Many residents have been priced out of Canada’s housing market, but for a large number of Canadians, their house is a vital asset for retirement and passing on wealth
In case anyone still wants to somehow debate whether the Liberals will deliver affordable housing.
“Housing needs to retain its value,” Mr. Trudeau told The Globe and Mail’s City Space podcast. “It’s a huge part of people’s potential for retirement and future nest egg.”
Housing CANNOT be an investment, and I say this as a homeowner whose house value has nearly tripled since I bought it. I bought a house simply because I didn’t want to rent for the rest of my life.
It’s obviously absurd to claim to want affordable housing and refuse to cause prices to go down. If housing is an “investment” then you are by definition fucking over all subsequent homebuyers. Everybody needs a place to live.
Can you elaborate on this? I’ve always thought that housing is an absolutely terrible “store of value”. Given the fact that appreciation at a population level, by definition means housing will be less affordable for the next generation. How is value for one generation balanced against subsequent ones. Also, it’s an incredibly inefficient way to build a nest egg or whatever. If you pay a mortgage like most people do, over 15-30 yrs, you’re paying something on the level of 150%-200% of its value over time. It seems to me a more rational way to build value is to keep housing costs low, allowing people to invest that difference (mortgage interest) into either investments or savings, rather than paying it to a bank.
I get that the US doesn’t really have a culture of saving, but I feel like this is rationalized by the “my house will be more valuable when I retire” crowd. It’s so easy to save now, with efficient investment products broadly available to individuals. Maybe it’s time to let the house as the bulk of your wealth go, and make housing affordable again.
How is value for one generation balanced against subsequent ones.
I don’t know actually. By market regulation? By ensuring new housing isn’t a PITA to build and telling NIMBYs to fuck off? You’d also need to regulate the other way. Ideally a maintained house wouldn’t have its value changed that much over time. And it would be adjusted to inflation.
if you pay a mortgage like most people do over 15-30 yrs, you’re paying something on the level of 150%-200% of its value.
Yes and your net worth accumulates 50%-66% of what you pay. That’s better then the 0% for renting. AND you don’t need to complete the mortgage to sell the home and reclaim that stored wealth.
And yes housing should be affordable. I’m saying all this within the context of some kind of free market economy with some kind of private property. Being able to add most of your home payments to your net worth is very helpful in the long run. Especially if you need the Monet, you can switch to renting. Again, ideally, that would be the same cost as a mortgage, as the landlord would be using that rent to pay down their mortgage or whatever.
It depends on your definition of “storage”. Like I said, I bought because I didn’t want to give money to a landlord for the rest of my life. The best-case outcome in my mind was breaking even when it comes time to sell. Any more than that necessarily increases housing costs for every subsequent generation.
I’m not saying you’re in any way wrong, but for my own understanding, are schemes to help people onto the housing market not effectively the same thing, while still retaining value for those who expect to do things like funding retirements with their existing properties?
No, because that government money to fund those programs has to come from somewhere, and it’s almost always debt that future generations end up saddled with, so it’s still making younger folks pay for it either way.
Fair argument, but in principle lots of taxation is about redistributing wealth to those who need it, and it doesn’t have to result in debt for future generations.
It eventually will be. If something yields a guaranteed return, the cost to buy that thing increases exponentially. The math is very simple and no amount of politicking can hide it.
Edit: let’s use the classic investing “rule of 72” to illustrate (multiplying the rate of return and number of years to double your capital will total 72). Assuming an annual increase in house value of 5%, which is way below what is happening in Canada right now, the value of a house will double every 14.4 years. Every 29 years (roughly a generation nowadays) the price will quadruple. Grandkids would pay sixteen times more for their grandparents’ house than the grandparents did.
That makes sense. The cost of housing is rising faster than pretty much anything else, so it’s inevitable that any well intentioned scheme to help first time buyers will ultimately become completely unaffordable unless something else changes. Thanks!
Such schemes exist in my country, so I’m curious now to look up some of the reasoning behind those schemes and see how they argue around or attempt to compensate for this.
