The sinkhole

Yesterday we waxed poetic about what a swell place this is. Canada, that is (which includes Alberta). If people here lack anything serious, it’s perspective. All we need do is outlast Trump, which will surely lead to the Leafs bringing home the Stanley Cup, tariff-free.

Yes, we lost a lot of jobs last month. It was a big surprise. Scotia’s cowboy economist Derek Holt said the StatsCan report was fake, unserious, flawed and not credible. We’ll see what the revisions turn out to be. Meanwhile the report took pressure off the central bank to up our interest rates two weeks from tomorrow.

Real estate sales are flat, prices moribund and buyers have been largely sitting on their paws worried about possible job loss and watching some upward pressure on mortgages. Compared to what’s unfolded south of the border, our real estate market is kinda peachy. Mortgages there soared to 7% as the silly Iran war unfolded, fuelling inflation returned, cresting at 7.5%. That’s an increase of 1% in the last year, and it’s cratered the market.

In contrast, home loans here are still in the 4% range. Maybe less if you woo TNL@TB. Before the latest jobs bomb economists were certain our rates would rise soon and again in 2027. Now it’s ano pen question. But cautious people would still be wise to lock in until the end of Trump 2.0. He’s nuts.

The bottom line for many Canadians is that real estate is no longer the path to financial security. Probably the opposite. The latest numbers are sobering.

Since Q1 in 2022, real home prices (adjusted for inflation) have plunged 24.1% across Canada. That is the second-deepest equity slice in history (eclipsed only by one almost four decades ago). In the GTA, that plop has been even worse, at 30%. The average detached home sits at just under $1.3 million, after topping out above two mill. Pray for those who were in a bidding war in February of 2022.

In Van, similar but not so bad with a 21% correction in detached values. Sales have slipped to a quarter-century low with things so piteous the premier (fighting for re-election) wants to tax builders who can’t sell their product to people who don’t want to buy. The average detached house still costs half a million more than in the Big Smoke.

All real estate is local, of course. Some cities, like Montreal, are relatively cheap. Some regional centres, like Halifax, have seen sharp price escalation. Others, like Winnipeg and Saskabush, just sit there, modestly smug. And in Alberta, Calgary and Edmonton just keep getting cheaper as the yahoos get louder.

Everywhere, property taxes have increased. Insurance premiums are insane. Municipalities have unfunded capital projects. The cost of power, water, sewers and connectivity keeps rising. Given current conditions – higher ownership charges and zero potential of taxless capital gains – the only justification for buying a property is because you lust for it. That desire may be to please a spouse. Or your parents. Or peers. Or because you’re living in the past. Whatever. Real estate now = real risk.

So let’s compare putting a 15% downpayment into a $1 million house that’s currently worth $850,000, with investing the same in your TFSA.

Since 2022 the house has given a negative rate of return. The downpayment is kaput. You have no equity. In fact, you have a house debt equal to, or larger than, your home’s market value.

If the same $150,000 were dumped into a TFSA (maybe combined with that of your squeeze to get enough room) and placed into an ETF tracking the TSX composite in early 2022, it would now be worth $246,000.

That’s a gain of $96,000, tax-free, over just four years. So instead of having a costly and unsaleable house which ate your $150,000 and left you with nothing but debt, you’d have $246,000.

But what about living costs? The rent you have to pay by not owning?

Remember, home ownership overhead is not about what you paid to get the place but what you fork out to keep it. That million-dollar home now worth $850,000 would have a monthly mortgage burden of $4,300. Add in property tax, insurance and utilities and it becomes close to six grand.

Can you rent for $6,000 a month, even in pricey Toronto or Vancouver? Damn right you can. And well. And that means the financial benefit of owning is zero. Well, it’s a lot worse than zero. It’s likely the largest current drainer of personal wealth in Canada.

This is why home sales have tanked. And nobody knows how to fix it.

If you want a property, can afford it and don’t care about ever getting your money back, go ahead. Your mom will be proud. Maybe that’s worth it.

About the picture: “My boy on a beautiful foggy autumn morning in Victoria looking ahead and wondering if there will be anything “extra” added to her breakfast,” writes Lloyd, a serial cute-canine contributor. “Mornings for me include sitting in the front chair with Ziggy perusing the latest missive from you, your suspender-snapping colleagues or Cow Man.”

To be in touch of send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2026/10/13/the-sinkhole/