Category Archives: Canada

We love debt even more than Americans

Canadian consumer debt.  It’s not just growing, it’s growing faster.

Transunion has released their latest quarterly analysis and it shows Canadian household debt loads increasing 400% percent faster than inflation.

Statistics Canada pegs Canadian household market debt at an astounding 163% of disposable income.

For comparisons sake, the US housing bubble saw household debt peak in 2007 at 128% of disposable income.  By 2011 the US rate was down to 112%.

The good news? Credit card debt is actually down year over year and delinquencies across all types of debt remain low.

Transunion puts the average household non-mortgage debt at $26,768.  Do you owe more or less than that?

Higgins said the increase stands in stark contrast to encouraging signs from relatively stagnant debt growth in the prior three quarters.

He also points out that in the past five years, debt loads have increased 400 per cent more than the rate of inflation — with inflation as measured by the Consumer Price Index up nine per cent and consumer debt jumping more than 37 per cent.

“Debt’s outpacing us and continues to outpace us, so at some point in time there’s going to be a reconciliation,” Higgins said.

“Hopefully it’s not drastic and hopefully it doesn’t hit everybody, but there’s going to be a correction somehow along the way.”

Read the full article over at the CBC.

Falling, not crashing.

Here’s a nice article that should reassure you.

The housing market in Canada is forecast to fall, but not crash like in the US.

In fact the first three paragraphs each repeat that this will NOT be like a US style crash.

Canadian housing prices will fall 10% over the next several years and homebuilding will slow sharply in 2013, but the country’s recent property boom is not expected to end in a U.S.-style collapse, according to a Reuters poll.

The survey of 20 forecasters published on Friday showed the majority believe the Canadian government has done enough to rein in runaway prices, preventing the type of crash that has devastated the U.S. market for years.

“This isn’t a sharp correction, this isn’t a U.S.-style correction, it’s just simply an unwinding of the excess valuation that was created by artificially low interest rates for a long period of time,” said Craig Alexander, chief economist at Toronto-Dominion Bank.

“I would emphasize that while a 10 % correction sounds scary, in actual fact, this would be a healthy outcome.”

Just a gentle feather slowly drifting to the safety of the ground.

Read the full article here.

How much more will Vancouver prices drop?

Scotiabank is now warning about the housing market falling across Canada.

They are predicting a nationwide drop of 10% over the next two to three years.

That’s the national drop they predict, saying bigger drops are coming to Vancouver and Toronto.

But how much more overvalued are we on a national scale and what sort of drops will we see here and in Toronto to drive national prices down 10%?  They don’t say, but they do remark on how long it took earlier market declines to recover:

The report notes that previous housing market downturns — in the 1970s and 1990s — took eight or nine years to bounce back to price levels seen before the decline.

“Historically, long cycles of rising home prices have been followed by extended periods of persistent softness, allowing affordability to be gradually restored and generating renewed pent-up demand,” the report stated.

The bank also warned that “balance sheets heavily skewed to real estate leave Canadians vulnerable to an adverse shock, including a sharp rise in unemployment and/or a sharp drop in home prices.”

The report predicts a “spillover effect” into construction employment, which — thanks to the massive run-up in house prices — has seen employment grow twice as fast as the economy as a whole.

However, “the full impact of the slowdown may not become fully visible until mid-decade,” the report stated.

Read the full article here.


Flaherty won’t ‘stand by’ in recession

The more things change the more they stay the same.

The president is back in the white house and there’s rumbling of a fiscal crisis again.

Flaherty has said he’s not going to take another recession lying down.

Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney both pledged Wednesday to take action to support the economy if a shock from the U.S., or Europe, threatened to once again plunge the country into recession.

“We are a pragmatic, sensible government. If our economy goes into recession because of an external shock from the United States or the eurozone, or both, we will take steps to stimulate the economy,” Flaherty told the Commons finance committee in an evening session.

“What we have done before we will do again. We will not do exactly the same thing again…but we are not going to stand by and have the Canadian economy slip deep into a recession with high unemployment.”

Rabidoux in Vancouver / HK property tax

A couple of news tidbits today:

First off Ben Rabidoux will be putting on a seminar in Vancouver about how to get rich flipping presales condo contracts.

At least I assume that’s what he’ll be talking about, what else could you talk about at a Vancouver real estate seminar?

Ben will be joined by David LePoidevin and they’ll actually be talking about the current state of the market, what comes next and what a ‘hard landing’ would look like for the economy and your investments.

Could Canada be facing a housing crash similar to what the US experienced?  As Canada’s most expensive real estate market, how will Vancouver fare?  What are the broader implications of a significant housing correction on the Canadian economy and job market?  What would a housing crash mean to your investment portfolio, and how can you protect yourself?

The event is at the Westin Bayshore on Wednesday November 28th at 7pm.  Registration is free, but first come first served.  There will be a Q&A session and a speculator dunk tank.  (Sorry, made that last one up.)

Also in the news, Mike sent in this note about a new property tax imposed in Hong Kong for non-resident buyers. Non-local and corporate buyers will now pay an extra 15% tax on purchase of property.  Hong Kong joins similar moves by Singapore and Australia to squeeze extra money out of foreign investors and give local buyers a market advantage to housing.

The 15 percent tax “will be effective in curbing foreign demand – mostly from mainland buyers – and avoiding ‘hot money’ influx into the property market,” Alfred Lau, a Hong Kong-based analyst at Bocom International Holdings Co., wrote in a report today. “However, local demand is not affected.”

The new property tax doesn’t apply to Hong Kong permanent residents. Inhabitants need to live in the city for seven straight years to be eligible for permanent residency, according to immigration rules, while Chinese citizens born in the city are automatically granted that status.