Recently I saw an article with a very Chinese-style title, "Trudeau vows to crack down on high housing prices." Because this title was too Chinese, I found a video of the Prime Minister’s speech and watched it. You guessed it, Trudeau didn’t say a word about suppressing housing prices. In the Internet age, there is too little knowledge and too many opinions. "Suppressing housing prices" is not only a way to attract attention, but also a form of opinion and catharsis. Such press releases may seem to hurt people who believe them, but they are not, because people who believe them are also looking for arguments to support their views and cannot be counted as victims.
Should the price of second-hand housing be a concern of the federal government? To answer this question, you need to know three things: 1. What the federal government cares about; 2. What is the relationship between second-hand housing prices and what the government cares about; 3. Who really cares about second-hand housing prices and what should be done.
01 What does the federal government care about?
North American politics actually only care about two words: votes. In order to prevent your political party from losing fans, you will do anything. But votes are more liquid than banknotes. When George H.W. Bush launched the war in Iraq, his approval rating reached 90%, and his re-election bid should have been a sure thing. However, Clinton snatched away all the fans when he said one sentence: It's the economy, stupid., "Stupid, the problem is the economy." Bush's popularity was still high during the war, but the unemployment situation was too serious during the election, and Clinton firmly seized this opportunity. In order to save votes, all politicians from now on have remembered that the unemployment rate cannot be too high.
Only by maintaining continuous growth in GDP can we maintain employment. So what is the contribution rate of real estate to GDP? Canadian real estate also contributes about 9% to GDP, but the contribution rate of new homes is 7.8% and the contribution rate of second-hand homes is only 1.2%. The reason is that on the day of delivery of a new house, all house prices and real estate brokerage commissions are included in GDP, while on the day of delivery of second-hand houses, only real estate brokerage commissions are included in GDP. Therefore, the contribution of second-hand housing transactions to GDP basically only involves the income of real estate agents, and has nothing to do with the income and employment of people in other industries. In order to promote employment and increase GDP, the federal government has no incentive to intervene in the second-hand housing market.
Can a high employment rate and GDP growth ensure the re-election of those in power? Carter lost to the movie actor Reagan because the inflation rate was too high during Carter's administration. Inflation is a kind of income tax. The income earned by employed people is deprived of part of their purchasing power by inflation. The indicator that represents the level of inflation is the consumer price index (CPI). The price of second-hand houses is not included in the CPI. Only the rent will be counted in the CPI. An increase in rent will cause the CPI to rise and push up inflation. Not only is the government concerned about inflation, but the central bank also sets inflation as its work target. If inflation exceeds a certain level, interest rates will be raised. Since second-hand housing prices are not included in the statistics CPI Therefore, the central bank will not raise interest rates just because second-hand housing prices rise.
The above are all knowledge points. I think that in the Internet age, people see too many opinions and have too little knowledge, so they have unrealistic expectations for government intervention in housing prices. What the Chinese media wants is the click rate and the number of reads. Other things are not important. Of course, they will not take spreading knowledge as their own responsibility. To see the facts clearly, we need to master more knowledge and listen less to opinions.
02 Doesn’t the federal government care at all about people’s housing issues?
I think the government doesn’t care about the price of second-hand housing. It doesn’t mean that the government doesn’t care about people’s livelihood issues in housing. Trudeau said the following when talking about housing prices on June 1:
"Today's young people want to buy a house. It is no longer as easy as it was for their parents or grandparents. It takes 23 years for Vancouverites to save the down payment for an average house."
“House prices now are not a problem; crisis ”
“This government has taken the following measures to solve the housing price problem: 1. Already allocated funds to build affordable housing affordablehousing project；2. Rapid housing construction projects were launched; 3. The first home buyer grant program is ongoing; 4. A crooked nut vacancy tax is about to be levied. "
Then, there was no more. There was no talk of suppressing housing prices in the speech.
