Household debt levels threaten recovery
Household debt levels in Canada are at record levels, higher than Greece. The Canadian reaction to recession has been to take on more debt, which has some worried about the impact that will have on our economy going forward.
Household debt has more than doubled from 1989 levels and now stands at a record $1-trillion – or $1.47 for every dollar of disposable income. With the Bank of Canada expected to raise interest rates, perhaps as early as next week, vulnerable Canadians could soon find themselves emptying their pockets to cover higher interest payments.
“The high rate of household indebtedness is a source of risk” to the Canadian economy, the Organization for Economic Co-operation and Development cautioned in a report Wednesday. It noted that household debt has swelled further in recent months – an unusual development. People usually save during recessions.
Read the full article in the Globe and Mail.
May 28th, 2010 at 2:38 pm
I'm interested in what brings the bears here. What are your reasons for wanting the market to go down?
Waiting to buy a place at a discount?
Want to laugh at an asshole home owner?
Want to laugh at offshore Chinese people?
Just want to prove that this is a bubble?
May 28th, 2010 at 9:24 am
@domus:
“Put capital gains tax on all homes”……..
Ya, that really worked in the US ti keep a bubble from forming. Governments would be crazy to do this as it would decrease their revenues. If you tax folks' capital gains, you have to let them deduct capital expenses. Big mistake!
May 28th, 2010 at 8:38 am
Oh Superlittleboy…
Don't you tire of being in your fantasy world? I will give it to you – you can be quite creative in your musings (ahem lies). But you must tire of believing that you actually own anything than you parent's basement, or that you travel anywhere than out for the local dimsum, or that you work in anything but a call centre.
You must tire of your bullishness when even the feds and banks come out and acknowledge that prices are overvalued and that there will be price declines. You see, littlesuperboy, what you don't know is that when these institutions say these things, it is already 6 months too late. The trend is already set into motion, and these boys are just covering their asses.
For your sake, I hope you get to buy something soon and cut that darn momasan umbilical cord in your parents basement.
May 28th, 2010 at 2:47 am
@Best place on meth:
Absolutely no way. A price/income of 4 is the norm for coastal California. Napa (outer SF bay area) was no doubt around 9 or 10 at peak. None of the numbers they give for other cities make sense either. Look at Las Vegas and Phoenix for example, metros which have a lot of statistical data. Price/income of 3.2 in Las Vegas at peak? That's just laughable.
May 28th, 2010 at 2:05 am
@Your time:
"It’s superlittleboy and his world of imaginary real estate purchases…
I guess he had to release some pent up bull angst with all those “negative” bank reports and growing inventory…"
Negative bank reports? Those negative reports have been around for ages. What happened to the subprime mess in the US that was going to tank Canada? You're just another lemming sucked out of reality. Fact is, gold prices are going up and it will drag up every hard asset class.
You're just another one of many bears on the sidelines waiting to buy but each time you look at open houses, you get more and more pissed because the prices are going up.
btw, I've been busy working here in Hong Kong while you bitch around on these bearish sites. I miss the laid back retired life of Vancouver and I'll be dropping by after I pass by South Africa to enjoy the world cup.
May 28th, 2010 at 2:02 am
@buff_butler: 3 months, 3 years, it doesn't matter, market prices are still going up.
Friday Free-for-all! | Vancouver Condo Info Says:
May 28th, 2010 at 1:28 am
[...] to listings ratio whiplash! -70% of sales in BC to FTBs averaging $45k income? -Who’s to blame for the housing bubble? -Watch out for thieves at open houses -60 applications so far for the 128 OV rentals [...]
May 28th, 2010 at 1:00 am
I think I got it.. the tracker is understating the numbers because Twarog's site doesn't capture all listings. Perhaps because of reciprocity.. ie some real estate companies don't allow their listings to be shared on other sites.
May 28th, 2010 at 12:51 am
For the Condo tracker..
Woodwards
128 W Cordova 31 listings
108 W Cordova 16 listings
Why the lower number on the tracker?
