Fright-day Free-for-all!

October 30th, 2015


Ready for some scaaaary housing news?

It’s time for our regular end of the week Friday free-for-all. Its news round-up and open topic discussion time again!

Overvalued, but no worries
Math check on profit
We’re 94th!
Mr. Robertson…
Silicon Valley Bubble redux
Sweden goes negative on rates

So what are you seeing out there? Post your news links, thoughts and anecdotes here and have an excellent weekend!

Posted in opinion | 96 Comments »

CMHC: Boom to end in 2016

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.

Well, that was exciting!

We’ve had a change of government in Canada.

And it’s time for another Friday Free-for-all!  Here are a few links to kick off the chat:

Hey Poloz, what’s up?
Where are you house-hunting?
What about elder-care?
Shoulda listened to Harper
Hot Mexican Money and Food!
Why did you vote Liberal?
Should you call the CRA?

So what are you seeing out there? Post your news links, thoughts and anecdotes here and have an excellent weekend!

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.”

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.

Friday Free-for-all

October 16th, 2015

It’s that time of the week again…

Friday Free-for-all time!

This is our regular end of the week news round up and open topic discussion thread for the weekend.

Here are a few recent links to kick off the chat:

Sales fall because not enough inventory?
Hey, Politicians!
BOC not responsible for record debt
Shaky economy for next PM?
It’s all relative
You can’t afford the burbs

So what are you seeing out there? Post your news links, thoughts and anecdotes here and have an excellent weekend!

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.

Friday Free-for-all!

October 9th, 2015

It’s that time of the week again, time for our regular end of the week news round up and open topic discussion thread for the weekend.

It’s Friday Free-for-all time!

Here are a few recent links to kick off the chat:

Trade deficit widens
The problem with everyone
$2m house on 19k a year income
Wealthy Chinese blamed
Not the most rigorous study
How to solve the Vancouver problem

So what are you seeing out there? Post your news links, thoughts and anecdotes here and have an excellent weekend!

A recent Bank of Montreal poll finds that approximately 1 in 6 Canadian homeowners would be pushed into default if payments rose $500.

According to the bank, 16 per cent of respondents said they would not be able to afford such an increase, while more than a quarter, or roughly 27 per cent, would need to review their budget.

Another 26 per cent said they would be concerned, but could probably handle it.

Such an increase would be generated in the case of a three percentage point hike in interest rates — from 2.75 per cent to 5.75 per cent — on a $300,000 mortgage with a 25-year amortization period.

Given that interest rates are likely to increase in the foreseeable future, the bank said there was no better time to put together a detailed debt management plan.

Read the full article here.

The number of BC immigrants is down 66% in the first half of this year and has crashed to a 15 year low.

From Business in Vancouver:

As a panel discussion on foreign home ownership prepares to convene next week in Vancouver, the latest statistics show that international immigration to British Columbia has crashed to 15-year lows.

The first half of 2015 has seen a net increase of less than 6,000 immigrants into B.C., compared with more than 18,000 in the same period last year.

This was the first time in more than 15 years, BC Stats said, that B.C. experienced a net loss of non-permanent residents.

If the current trend continues, immigration to B.C. will fall below the annual inflow that forms a key foundation of housing demand forecasts.

The dramatic decline began in the fourth quarter of 2014 when net immigration fell to negative 1,808 people – meaning that many more people left B.C. for other countries than arrived. This was the first net loss of immigrants to the province in more than a decade.

Read the full article here.

Posted in BC, data | 49 Comments »

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