Wednesday, April 9, 2008

The grass is always greener on the other side.

While the U.S. has experienced a downturn in its housing it seems that Canadians are still riding a real estate wave. The city of Toronto is having itself a condo boom. I say good for them. I hope that they keep it up for as long as possible. One interesting point on Canadian mortgages that the article mentions and that I did not know: “Canadians can’t deduct interest on their mortgages from their income tax like homeowners in the States, [so] people here tend to pay off their mortgage faster.” I’ve always felt that the mortgage interest deduction basically works as a middle-class entitlement. Should the federal government continue to have this tax-break when there are plenty of institutions around to lend (yes, even when times are tough) to qualifying consumers? Is it possible that this incentive is one of many factors that have driven undue speculation in the real estate market? I do believe that it has done so. Of course, abolishing such a popular tax-break would be politically unfeasible in the U.S. Our Canadian neighbors have correctly avoided this entitlement trap.

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