May 28th, 2010 at 12:42 am
Waitingforit:
Most big banks are using the 5 year posted 'bank rate' to qualify people.. 6.1% last time I checked. Means that someone who could have purchased a place being maxed out for $400k, now qualifies for about $300k. Really interesting when you run the numbers based on a rate of 4% versus 6.1%. Many of those 'pre-approvals' will find they can no longer purchase the home of their dreams.. oh well 400 sqft instead of 600 sqft.
May 28th, 2010 at 12:18 am
@domus:
Exactly. Interest is dedutible but only if you have the expectation of generating income from the tree via the crop. If you just buy a tree solely for the appreciation in value and let it sit there with no intention to produce income from it then interest is not deductible.
May 28th, 2010 at 12:12 am
Oops I was wrong. Just googled it – no replacement property rules on PRs in the U.S. But there is a sizable gains exemption and various other requirements (too much to mention here) that can be met to exclude the gain from income.
May 27th, 2010 at 11:58 pm
Great to all for the explanation, greatly appreciated!
The government's principle is: if you buy a tree and we can tax its apple crop, we will also give you a tax rebate for any debt incurred in the purchase. I get it now.
May 27th, 2010 at 11:47 pm
@domus:
Interest is deductible on a principal residence in the U.S. Sale of a PR is subject to capital gains however I believe replacement property rules may apply to defer the gain. I'm not a U.S. tax expert so take that with a grain of salt.
May 27th, 2010 at 11:43 pm
@“A-Sharp” Accountant:
I don't think capital gains qualify as "income" for the purposes of determining whether interest is deductible. So I don't think it follows that interest on a PR would be deductible just because capital gains become taxable.
For example, you can not deduct interest on a loan used to acquire shares the only income of which is capital gains when sold. You would have to demonstrate that the shares produce taxable dividend income in order for interest to be deductible.
May 27th, 2010 at 11:37 pm
@“A-Sharp” Accountant: How does it work in the US?
May 27th, 2010 at 11:36 pm
ignore the troll.
once krish was ignored it went away.
don't let the racist troll derail the bullish news. it's clear and no one could honestly be as dumb as this latest incranation of the troll. google the troll. ignore the troll it goes away.
it is wisdom but it is knowledge ignore the troll, focus on facts and stats. ignore it if it pretends to be an island hick named dave or any other type of moron. a moron is a moron. don't let the facts get skewed or taken off topic. just ignore it. it went away and it'll go to a beter site (a troll can enjoy itslef on any site and will move if there is no action)
May 27th, 2010 at 11:24 pm
@domus:
regarding taxing PR capital gains.
If they introduced taxable capital gains, then it would be logical that homeowners would be able to deduct interest directly. (without any risky S.M. stuff)
As a general rule, there is no interest deduction allowed for tax free income…so you can have it one way or the other.
May 27th, 2010 at 11:04 pm
@Inventory: that's a daily* inventory growth of 104.
*business day
May 27th, 2010 at 10:43 pm
Mar 1, 2010 = 12255
Mar 2, 2010 = 12324
Mar 3, 2010 = 12459
Mar 4, 2010 = 12670
Mar 5, 2010 = 12775
Mar 8, 2010 = 13019 **
Mar 9, 2010 = 13244
Mar 10, 2010 = 13439
Mar 11, 2010 = 13551
Mar 12, 2010 = 13609
Mar 15, 2010 = 13755
Mar 16, 2010 = 13779
Mar 17, 2010 = 13870
Mar 18, 2010 = 14042 **
Mar 19, 2010 = 14103
Mar 22,2010 = 14258
Mar 23, 2010 = 14312
Mar 24, 2010 = 14322
Mar 25, 2010 = 14446
Mar 26, 2010 = 14558
Mar 29, 2010 = 14635
Mar 30, 2010 = 14721
Mar 31, 2010 = 14679
Apr 1, 2010 = 14,667
Apr 6, 2010 = 14,832
Apr 7, 2010 = 14,915
Apr 8, 2010 = 15,221 **
Apr 9, 2010 = 15,399
Apr 12, 2010 = 15,462
Apr 13, 2010 = 15,595
Apr 14, 2010 = 15,779
Apr 15, 2010 = 15,858
Apr 16, 2010 = 15,822
Apr 17, 2010 = 15,924
Apr 19, 2010 = 16,088 **
Apr 20, 2010 = 16,305
Apr 21, 2010 = 16,340
Apr 22, 2010 = 16,496
Apr 23, 2010 = 16,579
Apr 26, 2010 = 16,741
Apr 27, 2010 = 16,846
Apr 28, 2010 = 16,866
Apr 29, 2010 = 16,918
Apr 30, 2010 = 17,039 **
May 3, 2010 = 16,799
May 4, 2010 = 16,980
May 5, 2010 = 17,089
May 6, 2010 = 17,200
May 7, 2010 = 17,368
May 10, 2010 = 17,437
May 11, 2010 = 17,598
May 12, 2010 = 17,719
May 13, 2010 = 17,922
May 14, 2010 = 18,080 **
May 17, 2010 = 18,212
May 18, 2010 = 18,319
May 19, 2010 = 18,315
May 20, 2010 = 18,360
May 21, 2010 = 18,438
May 24, 2010 = 18,423
May 25, 2010 = 18,608
May 26, 2010 = 18,681
May 27, 2010 = 18,815
May 27th, 2010 at 10:35 pm
Final numbers for today.
