Archive for the ‘predictions’ Category

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.

No sign of bubble bursting

Tuesday, September 15th, 2015

This Vancouver Sun article used to have the headline “Vancouver housing market in bubble, new house price index claims.

That version of the article apparently included the following:

“While foreign investors are no doubt playing some role, we think this explanation is overblown. Low interest rates and self-fulfilling expectations of higher prices continue to inflate actual prices independently of fundamentals,” reads a press release from the creators of the index.

“Over the longer-term, we still believe that these housing markets will experience major price reversals.”

But that has since been updated to “Vancouver’s ‘housing bubble’ shows no sign of bursting” and we’re having a hard time finding the above quote. The article now says:

According to Davidoff, it is impossible to judge Vancouver’s real estate market on the same bases as that in other cities. In the Prairies and the U.S. Midwest, where space is plentiful, the value of a home is essentially what it costs to build. Vancouver, on the other hand, is almost out of new land to build on. “The house, that means, is worth whatever people are willing to pay,” he said.

We can’t quite put our finger on it, but it feels like there’s been a subtle shift in the tone of this article.

Read whatever the article currently says here.

We were right, you should have listened.

Thursday, September 3rd, 2015

Ulsterman dug up this blast from the past: a posting from this here site in 2006.  At that time we recommended Vancouver real estate as the easy road to riches.  If you followed that advice you’re probably reading this now on a solid gold iPad while you recline on silk cushions with your feet in a bath of Diva Vodka. 



Are you ready to become so INCREDIBLY RICH that you no longer have to adhere to the standards and conventions of ‘civilized’ society? Are you TIRED of eeking out a day-to-day existence while you can smell THE REEK OF WEALTH all around you? Would you like to be able to walk through the mall without any pants and be so EXCESSIVELY WEALTHY that no one can utter a word about your pantless state, lest you unleash your personal squadron of vicious attack lawyers destroying their lives and reputations?

Well NOW you CAN!

Yes! Thanks to the MIRACLE of BOUNDLESS increases in PROPERTY VALUE you can now become a MULTI-MILLIONAIRE by investing in real-estate. And the best thing about it? This process requires NO EXPENSIVE COURSES OR SPECIAL EQUIPMENT. You don’t need any special skills or knowledge – In fact, you don’t even need a brain! THAT JUST HOW EASY IT IS!

Here’s how its done:

1) buy real-estate
2) sell real-estate (for more than you bought it for)
3) repeat and profit!

This SIMPLE MONEY-MAKING PLAN will see you swimming in your own personal GOLDEN BATHTUB filled with 50 dollar bills within a week. Within a month you will have SO MUCH MONEY coming in that you can hire people to MAKE MONEY FOR YOU. Within a year you will be so RICH, so INCREDIBLY WEALTHY that you will be able to buy yourself a SOLID GOLD SPHERE THREE HUNDRED MILES IN DIAMETER!

You will have the power to BUY AND SELL other people for your own amusement. Earth will be your playground and all that hear your name will COWER IN FEAR. So what are you waiting for? GET RICH NOW!

Why am I sharing my MONEY MAKING SECRETS with you? Because I care. I know that you personally have the RIGHT STUFF to dominate the globe and I want you to SUCCEED. And just to show you my generosity, my utter lack of personal greed or selfish motivation, I have just the thing to get you started. It’s a small leaky condo on the east side and it can be your stepping stone to UNLIMITED MIND-BOGGLING RICHES.


Remember, it’s never too late to take this advice! It’s entirely free and worth every penny paid! Stop slumping and start Trumping!

Why worry about home ownership rates?

Wednesday, August 19th, 2015

Some people have expressed concerns about Canadian home ownership rates hitting the highs that were last reached in the US before their market crashed, while others have said they’ll do what they can to increase home ownership rates in Canada.

So why would anyone worry about high ownership rates anyways?

ILoveCharts posted their take in the previous thread, and that comment is reproduced below:

Why do we need to worry about high home ownership rates?

1) Because when too many people own a home, it reduces the mobility of our workforce. Given the spotty/local nature of our economy, it’s important for our economy for people to be able to move within the country to follow the hot spots. When commodities are hot, people need to move to the west and our dollar is higher so manufacturing in the east suffers. When commodities are doing poorly the dollar drops and people need to move east to escape the barren mines, forests and oil fields of the west. Until we see major investment in diversification at the provincial level (likely will never happen,) this cycle will continue. With high home ownership rates, the teeter totter has tipped but people are nailed to the plank and they are stuck.

