Archive for the ‘debt’ Category

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.

Friday Free-for-all! Luxury Credit.

Friday, August 8th, 2014

You made it to the end of another work week, and that means it’s time to do our regular Friday Free-for-all post here at VCI.

This is our end of the week news round up and open topic discussion thread for the weekend.

Here are a few recent links to kick off the chat:

-Price changes and credit (graph)
-Why so many doomers?
-High prices raise debt levels
-Perspective on foreign buyer levels
-3rd try for Versace in Vancouver
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So what are you seeing out there? Post you news links, thoughts and anecdotes here and have an excellent weekend!

Americans moving for affordable housing

Monday, August 4th, 2014

The fastest growing cities in America are now the ones where housing is more affordable than average.

This is a change from the early part of the millennium where credit was easy and mortgages were easy to get.

Rising rents and the difficulty of securing a mortgage on the coasts have proved a boon to inland cities that offer the middle class a firmer footing and an easier life. In the eternal competition among urban centers, the shift has produced some new winners.

Oklahoma City, for example, has outpaced most other cities in growth since 2011, becoming the 12th-fastest-growing city last year. It has also won over a coveted demographic, young adults age 25 to 34, going from a net loss of millennials to a net gain. Other affordable cities that have jumped in the growth rankings include several in Texas, including El Paso and San Antonio, as well as Columbus, Ohio, and Little Rock, Ark.

Newcomers in Oklahoma City have traded traffic jams and preschool waiting lists for master suites the size of their old apartments. The sons of Lorin Olson, a stem cell biologist who moved here from New York’s Upper East Side, now ride bikes in their suburban neighborhood and go home to a four-bedroom house. Hector Lopez, a caricature artist, lives in a loft apartment here for less than he paid to stay in a garage near Los Angeles. Tony Trammell, one of a group of about a dozen friends to make the move from San Diego, paid $260,000 for his 3,300-square-foot home in a nearby suburb.

Read the full article in the NY Times.

If you’ve tried to hire someone from outside Vancouver for a position here, you may be aware of the challenge presented by expensive housing.

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.

 

High prices: sign of a sick or healthy market?

Wednesday, May 7th, 2014

When you own something you might be delighted to hear that the price is rising.

Even if you don’t sell it to cash in, there’s a certain amount of psychological comfort to be found in owning something ‘valuable’.

So it’s not remarkable that many people are delighted by the rising cost of real estate in Canada.

But is this just the economic equivalent of a sugar high?  If all homes are rising in price you don’t really benefit from selling unless you leave the market or downsize to where the percentages are smaller.

Jonathan Miller, a US real estate appraiser posted an article comparing the US and Canadian markets.

He makes the point that sharply rising prices in US markets didn’t work out to be indicative of a markets health, rather they led to the inevitable hangover when the party was over.

Is it different here?

Taxpayers funding condo flippers?

Monday, April 14th, 2014

By now everyone knows about the high cost of the Olympic Village project.

Current estimates are that it will cost taxpayers between $400 – $600 million to pay this off.

There are 68 units still left unsold over the last six years, but over at the ‘Canada House’ building it looks like a number of units have been bought and flipped, at least one for more than $400k profit in a month.

Hat tip to Mac who pointed out this article in the Province.

So whats going on here? Should these units have been priced higher or considering the tough sales across this project were they right to unload them quickly even if there were buyers willing to pay more?

Should you just move to an island?

Tuesday, March 25th, 2014

Skook has a post over at VancouverPeak.com about an island dream gone sour.

A BC couple purchased land on Mayne island and started building their dream home only to run into a confluence of cost overruns and real estate market downturn.

Today, their house is only a wood frame shell that looks out over one of B.C.’s most dramatic views, with the Lower Mainland in the distance, and regular sightings of ferries, whales and seals. The tiered wooded lot is only a five-minute drive to the ferry.
It is the idyllic best that B.C. has to offer, and yet the Klingsats won’t even break even on the near $1-million they spent on the property and construction. They have relisted it for $539,000, after previous listings at $649,000 and $699,000 didn’t get any offers. “Everybody loves the place, but the people don’t want a house that’s not finished,” says Mr. Klingsat, who gave up on the project six months ago. “And I can’t do it. I haven’t got any more money to put into it. “The whole economy everywhere is lousy – nothing is gangbusters. There are places for rent all over here on Vancouver island.”