18,815
May 27th, 2010 at 10:14 pm
From tomorrow's Times (of London). I could hardly say it better.
"Put capital gains tax on all homes"
http://www.timesonline.co.uk/tol/comment/columnis…
Some excerpts:
Our culture is deeply imbued with the belief that owner-occupation is not just a choice but a virtue. Allied to it is the notion that if you buy a property and live in it, you are morally entitled to a tax-free profit from your exertions. These assumptions underlie the preferential tax treatment of residential property, and they damage the economy and the quality of life.
The mythology of home ownership diverts resources from investment in companies that make things or provide services.
There would be less pollution, higher productivity and more wealth if only the superstition that home ownership is the route to riches were broken.
Property has not been a particularly good investment in real terms since 1945. The recent bubble has been exceptional and has led many homeowners to borrow heavily in the expectation of further price rises. Like banks that depleted their capital reserves and increased their leverage to boost profits, these homeowners are behaving in a way that seems individually rational but may prove disastrous for the economy, and indeed for themselves.
Taxing capital gains on home sales — partially offset by the abolition of stamp duty — would break this cycle of irrationalism. It would encourage the expansion of the rental sector, and signal that prosperity will not come from continually selling each other houses on the mistaken premise that prices can only go up. It would make people better off by removing the main deterrent to choosing a job that they would truly enjoy. And it would help to moderate swings in business activity by ensuring that consumers did not regard their homes as glorified ATM machines — collateral for ever-larger borrowings.
May 27th, 2010 at 9:59 pm
@Supraboy: "I’ve been in Hong Kong for 3 months and I’ve seen my property value increase by more than 10% since I’ve bought a place. "
Wait a minute, are you talking from 3 years ago? aka the ammount of time you've been on this site (im assuming you owned a property when you blessed us with your wisdom)?
May 27th, 2010 at 9:56 pm
From the Burnaby Newsleader – they needed an impartial report on the state of real estate in the area so they went straight to a…real estate agent and a mortgage broker.
Angela Calla claims that 70% of purchases last year were by first time buyers and that the average combine income of the purchasers was 45k. How can this make any sense? How can they qualify for any useful mortgage amount?
According to Angela Calla, a mortgage broker with Dominion Lending Systems and the host of CKNW’s Mortgage Show, 70 per cent of the province’s real estate purchases last year were first-time buyers.
“The average income we were seeing last year was $45,000, either combined or from one person,” said Calla
http://www.bclocalnews.com/greater_vancouver/burn…
May 27th, 2010 at 9:44 pm
99
Lol – look who's back..
It's superlittleboy and his world of imaginary real estate purchases…
I guess he had to release some pent up bull angst with all those "negative" bank reports and growing inventory…
But its strange…you think he would want prices to become more affordable so he can take his dungeon and dragons, porn surfing, basement dwelling self above ground and move out of momasan's house..
I guess he never wants to cut the umbilical cord, hence his desire for ever increasing prices..