They're not rich. There's no fixed 30 year mortgage in Canada, only 5 year fixed. They're screwed. They're middle class, anxiously looking at the interest rates and holding on to jobs they hate to stay afloat.
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.
> They're not rich. There's no fixed 30 year mortgage in Canada, only 5 year fixed.
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:
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.
1. I hardly think the US is a paragon of economic hope. But I find it amusing that a (presumably) Canadian goes straight to compare the country to the US. Nothing ever gets done in Canada until the ritual comparison is done. Very provincial mindset, inherited from Canada's past status as colony.
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.
Obviously variable interest rates are lower over time - fixed term mortgages have a premium over variable and in stably changing conditions thats baked into the rate.
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.
Can you expand on the "Canada is a slowly failing state" bit? It's an idea I've seen a lot in the past years but I don't fully get it, as a Canadian. How is Canada failing more than the US or European countries like Germany or UK for example?
“As shown in research published in 2021 by BCBC (Williams, 2021a), and in the Globe and Mail (Williams and Finlayson, 2022), the OECD projects that Canada will be the worst
performing economy out of 38 advanced countries over the next forty years (2020-2060), achieving the lowest growth in real GDP per capita – the most important measure of overall prosperity.”
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.
Sky rocketing housing prices, declining primary industries, biggest major resource exports destroy the earth and nobody sane wants/needs them, provincial gov'ts de-fund and undermine public health care, partisan nastiness inspired by imported US culture wars crap, contradictions in interests between geographical regions, monopolistic parasitic local bourgeoisie, should I go on?
The US isn't failing. It's balkanizing. That balkanization will probably undo itself. Even if it doesn't, the ununited states would still be economic powerhouses. Not as prosperous as it was during reconstruction or the height of the petrodollar, but that's an impossible standard to hold onto forever.
No, the countries' self reported rates of degrees obtainment are irrelevant.
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).
But presumably these people have kids! How are these kids supposed to buy a house?
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!
Honestly, I'm sitting at only $30k remaining on my mortgage, which we paid off in 19 years (sold first home, and upgraded in the middle of that) and frankly the rates now aren't really any higher than the first mortgage we got in 2005. So I'm sitting in a pretty good state and just hoping for a major downward drop in housing prices so that my kids (now teens) can afford rent and housing as adults. Or we'll all be living here on the farm. I feel privileged for my own personal situation but also just flabbergasted at the debt people have been willing to take on.
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.
The combination of high nominal prices and nornal-ish rates is what results in a high monthly outlay, that's what everyone is talking about. Affordability, not rates. At present prices, not 1990 prices.
Present prices need to drop. A lot. If rates drop, prices will just continue to climb like crazy. You cannot fix affordability by just making loans more affordable. We need way higher supply, much better regulation, and normal (e.g. not insanely low like they were from 2008-2023) interest rates for this sickness to go away.
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.
That's bullshit. Surely if you have a home worth over 3 million you can sell it and never have to work a single day in your life. Even if you have 50 years of life left, that's 60k per year, and that's more than many working people get with the cost of being active.
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.
Your average home in Canada is not 3 million. And your average "homeowner" is really a mortgage holder who is going to be in a world of pain as soon as his low interest rate mortgage is renewed.
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 don't know why or how it would get renewed but I guess some people have bad deals. Doesn't make the majority of good deals disappear though.
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 !
Owning a multimillion dollar home doesn't do anything for you if every other home is just as expensive. It's just a "housing token", and unless you can move out of the market and into something way cheaper, the value on the house means nothing. There aren't really any bargains in Canadian real estate anymore -- even remote and small cities on the prairies or in the Atlantic provinces where jobs are more scarce are carrying huge sticker prices.
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.
I mean, if that were true, then homeowners should have no problem with policies intended to knock down the price/value of homes. But that is definitely not what we observe, so I think something is missing in your theory.
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.
Exactly what I was thinking too. Hey if we can create a taxation system so that we can force people out of the home they own because their income can't cover the increases in taxes we "generate more housing" which is a win right? No you're just making paupers out of people who were just getting by before. Not something to be proud of.
It is simple: define some arbitrary boundary to call rich, say $10m and then add up all assets minus liabilities. Maybe take tax treatment of said assets into account and risk profile (10m all in Bitcoin for example)
I think we are looking at things like this backwards.
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.
