Everything You Know About Canada’s Real Estate Bubble is Wrong

Everything You Know About Canada’s Real Estate Bubble is Wrong

Let’s talk a little about Canada’s real estate market. We might as well start with Toronto and Vancouver, AKA Bubble Central.

What’s that? I’m being told 2014 Nelson would like to chime in. This is highly irregular, but I guess we’ll allow it.


Wait, Nelson. One thing before you go. How’d you get access to a time machine?


You’ll have to forgive the all-caps. 2014 Nelson was a little bit angrier than today’s version, who is all about calmness and cute kittens.

After many hours of research and some critical thought about my long-held assumptions, I began to realize about a year ago how wrong 2014 Nelson was about Canadian housing. The fact is places like Toronto and Vancouver have expensive housing because everyone wants to live there.

Say you’re an immigrant who’s won the right to come to Canada. Where are you going to go — Nelson’s hometown of 10,000 people in rural Alberta or a place filled with all other nationalities? Sure, the potential to be my friend is pretty strong, but I’m betting you’d pick the city.

I’m the first to admit a large city has all sorts of amenities my small-ass town just can’t offer. Our airport doesn’t even have a full-time employee. Our local hospital sends anything more complex than a runny nose to Calgary. Hell, our Wal-Mart isn’t even a Supercentre.

It’s basically a third-world country is what I’m saying. I’m going to push to get that on the next tourism poster. Wish me luck!

Now don’t get me wrong. I still wouldn’t be caught buying a place in Toronto or Vancouver. I just couldn’t bring myself to pay the premium. But I totally understand why someone would. And have you seen the rental market lately? Hot diggity damn.

Read this and weep if you’re a Toronto renter. The best cleavage in the world isn’t getting you that apartment. FINALLY, A CLEAVAGE REFERENCE ON FINANCIAL UPROAR. So you’d buy, because spending a lot to live in the city is preferable to being Nelson’s neighbor even though I promise I’ll totally throw all my trash into the other neighbor’s yard.

The rest of Canada

One of the most-cited affordability metrics for real estate is a simple as it is powerful. You take the average house price and divide it by average household income. Generally, a market that sits between 3-4 times earnings is considered reasonably affordable, at least historically.

Let’s take a look at national price-to-income ratios in Canada, at least until 2014. You’ll notice Toronto is on there. That’s on purpose.

Sorry about including Hamilton. What a cesspool.

Toronto — and many of its suburbs — are insanely unaffordable right now. Vancouver is even worse. Both of these cities are clearly skewing the average higher. Approximately a quarter of Canadians live in these two metro areas. This is a big deal.

Say the rest of Canada has a price-to-income ratio of 4x. As you’ll see, that’s not unrealistic. With interest rates as low as they are today, I’d argue carrying costs today are only a little more than they were in the 1990s and early 2000s when prices were 3x income.

Say you bought a $100,000 house in the 1990s. You made $33,333 per year and signed up for a standard 25-year mortgage. You paid 6%, because that’s what mortgages cost back then. It cost you $639 per month, or $7,668 per year. That works out to 23% of your gross income.

Note we’re excluding all sorts of home ownership expenses here.

Now it’s 25 years later and you’re buying a $200,000 home. You make $50,000 a year and again get standard 25-year mortgage. You pay 3.5%, which you can get from most mortgage brokers as long as your credit isn’t trash. You’re looking at a $998/month payment, or $11,976 per year. That works out to 23.9% of your gross income.

Affordable cities

There are plenty of cities where the average home costs approximately 4x median family income. Here’s a small sample:

  • Calgary: Average price $449k; median income $97k; P/I ratio 4.6
  • Edmonton: Average price $362k; median income $87k; P/I ratio 4.2
  • Ottawa: Average price $393k; median income $85k; P/I ratio 4.6
  • Winnipeg: Average price $303k; median income $68k; P/I ratio 4.5
  • Saskatoon: Average price $330k; median income $79k; P/I ratio 4.2
  • Regina: Average price $277k; median income $81k; P/I ratio 3.4

There are more as you get smaller, but you get the idea.

