[WGC] The Reality of the Canadian Housing Market
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by Dade Pendwyn
As much fun as it is to speculate on the apparently apocalyptic consequences of a 20% import tax decrease, how about we pause all the hearsay for a moment and look at some actual numbers.
In order to give this article some authenticity, I've used the stats of an actual Q1 housing company in Canada (hint: it's owned by somebody who's making a lot of noise). As I don't have this company's wage figures, I used the current job market wages, and then added a bit just to be on the conservative side. After all, I'm here to give housing manufacturers a good shake. Here are the wages I use😛
Skill 4 - 6.5 CAD (1 CAD higher than next Q1 offer)
Skill 3 - 4.3 CAD (0.3 CAD higher than next Q1 offer)
Skill 2 - 3 CAD (same as highest Q1 offer)
Skill 1 - 2 CAD (0.2 CAD higher than any skill 2 offer)
Skill 0 - 1.5 CAD
Here are the stats I turned up for this company (which, keep in mind, is a real company) with those wages:
*Note: Employees in this company who had not worked in several weeks were removed from the equation, though I still took into consideration their employee bonus. Also keep in mind that this company has decent wellness among employees, but not great. In other words, it would be easy to achieve these same results.*
Production: 0.695 Houses produced per day
Raw Materials Cost: 65 CAD per house (0.325 CAD per wood)
Total Wages per day: 61.9 CAD
Total Wages per house: 89.06 CAD
Total Wages per house + Raw Materials Cost per house = Break Even Price
Break Even Price: 154 CAD
Previous Q1 House Price: 212 CAD before taxes
Profit at Previous Price: 58 CAD per house, or a 38% profit
Current Q1 House Price (after import decrease): 190 CAD before taxes
Profit at Current Price: 36 CAD per house, or a 23% profit
In other industries you'd be ecstatic to get a 20% profit, especially in a Q1 sector where it's usually impossible to make a profit. Now let's consider also that those other industries pay usually 10% income tax, and 10% VAT, while the housing industry pays 2% income tax, and 3% VAT. Let's also keep in mind that the price of Q1 houses may not stay as low as they are now, seeing as there's only one producer with houses on the market below 200 CAD.
So there you go. For all the noise being made about the new housing tax, I figured I'd actually throw in some numbers for everyone to grapple onto. These numbers are fair, and if you contact me I'll tell you what company I used, so you can check the numbers yourself.
Call it what you want, but a 23% profit that is taxed only 2% in a Q1 is far from catastrophic. This new tax has taken house prices from "barbaric", to "approaching fair".
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15% still hurts. It's like squeezing into a pair of old pants a week after Christmas. You know you gotta cut down and get lean before it's gonna work out. Let's hope the housing manufacturers can adjust to the squeeze.
great article. also, nice simile plugson🙂
I just bought my first over-priced Q1 house for 6.7 gold!
Facts, numbers, and real evidence.....puts the housing sector response into context, thanks for the expose Dade!
First of all the price of wood has only gotten that low yesterday. It's been 10-20% higher in the previous couple of weeks.
Secondly, I'm not sure I understand how you came to the total wage per house number. Shouldn't you multiply the total wages per day by 27.4% since one days production is 0.726 ?
This is how I would see it with some slight corrections to your numbers.
Production: 0.726 Houses produced per day
Raw Materials Cost: 75 CAD per house (0.375 CAD per wood)
Total Wages per day: 77.45 CAD
Total Wages per house: $98.67 CAD ($77.45 x 27.4😵
Break Even Price: $176.12 CAD BEFORE TAXES
Break Even Price: $181.40 CAD AFTER TAXES
These numbers are more realistic. You can figure out the %ages if you like. I don't have time. But I hope you can see why I'm pissed off. And just to note: I believe you'll be seeing the Wood industry up in arms very shortly.
MIB, you're right about the wages. Not sure how I got that number, must have punched it in wrong. I switched it up.
You're wrong about wood, though. It's gone down again, and there are huge supplies of wood in Canada. I've readjusted the wage figures, and also the raw mats figures.
Keep in mind this was me being VERY generous to house manufacturers. This company had below average wellness, so it could easily make even bigger profits with some wellness initiatives.
And MIB, if you think 20% profit on a Q1 sector is a reason to be pissed off, you clearly know next to nothing about business in eRep. Especially when that 20% profit is getting taxed 8% less than every other industry in Canada.
Ok I fixed the anomaly. I forgot to take out the wages of the dead people from the "wages per day", but I took them out of the "wages per house". That's why the numbers were off. I fixed it now, but the profit %'s remain the same. I also took them out of the equation for production, obviously, except for their employee bonus.
Informative.
I don't believe I'm wrong on the price of wood. I've been buying thousands of units of it lately.
As for your numbers, you can keep juggling them, and be as generous, as you want, you're still pretty much guessing. I suggest you ask the state owned Canada Housing for their numbers. Don't know if Gov't companies are allowed to publically post their budget/income statement or not. But they've been selling houses for quite a hefty sum. If they couldn't afford to sell them for cheaper, what makes you think everyone else should have to?
"People can come up with statistics to prove anything, Kent. Forty percent of all people know that."
😃
"you clearly know next to nothing about business in eRep."
You're probably right, this is my first company and I don't want it to fail. If it does, it'll probably mean the end of my eRep. experience. If it's the policy of this Gov't to bankrupt it's citizens, then I suppose I won't miss the game that much.
M I B, I didn't make up any statistics. I used YOUR company info and I posted the wage info I used, so you can check all the numbers yourself. Everything is out in the open, that's how I do my numbers.
I understand your worry, but don't worry. My first company is in a horrible industry (moving tickets - 0% chance of profit essentially), and if it fails it's not a big deal. It only takes a month or so to get 20 gold.
I'm not saying anything about government housing companies. I agree with you. In fact, I think they should be abolished. Royal Canadian Air Force is pumping out disgusting numbers of tickets (17 employees or something ridiculous) into an industry that is already waaaay oversaturated. It's stupid, and it hurts the economy.
You should be pleased with these numbers. It shows that you can still make a VERY good profit even with the new taxes. New taxes can hurt business owners, but I guarantee you that you'll still be fine after this tax change. Keep in mind you've still got it a lot better than the rest of Canada, tax wise. A lot.
M I B, you can not compare numbers of a private company with a government owned company who employes 40 people, 20 over optimal number whose primary mission is to train canadiens.