The Canadian Real Estate Industry and Japanese Style 100 Year Amortization Mortgages – February 10, 2019,
There are 2 countries I know of with 100-year amortizations, Sweden and Japan. As many people know Japan has a Zombie Economy if you’re unaware of what a Zombie economy is? a Zombie is an economy that needs bailouts in order to operate or an economy that’s so indebted that it’s only able to repay the interest on its debts but not repay the principal. In regards to Sweden historically Sweden has been a debtor nation, as everyone knows Sweden is known primarily as a cradle to grave welfare state, most European countries would be beyond bankrupt without the protection of the European Union. Without a 100-year amortization mortgage, Swedes would have little to no hope of purchasing a house because the Swedish welfare State is huge which means the cost of living is high.
Government workers, Government enforced protection measures are expensive, Government workers need to get paid with benefits and recipients of welfare demand the same perks and benefits to the people who actually work for a living get and more as welfare recipients often cry foul if any person or entity dares to question the immorality of the Welfare State. All that aside Canada is running into a huge problem and this was why I’ve stated several times over that Justin Trudeau doesn’t seem to comprehend what Jean Chrétien and Paul Martins Liberals did to protect Pierre Trudeau’s socialist Utopia.
You’ll often hear the NDP and other Leftist speaking negatively about the Tax Loops holes, well it’s first important to understand that taxation is theft, taxation is nothing other than money redistribution scheme, but even if you don’t agree that tax is theft it’s important to understand when you remove tax Loopholes what you’re left with is Venezuelan style Socialism. Socialist countries typically end up with a dictator because the socialist leader or leaders vow to put an end to corruption, or vow to stop the tax cheats or vow to stop or put an end to the exploiters of the poor. We’re going to make those rich people pay more taxes is usually how dictators become dictators.
Pierre Trudeau was very close to being viewed as a dictator by Canadians. Trudeau, however, was wise enough not to allow that label to stick on him, he left Politics just at the right time and Brian Mulroney got stuck trying to clean up the mess Pierre Trudeau left behind. For Prime Minister Brian Mulroney in a cowardly attempt to keep Pierre Trudeau’s dream alive reshaped the tax code in an attempt to pay the bill, Trudeau left for him. Now, what Brian Mulroney should have done was told Canadians the truth that this bill couldn’t be paid, long story short Jean Chrétien and Paul Martin dominated the 1990’s, this economy we enjoy today is the result of their governments.
Free market socialism or corporatism is what Jean Chrétien and Paul Martin embraced, Canada’s version of the Glass Steagall act no longer exists and this of course allowed for CMHC to insure mortgages while at the same time allowing for mortgage-backed securities, furthermore Schedule 1 Canadian banks have access to print Canadian dollars at levels other countries banks can only imagine and this, of course, all exists with the expectation that the Canadian consumer will maintain a great score.
It’s important to understand something about The Canadian Real Estate Industry which is their main concern are the real estate investors, those home flipper people, those morons purchasing condos for $400K expecting cash flow, the development projects that can’t come to fruition because under the new rules fewer real estate investors are qualifying for mortgages.
There’s an assumption that Canadian families want to move into 1 and 2 bedroom condos, this simply isn’t true, what’s happening in Canada is that the retail consumer is waiting on the sidelines for the market to crash, but if the housing market in Canada crashes The Canadian Real Estate Industry is in trouble, because if a retail buyer buys a home for $1 million dollars and then that retail purchaser wakes up one morning and his/her house will only sell for $400K these people will lobby the government not to pay their mortgages, but worse than that is the condo boom, I’ve spoken in length about the major cities in Canada having an empty condo problem.
This empty condo problem is so problematic that people that subscribe to Airbnb are having to lower their standards for tenants. In Toronto as an example, now you could be in what you’d assume is an upper-class neighborhood and find a lot of shenanigans happening in the Condos. Lots of prostitution, teen parties, garbage filth, criminal activities etc. Furthermore what’s also ignored is the horrible construction of many of these condos, these developers continuously cut corners, they cut corners when they’re building houses and they do the same when they’re building condos, however, because the condos are either empty, being rented out or the owners for obvious reasons want to keep quiet in fears they’ll lose their investment, this stuff isn’t being reported.
Now if there’s a crash, what happens during a firesale, when there’s an abundance of properties available on the market is buyers will start to become more picking, picky buyers also talk a lot more, property management comes into question, more scrutiny of properties become the norm and pretty much this entire real estate scheme gets exposed for the sham that it is. In America, only the cities with ridiculous rental controls have a housing crisis. Americans don’t want anything to do with a condo. The population of New York City continues to shrink because the cost of living is too high. This is the reality of what happens when people can’t afford to live in a city.
In Toronto currently, this system isn’t broke yet, but it’s teetering in that direction, sure a 100-year amortization will be a stimulus to the economy, but it will be a stimulus to the wrong people and Canada’s problem is a lot worse than any American city. Canada is losing its manufacturing jobs and one of the main reasons why Canada is losing its manufacturing jobs is because of The Canadian Real Estate Industry. Most businesses rent their properties and because industrial spaces are being replaced with Condos, leasing an industrial space is becoming more expensive, which equates to job creators being forced to take on more financial risk, which obviously means those last and remaining job creators are having to pass those costs onto Canadians.
Now if The Canadian Real Estate Industry has its way, this problem will only get worse, what makes Canada worse off than even Japan is that we’re losing our Job creators while our population is growing. The real problem with losing your job creators is your newly found dependence on imports. Being that Canada’s manufacturing is disappearing, going forward there’s going to be a greater demand for the BoC to raise interest rates. Without going into details, when the economic crisis hits the United States during Donald Trump’s second term in office Canada better be prepared.
Because unlike in 2007-2008 when our housing Ponzi scheme had just begun, now all the suckers have been lured in and quite frankly not even a 1000 year mortgage can save the Canadian economy. This is no longer about qualifying for a mortgage anymore. This is a lease and rental problem now because as many people know, in a very short period, if enacted mortgages for 100-year amortizations will be the even greater than current mortgage prices as property prices will soar higher as more people qualify for a mortgage loan! Do you see the disaster The Canadian Real Estate Industry created yet? I do!
The Canadian Real Estate Industry Is Pressuring Ottawa To Get You Further Into Debt – Huffington Post
Interesting times ahead