Naysayers will be quick to say I’m missing a lot of cities, not just Toronto or Vancouver. Montreal is a big one. The average price of a house there is close to $500k, while the typical family earns about $50k. Damn, Montreal. You gotta get your earning game up. Even Laval, the big suburb, hardly has cheap real estate when compared to average incomes. Quebec City, which has held a reputation for affordable real estate for years now, has a price-to-income ratio of close to 5x. Victoria’s P/I ratio is much higher than average as well. Anything remotely close to Canada’s three largest metro areas is expensive, too. And so on. There are lots of exceptions here.

Is Canada’s real estate really that cheap?

Canada is filled with many regional real estate markets. Some are not affordable, while others are surprisingly so. These metrics ultimately affect rents too, so your strategy should be simple — avoid markets with a high cost of living for ones that allow you to make a similar wage while paying less for housing.

Ultimately, it comes down to this. If you make the average family income and buy an average house in Ottawa, which has a 4.6 price-to-income ratio, you’re looking at a mortgage payment that equals 26% of your gross income (assuming a 5% down payment and a 3.5% mortgage rate). This is not terrible. Most people can afford this.

Toronto, Vancouver, and now Montreal are increasingly unaffordable. The rest of the country isn’t bad. It might even be affordable. And, as always, if you want really cheap real estate, check out Canada’s medium sized cities. If you can scratch together $100k family income in Medicine Hat, Lethbridge, Halifax, St. John’s, Moncton. or numerous other places, you’ll live like a king. Some sort of royalty, anyway.

To truly live like a king you’d need Nelson as your neighbor. I’d totally rub my balls up against whatever window pointed to your house.

Should You Get a Part-Time Job to Justify an Additional Expense?

Should You Get a Part-Time Job to Justify an Additional Expense?

For years now I’ve been meaning to golf more.

It’s not really possible to golf less than I have over the last few years. In 2018 I made it out to the course exactly zero times. 2017 was a little better; I went to the driving range once and played nine holes. I don’t think I played in 2016 and I maybe went out twice in 2015. Even from 2005 to 2015 I went out 2-3 times a year. I was hardly Tiger Woodsing the place up.

I used to basically live on the golf course. In high school, when I wasn’t working I was golfing. I’d even get up at 6am to be on the course for 6:30 in May and June during my last two years in high school so we could squeeze in nine holes before going to school. We’d be groggy all day, but it was worth it.

My grandparents also owned a golf course, so I’d be out there at least once a week. That was pretty outstanding, actually. I’d play 18 holes and get my grandma to cook me a nice meal. I’d spend time with my grandparents and I never paid a nickel for any of it. Cheap teenage Nelson was then able to direct his cash to more profitable pursuits.

Perhaps biased by those memories, about once a year I consider getting a golf membership again. Alas, the days of free golf are long gone. My local course charges between $2,000 and $2,500 annually, depending on the year and the number of perks you sign up for. That is a lot of money for entertainment that only realistically runs from May to September.

At that point it becomes pretty easy to talk myself out of it. $2,500 is a lot of money. For that much money I could get CFL season tickets and afford to stay in a hotel every time I go. I could pay for my annual gym membership and an annual swimming pool pass. Or I could buy two $20 books every week and still have snack money left over.

So I usually forget the idea before I start. I just can’t justify the expense. There are simply far cheaper ways to entertain yourself.

But then I start to think about it another way. If I write just one $50 article a week for a year, that’s enough to cover my gym membership. Working just three hours per week at my part-time grocery store job accomplishes the same thing. So I attempt to justify this additional expense by creating the income to cover it.

Is this a smart thing to do, or am I looking at things all wrong?


Essentially, I’m trying to have my cake and eat it too, at least from a financial perspective. If I work a little extra I can have what I want while keeping my savings rate relatively constant.

I think such an arrangement can also force you to appreciate the sacrifice, too. Every time you’re working those extra hours you’ll think about how they’re paying for something you enjoy.

And as long as your hobby doesn’t cost too much and you’re stuck working 80 hours a week to pay for it, you should have plenty of time for both. I could easily find the time to work one additional eight hour shift every three weeks to pay for a golfing habit.


Ultimately, this is a bit of a slippery slope. Why exactly do I need to take on extra work to do something I enjoy? Why can’t I just do it and then maybe cut back on travel or something else I spend money on?

