Silly title, right?
“Last week’s news is this week’s news.”
Maybe it’s just the best I could come up with, on account of being so tired from hanging out in Trinity-Bellwoods Park this weekend with 10,000 of my closest friends…
Or maybe it’s just really, really tough to keep current on world issues with the incredible amount of information we have to digest on a daily basis.
If you’re not caught up on COVID cases rising in Ontario, are you caught up on President of the free world trying to fix the upcoming election? If you’re busy reading about plans to re-open the major sports leagues, do you have any idea where Elon Musk is going to live when he sells all his houses? Do you care about fiscal and monetary policy in Canada, or are you busy making an argument that the Peleton is racist?
That last one is a real thinker. Remember when people didn’t spend all their time looking for ways to be offended?
Something major happened last week that I want to talk about, as I think it could have a significant impact on our Toronto real estate market.
No, it wasn’t President Trump telling the world that he takes hydroxychloroquine.
No, it wasn’t Justin Trudeau giving away even more money during his daily press conference (I think this time it was to mother birds and their babies…).
And while the story of the Canadian loon stabbing and killing an American bald eagle through the heart with its beak makes some of us think back to 1812, that story is merely a headline-grabber.
What I wanted to talk about today is China.
I know, right? This is the Toronto Realty Blog! And here’s David talking about China?
The eyes are rolling, I can feel it.
But if you choose to bury your head in the sand, then so be it. That’s your call. If you want to be like the folks south of the border who are celebrating their “freedom” by licking each other at pubs in defiance of mother nature, then that’s your prerogative. You can’t ignore that what’s happening in China right now is larger than, say, Russia annexing Crimea, which nobody really seemed to care about.
I mean, do you care if China takes over Hong Kong?
Probably not.
It’s not nearly as interesting as your favourite Instagram “influencer” demonstrating which type of lip-gloss she prefers.
But if China brings Hong Kong back under their rule, this will have major implications across the world, including, but not limited to, financial ramifications.
Consider just how much money exists in capitalist Hong Kong, and how the presence, usage, investment, and distribution of this money would change if Hong Kong were brought under communist China rule.
Cue the conspiracy theory here if you want to, and hand me some pom-poms if you feel I’m about to cheerlead the market, but does anybody else think that there are hundreds of thousands of wealthy residents of Hong Kong who are about to try and get their money out of the country and into some hard assets, say, real estate, in other places across the world, say, Toronto?
Cue the groans.
My two-decade-old university degree is not in international studies, or world relations, or geo-politics. But that doesn’t preclude me from being realistic about this situation. Nobody in Hong Kong with substantial financial resources is going to allow this move to happen without first securing their family’s financial future, and that means moving money out of the soon-to-be communist system.
Then again, you could also argue that a trade war between China and the United States, resulting from the United States “interfering” with China’s plans for Hong Kong, could negatively affect the North American economy, and thus trigger a recession here at home.
But after what I saw in early 2017 when the downtown Toronto condo market was invaded by foreign capital, I have to think that another influx of capital like that would have a much larger effect on a micro level here in Toronto than a trade-war would have on a macro level for all of North America.
And by the way, I’m not exactly going out on a limb here.
Having written a draft of this blog on Friday, I was somewhat satisfied to see this headline appear on the cover of The Times in the U.K. over the weekend:
First, they wipe the data from their phones.
Then, they get their money out of the country…
–
The second topic of discussion for today, based on last week’s news, comes in the form of a potential move to a 10% minimum down payment here in Canada on the purchase of real estate.
Quoi?
Say it ain’t so?
We’ve been discussing, debating, and speculating on this for years! Could it really be happening?
If you’re not familiar with the website www.thinkpol.ca, well, then that makes two of us.
But here’s their article from May 19th:
“Canada Looking To Increase Minimum Mortgage Down Payments From 5% To 10%”
Evan Siddall, president and CEO of the Canada Mortgage and Housing Corporation (CMHC), warned the House of Commons Finance committee on Tuesday that Canada could see mortgage defaults reach $9 billion as a result of the COVID-19 pandemic.
