Real estate in Calgary - another bubble?

[Fuzz]

Originally Posted by _Q_

I think there's a misunderstanding.

I agree that there isn't a no-go interest rate zone. Understand rates will go as high as they need to and us home owners need to be comfortable with higher mortgage payments and lower equity.

The over leveraged households that bought $1.3 million homes in Toronto on a $150k salary using their parents money for down-payment won't be so lucky.

I just don't think there should be that many of them, becuase they would have had to pass the stress test. Will people have to make extremely difficult choices, like going camping instead of Mexico? Maybe. Tough to care on that one, becuase they'll probably choose debt over FOMO.

[Cowboy89]

Originally Posted by AltaGuy

I think you are right about this looming tradeoff, but wrong about who the Canadian government will ultimately be protecting. I think the government will be giving inflation a lot of room to run in the hopes that it simply slows of its own accord before cratering housing prices.

Agree fully. Human / political nature takes place here. Somebody has to feel pain here, retirees and those on fixed incomes or home owners. The amount of home ownership in this country is above 70% and I think the powers that be will be under more pressure for crashing house prices than letting inflation run higher (Especially when they can blame foreign wars, pandemic supply chain issues and other things for inflation whereas increase rates too steeply and too quickly can be blamed solely at the feet of the BoC).

Those of you talking about 50 bps increases every meeting like it's already happened should watch the next BoC decision. If they move only 25bps it will signal significantly where they intend to make this tradeoff.

[_Q_]

Originally Posted by Fuzz

I just don't think there should be that many of them, becuase they would have had to pass the stress test. Will people have to make extremely difficult choices, like going camping instead of Mexico? Maybe. Tough to care on that one, becuase they'll probably choose debt over FOMO.

Have stress tests actually been implemented properly though? It seems as though people have been qualifying for more mortgage now on lower income than they were when I bought my place in 2013.

It's all anecdotal I guess.

[Sliver]

Originally Posted by _Q_

I think there's a misunderstanding.

I agree that there isn't a no-go interest rate zone. Understand rates will go as high as they need to and us home owners need to be comfortable with higher mortgage payments and lower equity.

The over leveraged households that bought $1.3 million homes in Toronto on a $150k salary using their parents money for down-payment won't be so lucky.

Okay, well they should sell right now if that's their fear and take all the sweet profit they'll have made since they bought.

Real estate always carries with it some risk. There's a super easy out right now if people are concerned about the impending high interest rates.

Why should I feel bad for a guy sitting at the table currently way up who wants to gamble a little longer instead of cashing out his chips? I honestly don't really understand your perspective.

[CliffFletcher]

Originally Posted by opendoor

The whole thing is stupid. There's is absolutely no reason that central banks shouldn't have been raising interest rates in the 2014-2019 period to build in some buffer room when it was needed. It didn't take a genius to predict that sustained low rates when they weren't really needed was going to result in some serious issues down the road.

Because consumer spending is a huge part of modern economies, and it’s fuelled by consumer debt. A generation ago Canadians were more frugal than Americans. Now we carry considerably more household debt (and not just higher mortgage debt). Canadians today routinely buy a new vehicle with a 7 year loan, and buy their next new vehicle on credit before they’ve paid off their last. Or take out lines of credit to do home renos. Or take trips to Mexico on a credit card.

Popping that bubble will be very painful. We can sit back and express schadenfreude at the irresponsible choices of other Canadians. But that won’t make it any less painful. It’s naive to think there won’t be a political price to pay as well when the debt bubble bursts.

And then there’s public debt. What do government balance sheets look like with 7 per cent interest rates? Leaders would have to make very tough - and painful - choices around spending and taxes. With our political culture today, you can be sure it would get much uglier than when measures were taken to address the deficit crisis in the 90s.

[Sliver]

Originally Posted by CliffFletcher

Because consumer spending is a huge part of modern economies, and it’s fuelled by consumer debt. A generation ago Canadians were more frugal than Americans. Now we carry considerably more household debt (and not just higher mortgage debt). Canadians today routinely buy a new vehicle with a 7 year loan, and buy their next new vehicle on credit before they’ve paid off their last. Or take out lines of credit to do home renos. Or take trips to Mexico on a credit card.

Popping that bubble will be very painful. We can sit back and express schadenfreude at the irresponsible choices of other Canadians. But that won’t make it any less painful. It’s naive to think there won’t be a political price to pay as well when the debt bubble bursts.

And then there’s public debt. What do government balance sheets look like with 7 per cent interest rates? Leaders would have to make very tough - and painful - choices around spending and taxes. With our political culture today, you can be sure it would get much uglier than when measures were taken to address the deficit crisis in the 90s.

I don't see why I should care about this, though? My wife and I have basically underbought everything we own. Could be in a bigger house, have better cars, take fancier vacations, but we haven't and don't. A little comeuppance on the over-leveraged YOLO crowd sounds great to me.

