David Madani from Capital Economics is the mainstream media go-to guy when it comes to doom and gloom predictions.
For the past few years, Madani has been forecasting a 25% decline in Real Estate values, which, of course, did not happen. So what is going on here? Does Madani knows something I do not and why does the media keep interviewing this guy, if he’s been wrong for years?
My view on the topic is in the video, and below is a quick summary. Be sure to visit the YouTube page to access the links to articles mentioned and see any comments. Part 1 of this article is here.
What is Madani Saying?
Madani’s basic claim is that Real Estate is no longer affordable, and that people spend upwards of 50% of available income on their mortgage. We’ve all seen the numbers, he’s got a point there.
What Madani is NOT telling you?
What Madani neglects to mention is that Real Estate is a global tool for investment, and that Canada is riding a global economic wave. The entire First World sees Real Estate prices rising, for multiple reasons: we’ve all realized that the banking system can collapse on us and take our entire life savings with it while paying themselves fat bonuses throughout the entire process; we know that pensions erode faster and faster; that there is no safe place for our money; that we can’t trust anyone with our money, and we’re especially skeptical with bankers and mutual fund sales people.
Why I Like Real Estate?
If you’re like me, you’d rather have control over your money, and you’d rather be able to make some income with it. That’s why we love buying Real Estate, living in it – then selling it without having to pay Capital Gains Tax; or holding it for the long-term and renting it out, letting someone else (read:tenants) pay our mortgages. Yes, of course we have to pay taxes, maintenance, etc, however if you believe you do not when you rent, you’re out of your mind, it’s simply hidden in your rent.
Why Own Real Estate?
The other main reasons to own Real Estate are beating inflation and enjoying Capital Appreciation over the ownership years. At some point, you’ll be mortgage-free, or, you can take some equity out and re-invest it. The possibilities are exciting for owners, but not so much for tenants who have nothing to show at the end of their lifelong tenancies, nothing to their name and nothing to leave behind for their families. A situation you want to avoid.
Why Renting Ends Badly.
Another lame argument is that Renters can save money and invest it. This argument is flawed in so many ways: First, what exactly are they saving? owning does not cost more then renting. In some cases less, in some more, however if you have a decent deposit, you’re paying about the same as a renter, you get to own, you get appreciation and you get to pay down your mortgage. Or you can have your property rented and let someone else pay your mortgage for you.
Second lamesness is the myth about saving. How many people do you know that actually manage to save anything? Most renters I know live paycheck to paycheck. They do not save anything, they spend they extra income on lifestyle. It may be fun but they are going to be lodging at the poor house sooner or later. The owners are motivated savers: they’d rather eat at home and pay the mortgage faster. Got it?
Why Does The Mainstream Media Keep Quoting Madani?
I have to ask myself – and you – “What’s in it for them?” and “Why Madani?”
There are several possible reasons to the Madani Fest – and really I mean all the gloomers. First, The Mainstream Media is no longer #1 media channel. For years now, most of us get our news from the Internet. Those who are still watching TV are likely older and less educated. Those who are interacting online are asking questions and seeking fresh perspectives on the issues at hand, just like you are now.
The Mainstream Media needs to keep your attention – so they can sell you advertising. They feel left alone after Google is worth more then most countries and newspaper circulation dwindles quickly. So they need some noise to get your attention, and what’s better than a 25% decline in your most important asset to get it? This prediction repeats every 6-12 months, whenever they need to increase ratings.
Where is David Madani’s Proof? (hint: there isn’t any)
David Madani is not saying anything we do not already know, he’s mainly speaking of affordability and supply/demand. Nonetheless no numbers are ever provided, no proof is given, it’s all theoretical. And in theory, I can fly to the moon. Try to see if you can find any numbers to support his claims. If you do, please share them with me.Â
Final Thoughts.
As the world becomes smaller and more connected, we no longer live in a bubble that is called “a country”. We simply live in a global economy where everyone and everything is connected. Like it or hate it, that’s what it is, so you’d better make the most out of it. How? Buy well, and hold.
 Part 1 is available at:
https://urbanrealtytoronto.com/yossi-kaplan-vs-david-madani-part-1/