China & Canada – Money, Politics, Real Estate

CBC asks if the housing bubble will pop as a result of tightened capital controls?

Will China’s tightened capital controls pop the housing bubble?

China imposes further restrictions to control capital flowing out of the country

This month, the limit on foreign currency transactions in China was lowered to $9,000 to increase scrutiny on investment money flowing out of the country. Promoting some to fear this could be the catalyst that finally causes Canada’s bloated real-estate prices to collapse.

Obviously there will always be support for  real estate in Canada … forever expanding till the end of time (just our universe).

“International shoppers are ‘relatively minor players’ but there are a lot of other things going on in the Vancouver, Toronto, Seattle or San Francisco housing market that have continued to propel housing prices upward,” said senior economist Aaron Terrazas, of Zillow, a real estate market research company based in Seattle.

China caps capital

But what if buyers from China stop investing?

In January, new rules were created to curb the exodus of money overseas … only $65,000 per person is allowed in foreign transactions a year. On July 1, regulators dramatically lowered transaction limits to $9,000 before they must be reported to banking regulators.

‘Ants moving house’

It will have an effect, but it won’t be catastrophic, says Anne Stevenson-Yang, of J. Capital Research Ltd., She says the new controls are aimed at stopping “ants moving house” a Chinese term for getting a lot of people to make small money transfers to ultimately transfer enough to buy property.

But people find ways around the rules, she says.

Most important of all,

Homes still selling

Despite fears the recent 15-per-cent tax in Vancouver aimed at curbing foreign buyers would cool the market, Metro Vancouver saw $3.27-billion in foreign buyer sales in the past year … the market sizzles!

Home prices in Canada will keep rising, despite interest rate hike

“Canadian homeowners are prepared for the marginal increase in mortgage rates,” Phil Soper, Royal LePage’s president and CEO, said in a housing survey released Thursday.

While real estate is happening in China (at least at corporate level), 

Chinese real estate industry is set for an insane level of consolidation

 

Dalian Wanda Group’s $9.3 billion sale of nearly 90 tourist and hotel assets to Sunac China Holdings was just one indicator of the rapidly consolidating Chinese real estate market. Real estate companies in China are projected to spend more than $27.6 billion in acquisitions in 2017…. Basically, you buy me, I buy you =”Equity Bubble”, so to speak.

However,  some analysts do not quite share the same sentiment,

Chinese real estate investment is slowing down

Domestic real estate investment in China is dropping. Numbers released from the National Bureau of Statistics of China show that May’s property investment in terms of square footage was higher than last year, but still remained way below the baseline.

The decline in investment combined with cooling measures will likely result in a major drag on real estate prices in the country …Business Insider

And there is a lot of politics …

Ottawa’s despicable display in China

On the death of Nobel Peace laureate Liu Xiaobo and Canada’s efforts to wine and dine the prisoner’s tormentors

It would be hard to imagine a more obscene display of Canada’s slavish relationship with China’s depraved Communist Party regime: The very moment imprisoned democracy activist and Nobel Peace laureate Liu Xiaobo died under heavy guard on a hospital bed in the northeast city of Shenyang on Thursday, a beaming Governor General David Johnston was posing for photographs at the opulent Diaoyutai State Guesthouse in Beijing, shaking hands with Chinese tyrant Xi Jinping, Liu’s jailer, and tormentor.

For Canada, it’s business, business, more business, and public relations … Macleans.ca

Apparently the federal government’s inexplicable Investment Canada Act approval of the billion-dollar takeover of the Canadian seniors care home chain Retirement Concepts by the Anbang Insurance Group, a Chinese real-estate giant run by Wu Xiaohui, the billionaire husband of former Chinese supreme leader Deng Xiaoping’s granddaughter….

China Detains Chairman of Anbang, Which Sought Ties With Jared Kushner

On June 8, Wu Xiaohui was whisked away from Anbang’s corporate offices by Beijing’s anti-corruption police. He immediately stepped down from his post as Anbang’s chairman and hasn’t been heard from since. But Anbang remains in good standing with the federal government, and of course with the Canada China Business Council.

Anbang is listed as one of the Canada China Business Council’s 13 “benefactor” corporations, a status that entitles the Chinese behemoth to “front-of-the-line member-benefits” along with such well-connected firms as the Power Corporation of Canada, Huawei Technologies and Bombardier.

Does this tell you something? 

Anyway, here are the Seven Of The Weirdest Houses Ever Built … See the one in China, what does it tell you?

7  Weirdest Houses Ever Built

1.  Four shipping containers make up this three bedroom apartment in Sydney, Australia. They can be pulled apart for easy transportation.

2. These precarious looking houses were built were built on the rooftop of a factory building in Dongguan, China.

3. This house in Abuja, Nigeria is partially built in the shape of an airplane. The house was said to have been built by Said Jammal for his wife Liza because of her love for travelling.

4. Thierry atta sweeps the compound of his house built in the shape of a crocodile in Ivory Coast capital.

5. This house is built on a rock in river Drina, Baijina, Basta.

6. This house is built right into the rock in Coahuila, Northern Mexico.
7. This house was built upside down in Russia’s Siberian city of Krasnoyarsk. It was constructed as an attraction for local residents and tourists.
Amazing, isn’t it?!