Let me help the Prime Minister explain what this government has done to improve people’s livelihood in housing:
The first item, the affordable housing project, is named affordable housing. It is a project whose content cannot be seen from the name. If we understand it according to China's affordable housing, we would be completely wrong. This project is funded and organized by CMHC, which invites builders to bid every year. The winning builders build affordable housing, but these houses are only for rent and cannot be sold. Of course, the rent is very low, and applicants need to meet roughly the same conditions as receiving government relief. Generally speaking, low-rent housing is built for the less fortunate and the elderly and poor. Since these houses are not for sale, affordable housing affordable housing The project improves the rental problem of special groups of people, not the problem of buying a house, so it cannot solve the housing price problem.
The second item is rapid housing construction project. It was launched during the epidemic, and it was also funded by CMHC. Because CMHC is a state-owned enterprise and makes huge profits every year, the federal government's housing projects are all harvested from this sheep. The meaning of this project is that CMHC will pay for bidding on some projects that convert some non-rental properties into rentable properties, such as converting abandoned motels, factories, and warehouses into rentable properties. In fact, due to social distance requirements, the government's various shelters cannot accommodate so many people like sardines, and there is an urgent need to find places to quickly build some group rental housing such as shelters. this rapid housing The project has nothing to do with increasing housing supply or lowering second-hand housing prices.
The third item is the first home buyer subsidy FTHBI project. This project is also responsible for CMHC. Mortgage applicants with a down payment of less than 20% can apply for a mortgage of 4.5 times their annual income. If it is a second-hand house, the government will pay 5% of the down payment; if it is a new house, the government will pay 10% of the down payment. When the house is sold, the same proportion will be returned to the government based on the selling price. If there is support from parents, applicants who can make a down payment of 20% do not need the government to act as father and mother. At the same time, the income requirements of this project are too high, so from its launch in 2019 to today, I have not made a single such loan. I haven't experienced it myself, so I can't figure out who exactly benefits from this project. Not only did CMHC immediately raise its loan approval standards after the epidemic last year, but on June 1 this year, after commercial banks raised the stress test interest rate for loan applications with a down payment of no less than 20% to 5.25%, CMHC also raised the stress test interest rate for loan applications with a down payment of less than 20% to 5.25%. In short, if you want to get this little government subsidy, you have to go through several flaming mountains. Of all the measures Trudeau mentioned to curb housing prices, this is the only one that can effectively lower housing prices, because if it becomes difficult to get a loan, fewer people will buy a house.However, please note that Trudeau mentioned this program to say that his government is helping young people buy homes, not making it difficult for these young people. Why is there such a big gap between what we say and what we do?
The fourth item was proposed in this year's federal budget but has not yet been implemented. That is, if Wai Guoren holds a Canadian property and does not live in it or rent it out, a 1% vacancy tax will be levied every year. Among all the houses in Ontario, the proportion of Waiguolen owned is 3.4%. It is unknown whether anyone is so naive that they neither live in nor rent out. If so, these unscrupulous people would at best rent the house instead of selling it easily. The foreign vacancy tax still improves the supply of the rental market, rather than increasing the number of properties available for sale, so it has no impact on second-hand housing prices.
Trudeau suggested that second-hand housing prices have become a "crisis," but his answer has nothing to do with this question. I think he was right to say and do that. He said this because Machiavelli had revealed the fact in "The Prince": Leaders can be inconsistent with their words and deeds in order to achieve their own goals. Frankness is only needed when it works; methods such as sophistry and secret exchange of feelings can also be used when they work. This is the prerogative of the monarch. Not only did Trudeau have the right words, he also did the right things: The government should be concerned about housing security, not housing prices. Housing prices are the result of free market competition. The government must care about those who fail in the competition and cannot let these people live on the streets and destroy the environment of free competition. Trudeau is politically wise. When he talked about housing prices, he cleverly told the public: I think housing prices are a crisis, but it is none of my business. My measures are to solve the problem of living on the streets. If you don’t understand what I say, it’s your own problem.
