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?!

Why Toronto real estate is more vulnerable than Vancouver

While real estate Vancouver is doing pretty well in June, Toronto on the other hand sinks deeper into the red: –

Home sales in GTA plunge in June

Greater Toronto Area home sales plunge 37.3% in June despite a jump in listings

The average price of a home sold in the Greater Toronto Area was $793,915 in June, an eight per cent decline from a month earlier, according to data released Thursday from the Toronto Real Estate Board. On a year over year basis, On a year over year basis, June average prices were still up 6.3 per cent from a year ago … Fall in home Toronto home prices ‘a big surprise,’ says broker » Financial Post

Significant Toronto Real Estate Price Drop in June

A Big Surprise? 

Not quite. 

One of the main reasons is because Toronto is no Vancouver whereby we have said it all along, that Vancouver should be happening again in a matter of time – “New Taxes On Foreign Buyers Will Not Affect Vancouver Real Estate Sales In The Long Run“. Because if foreigners were to buy, the Pacific Utopia Vancouver will always get the attention of those coming from the Middle Kingdom first.  

It’s Geofengshui, stupid. 

As for Toronto?

Foreign buyers made up barely 5 % and the rest are local speculators, who apparently have all turned fence sitters (at least for now).

Hamburg New Concert Hall – Elbphilharmonie (Source)

Foreign buyer activity in Ontario housing market about 5 per cent: government

Newly released figures show nearly five per cent of home purchases in Ontario’s Greater Golden Horseshoe region were made by non-residents since the Liberal government announced a foreign buyer tax.

More hereunder – “The Facts Behind Toronto’s Most Recent Real-Estate Frenzy: Domestic speculation running high

You know what? Even the paltry 4%-5% isn’t home purchase, but agricultural properties. Meaning there is probably NO foreigner buying any residential properties at all.

The government says today that data collected from April 24 to May 26 show 18,282 residential and agricultural properties were bought or acquired in the Greater Golden Horseshoe region. Of those transactions, it says about 4.7 per cent of the properties were bought or acquired by people who aren’t citizens or permanent residents, and by foreign corporations » CTV

Is the “threat” to raise interest rate by Bank of Canada few days ago going to be the game changer again this time around?

It may, it may not. 

If it doesn’t work like before – that folks aren’t rushing to buy a house fearing the interest rate will go up, it’s not because Bank of Canada has done “The Boy Who Cried Wolf – Wolf! Wolf! The Wolf is chasing the sheep!” too many times, so much so that no one believes the interest rate is going to go up. The situation today is a lot more complicated, there are many more factors involved.

Perhaps one of the reason is the price level has indeed reached a point where most of the folks are no longer willing to pay. Either believing the price can’t possibly appreciate much more or they simply can’t afford it no more… This we gotta ask Stephen Poloz. The Man Who Knows It All?

While there are many more possibilities which we’ll try to speculate in the next installment, it could be also due to demographics. Again, Toronto is no Vancouver. Unlike foreign buyers who do not necessary have to flip right after they purchase the property, Toronto’s speculators are locals who can’t afford to keep on speculating if there is no instant profit like what they have been enjoying all these years.

In any case, you never know, these local speculators may start to play up the market again in the next few weeks/months … You know, speculators are some kind of hyperjunkies – they can only stay still for so long.

Meanhwile,

Toronto real estate market’s buyers and sellers stuck in summer standoff 

The Toronto area’s choppy real estate market may become fairly placid in July and August, as buyers and sellers each try to gauge the level of desperation in the other. … The Globe and Mail

Let’s see who has more staying power … The Sellers or the Buyers?
Ding dong, Round Two.

 

According to Philip Cross of Finanncial Post, “No one foresaw that lowering interest rates and the exchange rate would trigger the housing bubbles in Vancouver and Toronto”

 

Is Mr. Cross smoking something or what? Or are there new economic logics that we folk are not aware of …?
 
Since when cheap money does not cause economic problems like inflation, ballooning debts and in this case, housing bubble?
 
Except maybe for Stephen Poloz, economists and bankers say it all along, Paul Krugman says it all along, we say it all along, that cheap money is … COCAINE.

Philip Cross: How Canada’s weak-dollar strategy flopped—and then backfired

No one foresaw that lowering interest rates and the exchange rate (which reduced the price foreign investors paid for housing in Canada) would trigger the housing bubbles in Vancouver and Toronto. House prices in Vancouver took off suddenly and …and more » Financial Post

Now they say the Loonie is going tank again. Honestly, we poor folks are really tired of living with cheap Loonie … It sucks, and it really hurts.

Mr. Poloz, can you please make the Loonie classy for once?

