Category Archives: predictions

OMG OSFI!

YVR pointed out this article by Rob Mclister about the OSFI B-20 bombshell:

The new OSFI’s stress test rules will make 20% of the mortgage market not qualify or they will have to reduce their mortgage by 18% to qualify. That is before recent and future mortgage rate increases are factored in.

Roughly 80% of new big bank lending in the richly valued Toronto and Vancouver markets is low-ratio mortgage lending

OSFI’s stress test, as proposed, would slash buying power for prime buyers by roughly 18%

For non-prime borrowers, qualifying rates would immediately rocket into the 6% to 7% range

Read the full article here.

Business is ready for a rate hike

Lots of key indicators are telling the Bank of Canada that it’s time for an interest rate hike.

After the survey’s release, the chance of a July rate hike rose to 84 per cent from about 70 per cent, according to Bloomberg. Nine of 16 economists polled by Bloomberg now expect the central bank to raise rates to 0.75 per cent in July from the current 0.5 per cent.

The survey is one of the key pieces of information that Mr. Poloz and his central bank colleagues use to set monetary policy.

It was conducted between early May and early June, just before Mr. Poloz and his deputies started publicly saying the economy has turned the corner from the devastating oil price collapse that began in 2014.

Read the full article here.

Canadian dollar rises on rate hike expectation

Poloz is hinting that rate hikes are coming and thats pushing the Canadian dollar up a bit:

The Canadian dollar climbed to a four-month high of 76.44 cents US after Poloz’s comments, which fed speculation about a rate increase as early as its next scheduled announcement in two weeks. The boost lifted the loonie from an average price of 75.83 cents US on Tuesday.

If the central bank increases its key rate, the big Canadian banks are expected to raise their prime rates, driving up the cost of variable rate mortgages, other loans and lines of credit tied to the benchmark rate.

Poloz credited the two rate cuts introduced by the bank in 2015 for helping the economy counteract the effects of the oil-price slump, which began in late 2014. The reductions also helped increase the speed of the adjustment, Poloz added.

“It does look as though those cuts have done their job,” said Poloz, who was in Portugal on Wednesday to participate in a forum hosted by the European Central Bank.

“But we’re just approaching a new interest rate decision so I don’t want to prejudge. But certainly we need to be at least considering that whole situation now that the capacity, excess capacity, is being used up steadily.”

Read the full article over at the Financial Post.

Why are investors fleeing Canada?

Canada’s economy is booming, expanding at a 3.7% annual rate in the first quarter. And yet…

Meanwhile, in a year when stocks are rising everywhere, Canada’s benchmark index is the second-worst-performer in the developed world after Israel, according to Bloomberg data. It’s a similar story in currency and bond markets.

The performance underscores how, even with the improving economic performance, caution prevails. Investors remain concerned about geopolitical risks such as U.S. trade protectionism, the outlook for oil prices and a housing market that some analysts say may be on the verge of a correction.

“It is a tad curious to say the least that the Canadian economy arguably has been one of the bigger pleasant surprises in 2017 and meanwhile the equity market has done a belly flop,” said Doug Porter, chief economist at Bank of Montreal, who highlighted the disconnect between Canadian growth and market performance in a May 26 note.

Energy shares are down 10 percent year-to-date, while fears about contagion from a run on deposits at troubled mortgage lender Home Capital Group Inc. have weighed on financial shares, which are down 1.2 percent.

Read the full article over at Bloomberg.

What does a Green / NDP government mean for house prices in Vancouver BC?

The Green Party and NDP have announced an intention to form the government of BC and they have some different approaches to the real estate economy than the BC Liberals.

So what does the future look like to you? Will the new government implement some of their more dramatic policy changes and what does this mean for the Vancouver Housing Bubble and the wider BC real estate economy?

Oracle had the following wish list:

1) 30% FBT Province wide. Absolutely No Loopholes.

2) Tax 2nd homes of Citizens an annual property surcharge of 2% with rental offset. 3rd and more homes tax surcharge of 5%.

3) Tax homes of non taxpaying non residents 2%. Tax 2nd homes at 5%.

4) Limit foreign student at any institution to 15% maximum to ease rental crisis.

5) Inteoduce rental tax credit to out tax Evading Landords.

6) Pressure Federal government to limit 10 year tourist visas stays to a max of 3 months per year.

7) introduce extended mortgage amortization periods for those owners who will go underwater with the above changes.

Markoz points out this shift might not be painless for anyone:

Horgan and Weaver Have a Tough Job Ahead.

If they do all the things Eby talked about, real estate prices will definitely come down. The problem is, Krispy has painted our economy into a corner where it is very RE dependent. Lower prices mean lost jobs in construction and related industries. Also, as others have pointed out, lower tax revenues. There are many benefits to lower prices but they may not be self-evident to the 70% who own. Especially people who bought in the last 3 years.

The Krispy alternative, letting prices run amok until a 1 bedroom condo is $4 m, is not an alternative. Still, doing the right thing is going to be very painful and politically unpopular with many.

Dave wonders what’s next for Christy:

I think Clark should make a throne speech and outline what she wants to do for the next year of government and see what happens. Let the Greens and NDP shoot her vision down but at least people know what got voted down. I also think she should also try to split the NDP and Greens, not because it’s politically smart, but because voters should know what their MLAs stand for and support. Small chance she can pull something off, but not likely. I don’t see any ridings or obvious MLAs that the Liberals could split or steal.

Let us know your thoughts on the future of the BC economy and real estate prices in the comments below!