Category Archives: debt

The correlation between interest rates and speculation

Bank of Canada Governor Stephen Poloz has said he doesn’t think there’s a strong correlation between interest rates and speculation, claiming even a 5% increase in rates wouldn’t have an impact on real estate speculation in Canada.

Over at BetterDwelling.com they disagree with this thought:

It was almost stupid to not buy property at these rates, since it was almost free money. This didn’t just give speculators more capital, it created speculators out of people that would normally not be able to play the game. These aren’t Bay Street suits with wads of cash. Everyone from your barber to grocery store clerks are turning into real estate speculators. Cheap rates, a larger qualified buyer pool, and the expectation that you can always make money, turned shelter into lottery tickets.

Read the full article here.

Blame Mark Carney for Canada’s Housing Bubble?

The Financial Post has an article that lays the blame for the enormous Canadian housing bubble on former Bank of Canada Governor Mark Carney:

Carney, perhaps even more than former Fed Chairman Ben Bernanke, was an excellent crisis central banker. Unfortunately, he did not nail the dismount.

After it became clear in 2010 that the developed world had exited the financial crisis, Carney raised rates just a little, to 1 per cent, and then left them there until 2013, when he joined the Bank of England.

Seems like joining the Bank of England should count as nailing the dismount.

If Canada has a hard landing, accompanied by a severe recession or a depression, Carney’s (and to a lesser extent, Poloz’s) mistake will have been unforgivable.

Read the full article over at the financial post.

Have we seen this movie before? Canada surpasses US bubble peak

Even outside of ridiculous vancouver, this nation is real estate crazy. In many key metrics Canada has surpassed the US housing bubble at its peak.

As David Rosenberg, the chief economist at Gluskin Sheff told BNN Thursday, “This bubble is on par with what we had in the States back in ’05, ’06, ’07. We have to actually take a look at the situation. The housing market here is in a classic price bubble. If you don’t acknowledge that, you have your head in the sand.”

Read the full article over at Macleans.

Owe Canada! Canadians love debt

Owe Canada posted this in the weekends thread and it’s got some very interesting numbers:

Canadian annual gdp at the present time is $2.06 trillion.

In the 1 year period from the end of December, 2015 to the end of December, 2016 (calendar year 2016) the Canadian economy grew by 1.4% – ie: the size of the economy grew by $28.9 billion.

In this same 1 year time frame the total debt outstanding in Canada grew by $309 billion. For each $1.00 the economy grew in this 1 year period the total debt outstanding increased by $10.69.

Looking at just the total debt outstanding of domestic non-financial sectors in Canada. In the 1 year period from the end of December, 2015 to the end of December, 2016 the total debt outstanding of domestic non-financial sectors increased by $215 billion. For each $1.00 the economy grew in this 1 year period the total debt outstanding of domestic non-financial sectors increased by $7.43.

At the end of December, 2016 the total debt outstanding in Canada was 3.5 times greater than our annual gdp, and looking at just the total debt outstanding of domestic non-financial sectors, that was 2.5 times greater than our annual gdp.

Here’s more from Owe Canada.

Vancouver homes lost 49% of their down payment in one year.

Southseacompany pointed out this article at global news: according to zolo, Vancouver home prices have lost almost half of their down payment value in one year.

“Once considered Canada’s hottest locale for real estate, home values in the West Coast city took a beating over the course of a year, with the average home price dropping from over $1.1 million in February 2016 to $995,583 a year later.”

“Zoocasa calculated the loss (or gain) of return by taking the year-over-year change in average home prices and then dividing it by the down payment buyers would have had to make in February 2016.”

“By this measure, Vancouverites lost 49 per cent of the return on their down payments.”

Read the full article here.