Cheap money not a long term growth strategy.

Following up on the last story about Canadian household debt warnings from the Bank of Canada Devore posted a link to this BNN interview with Mark Carney.  Canadian debt levels are now higher than those found in the US, rising 7% just in the last year.

Here’s the note from Devore’s comment:

Some key points I heard:

– On mixed messages (rates low, but don’t borrow): we’re targeting inflation. Period. F has regulatory and legislative tools available to restrict borrowing.
– On tightening of lending rules: changes earlier in the year slowed consumer borrowing, but borrowing still growing faster than incomes, further tightening almost certain, 25 years amorts within realm of possibility.
– On asset-based lending: while debt is up, so are assets. But you cannot lend solely based on assets, ability to service is very important. Asset based lending tends to inflate asset prices, which drives further lending, in a cycle, not sustainable by any economy, assets eventually (de-)revalued.
– No country can grow debt faster than incomes sustainably.

Fairly light and polished, but there was no optimistic talk of future growth, prosperity, rising (asset/house) prices, employment, everything was very cautionary and low key. That the BoC is sounding alarm bells before an election, rather than keeping a happy face lid on things, I think is quite telling, and that they are expecting significant movement in the near term, and are just covering their bases.

View the interview video on BNN here.

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patriotz
9 years ago

http://www.theglobeandmail.com/report-on-business… If policy makers want Canadians to stop borrowing too much, it’s up to Ottawa, not financial institutions, to force a change in behaviour, says one of Bay Street’s longest-serving senior bankers. Toronto-Dominion Bank chief executive officer Ed Clark acknowledged Canadians’ alarming debt levels, but said the issue is a matter of public policy and would be best resolved by a tighter government rules on residential mortgages. In an interview with The Globe and Mail, Mr. Clark said that no bank wants to be the first to impose stricter requirements on borrowers out of fear that it will suffer a major loss of customers to rivals. Personal banking “is a highly competitive industry,” Mr. Clark said. “If we said ‘Look, we’re going to be heroes and save Canada from itself, and we’ll impose a whole new [mortgage] regime on everyone… Read more »

patriotz
9 years ago

@Yalie: Demand exceeds supply for everything that has a price greater than 0. That’s why it’s not free. Oh please. You can only talk about the amount of something supplied, or the amount or something demanded, at a given price. That's called the supply and demand functions. Of course there are more people who would want something for free than are willing to give it away. That's not even economics, just common sense. In any free market demand always equals supply at the market price, which is the price at which there are the same number of willing buyers and willing sellers. And with respect to RE (or any capital asset), demand/supply for the use of the asset (rental demand for RE) is not the same thing as demand/supply for ownership of the asset. The former is determined by actual… Read more »

D. Rail
D. Rail
9 years ago

@Re-diculous:

………

Vreaa @ 71:

Here you go:
http://www.cbc.ca/video/#/Show…..1696549384
………

Helmut and Tsur look like a couple of guys dredged up from West Hastings Street. Little stressed out maybe? Ha, ha. If you made up shit like this people wouldn’t believe you.

Anonymous
Anonymous
9 years ago

6 McLovin Says:

December 14th, 2010 at 9:21 pm

For those of you who think rich Chinese will bail out Vancouver:

http://www.businessinsider.com…..es-2010-12

Maybe they should buy there own empty condo’s first.

======================================

Yeah…amazing

On the domestic front….Try this simple test.

Solstice arrives soon.

When you drive by Hi-Rises etc..look up and see how many units have N-O lights on …..I say 70% on average.

What does that tell you ???

jesse
9 years ago

@Yalie: LOL you mean the demand curve is downward sloping?

Anonymous
Anonymous
9 years ago

Property taxes to rise 4.2 per cent. City's operating budget climbs to $1.03 billion
http://www.vancouversun.com/news/Property+taxes+r

Hrmmm I think I should call my landlord to fix the leaky facet, another dollar saved 🙂

stagnate
stagnate
9 years ago

yalie says: And in case you missed my other point

i think you got lost between the 10th and 11th crantini.

Yalie
Yalie
9 years ago

Stagnate, Since you're not the sharpest tool in the shed, I'll make it easy for you and use small words so you might actually understand. The price of anything – as long as someone is willing to pay even 1c for it, indicates that demand exceeds supply. Everything that has a price falls into that category. The point about the Bieber dolls – since your head is too far up your ass to get this – is that even very cheap, low-priced objects meet your criteria. The comparison with dolls and bananas was meant to demonstrate that your "supply > demand" argument is a ridiculous reason to ignore fundamental valuation. This goes for cheap plastic dolls made in China as well as West Side houses bought by cheap-plastic-doll-factory owners from China. And in case you missed my other point –… Read more »

Anonymous
Anonymous
9 years ago

87 stagnate Says:

December 15th, 2010 at 8:08 pm

YALIE DO NOT DRIVE TONIGHT

======================

Stats submit that 20% of accidents are caused by drunk drivers.

Thus, 80% of accidents are caused by SOBER drivers ( probabry Asian Dlivers in " Rexuses" going to the Roonie store @ 50% off day )

McLovin
McLovin
9 years ago

WFT? Says:

December 15th, 2010 at 12:27 pm

@Troll:

I really need your advice, please give me one good reason why I should buy that house.

