Thursday, June 28, 2007

London celebrates: "At least we're not Windsor!"

The Real Estate Investment Network (REIN) has released its updated list of top ten real estate investment towns in Ontario, analyzing "current and future prospects for real estate investment opportunities in the province, and identif[ying] the ten best towns and regions for long-term investing." So, where does London fit?

1.      KWC — Kitchener, Waterloo, Cambridge
2a.     Simcoe Shores — Barrie
2b.     Simcoe Shores — Orillia
3.      Durham Region — Whitby, Pickering and Ajax
4.      Markham
5a.     Hamilton
5b.     Brantford
6.      Brampton
7.      Ottawa
8.      Toronto (!)
9.      Oshawa
10.     Whitchurch–Stouffville

The Farm team, receiving honourable mention, is St. Catharines (Niagara region), Guelph, Orangeville, Aurora and Newmarket, London and Mississauga.
City councils in London over the past decade have relied heavily on the growth in the assessment base to reduce the impact to individual ratepayers of tax increases greatly exceeding the rate of inflation (4.8 per cent this year). Just how sustainable is this political strategy?

Update: Thucydides in the comments:
While London may have seen economic and population growth in the 2-3% range, spending and taxation growth has far outstripped this. Relying on assessment growth to mask the spending increases is not only dishonest, but also sets the city up for economic disaster once the development bubble bursts.

Yes, it could bust due to self inflicted injuries at city hall (which would be poetic justice indeed), but many external factors both in Canada and abroad can also burst the bubble. Do you think the people in city hall have considered the effects of a Democratic presidential victory in 2008, for example? (Hint; large US tax increase and general slowdown of the US economy).

Since London is already unattractive to investors, the results of a dramatic tax hike to cover the declining assessments or an enforced stoppage of expenditures due to lack of funds can only make matters worse. As a small consolation, most of the attractive places to invest listed above are only a two or three hour drive away. You might still be able to commute to work......

4 comments:

Jake said...

To be fair, most of the top ten cities are located in the GTA region, who have experienced double-digit growth in both population and assessment over the last five years. Huge assessment growth in a short amount of time has many negatives for taxpayers as well.

For example, the town of Milton (Halton Region)has grown from 30,000 in 2001 to 54,000 in 2006. This has led to a huge burden for the town's taxpayers since they have to spend millions for road widenings and sewers to service the new growth.

London has a more stable growth rate (2-3% per year) which is in line with both inflation and our population growth. This is sustainable just as long as city hall doesn't start to irritate the developers with red tape.

The problem is that city hall is now starting to interfere with the development industry and that could hamper our assessment base in the future. Tax increases will have to pick up the slack for a reduced assessment growth rate.

Therefore, I'm more worried about the activist bloc at city hall getting too much power and making too many bad decisions with development. This would make our tax situation worse than what it already is.

Thucydides said...

While London may have seen economic and population growth in the 2-3% range, spending and taxation growth has far outstripped this. Relying on assessment growth to mask the spending increases is not only dishonest, but also sets the city up for economic disaster once the development bubble bursts.

Yes, it could bust due to self inflicted injuries at city hall (which would be poetic justice indeed), but many external factors both in Canada and abroad can also burst the bubble. Do you think the people in city hall have considered the effects of a Democratic presidential victory in 2008, for example? (Hint; large US tax increase and general slowdown of the US economy).

Since London is already unattractive to investors, the results of a dramatic tax hike to cover the declining assessments or an enforced stoppage of expenditures due to lack of funds can only make matters worse. As a small consolation, most of the attractive places to invest listed above are only a two or three hour drive away. You might still be able to commute to work......

rhebner said...

I was raised in Windsor and didn't move away until graduating college. I was in your fair city about a month ago visiting family.

That being said, London is a golden city on a hill compared to Windsor. London has a downtown, Windsor has a sleazy strip club filled main street. London has white collar jobs, Windsor has illiterate factory workers (I spent a year in one of them, I oughta know). London has a rather nice ballpark and arena, Windsor has a decrepit old barn for hockey.

I know it's easy and popular to 'diss' your home town and the local political shenanigans, but compared to my home town, you've got it mighty good.

Thucydides said...

Rhebner, you are also describing the future look of London. The "nice ball park and arena" are not economically viable, and only stay open due to dollops of taxpayer cash (the same people who don't attend events at these places, by the way). The white collar jobs are slipping away, with telemarketing and call centres becoming the big new employers in London. To be fair, I suppose you need to be literate to succeed in those fields, but primary industry (those factory jobs and workers you seem so down on) is giving London a pass, so the economic base is pretty much without foundation or roof.

We have it good only as long as we can "live off the fat of the land", but as a long term strategy it is as viable as slash and burn agriculture. Productivity requires work, and people only work when they reap the rewards of their effort. London's median income is already lower than comparable cities in Ontario, how long before we go from a slow deflation to an abrupt crash?