Except they aren’t. They’ve just managed to keep up with the (real) rate of inflation. You’re not rich if your pay went from $7/hr to $10/hr but gas went from $3 to $4. You’re still in the same situation, if not a bit worse off.
yes.. because you can take a second mortgage on your home.. you can save into the mortgage instead of saving into an investment account. Talk to an advisor and they can tell you how you can convert an asset into money you can spend.
In the crab bucket promulgated by our Wall Street puppetmasters: yes, obviously. Get a reverse mortgage to take care of number one, and let your spoiled kids fend for themselves against the banks. That's been the goal of every generation since the dawn of man, right?
Is there an adjustment when I replace the roof? When I add a bedroom? When the house next door burnt down and got occupied by squatters? When OpenAI opened an office withing biking distance? When the local industry collapsed? When the house collapsed?
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 first question, sure: cost of improvements plus CPI.
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.)
I don't really care which one you pick, personally. If this turns out to be a problem (ppl won't sell to minorities or LGBT ppl or whatever) require they flip a coin or something.
Then given a shortage of housing and a house anyone can afford you likely will get 100 maybe 1000 offers per house. If it is a lottery then all you have done is made it so a lucky winner gets the house that would have been $1m for 250k say. So for the average person you have solved nothing infact they would be encouraged to leave for another city. Which is what a high price would have done.
Almost. It keeps housing as a luck of the draw thing (since it doesn't address shortage) but it keeps more money moving around in the town's economy rather than sitting tied up in a house.
Kind of! Here is the rub. When someone borrows $1m to buy a house, new money is created. Therefore the economy relies somewhat on borrowing to keep money flowing around.
Also, not everybody would take the deal. People who want to resell at an appreciated price can, they just have to pay the higher property taxes in the interim.
The fact that the four comments already posted so far when I got to this thread were all in abject denial is not encouraging. People who own detached single-family houses in high-demand metropolitan areas are in fact fantastically rich-- they're basically sitting on a dragon hoard of wealth-- and in doing so they're fucking everybody else over. LVT would fix this in a heartbeat but of course the political opposition would be fierce.
>> and in doing so they're fucking everybody else over.
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.
It's been said over and over that these people compare themselves to the people on the next rung up and conclude that they're not wealthy. I think it says something about nature of the bubbles we live in that this delusion isn't dashed organically. Gig delivery takes me down a lot of roads I wouldn't normally go down, dropping off Taco Bell and Outback and ColdStone to apartments and townhouses and tract homes and McMansions. In a previous life, I likely welcomed some of their owners and renters to [big box retailer]. It's difficult (and bad for sales numbers) to try to determine who is who; they're all shopping at the same places, ordering many of the same products. The differences in circumstances and means show themselves in private arenas where wealthy people aren't likely to encounter how the other half lives. So, when the McMansion-dwellers see the townhome- and apartment-dwellers, it's on "equal" ground. But it's important to remember that this is by design - partly their design.
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).
I see what you mean. And I believe that to actually become wealthy enough to be considered wealthy you sort of need to lack self-awareness and be willing to roll on others regardless of how much pain you are going to inflict. I think a large ego and accompanying egoistic behavior is almost a requirement.
Otherwise, you don't get rich because at many crossroads you find yourself in situations where you understand how unfair some things are and your awareness prevents you from taking part in this mess.
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...
Canada should get rid of the capital gains tax exemption on the sale of primary residences and use the money raised in that manner to build more housing and to help renters and the homeless. Even if they just levied a modest percentage tax, like 5% or 10%, it would raise enormous sums of capital. And homeowners would still be making windfall profits.
Or just make capital gains apply on any earnings over $1M or so. Suddenly it would not be such an exciting amazing thing to have your home double in value, would it?
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.
I agree with progressive taxation, but a tax on moving is stifling and encouraging people to hold onto their property and become landlords when they need to move.
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.
Most journalists won’t accept the ugly truth. We need x20 more housing approved and built than there is.
There is shit ton of land available, more than enough ppl to build it, and a huge demand.
Homes were never supposed to be an investment, it’s literally a depreciating asset. The only reason for it’s to go up in price - an economic bubble fueled by cartel mentality.
Just because homeowners haven’t colluded publicly doesn’t mean they don’t the freaking know what and why they are doing what they are doing :)
And.. this is the reason why Chinese government is actually cracking down on this bubble there.
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.
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