THE THRONE SPEECH

The long anticipated throne speech from the federal government has come and gone.  Long on talk and short on specifics.  Although that is a typical and somewhat traditional approach for a throne speech, the government discussed the opportunity to use the pandemic as a pivot point, but in my opinion they failed to present a specific plan.  Typical, and opportunity lost.  

What I was hoping to hear were details and plans on how we move through the looming second wave, and possibly a third wave of this pandemic.  Yes, the feds extended the wage subsidy another 12 months but where are the detailed plans for working with the provinces on the two critical areas of pandemic response – health and education – both provincial jurisdictions.

Make no mistake there is going to be a lot of borrowed money thrown at this pandemic, and rightfully so.  The elephant in the room is where and how the various levels of government intend to repay this money.  While the government vaguely referred to exploring tax ideas around extreme wealth inequality, nothing else is mentioned.  There has been talk about a wealth tax and even a home equity tax.  

Home ownership has always played a dual role for Canadians.  First and foremost, as shelter.  A patch of dirt, 4 walls and a roof. It doesn’t matter how elaborate or modest it is, you own it. At least, you own the equity in it until the mortgage is paid off.

The second role of home ownership is a source of wealth creation.  Real estate is the greatest source of wealth creation in history.  Sure, we have RRSPs and TFSAs, but they pale in comparison to the value and equity that real estate ownership has grown over the long term.

Over the past 60+ years, real estate in Guelph has averaged 6% growth.  There have been bad years – as in the early 1990s when the market dropped 20+% – but also incredible years – look at the conditions in 2017 and our current 2020 market where the gains have been even more on the positive side.  Averaged out, 6% compounded growth is a rate that GICs or stocks haven’t been able to touch.

Given the progressive nature of our income tax structure and the fact that real wages haven’t increased significantly over the past 20 years, our government has quite a tax problem on their hands.

The low-hanging fruit is to tax tech and internet companies – Netflix, Facebook & Google – but where do they go from there?  My suspicion is that given the incredible increase in real estate values over the past 10 years, the government is eyeing that pool of equity.  The pandemic and the government spending will provide the perfect excuse to attack what no other government has dared to go after: the wealth created by home ownership.

There are a large number of Canadians that are counting on the equity in their home to sustain and carry them through retirement years.  Homeownership and paying down a mortgage is what I will call the ultimate forced savings plan.  Many people don’t have the additional cash flow or the discipline to make monthly contributions to RRSPs and TFSAs.  The reward for monthly savings is too far in the future.  The penalty for not having the discipline to pay your mortgage is a destroyed credit rating and a loss of the house. Strong motivation to pay that bill every month! 

My fear is that this government will utilize the pandemic to position the need to find additional tax sources rather than realign the spending and current budget.  The federal response was necessary.  The question now will be where they identify the top priorities for spending, or will the pandemic be used as an excuse to spend even more money without paying attention to who will pay?

The cynic in me says the federal government will take this as permission to spend without restraint, and kick the debt and deficit issue down the road in hopes that taxpayers will forget. 

THE PAST WEEK IN THE GUELPH REAL ESTATE MARKET

This past week we saw 83 homes sold in Guelph – nearly twice as many deals as the same week last year, which saw only 44 home sales.  You’ll also notice last week’s median home was significantly larger than that of the previous year, which is in line with the uptick in larger homes we’ve seen on the market over the past few months. 

The median home sold last week was 3 bedrooms, 3 bathrooms, and 1,681 sqft. It sold for $649,000 – that’s $427/sqft and 101.23% of list price – and did so in just 10 days.

For the same week in 2019, the median property sold was a 3 bed, 2 bath, 1,462 sqft home that sold for $582,450, or $391/sqft.  This home took twice as long to sell (20 days on market) and sold for 99.12% of list price. 

Enjoy the last slice of summer weather & thanks for reading.

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FEATURED PROPERTY:

227 Christie Street

ROCKWOOD, ON

4 BED / 2.5 BATH / 2,020 SQ FT

This really is the quintessential family home – perfectly functional for everyday life and gatherings. The main floor features a spacious eat-in kitchen with plenty of storage and a cozy family room, plus formal living and dining rooms. Downstairs, the walkout basement is bright and spacious, with a floorplan to accommodate your family’s needs – home office, rec room, games area, storage, and more. Upstairs boasts 4 bedrooms, with a main family bath and a full master ensuite. The backyard is large, private, and full of potential! Just 15 minutes to Guelph, Acton GO, and the 401, you’ll fall in love with the small-town charm of Rockwood.

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