Vancouver Condo Info

..At least that’s what Mark Carney and other Bank of Canada officials have said according to this article, yet they’re refraining from being more specific.

Meanwhile the Organization for Economic and Co-operative Development (OECD) is urging Canada to start raising interest rates in the fall and keep on raising them to stop an inflating housing bubble and reign in inflation.

The OECD, a high-powered economic research group backed by contributions from its 34 rich country members, offers a scenario: An increase in the benchmark rate of a quarter of a percentage point in the autumn, and similar increases each quarter through to the end of next year, leaving the benchmark overnight target at 2.25 per cent.

That still would be low by historical standards, yet, according to the OECD, likely a big enough increase to cause prospective homeowners to think twice before buying at current inflated prices. However, the OECD’s recommendation comes with a risk.

The Federal Reserve Board has made a conditional pledge to leave U.S. rates extremely low until the end of 2014. Following the OECD’s path could create an unprecedented spread between Canadian and U.S. interest rates, which would put upward pressure on a Canadian dollar that many say already is too strong.

Oh, and the OECD made this same recommendation a year ago and was ignored. So I wonder how Carney intends to bring the days of ultra-cheap money to an end?

This post was submitted by Adam.

Yes, you heard that correctly.

The word “bubble” was used in a discussion on a national news broadcast.

The CBC discusses the Canadian housing bubble with four economists and gets a fairly unanimous agreement: The Canadian housing market is overpriced and bubbly in many areas.

video embedded below:

This post was submitted by specuskeptic.

You’ve probably noticed lots of eye rolling around here anytime someone mentions how Canadian banks are so different from US banks.  The Canadian Centre for Policy Alternatives is now pointing out in a report that Canadian banks actually received a multibillion dollar bailout from October 2008 to July 2010.  The government is being accused of offering ‘liquidity support’ that is much higher than originally reported.

All told, the study counts $114 billion worth of guarantees and financial aid for Canada’s big banks from government agencies such as the Bank of Canada and the Canada Mortgage and Housing Corp.

MacDonald combed through financial reports from government institutions as well as quarterly reports from the banks themselves.

He says the government has been obfuscating the true cost of supporting the banks.

“A healthy and resilient banking sector cannot operate under a shroud of secrecy. Details of the massive taxpayer support Canadian banks received should be released in the name of transparency and accountability,” MacDonald said.

They also point out that the heads of Canada’s big banks received large raises during the time this ‘liquidity support’ was offered.

So if there’s a housing bubble in Canada who is to blame? Some people blame foreign buyers, some people blame local buyers. Some people think sellers are to blame and some people think the government is to blame. From the National Post:

Many analysts are becoming increasingly concerned that some cities — notably Toronto, Vancouver and possibly Calgary — are in the midst of their own U.S.-style housing bubble. A document written by the country’s financial regulator and obtained earlier this year through an access to information request, expresses concern over the “emerging risk” of Canadian loans that “have some similarities to non-prime loans in the U.S. retail lending market.” Bank of Canada Governor Mark Carney continued tosound the alarm as well last week over the growing level of household debt, while maintaining the overnight lending rate at a near-record low level of 1%.

The question remains as to why prices in Toronto and Vancouver — where the economy is stagnant — are rising so fast, and not in cities like Edmonton and Saskatoon — where the economy, and population, is booming.

Read the rest of the article here.

The courier is getting lots of linkage from us as of late, but they’re playing both sides of this issue pretty well.  Is it racist to say that we should have foreign buyer restrictions or that absentee owners can kill a neighborhood?  Mark Hasiuk says NO.

Christy “Families First” Clark, a committed globalist, won’t restrict foreign ownership in B.C. Mayor Gregor Robertson, who slobbered over Beijing during a 2010 “trade mission” to China, won’t reform the tax code to accommodate the new normal. Which means foreign real estate investors pay the same rate (4.2 per cent) as local homeowners, not the business rate (18 per cent) they should.

Read the full article here.

This post was submitted by Farce.

A few people pointed out this Rob Carrick column over at the Globe and Mail, looks like it should get front page attention here:

In February, Mr. Salvi called this client to remind her about the upcoming RRSP contribution deadline. “She said, ‘You know, I cannot put anything into my RRSP and, by the way, I need to cash it in.’”

Mr. Salvi recalls warning her about the withholding tax that applies to money withdrawn from an RRSP. Her reply was that her RRSP was her last resort. “The sad thing is that it took years to grow that RRSP, and it’s going to be used up in a few months.”

