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Baby, we got a bubble!?

Interesting article from Diane Francis: Finanacial Post:

what do you guys think?

http://opinion.financialpost.com/2012/04/13/to-tame-torontos-housing-bubble-ban-foreign-buying/

o tame Toronto’s housing ‘bubble’, ban foreign buying

Diane Francis Apr 13, 2012 – 2:26 PM ET | Last Updated: Apr 13, 2012 2:33 PM ET
Tobin Grimshaw for the National Post

Tobin Grimshaw for the National Post

Conventional wisdom is that this is the market at work. This is not the market at work. This is manipulation of a government system of open-ended mortgage insurance that is poorly supervised.

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Nearly three times’ more condo high-rises are being built in Toronto than are being built in New York City and nearly seven times’ more than in Chicago, according to Bloomberg News.

This development boom, and accompanying price increases, is not about housing to meet a sudden surge in population. It is not about an economic boom. If it was, Calgary and Edmonton would have 128 cranes, like Toronto does, building housing and pushing up all prices. Instead, this is taking place in Toronto and Vancouver where economies are moribund.

What is going on here is a deluge of hot money from abroad that is creating an artificial and potentially dangerous real estate bubble

Conventional wisdom is that this is the market at work. This is not the market at work. This is manipulation of a government system of open-ended mortgage insurance that is poorly supervised. What is going on here is a deluge of hot money from abroad that is creating an artificial and potentially dangerous real estate bubble. This mania happened in several other countries — where it was shut down — and has spread to Canada. Officials here have been urging restraint but that is not the solution. A ban on foreign buying of residences is the only solution.

This is what is happening. For example, a modest bungalow in Toronto sold last month for $1,180,800, $400,000 more than the asking price of $759,000. Canadian bidders were furious and deserved to be. The winning bid was made by a university student whose parents have a business in the United States but who live in China. I don’t know if there was a mortgage involved, but student housing — even for foreign students — is now liberally insured by CMHC, in other words, by the Canadian taxpayer.
Related

Canada steps up housing market oversight

Canadians putting off buying homes: RBC

This artificially corrupts the housing sector, presents a great risk to taxpayers in future and inflates housing in the afflicted areas to unaffordable, unnecessary levels for Canadian buyers.

Such a transaction would be illegal in Australia or China, Thailand or Switzerland. Australia was a victim of a similar frenzy until 2010 when a ban was imposed. Here are the Aussie restrictions, itemized in a policy, issued by the Treasurer of Australia, that Canada should adopt immediately:
Advertisement

• Any temporary resident of Australia — a person with a work permit — can buy a new or used unit but cannot rent any of it to others and must sell when their residency ends. Temporary residents are banned from buying any investment properties;

• Non-resident foreigners are banned from buying homes or investment properties. The only exception is if a foreign entity doing business in Australia wants to buy housing for its Australian staff.

The hot money has also been kicked out of China, Hong Kong and Thailand where it swarmed around the condo market, pushing prices to unacceptable levels. Then it hit Vancouver and most recently Toronto with a vengeance, and is also beginning to nibble away in Calgary. Entire buildings are being marketed to foreigners from Asia, the Middle East and Latin America. Some groups are buying 50 to 100 units at a time.

But the latest loophole, offered by Canadian taxpayers without their permission, involves student housing that is being encouraged by CMHC. In 2010, the CMHC changed its rules to insure mortgages on residential properties that will be used for student housing, foreign or domestic. For only 15% down a unit bought near a university, or hundreds of them at a time, and rented to students will be insured by taxpayers.

The dangers signs are everywhere. Figures show that Canada’s vulnerability to mortgage defaults has soared beyond U.S. levels at the time of the sub-prime frenzy. In December, the International Monetary Fund warned Ottawa and urged it to review CMHC’s governance and oversight, and assess whether the agency needs to do more to protect itself against housing market risks.

Finance Minister Jim Flaherty, who has acted to try to cool the market three times since 2008, has cautioned families to be careful about taking on debts they won’t be able to afford when interest rates rise. But this is not about the market or about Canadians, but about unacceptable foreign buying pressure.

