My parents bought their first and only home in Montreal for $24,500 in 1956. We were able to retire my modest-by-today’s-standards university tuition loan in under 2 years. There was no doubt in anyone’s mind, mine included, that I would find work, that salary increases would be inevitable and that employment would be long-term. Even if mortgage or car payments stretched us at the beginning of the repayment cycle, the financial burden would become progressively easier to bear. We expected to be employed full-time for the duration of our working life and that we’d retire at age 65 with a good pension and little or no debt.
I mention Montreal because people buy and hold onto houses there for 30 years or more. Even before we moved to Toronto, we were hearing about residential properties here that were being flipped within months to profit from a hyperactive real estate market. The introduction of capital gains taxes on property held short term and occupancy requirements were intended to cool the market down—not extinguish it.
On CBC Radio this morning, a Toronto-based mortgage broker proposed that we resort to auctions instead of bidding wars to return some sanity to home buying in the Greater Toronto Area. The average selling price across the GTA in 2013 was $523,036. Resale condo prices averaged $343,943 for the same period. A week ago, also on CBC Radio, another mortgage broker spoke in terms of a 2.94%, 5 year fixed mortgage and a prospective homebuyer who could see his way clear to carrying that mortgage for $3500 a month—and no more.
Even for people earning enough to carry a home for $3500 a month, raises are not inevitable. Nor are guarantees of full-time employment to and retirement after age 65.
The subject of debt and debt avoidance in connection with higher education and tuition has appeared here all too often since October 2012. But it’s also appeared elsewhere. Parents are thinking twice about how to allocate their education budgets and enrollments are beginning to drop on both sides of the Canada-US border. This is something we can’t afford.
We need as many minds trained to the postsecondary level and gainfully employed as possible. This can happen only if education and training match labour market demand. Otherwise, young people will not be able to leave home and start lives of their own. Those of us who depend on pension income now, or will in the future, have a vested interested in seeing them employed because the dollars we’ll be drawing will not be dollars we contributed, but rather dollars that their generation will have contributed.
At present, the economy is wobbly at best. If there is to be some replacement for the manufacturing-related and other incomes we’ve lost, it won’t appear until 2015 at the earliest, according to today’s Toronto Star. The federal government has been telling us for some time that we have not set aside enough money to be able to retire comfortably at 65, if at all. It says nothing about the life our children will lead until they reach 65.
We have to deal with that subject now. That’s why the Personal Due Diligence Project exists. We place a premium on making decisions about buying higher education that will translate into disposable income after graduation. It wasn’t so long ago that we prepared for only one “career”. Recent history shows that our children will have to prepare for more than one. Those decisions will be a function of conditions in the world economy and how much job creation it stimulates in the labour market. Whether our children benefit from that job creation will be depend not only on whether they’ve been taught to read tea leaves, but whether they’re reading the right tea leaves. Individuals, the labour market and the economy are inextricably bound to one another.
We have to teach our children that what they think about is as important as thinking itself. University and other forms of higher education are for teaching them how to think. The Personal Due Diligence Project is for teaching them what to think about if they want to live the kind of life their parents lived.