Market pros say steep drop in the loonie is imminent 

For some analysts, including Klarity FX Inc.’s Amo Sahota, the second most-accurate predictor of the loonie’s moves last quarter, the reasons for remaining a bear are simple: traders are wildly overestimating the Bank of Canada’s desire to raise rates … The Globe and Mail

Here is an interesting read from HuffPost …

The Facts Behind Toronto’s Most Recent Real-Estate Frenzy

Toronto real estate had a sudden surge last year, and we’re finally starting to get a better picture of what happened. New statistics released by the Toronto Real Estate Board (TREB) once again confirm everyone didn’t just wake up to a shortage of land overnight. Instead it appears that speculators saw a gold rush, adding pressure to prices that sent emotional buyers into a bidding frenzy.

Domestic speculation running high

In the Greater Toronto Area-Hamilton economic zone, 6.2 per cent of homeowners own more than one home. Not 6.2 per cent of transactions in the past few months — 6.2 per cent of all homes. This is in line with the number the Ministry of Finance released just a few weeks ago.

2017-06-30-1498823382-2062702-ScreenShot20170630at7.48.49AM.png

Second home buyers are GTA residents that are registered to multiple property records in the same area. They’re only counted once, even if they appeared 15 times. Note, 2007 was a drop, but the Ministry of Finance says this was due to a change in recording standards. (Source: TREB, MPAC, Ministry of Finance and Better Dwelling)

Some might be informal landlords, but the cap rates don’t make economic sense. Meaning home prices in Toronto can’t be made up with rental income in an efficient way. Most purchases return around two per cent in rental income, which means you’ll lose money on a mortgage annually.

Toronto needs to continue building to prevent an actual housing crisis in the future.

These are either extremely dumb business people that can’t do math (not likely), or people holding empty to flip at peaks.

Sold in less than a year

A surprising number of properties in the City of Toronto have been bought and sold in less than a year. In 2016, TREB said it was “less than five per cent” but stopped short of giving a number … TREB is a secret society like Freemason?

In just the first five months of 2017 however, it accounted for seven per cent of transactions. TREB called this “a very small share,” but to give it context it’s about twice as large as Toronto’s luxury market. Also probably worth noting here that Toronto’s luxury market is considered one of the hottest in the world. In case you didn’t catch that, seven per cent of the properties that were sold this year were bought less than 12 months ago — right around when prices started taking off.

 

2017-06-30-1498823304-6271215-ScreenShot20170630at7.47.48AM.png

According to TREB, seven per cent of home sales between December 2016 and April 2017 were bought less than 12 months ago. In this period prices rose 25.89 per cent. To contrast, the same period in the year prior was only 14.25 per cent. (Source: TREB)

Read more at HuffPost

Canada Tops Indebtedness, Vancouver’s Costliest Listing, Cooling Measures Backfires, Bubble Coming Back

Real Estate Roundup

  1. Global News reported Canada is a celebrity when it come to debts, not only houldhold debts, but also commercial debts that is heavily skewed toward real estate.
  2. While the real estate is entering a tumultous era, Vancouver shows off her most expensive listing ever – $63 millions Belmont Estate, a 21,977 sf home of billionaire Joseph Segal and his wife Rosalie.
  3. Meanwhile, HuffPost thinks Kathleen Wynne’s housing bubble cooling measures are way too drastic … Fail?
  4. The scariest thing is Housing Bubble is coming back to haunt the U.S. … Can you imagine what is it like for real estate of both Canada and the U.S. to tank at the same time?

Indebted Canadians using homes as ATMs

1. Canada Tops Indebtedness

Canadians pile up debt faster than anyone in the world

Canada accumulating private debt faster than any other advanced economy

We all know about Canada’s ballooning household debt. Hardly a day goes by without a headline warning about overstretched Canadians wallets, and policymakers have long been racking their brains about ways to rein-in families’ debt binge.

But another type of private-sector debt has ballooned — and with hardly anyone taking notice.

Since 2011, Canada has racked up an additional $1 trillion to its non-government debt, and most of the increase came from Canadian companies, not households, according to a new report by the Canadian Centre for Policy Alternatives (CCPA). Corporate debt increased $671 billion (in 2016 dollars) since then.

As a result, Canada now leads advanced economies in private-debt accumulation, which is one of the best predictor of economic crises, according to CCPA economist David Macdonald, who authored the report… Global New

What housing crisis?

2. Vancouver’s Costliest Listing – $63 millions Belmont Estate

Behold, Greater Vancouver’s most expensive real estate listing of all time

Check out what $63 million will buy you in Vancouver. The 22,000 square foot Point Grey home of philanthropist Joe and Rosalie Segal recently hit the real estate market and the Global 1 helicopter took a look… Global News

Images Source 

3. Housing Cooling Measures Backfires?

Way To Burst The GTA Housing Bubble, Kathleen Wynne

HuffPost believes Premier Kathleen Wynne plan has yet to do have any positive effect on the real estate market – and if anything has caused more disruption than anything else.

