Category Archives: predictions

Loonie leaps on hints of rate hike

From southseacompany an article about the lowly looney leaping up on hints of a Canadian interest rate hike:

The Canadian dollar shot up Wednesday after the Bank of Canada held the line on a key interest rate but pointed to a boost in the future.

In foreign exchange trading, the loonie was ahead by 0.82 of a cent at 77.64 cents US when stock markets closed on Wednesday, after being up by more than one cent earlier in the day.

The central bank left its key target for the overnight rate unchanged at 1.25 per cent, where it has been since mid-January.

However, the bank said in a statement accompanying its decision that developments since April reinforce its view that “higher interest rates will be warranted to keep inflation near target.”

Read the full article over at the CBC.

Home sales fall 2x bank expectations

Southseacompany pointed out this one: Vancouver home sales fell twice as fast as a bank thought they would after new NDP taxes.

“Vancouver home sales dropped by around 30 per cent in the month after the BC NDP government introduced a plan to tackle housing affordability. But the losses look even more dramatic on a quarterly basis, according to calculations by a major bank.”

Read the full article here.

Negatives for real estate

Yvr2zrh shared this comment:

Wow. Quite a lot of negatives for real estate values.

1.) If you live outside Vancouver and keep an apartment empty there, you now have a very punitive tax. Total will be 3% by 2019 (only 0.5% provincial in 2018 as a bit of a leeway to allow people to sell).

2.) FBT @20% – pretty good. Big tax – starts immediately. Wow . More people will get caught again. Deals will die. Also if property is over $3M – this will make it 25% for a foreigner to buy a Van West house. Then they have to pay 3% per year ($90K?) to leave it empty. Game over.

3.) The 2% spec tax – Strange name – it’s more of an absentee owner / empty home tax. It’s pretty sizeable. It’s going to be strange but somehow I think they are going to force it onto certain “principal residences” i.e. students, 10-Year visa people – who don’t qualify for really being a resident. Then – if they really pay tax in BC there is a tax credit. Good system.

4.) Full reporting of pre-sale transactions for tax purposes. I suppose that may help but you need to require a tax withholding for non-residents because otherwise – they just won’t pay.

5.) Unveiling all the hidden ownership – starting with collecting on new transactions and forcing existing transactions to be unveiled.

So – I would say that “Housing for Housing” has been supported and properties for non-residents etc – – that will be tough. What about all the Okanagan properties owned by Albertans – – It’s going to be interesting to see how many people bail!!!

How sharp a correction?

Most economist are predicting a slower housing market in Canada, but how slow is too slow?

Southseacompany points to this article wondering how ‘sharp’ any correction would be:

Last week, the Bank of Canada hiked the overnight rate to 1.25 per cent, causing the credit union to note that Canadians have some of the highest levels of household debt in the world.

The interest rate hike — when combined with a new mortgage stress test for uninsured borrowers that came into effect on January 1 — could severely limit the purchasing power of many would-be home buyers, cooling the market dramatically.

But while most economists agree that these factors will dampen the market in the first few months of 2018, many believe it will eventually adjust to the changes. What’s more, some argue that Canadians debt levels aren’t as worrying as they might first appear.

“Household debt in Canada is seen by some as unsustainably high and a source of vulnerability for the financial system,” write National Bank chief economist Stéfane Marion and senior economist Matthieu Arseneau in a recent report. “But the international evidence suggests that Canadian household leverage and home prices are not abnormal.”

Read the full article here.