IMF thinks you have too much debt

Those old fogeys at the International Monetary Fund are raising their eyebrows at consumer debt in Canada again.

“Developments on the housing front require increased vigilance, and consideration may need to be given to additional prudential measures to prevent a further buildup in household debt,” the Washington-based IMF says in its latest economic outlook for the Western Hemisphere.

Clearly they don’t understand that it’s different here. Tell ’em Mr. Flaherty.

For his part, Mr. Flaherty says he’s satisfied he’s done enough to curb the accumulation of mortgage debt.

The finance minister said in New York on Wednesday that he would need to see “clear evidence of a bubble in the housing market in Canada, which we have not seen,” according to a report by Bloomberg News. Mr. Flaherty defined a bubble as “dramatic surges in prices in some part of the country.” He also said the measures he took in January have led to “some softening in the Canadian housing market.”

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registered
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registered

All Flaherty and his keeper need is to hold property prices until a culpable global trigger arises – for example a China correction – then express deep concern about our collapse and spew sound-bites of things not in their control. "The dog appeared out of nowhere, holding the accelerator to the floor wasn't a factor. Unlike other crash countries, proud Canadians can drive 250 kph."

jesse
Member

@fixie guy: The game has to be played, unfortunately. It's more popular to blame others for problems of our own makings.

The IMF wagging is rich; these are the same ones advocating extreme austerity on Greece as their wealthy classes flee the county with the spoils. Where were they 6 years ago when insiders were already sounding the alarm on sovreign debt issues? What did they think spreads on Greek debt were signalling back then, a free lunch?

Anonymous
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Anonymous

@jesse: First in first out does get a free lunch. People who come late to the bubble cafe get no lunch at all but they have to pay everyones bill.

patriotz
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@fixie guy:

The electorate will decide what the Cons need. Canadian voters don't have a history of accepting external causes for Canadian problems – except in the US, but the US has already tanked.

You're also being too Vancouver-centric. East of the Coquihalla the country cares a lot less about China than you may think. And they have never cared about Europe.

registered
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registered

4 patriotz Says: "You’re also being too Vancouver-centric. East of the Coquihalla the country cares a lot less about China than you may think."

As of earlier this year I am far east of the Coquihalla, in no small part in anticipation of what I believe must happen west. China was, as stated, an example. If you prefer European instability from a Greek default, it really makes no difference to the argument that they'll choose an external event which under normal conditions would create a little volatility in Canadian markets as a place to hang the catastrophic collapse of the real estate bubble they fueled. The Canadian voter will accept it, the same way they accepted the recession appeared out of nowhere the week after the Conservatives finally won their majority.

Flip Flop
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Flip Flop

at the end of the day, there are many to blame, but I think it's fair to say that no further action to cool the housing market need be taken. It would only exacerbate what's to come.

Not to mention the ill effects of changes to national housing policies, on communities that are not as inflated as ours.

As much as I would like to see 20%/25 as the minimum requirement for financing, I think those changes are best left for cooling hot RE markets of the future. Hopefully those at the helm will have the foresight and testicular fortitude to actually do that when the time comes.

FF

Anonymouse
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Anonymouse

@patriotz: "And they have never cared about Europe."

Even Montreal?

patriotz
Member

@Anonymouse:

Quebec has historically cared a lot less about Europe than the rest of Canada.

You might start by looking into their attitudes toward WWI and WWII.

patriotz
Member

@Flip Flop:

"I think it’s fair to say that no further action to cool the housing market need be taken. It would only exacerbate what’s to come."

No that's backwards, because the longer the bubble goes on and the more people buy at inflated prices, the more people will get hurt, both directly and indirectly (e.g. businesses leaving due to high housing costs).

The optimal outcome would be for prices to drop in half tomorrow.

buffates
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buffates

Just spoke with a client of mine up north in 100 mile. He was saying that he wants to buy some more stock but he has to wait to sell some property until it recovers to where it was earlier in the year. I see this as a pervasive example of the mindset that people have with houses as well as the stock market which is that they won't sell until their even or up on it when in many instances you should sell for a small loss early than have to wait the market to come back which can take years. And sometimes it never comes back.

Guy Smiley
Member
Guy Smiley
To deny there is a problem might be good politics for Flaherty and co. but is sheer financial idiocy for any homebuyers out there. But the inevitable crash just isn't happening fast enough for me. I came back from overseas 2 years ago and have been awaiting a real correction since then. Despite all the well-informed rent vs. buy metrics that have been discussed on this blog however, paying rent really does gall me. I'd feel much better about it if i had rental income from elsewhere offsetting it. Is american RE a good investment yet? Anyone here own one and rent one out? I'd love to hear about the experience if so. Is there taxation on both sides of the border from the income? I know that property tax for foreign owned properties is high in the US. Thanks… Read more »
Mark
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Mark

patriotz Says: “Quebec has historically cared a lot less about Europe than the rest of Canada.”

Really? Do you read anything else outside North Shore News?

Quebec is going to care quite a bit about Europe and China in the future.

Caisse de depot's Michael Sabia says Quebec not immune to market turbulence

“Despite its massive size, Quebec's Caisse de depot isn't necessarily safe from the turbulence shaking global economic markets, chief executive Michael Sabia said Wednesday.

Sabia took aim at Europe's political leaders, saying they need to act soon — and decisively — to deal with the crisis.

''It's important that they make decisions — and quickly,'' he said.

