Chicken vs Egg: Retail Sales and Housing Bubbles

Southseacompany pointed out this article in the Globe and Mail about the connection between retail sales and household debt.

Falling interest rates between the fall of 2013 and mid-2016 made it easy for Canadians to add debt. The five-year Government of Canada bond yield, on which mortgage rates are based, fell from a high of 2.2 per cent in September, 2013, to a low of 0.49 per cent in February, 2016. This trend made monthly mortgage payments lower and helped spur the housing boom.”

“The reverse process – rising interest rates – is now evident and mortgage debt is getting more difficult to service. The five-year bond yield has climbed to 1.1 per cent and major lenders are slowly raising mortgage rates.

Read the full article here.

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bullwhip29
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bullwhip29
KickThemOut
Member
KickThemOut

That’s why the foreign student serfs (FSS) don’t rent out their condos, except to friends and other mainlanders with illegal clauses.

Shut It Down Already
Guest
Shut It Down Already

Oh do shut up.

bullwhip29
Guest
bullwhip29

Trade Deal Ups Risks in Chinese Firm’s Takeover of Seniors’ Care Giant
https://thetyee.ca/Opinion/2017/02/27/Chinese-Firm-Takeover-Seniors-Care-Giant/

Newcomer
Member
Newcomer

The author argues that Canadians may be paying down debt rather than spending at the mall and that it is not much of a leap to think that they will pay down debt rather than buy houses. But I don’t think that is in keeping with the way most Canadians think. They generally think that paying a mortgage is a type of hyper-savings. The higher your mortgage payment, the more prudent and financially responsible you are. I read the low sales at the mall as part and parcel of house price appreciation (it’s all going on the house). Only unemployment or removal of credit will be able to stop RE spending. Basically, houses will need to be pried from their cold dead hands. Unless they change their minds, which is also possible, but certainly hasn’t happened yet.

Shut It Down Already
Guest
Shut It Down Already

Mortgage debt is increasing. CMHC obligations are increasing. Of course there are new buyers entering into the equation, but we also know that a high proportion of Canadians would be screwed if they missed a single pay cheque – maybe that’s consistent with paying down the mortgage, but I find it hard to believe when most buy the biggest place they can afford leaving little wiggle room in the budget.

Newcomer
Member
Newcomer

No question, many are on the razor’s edge.

Hyper-mega-Bull
Member
Hyper-mega-Bull

>mortgage debt is getting more difficult to service

Technically true. It is more difficult to service. But the increase is insignificant and hasn’t become difficult to service.

Glabr and mail is feeding you guys bull. They choose their wording to make a perfectly normal situation appear dramatic and news worthy.

What a crap paper.

Just me
Guest
Just me

I reluctantly have to agree with hyper-mega-bull. The changes so far are minimal. I don’t see yields on government bonds going a lot higher any time soon. I don’t see where this spike in mortgage rates should originate from.
It seems business as usual on that front. Any weakness in Vancouver RE will only come from reduced Asian demand, at least for the next few months.

KickThemOut
Member
KickThemOut

So the latest talk among those foreign students serfs in the office is to do fake leases with each other to avoid the empty home tax. They are even trying to recruit other people in the office like the boss, etc in their scheme.

Except a few of them are kind of dumb given their condos aren’t even in Vancouver. Oh well….

bullwhip29
Guest
bullwhip29

they dont need to be fake leases. groups of property owners/investors are simply making arrangements to have say property A rented out to nominee of property B, who then rents out their unit to nominee of property C and so on and so forth. real money can exchange hands (however this ultimately winds up going round and round in a complete circle), tax returns filed legitimately etc. and CRA, CoV and other authorities have nothing to go on. this said, there are costs to provide minimal furnishing for show and basic utilities and such, but this is a lot less than vacant home tax

BubbleTea
Guest
BubbleTea

So much dirty money in Vancouver….. The developer of Trump Tower Vancouver, Joo Kim Tiah, is the son of a convicted Malaysian stock fraud billionaire, Tony Tiah.
Krusty, J2 and Moonbean are just too happy to welcome dirty money into Canada.

