2010 Federal Budget

Yesterday at 3:30pm eastern, our Finance Minister Jim Flaherty, announced what the Canadian budget would be for the next 5 years. Click on the link below for a breakdown of this budget. When you are in this page, focus on the right hand column entitled "Budget Highlights"

http://www.bnn.ca/15921.html


Jonathan's Opinion

What I gather from this is that within the next year, our government will spend approximately $49.2 billion on things that should help with our economic recovery.

Everything that the stimulus money is being spent on is very important, but what people have to understand is that all this money will have to be repaid between 2011 and 2015. If you look at how much has to be paid back within each year, the average is about $13.5 billion per year.

How can we possibly come up with that kind of money?

- Our taxes will have to go up. (HST is one form of increase)
- Our insurance premiums will have to go up. (Most businesses will have to pay higher employment insurance premiums to pay for the increasing support that has gone to the legions of unemployed, many of whom have still not found jobs)
- Our interest rates will go up.

How does this affect the real estate market?

Overall, if taxes increase, premiums increase, and interest rates increase, Canadians will generally have less money. Therefore, they will also spend less money on items because borrowing money will be too expensive due to the increase in interest rates, and saving money will be more enticing because the higher interest rates will yield a better return on their money iif they have it in GIC's or their savings account.

When people have less money to spend, they will not buy many things, especially expensive things, such as houses. If not many people are buying houses, demand decreases. If demand decreases, prices of houses will also decrease.

Therefore, I do believe that a correction in housing prices into 2011 is inevitable. How much of a correction is unpredictable for now.