In China and Hong Kong, foreigners are banned and locals restricted to one mortgaged unit and a second one only if they pay cash for it. The Swiss have a quota for foreign purchases and allow one unit as a second residence for their exclusive use. European countries often charge foreigners twice the property taxes they charge locals. In Thailand, foreigners cannot buy land but can buy condos, but only up to 49% per building. The United States does not restrict foreign housing, but keeps track and mortgages are difficult to get.

Canada’s Office of the Superintendent of Financial Institutions (OSFI) itemized the dangers in a report obtained recently by Bloomberg News through an Access to Information request. The OSFI documents said foreign buyers were pushing up housing costs and lenders were becoming “increasingly liberal” with mortgages that don’t require borrowers to verify income.

This will result in a catastrophe. If Canada does not stop foreign buying, or temporary resident buying, Canadian taxpayers and homeowners will pay an enormous, and potentially disastrous, price.

Posted in: Diane Francis Tags: condo market, housing, housing bubble, Toronto
Diane Francis
 
Condo v Freehold price change ratios.

Per my previous post, I chose 3 specific areas all catering to condos and freeholds, for the months Jan 1 to April 12 and years 2010, 2011 and 2012 and divided them into the following categories: For Condos:- 1, 2, 3 bedrooms and 4+. For Freehold:- 2, 3 and 4+ bedrooms. The bedroom classifications are strictly by definition for example if a property was listed as 1+1 bedrooms, it was slotted into the 1 bedroom category as it can be anything from a nook to a basement backroom. As wel,l condos include condo townhomes.


Area 1: From Avenue Rd. east to Sherbourne & to the north where Sherbourne ends and its parallel westward to Berryman & south to just above Wellesley.

Area 2: From Christie east to Avenue Rd & the parallel to the north at Barton again paralleling Sherbounes end & south along the same parallel as area 1.

Area 3: From Avenue Rd. east to just east of Mt. Pleasant, Roehampton to the north & Oriole Gdns/Moore Ave to the south.

The results are given as the percentage of median price change between 2011 & 2010, 2012 & 2011, 2012 & 2010. The () provides the number of sales in the year.


Area 1..........................2012/2010.....................2012/2011......................2011/2010

1 Bd condos................14.1% (57).....................1.0% (112).....................15.3% (47)
2 Bd condos..................5.9% (76)....................-3.3% ( 82).......................9.6% (42)
3 Bd condos................-10.% (11)....................-61.0% ( 3)...................130.6% ( 7)
2 Bd FH.......................................................................................................................
3 Bd FH...................-49.2%. ( 4)...................................(0).................................( 2)
4+ BD FH................177.9% ( 2)....................68.8%...( 5)......................64.6% ( 4)

Area 2

1 Bd condos................17.0% ( 8)...................47.5% (10)...................-20.73% ( 4)
2 Bd condos................59.1% (11)...................19.9% ( 9).....................32.7% ( 1)
3 Bd condos..................na...........................na...........................na
2 Bd FH......................19.5% ( 1)....................26.7% ( 2).....................-5.7% ( 2)
3 Bd FH................... 41.0% ( 8)....................28.8% (12)......................9.5% (13)
4+ BD FH...................64.5% ( 7)..................-18.8% (15)...................102.7% (20)

Area 3

1 Bd condos.................5.3% (39).....................5.3% (77)......................... n/c (49)
2 Bd condos...............11.3% (47)....................-9.4% (75)......................22.7% (57)
3 Bd condos.............-41.4% ( 3)....................24.8% ( 8)......................-53.0% ( 1)
2 BD FH....................47.6% ( 4)....................59.9% ( 2)........................-7.7% ( 7)
3 Bd FH.....................16.6% (49)....................12.7% (39)........................3.4% (41)
4+ BD FH..................49.6% ( 6).....................57.5% (13)......................-5.0% (11)

Just a couple more notes. In area 1, this year so far, 17 - 2 bedroom condos sold for between 1 and 5.5 million whereas in 2011, 12 sold for between 1.15 and 6 million with 11 between 1 and 3.8 million in 2010.
. Area 2 sold 4 -2 bedroom condos for between 1.15 and 1.2 million in 2012, none above $1 million in 2011 and 1 -3 bedroom over $1million in 2010. Area 3 sold 1 over $1 million in 2012 and 2011. The median price for 2 bedroom condos were better than the 2 bedroom homes for each of the three years – the only such performance of the three areas.

