RBC Economist on Canadian housing and debt

Regular commenter Troll pointed out this article in the Financial Post: Just more clanging warning bells about Canadian consumer debt loads and house prices:

Central to Eric Lascelles’ concern is that the availability of cheap credit has driven household debt levels to record highs and soon-to-be-rising interest rates will bear a “palpable” impact on individuals as well as the broader economy.

“The very source of Canada’s relative success during the worst of the credit crunch — a banking sector that kept on lending and households that kept on buying — could yet spell its undoing if newly enlarged household debt loads prove too onerous to bear,” Mr. Lascelles says in a report issued Tuesday.

Further, he adds: “There is a popular misconception that the Bank of Canada cannot afford to raise interest rates because this would prove too damaging for mortgage holders. The opposite is in fact true. The reality is that the Bank of Canada cannot afford to delay raising interest rates, for precisely the same reason. The longer the bank delays, the more marginal borrowers will enter the market and be walloped when rates rise, and the further home prices will go above their equilibrium levels, only to tumble later.”

Once the Bank of Canada raises its key lending rate from the current “astonishingly cheap” one per cent, rising costs of servicing mortgage and other debts will sap consumer spending. Housing prices will fall as lower-tier buyers are forced out of the market by diminished affordability.

The strength that the housing market now provides the economy will morph into an “outright drag” on Canada’s overall growth rate, or gross domestic product, Mr. Lascelles concludes.

Read the full article here.

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Anonymous
Anonymous
9 years ago

@Madashell: ….When’s the last time you have check the prices at the supermarket? and how about the shrinking sizes such as toilet paper…..

Seems right to me: you eat less -> you dump less -> less paper required.

keeperofthederp
9 years ago

@Liberty: @Keping An Eye On The Pimps:

fuck mao

he was a fat fuck

Liberty
Liberty
9 years ago

@patriotz:

Why don't you just go fuck yourself. We don't want your comments here.

fricuRomeoJordan
fricuRomeoJordan
9 years ago

Thank you Paul B

Bears, keep the faith – prices are sliding now. Be patient.

Where is McLoser?

paulb.
paulb.
9 years ago

New Listings 204

Price Changes 96

Sold Listings 92

TI:16379

http://www.laurenandpaul.ca

keeperofthederp
9 years ago

this topic again

fixie guy
fixie guy
9 years ago

75 space889 Says: ”Anyways, regardless of how they got the money, if you come to Vancouver with say $10M cash, intends to just live a good life instead of rejoining the rat race, why would you be going back to work?

Fascinating reasoning. Of what relevance is "what they want"? Canada should court contributors, not waves of the idle rich. Don't let them in, problem solved. That's the point. And those who worked and saved a lifetime here should be taxed to make importing the non-working rich more palatable? No thanks.

Anonymous
Anonymous
9 years ago

Drought in Alberta

http://calgary.ctv.ca/servlet/an/local/CTVNews/20

For shits and giggles google "Kelowna Firestorm 2003". Not to mention this years fire in Slave Lake.

That took about 30 seconds.

You really think China is more succeptible to natural phenomena?

Here's a hint – Canada is geographically bigger than China.

The number of people affected by a particular event is larger in China due to the population, but to suggest these events don't occur in Canada is asinine. Give your head a shake.

patriotz
9 years ago

@space889:

Uhm…leaving aside ideology and political science for a minute, who the fuck are you to preside over any other country and say what’s legitimate and not? Are you like God or something?

Well in a sense yes, the Bible says that I am made in the image of God, which means like all other humans I have the ability to choose between right and wrong.

However I certainly have never held myself or anyone else to be God, i.e. infallible. What regime has? Hint: it's still in power and it puts the guy's face on its money.

space889
space889
9 years ago

@patriotz: Hmm…funny I'm not exactly seeing much love of human life from you either? You love to talk about all the shit in China yet I don't see you actually getting off the keyboard and actually go help these poor souls who live such deplorable lives? Oh yeah, it's because they don't deserve it because they let a dictatorship rule over them and get exploited by corrupt people. Thus they aren't worthy of your time and help. Got it.

space889
space889
9 years ago

@Anonymous: What's the last natural disaster reported in Canada? I believe it was the Manitoba Red River(?) flooding. Other than that I can't really recall any year where there is drought in Alberta that is expected to reduce harvest level by say 20%+, while there is huge flooding in Ontario that threatens 2 million people, followed by a big forest fires that threaten to burn down Prince George, etc, etc. There are problems in North America but unless the media is just totally ignoring them, I'm just not reading enough of them in a year and the ones I read just aren't on the same scale in terms of populations being affected. Now I do believe we know more about Kim Kardarshins personal day to day life than we will likely know about her Chinese equivalent. So my perception could… Read more »

space889
space889
9 years ago

@patriotz: Uhm…leaving aside ideology and political science for a minute, who the fuck are you to preside over any other country and say what's legitimate and not? Are you like God or something? What makes your views right above everyone else? Why is Canadian government recognizing Chinese government as the legit government of China? Surely the Canadian government as a democratic elected government must act on the wills and believes of the Canadians? If the majority of them believe as you do why the government doing something else? Lastly, didn't Canadian refused an international treaty to ban export of asbetos, which are generally used in third world countries like China, India, etc where workers and consumers have no proper protection? It's banned for use in Canada due to safety issues but is safe to export for use in other countries?… Read more »

