If Housing Prices In Canada Stop Rising, Houses Will Quickly Dissolve Into Money Pits: Housing fatigue, may equate to NEGATIVE interest rates – June 21, 2021,
One of the reasons I don’t hoard Canadian fiat cash has to do with regulations on the Canadian economy, which currently sets a floor to how far down prices in the housing market will go. I personally believe that the housing prices in Canada are reflective of the future depreciation of the Canadian dollar.
The problem in all of this comes with the private sector, who as I’ve been saying for years now is going to be forced to raise prices to pay for all of this government that Canadians are currently enjoying for free. When government grows, taxes are supposed to grow with it, and because the governments’ role in society isn’t supposed to be welfare, the private sector usually raises the cost of living to match the stupidity of the government.
When the government began giving away free LOANS to businesses I made sure that I didn’t sign up for any of that. Because as we all know, the government often uses these loan schemes to control private industry. A large portion of the Canadian housing market are small business people, who own properties that can not cash flow in this environment.
Wages will have to come up massively and I mean like $25 per hour in order for most of these properties to be reflective of the rental market. Now, if this were to happen, the cost of living for Canadians would rise drastically, but so would consumer prices, now if this normalization occurs, this doesn’t necessarily mean that home prices will appreciate in value.
Because as I like to point out the Canadian economy is DEFLATING not INFLATING, just because Canadian dollars are becoming more worthless than they were prior doesn’t equate to ECONOMIC inflation. If the economy was really inflating there would be no reason to suppress interest rates.
If interest rates were no longer suppress a lot of people could not afford their mortgages and fewer people would qualify for a mortgage, I hope the reader is becoming to understand the market manipulation in the Canadian housing market.
So it’s one of those events that I like to talk about which I call #LateStageSocalism in which you’re damned if you do and you’re damned if you don’t. Because technology has actually rendered a lot of government positions and government contracts economically worthless, many of these government jobs that taxpayers are being forced to finance need to disappear.
Now, will they disappear? I doubt it, most people don’t see this obvious problem, but the point I’m trying to make here is that because the numbers no longer reflect the real economy, the cost of MAINTAINING real estate on several fronts low or high-interest rates are going to make house and condos money Pitts.
The money used to inflate the housing market now is going to be paid for LATER and later is approaching fast. As I keep reminding people, the Canadian housing market can not stop rising or it will COLLAPSE! I’ve been saying that I expect negative interest rates to come to Canada.
a few months ago the Canadian dollar was rising, it retreated, the higher the Loonie got the more intervention the Bank of Canada would have to do in order to cool it. Now there’s another problem, the apparently there is housing fatigue, now I personally don’t think it’s housing fatigue, the problem is the prices are too high and via the lockdowns, fewer people are around the world are working and surprisingly to me, the people of Hong Kong post the annexation by the Chinese Communist Party aren’t as attracted to the Canadian market as I initially thought they’d be.
Prior to the Government getting involved in ensuring mortgages, most people regarded their homes as a money pit, because prior to the government getting involved, home equity for most people was a fantasy Most business people use the equity of their assets to get rich in real estate, most real estate investors use equity to purchase more properties, the risk of doing this, however, is that real estate is hard to liquidate especially if prices become stagnate for a prolonged period of time.
Now if the property you purchased was cash flow negative when you bought it and you bought the property with the intention of selling it for a higher price later and the high price never comes or maybe it takes a decade or so for you to see any price gains on your property, your property will quickly turn into a money pit.
Although most people think there’s a lot of Canadian dollars floating around the truth is most of the inflation of prices is a wealth effect and doesn’t really exist in the market. Debt in Canada hasn’t really declined, it’s actually accelerated.
Debt is deflationary, this is what most people do not understand. Debt is only inflationary when the value of property continues to rise in fiat money terms. Interest rates aren’t normal right now, they’re manipulated and if central bank interest rates are manipulated, debt is manipulated. If the wealth effect wears off property that doesn’t cash flow is going to learn about deflation the hard way. The worst type of deflation is when your property DOES NOT rise, but the cost of living does! Has Canadian real estate reached its peak? I don’t know but if negative interest rates come to Canada, one should know that a housing implosion will be imminent!
Interesting times ahead