The usual disclaimer sorry I know some don’t like them but they are a must. These statistics have been manually sourced and calculated from TREB’s MLS System and are for informational purposes only. The information gleaned can sometimes contain errors, omissions or changes not entered into the system. As such, the accuracy of the information is not warranted.
 
^^^
ISYM
If I am interpreting this correctly, I think that overall it supports that the median price increase on single family homes with a couple of exceptions has far outstripped the condo price increase. Is that correct?
If so, it does support the hypothesis we put forth.
 
thanks for the work, but sorry i can't really make heads or tails of the info ... maybe i'm too tired.

from what i've been told by realtors and lay people, historically speaking:
- in an upward market, SFH will appreciate first, followed by condos
- SFH appreciate more than multi-unit residences (ie. condos) on a % basis, all things being equal (ie. location, condition of property, market for type of product, etc)

- in a downward market, condos will drop in value first, followed by SFH; and
- condos will drop more on a % basis than SFH.
 
Interesting article from Diane Francis: Finanacial Post:

what do you guys think?

http://opinion.financialpost.com/2012/04/13/to-tame-torontos-housing-bubble-ban-foreign-buying/

o tame Toronto’s housing ‘bubble’, ban foreign buying

Diane Francis Apr 13, 2012 – 2:26 PM ET | Last Updated: Apr 13, 2012 2:33 PM ET
Tobin Grimshaw for the National Post

Tobin Grimshaw for the National Post

Conventional wisdom is that this is the market at work. This is not the market at work. This is manipulation of a government system of open-ended mortgage insurance that is poorly supervised.

Comments
Email
Twitter
inShare2

Nearly three times’ more condo high-rises are being built in Toronto than are being built in New York City and nearly seven times’ more than in Chicago, according to Bloomberg News.

This development boom, and accompanying price increases, is not about housing to meet a sudden surge in population. It is not about an economic boom. If it was, Calgary and Edmonton would have 128 cranes, like Toronto does, building housing and pushing up all prices. Instead, this is taking place in Toronto and Vancouver where economies are moribund.

What is going on here is a deluge of hot money from abroad that is creating an artificial and potentially dangerous real estate bubble

Conventional wisdom is that this is the market at work. This is not the market at work. This is manipulation of a government system of open-ended mortgage insurance that is poorly supervised. What is going on here is a deluge of hot money from abroad that is creating an artificial and potentially dangerous real estate bubble. This mania happened in several other countries — where it was shut down — and has spread to Canada. Officials here have been urging restraint but that is not the solution. A ban on foreign buying of residences is the only solution.

This is what is happening. For example, a modest bungalow in Toronto sold last month for $1,180,800, $400,000 more than the asking price of $759,000. Canadian bidders were furious and deserved to be. The winning bid was made by a university student whose parents have a business in the United States but who live in China. I don’t know if there was a mortgage involved, but student housing — even for foreign students — is now liberally insured by CMHC, in other words, by the Canadian taxpayer.
Related

Canada steps up housing market oversight

Canadians putting off buying homes: RBC

This artificially corrupts the housing sector, presents a great risk to taxpayers in future and inflates housing in the afflicted areas to unaffordable, unnecessary levels for Canadian buyers.

Such a transaction would be illegal in Australia or China, Thailand or Switzerland. Australia was a victim of a similar frenzy until 2010 when a ban was imposed. Here are the Aussie restrictions, itemized in a policy, issued by the Treasurer of Australia, that Canada should adopt immediately:
Advertisement

• Any temporary resident of Australia — a person with a work permit — can buy a new or used unit but cannot rent any of it to others and must sell when their residency ends. Temporary residents are banned from buying any investment properties;

• Non-resident foreigners are banned from buying homes or investment properties. The only exception is if a foreign entity doing business in Australia wants to buy housing for its Australian staff.

The hot money has also been kicked out of China, Hong Kong and Thailand where it swarmed around the condo market, pushing prices to unacceptable levels. Then it hit Vancouver and most recently Toronto with a vengeance, and is also beginning to nibble away in Calgary. Entire buildings are being marketed to foreigners from Asia, the Middle East and Latin America. Some groups are buying 50 to 100 units at a time.