[CliffFletcher]

Originally Posted by Sliver

I don't see why I should care about this, though? My wife and I have basically underbought everything we own. Could be in a bigger house, have better cars, take fancier vacations, but we haven't and don't. A little comeuppance on the over-leveraged YOLO crowd sounds great to me.

I don’t have any debt except a mortgage. So I’m on team don’t-buy-if-you-don’t-have-the-cash. But don’t kid yourself about how many people have a different approach to money, and how ugly it will get when they feel the pain. You might not care about them, but millions of extremely angry voters looking for someone to blame have a way of making their unhappiness felt by everybody.

[Leondros]

Originally Posted by Sliver

I don't see why I should care about this, though? My wife and I have basically underbought everything we own. Could be in a bigger house, have better cars, take fancier vacations, but we haven't and don't. A little comeuppance on the over-leveraged YOLO crowd sounds great to me.

Because those people won't be buying as much, less business for your small business?

[bizaro86]

Originally Posted by Sliver

I don't see why I should care about this, though? My wife and I have basically underbought everything we own. Could be in a bigger house, have better cars, take fancier vacations, but we haven't and don't. A little comeuppance on the over-leveraged YOLO crowd sounds great to me.

This is how I operate as well, but I'd expect higher taxes (especially on businesses and capital) to fund the eventual bailout of those who over spend/borrow.

Right now that tax is mostly in the form of inflation (which bails out borrowers because they can repay in less valuable dollars).

[opendoor]

Originally Posted by CliffFletcher

Because consumer spending is a huge part of modern economies, and it’s fuelled by consumer debt. A generation ago Canadians were more frugal than Americans. Now we carry considerably more household debt (and not just higher mortgage debt). Canadians today routinely buy a new vehicle with a 7 year loan, and buy their next new vehicle on credit before they’ve paid off their last. Or take out lines of credit to do home renos. Or take trips to Mexico on a credit card.

Popping that bubble will be very painful. We can sit back and express schadenfreude at the irresponsible choices of other Canadians. But that won’t make it any less painful. It’s naive to think there won’t be a political price to pay as well when the debt bubble bursts.

And then there’s public debt. What do government balance sheets look like with 7 per cent interest rates? Leaders would have to make very tough - and painful - choices around spending and taxes. With our political culture today, you can be sure it would get much uglier than when measures were taken to address the deficit crisis in the 90s.

It's not just a Canada problem though. Countries all over the world with lower levels of consumer debt did the exact same thing. Europe even had negative interest rates in that period. Dogmatically relying on inflation rates to guide policy without considering the negative long-term effects of low rates (i.e. lack of room for movement to respond to future crises, the problems that significant asset inflation would cause for the vast majority of the population, etc.) was a failure of basically all the central banks of Western countries.

[Sliver]

Originally Posted by Leondros

Because those people won't be buying as much, less business for your small business?

Yeah, honestly I think I'm half communist or something. I want what's best for society first and foremost and worry about myself/my business less. I would like to see our society quit mortgaging our kids' futures for short-term gain. I would also wholeheartedly participate in the solution by accepting - and not complaining - about less for myself if it makes the overall economy/system/society more economically stable.

Originally Posted by bizaro86

This is how I operate as well, but I'd expect higher taxes (especially on businesses and capital) to fund the eventual bailout of those who over spend/borrow.

Right now that tax is mostly in the form of inflation (which bails out borrowers because they can repay in less valuable dollars).

Taxes are too low on businesses already. I mean, you're only taxed on profits, so the guys you hear complain that they can't run their business because taxes are too high are generally being disingenuous with that argument. If you're not making money, you're not being taxed.

Like, didn't Kenney lower the provincial corporate tax rate during his tenure already? I can't remember, but it's not something that was needed if he did. Also, if he did I didn't notice. Maybe it would put a few thousand in my pocket that would have been better off in the public's hands.

I'd also pay more taxes for all people to have, say, dental coverage as part of our provincial healthcare.

Taxes don't bother me. I like the thought of elevating everybody and not just the fortunate.

[timun]

Originally Posted by Sliver

Like, didn't Kenney lower the provincial corporate tax rate during his tenure already? I can't remember, but it's not something that was needed if he did. Also, if he did I didn't notice.

He sure did, one of the first things they did. It was 12% when they took office, they lowered it to 11% on July 1, 2019, 10% on January 1, 2020, and 8% on July 1, 2020.

[blankall]

Originally Posted by Sliver

Yeah, honestly I think I'm half communist or something. I want what's best for society first and foremost and worry about myself/my business less. I would like to see our society quit mortgaging our kids' futures for short-term gain. I would also wholeheartedly participate in the solution by accepting - and not complaining - about less for myself if it makes the overall economy/system/society more economically stable.



Taxes are too low on businesses already. I mean, you're only taxed on profits, so the guys you hear complain that they can't run their business because taxes are too high are generally being disingenuous with that argument. If you're not making money, you're not being taxed.