Bubbleology – The new religion of 2/3 Canadians who believe Housing Bubble is Real

Apparently as many as 2/3 Canadians have converted to a new religion known as “Bubbleology”.

To the faithful Bubbleologists, Housing Bubble is the mighty Devil and his coming is imminent. Because certain unscrupulous profiteers have provoked the wrath of the Lord. However, Housing Bubble is no Armageddon, it’s not the end of the world yet. It’s just that there will be great suffering among ordinary folks whenever Mr. Bubble Housing comes visiting.

They believe the time is nigh, they believe the Great Suffering will take place in 2018, that’s when proponets of the “Great White Short” will be laughing their way to the banks…

Open living area designed in a circular fashion and semi-enclosed by rotating glass panels in this home located in Hollywood Hills. 

A Canadian Housing Bubble? Two-Thirds Say It’s Real

Nearly half of Canadians are worried about what interest rate hikes will do to their mortgage payments.

A majority of Canadians say there’s a housing bubble, but only a minority believes it will burst in the next year, a new survey has found.

The survey from Ipsos, carried out for consumer insolvency firm MNP Ltd., found 67 per cent of Canadians agree that the country is experiencing a housing bubble, but only 43 per cent think it’s going to come to an end in the next year.

With Canadian debt loads near record highs, even relatively small shifts in interest rates could have a noticeable impact on households.

According to expert estimates, any hike in interest rate is likely to cause typical homeowners anything from $1,000 to $3,000 more in mortgage cost. That’s scary considering most ordinary folks already completely submerged in water, that they are basically surviving on borrowed time.

Seriously,

BoC Hikes Rates; Will It Burst Canada’s Housing Bubble

The Bank of Canada has joined the Fed in embarking on the road to monetary policy normalization, hiking the benchmark monetary policy rate +25bps to 0.75%. This comes at a time as Canada’s property market is being increasingly labelled a bubble. Indeed the second chart, below, shows a stark acceleration in property price gains and an increasingly overvalued property market (looking at the OECD housing market valuation indicators). Thus it makes sense that the central bank would reduce monetary policy stimulus in this backdrop.

The risk in this sort of situation is always going to be that the central bank could end up bursting the bubble, and at some point it probably will, but so far this is just a small rate hike and only the beginning of the policy normalization process. As the Bank of Canada further normalizes policy the risk of a bursting of the Canadian housing bubble will rise. Given the importance of Chinese demand, it will also be important to keep tabs on economic conditions in China. At this point the risk assessment for Canada is slightly higher and the outlook is that risks will rise… Investment.com

Meanwhile Haris Anwar  of The Motley Fool advises,

Which REITs Are the Safest Bets if Canada’s Real Estate Bubble Bursts?

This reversal in home prices comes after the provincial government imposed a 15% tax on foreign buyers in April to curb speculation as part of its affordable housing plan.

This changing dynamic of the Canadian real estate market raises this important question: Which real estate investment trust (REIT) can withstand a possible crash in property values if this sluggishness prolongs and develops into a long overdue correction?

The chances of such a scenario developing aren’t very strong though. Most forecasters are predicting a soft landing rather than a crash in real estate values as demand dynamics remain strong, especially in the Greater Toronto Area and Vancouver.

But investors who earn a regular income from REITs have a reason to worry amid disturbing headlines in the financial press almost every day. After all, they saw the prices of some REITs drop by more than 50% during the 2008 Financial Crisis.

Another threat to the REIT sector comes from a possible interest rate increase by the Bank of Canada starting in July—a move which will increase the borrowing cost for REITs, leaving less for the profit distribution.

In this environment of uncertainty, I’ve picked the safest Canadian REITs which have solid business models and are in much better positions to withstand any economic shock or a sudden rise in interest rates.

RioCan Real Estate Investment Trust

RioCan Real Estate Investment Trust (TSX:REI.UN) is Canada’s largest REIT and is anchored well to maintain its distribution. With 300 retail properties across Canada, it owns and manages the country’s largest portfolio of shopping centres, including Wal-Mart, Canadian Tire, and Cineplex.

With the committed occupancy rate of 95%, RioCan tenants include very strong names that perform well in a recession due to their vast economic moats—a term used by Warren Buffett to describe companies commanding a strong competitive advantage over their rivals.

The most important performance criterium investors use to judge the performance of any REIT is its ability to maintain the cash flows to pay its unitholders. This ratio is called adjusted cash from operations, or AFFO.

In the case of RioCan, the trust is generating more cash than its distribution to unit holders. In first quarter of 2017, RioCan generated $0.44 per unit in AFFO and paid $0.35 per unit in distributions.

RioCan pays a monthly distribution of $0.1175 per unit. At the time of writing, the payout provides an annualized yield of 5.8%.

RioCan has also cut its debt by using proceeds from the sale of its U.S. assets last year, generating a cushion to shield itself from possible rate hikes. In the first three months of 2017, RioCan’s total-debt-to-total-assets ratio was 40.8%, down from 45.6% in the same period a year ago.

