Your house is not an asset – The number of Canadian millionaires will jump by more than half in the next five years: Credit Suisse – October 21, 2018,
According to Credit Suisse The number of Canadian millionaires will jump by more than half in the next five years and one of the major contributing factors are overvalued home prices primarily in Toronto and Vancouver. Now obviously this article came from the CBC and you can read it for yourself by clicking the link below:
The number of Canadian millionaires will jump by more than half in the next five years: Credit Suisse
In the header of the aforementioned article, I saw what is considered a doodad by Richdad Poor Dad which is a boat, but even I associate owning a boat with as wealth even though maybe I shouldn’t, however when you scroll down you see a picture of a “sold house” which reads “Rising home prices have played a big role in growing Canada’s cohort of millionaires.” and then I go it. I hate to tell you over-valued house millionaires, your house is not an asset, it’s actually a liability especially any equity you’re withdrawing from your house isn’t being used to grow your wealth.
If your house will sell for a million, but the bouse you want to buy costs a million are you really a millionaire? If you don’t actually have $1 million dollars in the bank are you really a millionaire? If the million dollar home you have won’t easily sell, thus making it an illiquid asset are you really a millionaire? If you million dollar house has a mortgage of $500K are you really a millionaire and of course, if interest rates rise, are you really a millionaire.
I’m all for the feel-good nature of the article, because at first, my assumption was that Canada was producing more than I thought in its private sector thus creating more wealth, but no, unfortunately what it appears is that people’s Net worth is increasing because their depreciating homes will sell for more than a million dollars. That’s a very depressing article in my opinion and if you actually read the article you can see why America will “only” create 18% more millionaires in comparison to Canada’s 54 percent.
In America, there are only a hand full of regions with over-valued housing markets and oddly enough majority of those regions are Democrat run states. In Canada, e have a Crown Corporation called CMHC, which is the underlying reason why the government-run portion of our mortgage-backed securities are so safe for private investors, thus creating an overvalued housing market in Canada’s largest regions.
As I’ve stated, Canada’s Condo sector is in serious trouble, rarely will find a new 3 or 4 bedroom condo being sold, because as many Canadians in Toronto and Vancouver know the condo market demand here is based on speculative investors who for the most part are doing nothing more than parking their borrowed dollars into a Condo sector that I believe is going to cause some interesting financial events to happen in the not too distant future.
Toronto and Vancouver both of a housing shortage, because actual demand isn’t being met, let’s say the Condo’s being built today in Toronto were like the condo’s being built in the 1990’s where at least they were being built based on domestic demand because the government wasn’t meddling in the mortgage markets, well the truth is there would be an abundance of 3 and 4 bedroom condos which of course would cool the market. But Canada has the BoC lowering interest rates in a Canadian economy that apparently didn’t crash when the U.S market crashed and the CMHC which is the insurance that if there is a mortgage crisis in Canada the Canadian taxpayers will bail out the private sector investors propping up the Canadian market. Congrats to all the new millionaires in Canada
Interesting times ahead