Archive for the ‘Canada’ Category

Household debt near record high

Monday, September 15th, 2014

Southseacompany pointed out this article in the Chicago Tribune:

Canadian household-debt ratio nears record as mortgages grow

“Home sales and prices have shown unexpected strength as the lowest mortgage rates in decades spur demand. ”

“With mortgage debt rising, the economy will be exposed when interest rates rise, said Andy Nasr, senior portfolio manager at Calgary-based Middlefield Capital Corp. which manages about C$4 billion ($3.6 billion), including real estate stocks.

“The misconception is that ‘Well it’s OK because people can somehow afford it,’” he said in an interview at Bloomberg’s Toronto office Friday. “They can’t.””

Global RE frothy again

Monday, September 8th, 2014

After housing markets slumped around the globe governments and central banks did what they could to reinflate them, driving down the cost of debt.

Well it worked.

The US market is down a bit from their precrash highs, but Canada is sailing high.  What’s the endgame?

With global monetary conditions so loose, governments are using regulatory tools to cool overheated housing markets. In Canada, for example, the maximum term of the riskiest mortgages has been lowered from 40 to 25 years. Regulators in both Hong Kong and Singapore have repeatedly raised stamp duties and tightened lending restrictions. The measures seem finally to be working, especially in Singapore, where prices are now falling.

So as potential home buyer on planet earth, what’s your next move? Do you go with low interest rates forever as a way to keep prices up, or do you stand back and wait for a price correction?

As an aside its interesting to note one nation whose market isn’t doing so well is Japan, where they’ve had rock bottom interest rates for a really long time.

I Believe the Children are our Future

Thursday, September 4th, 2014

The middle class is doomed.

You may have heard of that internal Conservative Government report on the middle class prepared by Employment and Social Development Canada even though it was never released.

The Canadian Press used the Access to Information Act to get a copy and it’s mostly remarkable due to some of its blunt take-aways:

“The market does not reward middle-income families so well,” says the report. “As a result, they get an increasingly smaller share of the earnings pie” compared with higher-income families.

The report also refers to debt, saying “many in the middle spend more than they earn, mortgaging their future to sustain their current consumption.”

“Over the medium term, middle-income Canadians are unlikely to move to higher income brackets, i.e., the ‘Canadian dream’ is a myth more than a reality.”

Well it turns out that there’s another way to look at the same data, as Finance Canada has just done.

“Their analysis arrives at conclusions — namely that middle-income families have stagnant wages, are unlikely to move to higher income groups, and are increasingly indebted — which appear to conflict with the general message in Budget 2014 and previous internal briefings,” says an accompanying briefing note for Oliver.

The new report points out that moving from single earner to double earner households as more women have joined the workforce has acted to keep the middle class afloat.

The Finance Canada report estimates about 70 per cent of the increase in middle-class household incomes since the mid-1990s can be attributed to higher workforce participation rates, primarily by women workers.

“There is no second wave of women, spouses, entering the workforce,” said New Democrat MP Nathan Cullen, the opposition’s finance critic.

Of course the MP is being overly pessimistic without cause, there’s an obvious next wave of income for households and it doesn’t require polygamy.

The children are our future.

It’s time for Canada to get in line with global economic trends and fully utilize the productivity of the available workforce.  We have a large population of potential workers that remain untapped.

Instead of wasting tax dollars and time in school, children could be gaining valuable experience cleaning homes, mining coal or any number of other jobs to help support the household. Lets not squander this bright future opportunity, let’s put the kids to work!

Most ‘overvalued’ housing markets

Tuesday, September 2nd, 2014

The Economist magazine has named the Canadian housing market among the most overvalued in the world. (Even though they love our cities)

Measured using price-to-rent and price-to-income ratios, the Economist says housing markets are at least 25 per cent overvalued in nine of the 23 economies it tracked.

When comparing the relationship between the costs of buying and renting, it cited Canada, Hong Kong and New Zealand as “the most glaring examples” of overheated markets.

“The overshoot in these economies and others bears an unhappy resemblance to the situation that prevailed in America at the height of its boom, just before the financial crisis,” the magazine states.

Read the full article here.

Hat-tip to kabloona for the link.

One of the most liveable cities

Wednesday, August 20th, 2014

There’s a magazine called the economist and sometimes they rank cities based on a number of factors. One of these factors is not the cost of living.

