He's right though. Think about it. You actually think that RE prices will go up to $2000/sq ft in 25 years? If you bought around $600/sq ft for 500k. You expect to sell for 1.7M that's over 2x the price increase. Also the building will get old and maintenance fees will cost an arm and a leg. Newer and better ones will be built in the next 25 years. There's still a lot of parking lots and old buildings around. Also I think you haven't factored in recession. We maybe be heading for that. Or a few years of no or low inflation and low growth. Japan's inflation has practically been nil over the last 10 years.
His duration of years is incorrect. The span should be looked between 1983-2008 for 25 years. It's around 225k -> 350k
Seems we have hit a recession. I guess you should recalculate your numbers to show the negative.
http://ca.news.finance.yahoo.com/s/...ops-interest-rate-historic-cent-declares.html
Bank of Canada chops interest rate to historic one per cent, declares recession
By Julian Beltrame,, The Canadian Press--
OTTAWA - The Bank of Canada slashed its key interest rate to the lowest level in history Tuesday, pronouncing the country's economy has fallen into recession and needs help to recover.
The central bank cut the trend-setting overnight rate one-half point to one per cent - below the 1.12 per cent that had served as the bank's policy rate floor in 1958 - while drastically revising downward its view of economic performance this year.
The decrease was in line with the expectations of economists, who have been calling for bold action on the parts of the central bank and the federal government in light of the quick and sharp downturn last fall that followed the destruction of savings in global stock markets.
Shortly after the central bank cut its rate, the big banks, led by Bank of Montreal (TSX: BMO.TO), TD Bank (TSX: TD.TO), Royal Bank (TSX: RBC.TO) and CIBC (TSX: CM.TO), also cut their prime lending rates by the same amount to three per cent, effective Wednesday.
The prime determines the rates on everything from consumer loans and lines of credit to some mortgages and other loans.
But given the money freeze in global money markets that has increased the cost of funds for Canada's chartered banks, economists viewed the action as a necessary, if insufficient, response.
Bank of Canada governor Mark Carney made clear that the economy needs all the help it can get.
While he had previously declared the economy in recession in public comments, on Tuesday he showed just how badly and quickly conditions had worsened by reversing the bank's October forecast of 0.6 per cent growth for 2009 into a 1.2-per-cent retreat.
"The outlook for the global economy has deteriorated since the bank's December interest rate announcement, with the intensifying financial crisis spilling over into real economic activity," he wrote in a one-page release.
"Heightened uncertainty is undermining business and household confidence worldwide and further eroding domestic demand."
In Canada, Carney said: "Exports are down sharply and domestic demand is shrinking as a result of declines in real income, household wealth and consumer and business confidence."
As if to confirm Carney's bleak assessment, Statistics Canada reported that manufacturing sales fell 6.4 per cent November to the lowest level in four years and fourth straight monthly decline. The petroleum and coal industry led the losses with a 18.5 per cent decline.
Both the Toronto Stock Exchange and the Canadian dollar took it on the chin Tuesday with significant losses.
It was Carney's relatively rosy outlook for the economy 2009 that surprised many private-sector economists.
He forecast growth will bounce back to a rate of 3.8 per cent in 2010, saying there were faint indications that previous and current aggressive actions of central bankers and governments to inject liquidity and stimulus are yielding results.
"I think they are overly optimistic on the speed of the rebound," said Scotia Capital economist Derek Holt. "What is happening now is one of the strongest contractions in the supply of money in 70 or 80 years."
Global Insight managing director Dale Orr added that the ball is now in the federal government's court, saying next Tuesday's budget should contain significant temporary stimulus that can be implemented quickly.
At one per cent, the Canadian central bank is coming to the end of its ability to affect interest rates.
Since December 2007, when the initial signs of economic weakness appeared, Carney has chopped the overnight rate by 3.5 percentage points, as well as injected $35 billion in liquidity into money markets through asset swaps.
Next up is fiscal stimulus in the budget. Senior government officials have said Finance Minister Jim Flaherty will inject up to $30 billion - or two per cent of gross domestic product - into the economy in infrastructure spending on construction and tax cuts.
But Carney said the key test remains the availability of credit. The world economy won't begin to recover until the global financial system, which has been rocked by scandal and scandalous lending practices, stabilizes, he said.
Canada's money markets are also considerably tighter than last fall, as some non-bank lenders have closed up shop. Although the chartered banks quickly followed Tuesday's rate cut, long-term loans remain relatively expensive and difficult to obtain.
Holt is urging the government to intervene through a number of instruments, including back-stopping car leasing and possibly even purchasing toxic non-mortgage assets, to free up lending.
But not all agree. "I don't think they go there until the Bank of Canada goes down to zero or near-zero interest rate," said Douglas Porter, deputy chief economist with BMO Capital Markets.
Many economists see the central bank lowering its rate to 0.5 per cent as early as March 3.
One problem Carney won't have to worry about for some time is high inflation.
The central bank now says prices will actually tumble into negative territory for two quarters this year as the contrast between last summer's sky-high gasoline prices and this year's much lower levels pushes the inflation rate down.
The bank and most economists do not view this as deflation - an alarming condition last seen in Japan in the 1990s - because it is not expected to be prolonged and is concentrated mostly on energy prices.
Overall, inflation will average 1.1 per cent this year and now won't return to the bank's two-per-cent target until 2011, the central bank said.
