A 'Economist's view' of Inflation issues in Canada and how its premedidated

[r3ccOs]

Having worked with/at at couple banks and O&Gs through my career, I befriend a number of economists with rollout of bloomber, ERP and ETRM solutions.

One I trust, works with the chief economist at ATB, formerlly with Todd Hirsch and has a perspective on whats going on with inflation and more specifically 'housing' prices.

The long and short is, this is Canada's plan. Our national debt and debt in general is overly extended (>2.1T), and regardless of what people think, this is cumulative of personal, private and public debt, putting us one of the highest per capita in the G7.

His theory, and not one driven by conspiracy, is that under the guise of a 'slowing growth rate', is the rational as to why Canada has been pushing immigration and its TFW program so hard over Trudeau's term. However he believes that ultimately it is only for economic simulus. I ask 'how so' - if so many people are coming here, but the rate of job creation is disproptianely low to the number of new immigrations that we are recieving.

It comes down to this... driving up the price of housing.

Yes, intrest rates have been hiked, to tamp down and placte the obsurd rate of inflation.. however the ONLY way to start combating the overal deficit that the public sector programs at all levels, is to increase the valuation of land.

in lays terms, as he speaks in economist colloquialisms.

Basically most asset holders in Canada are land holders of the following generation "Greatest, and Boomer", whereas GenX and Millenial is riddled in consumer debt. In fact, most GenX and Millenial are banking on their windfall, and already spending their inhertance, as say your ex-wife did your bonus.

The key here is, even with high intrest, the impact of compounding intrest on debt does not even compete with the rising home prices being driven out of the aggressive immigration policies set by this Trudeau goverment. Also fact is that this particular goverment is aware that the target countries of which immgiration is encouraged, is more 'likely' to purchase their homes as they have an affinity to multi-generational living.

In short, they are targeting a immgration from countries that they knowingly will drive land value, home value prices... this is in order to offset ultimately a asset/debt (like a TDSR) ratio, to pay down debt when an estate is distributed on, and to minimise the impact to Canada's overall credit score and also increase the population to improve our postion in the G7.

[max_boost]

that was a good read
makes sense to me

the question is what will change if the cons get in power? status quo, change it all up etc.

[suntan]

So I thought the cap gains exemption applied on the primary residence when the person died.

[ercchry]

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So I thought the cap gains exemption applied on the primary residence when the person died.

I believe he is speaking of genx/millennial consumer debt repayment, not the government

[Yolobimmer]

It wasn't premeditated, but 100% predictable following COVID.

I'll reply later with my more thorough take.

There's a lot of factors at play, including unprecedented private equity buying of new construction in Canada. There are highly sought after new build communities that we have seen 30 to 90% snatched up by private equity and corporate investors.

The total percentage of Canadian real estate owned by investors is now over 20%, with certain key areas pushing past 30%. Condos across Canada are now approximately 40% investor owned.

[suntan]

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I believe he is speaking of genx/millennial consumer debt repayment, not the government

lol man that's a hell of an assumption on the gov'ts part. Typical for the libs.

[ercchry]

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lol man that's a hell of an assumption on the gov'ts part. Typical for the libs.

More so than the gov paying down their debt?

[suntan]

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More so than the gov paying down their debt?

They won't have much choice if rates stay higher for longer.

[S-FLY]

Basically, if you don't own property now, your kids are effed because they'll end up on the wrong side of the wealth gap.

[max_boost]

they will be fine
lots of condos for sale

[littledan]

Not sure I understand. So to fix this issue they just keep pushing a bubble higher and higher? And it will magically never burst? because immigrants? How will they afford $2MM homes if interest rates hit 7%?

[Yolobimmer]

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they will be fine
lots of condos for sale

And small towns are actually deserted. Lots of cheap stuff out a ways.

[max_boost]

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Not sure I understand. So to fix this issue they just keep pushing a bubble higher and higher? And it will magically never burst? because immigrants? How will they afford $2MM homes if interest rates hit 7%?

blame @ercchry and the banks, of course lol

[arcticcat522]

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Not sure I understand. So to fix this issue they just keep pushing a bubble higher and higher? And it will magically never burst? because immigrants? How will they afford $2MM homes if interest rates hit 7%?

The household budget will ballance its self....easy peasy.

So what's the play here? Leverage to the max because today's money is less than tomorrow's money? (So long as you can manage today's payments)

[Disoblige]

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The household budget will ballance its self....easy peasy.

So what's the play here? Leverage to the max because today's money is less than tomorrow's money? (So long as you can manage today's payments)

Yaaaaas!!! Borrow till you're on the brink of drowning as long as you can upkeep payments. Profit later.