Anonymous
Anonymous
9 years ago

"China gets droughts, flood, and other natural disaster every single year. It manages through them pretty well all things considered. I doubt Canada will be handle the same magnitude of disasters as well."

as if droughts,flood, and other natural disasters don't happen on the north american continent (or any other continent) every year. or are you saying china is so special it somehow attracts more than its own share of natural disasters? and i doubt if the canadians who manage emergency services would appreciate your sentiment.

space889
space889
9 years ago

@fixie guy: When did I brag about the new immigrants? If anything I believe my stances have been that most are dirty money that should be returned to China if Canada were to do the morally right thing. Rather than the current policy of using them as political bargaining chips until their money runs out. As for the argument about how they are buying multi-million dollar homes while reporting very little if any income and drawing on social assistance. I believe we had this discussion awhile back where I said that the current method of providing social assistance purely on income rather than total asset level is flawed and will lead to abuses exactly as you stated. However my views were voted down by almost everyone on board as being bad and stupid and that it would hurt more innocent… Read more »

Alum
Alum
9 years ago

@Keping An Eye On The Pimps:

This guy is just testing.

Which idiots gave it a Thumbs down ?

space889
space889
9 years ago

@Chip: uhm…I believe there was also a 3 year natural disaster which severely hurt farm output? Yes the economic policies was bad and cause tons of problems. But the natural disaster also just made everything a lot worse than it otherwise would be. Or is that Mao's fault too?

China gets droughts, flood, and other natural disaster every single year. It manages through them pretty well all things considered. I doubt Canada will be handle the same magnitude of disasters as well.

space889
space889
9 years ago

@4SlicesofCheese: Very true though what are people who are buying these dollar store items doing to help the poor people who are paying the additional costs?? I don't see anything beside berating and scorn about what a fuckhole they live in and how they need to have free elections which will solve everything?

chip
chip
9 years ago

@patriotz:

It's true that China is messy and dangerous compared to the West. But less so than in the past. The 'pursuit of profit' is just another way of saying that China is handing over more economic decisions to individuals, and wherever this happens people tend to become freer and wealthier.

The rapaciousness that you see in China is, I think, partly what happens when communist regimes give way, because ideologies that dictate decision-making and behaviour tend to destroy civil society. Many of our virtues originate in economic behaviour dating back thousands of years, whether it's being polite to customers or insuring trust with partners in a trade.

The Chinese, like the Russians and others, need to relearn many of these virtues.

4SlicesofCheese
4SlicesofCheese
9 years ago

http://www.youtube.com/watch?v=gLBE5QAYXp8&fe

What stuff really costs. You think all that stuff in the dollar store only costs one dollar to make?

It costs you a dollar, but the real costs go to the people who live in the places where things are made and disposed.

Anonymous
Anonymous
9 years ago

@fixie guy: ….Getting rich in China and maintaining that performance elsewhere is the real hurdle……

Easy: go Vancouver, buy condo, you by tree, your husba by tree. Easy easy. 🙂

Madashell
Madashell
9 years ago

@Alum: When's the last time you have check the prices at the supermarket? and how about the shrinking sizes such as toilet paper.

patriotz
9 years ago

@Chip:

I agree that there is not widespread famine in China these days, but how many people have died or will die due to total disregard for environmental standards, lack of workplace safety, tainted food, AIDS spread from blood dealing, and what have you? I guess I should add China's slave labour camps, aka "prisons".

It's the same disregard for human life as during Mao's time. The difference today is that the goal is personal profit rather than forced egalitarianism.

Alum
Alum
9 years ago

@specuskeptic:

@Alum:

Inflation will not be an issue.

High Canadian dollar will decrease prices of imports.

i.e. making imported products cheaper at home. Thus putting a tab on inflation.

Chip
Chip
9 years ago

@patriotz:

I'd say the more important difference is that mao's economy starved and otherwise killed 30 million people

Anonymouse
Anonymouse
9 years ago

@fixie guy:

"Getting rich in China is no great miracle with their rock bottom wages, minimal worker protections, zero pollution controls, dirt cheap land and outrageous government stimulus. "

And a tripling of property prices since 2005. As I understand it many of the rich in Chinese got that way through property speculation.