Archive for the ‘economy’ Category

Rising home prices keep Canadians from starting families.

Thursday, November 19th, 2015

Bull! Bull! Bull! pointed out this article in the Vancouver Sun.

The survey of 1,700 Canadians found 52.8 per cent of Canadians overall cannot afford to start or expand their families, with 46.4 per cent of millennials sayings their existing debt was making it impossible, even before considering a mortgage.

Benjamin Tal, deputy chief economist with Canadian Imperial Bank of Commerce, thinks there’s no question household formation is being impacted by prices. “Common sense tells you it makes sense. We have an affordability crisis in large parts of the country. In these types of cases, people either stay in the basement (of their parents) but they definitely don’t buy a house. We know in the United States for sure this happened.”

Infrastructure in cities has not kept pace with density, as evidenced by some Toronto condominium developments posting signs warnings parents that their children might not be able to get into local schools because of overcrowding.

As Bull! Bull! Bull! points out, that’s not really a big deal because Vancouver isn’t a family town anyways:

that’s ok. young ppl can live in condos, ride bikes, instagram their breakfast, experiment with facial hair, smoke lots of pot and generally act like they never moved out of residence. (showers are optional). they’ll be happier anyways.

Read the full article here.

Oh look, free money! Should we leave it on the table?

Wednesday, November 11th, 2015

Should property taxes be higher for non-primary residences?

“The dark houses in West Vancouver are so prevalent on some streets that Mayor Michael Smith worries about how his community is functioning.

He would like to see a heavy tax on houses that are used as investments or secondary residences, just like the $20,000 a year he pays in taxes for his vacation house in Kauai, Hawaii.

“As a society, we need to decide whether homes are for people and families or whether they’re investments,” Mr. Smith said. “If it’s not your principal residence, you should pay more in tax. The best way to stop this is to make it punitive.”

In Coquitlam, residents are also noticing dark condos in the new high-rises around the city centre. But Mayor Richard Stewart said it is not seen as such a bad thing.

“We raise taxes to pay for city services and, if someone is paying taxes but not consuming services, most people don’t have a problem with that,” he said.

Is it good enough to collect a standard property tax from some one who doesn’t live in a community or should politicians jump to take extra money from people who can’t vote them out?

Read the full article here.

Your vote counts, we’re number 1!

Tuesday, November 10th, 2015

So, you probably noticed some issues with the site over the last few days – mainly the comment voting system was broken.

We’ve got a temporary fix in place, so it looks like you can go back to voting on comments for now.

Meanwhile TD says BC is the most susceptible to economic shocks due to housing:

B.C. has topped TD’s list for the most financially vulnerable households in Canada for 16 years in a row. With the most expensive housing market in the country, B.C.’s households spend the largest share of their monthly budgets on paying debt, devoting 9 per cent of their income toward interest payments alone. The typical B.C. household would have to spend more than half its income in order to afford an average-priced home. Stretched affordability has meant the province has an above-average number of homeowners who are delinquent on their mortgages, TD says. Households in B.C. hold a disproportionately large share of their overall wealth in their homes, having fewer non-housing financial assets than other provinces. On the bright side, those housing assets are considerable given the soaring cost of real estate in the province. Homeowners have also adjusted to high home prices by renting out portions of their homes to cover their mortgages, TD said.

Read the full article here.


How big can debt loads get?

Tuesday, November 3rd, 2015

It seems like every few months there’s more news about Canadians taking on record levels of debt – a recent story linked to by southseacompany is on this topic:

Evidence Canadians are on a debt-fueled spending spree.

Canada may have spent the first half of the year stuck in an oil-driven recession, but you’d never know it looking at Canadians’ spending habits.

Consumer spending was 6.68 per cent higher in the third quarter of this year compared to a year earlier, payment solutions provider Moneris reported in its latest quarterly report.

British Columbia and Ontario led the way in spending growth, with B.C. up 10.2 per cent and Ontario up 9 per cent.

Even in recession-ravaged Alberta, which lost 2.6 per cent of all its jobs in the past year, consumer spending is up by 0.3 per cent compared to last year.

Any one else getting bored with the repetition? Is it really different here and can Canada pull off this trick indefinately?

Here’s the full article.

