Picture on the left was taken on October 31st…
Picture on the right, taken November 1st…
Seriously! Yes, my wife is one of those… lol!
And that’s just one of three Christmas trees in our house… smh!
Listen, I love Christmas, and I very much enjoy getting in the spirit.
And by now I should be used to her and her early decorating obsession…
But for some reason, this year… when it’s still 70 degrees outside… it just seems wrong, lol.
Anyways…
Question: Have you ever wondered why real estate prices are so high?
I’m being a bit sarcastic… it seems that’s all that people talk about these days.
Not sure if it’s because of my profession, but no matter what circle I’m in… friends/family/strangers… someway, somehow, more often than not, the conversation turns to real estate.
Most recently, I was at a CIPBA dinner-meeting. CIBPA stands for Canadian Italian Business & Professional Association.
It’s a great group of people. For whatever reason, for years I have resisted joining, but they somehow convinced me to attend the most recent meeting.
They should really start emphasizing the fact that it is a DINNER- meeting, had I known they served such good meals at these meetings, I would have joined a lot sooner, lol.
Anyways, I was a t a table with a lot of intelligent folks, and of course, the conversation at some point turned to real estate.
Everyone seemed to have an opinion on why real estate prices have increased so much, and what the future of real estate looks like in Canada.
What made it even more interesting is that there was a wide range of ages at the tables, and most were not in real estate related industries.
It seems that the popular opinion as to why real estate prices have gone so wild, is 1) low interest rates, 2) population growth and 3) easy money and devaluing of the Canadian dollar.
And I agree with all of these items as contributing factors.
It’s actually refreshing to see that more and more people talking about #3 and understanding the correlation between “money printing” and its impact on asset prices.
There’s probably even a much longer list of reasons that have contributed to the rising real estate prices, but one reason in particular that not many outside the real estate community acknowledge, is development charges.
Check out this chart, shared recently by Mike Moffat of the Smart Prosperity Institute.
Development charges are 11 times higher in 2024 than 2010!
That represents 1,013% increase in just 14 years.
While property taxes only increased 19% in the same time period.
What does this mean?
It means first-time homebuyers are footing the bill for new housing, roads, infrastructure updates, ice skating trails (looking at you Town of LaSalle), and whatever else municipalities need money for.
While existing homeowners contribute a smaller amount.
Now, we’re not necessarily advocating for higher property taxes here.
But it’s hard to ignore the fact that the tax burden is becoming very much skewed to one side.
And it’s really not hard to understand how this happened.
It’s much easier for politicians to “tax the big bad greedy land developers,” than it is to increase the property tax of the existing homeowners in their municipality.
But the reality is this…
They are “taxing” future homeowners in their municipality, in order to spare the current homeowners.
Why? Because developers aren’t eating this cost.
They are passing it along to the homebuyer. And if the homebuyer is going to pay for it, then the developer is not building.
Either way, that leads to increased home prices.
Who do you think should cover the cost of new development: existing homeowners or new buyers?
Something to think about next time your conversation with friends/family/strangers, turns to real estate.
Until next time,
Vince
P.S. I don’t like to get to get too political in these newsletters, but if I took away anything from Donald Trump winning the U.S. Presidential Election, it’s that the Economy matters! In other words, if average people feel they are worse off financially than they were before, they will vote out existing politicians. Take note, Canada!