Also golf is a sport that comes with more expenses than just paying for green fees. I wouldn’t be able to resist tasty golf course food. The course is about a 15 minute drive from my house and gas ain’t free. And are you even a real golfer without fancy new clubs and sleeves full of whatever the happening new ball is? You’ll get laughed off the green if you use Top Flite.

(I just googled Top Flite and all the results are model airplanes. It shows how long I’ve been away from golf)

And do I really want to golf that badly anyway, or is it the nostalgia talking? If I wanted to play, I would have found a way. Taking on a part-time job to afford some hobby creates two obligations, making it more likely I’ll just throw up my hands and abandon the whole exercise.

Should you do it?

There are basically a million hobbies that are free or damn close to it. There are a lot cheaper ways to go outside than doing it on a golf course.

But what about hobbies that you’ve been doing forever? Say you really like golf and you’d like to find a way to pay for it. Should you take on additional work to do so?

Maybe a hybrid approach is best. You’ll work harder during the winter to save a little more while you’re not golfing. Or you’ll accept an overtime shift at work once a month. This might help you pay for some of your hobby, but not all of it.

Ultimately, you’ve got to reward yourself or you’ll end up having a miserable life living in your basement. I say as long as you’re still reaching your financial goals, feel free to spend money on whatever hobby you desire. Except genealogy. This shit is dumb, yo.

Why I (Gasp!) Still Pay Bank Fees

Why I (Gasp!) Still Pay Bank Fees

If you believe the PF-o-net (which I cannot stress enough you SHOULD NEVER DO), you’d know that only suckers invest in individual stocks, buy a mutual fund, get whole life insurance, buy a brand new car, or work at any moment past your 40th birthday. Working into middle age is worse than ass cancer.

Yeah, that’s right. Ass cancer. You’ve never heard of it because we’re all too scared to speak about it directly.

A few years ago, back when my wife encouraged my blogging habit enough to write here, she wrote a post outlining how she bought a token investment in some crummy mutual fund to get free banking. I threw my clickbaitest title on that bad boy and watched the angry comments roll in. It was great. So many people obviously didn’t read the thing before jumping to conclusions.

Meanwhile, my wife’s $500 investment is worth more than $700 now, and she got free banking in the process. Outstanding.

But for some of you, this isn’t enough. Why even bother with a traditional bank when there are branchless banks that don’t charge a nickel for as many transactions as you want?

I’m well aware those financial institutions exist, and have largely avoided using them. Here’s why.

The beauty of local banking

Many of you have no need for local banking. You get paid by direct deposit. Your side hustle income comes in via Paypal. Your drug dealer takes interac e-transfers for some reason. If you do get a cheque, every banking app has the ability to deposit it remotely. That covers pretty much everything.

Except for getting cash, that is.

I own a few different rental houses, and while I’m not terribly active on the private lending side anymore I still have a bunch of loans that are slowly being paid off. I’ve found that some of these people like paying me cash. I get an envelope of cash I can spread on my bare chest like a freak and they get a payment method that’s comfortable to them. It’s a totally not weird at all win-win.

How am I supposed to deposit cash at an online only bank?

I’m not just getting a couple of bucks each month, either. We’re talking upwards of $1,000. I don’t feel comfortable having that much money at my house, and although I probably could spend that much cash every month, I’d have to make an effort to do so. Sure, I could go to the bank and give them cash to pay off my credit card, but they would mock me as soon as I left. And rightfully so, too.

Fun fact: back in 2001 and 2002 when I first started using a credit card, online banking wasn’t a thing. My current bank (a credit union) didn’t even offer credit cards back then. I was forced to go to a competing bank and get a card there. I’d go to the credit union, withdraw the cash, and then go to the other bank and pay off the credit card. It got to be such a pain in the ass I’d barely use the card.

What our banking setup looks like today

I’ve maintained my own bank account while my wife has hers. All earned income goes into one account while passive income goes into the other.

This setup is maintained so I can easily track payments going in and out. It’s essentially became a business account without a business attached to it.

I pay $2 a month for the privilege of having the account and then $1 per transaction each time I pay a bill or use a cheque. Most months I’m spending anywhere from $4-$5 on banking.

