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The Premier of BC Christy Clark is in the news again with her pre-election enticement of no interest loans for 60 months of up to $37,500 to wannabe buyers who need a bigger cash down payment to qualify for a mortgage to purchase real estate in BC's absurd housing market that has been on ice since the summer. BNN Dec 16, 2016
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The chart mashup above was prompted by an observation from a reader (S.B.) that the technical structure of the Vancouver housing market is now within momentum levels for a trend change to the downside as soon as the next retest and failure of the recent highs completes; the setup being the "anti-trade". S.B. made earlier observations here "3 Vancouver Views" Sept 2016 and "Simple as ABCD" May 2016; thanks SB.
The evidence of serious downward repricing has this provincial government attempting to goose the demand side of the market with free ZIRP money provided by you and me dear tax payer. Not only will we tax payers supply the down payments to people who don't qualify under the already sub prime CHMC lending standards, but we are additionally collectively subsidizing the banking and mortgage industry that has little or no lending risk and we are continuing to feed the provincial government tax collector via the property transfer tax. "In total the property transfer tax brought in $1.53 billion for the government, $605 million more than budgeted" said BC Finance Minister Mike de Jong CBC NEWS July 2016.
Ontario and Toronto are also implelled to goose the fence sitters into buying into the market:
Ontario land transfer tax rebate doubled to $4K for first-time homebuyers. City News November 2016.
Ontario’s land transfer tax rises from 0.5 per cent on the first $55,000 of a purchase price to two per cent for everything above $400,000. Toronto’s land transfer tax is one per cent on the first $55,000 and two per cent on the rest. Toronto offers rebates of up to $3,725 for first-time homebuyers.
Sousa also announced a freeze in the property tax on apartment buildings while the government reviews how the tax burden affects rental market affordability. (Will landlords pass this along to tenants?)
Taxation and picking electoral sectors to reward or punish has created overly complex bureaucracies that exist in their own bubbles far removed from those they claim to serve. Every election brings new promises of reform (kiss that recent electoral reform goodbye) and at some point in the election cycle we hear that tax reform is on the agenda but reform never seems to make the cut. We may have to wait for a new generation of engineers armed with big data and new algorithms to simplify the tax structure. My favoutite is The Automated Payment Transaction Tax. It would do away with the tax department and with having to pay for the accounting and filing of overly complicated annual tax filings. The problem in this country is not the absence or lack of money creation.
Political ideology at all levels of government since the post war "invention" of CMHC has destroyed any possibility of a social contract that includes affordable housing as a basic right of tax payers. It appears to me that governments at all levels in Canada will continue to promote and urge Canadians to add even more household debt to their balance sheets that are already at historic levels nationally and globally. Although the Federal Government appears on the surface to be more rational than the provincial governments by warning Canadians who already have high levels of debt, they are not concerned with Canadian Banks who continue to be sheltered by tax revenue from the private sector. What they are concerned with is a RECESSION and THEIR OWN FEDERAL CASH FLOW. Is it irony or finger wagging and buck passing? The government is hooked on the commodification of real estate; it's a cash cow with a golden udder of debt that we are all attached to.
Here is the Federal Government at work:
Political ideology at all levels of government since the post war "invention" of CMHC has destroyed any possibility of a social contract that includes affordable housing as a basic right of tax payers. It appears to me that governments at all levels in Canada will continue to promote and urge Canadians to add even more household debt to their balance sheets that are already at historic levels nationally and globally. Although the Federal Government appears on the surface to be more rational than the provincial governments by warning Canadians who already have high levels of debt, they are not concerned with Canadian Banks who continue to be sheltered by tax revenue from the private sector. What they are concerned with is a RECESSION and THEIR OWN FEDERAL CASH FLOW. Is it irony or finger wagging and buck passing? The government is hooked on the commodification of real estate; it's a cash cow with a golden udder of debt that we are all attached to.
Here is the Federal Government at work:
CHMC Promotions Oct 2016 by the Globe and Mail
- 1992 Allow RRSP withdrawals for home purchase.
- 1999 Allow purchase with only 5% down payment.
- 2003 Remove house price ceiling on insured mortgages.
- 2003 "Green" mortgage insurance premium reduction and environmental incentives.
- 2005 Self Employed can self declare a 15% gross up of income and access all mortgage insurance products.
- 2005 Amortization increased to 30 years on insured mortgages.
- 2006 Amortization increased to 35 and 40 years on insured mortgages.
Warning from the Bank of Canada:
Risk of household financial stress and a sharp correction in house prices.
Some notes from the Satyajit Das videos below:
- Real growth was produced from the Industrial Revolution.
- But since the 1980's, growth has been fuelled by debt.
- An asset's income should pay for its debt.
- In the 1950's $1 to $2 of debt paid for $1 of GDP.
- By 2007-2008, $4 to $5 of debt paid for $1 of GDP.
- China in 2016 needs $6 to $8 of debt to pay for $1 of GDP.
- In the 20th century, population doubled and was an organic driver of growth. Now population does not drive growth.
- Innovation contributes to growth but productivity is falling.
- Now we have a service economy not a productive one.
- Innovation rates are falling dues to lack of R&D funding.
- We cannot repay debt without growth.
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