Chartwell Retirement Residences

Chartwell Retirement Residences (TSX:CSH.UN) is a Canadian REIT which also fits well in a conservative investment strategy to protect your capital during an economic downturn and continue to earn stable monthly income.

Chartwell Retirement is the largest operator in the Canadian senior living space, managing over 175 locations across four provinces in Canada. As the Canadian population ages, investing in retirement residences and long-term care facilities is probably one of the best strategies in the real estate sector.

And this is the reason that Chartwell Retirement has done much better when compared to the performance of S&P/TSX Composite Index. Over the past five years, its share value appreciated by 60%, almost double the returns of S&P/TSX index during the same period.

This REIT pays a stable monthly distribution of about $0.048 per unit, up 7% over the past five years. At the time of writing, the payout provides an annualized yield of 3.78%.

Should we believe the Motley Fool?

We don’t know. All I know is 2/3 of Canadians have embraced Bubbleology. In another word, they will most likely avoid any real estate related stock like plague?

What do realtors say?

Here’s what they told BNN,

Needing a return to normal

Kevin Somers, COO, Royal LePage

“Since the onset of the Great Recession nearly a decade ago, Canada’s economy has been running on emergency power, provided mainly by low interest rates. The Bank of Canada’s indication of an imminent rate hike is a positive signal that the Canadian economy is in a place of stability and ready to withstand a slight interest rate increase.

We believe that the real estate market is best served by a healthy economy that requires a return to normal conditions.”

Conflicting fears

John Pasalis, president, Realosophy Realty Inc.

“Bank of Canada raising interest rates by 25 basis points would have a dampening effect on the demand for homes – but I’m not convinced we’re going to see any immediate effects.

The psychological effects of this rate increase might counterintuitively have a positive effect on the real estate market. If buyers believe interest rates will increase even further in the near future, some of those sitting on the sidelines watching the cooling market with uncertainty may get back into the hunt.”

Tub Filled by a Hot Springs in Colorado Resort Built in an Old Mining Ghost Town. 

Anyway, Bank of Canada has finally stopped crying wolf, and raised interest rates by 25 basis points Wednesday.

That’s no surprise. What surprised many people is  the Loonie flew!

What sent the loonie soaring when everybody expected the rate hike?

It appears the Bank of Canada was a little more hawkish than markets had thought

Some were caught off guard by the significant spike in the loonie that followed, pushing it close to the 79-cent mark.

While the Canadian dollar’s recent strength (up more than five per cent in the past month) has been attributed to expectations for higher interest rates, it was thought that much of the rally had already run its course.

“The market seemed to interpret that as implying that the bank is planning on more than one further hike this year,”

Go Loonie, go.

Anyway, they say there will be a lot more money pouring in from the Middle Kingdom …

Chinese Investors To Spend $1 Trillion On Real Estate In Next Decade: Report

Toronto and Montreal have surpassed Vancouver as the biggest targets for Chinese buyers in Canada.

The company predicts that Chinese investors will pour some $1 trillion (C$1.27 trillion) into real estate around the world over the next decade, of which a considerable amount is likely to land in Canada. The country is the fourth-largest destination for Chinese real estate investment, behind the U.S., Australia and Hong Kong.

Sounds like the world is after after all, still a beautiful place.

Guess that’s the message Liberals wanted you to hear … Stay Positive, Be Optimistic. 

Dramatic, open living area blends seamlessly with the outdoors in this home located in Cape Town, South Africa 

Doomsayers: Canada’s housing market on the brink of severe downturn

Is the real estate market going down or going up?

According to BNN and Business Insider, the Canadian housing market is on the brink of collapse.

Canada’s housing market on the brink of ‘severe downturn,’ warns Capital Economics

The hot housing markets in Vancouver and Toronto appear to be on the verge of a severe downturn that could hit Canadian economic growth, says David Madani, Senior Canadian Economist at Capital Economics.

“The uptick in Vancouver home sales is nothing more than a head fake, while the worsening sales slump in Toronto’s much larger housing market points to a correction in prices,” said Madani in a report.

Vancouver home sales in May fell 8.5 per cent from a record peak a year earlier, but surged 22.8 per cent from April and were 23.7 per cent above the 10-year sales average for the month, according to data from the Greater Vancouver Real Estate Board. But that uptick was largely driven by low mortgage rates and is unsustainable, said Madani … BNN

It’s David Madani again – The infamous Canadian Real Estate “Doomsayer” who has been predicting the the market will belly up as far back as one decade ago.

Actually, we at CanuckPost.com have been saying the same thing for two decades now. Even economic guru Paul Krugman said that eons ago. And many shortsellers have lost their shirts as well.

Unfortunately or fortunately, the “doomsayers” have all been proven nonsense so far. The market momentum simply does not respect the economic fundamentals, so much so that we at CanuckPost.com now wonder if the real estate market will follow what has been postulated by some mad scientists, sorry, the astro-theoretical physicists or betterknown as the Cosmologists, that the Universe will not collapse. Instead, the Universe will expand forever – even though the end result is the same, we will still die. Except it will take a lot longer, and we will die in prettier form. Not exploded, imploded or toasted. We will simply turn into popsicles (see Housing Bubble – Big Freeze, Big Rip or Big Crunch?)

