This is an intervention Canada: you're addicted to real estate
Real estate is a hot topic in Canada.
Home prices are soaring in Toronto and Vancouver. We compare what 500-thousand dollars can buy you in big markets and small ones.
We watch reality shows about house flipping, and try to do it ourselves.
When you're in the midst of it all, it might seem normal. But Globe and Mail reporter Ian McGugan argues Canada is addicted to real estate, and until we admit that, nothing will change.
Canada, just look at yourself, my friend. You're an addict: a middle-class junkie, to be sure, but still a fiend on fire for the buzz of cheap mortgages and the rush of rising home prices.- Ian McGugan
That includes politicians, bankers, and regulators who proclaim concern, but really don't take meaningful action, McGugan says.
"Our elected officials aren't fools. While they devise half-hearted, largely cosmetic measures that might cool the madness by half a degree, the system goes on adding fuel to the frenzy."
McGugan points to three key factors as evidence: tax laws shelter profits on the sales of principal residences; CMHC insures mortgages with meagre down payments; and RRSP rules allow first-time homebuyers to tap their retirement savings, while governments proffer various other incentives to nudge newbies into the market.
"Any nation serious about getting off its real estate high would demand an immediate end to this nonsense," he says.
Worse still, McGugan says, Canada tries to pin the blame on foreigners.
Really? It's not foreigners who are propelling the lunacy in rust-belt towns like Windsor, Ontario, where prices soared 20 per cent over the past year. It's not foreigners who nearly doubled the debt load of Canadian households over the past generation, from 87 per cent of our disposable income in 1990 to 167 per cent now.- Ian McGugan
To McGugan, fundamentally, what really needs to change is Canada's addiction to real estate and that begins by admitting we have a problem.
"Then we have to admit we have all the tools to solve the problem — if only we choose to do so.
"Yes, I know, it's going to hurt a little, but here's one final truth: It will only get worse if we wait."