These schemes are very appealing to politicians because they get to have their cake and eat it too, at least for a short time. Their solution will work for a few years and they get to please both the homeowners and homebuyers. They will no longer be in politics by the time housing has doubled or quadrupled in cost, so someone else will take the blame and they can live their comfortable retirement telling everybody that back in their day, they successfully fixed the problem, but contemporary politicians aren’t as smart or skilled as they are.
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Housing CANNOT be an investment, and I say this as a homeowner whose house value has nearly tripled since I bought it. I bought a house simply because I didn’t want to rent for the rest of my life.
It’s obviously absurd to claim to want affordable housing and refuse to cause prices to go down. If housing is an “investment” then you are by definition fucking over all subsequent homebuyers. Everybody needs a place to live.
It shouldnt be an investment but it should still have value. As in it shouldn’t be commoditized but should still be a way to “store” wealth.
Can you elaborate on this? I’ve always thought that housing is an absolutely terrible “store of value”. Given the fact that appreciation at a population level, by definition means housing will be less affordable for the next generation. How is value for one generation balanced against subsequent ones. Also, it’s an incredibly inefficient way to build a nest egg or whatever. If you pay a mortgage like most people do, over 15-30 yrs, you’re paying something on the level of 150%-200% of its value over time. It seems to me a more rational way to build value is to keep housing costs low, allowing people to invest that difference (mortgage interest) into either investments or savings, rather than paying it to a bank.
I get that the US doesn’t really have a culture of saving, but I feel like this is rationalized by the “my house will be more valuable when I retire” crowd. It’s so easy to save now, with efficient investment products broadly available to individuals. Maybe it’s time to let the house as the bulk of your wealth go, and make housing affordable again.
I don’t know actually. By market regulation? By ensuring new housing isn’t a PITA to build and telling NIMBYs to fuck off? You’d also need to regulate the other way. Ideally a maintained house wouldn’t have its value changed that much over time. And it would be adjusted to inflation.
Yes and your net worth accumulates 50%-66% of what you pay. That’s better then the 0% for renting. AND you don’t need to complete the mortgage to sell the home and reclaim that stored wealth.
And yes housing should be affordable. I’m saying all this within the context of some kind of free market economy with some kind of private property. Being able to add most of your home payments to your net worth is very helpful in the long run. Especially if you need the Monet, you can switch to renting. Again, ideally, that would be the same cost as a mortgage, as the landlord would be using that rent to pay down their mortgage or whatever.
It depends on your definition of “storage”. Like I said, I bought because I didn’t want to give money to a landlord for the rest of my life. The best-case outcome in my mind was breaking even when it comes time to sell. Any more than that necessarily increases housing costs for every subsequent generation.
I’m not saying you’re in any way wrong, but for my own understanding, are schemes to help people onto the housing market not effectively the same thing, while still retaining value for those who expect to do things like funding retirements with their existing properties?
No, because that government money to fund those programs has to come from somewhere, and it’s almost always debt that future generations end up saddled with, so it’s still making younger folks pay for it either way.
Fair argument, but in principle lots of taxation is about redistributing wealth to those who need it, and it doesn’t have to result in debt for future generations.
It eventually will be. If something yields a guaranteed return, the cost to buy that thing increases exponentially. The math is very simple and no amount of politicking can hide it.
Edit: let’s use the classic investing “rule of 72” to illustrate (multiplying the rate of return and number of years to double your capital will total 72). Assuming an annual increase in house value of 5%, which is way below what is happening in Canada right now, the value of a house will double every 14.4 years. Every 29 years (roughly a generation nowadays) the price will quadruple. Grandkids would pay sixteen times more for their grandparents’ house than the grandparents did.
That makes sense. The cost of housing is rising faster than pretty much anything else, so it’s inevitable that any well intentioned scheme to help first time buyers will ultimately become completely unaffordable unless something else changes. Thanks! Such schemes exist in my country, so I’m curious now to look up some of the reasoning behind those schemes and see how they argue around or attempt to compensate for this.
These schemes are very appealing to politicians because they get to have their cake and eat it too, at least for a short time. Their solution will work for a few years and they get to please both the homeowners and homebuyers. They will no longer be in politics by the time housing has doubled or quadrupled in cost, so someone else will take the blame and they can live their comfortable retirement telling everybody that back in their day, they successfully fixed the problem, but contemporary politicians aren’t as smart or skilled as they are.