We will try to theorize the same thing for real estate in the next edition – Candian Real Estate – The Big Freeze.

Anyway, Business Insider also believe in the same thing ie. Game Over.

Canada’s housing market appears to be ‘teetering on the brink of a downturn’

Canada’s housing market keeps chugging along, and real estate watchers are becoming increasingly worried.

Home sales in the Vancouver metro area rebounded by 22.8% in May, the third-highest for the month on record. Notably, demand has shifted from single-family homes to condominiums and townhouses.

Meanwhile, home sales in the Greater Toronto Area fell 20.3% in May, according to the Toronto Real Estate Board. But, at the same time, prices kept climbing in the region: the average selling price for properties was 14.9% higher than in April.

Canada’s home price index rose 0.8% month-over-month in April, the highest increase since May 2016. That came in above expectations of up 0.3% and followed the 0.2% uptick the prior month. Toronto saw prices rise 2.1% and Vancouver saw an increase of 1.2%.


Capital Economics

“All things considered, the housing market appears to [be] teetering on the brink of a downturn, which is a bad sign for GDP growth prospects,” David Madani, senior Canada economist at Capital Economics, argued in a note.

See, it’s coming from the same source – The same “doomsayer” – David Madani again.

While we are quite sure Mr Madani will hit the jackpot one day (he will eventually proven correct after guessing the same thing repeatedly year after year), we got an all-new different theory now. We are going theorize the housing market to end as the Big Freeze (instead of Big Crunch or Big Rip – typical consequences of Housing Bubble Crisis).

As mentioned, the market will just expand forever in the Big Freeze scenario, and we will all die as popsicles eventually. We will attempt to fix the biggest issue of this particular theory – How NOT to die a popsicle!

Perhaps we can steal an idea or two from Darwin’s “Survival of the fittest” – No die.

Wish us luck, and good luck to Mr. David Madani’s “doom” prediction.

Meanwhile, those with vested interest in real estate will keep telling you the same thing … All Is Well – Keep Buying.

BMO chief executive downplays housing risk, says market’essentially heals itself 

What housing crisis? Uber-luxury properties sizzle in cooler market

Buyers of luxury real estate have a deeper understanding of the long-term value in the market, or they simply don’t have to look at the price as carefully, say realtors specializing in high-end properties… Toronto Star

Bank of Canada, IMF, Banks, Lenders, Realtors, Speculators, Homeowner … All wanted to the market to expand forever.

Your wish is my command … Let us work out how can Canada go the direction of the Big Freeze without being turned into an icy popsicle.

Stayed tuned.

Since it’s about the Big Freeze, let’s have some icy theme Interiors for a change: –

Icy Black Theme Bedroom

Clean Lines in this modern Black Band White Kitchen in a Chicago Penthouse

Bright but icy nonetheless.

Unique decorative wall with texture pattern -Vancouver, Canada

Another “Frozen” theme …

If we managed to find a solution based on the Big Freeze theory, the Black & White decor above will some warm colors like the one below : –

Black kitchen in renovated library in Portland Oregon

This is what we will try to achieve … Perfect Harmony.

 

Housing Bubble – Big Freeze, Big Rip or Big Crunch?

Architecture Of The Day

Ribbon Chapel. Onomichi, Japan

Predicting the Housing Bubble is in a way very similar to predicting how our Universe will end.

According to theoretical physicists the Universe could end between 2.8 billion and 22 billion years from now, but they can’t agree on its ultimate fate …

How will the Universe end: Big Freeze, Big Rip or Big Crunch?

The Big Rip & The Big Crunch

Both theories are inline with the conventional wisdom – “What goes up must come down” …  That the expansion caused by Dark Energy may eventually tear the Universe apart, forcing it to end in a Big Rip. Alternatively, the Universe could ‘shrink’, decrease or decay, effectively reversing the Big Bang and destroying the Universe in a Big Crunch … Back to how it all begin – “Singularity”.

The Big Freeze

The third and the latest theory postulated the Universe will just keep on expanding forever … All matters including planets/stars/galaxies will be so distant from each other so much so that there would be no more room for usable energy, or heat, to exist and the Universe would die from ‘heat death’, and becomes an endless void.

Applying End of the Universe theories to Housing Bubble

The Big Rip & The Big Crunch are what economists believe will happen in a matter time, that the housing market is a cyclical natural phenomenon ie. “What goes up must come down”.

However, our government, developers, and all those with vested interest in real estate would definately go with the Big Freeze theory, that home prices will keep going up, and the market will expand forever.

The questions we have in hand is what is Dark Matter and what is Dark Energy in housing term? For those unfamiliar with the cosmology terminology, Dark Matter is kind of glue – the matter-bonding agent (just like gravity), and the Dark Energy is the culprit that pushes matters apart … and causing the Universe to expand inderfinately as a result.

We can see Interest Rate is a form of Dark Matter, sorta. What about Dark Energy? A topic so massive even Albert Einstein was scratching his head.

Let’s move on to see what’s happening to the housing market right now …

According to Yahoo Finance, Fret Not.