No data. No research. Listing terminations, for example, had almost tripled on a year-over-year basis. According to figures compiled via TREB, we have seen a movement from 681 termination listings on April 20, 2016 to 1,774 termination listings as of April 20, 2017, which is essentially proof that the market was already changing when Wynne decided to interfere with the housing cycle, which has basically stopped everything … That implementing so many big changes at once was not an appropriate or an informed decision … HuffPost

No data. No research?

Sorry, we beg to differ. We believe what Liberals are doing is politically correct = We think Liberals will reign supreme come next election.

Meanwhile, we are more concern about what is happening in the U.S. … We think the U.S. will have a major impact on our housing bubble, real or imagined.

4. Housing Bubble Coming Back To Haunt U.S.

Americans Are Pouring Money Into Their Homes Like It’s the 1990s

If you’re building or renovating a home in the U.S. these days, you’ve got plenty of company. Americans’ spending on residential construction projects — from the pouring of foundations to home improvement — just hammered out its strongest three-month … Bloomberg 

 

Americans Suddenly Sour On The Housing Market

High home prices have led many consumers to give us the first clear indication we’ve seen in the National Housing Survey’s seven-yearAmericans have been gung-ho in recent years about the housing market, bidding up prices with gusto as they went. But since then, some dark clouds have appeared …Seeking Alpha

And,

But the situation at home in China tells a different story,

Mirror, mirror on the wall, will Uncle Sam’s real estate belly up anytime soon?

Similarly,

How Trump Could Burst Australia’s Property Bubble

Perhaps we don’t have a housing affordability crisis, but instead a looming housing apocalypse.

Interest rates will inevitably rise from record lows, and record household debt levels will force many Australians to sell. A glut of homes will flood the market, not out of choice, but economic necessity, and the property bubble will burst.

In short, inflationary house prices are slowly killing the Australian economy.

President Donald Trump’s avowed commitment to massive infrastructure spending (conservatively estimated at US $200 billion) is another economic force likely to put upward pressure on US interest rates. If Trump manages to also cut income taxes, a further rush of money will enter the US economy, thereby stimulating employment and further increasing the costs of US borrowing.

Australia will not be unaffected by these developments. Interest rates will inevitably rise from record lows, and record household debt levels will force many Australians to sell. A glut of homes will flood the market, not out of choice, but economic necessity, and the property bubble will burst… HuffPost Australia

Canadian Homes Prices are 4th Priciest whereas Income ranked 11th in the world

When it comes to home prices vs. income, Canadians are like couples with mismatched libidos … Okay, bad analogy here.

The truth is we got a real serious Mismatch: Income and Expense Volatility Are Undermining Households

HARD FACTS

  • Canadian homes prices are the 4th priciest in the world. Whereas Canadian income (GNI) ranked 11th in the world

Canadian home prices in the Great White North has settled comfortably among the world’s most expensive housing markets, a third consecutive fourth-place ranking out of 55 countries.

Canadian home prices settle comfortably among the world’s 5 priciest markets: report

The rankings were compiled by Knight Frank, a global real estate consultancy based in London.

Its Global House Price Index ranks housing markets for 55 nations based on annual price growth … Canada’s housing market ranked fourth overall in the first quarter this year after average home prices grew by 13.5 per cent.

In fact, the Great White North has seen steadily increasing annual price growth in every quarter since 2015, as the following graph shows.

The latest report showed that Canada was one of 11 countries to see double-digit price growth in the year up to March 2017; it trailed only Iceland (1st), Hong Kong (2nd) and New Zealand (3rd)… Worldatlas.com

Kindly note that we are talking average home prices here, which is about $500K a pop according to mainstream media. If you were to take the realistic home prices in Vancouver and Toronto into cosnideration … I believe Canadian home prices could be the 2nd Priciest, realistically speaking.

25 Highest Income Earning Countries In The World

Gross National Income helps determine the average wealth of a country and of its general population.

Gross National Income (GNI) per Capita By Country

Rank Country Gross National Income per capita (US Dollars)
1 Norway $103,630
2 Qatar $92,200
3 Macau $76,270
4 Luxembourg $75,990
5 Australia $64,540
6 Sweden $61,610
7 Denmark $61,310
8 United States $55,200
9 Singapore $55,150
10 Netherlands $51,890
11 Canada $51,630

What do you say, Mr. Trudeau?

When can average Canadian owns a home that looks like this one …

Fantastic Pre-Civil War Home in Charleston SC

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).