''If it takes months and months'' to react, the [b]Quebec economy could be adversely affected, [/b]he added, reflecting similar remarks over the last few days by federal Finance Minister Jim Flaherty.”
http://www.winnipegfreepress.com/business/breakin

pipewrench
Member
pipewrench

@Jay Bytha Way:

http://www.cnbc.com/id/44535325/

Bottom line, despite record-low mortgage rates, Americans aren't buying enough homes.

That is largely because they can't qualify for those low rates and because they don't want to buy into a housing market that is still depreciating

Rents are starting to increase because so many people are on the sidelines. If the area is stable with employment and a good return on rent is available it might be time to take the dip.

patriotz
Member

@Jay Bytha Way:

"Despite all the well-informed rent vs. buy metrics that have been discussed on this blog however, paying rent really does gall me."

Do you have your own electrical generator or do you rent BC Hydro's? Why?

Renting simply means paying someone else for the use of their capital. Everyone is a renter of something, and anyone who owns capital used by someone else is renting it out. That's what the whole economy is based on.

"I’d feel much better about it if i had rental income from elsewhere offsetting it."

That's what I do, but I don't rent out RE, I rent out my pipelines, telecom networks, oil production facilities, etc and I rent my residence from someone else. My yield is a lot better than his.

VanRant
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VanRant

What a mess Flaherty had created. He had created a bigger bubble in Canada than Greenspan had in the United States. When it blows up, it will be the biggest economic collapse in Canadian history. His name will be dirt.

gordholio
Member
11, Jay: I sold my home up here a year ago and am now renting (and am extremely happy to be doing so) But I too am looking around to maybe, potentially, possibly buy something in the US to rent out to others. I've owned land in the US before (during the early 00 run-up), but I've never owned anything with a structure on it. If we do buy something down there, it's going to be nearby so I can do my own property management (finding renters, etc) and so I can check up on it personally by driving to it in less than 15 minutes. I do know that technically, as a Canadian, you're not allowed to work on a rental proeprty yourself. I mean, some people do it, but they run great risks. I *think* you basically pay… Read more »
jesse
Member
Michael Pettis: BRICS to the Rescue Since the crisis we have seen consumption growth in the US and peripheral Europe drop sharply as households deleveraged. Of course we have also seen real estate investment in both regions drop sharply. The only mitigating trend was the surge in developing-country investment, with China driving that surge to astonishing levels, which created some additional global demand to counterbalance the decline in all the other major sources. But even leaving aside the fact that much of the increased investment will almost certainly turn out to be value destroying, the purpose of investment today is to serve consumption tomorrow. I do not believe that US and European consumption growth will return for many years, and the fact that the investment surge in places like China, because they are generating debt-servicing costs much faster than they… Read more »
patriotz
Member

@gordholio:

"And, to me, it doesn’t make any sense at all if your property doesn’t appreciate."

Correction:

Renting out RE doesn't make sense at all if you expect your returns to come from appreciation.

Anonymous
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Anonymous

@gordholio: So you plan on buying right across the border in the Blaine area? Are you sure the rental market is ok in this region? I'm worried personally that everything is quite depressed in terms of rentals until you get down to Seattle.

Why wouldn't you get a mortgage on the place to avoid tying up too much cash? 30 year mortgage rates are quite reasonable in the US. From what I understand, the mortgage market is not completely closed to Canadians who have a good down payment.

Are you legally allowed to manage a property from Canada and cross over the border to show it?

Pipa
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Pipa

gordholio Says "Yet I’m still not convinced it’s a great way to spend (invest) our money. Dealing with people living in your house can be a hassle if you don’t get the right people"

Better spend spare time fishing 🙂

Pacifica Partners
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Pacifica Partners

Canadian Real Estate Chart Book

http://www.pacificapartners.com/blog/2011/10/06/c

Alum
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Alum

He was an inventor with more than 300 patents to his name. He was a college dropout. He was a billionaire who wore jeans to work.

He was one of the world's great persuaders, coaxing millions of people to try technology they had never considered before. He was an angry perfectionist. He was the world's best- known corporate chief executive.

He was Steve Jobs.

Anonymouse
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Anonymouse

@patriotz: "Quebec has historically cared a lot less about Europe than the rest of Canada. You might start by looking into their attitudes toward WWI and WWII."

I'm more interested in their attitude today, not how it was 70 years ago.

Laibach
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Laibach

Out of topic but still relevant… beside making province mor totalitarian are these clowns think this approach will resolve issues that folks in BC have, unbelievable.

http://www.winnipegfreepress.com/canada/breakingn

bubba
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bubba
Recommended….history repeating itself American Holocaust Part 1 ( 5 parts ) http://www.youtube.com/watch?v=eO-eVe2xJZs From 1931-1940 10 millions Americans " disappeared " during the Depression era. Dust Bowl refugees were not allowed to escape to other areas of US. The Indians were turfed from the Great Plains, and homesteaders farmed since 1800's . Farming was so productive that they had major surpluses which pissed off commodity traders, which then imported goods from Europe. Cotton prices 1919 (36 cents lb. ) — Cotton prices 1931( 6 cents lb.) Hoover was originally a geologist/mining engineer ,(and a Rothschild /Rockefeller minion) but was given the job of distributing food supplies to Europe, but back home in the US , while, when President Hoover basically starved his own citizens and WW1 vets. Google "Hooverville" Much of the great Plains farmland had Oil reserves, discovered after homesteaders… Read more »
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