Category Archives: economy

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.

Debt addicts face painful withdrawal

Canadians love debt that gets sunk into ever rising property prices and banks and other lenders have been happy to provide.  As long as rates only go down this is a pretty good situation, but what if rates were to go the other way one day?

Financial companies have been more-than-willing lenders. But there are several reasons why Canadians have been such enthusiastic borrowers.

Last week, new figures showed that consumer lending now totals more than $2 trillion, a new record. As we reported last week, for every dollar of Canadians’ disposable income, they owe almost $1.67.

From the point of view of Canadians, money has never been so cheap. But the rising cost of housing, especially in the country’s biggest cities, has also drawn people into taking on more debt.

Continue reading Debt addicts face painful withdrawal

And now a political message from Dave

Dave sent in the following opinion, in which he throws up his hands in despair at the state of politics in BC and its role in the housing bubble.

If there was ever an election to vote for None of the Above, this would be it.

I no longer believe that any of the three major parties represent the interests of the average British Columbian. Each have sold themselves out to Special Interest groups of one type or another.

I’ll first start with the BC Liberals because they are looking for a fifth term. I have been a party member, volunteer and voter for the BC Liberals each of the last four elections. I am also a small business owner and employer and I generate a healthy income. In theory, I’m the easiest vote the Liberals should ever get. But they aren’t getting my vote this time.

Continue reading And now a political message from Dave