Homeowners Refuse to Accept the Awkward Truth: They're Rich
thewalrus.ca
thewalrus.ca
Canada is a slowly failing state. Its economy is gutted and distorted. Renters in Canada aren't middle class. They're poor: its just that the country has become poor.
https://bcbc.com/insight/canadas-productivity-performance-ov...
I’m not sure I agree with the idea that Canada is a “failing state” but I do think there is a significant risk that we will not maintain the standard of living we are accustomed to and that I think we believe we deserve - deserve in spite of the evidence that we’re not innovating.
That seems like a good indication of a successful country although of course not the sole thing to measure that on.
The quality of primary education is very low [1]. University education is mediocre, about par with the US [2]. Waterloo and UofT have decent CS programs but other than that nothing impressive.
Canada imports its highly educated workforce (Dr.s, top engineers, etc) from China and Europe. For many, Canada is a stepping stone to go to the US.
[1] I moved to Canada twice as a kid from two separate non-English countries. Both times I was shocked at how far behind my peers were. Grade 10 history devoted an entire lesson to the Summit Series, but neglected the Cuban missile crisis. Oh, and the Summit Series lesson was just jingoistic dribble, not a word of how Clarke is a thug who should be in jail.
[2] The US (undergrad) engineering programs are better, but I'll admit Canadian grading is not as bad as American; far less grade inflation. So let's call it a tie. Nothing compared to a continental European program, or East Asian program (or, frankly some select L. American universities).
Zero interest rate policies and poor regulation of the real estate market drove prices so high and it's amazing to watch people suddenly act as if it's higher rates now that are the cause of affordability problems. Absolutely short-termist thinking.
Governments (both fed and provincial) let ... no, encouraged ... this to happen.
If your workers can't afford to live where they work... you will stop producing anything at all.
If that means "destroying" the perceived wealth of homeowners like myself, so be it.
Look at a graph of BoC rates for the last 40 years and then see what an anomaly the period after 2008 is. Nobody should be expecting/demanding a return to that.
If my kids are in a worse economic situation than me, than I have failed economically in life. I mean, how can I enjoy living in a house with a big back yard if my kid has a choice of moving to the US or renting for life?
At the end of my life, Im more screwed if I own a house and my kid rents than if I rent and my kids own their home!
The reality is that the complainers are usually filthy rich boomers with an insanely luxurious lifestyle, and they want you to believe otherwise but it never checks out...
I got a price complaint just the other day, from one of those with a fully paid home (with a single salary) that would take over 30 years to buy with a current median salary. The home cannot be bought by a person holding the exact same job at the same exact pay level when they were purchasing. The funniest thing is that they still get 190% of minimum wage salary and 126% of median wage salary. As far as I know they can buy another house much easier than a working household because they have full house equity as collateral.
There is a lot of political silencing going on, but boomers are disgusting and basically stole generations future on top of burning the planet to get there. I just don't get why we still let them do so much posturing and pretending.
Anyway I don't get your aggression. My point was that Canadians are far worse than the article suggests: half the country should be considered poor (the renters) and the "wealthy" are one interest hike away from bankruptcy.
I'm not aggressing you or anyone else here? I'm a bit unsettled by the situation that has been created overtime thought exploitation, corruption and negligence of the previous generation. If you feel attacked maybe you are compensating because you feel this message is destined for you? I honestly don't know and can't say because I know nothing about you and couldn't care less about you specifically (no offense). The point if someone concerned reads this he will understand and he will know, just like when you point at some bitten door and the dog knows...
Also considering the rules in place for borrowing, it's more than doubtful that an interest hike would put anyone out of their house. Or they lied to the bank, or have an irresponsible unsustainable lifestyle compared to their means, stuff like that. We don't lend money to people who don't have revenues that can cover significantly more than typical life costs. Otherwise, there would be virtually no renters...
Sure, maybe Canada is not doing good overall but that doesn't change the fact that some are pretty rich compared to rest of Canada and even more compared to the rest of the world. And this is exactly what the article say !
And yet the home ownership rates are basically the same in the two countries (~65%), and the median net worth of Canadians is higher than that of Americans:
* https://www.nytimes.com/2019/04/26/world/canada/middle-class...
* https://www.investopedia.com/financial-edge/1012/u.s.-or-can...
And outside the last 2-3 years, short-term, variable-rate mortgages have been a better deal the majority (90%) of the time (especially since the 1980s with mostly-falling rates):
> Many fans of variable mortgages quote research by Moshe Milevsky, a professor of finance at York University. He found that, between 1950 and 2000, Canadian homeowners would have been better off with a variable mortgage almost 90% of the time. More recently, between 2007 and 2022, the five-year variable interest rate has mostly been lower than the five-year fixed rate, sometimes considerably so.