Why Canada’s housing ‘bubbles’ aren’t headed for catastrophe

Iman Sheikh, Yahoo Finance Canada

The phrase “housing bubble” is dangerously close to platitudinal territory. Something of a slogan used to characterize the cost of buying property in metro Toronto and Vancouver — often with the contiguous phrase “red hot” — it’s neither useful nor factual. There is no economic tsunami poised to replace over-leveraged homeowner optimism with anguish and destitution. Experts say we don’t even know if this is a bubble at all.

“People are really only able to identify that it was a bubble after the fact if there’s been some sort of a strong correction,” says Canada Mortgage and Housing Corporation chief economist Bob Dugan.

Although Toronto’s average home prices in May went up 14.9 per cent over 12 months, the rise is conservative when compared with 33 per cent in March from the previous year. According to the Toronto Real Estate Board (TREB), new listings in May increased by 48.9 per cent and sales dropped 20.3 per cent. So based on a month’s data — which responsible analysts are not comfortable using as the basis for broader claims — it seems as though the market is calming gradually, not at whiplash speed.

“Data from month to month can be volatile,” Dugan says. “We’ve certainly seen a cooling in April, but when we forecasted for the Greater Toronto Area, we did expect activity to cool. In the first quarter of 2017, existing home sales hit a record level and we have been forecasting those sales to decline through the rest of the year.”

That the market is more or less behaving as the CMHC predicted hasn’t given pause to the scaremongering of columnists. In Canada’s Housing Assessment Report (HMA) for the second quarter of 2017, overvaluation in the country’s housing overall has been downgraded to moderate from a previously strong assessment.

“House price growth at the national level has weakened to around 4 per cent year-over-year, while personal disposable income has grown at a steady pace and growth in young adult population has strengthened at the end of 2016,” the HMA finds.

However, there are still significant areas of concern, according to the HMA report, and not just in megalopolises. The report determines the health of a particular market by examining four factors: (1) overheating, where demand for existing homes leaps ahead of the supply of existing homes for sale; (2) continuous price acceleration, (3) overvaluation of house prices in comparison to what the market can support, (4) overbuilding, which is when the inventory of newly built housing units rises along with the number of available rental units. Of the 15 metropolitan areas analyzed, Toronto, Vancouver, Victoria, Saskatoon and Hamilton showed strong evidence of problematic housing conditions.

“It’s not just Toronto and Vancouver, we’ve also noticed some spreading to neighbouring communities,” Dugan says. “Hamilton is showing price acceleration and overvaluation and when you look at the B.C. market around Vancouver, we’re seeing that in Victoria as well.”

But the cavalcade of alarmist columns flowed uninterrupted in Financial Post, CBCNews and Huff Post (which will soon share a parent company with Yahoo) this year, calling for a repeat of the 1989 housing market crash, using marquee phrases such as “Big banks raise alarms,” “CEOs are concerned,” and “What if Canada’s real estate bubble bursts?”

Well, a “crash” is not likely to happen because the market today is notably different from that of the late 1980s. In 1985, the posted interest rate for a five-year fixed mortgage (the most popular in Canada) was 13.25 per cent. Today, it’s between 2.2 and 2.7 per cent, and won’t flicker too far off that mark.

“I think the cost of borrowing money will remain fairly low but I do expect it to go up,” Dugan says. “Interest rates are going to rise at the end of 2017, beginning of 2018, but it’ll be a gradual rise I don’t think it’s going to happen very quickly. That’s our forecast.”

What analysts really mean when they predict a crash is that the market’s problematic conditions make Canadians more vulnerable to external economic shocks, for example a shake-up in the U.S. economy.

Household debt in Canada is fairly high when you compare debt levels to income. In isolation, this is no cause for terror, but were something unexpected to happen, the market would correct sharply.

“If the unemployment rate goes up and people start losing their jobs in Toronto and Vancouver,” Dugan explains, “the high level of debt and overvaluation could make the correction worse.”

When economists went back and tested their HMA model with historical data from the period leading up to 1989, the model did identify overheating, price acceleration and overvaluation. But in the late 1980s, inflation was much higher. As the Bank of Canada grappled with this problem, inflation grew closer to five percent during the recession of 1990. Today, it’s well below two per cent.

“If there were a recession to happen in the near future, we would be going into it with very low inflation so there’s no need for the Bank of Canada to increase interest rates as the economy slows,” Dugan says. “So the circumstances are very different now. From 1989 to 1990, we saw a significant increase of interest rates that pushed mortgage rates higher. We don’t see that today. There’s no need for monetary policy to tighten the way it did back then.”

The CMHC also found that speculative demand in cities such as Toronto and Vancouver was pushing prices up. With the government’s new 15 per cent speculation tax on non-resident buyers, this should add to the slowing down of the market, particularly in 2018, Dugan says. There are good reasons speculative demand is particularly high in those two cities.

“A lot of the extra demand gets pushed into price increases because you have the green belt around Toronto that limits the expansion of the housing stock,” he says. “Around Vancouver, they have the ocean, the mountains and some agricultural land. There aren’t a lot of places to increase the supply of housing so when you get more demand, it could quickly translate to price increases. That’s an attractive thing to speculators.”

