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No matter the politics, Trump’s wall could provide jobs, stimulus if recession strikes: Don Pittis

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If a U.S. recession is around the corner, the construction of President’s Donald Trump’s wall on the Mexican border could be an economic godsend.

Last week, the world’s most powerful central banker, U.S. Fed Chair Jerome Powell, assured us that economic growth would continue in 2019. Bank of Canada governor Stephen Poloz has been similarly optimistic.

But the forecasts after that are more cloudy.

The International Monetary Fund has already warned that the world is unprepared for the next slowdown, and the Organization for Economic Co-operation and Development (OECD) has recommended countries dust off plans for fiscal spending when recession hits.

Self-inflicted illness?

It may be that for Trump, if such a slowdown comes, it will be an example of economic Munchausen syndrome — a self-inflicted condition caused by his “easy to win” trade war with China and others.

But whatever the cause, fighting recession with big infrastructure spending projects has a long tradition around the world. 

The creation of the Promenade des Anglais, in the French Mediterranean city of Nice in the 1800s, was an early example, when wealthy English residents contributed to build a shoreline walkway to provide jobs for the unemployed and to get beggars off the street.

In the Dirty ’30s, governments organized similar make-work projects, including the deepening of Regina’s Wascana Lake, using shovels, wheelbarrows and more than 2,000 labourers.

An early plan by English architect Thomas Mawson for a giant park in the centre of Regina at Wascana Lake. In the 1930s, the lake was deepened and reshaped using shovels as a make-work project. (Saskatchewan Council for Archives and Archivists)

More recent projects have been much bigger. Before the handover of Hong Kong to China in 1997, the Hong Kong government launched a multibillion-dollar infrastructure project to build a new airport, port and road connections, to boost the economy despite uncertainty during the transfer of power.

And according to Canadian research, such spending really works. In the construction phase alone, infrastructure projects multiply the value of the taxpayer money — ​or government borrowing — that’s spent.

“Spent money on infrastructure generates, in addition to economic benefits like short-term employment and things of that kind in construction, … positive net flow to the government,” said Michael Fenn, a visiting fellow at Western University’s Ivey School of Business and former head of Ontario transport agency Metrolinx, who has been described as an “infrastructure guru.”

“The fiscal dividend for infrastructure is something like $1.60 for every dollar spent,” said Fenn.

That doesn’t include such advantages as preventing the dispersion of workers or keeping their skills fresh during a recession. And it doesn’t include the future stream of benefits to society from the project after it’s completed.

Fiscal dividend of the wall

Even at $1.60 to $1, it’s still not clear how much stimulus constructing a wall would add to the U.S. economy — partly because the amount to be spent remains confusingly disputed.

Trump’s request of $5.7 billion means it wouldn’t make much of a difference to the gigantic U.S. economy during a recession. But then neither would it make much of a wall.

Research by the Brookings Institute puts the figure as high as $70 billion, which really would create plenty of make-work jobs.

Hong Kong’s Tsing Ma suspension bridge is shown under construction before the 1997 handover of the Crown colony to China. It’s an example of stimulus with a large, long-term return. (Reuters)

There are at least two problems with the wall as a make-work project. One is that if the project really did start soon, before recession hit, there might not be enough workers to build it. (The irony of importing labourers from South and Central America to do the job would be too much.)

With U.S. unemployment at the lowest it has been in nearly 50 years, building a wall now could very well drive up inflation, giving the Fed one more reason to raise interest rates.

The other issue to be considered is long-term value creation, which studies consistently show can be the biggest payback for infrastructure spending. On well-chosen projects, it dwarfs the immediate $1.60 to $1 ratio of the original stimulus.

Money well-spent?

Sometimes the stimulus itself is well worth the money spent. The long-term benefit — as in the esthetic advantage of the Promenade des Anglais or Wascana Lake — may be hard to measure. 

Jackie Schmidt, president of Heritage Regina, says the beautification of the enormous artificial lake in that Prairie city was worth the money. “I think the product was worth it, no matter how you paid for it.”

But it’s not clear if anyone would spend the money the same way now.

The economic payback of Hong Kong’s giant construction project was easier to measure, maintaining the former British colony’s place as a transport hub, even while mainland infrastructure grew up in competition.

The long term value of a wall?

Trump’s belief that it would be a barrier to drugs or terrorism has been widely discredited. There might be a certain economic advantage in making Trump supporters feel more secure — though that is hard to measure.

And should the existence of a wall prove to be a deterrent to would-be border crossers, the humanitarian benefit of reducing the number people who die in the desert would certainly have value.