03 Who is worried about housing prices? Is there any antidote?
Do people on Capitol Hill really care about housing prices? Tell everyone, On Capitol Hill, only the opposition party cares about housing prices, and it is always the opposition party that has the final say that cares about housing prices. Trudeau's political opponents have repeatedly raised the issue of housing prices in parliamentary debates. Therefore, some netizens found a video of Freeland in 2015 when the Liberal Party was still the opposition party, making fun of this political trick that only the opposition party cares about housing prices. Freeland is now the Deputy Prime Minister and Minister of Finance and the second-ranking figure in the Liberal Party. When she spoke as an opposition member of Parliament in 2015, she strongly criticized the then-ruling Conservative Party for its inaction on housing prices. Her tone and wording were exactly the same as those spoken by Trudeau's political opponents today.
People who wake up early and rush to the late market are really concerned about housing prices. People who have immigrated to Canada for many years but have not bought a house think that getting a diploma or starting a business is more important than buying a house, so they fail step by step. Those who are further away from their dream of buying a house every year are most concerned about housing prices.
Millennials are often cited as a scapegoat, and their inability to afford housing seems to be a social problem. 85% of people in Canada believe that buying a house is a good investment. The fact that young people cannot easily participate in this best investment cannot be regarded as a social problem. The fact that young people cannot afford to rent a house should be a social problem. Both Seoul and Shenzhen have rent loans. Young people who cannot afford to rent a house already have financial solutions. Being unable to afford a house is not a social problem. Young people of the Millennial generation need to work harder than their parents or grandparents to buy a house. It is this group of people with 150 problems facing the country over the years. If the parents of contemporary young people cannot help them, housing prices will become a common anxiety for these two generations.
BNN TV recently interviewed a real estate agent. The reporter asked her what is the biggest challenge for buyers based on the current housing prices in Toronto? The real estate agent’s name is Davelle Morrison. You can find this video on YouTube. She clearly and loudly gave the exact answer to this question, without any additional conditions or assumptions. Her answer was only one word: parents . Yes, this is the correct answer, and it is what I have mentioned many times in my articles: if you don’t work hard in the first wave, you will be sad in the later wave. Trudeau should be able to see such a simple answer, but he can't say it. A latest survey from TD Bank shows that 49% of young people buying a house in 2021 will need their parents to support the down payment, compared with only 11% 20 years ago. If there are people who desperately want to settle down because they see housing prices, then there must be another group of people who can win by doing nothing. Parents are the only antidote to the anxiety about high housing prices. Because housing prices have reached a level that requires more than one generation of efforts to reach.
04 Doesn’t anyone care about the gap between rich and poor?
Someone left me a message and advised me not to encourage people to invest in real estate. TA believes that if the Chinese become rich by investing in real estate in Canada, they will be hated by other ethnic groups, just like the Jews were persecuted, which will affect the survival of the next generation of Chinese. I think this person was trafficked to Canada and did not immigrate voluntarily. The capitalist constitutional system has already solved the gap between rich and poor. We should know this before we immigrate to capitalist countries. Moreover, the Chinese have just solved the problem of food and clothing a few years ago. If we compare the wealth of the Chinese with that of the Jews, do the poor have to worry about the rich? Instead of worrying about getting rich in Canada, why not move back?
The greatest feature of the constitutional system is a democracy in which the minority obeys the majority. This system can easily lead to a situation where the rich can eat. For example, if 10 people want to go out for dinner together, then 8 people vote and decide that the two richest people will pay the bill. It won’t take long for these two rich people to be left poor. Why hasn’t this situation of taking advantage of the democratic system to take advantage of large households not happened? The reason is A constitutional system must have two cornerstones: 1. The minority obeys the majority; 2. Private property rights are sacrosanct. These two cornerstones are indispensable, otherwise there will be a situation where the big players take over. Chile once had the problem of only a minority obeying the majority system, but private property rights were not protected. As a result, the rich could only bribe the army to protect their own interests. Military coups occurred frequently, and palace fights were all day long. The poor and the rich had a hard time.