For me, saving $5 a month is nothing. I’ll squander that much on jalepeno flavored Doritos on a given weekend if I’m feeling peckish. Taking the time and effort to switch the account to somewhere I would pay less in fees just isn’t worth it. And as I’ve mentioned before, I think having a relationship with your local banker is beneficial.

We also have a high-interest account at one of the branchless banks. Every now and again they’ll send us a promo for 3% interest for 90 days and we’ll stick some cash in there. The promo expires and we yank the money out faster than I nope out of a yoga class.

Let’s wrap it up

Banking is a popular topic here in the personal finance world, but it shouldn’t be. If you never have any cash in your life, it’s probably best to have an online-only bank. Or stay with your current bank. Even if you’re paying $10 or $20 a month in fees it’s not really that big of a deal.

Big expenses are important. So is earning more money. Feel free to try and lower your bank fees, but spend way more time on the important stuff. Or, just buy some Canadian bank shares. Profit off everyone else’s bank fees.

Weekly Linkfest #23

Weekly Linkfest #23

Michael Jordan is my favorite former athlete. The guy dominates basketball for a decade and then decides he’s bored and he’s going to give baseball a try now. Because, hey, why the hell not?

Michael Jordan’s baseball career is viewed by most as a punchline. “Hey, remember when the NBA unofficially kicked MJ out and then he sucked at baseball for a year? LOL that was great, huh?”

But people aren’t giving Jordan nearly enough credit. The guy had barely picked up a bat for 13 years. Then he goes to AA ball, which is reserved for the best 1,000 baseball players in the world. And he held his own. That’s the amazing part. He wasn’t an embarrassment.

According to Terry Francona, who was Jordan’s manager in Birmingham, the basketball legend had what it took to make it to the major leagues if he was willing to put in the work. If I had a time machine, I’d use it to convince MJ to stick it out — right after I murdered baby Hitler, of course.

SPECIAL PROGRAMMING NOTE: I will be appearing live on BNN on February 10th between 10 AM and 11 AM Eastern time. I’ll share a more precise time on Twitter as soon as they tell me. Set your PVRs, kids. It’ll also be on BNN’s website afterwards for those of you who don’t have cable or have jobs.

Time for links

1. HBO released a new Warren Buffett documentary on Sunday, which I has not seen because I am too cheap to pay for that channel. And all the other channels. The good news for us cheapskates is Buffett did a lot of interviews promoting the movie. Here’s one he did with Bill Gates. It was broadcast on Facebook Live, which prompted Warren to ask “what’s Facebook Live?”

2. One of my favorite articles ever was on CNBC this week, profiling a guy who steals ideas from Kickstarters and sells them on his own. Click on this, it’s absolutely fascinating.

3. Asset-Based Life has some thoughts about a safe withdrawal rate. Spoiler alert: Paul’s not going for a 4% withdrawal rate.

4. This one is a bit of a doozy. It’s about Medallion Financial, a dying company with millions lent out against rapidly declining taxi medallions. This article outlines how Medallion Financial used an ex-fashion model to try and sway public opinion in some not-so-honest ways.

5. Here’s an article at the Findependence Day Hub about how you can use strategically placed RRSP contributions to get some excellent short-term returns.

6. Andrew Hallam, over at Asset Builder, asks whether Mexico is the best place in the world to retire. He makes a pretty compelling argument. I’m still not that excited about investing in Mexico, though.

7. Kapitalist tells an amazing story from Reddit about a stock trader who blew most of a $2.5 million inheritance on trading before betting his last $250,000 on Apple missing earnings. It turns out that the story was probably fake, but it’s still bananas.

8. Here’s how Dr. Jin Won Choi of MoneyGeek values stocks. It’s a somewhat complex read, but it’s a worthy piece of writing for anyone who calls themselves a value investor.

9. This week’s cold shower is brought to you by Garth Turner, who points out just how much of our economy is dependent on both building and trading houses.

10. I was featured in this list of Canadian personal finance bloggers to follow in Canada.

11. 5i Research points out a growing company that pays an 8.7% yield. It’s a pretty compelling opportunity.

