Asset bubbles skew and distort the playing field, and honest, taxpaying citizens justifiably feel unfairly treated. This is very, very bad for our society. We all benefit if we live under circumstances where honest efforts and hard work are fairly rewarded. The politicians holding Canada’s financial policy strings are doing absolutely nothing to limit the housing bubble that is perverting circumstances in this fashion, and which is destined to severely injure many Canadians. They know there is a problem, but would rather steer a course for re-election than genuinely improve the country’s financial outlook. History will judge them poorly. -vreaa
“Dear Mr Flaherty, Mr Harper, and Mr Carney,
I feel compelled to let you know how your policies have affected me and my family.
First, a little bit about me. Unlike many Canadians, I’ve got some cash – not enough to be considered “rich” but enough to raise an eyebrow or two. I didn’t inherit it, win it, marry into it, or obtain it through illegal activity. It’s a result of hard work, living below my means, and most importantly taking entrepreneurial risks.
Over the years, I’ve been one of those fellows who have repeatedly incorporated startup businesses and have created jobs for Canadians, with the hope that I would reap the financial rewards. Along the way it usually didn’t turn out that way, as most of my businesses failed and I lost much of my invested time and money. And believe me, there have been periods of my life where the time invested has been equivalent to 60+ unpaid hours per week. It hasn’t been easy. But I learned from my mistakes and, eventually, one of my ventures paid off and produced a bit of a windfall for me and my little family.
This brings me to the real estate situation in Vancouver, which is where I was born and have lived my entire life.
Even though I have savings, your easy money policies have allowed practically anyone to compete with me in purchasing a house for my family. If I attempt to place a reasonable offer for a house, I know there will be a dozen young kids with no savings and horrifically large pre-approved mortgages outbidding me and driving the price of these shacks in Vancouver ever higher.
But these buyers do not appreciate how long and hard one has to work, risk, and save to actually come up with the cash to buy a house at these levels. A representative example is my son’s preschool teacher who recently informed me, “I bought a place! I got a 1.75% mortgage and my bank helped me to open up a line of credit to come up with the down payment!”
At the other end of the spectrum, higher end houses are being bid up by foreign buyers. A news article appearing in the Vancouver Sun this morning provides evidence of this, with its revelation that higher-priced properties in the west side of Vancouver, Burnaby, Richmond, and the Tri Cities are experiencing the most sales. These happen to be areas in which Asian demand is high.
Now I know how it works in Canada; If you object to selling out your city to the highest (foreign) bidder you are called a “racist”. But let me say this. In the process of earning my nest egg, I paid plenty of taxes to Canada and BC all along the way: payroll taxes, corporate income taxes, personal income taxes, capital gain taxes, worker’s comp, etc that were used to build the infrastructure and fund social programs. These taxes and regulations often brought me and my businesses to their knees.
Yet, through association with several new Canadians, I know many foreigners have built their wealth without facing the same levels of taxation, legal obstacles, fair pay for workers, and environmental concerns in their home countries. And, as politically incorrect as it is to state, from what I have seen, experienced, and read, I’m convinced that much of this foreign money is dirty – generated through crime and corruption.
How can I reasonably compete with these foreign buyers? How can our children be expected to compete?
So, in spite of my successes, I am living, along with my wife and kids, in an older, very modest rental house. And I feel stuck. Renting has its benefits, but I’m also under the thumb of my landlord.
The easy money and immigration policies of the federal government and the Bank of Canada have resulted in a personal dilemma. I can’t afford a house of reasonable quality in Vancouver. So I’m left with three choices:
1. Rent indefinitely.
2. Blow my life savings on an over-priced, tear down dump.
3. Move away from all our friends and family in Vancouver so that I can provide a quality house and better standard of living for my family. And if we move away from Vancouver, it may make sense for us to move away from Canada altogether.
It simply makes no sense to me that this government is maintaining policies that reward only those with nothing to lose (new buyers with no savings) and those who make their riches in offshore businesses.
I’m convinced that, in the end, it is our younger people and children who will be paying a huge price for these short-sighted policies. Does anyone in Canada believe that our children will be enjoying a higher standard of living than our past generations? I certainly don’t.”
Update 3 Feb 2010 – As if to illustrate the points made in the preamble, here is a poster at greaterfool.ca (omg 3 Feb 2010 3:36 pm) advising Vancouver Renter to stop being a such an honest citizen. Welcome to “the new morality” -
“Hold out man, renting ain’t so bad especially when you see your landlord shelling out thousand on upkeep. Alternatively, have you looked into transferring all you assets to your wife and kids. Then you personally buy with 5% down. Usually banks want it to be a matrimonial house – ie both names on the mortgage but in this climate you should be able to get a mortgage in just your name. So if RE continue to go up your’re at least in the market. If things take a dive then you simply default and go into personal bankruptcy. Your assest are in your wife and kids names and beyond the creditors reach. This will be the new morality of the next decade.”