Category Archives: economy

7 Canadian banks get negative outlook

Standard and Poor’s have downgraded their outlook for 7 Canadian banks from stable to negative.

And what has motivated this downgrade?

High housing prices and consumer debt.

Now you can bet that S&P are aware of the CMHC and the backdoor bank bailout, but when things get this out of balance there is a spill-over effect.  If you can’t pay the mortgage you probably aren’t paying the credit card bill either, and there’s no CMHC buying up credit card debt.

“A prolonged run-up in housing prices and consumer indebtedness in Canada is in our view contributing to growing imbalances and Canada’s vulnerability to the generally weak global economy, applying negative pressure on economic risk for banks,” the rating agency stated in its decision. “Growing pressure on banks’ risk appetites and profitability arising from competition for loan and deposit market share could also lead to a deterioration in our view of industry risk.”

The seven Canadian banks with a negative outlook are:

-Bank of Nova Scotia
-Central 1 Credit Union
-Home Capital Group Inc.
-Laurentian Bank of Canada
-National Bank of Canada
-Royal Bank of Canada
-Toronto-Dominion Bank

Full article in the Globe and Mail.

 

The incredible sinking Richmond

Inventory posted this update to detached sales in Richmond and it’s astounding.

We’re not at the end of the month quite yet, so this number will rise, but we would have to have an incredible amount of sales to not have July 2012 register as an all time record low number of sales.

Here’s the comparison for July detached sales all the way back to 1995, we’re currently sitting at about half of the low normal level:

Richmond Detached July

1995 = 108
1996 = 117
1997 = 122
1998 = 86
1999 = 113
2000 = 96
2001 = 183
2002 = 154
2003 = 209
2004 = 129
2005 = 170
2006 = 97
2007 = 175
2008 = 92
2009 = 221
2010 = 107
2011 = 123
2012 = 54 (-56%) ***July 29

Just what is happening there to the south of Vancouver?  Have houses in Richmond fallen out of favour with buyers for some reason?

Ready for a 25% off sale?

A day after the RBC released a report saying there is no condo bubble in Toronto we get a conflicting report from Capital Economics.

Not only do we have a housing bubble problem in Canada, it appears to be peaking and bursting right now.

Economist David Madani says get ready for a 25% drop in prices.

The thing people always seem to forget when it comes to housing markets is that they move SLOWLY.

Housing prices typically respond to changes in the market with a lag of five to nine months, according to Mr. Madani. He points out that home sales have already seen material declines, down 4% over the last two months. Vancouver in particular has been hard hit, with sales down 28% year-over-year.

“Overall, the willingness of buyers to pay these historically high house prices now looks to be proving fragile against the increasingly disappointing macroeconomic backdrop,” he said. “The housing bubble in Vancouver already appears to be deflating, with only Toronto defying the inevitable. Accordingly, we expect substantial declines in house prices over the next year or two.”

Check back here in two years to see whose prediction was more accurate: RBC or Capital Economics.

 

Lots of new condos coming

They aren’t making any more land, but they are making more condos.  Lots more condos.

Real estate market team MPC Intelligence started tracking new condo projects in Vancouver in 2005.

They just recorded the busiest six months on record for announced new concrete condo projects.

This despite a recent slow down in the presales market.

A new wave of projects is expected in the fall.

Hancock said the pace of pre-sales has slowed in the last two months, but he expects a “large wave” of new launches in the fall.

Hancock attributes the slowdown to developers postponing projects because of market conditions, and some projects being delayed in the approvals process.

He said projects priced right and in the right location — near rapid transit — are doing well, citing strong sales at the Solo District condo project in Burnaby that started pre-sales this past weekend.

Hancock noted that 55 per cent of the concrete condos introduced to the market this year have been sold, with most sales in the first quarter and “the second quarter showing slower uptake.”

He also said it’s “too early to tell” if the slowing resale market is a factor in developers delaying projects.

The presales market can’t be doing too bad when we have big projects like Marine Gateway selling out in 4 hours.  The odd thing is some people are reporting seeing bus ads for this development.

Why spend money advertising something that isn’t for sale anymore? Can anyone confirm these ads?

The good news is they have a plan to deal with the smell.

 

 

RBC: No Toronto Condo Bubble

Royal Bank says everyone should stop worrying about the condo bubble in Toronto.

Policy makers in Ottawa and various economists just need to chill.

There is no Condo Bubble in Toronto.

Can someone ask them about Vancouver?

There are more condos under construction in Toronto than any other city in North America, and more residential building is taking place in the Greater Toronto Area than ever before.

Mr. Flaherty’s fears about overpriced real estate, and condo markets in particular, prompted him to surprise the market last month with new mortgage insurance rules that aim to take some of the wind out of the market’s sails. He’s trying to engineer a gradual slowdown of the market, fearing that otherwise it could crash at some point.

Mr. Hogue’s lack of concern about a bubble does not mean he thinks the market will boom, however. He expects condo prices to fall by perhaps 2 per cent to 7 per cent from their peak. He predicts that a two-tiered market could emerge, with condo prices softening while the market for single-family homes is resilient.

Full article in the Globe and Mail.