Friday, October 16, 2015

Conservatives Vs Liberals - How does the election effect housing prices?

In terms of real estate, how does the Canadian election effect home prices?

Well it depends. Are you buying or selling?

If you are thinking of voting for the Conservatives, expect more of the same laissez-faire approach to economics - which means to say the Conservatives like to do nothing unless they absolutely have to.

Remember the recession that started several months ago? Stephen Harper denied it was a recession until economists told him, yes, yes it is a recession. And even after the recession was confirmed Stephen Harper has actively avoided using the word "recession" - because talking about the recession is bad for his re-election campaign. (Instead Harper has been trying to distract people by fear-mongering about Muslims.)

In terms of real estate a recession lowers house prices, so that is good for home buyers, but bad for people looking to sell.

Voting for the Liberals means lower taxes for the middle class, which makes homebuying more affordable - which means prices may end up going higher, which is good for sellers, but more affordability also means the economy is more robust and Canadian homebuyers will be more able to afford that new home. So that is a win-win.

In contrast the Conservatives like to lower taxes for the rich - which they have been doing for 10 years now. This has resulted in the richest Canadians becoming richer, while the middle class has failed to make any progress. The Conservatives had 10 years to lower taxes on the middle class, and they squandered those ten years on partisan politics and betting on oil futures. Thus the rich are now more able to buy property and make themselves richer. Land ownership in Canada has become very skewed towards the rich during the last 10 years, plus foreign ownership of land in Canada has skyrocketed, with much of Canada's oil and mineral reserves being bought up by the Chinese.

Also we should note that the polls show that the best the Conservatives can hope for right now is a minority government, which would be hamstrung by the fact the Liberals, NDP and the Bloc are all refusing to support a minority Conservative government. So even if the Conservatives managed to cling to power, they would be essentially powerless.

In contrast the Liberals are currently poised to seize a possible majority government, which could usher in years of economic benefits for the middle class.

Canada's political system is really about class warfare - squabbling over who should pay more taxes and how much we should spend on social programs.

The Conservatives support the rich, and cut taxes for the rich while cutting social programs that help the middle class and poor.

The Liberals support the middle class, and cut taxes for the middle class, raise taxes on the rich, and use a moderate amount of funding for the social programs.

The NDP support the poor, cut taxes for the poor, raise taxes for the rich and upper-middle class, and spend oodles of money on social programs.

So who you vote for is really a matter of whether you buy, mortgage or rent real estate.

If you are rich, you buy real estate outright. No mortgage. Therefore you should vote Conservative.

If you are middle class, you buy real estate with a mortgage and pay it off over time. Therefore you should vote Liberal.

If you are poor, you are still renting an apartment, living in your parent's basement, etc. You should vote NDP.

There you go - Canada's political parties explained in real estate terms, in a nutshell.

GTA and Vancouver Suburbs Prices Soaring

When will Canada experience a US style burst?
If you think the prices within Toronto and Vancouver are skyrocketing, wait til you see the prices for the suburbs - which would normally be considerably cheaper. All of this adds up to an ever-inflating housing bubble in two of Canada's hottest real estate markets.

According to the latest Royal LePage housing report, the cost of homes in the suburbs are surging, eclipsing those of the city core in some cases.

Home prices in the Toronto area climbed 11.3 per cent in the third quarter from a year earlier, to $612,261. In the city proper, the cost was almost $640,000.

The median price of a two-storey Toronto home, is up 17.1 per cent to $961,656. The price of a similar home in nearby Richmond Hill rose 18.6 per cent to $963,561 and in Vaughan by 18 per cent to $842,173.

Vancouver homes are also high, up 17.3 per cent at more than $1.9-million. The corresponding prices in Richmond and Burnaby surged 23.5 and 20.9 per cent, respectively, to about $1.2-million. A  two-storey in North Vancouver is $1.3-million, while those in West Vancouver are going for about $2.8-million.

Across Canada, home prices rose 0.6 per cent in September from August, and 5.6 per cent from a year earlier, according to the Teranet-National Bank home price index released yesterday. The index showed that prices climbed 10.4 per cent in Vancouver and 8.6 per cent in Vancouver

"The Vancouver index, at 201.24 in September, is the first to top 200, meaning that prices in that market are slightly more than twice as high as in June 2005."

With respect to these two markets a bubble has been forming for over two decades, with prices reaching dizzying heights - especially in Vancouver. At some point the bubble has to burst and prices will tumble, but to do so there has to be an impetus - something to set it off. A proverbial flea that broke the camel's back.

The 2008-2010 recession wasn't enough to do it. The current 2015 oil-collapse recession plaguing Canada likely won't be enough either, because when you consider that the Canadian dollar has slid dramatically over the past two years, what you realize is that if you measure housing prices in US dollars, the prices haven't really gone up that much.

The Canadian dollar hasn’t been above parity with the U.S. dollar since Valentine’s Day 2013. Since then it’s dropped at a record-setting pace of 23 per cent by July 2015.

Now you might think, oh the dollar is down, wouldn't that effect our economy? And you would be right - it does. It boosts our exports because the prices of doing business/buying goods in Canada is now cheaper. It also means the prices of investing in real estate in Canada is now cheaper too (for non-Canadians).

One would wonder if it were possible to take your money you had invested in oil - if you timed it right before the oil prices collapsed - and reinvest in real estate. Then when the oil prices go back up eventually, the price of the Canadian "petro dollar" would rise in value too - which means when you sell the real estate, you've then made a bundle on both the increased value of the real estate, but you've also made a bundle off the fluctuating US-CDN exchange rate. Hypothetically speaking.

Meanwhile Canada has an election coming up very soon...

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