Constitutional democracy has two general methods to solve the problem of wealth gap: 1. Implement a progressive tax system with equal opportunities and impose punitive tax rates on those who win in free competition. People who make more money will be taxed more. As long as you choose to live in a constitutional democracy, it means that you accept this method of solving wealth gap, unless you are trafficked. To Canada, 2. Implement social welfare with equal outcomes, allowing the less fortunate and those who have failed in fair competition to receive equal assistance, maintain absolute equality on the same poverty line, and provide the option of fair outcomes in exchange for these people accepting a cynical lifestyle that does not destroy the social system of equal opportunities, does not revolutionize, and does not rebel. The rich are willing to pay more taxes, and the poor are willing to be fed. This is a systematic solution to the problem of the gap between rich and poor under a constitutional system.
Okay, now everyone can understand why the ruling party always emphasizes that we have done a lot to address the gap between rich and poor, while the opposition party always challenges this problem that cannot be eliminated at all.The gap between rich and poor is caused by accumulation and is a matter of each family's hard work. It is protected by the constitutional system and has nothing to do with who is in power. If you hope to elect a modern-day Robin Hood through peaceful elections, confiscate all the properties of the rich and distribute them to the poor, then you should go back, Canada is not for you.
Since last year, the governments of New Zealand and Australia have taken some measures to suppress housing prices. Some are concerned whether Canada will follow suit. According to my observation, Canada has two main differences compared with these two countries: 1. Canada is a country that is strong in its differences , these words are Trudeau’s original words. It is a country that is rich because of tolerance. It has legalized marijuana and accepted Syrian refugees. These tolerances are completely beyond the capabilities of New Australia. New Australia cannot tolerate the situation of letting people who can borrow money get rich first, but Canada can tolerate people with real estate wealth. residents; 2. Canada’s economy is larger than that of New Australia, and the rise and fall of second-hand housing prices neither affects GDP nor CPI. However, New Australia’s economy is too small, and price fluctuations in the second-hand housing market have a greater impact on gross national product and consumer price index. If Canada follows New Australia, it will become narrow-minded by reducing its inclusiveness, which conflicts with the liberalism advocated by Canada.
When the federal government talks about housing prices, it's mostly for show and doing Tai Chi. Provincial governments sometimes get confused. For example, in April 2017, the Ontario Liberal Party came out to suppress housing prices. We have already seen the results. In 2018, the Liberal Party lost everything in the provincial election in Ontario. The homeownership rate in Ontario is 68%. If the Liberal Party dares to touch the homeowners' cheese, the homeowners will ask them to step down. The direct consequences of intervening in housing prices can be seen immediately. If you don’t believe it, come and try it.
Conclusion: Since the beginning of this year, my workload has doubled compared to the same period last year. Many customers who are foresight have a sense of FOMO urgency. FOMO is the abbreviation of Fear of missing out, which is the fear that if you don’t buy it, you won’t be able to afford it. This atmosphere is still very strong today. At the other extreme are some people who always believe that the government will suppress housing prices and they can buy a house at half the price. There is a huge difference in the level of Chinese understanding of Canada's political and economic system. There is a huge gap in wealth between those who understand and those who don’t understand within 5 years. The Canadian government is a government under a constitutional system. What it can and cannot do has long been written in the Constitution. Compared with the paternalistic system, Canada's environment is too liberal, and the government never cares how many children a family can have. People who are accustomed to a paternalistic social environment still have the habit of having giant babies after arriving in Canada, and they often ask the government for milk. “Humanity has always faced a choice: to find equality in poverty, or to find freedom in inequality.” - Hayek. To find freedom, you need to participate in competition. To find equality, you only need to find the government. If you want to lie down and win, you need to sow the seeds now and wait for the flowers to bloom; if you want to lie down and lie down, you can lie down after you die, when you will have plenty of time to lie down without any worries.