The original article in over at the Globe and Mail. Skook adds some extra thoughts and information.

RFM has also added some information summarizing other properties in that particular island market.  There are 113 properties for sale on an island with a population of 900.

RBC warns of mortgage rate increases

Tuesday, February 25th, 2014

RBC sees mortgage rates going up instead of flat or down.

Their forecast is for housing to get less affordable due to rate increases.

The Royal Bank of Canada says the ability of Canadians to keep up with housing costs has been improving of late, but warns that’s about to change.

RBC’s latest housing affordability measure shows home servicing costs relative to incomes dipped slightly in the last three months of 2013 after having risen the previous two quarters.

But the relief will be temporary, the bank says in a new report, because mortgage rates are due to start rising this year.

“RBC anticipates that as longer-term interest rates begin to moderately rise, the costs of owning a home at market value will gradually outpace (growth) household incomes by late-2014, leading to strained affordability in several markets across Canada, much like the trend in Toronto,” RBC chief economist Craig Wright said in the report.

The finding bucks the recent trend, which has seen mortgage rates remain stable or even moving lower, with some brokers offering five-year fixed rates below three per cent.

Read the full article here.

Canada plans to stop selling citizenship

Tuesday, February 11th, 2014

The federal government has announced that they are closing the immigrant investor program.

So how does this wash out with Vancouver HAM-hype?

If prices crash now does that mean that all the salespeople that used ‘foreign money’ instead of ‘in debt locals’ as a justification for high prices were correct?

A source said the government is acting based on data that show that, 20 years after arriving in Canada, an immigrant investor has paid about $200,000 less in taxes than a newcomer who came in under the federal skilled worker program, and almost $100,000 less than one who was a live-in caregiver.

In the past 28 years, more than 130,000 people have come to Canada under the investor program, including applicants and their families.

And what about those ‘in debt locals’?

Turkey shared some interesting numbers on the sheer size of Canadian debt growth:

Let’s start with non-mortgage debt:

Equifax said Monday that its figures show that consumer debt, excluding mortgages, rose to $518.3-billion through the end of November 2013. That was up 4.2 per cent from $497.4-billion a year earlier.

Up 20 billion dollars in a year; the total is 520 billion. That works out to about $15k per Canadian man, woman, and child.

Meanwhile, overall consumer debt, including mortgages, also continues to rise — up 9.1 per cent to $1.422-trillion from $1.303-trillion a year earlier.

Up 120 billion dollars in a year; the total is 1.42 billion. That’s about $41k per Canadian man, woman, and child.

Now the editorializing bit.

High debt levels are not a big concern in current conditions, which signal a stabilizing economy, improvement in the unemployment rate and an anticipated gradual increase in interest rates.

An increase in debt, by itself and without context, is not a troubling sign in an improving economy. It’s the friggin’ size of the thing that’s a catastrophe! These numbers are absurd. Plus, BC’s numbers have traditionally been worse.

What’s holding back the BC economy?

Monday, January 20th, 2014

BC’s economy is tepid, with some pessimistic outlooks from business leaders.

So what’s holding us back? Why don’t we have a higher rate of innovation and a broader growth economy?

That’s the question asked by this BC Business article:

Tamara Vrooman, president and CEO of Vancouver City Savings Credit Union, said complacency about the allure of B.C.’s climate, geography, and lifestyle may be one of the greatest risks. “Snow and mountains do not a business strategy make,” she warned. “I see for the first time in a decade, young people between 25 and 34 moving en masse to Alberta, Saskatchewan, and Manitoba, because that’s where the jobs are,”  Vrooman said. “I’m quite concerned about our ability to grow our economy for the next generation if they can’t find gainful employment here.”

The numbers back her up. Statistics Canada figures show B.C. lost 18,900 full-time jobs in 2013. Yet even with fewer spots to fill, companies are finding themselves unable to find workers with the skills needed to grow their businesses. There aren’t enough graduates in high-demand fields, and B.C. wages for even those workers are often insufficient to offset the high cost of living.

Is this a chicken and the egg problem?  Businesses can’t afford to pay enough to bring in the talent that would grow business?  Or is there a complacency problem here, where the environment was always supposed to be enough to draw people in and they’d take a paycut to live here?

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