12. And that’s all I’ve got. Read Financial Uproar again or something.

Stuff Nelson wrote

As a reminder, you can hire me to write for your blog, newspaper, or poorly-Xeroxed newsletter. Hit the ol’ contact me page to get the ball rolling. Actually, don’t. Nelly’s getting too busy. 

1. Let’s start things off with my debut piece on InvestorPlace on why Amazon’s P/E ratio doesn’t matter. Still doesn’t mean I’m going to invest in it, though.

2. I wrote about a rumored deal that made headlines on Friday, which is Hudson’s Bay Company looking to buy Macy’s despite the latter having a market cap five times higher. Hint: it’s not about the retail business.

3. I talked about something called shareholder yield, which I think is far more important than just a company’s dividend yield.

Tweet of the week

I was a little miserable this week on the ol’ Twatter, so I might have to go back to last week.

Poor Johnny Depp. So rich yet so poor at the same time.

Have a good week, everybody. Enjoy the Super Bowl.

Weekly Linkfest #5

Weekly Linkfest #5

I decided to go on a solo road trip this weekend to visit some friends, a trip that for the most part was highly enjoyable. It’s nice to see people who only exist as email contacts for the other 51 weeks of the year.

The only bad part? The hotel’s fire alarm went off at 4:30am.

Because it was 4:30 and the last thing I wanted was to leave my comfy bed, I delayed leaving. I just assumed it was a false alarm. I couldn’t smell any smoke or see anything. And if people were evacuating my floor, they were doing it with the volume and intensity as mice.

But the alarm persisted for five minutes and then ten, so I finally roused myself and started the difficult process of putting on pants. I got dressed, headed to the front desk, and saw a half dozen firefighters just milling about. That was all I needed to see; I turned around and went back upstairs using the elevator this time.

I’m not usually in favor of the death penalty, but I am for whoever pulled that fire alarm.

Link Time

These are the articles I liked this week.

1. Let’s start things off with by far the most bizarre article I read this week, on Meat Loaf’s fantasy sports prowess. The man is either the greatest fantasy sports player of all-time or one of the great liars. Either way, it’s an article worth a few minutes of your time.

2. Over at Money We Have, Barry Choi points out that choosing the correct mortgage adds up to tens of thousands of dollars in savings over a 25-year term. By spending a little more time picking out the right loan, you can have a huge impact on your overall finances.

3. You know how everyone says the income of the average worker continues to be stagnant? Well PK at Don’t Quit Your Day Job actually crunched the numbers, and came to a slightly different conclusion.

4. Oddball Stocks continues to be one of my favorite value investing blogs. His latest post is on the information edge needed by active investors to be successful. He argues this edge doesn’t need to be as large as one would think.

5. Over at Half Banked, Desirae points out that having a blog is basically just a bill of expense. Okay, not really, but to be halfways successful in the niche you do have to spend a couple of bucks.

6. Speaking of mortgages, Canadian Mortgage Trends tells about some potential bad news for homeowners starting in 2017. It looks like mortgage insurance premiums will go up. I guess y’all will just have to do what everyone has been telling you all along and put 20% down.

7. Over at Boomer and Echo, Robb has some really simple advice to millennials. Just start investing already, dammit. And while you’re at it, move out of your parents’ basement.

Fun somewhat related fact: while talking to a friend on Friday he told the story about a house developer who built seniors condos. And he said he doesn’t build any one bedroom condos anymore. The reason? Because many seniors want an extra bedroom for their kids/grandkids to have the option to move into. Apparently this happens all the time.

8. Nomad Capitalist has some feelings about recent immigration changes brought in by a previous government, and he’s no fan. In between that bill and recent taxes that make it prohibitively expensive for a foreigner to purchase a place in Vancouver, it would be easy for immigrants to get the wrong impression.

Stuff Nelson wrote

As a reminder, you can hire me to write for your blog, newspaper, or poorly-Xeroxed newsletter. Hit the ol’ contact me page to get the ball rolling. 

1. Do you want to invest in the electric car revolution but aren’t sure which company will profit? I propose an alternate solution over at Motley Fool Canada.

2. Home insurance when you have a pool is a little more tricky than normal. I give you all the deets over at Lowest Rates.

Tweet of the week

This really deserved more than one like.

Have a good week, everyone.