Notice in the upper chart of Canadian Disposable Income that "Economic Families" have the advantage in maintaining a spending lifestyle over "Unattached Individuals".
Size matters but fundamentally overpriced housing in Canadian metros is being fueled by planners thinking in small commodity units built for the transient.
Perhaps it's time to start adding high rise self managed purpose built communal buildings to our urban housing stock.
Left, Right or Down
The national wire service press subscribers refer to the Broadbent Institute's September 2014 study "Inequality and the Fading of Redistributive Politics" Edited by Keith Banting and John Myles (see the quoted paragraphs and link to the source material below) as being "left leaning" I am willing to bet that the bottom quintiles of earners are more concerned with the direction of "down".
Deep and Persistent Wealth Inequality in Canada
Bill Maher - Wealth Inequality in America
This site continues to grow in content and as it does I need to manage my time by keeping the navigation as direct as possible and my publishing procedure of charts, data and comments as simple as possible.
I have replaced the Housing Summary page with a Directory page that I can easily update on the fly when needed.
For those of you who were getting the Housing Summary updates via RSS please switch your RSS feed to the History Readings page.
You can also following me on Twitter to get updates.
In the last 10 years average SFD Prices and median Family Income are up:
99% & 33% in Vancouver & BC
66% & 65% in Calgary & AB
79% & 30% in Toronto & ON
I have added the chart above to the Earnings Employment page.
If you want to live and work in Vancouver now, you have to pay a very high premium for housing; and if you are in the lower percentiles of earners and have to commute to Vancouver for an ordinary service related job, you will have the added commute and time expense from the more "affordable" suburbs.
In BC, the contradiction between years of economic growth and rising insecurity is especially stark. Even at the height of the economic boom of the mid-2000s, median earnings for BC workers were lower than for their parents’ generation in the late 1970s, once inflation is taken into account. BC saw the largest decline in median earnings for full-time, full-year workers of the four Canadian provinces where earnings fell since the late 1970s. And that happened during a time when the provincial economy almost doubled in real terms and real GDP per capita rose by more than 25 per cent.
In Toronto it's almost as bad. In the last 10 years, GTA SFD prices have increased 79% but median family incomes have gone up only 30% (Vancouver has produced an absurd 99% & 33% increase).
Ontario will probably continue to benefit from Federal Government spending as politicians and other actors hold court for corporate Canada; but for labour, family income has fallen way behind housing costs in a decade of extreme speculation while CPI is still the same as it was in 2004. The next decade has even more wage destruction in store (see PBS video "Humans Need Not Apply" below).
In Calgary and Alberta it's Texas tea that drives incomes and the speculative willingness to bid housing prices up well beyond fundamentals. For the moment, housing costs are backed up by a commensurate rise in family incomes (66% & 65%) over the last decade. But that narrow spread will widen as energy alternatives continue to advance throughout the world and the internet produces more labour saving cost effectiveness.
The challenge will not be housing costs; it will be income distribution. Make sure your income source has a future.
North Americans are consuming more than they produce.
I was interviewed on BNN yesterday, and the last thing I said was that if Canadian real estate investors are betting on nominal inflation in housing prices in Calgary - it is a pretty good bet - because Alberta has very high (22% above national average) employment earnings that have been rising at 5% per year since the March 2009 Pit of Gloom compared to Ontario earnings rising only 2% per year during the same period. After I got home from the studio I began to think about oil, the energy sector and the boom & bust cycles of Alberta oil. What could disrupt the boom?
Always provocative is Stephen Colbert and his guest last night was Elon Musk (Youtube below); it got me thinking. The disrupters are innovation (Musk etal), a rising supply of energy (U.S. fracking & China's solar panel ramp up) and the strengthening U.S. Dollar. If you are making a leveraged bet on continuing price rises in Calgary housing, it would be prudent to match your amortization to your wage earning contract. A sudden shift down in tar sand grade demand would force the weak hands to sell their real estate. The collapse in the BDI is due to the real price of oil dropping, an over supply in vessels, a strengthening of the U.S. Dollar, a global trade slowdown and disruption via innovation as an old generation gets replaced with the new.
1980 Oil peaked at US$35 per barrel ($100 per barrel today) Source
1986 Oil dropped from US$27 to below $10 ($58 to $22 today)
1986 Average U.S. Inflation was 1.9% Source
2014 Average U.S. Inflation is 1.7% Source
1.00 2014 US Dollar = 0.54 1986 US Dollars (using GDP Defaltor)
1.00 2014 US Dollar = 0.47 1986 US Dollars (using CPI Defaltor)
US$ Index peaked at 164.72 in February of 1985 Source
I will be on BNN today (July 23) at 4.15pm-ish Pacific Time with Kim Parlee who hosts Money Talk. We will be looking at the bifurcated Canadian real estate market that has zoomed in the hot metros but has left small town Canada under employed and over indebted.
I'm bringing 5 stripped down charts; we'll see how many we get to. I will put the interview link up here after I get it.
The Spear's & WealthInsight list of cities with the highest percentage of millionaires. Toronto is ranked 15th with 3.3% of its population having assets apart from prime residence, of more than US$ 1,000,000. Spears July 2014
A ranking like this is important, said WealthInsight Analyst Oliver Williams, "...because wealthy individuals, more than any other group, will change their home and even their domicile based on factors of ready access to wealth managers and private banks as well as political stability and heritage. Owning a piece of history in a city such as London is an aspiration for many, particularly wealthy individuals from overseas..."