Victoria – “And you think we have not created a casino mentality?”

This anecdote is third hand. It comes from a speculator in Victoria, and has already been headlined at greaterfool.ca, and commented on, there, by Garth Turner. It deals, however, with a sentiment that is so seminal to the Vancouver bubble that we have felt moved to archive it here. -vreaa

“I bought a new condo, 2000 sq ft, facing the ocean on ocean frontage in 2007 for $1,200,000 A rental agency has advised me not to take short term tenants since possible damages to the condo may deflate the value. I partly financed by taking a conventional mortgage on my present home property for $875,000 prime minus .69%. Current rate is 1.56%. My home property is appraised at $1,700,000 (2007).(Prime ocean front). I rejected an offer of $1,600,000 in 2008. The market is firming up again in the Victoria area. We intend to move to the condo when the house is sold. My question: I would love to deduct the mortgage interest on the condo! How can this be done?”

[Garth Turner comments – “Just to put this in Dick-and-Jim terms for the feds: Guy with inflated property borrows 50% of its value to buy a spec property with 72% financing. He is able to get a mortgage at 1.56%, which is the current rate of inflation, which also means the money is free. Guy is a tool. His action serves only to pump up real estate values further, thanks to absurd interest rates, orchestrated by the Bank of Canada. He now wants to deduct the interest on his free mortgage money from his taxable income, which means other taxpayers (who don’t have $2.7 million in real estate) would pay half his costs for him. And you think we have not created a casino mentality?”]

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