But the latest loophole, offered by Canadian taxpayers without their permission, involves student housing that is being encouraged by CMHC. In 2010, the CMHC changed its rules to insure mortgages on residential properties that will be used for student housing, foreign or domestic. For only 15% down a unit bought near a university, or hundreds of them at a time, and rented to students will be insured by taxpayers.

The dangers signs are everywhere. Figures show that Canada’s vulnerability to mortgage defaults has soared beyond U.S. levels at the time of the sub-prime frenzy. In December, the International Monetary Fund warned Ottawa and urged it to review CMHC’s governance and oversight, and assess whether the agency needs to do more to protect itself against housing market risks.

Finance Minister Jim Flaherty, who has acted to try to cool the market three times since 2008, has cautioned families to be careful about taking on debts they won’t be able to afford when interest rates rise. But this is not about the market or about Canadians, but about unacceptable foreign buying pressure.

In China and Hong Kong, foreigners are banned and locals restricted to one mortgaged unit and a second one only if they pay cash for it. The Swiss have a quota for foreign purchases and allow one unit as a second residence for their exclusive use. European countries often charge foreigners twice the property taxes they charge locals. In Thailand, foreigners cannot buy land but can buy condos, but only up to 49% per building. The United States does not restrict foreign housing, but keeps track and mortgages are difficult to get.

Canada’s Office of the Superintendent of Financial Institutions (OSFI) itemized the dangers in a report obtained recently by Bloomberg News through an Access to Information request. The OSFI documents said foreign buyers were pushing up housing costs and lenders were becoming “increasingly liberal” with mortgages that don’t require borrowers to verify income.

This will result in a catastrophe. If Canada does not stop foreign buying, or temporary resident buying, Canadian taxpayers and homeowners will pay an enormous, and potentially disastrous, price.

Posted in: Diane Francis Tags: condo market, housing, housing bubble, Toronto
Diane Francis

As I'm told by reliable industry sources, the investor buying is by Canadian citizens of non-Canadan origins who are purchasing units with 20%+ of equity.

The CMH Corp. is not a factor in these transactions.

Guys, with all due respects who gives a crap about Windsor or London? There's no comparison and more important no correlation between prices in these small, regional cities (a stretch of the term I'd you ask me) and mighty Toronto. I find Ms. Francis's comments alarmist and well *yawn*....dull. I would and will be concerned when inventory starts to skyrocket, vacancies still to climb and prices start to drop. The reality is the exact opposite of all of those critical measures. Relax and enjoy the show!

I would sooner migrate to Western Europe than find myself living in one of our places, even if real estate were totally free.
 
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Interested, yes, it does appear that freehold values are outstripping the condos as you have surmised, the exception being the 2 bedroom condos in area 2 this year as I noted and which I find intriguing. It could be lack of supply for the 2 & 3 bedroom freehold in area 2 yet, I would hedge a bet that the buyers of those are transient owners.

CDR, I did the research to discern a margin between the two because of previous discussion. Overall yes, in an upward market freeholds do appreciate first that will stand to reason at least until people stop cohabiting or having children since most of these people look to buy property with attached land. It used to be that appreciation was detached, townhomes, condos and depreciation was townhomes, condos and detached. Townhomes took the brunt because they were more prevalent outside of Toronto than condos and looked upon as the red-headed stepchild of family housing - nothing shy of community housing. They’re a valuable commodity now.

What is evident to me from this chart is that area 2 despite the lack of comparable sales numbers to areas 1 & 3, condos are propped up sparingly, possibly by prestige only for the last two years akin to the attraction of the original Hazelton Lanes of the late 70s & 80’s or the residences of Manulife where if you lived there you had arrived – both now no more than another obscure address.

Aside from that, I would be concerned if I owned a 2+ bedroom condo between Yonge and Sherbourne (area 1) and a 1 bedroom in areas 1 and 3.
 
Canada should tax foreign investors rather than ban them. We should make a profit to benefit our society from those hot money inflows. Subways, pulbic health, and many other infrastructures all need tons of taxes to build up here.
 
the Silent Generation is the generation born from 1925–1945, so they are the parents of baby boomers.
currently, they range in ages from 67 to 87 years old and they are the ones that will leave their homes, go to nursing homes, etc and that will require $$$. any money left over will be distributed to a larger pool of ppl (ie. several children/grandchildren, etc)

the BB generation was born following World War II, from 1946 up to 1964, and they are a huge demographic.
currently, they range in ages from 48 to 66 years old.

the Silent Generation have/will have to sell soon and the BB sometime there after within the next 10-20 years.
it is highly acknowledged that generations following the BBs (ie. X, Y, Z, and AO) have declining birth rates which barely match the death rates.
IMO that translates to higher supply and less demand.


