone ever noticed that All politicians break campaign promises?

[kirant]

Originally Posted by fotze

Might be a revenue problem too.

This is part of it. The changes on the royalty rate on the oil sands is directly tied to the WTI pricing of oil.

Additionally, I think Stelmach provided an out for some groups building in the Oil Sands by letting them pay a really, really low royalty instead of 25% flat until construction is done (but also allowing expansions to be considered part of construction), creating a situation where companies are building massive plants. I'm not sure on the entire details of this, but this is the narrative I'm familiar with, that the ongoing construction is reducing royalty income.

[Julio]

Originally Posted by Plett25

If SK has a surplus, it is because they have higher tax revenues, because SK spends more per capita than AB does



It is almost like falling revenues created a deficit...

It looks like Sask. spends about $100 a person more than Alberta does...so that's about $110 million. Not exactly the reason Sask. is + or- even and Alberta is looking at $6 billion in the hole.

[Rerun]

Originally Posted by Slava

You're not only investing $15k though. You're investing $260k and paying $15k upfront. The rest of that is financed and I picked a rate which might have been sort of accurate for the first five years (or more/less depending on your term).

Not only that, but 3.5% compounded starts to look like historical GIC rates. Maybe today you can't buy a GIC that pays you 3.5%, but when prime was 11% you could've!

But I still have to live somewhere right? And if I don't pay a mortgage I pay rent, which by the way is sure to increase exponentially over the course of 20 years.

So lets say rent on a $300,000 house is $1500 per month. Thats $18000 per year. $18,000 of $300,000 is 6% of the value of the house... on this basis lets say rent 20 years ago on a $150,000 would be $9000 per year or $750 per month.

Now I'm no math wiz and I don't know how to figure out your yearly rent costs based on an a 100% increase in rent over a total of 20 years ($9000 to $18000, assuming an average increase every year) but even if you use 20 years of paying $9000 per year in rent with no increases whatsoever, you will have paid $180,000 in total with nothing to show for it.

Edit: Assuming over the course of 20 years you pay an average rent payment of $13500 per year... therefore 20 x $13500 = $270,000 thats GONE. The only money I have is what ever return on the $15,000 that I invested (hopefully in something that didn't go belly up). Lets assume I get a 10% per year return on my $15,000. What would be the total value of my $15,000 initial investment after 20 years?
Guaranteed its not going to be $300,000.