Funky monkey
Guest
Funky monkey

When it becomes a major political issue they will care.

patriotz
Member

Which is never I think. Face it, nobody cares except the kind of people who post here. There are two Federal leadership races going on right now, nobody has talked about it yet and I doubt anyone will.

patriotz
Member

The money (in net terms at least) is actually going from Canada to Malaysia. Think about it.

Just me
Guest
Just me
http://vancouversun.com/business/local-business/explain-approving-china-firms-1-billion-deal-for-b-c-retirement-home-chain-trudeau-government-told “Explain approving China firm’s $1-billion deal for B.C. retirement home chain, Trudeau government told” The New York Times has dug into who is behind the company’s chairman, Wu Xiaohui. Investigations into remote villages across China and sometimes empty city offices unearthed a fuzzy picture of almost 40 shell companies, mostly owned by his wife, Zhuo Ran, the granddaughter of former Chinese leader Deng Xiaoping, and Chen Xiaolu, the son of a notable Chinese general, plus a few Chinese government-owned companies. Davies, who brought questions about the deal to question period in Ottawa last week, said: “As a federal politician, there is the health perspective (related to Retirement Services’ delivery of care to seniors) but also the Investment Canada review process having a lack of transparency is totally unacceptable. It’s been that way for years through Liberal and Conservative governments.”… Read more »
BubbleTea
Guest
BubbleTea

Another great article by Sam Cooper….
Battle over lawyers’ money-laundering loophole shapes up in B.C.
http://vancouversun.com/news/national/b-c-a-battleground-for-lawyer-loophole-cases

Just me
Guest
Just me

Lawyers are human: given the opportunity to make money, they will take it. A honor-based approach is just a guarantee that crimes will be committed.

These articles are important. Many people have become desensitized and accept corruption as a fact of life.

KickThemOut
Member
KickThemOut

I thought there is a thing called Professional Integrity in Canada. That’s why certain professions are certified. Are you saying that’s no longer the case? Why do you have a low opinion and hate of real hard working Canadians?

Donald T
Guest
Donald T

accountants, doctors, dentists. —>ok
Lawyer —–> you are kidding me, very few are not bad apples.

Just me
Guest
Just me

One has to wonder how much of these multi-billion transfers headed our way last year.

http://in.reuters.com/article/us-china-forex-idINKBN1660AH

China FX regulator says strengthening supervision of forex market

“The authorities have cracked down on underground banks that have been accused of helping people spirit cash out of the country.”

SAFE recently uncovered an underground bank in the southern Chinese city of Shenzhen involving 50 billion yuan ($7.3 billion), and cases of firms’ using fake documents and fake trade deals to transfer foreign exchange overseas.

Last year, Chinese police busted more than 380 underground banks, involving more than 900 billion yuan, and arrested more than 800 suspects, the Ministry of Public Security said in an online statement published on Sunday.

“Underground banking has become a major channel used for money laundering and illegal cross-border transfer of funds,” the ministry said.

Just me
Guest
Just me
One more article. Different source, similar findings. http://www.scmp.com/news/china/economy/article/2074330/hundreds-arrested-china-crackdown-underground-banks China’s police authority said it busted more than 380 “underground banks” last year, involving over 900 billion yuan (US$131 billion) as the authorities attempt to stem an exodus of cash flowing out of the country. The Ministry of Public Security said in a statement on its website on Sunday that more than 800 suspects involved in money laundering were arrested and it found that illegal banking operations were “rampant” across the country, helped by the emergence of internet finance and new online payment methods. China’s police authority will continue to work with the People’s Bank of China and the foreign exchange regulator this year to crack down on money laundering operations conducted by offshore companies and underground banks, according to the public security ministry statement. China Police Daily reported on Monday that… Read more »
bullwhip29
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bullwhip29

