Cornucopia

Let’s recap.

This week inflation came in cool. Interest rates went down in Canada for the first time since last winter. They dropped as well in the States, which hadn’t happened before in 2025. Variable mortgages and bank primes fall today. And Ottawa has just thrown the first $13 billion at housing – with twice that amount yet to come.

All this led to the maligned statement here a day or so ago that Canadian real estate is Too Big To Fail. Even Trump, tariffs, trade wars, annexation talk, layoffs, bitter elections, tepid demand, slagging sales and a new, untested PM didn’t bring a price crash.

And now cheaper loans plus extra government pump-priming are already – in the course of a few days – having a noticeable effect in some markets. In no way is this abandoning the argument that housing is insanely and wrongly priced, but let’s face it: the people currently in power in Canada have no intention of letting the value of existing homes falter.

Here are a few of the weird things governments are doing.

Go ahead. Raid your retirement:
RRSPs were always a reasonable idea – encourage people to save during their careers by letting them deduct from taxes money put towards retirement. After they stopped working they could take it out (plus tax-free growth) and pay a lower rate. But all that got screwed up in the early 1990s when there was a serious real estate slump and the industry convinced MPs (I was one of them) to let people suck RRSP money out for a house downpayment. It worked. The market rebounded madly.

But the Home Buyers Plan was not removed. In fact, it was goosed. Now a couple can borrow up to $120,000 from their plans, tax-free, make no repayment for five years, then take 15 more years to put it back. The cost to a retirement plan can be enormous. But real estate rocks on.

The most outrageous shelter:
It was hard to believe the FHSA when it came along. But there it was. The single-greatest tax giveaway in Canadian history – all to support the price of housing, This is like the HBP, but on steroids. With sprinkles. Contribute eight grand a year, grow it tax-free, write that contribution off taxable income and then cash it all in to buy a house without repaying any of the deferred taxation. Oh yeah, then (maybe) sell the house for a tax-free gain. And if you don’t buy, just transfer the mess to your RRSP. Tax-free. Outageous.

Free profits from property:
Of course we can’t forget the famous PR exemption. Of all the assets one can purchase, from stocks to bonds, funds, bullion, rental units or hockey cards, only one allows 100% tax-free gains. For that reason, real estate’s principal residence exemption has encouraged over-investment in this single asset for the last half-century. Now the nesting generation can’t afford a home while parents amass unearned wealth. Well done, Canada.

More tax breaks:
Newbie buyers typically get a pass on part of the transfer tax everybody else has to pay when a deed changes hands. Some places even have a double land transfer tax, so this is serious money. In general a rebate is available to cover half, if not all, of this burden.

Then there’s the federal free-washer-&-dryer First Time Home Buyer’s Tax Credit. Yes, a gift from Ottawa worth up to ten grand, depending on a purchaser’s tax rate. But probably enough for almost any couple to get a couple of Maytags.

And don’t forget the sales tax exemption on newly-built homes. This will be a feature of Mark Carney’s Build Caada Homes plan that we yammered about here yesterday. This should drop the purchase price by tens of thousands. Or hundreds of them.

Weensy, pathetic down payments:
What appreciating asset can you buy using money borrowed on the basis of 20x leverage with a rock-bottom rate because the loan’s backed the government, removing risk from the lender? A house, of course. Not only are 5% down payments absurdly low, encouraging people to buy properties they can’t actually afford, but CHMC insurance coddles the mortgage providers. This is why the best loan rates are routinely extended to the dodgiest of borrowers. Up is down when it comes to real estate financing.

And free money:
No money? No rich parents to gift you or (unwisely) co-sign your mortgage? No problemo. In lots oi municipalities and some provinces the government will actually give you the money to buy a hunk of real estate. Like in Kitchener-Waterloo, with its Affordable Home Ownership Program.

“The program provides qualified low to moderate-income households with down payment assistance loans of 5% of the purchase price of an eligible home for the first $500,000 and 10% of any amount over $500,000m” it says. Applicants must qualify for a mortgage, make less than $109,000 from employment, be a lawful area resident and agree to use the home as a PR. Then, if you’re chosen, a free house!

Well, see what we mean. This sucker is not going to crumble with three levels of government pumping it. Now Mark Carney is committing $36 billion more to this asset class – which is one reason you elected him. Because, everyone says, we have a “housing crisis’. Guess why?

Is any other nation better at sucking and blowing?

About the picture: “I read your blog everyday and try to impart your wisdom to my boys,” writes John. “Josh, Bruins fan, and Obi, pathetic Leafs fan, are posing for their spread in GbQ, Good boy Quarterly. Obi is a rare black mid-golden doodle and definitely man’s best friend. As a wrinklie I appreciate your insights in realestate and finance. Your subtle humor makes me laugh out loud. Garth…. thank dog for you!”

To be in touch or send a picture of your beast, email to ‘[email protected]’.

Source: https://www.greaterfool.ca/2025/09/18/cornucopia/