What can you say about a man who spent barely four months as Canadas minister of national revenue—half that time on the campaign trail—yet has been boasting ever since that he’s an expert on financial matters because he “ran the country’s tax system”?
At the very least, Garth Turner has a flair for self-promotion. A former journalist whose moment in the political sun lasted only as long as Kim Campbell’s 1993 Conservative government, Turner has since reinvented himself as a best-selling author and public speaker on the topic of personal finance.
Reinvention is one of Turner’s strong suits. Before he en-
tered politics, he railed against the Goods and Services Tax and offered readers of his newspaper column tips on how to avoid income taxes by opening a foreign bank account. As an MP, however, Turner morphed into a defender both of the GST and the tax system. “It’s not fair that there are people who think they can get away with not paying their taxes,” he complained shortly before losing his seat in the 1993 Liberal landslide.
These days, Turner has found another cause, as a handsomely paid pitchman for the mutual fund industry. He’s written four books on personal finance, each saying essentially the same thing: that the housing market is headed for disaster early in the next century and that the best way for baby boomers to safeguard their futures is to leverage their homes and invest the money in mutual funds. He repeats that message in hundreds of speeches across the country at seminars paid for—at thousands of dollars a pop—by financial advisers and brokers. The sponsors, naturally enough, are looking for new clients. Turner’s job is to attract a crowd and then convince those in attendance to sign up for a financial consultation. (He doesn’t mince words on that score. “This event must accomplish your goal, earn you new clients and build your book, or it’s simply not worth doing,” he said in a recent pitch to the financial planning community.)
Turner isn’t the only self-styled financial wizard who plays this game. Nor is he the only person to suggest that residential real estate is headed for a meltdown as boomers retire, sell their big city homes and move to smaller houses or rural retreats. David Foot, the economist and demographer, advanced much the same argument in his book Boom, Bust and Echo, which in turn borrowed from a U.S. study by two
Harvard economists. But what sets Turner apart is the determination with which he exhorts Canadians to borrow against their homes and invest in the market. Of course, that’s precisely why client-hungry planners hire him. Many baby boomers live from paycheque to paycheque, so the only way to get them to invest heavily in funds is to push them to go even deeper into debt.
The question is, does Turner’s advice make sense for the rest of us? Is it true that residential property is destined to become, in his words, a “wealth trap”?
The answer, according to one Bay Street economist, is em-
phatically no. Derek Holt, who works for the Royal Bank and has been studying the housing market and demographic trends since 1994, says the theory that house prices will plunge in 10 to 15 years is based on a flawed set of assumptions. While it’s true that boomers represent the largest single age cohort in North America, they’ve also given birth to the second-largest. In Canada, there are 9.8 million people who were born between 1947 and 1966, and another eight million who are their children. Those boom-echo kids will enter the housing market at a pace of between 360,000 and 400,000 a year for at least the next 20 years, Holt says, ensuring a steady supply of home buyers. Add to that a yearly influx of some 200,000 immigrants and the prospect of a prolonged real estate meltdown starts to seem highly remote. If anything, Holt says,
the outlook is one of “healthy growth in demand for new home construction for decades to come.”
Holt’s research underscores a couple of other interesting facts. First, the demand for larger houses is driven by incomes and not by family size, which contradicts the theory that empty nesters will abandon their monster homes. In reality, the average size of a home has continued to increase in recent decades even though the average family size has dropped. Second, the proportion of seniors who do move to smaller residences is low and falling. The growing popularity of reverse mortgages—which allow people to remain in their homes and live off the equity—appears likely to reinforce that trend.
The Royal Bank economist is too much of a gentleman to criticize Turner by name, but the evidence is all there. If Holt is right that the housing market is going to remain healthy, what will Turner do next—become a real estate broker?
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