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 

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

Chinese Insatiable Appetite For Canadian Real Estate Continues

The Chinese have been #1 investors for Canadian real estate … Nothing new.

Instead of slowing down after the infamous Vancouver Foreign Buyer Tax, they come in greater number as if apocalypse is going to land in the Middle Kingdom soon.

The momentum continues, home prices keep going north, millenials remain in the same doldrum as far as housing affordability is concerned.

Now what?

The more the merrier?

Chinese inquiries in Toronto, Montreal, Calgary real estatespiked with Vancouver tax

CBC.ca
Inquiries from China for property in several big Canadian markets spiked in the months after Vancouver introduced its tax for foreign buyers, according to a report based on data from a top Chinese foreign property website.
The report, released Tuesday by Sotheby’s International Realty Canada in conjunction with Juwai.com, said Chinese inquiries for listings in the Vancouver market slumped by 81 per cent year over year in July 2016, the month the 15 per cent tax was announced.

Continue reading “Chinese Insatiable Appetite For Canadian Real Estate Continues”

Nouveau Silk Road: From Middle Kingdom to The Great White North

Jonathan Manthorpe believes there is a direct line linking the explosive real estate bubbles in Toronto and Vancouver and how secure Chinese President Xi Jinping looks on his throne.

How China’s Politics Messing Up Canadian Real Estate Markets

The evidence — the vast amount of money being spirited out of China by relatives, friends and cronies of the Red Aristocracy around Xi — suggests he’s set to tumble. Last year about $US1 trillion was spirited out of China by Communist Party leaders and their hangers-on, in defiance of currency regulations.

Image Source

They clearly do not feel the regime is secure and want their assets hidden away in stable overseas havens like Canada, the United States, Australia or Europe.

Sounds like it’s not “London Bridge is falling down”, its “The Great Wall is tumbling down”?

Continue reading “Nouveau Silk Road: From Middle Kingdom to The Great White North”

The Great Canadian Real Estate Continues To Fly Sky High

House prices are coming down like “London Bridge is falling down”?

Dream on …

Housing Bubble or not, all indications suggest no one believes Chicken Little: “The sky is falling!” …

Canadian Real Estate Could Still Get Way More Expensive

Huffington Post Canada ‎Jul 16, 2016‎
Global comparison puts Canadian home affordability in perspective.
Image Source

Continue reading “The Great Canadian Real Estate Continues To Fly Sky High”

Canadian Real Estate Crazy Horse Show

While house prices are soaring, so is unemployment.

What can we make up of such a scenario?

Can we assume real estate market has nothing to do with economy in reality? Else, how do you explain house prices still going up when more and more people are getting unemployed?

On the rise in Hamilton: housing prices & unemployment

CBC.caJul 16, 2016
Meanwhile, housing prices here have between June 2015 and ’16 have expanded 13.8%. That’s a faster growth than Toronto’s notoriously …

And renters will soon have to live in tents …

Rental bidding wars hitting Vancouver’s rental market

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