In my home town of Calgary, real estate prices have been going through the roof (pardon the pun) and I have noticed that it is really impacting the spending mood of people in this town. I am still a pretty young guy, and I am looking around at some of the things that are being purchased by my age group (early 30s) and I start to get a bit worried. There are more Porsche’s, Burberry bags, and other items flying out of Holt Renfrew (very high-end retailer in Canada) than I have ever seen.
Sure, wages are going up in Calgary and there some pretty good value in stock options for those of us in the oil and gas business, but the cost of living is also going up tremendously. As an individual in the HR field, I have a pretty good idea of what people are earning out there and there is no way that the number of people buying these big ticket items is in line with wages. Even at $100,000+ in salary (or double that for the double income no kids crowd), most of these young people would still be struggling to live here while buying these items at the same time. The only way I can figure it is working is via debt tied to skyrocketing home prices.
Many properties in Calgary have double in the last year. This makes it SUPER easy to go an get a LOC against the house. In know because my bank called me and asked me if I wanted one. These things are being bought using borrowed money, and I think that anyone with a head on their shoulders knows what that means. Frankly, it scares the sh!& out of me. What happens when it bursts? Not a position I want to put my family in, that is for sure. Anyway, I know this seems like just another doom and gloom article about the economy, but I really believe that this “trend” will come around and bite some of these people. What is more important to me is socking away money so that I earn more passively and enjoy life with my kids – hence my dividend investment strategy.
But at least they will have had a Porsche.Google+