Like, didn't Kenney lower the provincial corporate tax rate during his tenure already? I can't remember, but it's not something that was needed if he did. Also, if he did I didn't notice. Maybe it would put a few thousand in my pocket that would have been better off in the public's hands.

I'd also pay more taxes for all people to have, say, dental coverage as part of our provincial healthcare.

Taxes don't bother me. I like the thought of elevating everybody and not just the fortunate.

Yes and no.

You aren't taxed necessarily just on profit. There are non-income taxes that have a major burden on businesses, especially new ones. Additionally, a lot of the "profits" end up going back into the business. You need a significant reserve to run most businesses.

I agree though, there is a fundamental problem. Corporations can indefinitely defer income taxes, and then invest the money.

So it's one thing to have a businesses starting up and trying to build reserve capital defer taxes. It's another for an established business who is just paying less taxes.

[Leondros]

Originally Posted by Sliver

Yeah, honestly I think I'm half communist or something. I want what's best for society first and foremost and worry about myself/my business less. I would like to see our society quit mortgaging our kids' futures for short-term gain. I would also wholeheartedly participate in the solution by accepting - and not complaining - about less for myself if it makes the overall economy/system/society more economically stable.



Taxes are too low on businesses already. I mean, you're only taxed on profits, so the guys you hear complain that they can't run their business because taxes are too high are generally being disingenuous with that argument. If you're not making money, you're not being taxed.

Like, didn't Kenney lower the provincial corporate tax rate during his tenure already? I can't remember, but it's not something that was needed if he did. Also, if he did I didn't notice. Maybe it would put a few thousand in my pocket that would have been better off in the public's hands.

I'd also pay more taxes for all people to have, say, dental coverage as part of our provincial healthcare.

Taxes don't bother me. I like the thought of elevating everybody and not just the fortunate.

You were just an example though. This is another reason you should care:

Less money due to the fact everyone is just paying banks higher interest rates = less consumer spending = less profits to be taxed = less business being able to employ people. Its a viscious viscous feedback loop that just slaughters the economy. We can wag our fingers all we want about financial prudence but unfortunately that train has passed.

[burn_this_city]

Feds are banning foreign buyers for the next 2 years in the budget.

https://www.ctvnews.ca/politics/fede...sing-1.5850968

[Leondros]

Originally Posted by burn_this_city

Feds are banning foreign buyers for the next 2 years in the budget.

https://www.ctvnews.ca/politics/fede...sing-1.5850968

A decent step but a lot of home buyers atleast on the Vancouver side of things are already utilizing their adult children (students) or spouses (permanent residents) to purchase property. Both of which are exempt.

Foreigners who are purchasing their primary residence here in Canada will be exempt.

That will also be near impossible to audit...

[blankall]

Originally Posted by burn_this_city

Feds are banning foreign buyers for the next 2 years in the budget.

https://www.ctvnews.ca/politics/fede...sing-1.5850968

I expect to see a dramatic rise in students who can suddenly somehow afford 7 figure properties:

The foreign buyers ban will apply to condos, apartments, and single residential units. Permanent residents, foreign workers, and students will be excluded from this new measure. Foreigners who are purchasing their primary residence here in Canada will be exempt.

Why are they excluding students? It's necessary to own a property while you complete a 2 year diploma?

[CliffFletcher]

Originally Posted by blankall

I expect to see a dramatic rise in students who can suddenly somehow afford 7 figure properties:



Why are they excluding students? It's necessary to own a property while you complete a 2 year diploma?

Government simply can’t resist the sweet, easy money that foreign investment in real estate brings into the Canadian economy. So much easier than producing and exporting things.

[CroFlames]

Originally Posted by Sliver

Yeah, honestly I think I'm half communist or something. I want what's best for society first and foremost and worry about myself/my business less. I would like to see our society quit mortgaging our kids' futures for short-term gain. I would also wholeheartedly participate in the solution by accepting - and not complaining - about less for myself if it makes the overall economy/system/society more economically stable.



Taxes are too low on businesses already. I mean, you're only taxed on profits, so the guys you hear complain that they can't run their business because taxes are too high are generally being disingenuous with that argument. If you're not making money, you're not being taxed.

Like, didn't Kenney lower the provincial corporate tax rate during his tenure already? I can't remember, but it's not something that was needed if he did. Also, if he did I didn't notice. Maybe it would put a few thousand in my pocket that would have been better off in the public's hands.

I'd also pay more taxes for all people to have, say, dental coverage as part of our provincial healthcare.

Taxes don't bother me. I like the thought of elevating everybody and not just the fortunate.

You might be a Saint actually.

I doubt 0.01% of the population thinks like you do.

[Johnny199r]

Best tweet I've seen today

"Implementing a foreign buyer ban without a beneficial ownership registry is like trying to stop a leak with Swiss cheese."