Defined benefit pension plans cover a very small part of the population. Other than large institutions and government, teachers, most people do not have them. I don't recall exact numbers but self employed do not and they are I believe 60% of the work force.
Of the residual 40%; only about 35% have defined benefit plans or about 14% of the whole Canadian work force. About another 20-25% are covered by defined contribution programs. The rest of us fare on our own with RRSP's. And we know the majority of Canadians cannot or choose not (rather it is the former as they can't afford to) max out the RRSP.

People in the privileged position of having Defined Benefit Plans are amongst the only people who can afford to retire.

In your situation I commend you. Clearly from your posts you make informed decisions.

However, having a defined benefit program means all the money you would be putting towards your own retirement and let me suggest RRSP maximum payments will not be enough so you would have to save further outside the RRSP. This money can go to your mortgage or where ever. This is what is so difficult for Canadians without these plans. I see it among my peer group. They make good money but could not maintain their standard of living or even close since unless exceptionally lucky, RRSP's have not given the return or close to what someone having the defined benefit program is acheiving. Further, the risk is solely on the individual. The proof of the pudding as it were is that companies are trying not to offer defined benefit programs and trying the end them in fact in a number of cases or putting new employees on defined contribution plans. Only government cruises along merrily with a huge unfunded liability which John Q. Taxpayer has to subsidize. The companies are transferring responsibility because I believe they realize the returns from the 70's to 2000 will not be repeated going forward. Inflation is down relative to those years, outsized returns will not happen, and the amount/cost will go up.

further to the above comments, the attached web-article from G&M seems to reinforce the notion that those 65+yrs old are net sellers and 50% of BB's wealth tied into R/E so there is massive pressure to sell to tap into their equity to fund retirement.


http://www.theglobeandmail.com/glob...enting-bandwagon/article2230605/?from=2401944
 
^^^
I think the issue is more complicated. Not every neighbourhood will be the same. I believe that the relatively more affluent neighbourhoods, also those more likely to have Defined Benefit plans, will not be rushing to sell.

By way of personal example, I had many elderly family members who were not wealthy but well enough off, without defined benefit plans, that they chose to stay in the family home well into their 80's. The did not wish to rent. They paid the gardner to cut the grass and shovel the snow. They said they would "never" buy a condo and would rent when it got to the point they had to, not because they could not afford to role the equity from the house to a condo, but because "they did not want to live in an apartment" until absolutely necessary. For eg. Forest Hill, Rosedale, Lawrence Park, and Bayview/York Mills; to name a few neighbourhoods....I doubt will sell unless they so desire to do so in the majority of cases. On the other hand, there are those who will wish to downsize but it will be a voluntary choice, often to a place just as expensive by the way but smaller and even more done up than their homes; whether it be a smaller house, luxury town home or condo.

The concept in the globe web cast may hold in the less well "healed" group of baby boomers which I appreciate may represent the majority. That said, however, we must remember that the boomers are just starting their retirement now and will be doing this over 25 years so this is not a phenomenon which will happen immediately.

In fact, I would argue that since there are early boomers (from 1946 to 1955 and late boomers from 1956 to I believe 1964 though I may be wrong with these dates); it will only be when the late boomers leave and probably around 2020-2025 that supply in TO may start to outstrip the demand for the SFH.
 
See p.m.

Defined benefit pension plans cover a very small part of the population. Other than large institutions and government, teachers, most people do not have them. I don't recall exact numbers but self employed do not and they are I believe 60% of the work force.
Of the residual 40%; only about 35% have defined benefit plans or about 14% of the whole Canadian work force. About another 20-25% are covered by defined contribution programs. The rest of us fare on our own with RRSP's. And we know the majority of Canadians cannot or choose not (rather it is the former as they can't afford to) max out the RRSP.

People in the privileged position of having Defined Benefit Plans are amongst the only people who can afford to retire.
Your numbers don't make sense. 4.5 million to 5 million of Canadians have defined benefit pension plans, and for the province of Quebec, it's about a third of the workforce (with "workforce" including those who may only be 23 years old or whatever).

