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Real Estate

The Ontario Real Estate market meets its April 2017 Budget; are we in crisis?

April 2017 will possibly go down as the turning point in Ontario/Canada’s economy. Although the brunt of the straws that broke the camel’s back were dropped in Ontario, it’s obvious that this province is Canada’s strongest at the moment. Remember presently, Real Estate, Construction and Mortgage/Finance are pretty much the only above positive performing industries in Canada. To recap collectively what transpired in April here are the following in layman terms (excuse my spelling and grammar, can’t be bothered):

1) 15% foreign real estate buyer tax, essentially taxing well to do non-citizens and non-permanent residents investing in real estate in the better part of Ontario. These dollars will no doubt be diverted elsewhere away from real estate entrepreneurs, retirees looking to down size and leave an inheritance to their kids and grandchildren looking to get into real estate themselves, real estate developers employing tens of thousands of contractors and sub-trades, contractors and sub-trades busy building homes for which their contracts will dwindle, tens of thousands of realtors making a living helping others buy and sell real estate, tens of thousands of mortgage brokers helping buyers borrow money, and much more.

2) Taxing residential landlords and real estate owners for vacancies, limiting rent increases, controlling how leases are drafted, and making it harder for landlords to move back into their own property. Essentially landlords usually advertise lower rental rates at the onset to get tenants in and fill their vacancies quicker. Unfortunately now they will have to advertise and ask rents at their target rates (usually taking into consideration their break even carrying costs, wear and tear, plus inflation and a small profit to make it worth their time, effort and risk), this will mean the time to fill a vacancy will increase, this now will cause the landlord to be taxed/penalized longer, and thus either force the landlord to increase rents even more to recover the tax or simply sell the property, convert it to another use or move in. Again, the domino effect is to destroy the rental industry for landlords. There will be less and less motivation for anyone to invest in real estate purely for the purpose of renting and building a portfolio of rental income generating properties.

3) Here is an odd one….taxing owners of vacant land! How will they control this? How do you define vacant? Build a small home on 3 acres? Or put a billboard sign on a plot of land comprising 100 acres? The worst part is that it was the Liberal government who invented the green belt and a prohibition on developing many strategic and easily accessible plots of land for residential development communities. Let’s no forget the red tape to get to construction permit status…and now the cherry – dismantling the Ontario Municipal Board. This is exactly what happens when the people elect the tooth fairy to substitute in for Einstein in a physics class. If your doctor was sick one day, how comfortable would you be if her receptionist subbed in permanently? Dismantling the OMB will mean more and more people who do not understand the economics, benefits and necessity to develop land, will have a stronger voice in kyboshing entire construction projects for residential communities. Every time a retiree attends a planning meeting to tell the panel that they just don’t want any change to their community of 65 years and to reduce the developers project by several floors, hundreds of units and to build out larger sidewalks, green space, parks and useless costly artwork the cost per square foot for the contingent condo or housing unit goes up and up and up. In the meantime the retiree is the only one attending this hearing because they have the time too….the ones who should be asked their thoughts are the people who want to buy-in to the development and move-in to the community (but most likely too busy working at full time jobs and trying to spend whatever free time they do have with their families). Relying entirely on community members who already own homes, not likely to buy into the new development and not equipped to understand the benefits to them as well as to the people outside of their community is an inefficient and grossly inaccurate way of addressing new construction in Ontario. For example, if the Trinity Bell woods area suddenly sees a spike in job growth, wouldn’t it make more sense to allow for increased density in new residential construction to allow those employed in that area to move close to work? This will in turn decrease the burden on our transit system, roads, parking, highways and pollution. Well thought out Studies need to be completed; Toronto’s (for example) intensification plan should be readdressed with every construction project not with every new election. There is so much wrong with how property in Ontario, let alone Canada is handled. We have great universities spewing out intelligent specialists in urbanization, construction, development, economics etc….its these people who should be employed to help make these decisions together with the contributors to these industries like developers, land owners etc… not simply ill-equipped appointed friends of the elected officials.

4) But this will all mean nothing, the Tooth Fairy, Kathleen Wynne, has come to our rescue. She has found a magical way to put money under all our pillows. Yes! Somehow, a province that can’t afford its debt load, can’t afford its homegrown and manufactured Hydro, has released a budget that requires us to spend $40 Billion Canadian Dollars immediately and $141 BILLION over time, AND will balance itself (no thanks to help from JT’s accountant and bookkeeper, I am sure). Don’t worry guys $40 Billion Canadian is now only $29 Billion USD, and $141 Billion Canadian is only $102 Billion USD. Yes the budget is NOT creating any new jobs…no it’s just giving away the money…much simpler….genius! Tuition is free to 210,000 students approximately who can fill out an OSAP form (for those of you who went to university, if you recall it seemed like everyone can get some OSAP…you just needed to know how to complete the form ; ).) Don’t judge me for this comment…I went through nearly 11 years of schooling…worked two jobs since I was 11, and earned scholarships to help pay for it all…not to mention I took out loans…the first thing on my mind when I graduated was to pay them off….I worked hard and paid them off within 1-2 years, with interest. I now have 3 kids and would love to see this happen but we all know this won’t last…it can’t, and I would be a failure if my kids had to apply for OSAP. There should be a rule…if you needed OSAP to get your education and you still failed at a career then you shouldn’t be able to get it again unless for some reason out of your control and capacity you needed that second chance…laziness should not be rewarded. Furthermore, if your kids apply for OSAP, when you did as well, it shouldn’t be free…they should pay it back or part of it. The education system has worked for thousands of years the way it is for a reason…now we want to revolutionize it by rewarding laziness and people who want to go to school for no good career choice or reason. How many applications do you think will come in next year? OSAP should control your stream of study make sure it follows a viable career path; failures and below decent grade point averages should require a stay of any funding and the requirement to pay it back. Again, I haven’t relied on my MBA in quite a while…but those are just some thoughts off the top of my head to help the Tooth Fairy try and make this work. I may be wrong. This system will require a lot of infrastructure to vet the hundreds of thousands of applications and administer the funding….this is a pure cost to Ontario…there is no money coming back…that means everyone employed to administer this system will also increase the cost of this plan….conservatively this plan will cost Ontario $3Billion per year…that’s if they can properly vet all those who should not qualify. But don’t quote me…I am probably over dramatizing my thoughts (trying to be more like JT)…the money being used here requires that students follow a career path/program apparently and that our system is well equipped to police this…not to mention they say they will allocate only $190 Million….Hmm…for 210,000 students…that’s like $904 each….what the hell does that cover exactly? Transportation for the first semester? Again….stop trying to fool Canadians. This program will cost billions, and billions to police and billions to figure out if it works long after we spent the billions in the first place.

