Archive for the ‘economy’ Category

Party like it’s 1981

Wednesday, July 1st, 2015

Remember the 80’s?

Big hair, jelly bracelets and 20% interest rates.

Homebuyers back then had a tough time, they had to save up for a big down payment and the cost of holding a mortgage was high.  All that hard work and sacrifice was well rewarded though as Rob Carrick points out in the Globe and Mail:

The high interest rates of the early 1980s must have felt unbearable for all Canadians buying homes and arranging mortgages (it was heaven for savers, but never mind). The reward for perseverance was a 30-year run in which resale house prices on a national basis surged by an average annual 5 per cent and were up in 28 of 34 years.

This rally was fed by falling interest rates. After the visit to high-rate hell in the early 1980s, home owners benefited from a long decline in rates that continued into 2015. House prices haven’t gone up because homes are a great investment, because of immigration, because of foreign money or because home ownership is awesome. It’s because we’ve had a 30-year sale on the cost of financing a home purchase, with ever-increasing deep discounts.

That sale may be ending. There’s a growing sense that the U.S. economy is on the upswing, and interest rates in the bond market have already started to creep higher. Mortgage rates take their cue from rates in the bond market, so we could see lenders increase fixed-rate mortgage costs at some point this year or next.

For the historical perspective read the full article here.

The thing that may surprise you is that despite a housing market that has provided magical returns for older buyers and cheaper and cheaper debt seniors are still going bankrupt in record numbers.

Time for another recession?

Tuesday, June 30th, 2015

It seems like it was just a few years ago we had a recession, could it really be time for another already?

The Canadian economy has now contracted four months in a row and if that trend continues will Poloz have to cut rates again?

Economists have already written off the first half the year, but something better was still expected for April.

This also brings into question the outlook that had been painted by Bank of Canada Governor Stephen Poloz.

A recession is typically defined as two consecutive quarters of contraction, meaning May and June will have to be stronger to avert that in Canada.

Even if the May showing is flat, said Andrew Grantham of CIBC World Markets, there could still be a “modest negative” for the second quarter.

“It probably already feels like a recession for people in Alberta and Saskatchewan,” he said.

Read the full article here.

Flipping houses in Dunbar

Tuesday, June 16th, 2015

Many Franks pointed out this article over at BiV about house flipping in Dunbar. and points out how the math might not always be as appealing as it first sounds:

“A well-backed investor leveraging 20% down financing [around $400,000] would yield over 100% [on their cash investment],” said Derek Tinney, Landcor Data operations manager.Vancouver realtor Ken Leong, who admits to a brief – and heady – history of flipping condominiums for himself and clients, said it takes more nerve and cash to speculate on Vancouver’s detached-house market than during the exuberant days of condo flips a decade ago.

Leong said that if house price increases go soft – as in the current condo market – investors could find themselves financially under water fast.

Buried below the big numbers and cherry-picked examples are some important details:

[I]f an investor bought a house for $1 million and flipped it a few months later for $1.1 million, he or she would have to pay $18,000 in B.C.’s property purchase tax. Realtor commissions to sell the house would total around $33,500. The capital gains tax, likely at the highest tax bracket, would be roughly $30,000.“So now your $100,000 gain is down to less than $20,000, and you still have to add in the carrying costs of financing of around $4,000 per month while the house is for sale,” he said.

“It would be hard to make a big profit on such a flip,” Leong said. “Actually the government would make more than the investor.”

The last sentence is key.

Read the original article here.

What roll for developers in affordability debate?

Wednesday, June 3rd, 2015

Often when it comes to real estate stories in the local media the people interviewed are developers, marketers or realtors. These are all professionals who deal with the market every day, so it makes sense for the media to seek their opinion on housing stories.

But should they be driving the ‘affordability’ debate?

Architect and professor Avi Friedman thinks not.

“Builders will not initiate innovative ideas because they are profit motivators, so the city needs to act as a catalyst,” he told CBC Radio One’s Rick Cluff on The Early Edition.

Friedman also criticized the idea offered by many in the real estate industry, like marketer Bob Rennie, that Vancouver isn’t going to be affordable for everyone and that young people should consider moving to the suburbs.