ANSWER THE QUESTION TROLL!!!!

stagnate
stagnate
9 years ago

YALIE DO NOT DRIVE TONIGHT

stagnate
stagnate
9 years ago

yalie says: Although your statement that “demand will exceed supply for shaughnessy land forever” is technically true, it’s also true of bananas, iPhones, and Justin Bieber bobble-head dolls. That doesn’t make them worth 5.4 million dollars each

wow, put your post in the hall of fame. you agree with me but then say that demand will exceed supply forever for justin bieber bobble-head dolls. here's my only tip for you tonight-

Re-diculous
Re-diculous
9 years ago
Anonymous
Anonymous
9 years ago

Shaugnessy was a prime example of irrational exuberance.

When the Depression hit, many of the owners went bankrupt and the Mansions turned into rooming houses which exist to this very day.

Shaugnessy was referred to as " Poverty Heights ".

This cycle is being repeated as we speak…with monster houses having outlived their usefulness and Asians buying them up and renting out rooms

BTW everyone who votes me down can Fuck right Off .

Yalie
Yalie
9 years ago

demand will exceed supply for shaughnessy land forever. an asset of limited supply will demand a premium. depends on someones long term goals and desired asset allocation but the market has set the premium. you’re a smart guy asking a dumb question, not much more to it than that. Sometimes I wonder how Vancouver residents can be so overwhelmingly retarded when it comes to valuing real estate. And then a quote like this comes along which succinctly demonstrates the average resident's level of understanding of basic economics, and it all makes sense. Demand exceeds supply for everything that has a price greater than 0. That's why it's not free. Almost any introductory economics textbook will define economics as "the study of how to allocate limited resources in a world with unlimited demand". Although your statement that "demand will exceed supply… Read more »

Best place on meth
Best place on meth
9 years ago

@Anonymous:

#81 is mine.

Anonymous
Anonymous
9 years ago

@oneangryslav2: >>>Maybe 75% or even 80% ownership rates and price/income multiples of 5 are the new standard in Vancouver.<<< First of all, the price/income multiple is far higher than 5. If it actually were 5 I'd say there wouldn't be a major crash, just a minor correction. Secondly, before the bubble started the rate of ownership was 62%, or around 2 owners per 1 renter. If ownership rates went to 75% you would have 3 owners per renter, at 80% you would have 4 owners to 1 renter. I've already shown a chart for the U.S. and U.K. where the rate went as high as 69% before reversing course. At 80% who the hell is going to help pay the mortgages for all those new owners when they're so heavily dependent on renters? Sure, in theory anything is possible, like… Read more »

oneangryslav2
oneangryslav2
9 years ago

@stagnate:

Your quotes:

don’t confuse price into it, the quote can be taken literally.

demand will exceed supply for shaughnessy land forever. an asset of limited supply will demand a premium.

You are the one who brought price into it. Okay, I agree: People will be willing to pay more to live in the same house in Shaughnessy than if that house were at E. 49th and Knight. What further implications do you wish for us to draw from that?

Anonymous
Anonymous
9 years ago

38 Bubble Lad Says:

December 15th, 2010 at 11:30 am

I heard an ugly rumor the other day that, during that last cold snap, the heat went out at the Olympic Village development and the inhabitants (what few there were) had to all stay in hotels.

==================

Go for it.

I never had any confidence in this Bullshite technology.

Any developer and/or purchaser should lot COV be the guineau pig if this LEEDS or similar systems work. I recall Strataman's sermon on how bad the OV systems were and the specilaized personnel needed

If I won an Olympic condo in a lottery etc. I would fire sale and cash out ASAP.

oneangryslav2
oneangryslav2
9 years ago

@Best place on meth: I don't think that Troll is either of those people. In fact, I think that Troll is far from living up to his stage name since he is actually asking some very good questions. To take one example, he asks about home ownership rates and price/income multiples. Nobody here knows if 70% is the maximum possible. In fact, I don't even know how this statistic is calculated. Is it via survey, census? As for price/multiples, he's correct that just because 3.5 has been standard for Vancouver historically does not necessarily mean that it is (or should be) the equilibrium rate. What I think that Troll is implying, without coming right out and saying it, is "things are different". Not necessarily different [only] in Vancouver, but just different. According to him, we have diverged from "fundamentals" for… Read more »

jesse
9 years ago

@stagnate: "an asset of limited supply will demand a premium. "

That's right. But it's a strawman. Everyone wants to live in a mansion so mansions are in demand. Thanks.

paulb.
paulb.
9 years ago

New Listings 90

Price Changes 27

Sold Listings 91

stagnate
stagnate
9 years ago

oneangryslav says: This quote is mindnumbingly bereft of elementary economic logic. Take out your Economics 101 text and take a look at a basic supply-demand curve

don't confuse price into it, the quote can be taken literally. if you still don't understand, i don't care how bright you might be, real estate is not your gig.

oneangryslav2
oneangryslav2
9 years ago

@stagnate:

demand will exceed supply for shaughnessy land forever

This quote is mindnumbingly bereft of elementary economic logic. Take out your Economics 101 text and take a look at a basic supply-demand curve.

Best place on meth
Best place on meth
9 years ago

@Troll:

>>>And that is all based on fuzzy guesses that all the buyers are gone…<<<

No you worthless, illiterate cheerleader, my precise words were "we have few buyers left."

This is a perfect example of how the scumbags in the real estate industry lie through their teeth.

I wouldn't be surprised at all if you were Chimpman or Agent Shill in disguise.