Also, we will now have an Ontario Drug Plan. Yes, free drugs so long as you are under 25 years old. Who asked for this? Why is putting billions into this plan so important when our health care system is unsustainable? Also why 25 years old? This is the healthiest segment of our society. Aside from antibiotics (and the abortion pill, if you agree with that) who else is this going to help? On paper this sounds great….but in my opinion the only Ontarions who probably had any desire for this plan was the elderly. Not to mention if both your parents work as an employee chances are one of them may already have a drug plan. The Tooth Fairy is simply putting money back into the insurer’s pockets and steeling it from Ontario tax payers. But don’t worry Kathleen is also going to spend about $10Billion on health care, renovating some of our hospitals, and hiring more staff, doctors and nurses…hopefully. But we all know from the past that simply dumping more money into health care never really worked…Using a Band-Aid to stop a leaky boat that started sinking in 1947 won’t solve the problem….the entire haul needs to be repaired and replaced. The health care system needs to be “made to work” not “put to work”! It’s about time the system consider quasi and semi-private health care initiatives….prohibiting this is not stopping Canadians willing to spend money on urgent care from going down south and paying American Doctors to do the job…when we can easily keep the money here and grow our own economy. Wake UP! At least these Canadians are making this choice out of their own volition and not feeling like they are being unnecessarily over taxed to pay for a system they can’t use in time, in order to help fund the magical Tooth Fairy. Again, none of these initiatives will pay any dividends or provide any pay back to the Canadian economy….they are simply cost centres.

Here are some other cost centre initiatives:
1) Senior annual tax credit of $130 for public transit…I personally am okay with this. I have parents too, and a grandmother.
2) More child care kindergarten and daycare classes, reducing the class sizes to eventually 29 kids (I guess safety and attention reasons)
3) Basic Income Plan….YUP…the government will top up your income depending on where you live….meaning if you earn less than $34,000 (single) or $48,000 (double) per year the government will give you free money!
4) And more!

So where is this money going to come from? We are going to raise taxes on hotels and try and tax airbnb….yup! The Ontario tourism industry is booming apparently and our hotels are making great money…we just need to tax them a little more so that we can pay for the $141 Billion dollars we want to spend (p.s. can someone name a province, state or even a country where the tourism industry is so successful that the government tax alone on hotel stays is in the billions each year….Vegas? Rome? Maldives? NONE). Oh ya….we are also raising taxes on cigarette cartons….wait until they legalize cannabis in July 2018….taxes will probably be so high that it will counteract the measures to eliminate the grey market….people will surely grow their own because they can…and eventually someone will figure out a way to napsterize (if you remember Napster) these home growing pot growers and turn a profit (is that a Billion dollar idea? Don’t forget me). Now that we know Cannabis is going recreational, these Cannabis kings should stop voting Liberal for this one reason….it’s time to understand the economics of how the future will look if things proceed the way they are…Conservatives are not going to get rid of recreational Cannabis they are just going to be smarter about it and make it actually work.

No one is paying attention but we export more money on so-called humanitarian endeavors that once it reaches its destination we have no idea what good it did. Let’s not forget the U.S. This week they lowered corporate tax rates….this means American companies will no longer setup shop here in Canada and leave…taxes are now greener back home for them. Jobs will be lost and Canada will see a reduction of taxable corporate income in Canada. Did anyone notice that Gas rates went up but our dollar is still dwindling? For the first time in history our dollar did not rebound…why? Its obvious JT is printing more and more Canadian dollars…this has permanently destroyed the value of our Canadian dollar…we are now stuck at $1.37 for every USD. Does anyone understand what this means to our economy? Its not just about our net worth dropping by almost 40%…anyhow Never mind that’s another discussion (and you wonder why foreigners are going to be unaffected by the 15% tax ; ) but they surely will be frustrated!). Finally, Trump just destroyed our lumber and dairy industries….aside from gas we have no other real natural or farmed exports worth bragging about….and what did JT do about this? Nothing…he is attempting to kill Trump with kindness and silence….like he gives a shit. The only thing JT does well is talk about inclusion of the populace (which is good)….but that wasn’t JT’s creation…that is Canada….he is just using propaganda to convince Canadians that he invented it…wake up, we are all born here knowing that we took this land from natives and immigrated from somewhere overseas….we made this our home with the same love, care and tolerance for hundreds of years nothing new.

I could keep going…but I have to go to the office on a Saturday. Don’t get me wrong…after my kids, my wife and my family…..I love this Country, this Province and its diversity – the people and all, more than anything. I was born and raised here. I am just sick and tired of worrying about its future. The right people are doing nothing or are not given a voice or the opportunity to do things right. And the wrong people run the show….puppeteering none sense.

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