If you, like most, are wondering how anyone can afford a house these days, here’s part of the answer: a multi-generational transfer of wealth. Absent that, the housing boom could never have gotten to the point where prices behave like a homesick angel.
The issue is not that capital is being transferred. Rather, the problem is that capital currently deployed to finance productive ventures where it earns dividends and income is being cashed out to purchase a consumption good.
So where do parents get the money? Based on data from Equifax, the study estimates that only 5.5% use debt to finance gifting, with the highest share in Toronto and Vancouver.
It would appear that most is coming from parents’ savings, which grew during the pandemic, but also perhaps from grandparents.
How long before that’s going to be taxed?
the liberals had that in their platform , minimum 5% capital gains on housing and heading up .
Housing is not just a consumptive good. Many of the houses being purchased in expensive markets are 50+ years old and badly in need of repair. So the parent’s money is also being used to pay for tradesmen etc. Keeps the local economy going. Believe me, I know.
Yup. My parents and I moved into the house I inherited soon after it was built in 1963. It’s showing its age.
Since my father died, I’ve replaced the hot water heater, had the sewer unplugged, put new shingles on the house and garage, and had some drainage holes dug around the outside of the basement to prevent flooding. Then I had some old trees taken down.
I estimate on maintenance and repairs, I spent around $25,000 so far. Whoever buys it will have to do a lot of interior renovations.
“Many of the houses being purchased in expensive markets are 50+ years old and badly in need of repair.”
There’s no longer any proper appreciation for a matched set of Harvest Gold kitchen appliances.
Life Follows Art dept.
Those Were The Days My Friend – Mary Hopkins:
https://www.youtube.com/watch?v=y3KEhWTnWvE
Love it! My daughter just bought a 70’s house. It has a worn look, but so homey! Beautiful brick wall with a fire place, ceiling beams, great big windows with a terrific view. Really makes a person nostalgic for the old days. I am pushing for an in- law suite as part of the renovations, but I seem to be getting some resistance.
The ESG sociopaths are driving investment dollars away from the most productive ventures in North America into less productive ventures or casino-investments such as cryptos. Mark Carney has managed to get the Big Banks to jump on board the energy poverty bandwagon to worship the epistemological mush behind ESG. The environmental is obsessed with net-zero delusions, the Social is obsessed with woke nihilism as is the Governance.
Unaffordable housing is entirely a consequence of governmental (regulatory) impedance of supply, low interest rates, high immigration, and urban populations in favour of all the above.
Despite what you may believe, there are still many affordable houses available on the market. The thing is, in this particular market, the nearest Starbucks is 50 miles away, Applebees is considered fine dining, and nobody would know what the hell you’re talking about when you ask where the trendy nightspot in town is.
Applebees? Starbucks? how about mcDs for both
Burger King has better buns and I like the taste of their patties much better than McDo’s–however, I’m 100% behind your sentiment.
Yes it’s great to live in the middle of nowhere, if you’re self employed and can make a living in the middle of nowhere. Not many people are so blessed, which is why not many people live there.
Starbucks about an hour’s drive away? You’re either really living in the middle of nowhere or you’re in a one-horse town. Even Fort St. John has a Starbucks. Mind you, it also has 3, or is it 4, Tim Hortons outlets.
I would consider the absence of Starbucks to be a plus, both intrinsically, and also symbolic of way fewer liberals in the region.
Governments have pooched free markets.
QE will fuck everybody.
You say generational wealth transfer like it was a bad thing? Yes, I know such a transfer implies an intact family (White privilege) … responsible accumulation of assets (white privilege) … cohesive family relations (White privilege) … deferred gratification (White privilege) …
Can’t have those privileged white folk (and Asians) being responsible and supporting their children now can we … ?
Add to that support for one’s family members.
My father intended that his estate be used to initially provide for my mother. Since she died before he did, I became the sole beneficiary.
Bless your father’s memory. He has achieved a crown in heaven for the goodwill he left behind.
I attribute that to his wartime experiences.
His part of Berlin apparently got hit worse than where my mother and her family lived. After a bombing raid, he scrounged for food as he had, I think, 8 or 9 siblings (details about his family were always rather sketchy for me). That role of provider continued after my mother and I joined him in Canada in the mid-1950s.
He made a good living as a machinist and set aside much of what he earned, partly looking towards the future and, I’m sure, the sense of “just in case”. He made hay while the sun was shining.
Wow. Good insight, Kenji.
Why should mom&dad have to pay inheritance taxes when they die? Best case scenario is that there isn’t any capital to tax when they die and their kid(s) have received their largess without the odious tax man taking “the government’s share.”
If you have any assets to speak of … and don’t have a Trust … you should get one forthwith.
This thread is sounding like first world problems.
Pay the tradesmen to tweak your private property and be thankful.
I do.
I learned stuff by doing, renovating this 100+yr old house with family. Amazed the kids with sheetmetal, electrical, plumbing, roofing, window replacements, siding.
Enmax rated as better than newer homes and close to highly efficient homes.
Replacement value? Land only.
Not ashamed of the house/car/motos, all paid up.
Yeah, I don’t know if this is driving housing prices all that much. Sounds like a narrative that is being established to justify estate taxes.
There are lots of affordable houses in Canada outside of insane markets like Toronto and Vancouver.
Plus, parents and grandparents have always helped their kids with houses. This isn’t anything new.