“People who grew up and live in a city should be able to buy a home in their city. The fear is that, some of these young people may leave Vancouver,” Friedman said.

“Once you see the departure of young people from the city, they take along their potential … to start new businesses, to create a vibrancy that young people bring to a place.”

Friedman says it is incumbent upon the city and its leadership to foster and implement new ideas that will allow young people to stay and thrive in Vancouver.

Read the full article over at the CBC.

House-poor Canadians

Thursday, May 28th, 2015

Southseacompany pointed out this article.  Seems like the more valuable our real estate gets the more house-poor Canadians become.

“Campbell says that many, like Edgerton and Camus, are surviving now, but the big question is what happens if there’s an unplanned setback — from a job loss to a rise in interest rates.”

“”If the housing market goes down and those individuals have to sell, we’re going to see a lot of houses on the market, which will further reduce the house market in general,”

‘Canada has among the highest home ownership rates in the world; owning a home is one of the ultimate Canadian dreams. And it’s perhaps why so many people choose to live house poor rather than sell their home.”

Read the full article at the CBC.

Mayor backs real estate speculation tax

Monday, May 25th, 2015

Vancouver Mayor Gregor Robinson has come out in support of a speculation tax on real estate purchases.

We definitely need taxation tools that discourage speculation on real estate,” a statement from Robertson says. “It’s clear that rampant speculation on real estate is driving up prices in Vancouver. Vancouver needs the B.C. Government to take action on creating a speculation tax and recognize that we need a fair and level playing field to make housing more affordable for residents in Vancouver, and throughout the province.

Read the full article here.

Housing costs in bc ‘pretty reasonable’

Monday, May 18th, 2015

The BC Housing Minister has clarified whether or not his ministry or the government will collect data on real estate buyers:

“I don’t believe we should be in the market place,” Coleman said, referring to his ministry, “and we have not had any request to go and do this work … There is no initiative at this time in government to go and interfere in the market place in regards to housing.”

The collecting of any data is not necessary because housing cost are actually pretty reasonable when you look at it right:

“I believe that the market place adjusts. If you notice over the years, it has fluctuations up and fluctuations down. If you look at the mean cost of housing across British Columbia and you compare it to other major cities worldwide, the reason it is attractive internationally is because it’s actually pretty reasonable compared to other cities like London, Singapore, Tokyo,” Coleman answered.

It’s actually a VERY favourable comparison. Initially we thought he was asking us to compare Vancouver housing prices to London house prices, but then we realized he was actually asking us to compare the mean cost of housing across the province of BC to a city like London.

Other than the differences those two things are very much alike.

Read the full article over at VanCity Buzz.

Friday Free-for-all!

Friday, May 15th, 2015

It’s that time of the week again…

Friday Free-for-all time!

This is our standard 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:

How about more taxes?
Not all owners oppose lower prices
Equity Protection
What a realtor says
The premier wedge issue?
Lessons learned in the 80s?
Harper warns of high debt

So what are you seeing out there? Post your news links, thoughts and anecdotes here and have an excellent weekend!

 

BC Premier has a message for first time buyers

Wednesday, May 13th, 2015

A recent petition seems to have gotten enough attention to get the Premier to comment on the issue of limits to foreign buyers of BC real estate.  This article say’s she’s sitting on the fence, but her quote seems to pretty clearly have a message for struggling first time buyers in BC:

“By trying to move foreign buyers out of the market, housing prices overall will drop. That’s good for first time home buyers, but not for anybody who’s depending on the equity in their home to maybe get a loan or use that to finance some other projects.”

Which category do you think holds about 70% of the voting population?

Canadians deep in debt and getting deeper

Monday, May 11th, 2015

The Globe and Mail nicely sums up the current Canadian obsession with taking on household debt. This infographic has all the pretty charts related to the current situation in which current debt totals a record $1.8 trillion. Just over a trillion of that is Mortgage debt, with the other big growth seen in lines of credit and car loans.

One Trillion is a big number and it can be hard to visualize.  Here’s one way to put it into perspective:

If you spent $1-million every day, it would take you 2,740 years to spend $1-trillion.

Albertans carry the largest debt to income ratio followed by BC. It seems the nation loves debt, but the west loves it best.

Read the full article here.

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