Manulife revealed as bank fined $1.15M for violating anti-money laundering reporting rules
http://www.cbc.ca/news/business/fintrac-fine-name-secret-1.3999156

bullwhip29
Guest
bullwhip29

In rental crisis, B.C. has no plan for housing foreign students: Critics
http://vancouversun.com/news/local-news/in-rental-crisis-b-c-has-no-plan-for-housing-foreign-students-critics

Just me
Guest
Just me
“The B.C. government boasted Monday it had lured far more foreign students per capita than anywhere else in Canada — 130,000 — claiming they inject $2 billion each year into the economy, creating 29,000 jobs. “These students enhance our global perspectives and connections, and their presence helps lay the groundwork for a prosperous and economically diverse future for B.C.,” said Advanced Education Minister Andrew Wilkinson. What Wilkinson didn’t say about the B.C. Jobs Plan, however, is it has virtually no strategy to house foreign students, whose numbers have been exceeding the government’s targets. The volume of foreign students has jumped by 44,000 in the past five years.” Well, if you hang out at Open Houses during the weekend, you can see many of these foreign students shopping (parents in tow) for multimillion dollars abodes in the west side. They even… Read more »
Banned Oracle
Guest
Banned Oracle

I’ve been trying to tell most morons that this is the new IIP program x 10.

Keep watching rents while the debate keeps going here. And watch what happens tobdetached prices this spring. Just watch.

Just me
Guest
Just me

Just off Bloomberg.

https://www.bloomberg.com/news/articles/2017-02-27/foreigners-housing-bets-start-with-banks-canada-economy-watch

“Foreigners’ Bets on Canada’s Housing Market Start With Its Banks”

Bear Vancouverite
Member
Bear Vancouverite

This sounds to me like foreign investors rely quite a bit on credit to buy. I hope the BOC continues to push policy that leads to more credit tightening, it will kill all birds with one stone.

Van real estate buff
Guest
Van real estate buff

Feb 27, 2017 Daily Video Review of Vancouver Real Estate Housing Bubble News https://youtu.be/wrF9iGfJcZM

paulb
Member

New
320
Price Change
50
Sold
121
TI:8142

http://www.clivestevepaul.com

Fomostyle
Guest
Fomostyle
Van real estate buff
Guest
Van real estate buff
Just me
Guest
Just me
Very nice post. I would still argue that large townhomes are highly desirable on the west side. But fully agree that developers only want to build small glass boxes of 500sqft because they are easy to sell as gold bars to absent owners. Have you noticed hiw small units are becoming? One would think that in a building with 20 floors there would be space for a few 1,600sqft family sized homes. They do not build them because the Chinese investors prefer small oarcels, buying two or three if scaling up is necessary. Even the design is total crap. Bedrooms and toilettes directly adjoining kitchens. Lack of privacy from neighbours and from other oeople in the same house, and superthin walls that save on valuable inches of space. These places were not built for living in them, they were built… Read more »
Shut It Down Already
Guest
Shut It Down Already

Don’t forget that ~90% of those small units are sold to locals.

#ignorethedata

Banned Oracle
Guest
Banned Oracle

Shut the fuck up you clown.

Shut It Down Already
Guest
Shut It Down Already

Somebody has been out on the cider!

Bear Vancouverite
Member
Bear Vancouverite

I see the exact opposite of what you’re seeing. The small units are this small exactly because that is what locals can afford. Who can afford a new 1600 sq ft apartment at $900-1200/sq ft?

Because I believe we’re building too much inventory of these small units, I often question those in the industry about why they keep building these small units and the answer is always the same: it’s where the market demand is due to prices and affordabilty.

Make no mistake, the path to “affordability” as envisioned by developers and Rennie is ever shrinking square footage so that locals can keep buying units. I personally believe foreign investors won’t be caught dead investing in a 500sq ft box.

