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Real Estate and Business

Ontario Electricity Costs Increase 55% Effective November 1st

New Toronto Hydro Rates effective November 1st, 2019

On November 1st, 2019, Toronto Hydro sent out an email  advising that the Ontario Energy Board announced new rates for electricity costs, effective same day. The astronomical increase is familiar to hyper-inflation symptoms found in third-world countries going to economic crisis.

More disturbing is the lack of coverage by main stream media about this significant increase in electricity costs. This will have a potentially severe impact on some residents, such as the elderly on pensions.

Homeowners and tenants that pay their own utilities, will be surprised when they receive their next bill. No doubt Toronto Hydro will be receiving a lot of phone calls from across the city.

If you find yourself in a situation where you won’t be able to pay the higher electricity costs, there are a number of programs that could help you deal with the situation. Check out other programs as well that you may qualify for to help with your monthly bills.

Ontario Energy Board Offers Two Programs to Assist With Skyrocketing Electricity Bills

Ontario Electricity Support Program

The Ontario Electricity Support Program (OESP) provides monthly on-bill credits for lower-income customers to reduce their electricity costs. Details

Low-Income Energy Assistance Program

“If you’re behind on your electricity or natural gas bill and face having your service disconnected, you may qualify for emergency financial help through the Low-income Energy Assistance Program (LEAP). There are also special customer service rules available for low-income households. You need to meet certain criteria to qualify for these programs, and must go through one of the intake agencies in Ontario listed below.” Details

Other Programs and Resources

Visit the links section for other programs, incentives, subsidies and tools.

Are you aware of other programs?… please enter a link in the comment section below so I can add them to the list.

Paying Extra to Own a Home: Renting Versus Owning

It is well-known that in the long-run it has been proven over hundreds of years that it is more lucrative to own your home than it is to rent it. This is especially the case in Canada given our capital gains exemption on principal residences. However, though this is usually the case an the case in the long-run, it isn’t always the case at specific points in time.

It is more lucrative to rent, rather than own your home when the market is in a bubble and it is about to go through a correction. That is something that hasn’t happened in Toronto for decades.

The belief and desire that home ownership is the best thing to do drove millions of Americans to purchase homes they could not afford leading up to the 2007-2008 liquidity crisis and  housing crash in the United States. This blind desire to own a home, fueled by the media and misunderstanding of the economics of home ownership, contributed to the skyrocketing of real estate prices. What made it worse was the government’s willingness to help families buy homes when it made more financial sense for those families to rent. Yet, the calculation of whether one should buy or rent is very straight forward.

The cost of renting your home usually includes:

  • Monthly rent
  • Utilities used
  • Tenant insurance

The cost of owning our home usually includes:

  • Mortgage payments (principal and interest)
  • Maintenance fees (if a condo unit) or maintenance costs
  • Insurance
  • Property taxes

When you add up the costs if you were to rent or own a specific home there are years when it is cheaper to rent and years when it is cheaper to own. Theoretically, the cost of renting should be equal to the cost of owning a home (less the principal repayment component of the mortgage payments). Leading up to the devastating collapse of the United States real estate market the comparison clearly showed a significant premium in owning a home. In other words, it was about 25% cheaper to rent than to own. So, home prices were over-inflated and out of equilibrium. It was only a matter of time before the market adjusted itself.

In Canada, the situation includes two additional significant factors; 1) the heavy immigration rate driving increasing demand and 2) the capital gains tax exemption on primary residences. These two items work to drive demand and produce a higher financial return on home ownership.  With increasing demand comes increasing prices for rent… and for home prices.

Very simply, the more people that need a place to rent, the more a rental unit will rent for. The more a rental unit rents for, the greater the value of the unit and the property it is located at. Though in Canada, the price of housing increased at a greater pace than rent, due to rent control. After a few years of rising housing prices, the pressure was put on by tenants to offer more rent to secure under-priced rental units.

In Toronto, the housing market continues to be in a state of disequilibrium as demand outpaces supply, which is kept tight by regulations and policies of all levels of government and the development and tax costs forced on developers by those governments.

Though a young professional might be tempted to rent a lower-cost unit in Toronto (if they can find one), the reality is that if they don’t buy their own place, their chances of home ownership might be worse in the future and certainly their accumulation of wealth will be significantly hampered.

To take advantage of the housing market returns, many millenials are renting in Toronto to live and buying in smaller communities where prices are low and they can get a rental income as the property appreciates in value. They can then use the equity in that property to buy their Toronto home down the road.