But this isn’t 1989 — the economy is strong today. The Bank of Canada reports that the consumer price index is currently at the two-per-cent target. If you need a house, keep looking for a house. But this isn’t the time to speculate, based on market indicators. Buyers should be aware of the risks, Dugan warns, but it’s far too soon to call for a crash in prices.

“What I would tell people buying in Toronto or Vancouver is that there could be some speculative demand driving prices higher, so make sure the home you buy is in line with your needs. We like to work with models — one month’s data isn’t enough to give you robust results.”

Conclusion: The party will go on forever. All is well, and keep investing (confidently).

Anyway, what is few million dollars house compared to the cosmo numbers?

According to the M-Theory, there are infinite number of universes. And in our observable Universe alone, there are billions of Galaxies x billions of Stars x billions of Planets … To sum up, there are more stars out there than all the sand grains you could possibly find on earth.

Image result for universe "you are here" blogspot.com

Meaning?

I imagine it means we should behave like Dark Energy, keep buying up real estate … Even at one billion dollars a pop, a house is still a big bargain, a Mickey Mouse costs less than loose change compared to the known astronomy numbers.

The only consideration is … Do you trust our power-that-be will be smart enough to make the Housing Dark Matter and Dark Energy work together harmoniously all the way till the end of time?

Liberals, any comment? Conservatives, any criticism?

On a related note,

Why every housing bubble looks like the new normal

Maybe prices in Toronto and the surrounding suburbs really have reached a new normal, and a wide swath of people are permanently shut out of the market… Macleans.ca

Unless you disagree the Real Estate Universe will expand forever … Why not?

Why Ottawa should bail out home buyers if house prices tank

For a few weeks in May, Home Capital Group Inc. looked like it would become the first Canadian financial institution to collapse since the 1990s…Macleans.ca

Get an idea here – How City of Toronto will proceed to create a problem without having any idea how to resolve the problem (in case the problem becomes untenable): “Is replacing OMB with Local Planning Appeal Tribunal a Boon or Bane?(More to follow soon)

Bank Of Montreal: Best Bank For The Canadian Housing ‘Bubble

BMO is holding its own in Canadian banking, but posted weak deposit growth in America. The bank will likely continue growing strongly in retail investing… Seeking Alpha

Emm .. Perhaps Robert Mugabe can offer us some insight in this case.

Liberals managed to slay the nasty housing Fire Dragon

At the rate things are going, expect Liberals to reign supreme for another term.

Why? Because Liberals slayed the nasty Fire Breathing Housing Dragon.

For real?

It’s not a fake news, except we have no idea if the dragon is dead or merely injured? Regardless, even the fire dragon has been administered with only temporary anaesthetic agents. It’s a cause to celebrate …

At least their actions seems to work magic, if only the followings are not fake news …

TREB May numbers show a soft month for Toronto real estate market

According to the latest statistics from the Toronto Real Estate Board (TREB), the annual pace of increase for the City of Toronto house prices rose by nearly 15 per cent last month, compared to May 2016.

But the volume of home sales, meanwhile, in both Toronto and the Greater Toronto Area (GTA) took a hit. The GTA encompasses the 905 and 416 area codes.

The total average sales drop was –20.3 per cent, year over year, TREB says.

In Toronto, the declines were:

  • Detached: –26.1 per cent.
  • Semi-detached: –14.1 per cent.
  • Townhouse: –24.3 per cent.
  • Condo: –4.3 per cent.

For the GTA, the drops were:

  • Detached: –26.3 per cent.
  • Semi-detached: –22.7 per cent.
  • Townhouse: –18.1 per cent.
  • Condo: –6.4 per cent.

Compared to this time last year, home prices in the GTA remain high — the average home was at $752,100 in May 2016; a year later, it’s at $863,910. If you want to live in Toronto itself, you’re looking at paying $899,728.

The number of new sales listings rose by 42.9 per cent last month,  compared to a year ago.

Prices down from April 2017 to May 2017

Comparing home prices from the last two months, however, tells a slightly different story: the average price of homes in the GTA dropped by more than $55,000 — from $919,614 to $863,910 — in May compared to the previous month.

In late April, the Ontario government introduced 16 measures intended to rein-in home prices, including a 15 per cent foreign buyers tax expansion of rent control; and legislation that would allow Toronto and other municipalities to tax vacant properties. … CBC.ca

One of the latest transaction seems to suggest this is the case … FAILED to get asking price.

SOLD

259 Roxton Road – BICKFORD PARK

Asking $2,148,000, Got $2,050,000.

3 bedroom, 5 bathroom townhouse on a 13.98 x 128.71 foot lot at 259 Roxton Road in Bickford Park.

Listed at $2,148,000. Sold for $2,050,000.

What are you waiting for? Go get or remodel your bathroom like this one …

Bathroom with hand painted gold leaf mural (Toronto)

No, Stephen Poloz will not mess with the housing bubble

Toronto’s housing bubble is not Stephen Poloz’s problem refers.

A weaker economy would necessitate low interest rates, which in turn fuel financial imbalances. That’s where the central bank is today — unable to keep inflation at the 2 percent target over the past two years in an economy it says still has plenty of slack.

