Archive for the ‘debt’ Category

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?

30% of retirees return to work to pay bills

Monday, January 13th, 2014

ING has released the results of a survey they did showing that 3 out of 10 retired Canadians ended up having to return to work to pay bills.

Many retirees simply hadn’t saved enough or underestimated the cost of living.

The surveys portray a notable disconnect between Canadians’ expectations of life after the workforce and the reality of the cost.

ING Direct said that respondents wished they had found more ways to save for retirement, that they had started saving earlier and hadn’t “spent money so mindlessly.”

“The reality of retirement for many Canadians is a sobering reminder that you can’t put your financial future on the back burner,” ING Direct president and CEO Peter Aceto said in a release.

“Among the many other financial priorities we face during our prime working years, we need to make sure that retirement planning doesn’t get overlooked.”

So how are your retirement plans dear reader? Are you betting it all on a house in Vancouver?  Are you just starting out and saving and investing, or are you finding it difficult to put enough aside for your golden years?

Down is the new flat in Vancouver and Victoria

Monday, January 6th, 2014

A ‘flat’ market sounds good right?

Not too up, not too down, but just right.

It means if you buy a condo now you won’t have to suffer the indignity of someone buying the unit upstairs from you for $100k less in the future.

So flat is comfortable and we’re starting to see that word a lot more these days.  This article uses it in the headline: Vancouver condo market stays flat.

So you might be surprised to read the following directly under that headline:

Although Vancouver has a reputation as one of the most expensive cities in North America for housing, condo prices stayed flat or even dropped last year, according to recently released assessment numbers.

That follows several years of the same pattern, which means overall condo prices are now seven to eight per cent lower in inflation-adjusted dollars than they were at the recent peak of the condo market in 2009, says one analyst.

Meanwhile in the capital city they’re using the same word: Flat forecast for Greater Victoria home prices.

And here’s what they say:

Although the number of homes sold for the past year rose by four per cent to 5,998 from 5,747 in 2012, the benchmark price for a single-family house slid by 3.2 per cent. That benchmark, representing a typical house, was $479,599 in December, down from $495,400 during the same month in 2012, the board said Thursday.

The benchmark price has dropped from three years ago when it was $515,500, the board said. And it’s lower than the $483,400 price recorded five years ago.

So here’s the cheat sheet:

Vancouver ‘flat’ = 7-8% drop over four years.

Victoria ‘flat’ = $35,901 drop over three years.

2 beds starting at $750k, heat extra

Tuesday, December 10th, 2013

Looks like more problems over at the Olympic Village.

You’d think that all the hot air over this project would mean there’d be no lack of heat, but I guess you’d be wrong.

A problem with the much-lauded heating and cooling system in the buildings constructed for the 2010 Winter Games has left some residents without heat since the beginning of Vancouver’s cold snap, condo owner and resident Tomasz Rutkowski said Monday.

It’s nearly freezing at 6 C in Rutkowski’s two-bedroom apartment in the Kayak building at 77 Walter Hardwick Avenue, where his five-year-old son has been walking around and sleeping in a winter jacket.

Rutkowski reported the problem a few times to the property manager and strata council, but said he was told that the system is “just a weak system.”

“They just told us, buy portable heaters,” he said, adding that’s a poor solution for his condo with floor-to-ceiling windows. “This is supposed to be environmentally friendly, now they’re telling us to get those heaters.”

(The city and the mayor have applauded the heating system, a neighbourhood energy utility that recaptures heat from sewage and redistributes it throughout the community, as a green initiative.)

Read the full article here at Metro News.

The good news? The strata is responsible for the costs of maintaining the system, so this is one part of the Olympic Village that tax payers won’t have to cover.

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