Bear Vancouverite
Member
Bear Vancouverite

I should add that I have some friends in the industry who are involved with foreign investors. I have never heard of those investors asking for anyone to help them find 500 sq ft units for investment. Almost always they want to buy land.

The few people I know who are either local investors or work with /sell to local investors definitely spend a lot more time lining up to get choice sub 700sq ft units.

Newcomer
Member
Newcomer

What is odd, though, is why these units are not on the rental market. If they are owned by locals, you would expect them to need the income to help with the mortgage and you would expect them to find renting them out fairly simple.

I can see keeping a whole house off the market because you think that it will be easier to flip without anyone in it, because the buyer will want to move in. But the buyer of a one bedroom or studio apartment is almost always going to be another investor (nobody with the money to afford a Vancouver apartment would want to live in a 500 sqft box). So a tenant should be a plus.

YVR
Guest
YVR

Locals are buying them with parents (HELOC) help to live in.

Banned Oracle
Guest
Banned Oracle

The third clown that can’t do math.

Do you even realize that someone has to pay the monthly payments on Helocs???

Of course you do. You get the third clown prize hat.

Shut It Down Already
Guest
Shut It Down Already

Did you even read what he said? The parents pay, duh.

Newcomer
Member
Newcomer

Yes, I do think that is the case, too. But there are a lot of empty apartments out there. Who owns them, I wonder.

Banned Oracle
Guest
Banned Oracle

The other clown. Your lucky you’re not South of the 49th. Trump would muzzle you mr type quickly.

bullwhip29
Guest
bullwhip29
Doomcouver
Guest
Doomcouver

This is what happens when you treat housing like a speculative investment rather than shelter. How many houses does our Finance Minister own again? Like 8 of them or something? So ridiculous.

Just me
Guest
Just me

There is a simple solution. Do not vote for him and Christy Clark.

Doomcouver
Guest
Doomcouver

Don’t worry, I’d rather pull out my fingernails than vote for Christy and her cronies. I think we need to get David Eby some real power, if there’s one politician in BC that has the ability and knowledge to fix things it’d be him. I’m not a fan of what the NDP has done in the past but it was certainly better under them than Christy Don’t Touch My Home Equity Clarke.

southseacompany
Member
southseacompany

“New regulations more likely as Canadian home prices rise: Poll”, BNN

http://www.bnn.ca/new-regulations-more-likely-as-canadian-home-prices-rise-poll-1.679280

” Low borrowing costs and hot demand in key urban centers will keep pushing Canadian house prices higher this year, a Reuters poll showed, pressuring policymakers to take further steps to rein in a market that more experts are calling a bubble.”

southseacompany
Member
southseacompany

“‘Borderline ridiculous’: Vancouver tech leader warns home prices hurting competitiveness”, BNN

https://www.bnn.ca/borderline-ridiculous-vancouver-tech-leader-warns-home-prices-hurting-competitiveness-1.682279

“Andrew Reid, founder of Vancouver-based software firm Vision Critical, said the city’s housing market is “borderline ridiculous” compared to other major tech hubs, and it’s posing a challenge for businesses looking to attract new talent.”

hmm ok
Guest
hmm ok

Vision Critical always has job openings. I get the impression they have high turnover. I believe Andrew Reid is famous pollster Angus Reid’s son. From what I hear his father basically installed him at the head of this company.

ostritch
Member
ostritch

EVERY “big” Vancouver company does the same schpiel, Lulu Lemon, Hoot Suite, Electronic Arts, and now Vision Critical, they have to have people with US resumes and they leave jobs openings unfilled for years because no one is good (American) enough. Train, pay for conferences, and allow employees to connect with their co-horts in the US and problem solved.

history
Guest
history

Allow employees to live in their vehicls in the parking lot, problem solved. Whats wong with HR people these days? Critical lack of unlimited ingenuity.