Raising interest rates to thwart an asset bubble would simply force the rest of the country to suffer for the excesses of Toronto and Vancouver housing markets.

“From the Bank of Canada’s perspective, what you have is a potential financial stability concern that isn’t explicitly part of the Banks’s inflation targeting framework, while inflation remains well below target,” said Jean-Francois Perrault, chief economist at Bank of Nova Scotia.

So, no, Stephen Poloz will not mess with the housing bubble. Probably not in a million years.

Poloz to the rescue? No. Don’t bet the Bank of Canada will bust the housing bubble

THEOPHILOS ARGITIS, BLOOMBERG

ANALYSIS

The old debate about whether central banks should raise rates to counteract housing bubbles is finding new life in Canada as the country copes with runaway prices in its two biggest real estate markets.

Home prices in Toronto are up 32 per cent over the past year and have more than doubled since the recession. In Vancouver, which is an even pricier city, they’ve climbed 58 per cent over four years. Meanwhile, household debt is at record levels, recently surpassing gross domestic product for the first time.

Lawmakers at every level have tried with a succession of tailored policies to engineer a slowdown, but have fallen short of achieving the desired effect.

Could now be the time for the Bank of Canada, headed by Stephen Poloz, which releases its bi-annual analysis of financial stability risks Thursday, to step in with higher borrowing costs to “lean against” the bubble, even at the expense of its inflation target?

Don’t bet the house on it.

Two Lenses

The Bank of Canada looks at financial stability through two separate lenses.

The central bank’s primary objective is to adjust interest rates to keep inflation as close to 2 per cent as possible. Financial imbalances, along with other moving parts such as trade, business investment and oil prices, factor into the decision making. For example, policy makers would consider the effect a sharp housing correction would have on consumer spending. The bank also considers financial stability outside the context of macroeconomic objectives, because the economy can’t function properly without a stable financial system. Indeed, the bank acknowledged in 2011 that in some circumstances, preemptively leaning against a build up of debt would be beneficial, even if it meant missing its inflation target temporarily.

The distinction matters for policy.

Financial Stability

When the primary concern is financial stability, the direction of policy is clear in the face of growing debt and financial imbalances; interest rates should be on the way up since cheap credit fuels household borrowing. From 2011 to 2013, the central bank addressed existing financial stability concerns in this way, by incorporating explicitly into policy first a tightening bias and then a reluctance to cut rates.

In fact, the focus on financial stability was controversial in government circles at the time and a source of friction between then Bank of Canada Governor Mark Carney and former Prime Minister Stephen Harper as the economy teetered on the verge of another recession in 2012. At the time, Carney was alone among Group of Seven central bankers to cleave to a tightening bias and, as a result, Canada’s currency continued to trade above parity with the U.S. dollar, slowing growth.

Inflation Target

When the inflation target is the main policy impetus, things get messier.

Sometimes, inflation and financial stability concerns call for the same action. For example, if a red hot housing market leads to higher inflation, it’s a textbook case for central bank tightening.

Often, the two objectives conflict. A weaker economy would necessitate low interest rates, which in turn fuel financial imbalances. That’s where the central bank is today — unable to keep inflation at the 2 percent target over the past two years in an economy it says still has plenty of slack.

Raising interest rates to thwart an asset bubble would simply force the rest of the country to suffer for the excesses of Toronto and Vancouver housing markets.

“From the Bank of Canada’s perspective, what you have is a potential financial stability concern that isn’t explicitly part of the Banks’s inflation targeting framework, while inflation remains well below target,” said Jean-Francois Perrault, chief economist at Bank of Nova Scotia.

What Now?

Since the oil price collapse in 2014, there’s been little debate on the issue. Policy makers at the central bank have been more concerned with getting inflation higher with lower rates, leaving regulators to tackle the financial stability issues.

So, now that Canada has emerged from the oil shock, does financial stability resurface as a driver of monetary policy?

The central bank’s own research hasn’t supported such a shift. A study published last year showed higher borrowing costs reduce financial vulnerabilities only modestly, and impose large costs on the rest of the economy.

The central bank also distinguishes household indebtedness from the housing market, which allows it to worry less about rising home prices that are driven by factors such as population growth or supply constraints, as opposed to debt accumulation. And the recent run-up in home values hasn’t been accompanied by an equivalent run-up in credit growth.

The Bank of Canada has stopped mentioning the issue in its closely parsed rate statements. The last time the term “household imbalances” appeared was in the Dec. 7 statement. And there is evidence the market is cooling already on the back of recent measures by the Ontario government, and the troubles at alternative mortgage lender Home Capital Group Inc.

Poloz has even dismissed the idea that higher borrowing costs would reduce the sort of speculative demand that seems to be prevalent in Toronto and Vancouver.

“They haven’t said anything to suggest financial stability considerations would trump the inflation objective,” Perrault said.

Most indicative may be that Poloz has actually turned the financial stability argument on its head. Higher-than-needed interest rates would not only slow the economy, they would even be bad for financial stability by increasing the financial stress of highly indebted households.

This was part of the rationale for cutting rates twice in 2015. And it’s another way of saying that with household debt levels where they are, it’s already too late for the Bank of Canada to lean in.