CMHC: Boom to end in 2016

Monday, October 26th, 2015

Hmm. This sounds familiar.

The CMHC is predicting that the Canadian housing boom will come to a screeching halt next year and barely keep up with inflation:

Canada Mortgage and Housing Corp. issued a dim forecast for the housing market for the next two years on Monday, predicting dismal price growth — but at least one economist thinks the Crown corporation’s numbers may be off in Canada’s most significant market.

CMHC, which advises the federal government on housing policy, isn’t predicting a massive correction for housing, but it did say that consumers can expect prices to barely keep pace with inflation through 2017 and that sales and new construction would slow down.

Read the full article here.

Will the new government drive house prices up or down?

Thursday, October 22nd, 2015

How will the new Liberal government policies affect rates and house prices in Canada?

And just what does ‘affordability’ mean in this context?

“Here’s some of what the mortgage market can expect from Mr. Trudeau’s new government:

Higher bond yields: Balancing the budget is not a priority for the Liberals until 2019. Trudeau is expected to go on a spending spree and bond traders aren’t keen about it. It suggests a greater supply of government debt and potentially higher long-term yields to come. That, of course, could mean at least slightly higher fixed mortgage rates than we’d otherwise see.

A More Hawkish Poloz: The odds just dropped for a cut in prime rate. More spending by Ottawa puts less pressure on governor Stephen Poloz to stimulate the economy with rate cuts. The implied probability of a rate hike by next October has almost doubled, from 8% yesterday to 15% as we speak.

Wider RRSP Access: The Liberals say they’ll open access to the RRSP Home Buyer’s Plan, particularly for homebuyers coping with significant life changes (divorce, death of a spouse, a sick or elderly family member, etc.). More access to down payment funds will prop up housing sales and home ownership slightly, and support home prices.

More “Affordability”: The Liberal platform includes a review of housing policy in high-priced markets. The new government will “consider all policy tools that could keep home ownership within reach.” What that means, we’ll have to wait and see. It could definitely be positive for renters and income property investors, given the Liberals have promised to “direct CMHC…to provide financing to support the construction” of new rental housing.

First-timer Support: Trudeau’s government will add more flexible programs for first-time homebuyers. This could mean any number of things, potentially even higher amortization limits for new buyers.
New Blood at the DoF: The Liberals will be installing a new Minister of Finance, who has enormous power over housing regulation. Will he or she be as hands-off on mortgage policy as the outgoing Joe Oliver? We’re guessing not. We’ll likely have an answer by the time the Liberals release their first budget next spring.”

Can someone please explain this market?

Monday, October 19th, 2015

The following was posted by ‘Whistler or bust?‘ in the comments this weekend:

I will be the first to admit I have been very wrong about the direction of Van RE in the past 2-3 years. That disclaimer said, lets examine some facts to see if there is any upside left:

These are the incomes required to be in each % (Source CBC)

10% of income earners $80,400*
1% of income earners $191,100*
0.1% of income earners $685,000**
0.01% of income earners $2.57 million*

So with the average Vancouver detached home at $1,408,722 (Source Yatter Matters)

A DP of $281,744 is required to buy
PPT is $26,174
Misc Closing $2,000
Total $309,918

Mortgage $1,126,978 @ 2.59 for 5 yrs = $66,072 Annually ( I will note these are record low rates)
Assume 1% Annual Maintenance (This is a standard benchmark over many years) $14,080
Property Taxes – These can vary but lets assume $7,000?

So Annual carrying costs total $87,152 AFTER TAX – I am excluding heating and hydro which vary but in no cases less than $3,000 annually for a detached home

Back to our chart above – Lets assume a 30% avg tax rate for the 10%, 35% for the 1% and 45% for the 0.1 and 0.01%.
After Tax
10% of income earners $56,200* – This house would take up 155% of the after-tax income
1% of income earners $124,215* – This house would take up 70% of after-tax income
0.1% of income earners $376,750* – This house would take up 23% of after tax income
0.01% of income earners $1.413 mil – This house would take up 6% of after- tax income

This is assuming all of these people have $310K for closing. This is assuming they are buying the average house of $1.4 mil. I think we all know what kind of house $1.4 mil gets on the West Side and even on the East side nowadays.