Best place on meth
Member
Best place on meth

A company that truly cared about their employees would at very least lease some RV’s on their behalf.

Newcomer
Member
Newcomer

Borderline. Yeah, right!

ostritch
Member
ostritch

Spend some money to train and hire local talent, asshole.

squeak
Member
squeak

That would be the honourable thing to do……but, Vancouvers real estate is now so out of reach for Normal people including highly skilled and talented under 50’s that it does not make sense to live here.

If I was a young talented person, I would not be able to flee out and away from the Vancouver nightmare fast enough! You got to play your cards well, use your youth and talent cards where they are counted. In Vancouver they are not. Time is money. Don’t waste it.

Bear Vancouverite
Member
Bear Vancouverite

And yet the article that Fomostyle posted clearly says that people making $140k, $170k, and even $700k in Silicon Valley are priced out and have a hard time making ends meet.

The grass isn’t necessarily greener over there.

southseacompany
Member
southseacompany

“The odds of an interest rate hike have begun to shift in a new direction”, CNBC

http://www.cnbc.com/2017/02/27/interest-rates-markets-brace-for-march-fed-hike.html

“Just as Washington is gearing up to goose the economy, the Federal Reserve could be teeing up an interest rate increase that could put a damper on things.”

“The chances that the Fed will hike rates at its March 14-15 meeting have been creeping higher in recent days. By at least one estimate, the probability is now at 50 percent, after being in the teens just last week.”

Banned Oracle
Guest
Banned Oracle

You have Anything to add insight to MSM propaganda you post?

Any comments on what you post?

Shut It Down Already
Guest
Shut It Down Already

“MSM propaganda”? Are you some sort of conspiracy theorist? What sort of dull conspiracy theory involves a coin flip’s chance of a tiny interest rate hike? Is this population control in action and CNBC is complicit?

history
Guest
history

did someone say population control? the fire crackling from the parking lot burn barrel is noisy tonight, must be the fresh dry skids.

ostritch
Member
ostritch

I think Trump hates Yellen and the feeling is mutual. She’s gonna try to make it $$$$ for him to enact his plans.

realist
Member
realist

southseacompany, thank you for your posts! They are much appreciated by many who read this blog, myself included.

southseacompany
Member
southseacompany

From the US: “Pending home sales drop unexpectedly to lowest in a year, down 2.8% in January”, CNBC

http://www.cnbc.com/2017/02/27/pending-home-sales-drop-to-lowest-in-a-year-down-in-january.html

“Higher mortgage rates and near record low supply resulted in disappointing home sales to start the year.”

fomostyle
Guest
fomostyle

Great clip from show in London discussing the global housing bubble. A must watch!

https://www.rt.com/shows/renegade-inc/378716-uk-house-prices-risks/

Time to go
Guest
Time to go

This is a great watch. Steve Keen simplifies the credit issues so well.

Thanks for sharing!

Banned Oracle
Guest
Banned Oracle

Metro Vancouver now has 130,000 foreign students now. A figure announced by Christy on Monday.

Add another 130,000 moms on 10 year visitor visas.

Add 130,000 IMP, TFW, and Canadian experience class.

Almost 400,000 of temps here in addition to the 2+ million locals. That’s like 15% of the population!!!

And you guys are surprised about why rents going up?????

Funkey Monkey
Guest
Funkey Monkey

I ignore your posts. Everyone else should too.

Shut It Down Already
Guest
Shut It Down Already

Now how about giving us some numbers to compare that 15% with (perhaps other cities) or maybe even an idea of how it has been changing over time?

Anybody can present a single data point and add three exclamation marks after it!!!

Just me
Guest
Just me

Does the fact that other cities may have the same problem make our predicament better?

Oracle, in his rather unpleasant way, has highlighted a very real issue.

