Anyone buying an investment property with the intent to rent it out in Toronto or Vancouver will take a minimum of 28 years to cover the price of buying it – October 15, 2021,
Hearing about a housing bubble in Canadian real estate is nothing new, even if you’re a believer in Free Markets, based on the history of Canadian governments bailing out people and corporate entities many of us are resigned to the reality that the Ballooning Canadian real estate market will be paid for by debasing the Canadian dollar.
But acceptance of future debasement of fiat money drives prices higher and potentially faster, which can ultimately lead to hyperinflation of fiat currencies. The working class is the basis of any money system, welfare whether personal or corporate is a creation of government and welfare leads to price inflation. Austerity measures in a nutshell are the destroyer of Welfare and for believers of Big Government, Austerity measures should be made illegal.
With that said, I personally expect life to get more expensive in Canada and our economic dependence on China to accelerate. Because from where I observe the Canadian economy economic deflation will be hidden by asset appreciation and consumer price inflation. Toronto and Vancouver real estate make the headlines, what’s ignored are the other inflated property markets in Canada.
Land not put to productive use, that’s appreciating in value will lead to economic deflation in the future. There’s a lot of land for sale all over Canada, that’s unproductive but in this “market” demands a lot of money, so although real estate investors in Toronto and Vancouver might take 28 years to pay off their investment, there are other properties in the Canadian market that are in far worse shape
In real estate as many of us know, the real estate investors’ objective is not to pay off their loan/mortgage, the real estate investor is often trying to grow their portfolio, so they can borrow more money that they can then put into productive uses. The real estate investor is currently the beneficiary of Government waste and the lack of desire for austerity measures or normalized interest rates.
This is, of course, why Canadian real estate has become more of a flippers “market” and less of a cashflow “market”. If interest rates remain at zero percent indefinitely and the shrinking of government is not part of Canada’s future, I’d say investing for Canadian dollar debasement is a smart investment decision. The risk of investing in Canadian dollar debasement is that taxes to cover government expenses are going to decline.
People in debt don’t pay taxes and inflation in prices make people poorer and ultimately more dependent on government assistance. I’ve seen this dilemma in third-world nations, until you’ve been to a third-world nation and lived amongst the people, you don’t get the economics of their situation. Laziness isn’t only a developed world problem, laziness also exists in the third world.
The difference is those third-world governments don’t have the ability to reward laziness in the manner Canada can reward laziness. But the end result for laziness in poorer regions of the world is that fewer taxes are collected and therefore Government spending and government waste are stifled. Because of financial illiteracy, often if a private company brings wealth to a third-world nation, the socialist government of that region will often either extort said private business or nationalize said private business.
Many developed nations have embraced the extortion model, it’s currently called “tax the rich” and because most business people have embraced the real estate investment model of using debt for leverage, the entire economic structure for most of the western world doesn’t appear to realize that the working classes are getting poorer, therefore, putting this entire economic structure at risk of implosion
With average prices up another 14%, Swiss bank UBS warns of housing bubbles in Canada | cbc.ca
Interesting times ahead!