2. The US has always had much large underclass which Canada, to its (partial [1]) credit does not. The bottom 10% in the US are much worse off than the bottom 10% in Canada.
3. At least 10% of the US population are illegal immigrants. The US syste can hardly be blamed for having the poorest people in the world pouring in. (Though the system could be blamed for turning a blind eye to it, but that's another convo.)
4 The net wealth in Canada is a mirage. For most people its tied to unproductive, inflated assets - people's homes. Thats a very scary place to be as a society.
To its credit, Canada has a (lackluster to poor) public health care system, and caps university tuition. The US has (financially) the worst medical and education system in the world. Both countries' health care systems will not be fixed until they collapse.
But overall, Canada is only as secure and as stable as the US (which is not stable or secure right now). Paired with unique Canadian challenges, Im scared for Canada.
Actually, Im only scared for my siblings. I really don't care for Canada more than I do any other country.
[1] most of the credit goes to the UK for banning slavery much earlier than the US and not having a climate suitable for it.
Also, Canada gets no credit for having tundra and the richest country in the world as neighbors.
The danger of variable rates is not that you might end up paying an extra 50 grand by the end of the mortgage. That's almost impossible.
The danger is that you won't get to reach the end of the mortgage because at some point an interest rate spike makes you insolvent. A short, but sharp spike, that wipes out your savings.
In 2030: If you have six months of savings for a rainy day, then you are rich.
In 2040: If you have a job that pays, then you are rich.
Contrary to the article, I actually think the opposite has happened: when I still lived in Toronto it was nauseating how often people blathered about how wealthy their property had supposedly made them. Bragging about the value of your home, and thinking it makes you rich is the most annoying Toronto party conversation topic and social phenomenon of the last 20 years.
Someone with an expensive house has the option to cash that in and buy a cheaper house somewhere else. There money is welcome in every country and city in the world! (Residency permitting).
The high value allows borrowing against the property to invest. Assuming you can get the loan. But it is a prerequisite to have equity!
Obviously with a mortgage a loss in value loses % equity and at some point that becomes negative equity.
That said homeowners with kids might welcome policies that slow the rate of growth in housing prices.
The opposite might be true though - somebody who doesn't own their own home might be poor.
It is not that people who have managed to own in most cases a fairly unremarkable house are rich. They can't easily do anything with that "wealth". They may have a fairly meager lifestyle. These are not things most people associate with the word "rich".
It seems to me instead that we have collectively become extremely poor. So poor that people who have managed to obtain what was fairly normal a generation ago are now called rich.
We should open our eyes to our poverty and wonder where all the economic expansion and productivity gains over the last decades have gone.
It's not even anywhere near a million.
I should have just said if you own a house anywhere near a metropolitan area.
Because each of those scenarios opens an avenue for gaming the system, and if there's still a big deficit of units, every game of corruption will be played in order to squeeze out the market-banned value.
To the rest, orienting the policy around the vanishingly rare corner cases when property values go down is kind of silly. Our entire political system is a machine optimized towards preventing home values from ever falling. (Which does make me wonder why people feign surprise at the intended result that housing is nearly impossible to afford.)
And how will municipalities pay for services given that property taxes are basically their only source of revenues?
The raised taxes could be earmarked for building (gasp!) public housing. The stuff we used to build until the 90s, when it suddenly became absolutely unpopular and politically toxic for governments to encourage affordable housing stock.
That these kinds of policies can't/won't happen tells you that the foxes are running the hen house in this country, at every level of government and business. E.g. the response to affordability crisis is more stimulus and subsidies (new tax free home buyers accounts, etc), rather than getting pricing under control by building homes and regulating real estate law.
All very frustrating.
Instead have a property tax to raise the same money.
I am also against stamp duty. I suspect it stop’s people where I live moving when it might be a years salary in pure tax. So people less likely to move. Renovating/extending homes for profit (increasing the effective housing supply with infill) happens less.
Exactly, from the article:
>> in North Vancouver, one Airbnb host complained to North Shore News that “people don’t want to deal with [long-term] tenants” who are less profitable and harder to evict. But it’s also evident in the way that homeowners frequently oppose new developments that encroach on their neighbourhoods, fighting—often successfully—against change and exacerbating unaffordability and insufficient housing supply in the process.
All of this to say, wealthy people are unreliable arbiters of their standing. Either they're blissfully unaware, or purposely crafted their situation (and implicitly must benefit from the surface-level seeming lack of awareness).
My experience is that they generally are low quality humans considering many variables. Yet they successfully secured a large amount of ressource. Our system is completely broken in that it rewards the worst behavior at almost all stages of the game. I am a bit disillusioned, but I doubt it is possible to have material success without cheating/lying and the like in our current society. But that is probably true for a while now...
Not sure this is true. Trades are all maxed out and not enough people entering them.