Shut It Down Already
Guest
Shut It Down Already

15% stated on its own is completely meaningless.

ostritch
Member
ostritch

Why should he? You’d just argue with him anyway.

Shut It Down Already
Guest
Shut It Down Already

You have no clue. I like data. I despise liars and sensationalism. Oracle has zero credibility.

!!!

Newcomer
Member
Newcomer

At the risk of sounding like jerk, she has the credibility that people give her by responding to her posts.

bullwhip29
Guest
bullwhip29

37% of young homeowners borrow from ‘bank of mom and dad,’ HSBC survey indicates
http://www.cbc.ca/news/business/hsbc-housing-survey-1.4002458

“…more than four out of five — 82 per cent — intended to buy one in the next five years…”

“…nearly three-quarters, or 73 per cent, of millennials who planned to buy soon said they had not yet started saving for a down payment.”

>>> so, what does this say about the next generation of so-called movers and shakers who basically take their parent’s (and grandparent’s) for granted and don’t even bother trying to make it on their own?

Newcomer
Member
Newcomer

Independence is not a valued trait at the moment. This is why millennials don’t buy cars or move out of the house or do any of the things that were priority one at their age in the past. They want in, not out.

MarKoz
Member

To own a car, you need to factor in the payments, insurance, gas and maintenance. That can easily add up to $700 per month, even for a used car. Then you look at the cost of rent and the low wages millennials have to endure. Lack of independence or lack of opportunity?

Newcomer
Member
Newcomer

Saving is a better approach than buying on credit for a second-hand car. That way, you don’t buy more than you can afford. People used to get a job just to be able to buy a really old car and then spend evenings fixing it. It’s just a matter of priorities.

squeak
Member
squeak
There are no jobs in Vancouver that pay well enough to pay for what a house/condo cost these days. Either they flee away from Vancouver or still live with mommy/daddy or join the 4000 + and growing numbers of homeless. Those are the options. To “try to make it on your own” in Vancouver is a poor investment of time for young people, you will never make it on your own here, no matter how talented you are. There were some posts that were made in the past that you need a $200K + yearly income to buy with todays housing prices. Oh, where are those jobs? Not in Vancouver. Ie, if I was a skilled/specialized surgeon making 200K+ a year, do you really think Vancouver would be a preferred choice, considering what kind of dwelling I would get to… Read more »
Newcomer
Member
Newcomer

You don’t have to buy, you could rent. There are jobs that cover rent (not a lot, but some).

Also, 200 K/year is not enough to buy a SFH or a townhouse in the CoV. With that income and 200K saved, you have enough for a so-so condo (1 M).

squeak
Member
squeak

Pathetic.

Newcomer
Member
Newcomer

All hope is not lost, a married couple who both earned that much and had about a half a million in liquid savings could get something modest in East Van or North Burnaby.

ostritch
Member
ostritch

Or you could learn to sleep standing up. Yes. Lots of doctors think that 12+ years of slogging through school makes sleeping standing up in their 600 sq ft studio apartment overlooking the city was worth it.

Newcomer
Member
Newcomer

I like having a SFH, but I’ve lived in lots of small places. In Tokyo, I shared a 180 sqft apartment with my girlfriend. When I got a 360 sqft place, my spacious pad became party central.

Best place on meth
Member
Best place on meth

Millennials, eh? Those are the kids covered with tattoos, piercings and beards, aren’t they? And the men look even worse.

Yeah, given the slim likelihood of a real job ever being in their future I can see why they’re eager to buy and make money off real estate.

I can also see why their parents want to give them a down payment to finally get them the fuck out of the house.

squeak
Member
squeak

Tattoos is a urine poor investment, they would have been better off buying a Sharpie and express themselves by drawing stick people or some deep statements found on pinterest.

If that is the best money management some individuals can do, I would be very nervous as a parent to hand over hard earned money, even the baby
boomers had to work hard too. Not all were blessed with great jobs, important jobs but not always well paid.

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