The Dark Years

The New Economy and Canadian Housing's Bubble Status

One of the things that drove the bubble in the US was favorable tax policies. The 1997 Clinton Administration introduction of a 250k/500k exemption from long term profit on sale of your personal residence that certainly helped. With rapid price increases a family could gain quick wealth every two years by buying and selling (and of course moving) into a new home. Those who could took their gain and turned the previous residence into a rental and then began taking deductions for depreciation, taxes, association dues, mortgage interest and repairs. The gain got them into another residence and their fortunes seemed to take off. My point is that the favorable effect of these tax breaks helped fuel our bubble, but I doubt that is the case in Canada since presumably Canada does not offer such incentives. As I understand it taxes are significantly higher in Canada and less complicated as there are fewer loopholes and credits. Canadians pay high taxes but receive more from their government in the form of quality medical services which has some off setting benefit in dollars available to buy housing with. What all this leads to is the conclusion that it is very difficult to make like kind comparisons.