Furthermore, defined benefit plans are more heavily represented in the baby boomer generation than in the current generation. This doesn't bode as well for the current generation, but it's good news for the baby boomers, esp. since they as a group more likely will have paid-off (or near-paid-off) homes by the time they retire.
 
Your numbers don't make sense. 4.5 million to 5 million of Canadians have defined benefit pension plans, and for the province of Quebec, it's about a third of the workforce (with "workforce" including those who may only be 23 years old or whatever).

Furthermore, defined benefit plans are more heavily represented in the baby boomer generation than in the current generation. This doesn't bode as well for the current generation, but it's good news for the baby boomers, esp. since they as a group more likely will have paid-off (or near-paid-off) homes by the time they retire.

^^^
You are correct about the DBB plans. I apologize. It is still a very small minority.

Also, the number of good jobs in manufacturing that have disappeared in 2008 onwards replaced by service industry jobs in Canada means the number is probably smaller and shrinking yearly.

It was 29% in 2008. It is surely less in 2012.

http://www.boomerandecho.com/defined-benefit-plan/

While the media and financial blogosphere continue to debate whether the best savings vehicle for retirement is the TFSA or the RRSP, approximately 29% of Canadian workers still have the luxury of a defined benefit pension to fund their retirement. The defined benefit plan (commonly referred to as a “gold-plated pension”) has been on the decline over the last two decades, but it still represents a fairly large sample of the Canadian work force.
What is a Defined Benefit Plan?

A defined benefit plan is a pension that is based on your highest average salary and the number of years of your pensionable service. This type of pension plan enables you to plan for your retirement because you can estimate your future pension income in relation to your salary. The pension plan assures you a pre-defined lifetime income, regardless of capital market conditions and how long you live. The defined benefit plan is financed by employee and employer contributions, and by investment earnings.

The contributions to your defined benefit plan are tax deductible. Each year your pension contributions, and your Pension Adjustment (PA), are reported to Canada Revenue Agency on your T4 slip. Your PA estimates the dollar value of the pension you earned in a particular year (based on a formula under the Income Tax Act) and determines the amount, if any, that you can contribute to an RRSP. Canada Revenue Agency will advise you of the maximum RRSP contribution you can make each year.
What’s so great about a Defined Benefit Plan?

According to a 2008 research study by CGA-Canada on the state of the Canadian pension system, private savings cannot outperform defined benefit pension plans. Here is a summary of their findings:

Private savings done outside of retirement savings vehicles would hardly reach half of the benefits level offered by the defined benefit plan, particularly in the public sector. For this reason, declining defined benefit pension plan coverage is received as bad news to many.
It is simply not possible under the current tax rules to generate or to mimic the benefits bestowed by public-sector defined benefit pension plans.
Maximizing RRSP contributions does not lead to achieving a level of pension benefits similar to that of defined benefit pension plans.
CGA-Canada contends that private savings would have to be undertaken outside of tax-preferred saving instruments to produce similar benefits.

What to expect in Retirement?

In a defined benefit plan, the employee will receive the specified monthly income for the rest of their life. Most plans allow for payments to continue to their spouse or common law partner and some may also allow for inflation adjustments.

For example:

Let’s take the case of an employee making $80,000 per year who joins a defined benefit plan at age 35 and retires at age 65. The terms of the plan are:

the employee contributes 10% of annual salary
at retirement he receives 2.0% x years of service x best-5-average salary

The contributions and benefits would be calculated as follows:

$80,000 x 10% = $8,000 contributed per year
2.0% x 30 years of service x $80,000 (average salary) = $48,000 (in today’s dollars) per year throughout retirement

Assumption: $80,000 salary grows at rate of inflation but all values are stated in today’s dollars
Defined Benefit Plan: Not Guaranteed

A company may change the terms of a pension plan or type of plan offered. For example, in 2008 Sears Canada froze their existing defined benefit plan and introduced a new defined contribution plan. For affected employees, any benefits accrued in the defined benefit plan when it was frozen remain in that plan until your retirement age. Any future contributions would be made to the defined contribution plan only.