What do we know?

Let’s enjoy some porn of luxury homes … Awesome, but you can never own one, not even you strike lottery (unless the jackpot is a huge one).

What Housing Bubble, What Mortgage Trouble?

U.S. investment bank Goldman Sachs says there’s an almost one in three chance of Canada’s housing market going bust in the near future.

“The end of Canada’s housing boom?”, so said The Economist.

Utter Nonsense?

Sounds like it because …

Although concerns about Canada’s record level of household debt have intensified recently. And a recent poll conducted for Bloomberg News suggests it is also negatively impacting Canadians’ sentiments towards their country’s housing market — BUT this is not the case for National Bank.

“Underwriting standards for mortgage debt in Canada has become an issue for many investors following the troubles of an alternative mortgage lender at a time when home price inflation in Ontario is ahead of fundamentals,” National Bank Chief Economist Stefane Marion explains.

And here comes the politically correct statements (anticipated – What else to expect from the power-that-be?):-

Apparently, the National Bank believes there is big a difference between the pre-bust US housing market and Canada’s current boom. Parallels are being drawn and the outcome won’t be the same, according Stefane Marion.

“We take solace from the fact that lending standards for first-time homeowners in Canada have remained strict in recent years”. So much so that “Underwriting standards for mortgage debt in Canada have become an issue for many investors following the troubles of an alternative-mortgage lender at a time when home price inflation in Ontario is ahead of fundamentals”.

In 2006 — before the housing market crashed stateside — more than a quarter of first-time US homebuyers had low credit scores. National Bank considers borrowers with a FICO score under 620 and a Beacon score of less than 660 to have low credit ratings.

In Canada, these higher-risk borrowers represent a 4-per-cent share of first-time homebuyers, a “multi-year” low according to Marion: “That is a far cry from the peak of 28 per cent observed in the US at the height of its housing bubble”.

Last month, the Ontario Securities Commission, the provincial agency that regulates the lending industry, said Home Capital had knowledge of broker fraud earlier than it had let on. The development compromised investor confidence in the subprime lender and shares tumbled.

“For perspective, [Home Capital Group] has a sub-$20 billion mortgage book, which translates to minnow status relative to the $1.1 trillion of residential real estate credit on Big-Six balance sheets,” a National Bank analyst tells the Financial Post.

Guess you may trust Stefane Marion because the following home sales confirms everything remains fine and dandy, things are still very rosy …

For example, someone just bought this house for a cool $7 millions:-

SOLD

(Slightly Overasking)

90 Roxborough Street East – ROSEDALE

4 bedroom, 5 bathroom house on a 64.17 x 125.42 foot lot in South Rosedale.

Great house. Posh location.

In 2014, the asking price was $5,560,000. In October 2014, the price was dropped to $5,450,000. A few weeks later, it was down to $5,250,000. It sold in January 2015 for $5,060,000.

Almost three years later, it was listed at $6,995,000.

It sold last week for $7,000,000

So, What Housing Bubble, What Mortgage Trouble?

Still not convinced times are still good?

Here is an example that home prices is still hotter than hot …

__________________

PRICE INCREASE

50 Lippincott Street – KENSINGTON

1 bedroom, 1 bathroom bungalow row house on a 16 x 125 foot lot with 2 parking spots at 50 Lippincott Street in Kensington (near the Dundas Chinatown on the west side).

An absolute Fixer Upper babe because it could be renovated to be like the neighbour at 52 Lippincott Street that was listed in 2014 for $549,000, or become a 3 storey house like the one located a few doors down from this house…

This house was listed at $699,000.

It hasn’t sold but the price already increased – The new asking price for this fixer upper row house bungalow is now …

$830,000

See, What Housing Bubble, What Mortgage Trouble?

______________

For this reason, and if you are looking to buy a property in downtown Toronto, you may want to consider this newly listed home seriously and very quickly … Located in the other Chinatown* (on the east side): –

* There are two Chinatowns in downtown Toronto. The original one is on Dundas (tourist spot), the other one is on the east side at Gerrard/Broadview. Actually, there is hardly any Chinese there nowadays. The real Chinatown or should I say the “China City” is located up north in Markham, where the biggest Chinese shopping mall in North America is located – The Pacific Mall.

For Sales

72 First Avenue – RIVERSIDE

3 bedroom, 4 bathroom semi with 2 parking spots on a 16.60 x 126.00 foot lot

But to make it work, you gotta be mentally prepared to compromise a little – Beaside there is a jail and mental hospital nearby. The look is like … Well, this the first thing you will see – the main door of the house!

This is what this house used to look like before it was gutted and renovated

And considering they renovated the whole house, I wonder why wouldn’t they replace the entrance door like this house … ?

Or paint it so that .. you know the original industrial looking brown … Well, how much does a door cost that they wouldn’t even consider replacing it? Even a simple question like this has become a science of late?

Otherwise, this is not a bad buy.

This is a semi detached with 2 bathrooms, and 2 parking spots and it is listed at $999,000.

Prediction: It will sell fast and probably closer to $1,225,000… maybe a bit more.

So, hurry up before it’s gone!

Declaration: We have no hidden interest in this property.

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