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Relative to the cost of purchasing, it does. Buying in major cities in Canada simply does not make any financial sense unless you were counting on continued ins

Relative to the cost of purchasing, it does. Buying in major cities in Canada simply does not make any financial sense unless you were counting on continued insane growth (fueled by local speculation as much or more than foreign). Most people are unaware of the specific bet they are making, and buy just because Canada has a crazy cult of home ownership. From my own experience, it is far more intense than anywhere else. Paying anything other than a mortgage is widely seen as "throwing your money away", even with the above financial realities. Unfortunately, although people are unaware of the nature of the bet they are making (unbridled speculation fueling price growth), they have been right for a long time, even through the housing collapse in the US. But the music's gotta stop at some point. Though locals may talk about how young Canadians are "screwed" or that no one can afford a house anymore, the reality is that home ownership in Canada is higher than it has ever been in history. Young Canadians simply need to accept that, for now, owning a house shouldn't be their one goal in life: they should opt-out of the cult of home ownership, and just wait until buying makes financial sense (i.e. the bubble bursts or deflates).

kennywinker 6y ago
1. "crazy cult of home ownership" you're talking about the thing that has driven middle class wealth accumulation for most of the past 100 years? crazy cult. 2. "opt-out of the cult of home ownership, and just wait until buying makes financial sense (i.e. the bubble bursts or deflates)" For the bubble to burst, the things driving it have to change. Since the 90s, floods of global money have been driving up the cost of housing in canada's major cities. The bubble has been bubbling for 30 years. "just wait" is not actually a viable solution. Recent changes - an empty homes tax and a foreign buyer taxes - have been attempts to curb the problem, but it's not like we've tried all the tools in the toolchest - we've barely tried anything.
- amscanne 6y ago
  A home is place to live, not some magical wealth generator. The cult is that it is seen as such, and people have it in their heads that home ownership is the most important component in financial success. The reason that you note “just wait” is not a viable option is surely because you also view home ownership as something you need to do. But you don’t need it, you just want it. Blaming global money is the easy thing to do, but I don’t think there’s compelling data that supports this. Sure, it has had an effect, but Canadians themselves hold a large share of responsibility for the market today. This is why the empty homes and foreign buyers haven’t really done anything — they are just populist measures. If you really want to have an impact, fight local speculation too. Regarding the middle class wealth accumulation, Canada is in for a world of hurt when the bubble bursts. A shocking proportion (1/3) of Canadians nearing retirement have no assets outside their primary residence, and their plan is to use reverse mortgages or downsizing to fund their retirement. This is because so many Canadians live at the edge of what they can afford, commonly known as “house poor”, which is the phenomenon driving a lot of local prices. What is happening now is a massive intergenerational transfer of wealth from the younger generation to the older generation. When the bubble deflates, everyone who sold their house is making bank, and young people who were desperate to have a piece of dirt are the ones who will be holding the bag. I’m not saying you shouldn’t own a house if you need it and can afford it, but the idea of a home as a “wealth generation” device will not age well in Canada.
morbm 6y ago
I agree with everything you've said, except the last point. The federal government has shown that it will do what's necessary to maintain the status quo. As each COVID benefit runs out, another one is added to replace it. How long can they keep this going? I don't know, but I'm not willing to bet against all the people who own 1+ homes and the politicians who represent them. I personally delayed buying a house in Toronto since 2013, thinking that it's too hot and it can't keep going up. I missed out massively. I don't recommend young Canadians to wait, but rather buy your primary residence if you can before you're completely priced out of the market. Just don't put all your investment into housing in the GTA, it may pop one day.
- amscanne 6y ago
  Well it’s true that my advice is not pragmatic. The market can remain irrational longer than you can remain solvent. But I wouldn’t encourage FOMO by saying “buy or you’ll be priced out!” since it’s just perpetuating the assumption that it’ll last forevér. It won’t. But it might last a while. If you really want a house and can afford it, buy a house. But understand the reality of the financial risk. That’s not just coming from me, it’s coming the Bank of Canada and many other international organizations.

kennywinker 6y ago

1. "crazy cult of home ownership" you're talking about the thing that has driven middle class wealth accumulation for most of the past 100 years? crazy cult. 2. "opt-out of the cult of home ownership, and just wait until buying makes financial sense (i.e. the bubble bursts or deflates)" For the bubble to burst, the things driving it have to change. Since the 90s, floods of global money have been driving up the cost of housing in canada's major cities. The bubble has been bubbling for 30 years. "just wait" is not actually a viable solution. Recent changes - an empty homes tax and a foreign buyer taxes - have been attempts to curb the problem, but it's not like we've tried all the tools in the toolchest - we've barely tried anything.

amscanne 6y ago
A home is place to live, not some magical wealth generator. The cult is that it is seen as such, and people have it in their heads that home ownership is the most important component in financial success. The reason that you note “just wait” is not a viable option is surely because you also view home ownership as something you need to do. But you don’t need it, you just want it. Blaming global money is the easy thing to do, but I don’t think there’s compelling data that supports this. Sure, it has had an effect, but Canadians themselves hold a large share of responsibility for the market today. This is why the empty homes and foreign buyers haven’t really done anything — they are just populist measures. If you really want to have an impact, fight local speculation too. Regarding the middle class wealth accumulation, Canada is in for a world of hurt when the bubble bursts. A shocking proportion (1/3) of Canadians nearing retirement have no assets outside their primary residence, and their plan is to use reverse mortgages or downsizing to fund their retirement. This is because so many Canadians live at the edge of what they can afford, commonly known as “house poor”, which is the phenomenon driving a lot of local prices. What is happening now is a massive intergenerational transfer of wealth from the younger generation to the older generation. When the bubble deflates, everyone who sold their house is making bank, and young people who were desperate to have a piece of dirt are the ones who will be holding the bag. I’m not saying you shouldn’t own a house if you need it and can afford it, but the idea of a home as a “wealth generation” device will not age well in Canada.

morbm 6y ago

I agree with everything you've said, except the last point. The federal government has shown that it will do what's necessary to maintain the status quo. As each COVID benefit runs out, another one is added to replace it. How long can they keep this going? I don't know, but I'm not willing to bet against all the people who own 1+ homes and the politicians who represent them. I personally delayed buying a house in Toronto since 2013, thinking that it's too hot and it can't keep going up. I missed out massively. I don't recommend young Canadians to wait, but rather buy your primary residence if you can before you're completely priced out of the market. Just don't put all your investment into housing in the GTA, it may pop one day.

amscanne 6y ago
Well it’s true that my advice is not pragmatic. The market can remain irrational longer than you can remain solvent. But I wouldn’t encourage FOMO by saying “buy or you’ll be priced out!” since it’s just perpetuating the assumption that it’ll last forevér. It won’t. But it might last a while. If you really want a house and can afford it, buy a house. But understand the reality of the financial risk. That’s not just coming from me, it’s coming the Bank of Canada and many other international organizations.