Rising home prices keep Canadians from starting families.

Bull! Bull! Bull! pointed out this article in the Vancouver Sun.

The ratesupermarket.ca survey of 1,700 Canadians found 52.8 per cent of Canadians overall cannot afford to start or expand their families, with 46.4 per cent of millennials sayings their existing debt was making it impossible, even before considering a mortgage.

Benjamin Tal, deputy chief economist with Canadian Imperial Bank of Commerce, thinks there’s no question household formation is being impacted by prices. “Common sense tells you it makes sense. We have an affordability crisis in large parts of the country. In these types of cases, people either stay in the basement (of their parents) but they definitely don’t buy a house. We know in the United States for sure this happened.”

Infrastructure in cities has not kept pace with density, as evidenced by some Toronto condominium developments posting signs warnings parents that their children might not be able to get into local schools because of overcrowding.

As Bull! Bull! Bull! points out, that’s not really a big deal because Vancouver isn’t a family town anyways:

that’s ok. young ppl can live in condos, ride bikes, instagram their breakfast, experiment with facial hair, smoke lots of pot and generally act like they never moved out of residence. (showers are optional). they’ll be happier anyways.

Read the full article here.

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space889
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space889

Uhmm…..I thought only an evil communist dictatorship country would do this…not a democratic and morally advanced country, in 21st century no less!

Native Women in Saskatchewan sterilized against will:
http://thestarphoenix.com/opinion/editorials/editorial-sterilization-pressure-odious

space889
Guest
space889

And here I thought it was because young people are lazy and don’t have work ethic like their boomer parents.

And staying in their parents’ basements instead of going out and renting like a proper adult, as Patriotz told us how things used to go. No wonder these lazy kidults are failing and complaining. If only they would man up like the boomers….

space889
Guest
space889

@patriotz – well, that’s kind of my point – those high yields don’t come free as a sure thing, so if you borrow to invest, even in blue chip super safe companies, it is not really that 100% sure thing.

But seems like some bears can’t get that concept.

space889
Guest
space889

@HAMster – So let me get this straight, a bank’s business is lending out money. So it issues a bunch of preferred shares yielding 5% in after tax income, and take that $$ to lend out at 3% – 4% on a secured loan before tax and operating expenses, so it can pay an after tax 5% dividend on the money it lend out???

And the people borrowing at the 3% – 4% rate to invest in the 5% preferred shared issued by the said bank faces no risk and can collect the 1% spread and likely some tax refunds, laughing all the way to the bank, and mocking stupid home buyers / owners?? Seriously?

patriotz
Member

@4:

Corporations are under no obligation to pay dividends on common or preferred shares. They do have to pay dividends on the preferred if they are paying on the common. They can and do suspend dividends when profits get squeezed and shareholders have no recourse.

Also, if a corporation goes BK, the debtholders (who include depositors in the case of a bank) have to be paid off before preferred or common shareholders get anything.

In addition, the banks are required to maintain a ratio between debt (which they are obliged to pay back) and equity (which they’re not).

This is why banks pay dividend rates higher than their lending rates.

space889
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space889

@patriotz – Yes and which is why borrowing to invest into those isn’t a sure can’t loose strategy as some make them out to be.

realist
Member
realist

@4 space889
“So it issues a bunch of preferred shares yielding 5% in after tax income, and take that $$ to lend out at 3% – 4% on a secured loan”

No, the bank issues preferred shares because its regulators compel it to maintain a certain minimum equity in proportion to the bank’s assets – that is, the money they have lent out. For chartered Canadian banks, the ratio of assets to equity averages 17.5:

http://www.cba.ca/contents/files/statistics/stat_bankq_en.pdf

So where does the rest of the money they lend out come from? Depositors, debts, and thin air!

It’s a great business, if you can get into it. And Canadian chartered banks have put much effort into seeing that you don’t!

elvince
Guest
elvince
@space889 @HAMster: A bank issues 100$ in equity, onto which it pays a certain rate (let’s suppose your 5%), then borrow 900$ at a ridiculously low rate, and then finally lends that 1000$. It is then levered 1:10. There legally is a maximum at which a bank can be levered, so to access the low rate money, it has to lend it’s own “high-rate” money. Not all loans are at the 3-4% rate. That’s mostly mortgages. Credit cards are often closer to 20%. But even if a bank loaned the whole 1000$ at 3%, if the money comes from a 5% prefered and the rest is pretty much 0% from chequing accounts, the banks pays an average of 0.5% interest rate and loans at 3%. If they manage to lose less than 2.5% to loan-loss and operating costs, they have… Read more »
Funkeymonkey
Member
Funkeymonkey

I am young. I look for jobs outside this city every day. I love my job. but will move because of cost of housing here. I make over a 100k per year and live debt free because I rent.

realist
Member
realist

@6 space889

Show me a “can’t lose” investment, and I’ll be your friend for life.