Building a wall along the U.S.-Mexico border would create jobs, but it might not add as much value as other would-be infrastructure projects. (Kevin Lamarque/Reuters)

But even in a recession, the value of a make-work project must be assessed in many ways.

“The first question you would ask is, ‘Is this the best way to address the issue?'” said Fenn. The second critical question, he says, is among all possible projects, does this one provide best value for money?

“In Canada, a project like the wall would compete with a whole lot of other things in health care, education, transportation and telecommunications to see where the money was best spent.”

Andy Manahan, executive director of the Residential and Civil Construction Alliance of Ontario, says his members profit from construction spending — whether it is wise or not.

For the best projects, the value of doing such things as removing transportation bottlenecks or preventing costly flooding can be easily shown to pay their costs back many times over in increased business activity or reduced future expenses.

“On the other side of the coin, if you do short-term political thinking,” he said, “then you may be spending on projects that have a negative return, which you don’t want.” 

Based on his long experience in the industry, Manahan said he suspects that Trump’s wall is of the second variety.

“My personal opinion is that it’s a waste of money and time.”


Follow Don on Twitter @don_pittis

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Window repair or replacement is the responsibility of the condo corporation

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If the windows in your condo are hazy, drafty, or have rotting frames, it’s an indicator that they need repairs or outright replacement.

However, under the Condominium Act, it is the responsibility of the condo’s board to carry out such changes as a replaced window is a common element.

“Under the Condominium Act, a declaration may alter the maintenance or repair obligations of unit owners and the corporation but cannot make unit owners responsible for repairs to the common elements,” said Gerry Hyman is a former president of the Canadian Condominium Institute and contributor for the Star.

“A declaration for a high-rise condominium invariably provides that the unit boundary is the interior surface of windows. That means that the entire window — whether it is a single pane or a double pane — is a common element. Necessary repairs or replacement of a broken pane is the obligation of the corporation.”

According to Consumer Reports, selecting an installing windows replacement can be very overwhelming for homeowners. Therefore, if you aren’t covered by your condo’s corporation, it would be necessary to hire professional hands.

Wood, vinyl and composite windows need to be tested on how they can withstand various natural elements. For wind resistance, a window can be very tight when it’s warm but get quite cold too—especially when it begins to leak a lot.

Whatever the case may be, the bottom line remains that replacement windows can save you heating and cooling costs, but it’s best not to expect drastic savings.

Additionally, while getting a new window might help you save on your electric and gas bills, due to their expensive cost, it may take a long time to offset their cost.

Mid-last-year, the government withdraw a $377 million Green Ontario program that provided subsidy on windows to installers and repairers. Window companies had to install energy-efficient windows in order to qualify for the government subsidy that pays for up to $500 of a $1,000 to $1,500 window.

Due to the largely generous subsidies from the government under the Green Ontario program, a lot of window dealers were fully booked for months—even after the program had ended.

“We’re fine with the program ending, we just need more time to satisfy consumers,” said Jason Neal, the executive director of the Siding and Window Dealer Association of Canada, the industry group representing window dealers in a report.

According to Neal, the Progressive Conservatives acted hastily, making massive changes with no prior notice.

“No notification was given to us by anyone,” he said, noting he learned about the change through one of his dealers.

“It’s created a ripple effect.If they had just given us notice we would have pushed that down the line from the manufacturer right into the dealer right down to the consumer.”

Neal noted that he wasn’t particularly sad to see the Green Ontario program end, as it was “the worst rebate program in the history of the window industry.”

“It’s been horrible,” he said. “$500 a window has created such hysteria.”

However, despite the program ending about a year ago, numerous homeowners have been contacting window dealers consistently with concerns that they might not be able to afford replacement windows without the government’s subsidy.

“I understand their concern,” said window dealer Chris George. “I would suggest they reach out to their local representative of the government in their riding and let them know about their concerns.”

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7 Vancouver Real Estate Buying Tips

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The real estate market in Vancouver is turning around for good for everyone looking to purchase a home.

Previously soaring prices are now beginning to ease up, making it a perfect time for buyers—with real estate agents already getting ready for a very busy spring and summer season.

However, before splashing cash on a new property, there are some very important tips you need to know to ensure you make the most of the buyer’s market.

Here are some few expert tips that would guide you when purchasing a home in the sometimes frustration Vancouver seller’s market.

  1. Get adequate financing

It is very important that before you make the move to purchase a property, you put into careful consideration your credit score.

Normally, home buyers with lower scores use the secondary mortgage market to finance their purchase, as they’re more likely to pay a higher interest rate.However, it is advisable to get loan approval long before purchasing the house. This way, you are fully aware of how much you are able to spend—but never be tempted to borrow the maximum amount of money available.

