The children of boomers could well be the last generation to inherit substantial wealth. Everyone else is doomed, especially the property-less classes in the rest of Canada.
In Toronto, you now have to be a millionaire to buy the average detached home, according to April data from the Toronto Real Estate Board. The only place more expensive is Vancouver, where the average home costs $1.2 million.
The Toronto house that famously sold last month for $965,670 is a tiny, two-storey, 1950s, brick-and-clapboard house in a working-class neighbourhood. It has no driveway. It wouldn’t be featured in Architectural Digest.
The barrier to entry is now impossibly high for anyone from other provinces. In Fredericton, for instance, the average home price is $175,000; in Halifax, it’s $270,000.
When real estate prices elsewhere are starkly lower, mobility is constrained for all but the local landed gentry and their offspring. The political implications are serious when the majority of Canadians are locked out of the country’s two biggest economic hubs.
“Democracy is not just one citizen, one vote,” notes Joseph Stiglitz, a Nobel laureate in economics, “but a promise of equal opportunity.”
Thomas Piketty, a French economist, points out what you and I have always suspected: the rich are getting richer and the poor are getting zip. His core finding: capitalist economies are two-tier societies with an ever-widening gap.
In his new book, Capital in the Twenty-First Century, Piketty says capital’s rate of income growth is triple that of labour’s — four to five percent a year versus 1.5 percent. The 671-page tome, translated from French, is on the New York Times bestseller list. Amazon briefly ran out of stock.
Karl Marx put forward a similar theory in 1867 in Das Kapital, his four-volume analysis of capitalist economics. A century and a half later, Piketty has proved Marx right. The research covers 30 countries and 200 years of data, including tax archives.
But Piketty is no Marxist. The 42-year-old professor at the Paris School of Economics was a teenager in 1989 when the Berlin Wall fell, an experience, he says, that “sort of vaccinated” him for life.
Piketty’s findings reveal that anyone living off assets will grow richer and anyone on a salary will grow relatively poorer. Our wealthiest one per cent earns $381,300 a year, nearly 10 times more than the average Canadian, who makes $38,700, according to Statistics Canada.
Per capita gross domestic product, a standard measure of prosperity, masks distribution. It shows the average, not the plight of the 90 per cent at the bottom of the heap.
Indeed, while the U.S. still has the highest per capita GDP among large nations, its middle class has fallen behind Canada’s middle class, according to the New York Times. Reasons include our more progressive taxation policies, our higher minimum wages and higher rates of organized labour, and their even wider gap between rich and poor.
For centuries, primogeniture in Europe ensured that first-born males inherited the great estates intact. Females, as Jane Austen so brilliantly described, had to hunt for security and wealth through shrewd marriages.
Today, nearly seven out of 10 Canadians are homeowners, but many are drowning in mortgage debt. They won’t leave much to their heirs.
Children born today could end up in smaller-footprint dwellings — good news for the environment. Back-to-the-future homes will have a single bathroom, two bedrooms and no living room. Maritime kitchen parties could become the Canadian norm.
Perhaps young people contemplating a move to Vancouver or Toronto should heed Jane Austen’s advice and marry someone who will inherit a house. Interprovincial matchmaking, anyone?
Convinced about securing your future? Or even your family’s future? Talk To Tan Now to see if you can acquire home ownership and secure a nest egg for yourself and your family. 905-821-3200 or [email protected]
Source: Jan Wong @ The Chronicle Herald