Get your head around these numbers: Canada’s average national home price rose to $470k in January, and is over $1,000,000 in hot spots like Toronto and Vancouver.
In Canada you can buy a $1,000,000 home with just 75K down and a $925,000 mortgage. The $925K loan is then insured by Canadian taxpayers (via CMHC). And this is after the government tightened mortgage rules this month. See: New mortgage rules for homes over 500K go into effect.
At 3% on a 25 year amortization, a 925K home loan costs ‘just’ $4,378 a month in after tax income, without any other provision for utilities, taxes, maintenance, repairs or any other debt payments or living costs of any kind. In Canada, that means one would need to earn about $70,000 a year of before tax income just to pay the mortgage payments alone. And that’s at the lowest interest rates in history.
At even 5%, the same mortgage would require a 22% increase in payments to $5,380 a month or about 90K a year in before tax income.
Sound reasonable to anyone? Think boomers will have an easy time finding able buyers for their scores of $1m+ properties?
Having grown large during the credit/commodities/property bubble (2005-15), governments are now looking (needing) to raise taxes in every way possible as revenues decline. We should expect a particular focus on raising property tax revenues since non-property owners are generally broke. More of this to come:
The Ontario government is threatening to go as far back as 1989 to target commercial entities, including two of Canada’s largest companies, that have been avoiding land-transfer taxes through what is now a disputed legal loophole. See this direct video link.
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