“What’s your mortgage payment that you’re comfortable with? And take into the fact the taxes you’re going to have to pay, if it’s a strata – what the maintenance fees are, if it’s a home what type of maintenance are you going to have to pay in the future?” said Phil Moore, president of the Real Estate Board of Greater Vancouver in a report.

Always be careful of the type of loan you secure and ensure that you can comfortably afford it over a long period of time.

  1. Get a real estate agent

Buying a property without professional help is a very risky move and can be likened to choosing to represent yourself in court without a lawyer. While you might trust your negotiation skills, only realtors are permitted to present offers directly.

Therefore, it is necessary to get a professional real estate agent in the area to represent you. So, screen a few agents and select the best one who has in-depth knowledge of the markets and has a great reputation.

“They’re there to protect you. They’re there to walk you through each step of the process,” Moore said.

  1. Sign up for automated alerts

Most—if not all—realtors have access to the Vancouver real estate board’s database which is updated approximately two days before the public MLS website.

Therefore, you can request from your realtor to sign you up for automatic real-time alerts of all new listings. Doing this gives you an edge as you’re among the very first to know about new properties.

  1. Do a thorough inspection

After receiving an alert for a new listing, it is necessary to push almost immediately for an inspection from your realtor. In this current market, buyers now have time to make an inspection.

Making a quick inspection eliminates any surprises—as there could be major maintenance or repair issues that could spring up. Therefore, you can now table your offer based on the outcome of the inspection, with clauses about claiming your damage deposit back if everything isn’t as was advertised.

Additionally, if you notice that renovations were done, you need to be sure that it was permitted work and carried out appropriately. Failing to do this would ultimately lead to further cost down the line and simultaneously affect the resale value.

  1. Have a back-up plan

There’s always the possibility that everything may not go as smoothly as you’d want. From the inspection being a failureto the property not living up to your expectations—or not being able to agree on the closing date that matches with your needs.

However, a professional real estate agent will definitely help you get past all of these things. If you plan on selling the property as you buy, you can table that and make it part of the deal.

“You’ve got an option, especially in a buyer’s market: you can put in an offer subject to selling your place. So maybe you want to have a place lined up,” Moore added.

Additionally, building contingencies into your buying plan is necessary. Things such as unexpected delays in closing the deal, closing cost and moving costs that could result in added living expenses if that’s your permanent home.

  1. Don’t fall for the buyer frenzy

The Vancouver market buying frenzy that caused a serious climb in the prices a couple of years ago has ended. Thus, it is important not to get caught up in bidding wars with properties that have been deliberately under-priced—with the hope of initiating multiple offers.

“Some of the sellers have been on the market for over a year and they’re eager to sell. So what I’m saying to consumers is: you have a lot of choices, you’re in the driver’s seat, let’s go out and take a look at what’s available,” said Moore.

  1. Never be wary of multiple offers

When purchasing a property, don’t be afraid of multiple offers as you have the same opportunity as anybody else.

Typically, there are just a few offers below the asking price: a couple priced fully, and two or three above the asking price—depending on how close the fair market value is from the asking price.

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Do you know what kind of condo you’re buying?

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(NC) Condominiums can come in all shapes and sizes. But it’s important to know that not all condos are created equal when it comes to warranty coverage.

Whether you’re buying a condominium townhouse, loft-style two-bedroom or a high-rise studio, they are all classified as condominiums if you own your unit while at the same time share access (and the associated fees) for facilities ranging from pools and parking garages to elevators and driveways, otherwise known as common elements.

The most common types of condos are standard condominiums and common elements condominiums. The determination of how a condominium project is designated happens during the planning stage when the builder proposes the project and the municipality approves it.

When you’re in the market to buy, you need to know how your chosen condo is classified because it affects the warranty coverage under the Ontario New Home Warranties Plan Act. Standard condominiums have warranty coverage for units and common elements, but common elements condominiums only have unit coverage.

How could this affect you as the owner? If your condo complex has underground parking and, for example, there are problems with leaks or a faulty door, the condo designation will determine whether there’s warranty coverage.

If your unit is a standard condominium development, then the common elements warranty may cover the repairs. If it’s a common element condominium development, then repairs might have to be covered by the condo corporation’s insurance, which could impact your condo fees or require a special assessment on all the owners.

To avoid surprises, you should have a real estate lawyer review the Declaration and Description attached to your purchase agreement to be sure that you know the designation and boundaries of the unit you’re looking to purchase. Find more information on the types of condos and their coverage at tarion.com.

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