So the conclusion – Even the 1%ers are realistically priced out of the average Van detached home. Only the 0.1% and and above can really afford to buy.

Put another way – 99% of people are priced out. As families combined lets assume 95% are priced out.

So to all you bulls out there, please answer the questions: Is this a healthy market? Is this a market with any upside left?

I think we all know the answer.

We suspect Vancouver isn’t actually ‘hell on earth’…

Wednesday, October 14th, 2015

Occasionally we have some commenters here who seem to be pretty sure (or at least proclaim to be pretty sure) that Vancouver is hell on earth.

We suspect this isn’t entirely true, because most anyone you meet here has the ability to move away to a number of other options yet they hang around.

But  one recent comment references the fear that Vancouver will become ‘hell on earth’ by slowly crushing the economy into two strata:

Soon there will be two classes of Vancouverites.

The service class will live in 200 square foot mini-apartments, twenty such units per building, working for 50,000 dollars a year, paying 2,500 a month in rent, and paying a big chunk of their paychecks on taxes at the provincial and federal levels to pay for schools, hospitals, universities, and the coast guard. They will service the rich class and take the bus to get there.

The rich class will live in 7,000 square foot rectangular box houses, worth three million each, ridiculously crammed on 45 foot lots, their BMWs and Bugattis parked out front. Each household will claim poverty status, claiming to be earning just ten thousand dollars a year. That way the wives and kids and grandparents in those houses will not have to pay anything for their healthcare and education. It is all paid for by the income taxes of the suckers in the service class.

Meanwhile, unknown to Ottawa or Victoria, the businessman head of those rich homes is earning a million dollars a year in China, in activities that are often associated with phrases like “rule breaking” and “money laundering”.

That allows them to own another three houses and condominiums in Vancouver, places that are empty, places the government thinks his kids and nephews own because he put their names on the deeds.

Vancouver is turning into hell on earth.

Original comment from a Globe and Mail article referenced by Yunak.

Harper plans to pump up housing market

Tuesday, September 29th, 2015

Harper has announced an interesting goal: 700,000 new home owners by 2020.

Harper says home ownership provides Canadians with financial stability and strengthens communities.

According to information provided by the party, the target would raise Canada’s home ownership rate to approximately 72.5 per cent. The Canada Mortgage and Housing Corp., citing information from Statistics Canada’s National Household Survey, says the home ownership rate was 69.0 per cent as of 2011, the most current data available.

Meanwhile in the Metro area home ownership rates have moved from 56% in 1986 to 65% in 2011.

Property tax deferment and empty bedrooms

Wednesday, September 23rd, 2015

Peter Ladner over at the Vancouver Courier asks the question ‘why reward Vancouver seniors for staying in big empty houses‘?

The oldest of us will be 80 in 10 years, well past the time we needed all those bedrooms for our children, even the ones who stick around into their 30s. And we have lots of those bedrooms. Canadians have the most living space per person of any country in the world (2.5 rooms per person), according to Organization for Economic Co-operation and Development stats. I confess: I have two empty bedrooms in my home, even after converting the basement into a suite.

A decade ago, Urban Futures estimated that around 30 per cent of homes in Metro Vancouver had at least one unoccupied bedroom. That would be 220,000 empty bedrooms then, and many more in coming years as the boomer tsunami arrives. It would be interesting to calculate how many years we could go without building any new homes simply by filling up the ones we already have.

The opposing viewpoint says that asking people to pay their property tax is the same as kicking old people out of their homes, some calling Ladner ‘a disgusting human being’.  But as George points out is it really unfair to ask people who’ve benefitted from decades of rising property values to pay their share of the tax bill?

…Whenever young people cry about high housing prices in Vancouver, we’re told that’s the free market, suck it up, supply and demand, blah blah blah. It’s actually not a free market, it’s a highly distorted market, but that’s besides the point. If it’s good for the goose, it’s good for the gander. If young people in Vancouver are just supposed to accept being priced out due to the free market, then elderly people should have to accept the same thing. I am not saying I want to see elderly people displaced out of Vancouver. But Peter Ladner is right, it’s just not fair that elderly people sitting on massively overvalued homes get what amounts to a tax subsidy from the young, the very people priced out of the city.

What do you think? Are you against young families or the elderly?


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