Oh and some crap about compounding interest on coach potato funds.

[mr2mike]

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Not sure I understand. So to fix this issue they just keep pushing a bubble higher and higher? And it will magically never burst? because immigrants? How will they afford $2MM homes if interest rates hit 7%?

I'm with littledan. Please explain this?
Bubbles aren't necessarily controllable, this is why they're called a bubble.
Ebbs and flows always happen across the economy. Always has, always will.
Just the larger this bubble grows, the bigger the pop.

[Xtrema]

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Not sure I understand. So to fix this issue they just keep pushing a bubble higher and higher? And it will magically never burst? because immigrants? How will they afford $2MM homes if interest rates hit 7%?

This is exactly what UBS is saying by calling Vancoucer and Toronto RE no longer a bubble.

Price levels in Vancouver and Toronto have corrected by more than 10% in inflation-adjusted terms since mid-2022. We now rank these markets in overvalued territory.

You money is now worth less and housing prices is justified.

The way I see it, if there's ever a contraction, REITs will snatch them up and turn them into rentals. There is no shortage of renters because the 3M we just imported and probably at least 1M/year until end of time if we want to hit 100m by 2100.

And the 1M TFW we have, the businesses can exploit the shit out of them until they get PR status.

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The key here is, even with high intrest, the impact of compounding intrest on debt does not even compete with the rising home prices being driven out of the aggressive immigration policies set by this Trudeau goverment. Also fact is that this particular goverment is aware that the target countries of which immgiration is encouraged, is more 'likely' to purchase their homes as they have an affinity to multi-generational living.

In short, they are targeting a immgration from countries that they knowingly will drive land value, home value prices... this is in order to offset ultimately a asset/debt (like a TDSR) ratio, to pay down debt when an estate is distributed on, and to minimise the impact to Canada's overall credit score and also increase the population to improve our postion in the G7.

That's always the game. Massive wave on HKer after 6/4 that cause the 91 run. Massive Chinese immigrants trying to get asset out of China for the last 2 decades. All cause housing to grow abnormally, at least of GVA/GTA.

Then locals are jumping into play the spec game. When my cousin worked in IESO, a number of colleagues are actively speculating with 2-3 houses with government wages. Like WTF.

As for this recent wave, I think only 50% are "wealthy" but it still dry up rental pools. The kids they import form HK last couple years doesn't really have assets at all but they can leverage bank of mom and dad to at least cover rent.

With CMHC and potential bank run if people defaults, importing a bunch of people offset that risk isn't the worst idea ever. But it comes with other problems.

[Yolobimmer]

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This is exactly what UBS is saying by calling Vancoucer and Toronto RE no longer a bubble.




The way I see it, if there's ever a contraction, REITs will snatch them up and turn them into rentals. There is no shortage of renters because the 3M we just imported and properly at least 1M/year until end of time.

And the 1M TFW we have, the businesses can exploit the shit out of them until they get PR status.

This is WHY Canada has always relied on immigration. Without them we would be in contraction, both by population and economy. Let's face it, we need workers.

And yes, interest rate hikes were not about taming inflation. They were to chip away at savings to keep more Canadians working and to drive down wages.

It's all about our corporate overlords.

As for housing. It's unreasonable long term to expect low wage earners to expect to live in major centres. We have lots of cheap houses and land. But they are an hour + outside of major centres.

You are not.going to live around Central Park on $30 an hour, nor should anyone expect to.

What we need is high speed rail. That way you can live in some shithole like Penhold for the cost of daily Starbucks, and be at work in Calgary or Edmonton in 30 minutes.

But a short term solution is to ban real estate investing in residential real estate. A one house per family policy would clear shit up IMMEDIATELTY, and we could go back to interest free loans.

[suntan]

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This is exactly what UBS is saying by calling Vancoucer and Toronto RE no longer a bubble.




You money is now worth less and housing prices is justified.

The way I see it, if there's ever a contraction, REITs will snatch them up and turn them into rentals. There is no shortage of renters because the 3M we just imported and probably at least 1M/year until end of time if we want to hit 100m by 2100.

And the 1M TFW we have, the businesses can exploit the shit out of them until they get PR status.

So there's going to be a recession where the lowest paid people keep their jobs @ $20-$25/hr and are able to afford $3-4K rent per month, or high paid people keep their jobs but lose their homes and those homes are snatched up and the high paid person can still live in their home but pay rent or the high paid person loses their job and loses their house and for some reason the bank decides to take a huge hit on the loan and sell the home for cheap to a REIT because banks like to lose money?

[max_boost]

Vancouver is nice
Toronto is cool
Calgary is for budget ballers