2) Because there is a practical maximum and a natural median. There will always be people who can’t practically buy (they are students, in poverty, etc.) When you go through a period of above-average buying, you expand the size of the housing industry (construction, realtors, etc.) in a way that is not sustainable in the long run. Once you hit the maximum, it only has one way to go to get back to the median. In the process, a lot of people lose their jobs. Seeing as 70% of people own homes, they start to run into problems with their mortgage. You can try to move the maximum point a little bit with new lending rules.. but you can only play that game for so long. Are we going to bring back the 40 year mortgage? Shocking to hear that we are going to allow $70k tax free out of the RRSP…

3) Because home ownership provides little to no value to society when it’s more expensive than renting. We want Canadians to be saving their money and investing in Canadian companies through Canadian stocks. We want those vast sums of money to deployed in our markets – creating and growing enterprises. Ownership of dirt doesn’t move our country forward.

The price of land is arbitrary. We have the second lowest population density in the world. It’s an incredible sign of weakness that we have allowed ourselves to get into a situation where we each pay so much for little pieces of it. We need to blame ourselves and our governments. We need to blame ourselves for feeling entitled to increases in the value of our property. Businesses with growing cashflows deserve to increase in value. Dirt does not – at least not at this rate. We need to blame the governments for being so willing to satisfy our demand for their short-term gain.

Now we’re hooped. The NDP wants to bring in massive social housing projects, the Conservatives want to use what is basically a nationalized bank (CMHC) to backstop ever-increasing mortgages for an ever increasing portion of the population and the Liberals just want to legalize weed.

I honestly can’t think of a way out of it.

Mayor: city is at a ‘breaking point’

Wednesday, July 29th, 2015

When it comes to housing affordability Mayor Robertson says that Vancouver is at a breaking point:

 “The conditions and the context keep getting tougher and tougher in Vancouver as the city gets more and more expensive and more desirable to people all over the world to invest in and move into. We’re basically at a breaking point where we need interventions in the market to ensure that people who live and work and grow up here in Vancouver have the opportunity to stay in the city and to keep being part of it and contributing.”

You may recall the Mayor wrote a letter to the BC Premier supporting the idea of speculation tax. The response from the Premier was based around the fact that such a tax would risk driving down house prices.

The Mayor responds to that idea in this interview at the Tyee:

“I think it’s completely wrong. It’s a totally different subject. What we’re talking about is taking some of the profit out of flipping and speculation, which doesn’t have to do necessarily with foreign ownership or homeownership or the value of homes. This is a business activity that’s taking place every day here in Vancouver where there’s a lot of profit, and it’s an option to transfer some of that profit so people can afford to live in the city. They went off on a completely different tangent in their response at the provincial level, and that’s unfortunate. The premier has said that affordable housing in Vancouver is a problem. Well, we need some action to deal with that.”

The problem with low debt levels

Tuesday, July 28th, 2015

We’ve seen lots of warnings about dangerously high consumer debt levels in Canada for years now, but here’s something new: Millennials lack of debt may be a sign of trouble.

Insolvency filings by consumers have started to edge higher after a long decline that began after the last recession. As has already been widely noted, the share of insolvencies accounted for by seniors is growing faster than any age group. What has not had much attention is the fact that the young-adult share is falling. Could this be a rare bit of good news for a cohort of the population that has been struggling financially?

Falling insolvencies among young adults definitely sounds good, but every silver lining must have a cloud right?  What’s the chicken-little take on this situation?

Hoyes Michalos recently produced an analysis called Joe Debtor that looked at people who make insolvency filings. The firm says 86 per cent of debtors ages 18 to 29 are working, but their average income is the lowest of all groups at $1,996 on a net basis per month. The average unsecured debt for the group is $32,229, also lowest of all age groups.

Personal loans are the biggest debt component at $11,841 for young adults making insolvency filings, followed by credit cards at $9,858. Almost 30 per cent have student debt, with the average amount owed averaging $3,716.

Their problems in today’s economy may have kept millennials from worse debt problems, Mr. Hoyes suggests. “If you haven’t been able to get a decent job, then it’s a lot more difficult to get into a huge pile of debt.”

In today’s debt-hungry world a lack of bankruptcies is indicative of a low income, how’s that for a bummer?

VCI Network

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