A company’s bankruptcy may also affect pension recipients depending on the status of the plan at the time. If the plan is fully funded at the time, there should be enough money to continue paying pensioners and to pay out a lump sum payment to non-retired employees. However, if the plan is underfunded, employees will receive less than the promised amount. In some jurisdictions, the government provides a guaranteed minimum income to retirees. For example, in Ontario, the Pension Benefits Guarantee Fund insures pensions up to $1000/month.
A Clear Winner in Retirement

Experts will continue the debate between the RRSP and TFSA as the best choice for retirement savings. And private sector employers will continue to shift towards the defined contribution plan in order to save money and pass along much of the risk and ownership of retirement savings to their employees. A defined benefit plan is becoming increasingly rare to find, but for those 29% of Canadians who currently have the luxury of a gold-plated pension, there isn’t any doubt that retirement is looking pretty sweet.
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^^^
Another post from CTV news:

The Canadian Press

Date: Wednesday Jan. 4, 2012 6:09 PM ET

TORONTO — The deteriorating health of Canadian pensions in 2011 is likely to convince more employers to shift burdens to employees this year and force an increase in retirement ages, according to pension consulting firm Towers Watson.

The company said Wednesday that low interest rates and plunging stock markets weighed heavily on defined benefit pension plans, which promise to pay a certain level of post-retirement income.

And that "double whammy" of poor performance is likely to continue in 2012, it said.

Data from the firm's tracking index found that the funded ratio of a hypothetical defined benefit plan in Canada fell 16.2 per cent from 86 per cent at the start of last year to 72 per cent at year-end.

For Canadian employers that offer defined benefit plans --including some of the country's best known companies -- the drop means larger plan deficits for 2011 and higher pension costs in 2012, said Ian Markham, a senior actuary at Towers Watson.

"The employer side of it will be saying we are having to put an absolute ton of money into our pension plans and it has to come from somewhere," he said.

If pension plan values do not recover over the long term, retirees may face lower pensions and benefits.

"What that means is either Canadians are going to have to face a lower standard of living in retirement, or they're going to have to keep working longer," Markham said.

An aging workforce that may not only weaken workplace morale, but result in an even higher youth unemployment rate, he added.

"With so many people hanging around, then there's going to be less young people being hired," he said.

Research from Statistics Canada released late last year found that a 50-year-old worker in 2008 could expect to stay in the labour force another 16 years -- 3.5 years longer than would have been the case in the mid-1990s.

Only about 4.5 million Canadians now have guaranteed benefits, most in the public sector. Many companies in the private sector have found the cost of guaranteeing benefits under defined benefit plans too expensive and, in some cases, a threat to their survival.

Many companies have already opting out of defined benefit plans in favour of defined contribution plans, which don't provide a guaranteed level of retirement benefits.

Some of Canada's largest companies --including Air Canada (TSX:AC.B) and Canadian Pacific Railway (TSX:CP) have been vocal about problems they face due to massive pension plan deficits.

Markham said RRSPs and defined contribution plans are in the same rough shape as defined benefit plans, but are not measured by the index because it focuses on effects on corporate Canada.

To compile its index, Towers Watson tracks the performance of a hypothetical defined benefit pension plan that was fully funded in 2000 and uses a typical model that allocates 60 per cent to stocks and 40 per cent to bonds.

The financial heath of the plan is based on investment returns, which indicates the amount of assets the plan holds, and long-term interest rates on corporate bonds, which determines the amount of assets needed to pay future benefits to current plan members.

Towers Watson said the typical plan would have generated a 0.5 per cent return in 2011, while liabilities would have increased by 20 per cent, due to the decline in interest rates.

Read more: http://www.ctv.ca/CTVNews/Canada/20120104/pension-plan-values-120104/#ixzz1s1ZjIRrm
 
Furthermore, defined benefit plans are more heavily represented in the baby boomer generation than in the current generation. This doesn't bode as well for the current generation, but it's good news for the baby boomers, esp. since they as a group more likely will have paid-off (or near-paid-off) homes by the time they retire.

This also sets up for intergenerational tensions. It is questionable if industry other than government can/will still be able to pay this going forward so especially late boomers may not get all the benefits they expect or were promised.