This year three Canadian cities made the top ten: Vancouver, Toronto and Calgary took 3rd, 4th and 5th place.

When a five-year view is taken, global liveability has declined by 0.68 percentage points, highlighting the fact that the last five years have been characterised by heightened unrest in the wake of the global economic crisis, which has undermined many of the developmental gains that cities may have experienced through public policy and investment,” the report said.

Read more: http://calgary.ctvnews.ca/calgary-makes-top-ten-list-of-livable-cities-1.1966845#ixzz3AwisPTPr

Bank ratings go negative

Tuesday, August 12th, 2014

At the end of last week S&P cut the rating for Canadian banks to negative.

Royal Bank of Canada, Toronto- Dominion Bank and four other Canadian lenders’ rating outlooks were cut to negative by Standard & Poor’s, which cited regulations that seek to limit government support in a crisis.

Canadian officials issued regulatory proposals Aug. 1 aimed at relieving taxpayers from the burden of potential bailouts if key banks fail. The new rules mandate any new senior unsecured debt issued by a so-called systemically important bank must be convertible to equity if the firm faces insolvency. The proposals are open to public consultations until Sept. 12.

Read the full article here.

What’s wrong with Canada’s economy?

Wednesday, August 6th, 2014

Economists are apparently ‘scratching their heads‘ over Canada’s humdrum economic growth.

The US has been growing new jobs lately, but not so much here at home.

In June, Canada lost 9,400 positions and the jobless rate edged up to 7.1%, the highest reading in six months. On Friday, Statistics Canada will release its labour force survey for July.

The Canadian economy “should improve next year when stronger U.S. growth helps to boost hiring and investment here at home,” the Conference Board’s Mr. Hodgson said in Tuesday’s report.

Read the full article over at the Vancouver Sun.

Who wants a housing market crash?

Monday, July 14th, 2014

You might want a housing market crash (or ‘correction’ if the word ‘crash’ is too strong), but that’s likely because you want to buy a house.

It’s not hard to believe that the majority of Canadians don’t long for a housing market correction, especially those who own property.

It feels good when your equity rises right? What’s not to like?

The Financial Post looks at these feelings, and whether they are sensible or not.

They split home-owers into three categories: First time buyers, young owners with growing families and older owners thinking about downsizing.

They say the first two groups would actually benefit from a crash.

If you’re wondering why most homeowners should be begging for a housing market crash read the article here and let us know if you agree with their reasoning.

 

The everything bubble: how does it end?

Tuesday, July 8th, 2014

Does every major asset seem expensive to you right now?  Does it seem overpriced?

Well, what if it is, where do we end up?

The NY Times has an article titled How The Everything Boom might end: The Good, Bad and the ugly.

Basically it breaks down into (1) the good: Low price of capital unleashes productivity, economy grows into current valuations. (2) The bad: Japan style stagnation 15 years of low rates and low returns or (3) the ugly: spike in prices with a depressed economy.

But the pattern of the last few years shows that the “bad” scenario has been closest to the reality. That doesn’t mean the rest of the bad script will continue in the years ahead, but it should prompt those predicting the first or third outcome to wrestle with why they have been wrong so far.

So what do you think? Whats the future look like from your view point and would it have been any easier to predict the future in the past?

Young adults buying condos: what are you thinking?

Wednesday, June 11th, 2014

You want the pride of ownership.

And maybe buying a condo is like training wheels for real home ownership.

You get the practice of paying property tax and maintenance.

But over at the Globe and Mail Rob Carrick is trying to talk down the market again – he says maybe you should rent the condo and save the difference on the cost of buying.

“I would say buyers in their 20s probably won’t live in that condo for five years,” Mr. Fleming said. “They’re going to either outgrow it, or find a mate and want a bigger, better or different place.”

Even if you meet someone and live together in your condo, you’ll probably want to move when you have kids. Mr. Fleming said an increasing number of couples are starting families in condos, but a house is still seen by most as the best place to do this.

Moving from a condo you own to a house will cost you a lot. If you used a real estate agent to sell the place, you might pay a $15,000 commission plus HST to sell a $300,000 condo. “It’s expensive to move,” Mr. Fleming said. “Hopefully you purchased that condo for $250,000.”

Read the full article here.

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