But show me an investment where leverage doesn’t operate in both directions, and I’ll start a religion around you.

Many have already gone over to the RE religion, because RE has been cleverly gamed on many fronts to suspend the facts of economic life above. And when the leverage goes in reverse, you can look forward to it coming to your balance sheet, dear Canadian taxpayer!

bird
Guest
bird

@9 are you in a position where you can go into business on your own? That’s how I made the break – switched my office hours to contracts I could do remotely and then was able to live anywhere. Made leaving Vancouver easier since I didn’t need to find an office job first.

Son of Ponzi
Guest
Son of Ponzi

Rising house prices keeping Canadians from starting families.
That’s why we need the Syrians.
They all have 5 children, all ready made.

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

Rent starts at $1,300 for a one-bedroom in “affordable” south Vancouver housing project

http://www.straight.com/news/581836/rent-starts-1300-one-bedroom-affordable-south-vancouver-housing-project

ostritch
Member
ostritch

Europe falters. The US is running scared. Demagogues abound. But the sale of the city of Vancouver to the world’s wealthy carries on unabated. Inventory as listed on this blog is the lowest I’ve ever seen it.

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

@14

with COCs priced out rents are about to skyrocket.

Best place on meth
Member
Best place on meth

I’ve just been informed by a reliable source that you do not actually need to own real estate to start a family.

You can actually do it while renting.

Sounds crazy but I’m just putting it out there anyway.

space889
Guest
space889
@elvince – well, the money in chequing account are usually the float for day to day cash uses, banks don’t really lend that out for term loans. But that’s not the main point in my example. Anyways, I was using bank in a simplified example since most people consider their preferred to be super safe blue chip that wouldn’t loss money in a borrow to invest scheme. I know banks lever up using loans, bonds, etc. But again, if the preferred shares are no loss propositions and dividends are tax advantage, then why would any rational people buy bank bonds at a lower fully taxable interest rate? And why aren’t institutional investors pretty much just buy up all these 5% yield preferred? It’s not like the institutional inestors lack the money, or leaving them to the retail investors out of… Read more »
space889
Guest
space889

@realist – well talk to the bears like Vangrl who seems to have found the magic formula of easy no work portfolios that can return 8% to 10%/yr easily.

I’m merely pointing out the scheme of borrowing money at low rates to invest in blue chip preferred isn’t a foolproof no loss strategy for some very obvious reason, and people seem to get hang up on some technicalities, and believes banks can only make loans instead buying preferred for some reason.

space889
Guest
space889

@BBB – well bears will tell you that asking rent is not the same as market rent, and you just need to bargain hard and twist the landlord’s balls to get amazing rental deals at far lower costs than home ownership.

patriotz
Member

@12: “That’s why we need the Syrians. They all have 5 children, all ready made.”

Stuff like this always makes me want to find out the facts:

https://www.google.ca/search?client=ubuntu&channel=fs&q=syria+birth+rate&ie=utf-8&oe=utf-8&gfe_rd=cr&ei=EFdOVtnwJ4PB8gfbjJLoAQ

Note the rate in 2012 is given as 3/woman. This is one of the lowest in the Arab world, not surprising since Syria is one of the most secular Arab countries. Also note the stories that the rate has now dropped in half, not uncommon in countries that are seeing this kind of turmoil.

patriotz
Member

@17: “And why aren’t institutional investors pretty much just buy up all these 5% yield preferred?”

Because most of them can’t get the dividend tax credit (they are non-taxable like CPP, pension funds, charities) and the DTC is a major part of the return on preferreds.

There are mutual funds that hold preferreds for which individual unitholders can get the DTC.

Oracle
Guest
Oracle

Housing out of reach in Vancouver and Toronto just affects those locals who never bought in years ago.

Immigrants are either rich or poor usually.

The rich love it because it gives them a place to hide their money overseas, while declaring no income, and being subsidized by the taxpayer.

The poor immigrants live it because at least they will have food on the table.

The locals who bought years ago love it because they feel weather than heir neighbours.

space889
Guest
space889

@patriotz – well if the preferred is paying 5% and a 5yr bond is paying 3.5%, all else equal, you would still buy the preferred since the rate is higher, preferential tax treatment or not.

pricedoutfornow
Guest
pricedoutfornow

I rent. I have a family. I live in Vancouver. Rent is alright, more than I’d like, but isn’t everything? (prob 30% of our gross family income, maybe less). You have to be a smart renter, screen your landlord properly, make sure they aren’t one who will tear down and build in 6 months.Prefer ones who don’t have a mortgage (ie property’s been in the family for decades). You’ll be alright.

paulb
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