B.C. Launches Aggressive Housing Plan Targeting Luxury Homes

The NDP government of British Columbia has introduced an aggressive $6 billion plan targeting luxury homes, foreign buyers and absentee property owners.

In an attempt to make housing in Vancouver more affordable for everyone, the NDP government has launched over 30 measures that include increasing property taxes on homes above $3 million by thousands of dollars a year, increase foreign buyers tax from 15% to 20% (an extra $50,000 in tax for every million dollars). taxing AirBnB rentals and some new taxes as well. The AirBnB should be no surprise as I have posted about it in the past and vlogged about it on my youtube channel.

The idea is to take money from those that have it and buy housing for those that want to live in Vancouver, but can’t afford it. The plan is an extensive one that will require a large degree of complexity and hiring staff in order to implement.  A large portion of taxes raised will end up going to hiring more government employees. What is left will go towards building of rental and affordable housing according to their targets.

Over the years, Canadian real estate has become the place for foreigners, especially those from China, Russia, India, Middle East to park their money. For whatever reason, these individuals feel that it is safer to put their money in Canada, away from the legal, political and economic uncertainty in their home countries. In the process, they have driven up Canadian real estate prices beyond the reach of the average hard working Canadian. Well-educated and willing youth, many with fairly decent jobs, and unable to purchase their own home are seeing unemployed foreign youth living in multi-million dollar homes and driving luxury or even exotic sports cars.

The message is clear, in order to appease the cries of the general population for affordable housing, politicians looking to get elected have yielded the battle cry of affordable housing. Unable to address the fundamental underlying issue they have turned to smoke and mirrors to address the concerns of the population. Unfortunately, this is not going to end here as those underlying issues remain unaddressed.

There is a reason why foreigners are able to buy homes when Canadians cannot afford it. There is a reason why well-educated Canadians can not get jobs and foreigners are living luxurious lifestyles without employment. Rather than address those issues, the NDP government of B.C. is simply taking money from those that it sees having a lot of it and giving it to those that don’t have enough of it.

It is probably that the prices of the $3 million plus homes will be cooled. It is also probable that some of those home owners may now liquidate their $3 million home, but will a homeless person buy it? No, that homeless person will still be homeless. But, those foreigners may not be visiting Vancouver, spending their money at restaurants, transportation, buyer cars, furniture, etc. If that happens the impact on average local jobs could be negative, which means less tax revenues. In turn, this could make it even harder for individuals to afford homes at all levels of prices.

The NDP government’s message is clear, Vancouver belongs to British Columbians, so speculate on real estate somewhere else!

The Dead Donkey Story as told by John R. Ing

Yesterday evening at the National Club on Bay Street I had the pleasure of meeting John R. Ing, President and CEO of Maison Placements Canada Inc., a leading independent Canadian research-based institutional investment dealer. Established in 1955, Maison is a participating organization of the Toronto Stock Exchange, the Montreal Exchange, and a member of the Investment Dealers’ Association and CIPF.

Ing was addressing the Canadian Institute of Mining (CIM) members and guests, speaking about gold, inflation and the American dollar.

Among his well researched and value packed presentation was a story that very well sums up much of what the United States is presently experiencing and how it has gotten to where it is today.

The story as told by John R. Ing is that there was a farmer who was selling his donkey to another farmer for $100.  Upon shaking hands he collected his $100 for delivery the next day.  The following day the farmer shows up in his truck with the donkey in the back.  After a brief greeting the second farmer asks him where his donkey is.  The first farmer informs  him that there is a slight problem in that the donkey has died.  After a moment of contemplation the second farmer asks for his $100 back at which time the first farmer replies that he can’t return the money because he’s already spent it.

Upon further contemplation the second farmer replies, okay unload the donkey in the barn.  The first farmer looks at him and asks what he’s going to do with the dead donkey.  The seond farmer replies I’m going to auction it off.  The first farmer is puzzled but does as requested.

The next week the first farmer comes across the second farmer and asks him how the auction is going.  The second farmer replies that he made a profit of $890 on the auction.  The first farmer asked how he did that.  The second farmer replies, “I sold 100 tickets at $10 each and raised $1000”.  The first farmer asks, “But, weren’t the people angry”.  The second farmer replies, “Only the winner and when he complained I gave him his $10 back.

Does this resonate with you?