When somebody buys an overpriced house they’re giving up all the other things that money could have been used for.  It looks like those sacrifices include saving for retirement or their kids education.

Here’s the full article.

This post was submitted by Scott.

Nice response from Sandy Garossino to last weeks Allen Garr column “Blaming Chinese For High House Prices in Vancouver Is Racist”.

When I raised concerns over the impact of international transactions during the civic election campaign, the response was overwhelming and full-spectrum from across our entire community, because the problem is universal.

It was notable how concerned Canadian Chinese Vancouverites are about this difficult issue, and how optimistic and imaginative some of their solutions are. Many in this community, such as Susie Joe Dooner, expressed grave concern about the exodus of gifted young people they have seen—their own friends and family leaving their home city and province in despair of having a future here.

And it was this community which also expressed concern that our local real estate and development industry bears some responsibility for its aggressive marketing to foreign investors. Some cautioned that the scale of the potential market poses real hazards to a small city like Vancouver.

It is profoundly inaccurate to represent the public reservation about unregulated international capital in our housing market as having a racial bias, when the concern is universal.

Read the full letter over at the Courier.

I wonder why we don’t have a foreign owner property tax structure like Florida and other places that charge a premium to non-resident owners (regardless of what their race or country of residence is).  It would raise more money to pay for city expenses, take some of the tax burden off residents and best of all the only people who would complain about it can’t vote!

This post was submitted by Jackson.

Many Franks pointed out this article in the Financial Post, which offers a flipside view to yesterdays “do whatever it takes to scrape up 5%” article.

It has a real simple message: Banks exist to make money.  That includes making offers that sound good but may not be in your best interest.

While many people want to blame the banks or the government for Canadas alarming consumer debt problem, theres only one person who is truly to blame: the consumer.  Sign yourself up for a suckers deal and you have only yourself to blame.

While some bank chief executives have put it on themselves to tighten their own lending rules, others continue to look to Ottawa to take the lead.

In the interim, all you have to do is walk into a branch, grab some pamphlets and you will see an array of offers that could get you into even more debt trouble.

One of my favourites is the cash-back mortgage. It is offered to a varying degree by most of the major banks, so there is no point in picking on any one institution.

Here’s the offer: Take out a mortgage for more than five years and get 5% of the value of the mortgage up front to a maximum of $25,000. In other words, get a $500,000 loan and immediately get $25,000 back. “It’s great for first-time buyers,” we’re told.

Really? If the loan is at the posted rate of 5.44%, which it usually is for these types of mortgages, you could easily land into more debt trouble long term.

Another deal tries to lure me over to a new bank with an offer of 2% cash up front, or up to $4,000 on $200,000 if I switch to the financial institution. But what about the costs to break my existing mortgage, and is there really any point in switching products to get that cash right away if I’m going to end up with a higher rate and a less-flexible mortgage?

“Somebody is going to pay for it,” says Kelvin Mangaroo, president of RateSupermarket.ca, about the cost of the promises. “Sometimes there is more fine print than the actual offer.”

Check out full article here.

What do you think, do we need more consumer protection to protect consumers from themselves?

Donald pointed out this discussion over at the SeattleBubble blog about 10 reasons NOT to buy a home:

10. Renters don’t have to fix leaky plumbing, pay for a new roof, or buy major appliances.
9. The moment you sign the closing papers, you lose ~10% of your home’s value.
8. Better job offer in another city? Hope you can afford to sell…
7. Lousy neighbors move in next door? Too bad, you’re basically stuck!
6. Your down payment and equity are anything but liquid.

Read the rest of the list at SeattleBubble.com.  One interesting thing to consider is this list is based on a theoretical situation where home prices are at reasonable levels and supported by local economic fundamentals.  In a hot housing market where prices only go up and people fight for the right to overbid on a teardown in a bad neighborhood it’s always a good idea to buy instead of rent.  Always.

For most people a home is the largest purchase they will make in their life.  And it’s so complicated!

Now you could do a bunch of research or you could relax and let an expert tell you what to do.

Fortunately there’s a whole bunch of people that specialize in the finer points of buying and selling real estate and they form organizations to help you, the potential buyer/seller.

In the USA there’s the National Association of Realtors or NAR and they put out this great ad in 2006:

LOL on bad timing.  In 2006 in the US only one of those options was a good move.  And yes, that’s a real ad.  Found it over at Burbed with thanks to gordholio.

This post was submitted by Ronco.