Comments on: Gross Indulgence

By: Robert Murrieta

Robert Murrieta — Wed, 21 Jul 2010 16:41:57 +0000

I was looking out for information about this on Google and stumbled on your piece. I found it to be well explained. Thanks

By: Tracy J

Tracy J — Tue, 26 Aug 2008 23:13:34 +0000

So the average family income can’t qualify for an average priced home? That really proves that we are getting in over our heads on average, doesn’t it!

By: Blaine

Blaine — Tue, 26 Aug 2008 04:40:36 +0000

Seriously Erran, you cannot compare tax rates between provinces because it’s like comparing apples and oranges. Each province has their own economic and revenue pros and cons. Alberta has low taxes and no PST but they also have tons of oil money and their residents pay for health care. You seem to like comparing us to BC but I’ve heard more than once that BC stands for “Bring Cash”. A $200,000 house in Winnipeg is worth $500,000 in Vancouver (FYI, salaries are not 3 times more in Vancouver than what they are in Winnipeg. You also have to consider that BC has 4 times the population of Manitoba – a larger population means a larger tax base. Not to mention that BC is the Pacific port for all of Canada.

So, if you want to save a few hundred dollars a year in taxes but have to spend a few thousand more to maintain the same lifestyle in BC that you have in Winnipeg that sounds to me like a ridiculous financial decision. That’s like saying you can save 50 cents buying milk at the store across town but you spend $5 in gas to drive there and back. Duh.

By: Rebecca

Rebecca — Mon, 25 Aug 2008 23:44:38 +0000

Mike, like you I really want the security that home ownership provides, especially in retirement – but at what cost? When my parents were around my age, approximately 1972 if I average out their ages, the average cost of a new home was $27,550 and the median income was $9,697 (these are US numbers because Canadian ones for ‘72 hard to find). So a house was worth about 2.5x gross income.

Now the average house price is $341,100 according to Gail. Median household income in 2005 was $53,634. That’s over 6x gross income for a house – i.e. the average family would have to sock away 10% of their GROSS incomes for over 6 years for a 10% downpayment (assuming their money is in investment vehicles that keep up with the increase in house prices over that period of time!)

Depressing, isn’t it? I suppose I’ll just keep popping cash into my RRSP every month, and if I REALLY want a house later down life’s road, I’ll withdraw my downpayment from there. At the moment I’m really leery, though – how can house prices possibly sustain themselves when the baby boomers retire and downsize, anyway? My generation won’t be able to afford to buy their houses at today’s prices.

Melissa, the BC housing market makes me cringe too! I used to live in BC and was pondering moving back there for a while, but what I’m paying in downtown Toronto for a large one-bedroom apartment would only get me a bachelor suite in someone’s basement in Vancouver, if I were even lucky enough to find one available.

By: H

Mon, 25 Aug 2008 22:49:11 +0000

It’s deceiving that Manitoba has the highest tax rate because it’s consistently has one of the lowest costs-of-living across Canada. My husband used to work at the bank and grad students would tell him they choose to study here because it’s too expensive everywhere else! It’s just too bad housing prices shot up when they did a few years ago. I’m sure the last person that owned our house must have bought it for a third of the price we paid.

By: Melissa

Melissa — Mon, 25 Aug 2008 19:56:49 +0000

What a great post! Definitely motivating and really hits home. Sometimes it’s really easy to forget what our goals are and get lost in the picture that society paints for us.

I was surprised to see BC has the lowest tax amount! But let me tell you, housing costs in our area are outrageous! I bought a 1 bedroom apartment in greater Vancouver last October, because that was ALL i was willing to pay for. BC is beautiful, but i don’t think it’s worth being in debt for the rest of my life, to view mountains that i will never climb :p When it’s time to get a bigger place, due to family growth – moving out of BC will be the first thing to do.

Thanks for the motivation Gail

By: Stephanie

Stephanie — Mon, 25 Aug 2008 18:23:16 +0000

I recently purchased a house and was absolutely amazed regarding how much money I could qualify for. I then asked my lender to basically reverse engineed from a total monthly payment including taxes, insurance, principle and interest to a dollar amount to see what I could really afford. It absolutely blows my mind what the mortgage payment would have been if I borrowed the maximum. The whole thing is stressful since there is absolutely no way to predict all of the costs ahead of time. As a result it is really best to leave some wiggle room in the budget. Also if you are purchasing a home that isn’t new there are unforseen repair costs. So even down south of Canada where the real estate market is falling apart the banks are still approving mortgages that home owners can’t realistically afford. Where I live it seams like every other house is either bank owned, short sale or a forclosure sale. I feel like most people still feel that if the bank will approve them for the money they must be able to afford the mortgage.

By: Mike

Mike — Mon, 25 Aug 2008 17:33:51 +0000

Hmm, had a good chuckle with Gail’s post today – she says “you’re not as rich as you think” – Scotiabank tells us “You’re richer than you think” – hmm, who do we believe – DAH, Gail!

Rebecca, I have been thinking a lot like you lately regarding housing. But I’m reaching mid-life and now pondering the whole retirement thing – generally, a well maintained house could carry for less per month than renting, and I don’t think I want ongoing condo fees for life either – and when it comes to fixed income retirement living, I think I would want the house and if I needed more cash, I have the asset to sell. At least, those are today’s thoughts. Either way, I’m saving my cash for down payment or retirement – can’t wait for the tax free savings accounts!

By: Erran

Erran — Mon, 25 Aug 2008 17:04:45 +0000

Diana, I’ve considered moving there not too long ago, so definitely familiar with the prices in real estate/rent. But at least the cost is attributed to commercial market demand (well, except the new gas tax)…but why is the Manitoba sucking as dry?? Between the two, I’d rather live in BC…much nicer even at the higher cost of living.

By: Rebecca

Rebecca — Mon, 25 Aug 2008 16:37:22 +0000

So in conclusion I will never be able to afford a house unless a relative drops dead and leaves me a pile of cash. I don’t even see the point of trying to save up for a house, honestly – I’ve already figured out that I’d have to save up for a 10% downpayment for about 10 years on your “average” house. So why bother? I’ll just rent and contribute more to my RRSP instead – and I get the added bonus of not having to worry about home repairs.

By: Diana

Diana — Mon, 25 Aug 2008 15:51:57 +0000

BC may have lower taxes, but we pay through the nose for everything else. Erran, you complained about housing. Check out the MLS numbers for the Greater Vancouver area. Rents are expensive too. Then there is food. Gas fluctuates 1.38 to 1.45 litre. I removed the $ to make it seem less expensive.

By: Erran

Erran — Mon, 25 Aug 2008 14:55:27 +0000

Thanks to you Gail, you got me paranoid about the economy. Funny how the media makes it seem everything is all hunky-dory, but in reality, people are way too close to the edge…and your show displays just how easy it is to get into a debt hole. Unrealistic housing prices and soaring transport costs (translates into higher food costs) are bleeding people and sadly I wonder if people actually realize that. With debt levels at an all-time high, and savings at a low, you got to wonder when it’s all going to fall through. On one hand, I’m hoping for a massive market correction because housing prices, regardless of which market you look at, are at levels obscene to the average household, but unfortunately, if this were to happen, t will come at the hardship of many “undisciplined” people which on the other hand is something I wouldn’t want to see. As the ever-famous quote goes “oh the humanity!”.

Living in Winnipeg, MB, all I have to say to the stats info you provided is “what the ****?!?”. How is it that Winnipeg, a blue collar town, is getting jacked with one of the highest amount of taxes?? As you always say Gail “whasss up with dat?” No wonder the younger people are flocking to BC, Ontario and Alberta…