All posts by wreckonomics

The hidden cost of low condo fees.

Shopping for a condo? You might not want to go for the one with the cheapest strata fees:

“This is a coming crisis that nobody is talking about,” said Chris Jaglowitz, a lawyer who specializes in condo law for Gardiner Miller Arnold LLP and a member of the Condominium Managers of Ontario. “You have all of these older buildings, and someone needs to pay for long-neglected repairs. And many people won’t be able to cover their share.”

That’s because condo buildings are owned collectively by the residents, and all repair bills are shared equally. Condo boards are able to levy special assessments in addition to condo fees to pay for projects. But the boards are made up of residents, who are sometimes motivated to keep fees low. And they serve short terms, which means long-term planning is often difficult.

Check out the full article in the Globe and Mail.

Hasman calls market ‘unhealthy’ ‘not sustainable’

If you live in Vancouver you probably recognize the name Andrew Hasman. He’s a local realtor since 1993, and apparently doesn’t agree with the view that we’re in a new paradigm, but still manages to steer clear of the word ‘bubble’.

“Many people who buy here aren’t buying because they’re moving here,” said Hasman. “They’re buying on speculation or to park money here … There have been cases where people come and purchase five or six houses. No one needs five to six houses unless you’re speculating.”

Overseas buyers from Mainland China have been the driving force behind the price rise, Hasman said. “That’s what’s driving the market, really — of single family homes that have sold in the last 18 months, I would say, they’re conservatively 70 per cent, probably 80 per cent of the buyers,” he said.

He said that in some cases, the houses are placed back on the market within weeks, at a 10 per cent higher price, or simply remain empty.

For more local realtor reactions to the current market check out the full article in the Vancouver Observer.

James Flaherty on the housing market


Jesse posted a letter in the forum that he sent To his MP and James Flaherty supporting changes to government support of Canadian housing markets. Evidently a few others wrote in as well, because Jesse posted Flaherties response, which was duplicated in a PDF we received from another reader. You can read the full response in the forum post, but here are a few key sections we thought were interesting:

…we are encouraging responsible home ownership through measures to help first-time home buyers.

Does assisting someone to buy something encourage responsibility?

Unlike the citizens of other countries, such as the United States, Canadians did not face mass foreclosures on their homes, and our banks did not require taxpayer bailouts due to turmoil in the housing market.

Didn’t the taxpayer backed CMHC pump un unprecedented amount of money into Canadian mortgages?

Third, we withdrew government insurance backing on home equity lines of credit (HELOCSs). Taxpayers should no bear any risk associated with such consumer credit products. These risks should be managed by the financial institutions that offer these products.

Agreed! So why were helocs ever government insured?

Those were just a few points that jumped out to me, anyone else spot anything remarkable in that message that you agree or disagree with?

3rd times the charm, no new mortgage rules

Jimmy Flaherty has just announced that there will be no new mortgage rules announced as there is already “softening” showing up in real estate markets across Canada:

Flaherty said he’s already intervened to toughen mortgage rules three times in the last few years and there’s no need for further action as conditions in the market are finally moving in the right direction.

Flaherty said he does not believe there were any unintended consequences in the housing market resulting from government intervention in the mortgage business during the financial crisis to keep banks lending money.

Still, he said his government keeps a close eye on the housing market and subsequently stepped in three times with changes to mortgage rules when there were concerns about risk.

Alberta leads the way on delinquincies

Huh. Even with high oil prices and rock bottom rates homeowners in Alberta don’t seem to all be paying their bills on time:

Homeowners in the province are nearly twice as likely to fall behind than those in the rest of Canada. And the proportion struggling to make mortgage payments is the highest it has been since at least 1990, according to fresh data from the Canadian Bankers Association.

The rising rate of delinquency comes as economists warn that Canadians are under increasing pressure when it comes to servicing their debts.

As interest rates move higher in the coming months, many could find it even harder to make their monthly payments.

The main problem for the province has been Calgary’s housing market, which has struggled since a boom at the start of the decade caused massive price gains in a short period. In 2005, prices were up 10 per cent. The following year, home prices surged another 50 per cent.

The gains came to a halt five years ago, when the market began to weaken. Then, when the recession hit in 2008, panicked homeowners rushed to sell in near-record numbers, flooding the market with inventory and putting renewed pressure on prices.

This issue also seems to be negatively affecting Genworth.