As for government, you can see that the rest of the "real economy" is being asked to pay DBB for workers when the majority have to plan for their own retirement. So they fund not only their retirement, but subsidize the "employees" of government. I would suggest that over time, the estimate average 20% higher wage/benefit in the government over private industry will have to be reigned in.

I appreciate Eug you said you are in the healthcare field in Ontario and a member of a DBB of government but I think we can both agree that while you personally are the recipient of an enrichment that is not fairly shared in society (and in so being are fortunate ), in the longer term that cannot continue unless the country as a whole gets much wealthier as there will resistance and demand eventually for change.
 
http://www.moneyville.ca/article/11...ne-cellars-are-downsized-but-not-expectations

From the Toronto Star:

Toronto luxury home demand on the rise
Image

Sales of luxury homes in the GTA continue to be strong.
TONY BOCK/TORONTO STAR FILE PHOTO

By Susan Pigg | Fri Apr 13 2012

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As status symbols go, they don’t have as much flash as a sports car, but high-end househunters are looking for a different kind of luxury in Toronto’s top neighbourhoods these days — two laundry rooms.

The well-heeled are also seeking out swimming pools — no matter how tiny — as well as home-office/homework rooms where they can catch up on work while keeping an eye on the kids.

Wine cellars are being downsized, but not expectations, says Paul Maranger, senior vice president of sales for luxury realtor Sotheby’s International Canada.

“We’re seeing very charming but much smaller wine cellars. Most people still like wine,” Maranger said in an interview after speaking on a BMO Financial Group panel Thursday about the state of Canada’s housing market.

And in bigger homes, the basement laundry room is being augmented by a second — but not too close to the kids’ rooms because of the noise. Instead, they’re being tucked into closets or off the master bedroom.

“We’ve seen a significant uptick in sales over $2 million this year,” Maranger told the panel, noting that some 128 luxury properties have sold in Toronto during the first three months of this year, compared to 95 during the same period last year.

Increasingly the wealthy want to be close to subways so they can leave the Lexus in the driveway and walk to restaurants, schools and other amenities, he added.

“The difference with ‘luxury’ in Toronto now is that it’s not defined necessarily by size, but by appointments,” Maranger said in an interview.

“We’re seeing better and better appointments in smaller houses and greater demand for those. Oddly, in Toronto the luxury buyer is not looking for value, they are looking for convenience.”

That’s why higher-end buyers now seem willing to pay a substantial premium — he cited one home in the Summerhill area of central Toronto that recently sold for $370,000 over asking price — to be near the subway, and especially the Yonge St. line.

Maranger anticipates substantial renovations, retrofits and teardowns of older properties within walking distance of subway lines over the next few years as higher-end homeowners abandon luxurious suburban homes to ease their commute to downtown jobs but look to replicate the lifestyle they afforded.

It’s not unusual to see these homebuyers spend $125,000 to $250,000 on small, but elegant, backyard renovations to create an oasis in the city, he said.

One couple even installed an in-ground dipping pool that was just 4 feet by 4 feet by 5 feet deep and heated.

The high-end market, and condo sales in particular, continue to be driven by wealthy international buyers from China, the Middle East and elsewhere, looking to park capital in the city or take advantage of this “elite education hub.”

Many, like one Japanese couple who recently bought a high-end house, are looking for properties, usually condos, where their kids can live while going to private or post-secondary school here.

There are two luxury markets in the city, Maranger stressed — single family homes priced at $2 million-plus and condos, especially in the tony Yorkville area, that are selling for $1,200 per square foot and up.

The high-end condo market sales — newcomers include the Ritz-Carlton and Trump International and the soon-to-be-opened Shangri-La and Four Seasons Hotel properties — are softer so far this year than last, he noted.


The article points out a couple of things. Most strikingly: Wealthy don't care about the prices essentially. I don't know if I agree with that. In a constant increasing market, maybe. If prices correct, I suspect that kind of thinking will change very quickly (except for the "uber-wealthy").

The article acknowledges/admits there is some resistance in Downtown TO at the 3 condo hotel projects. Even if Yorkville can fetch $1200/sq.ft. much of the Ritz is well over that ($1500+) so it too is experiencing resistance I would think.

I would have to believe that the rest of downtown TO mid-higher end will be impacted next if this trend continues...after all, if you could buy luxury for 10% more over mid-luxury...where would you buy. At 30-50% premiums, perhaps another story.
 

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