“We feel we need to avoid exposing young people (and through CMHC, Canadian taxpayers) to the amplified losses that result from falling house prices,” Siddall said. “Unless we act, a first time homebuyer purchasing a $300,000 home with a 5 per cent down payment stands to lose over $45,000 on their $15,000 investment if prices fall by 10 per cent. (Our calculations include the mortgage insurance premium and the costs of selling the home if forced to do so because of unemployment or any other reason.) In comparison, a 10 per cent down payment offers more of a cushion against possible losses.”
Sidall warned that mortgage deferrals are exacerbating already history levels of household debt.
“Canadians are among world leaders in household debt. Pre-COVID, the ratio of gross debt to GDP for Canada was at 99 per cent,” Sidall told the committee. “Due in part to increased borrowing but even more so to declines in GDP, we estimate it will increase to above 115 per cent in Q2 2020 and reach 130 per cent in Q3, before declining. These ratios are well in excess of the 80 per cent threshold above which the Bank for International Settlements has shown that national debt intensifies the drag on GDP growth.”
Siddall expects the debt multiples of disposable income to shoot up from 176 per cent in late 2019 to well over 200 per cent through 2021, even as CMHC a decline in average house prices of 9 – 18 per cent in the coming 12 months.
“The resulting combination of higher mortgage debt, declining house prices and increased unemployment is cause for concern for Canada’s longer-term financial stability,” Sidall said.
“A team is at work within CMHC to help manage a growing debt ‘deferral cliff’ that looms in the fall, when some unemployed people will need to start paying their mortgages again,” Sidall added. “As much as one fifth of all mortgages could be in arrears if our economy has not recovered sufficiently.”
Sidall said that the agency’s support for homeownership cannot be unlimited.
“Homeownership is like blood pressure: you can have too much of it. Housing demand is far easier to stimulate than supply and the result, as we’ve seen, is Economics 101: ever-increasing prices,” Sidall said. “So if housing affordability is our aim, as surely it must be, then there must be a limit to the demand we help to create, especially when supply isn’t keeping up.”
Whether it was Mr. Siddall’s or ThinkPol’s insertion of the “…and through CMHC, Canadian taxpayers” comment, the Libertarians will love it.
We’ve long debated the role of the CMHC in over-burdening the Canadian taxpayer through insured mortgages, and an opponent of this role would agree that a move from a 5% minimum down payment to a 10% minimum down payment would help take some risk off the backs of Canadian taxpayers.
Mr. Siddall’s comments merely assume a decline in 10% of Canadian home prices, which is far from a guarantee.
Now in theory, I agree with Mr. Siddall. The benefit to a leveraged investment is the gain amplified by that leverage, ie. when you buy a $500,000 condo with $50,000 down, and it goes up to $600,000 in value, that $100,000 profit represents a 200% gain. Compared this to an investment of $500,000, unleveraged, say in the stock market, and that $100,000 gain represents only a 20% gain. But the same is true in times of depreciating prices! That same buyer of the $500,000, after it declines to $450,000, has lost merely 10% on the value of the asset, but 100% of the investment.
But why now?
And what other ramifications would this have for the market?
Take the low-end buyers out of the market, but this doesn’t remove the foreign buyers, purchasing in cash, right? That’s always been the counter-argument to the idea of making it harder for first-time and/or low-end buyers – that it’s “unfair” to Canadians to punish and prohibit them from entering the market while foreign buyers with boatloads of money are unaffected by any policy change.
–
The third piece of news that I want to circle back to after last week is this:
“Poloz Says Risks To Canada’s Economic Outlook ‘Overblown'”
This just goes to show you that you can find whatever type of news you want, if you’re looking for it.
You want bad news? It’s there.
You want good news? It’s there too.
Stephen Poloz and Evan Siddall might be singing different tunes with respect to their levels of optimism and pessimism, but they do have one curious thing in common: they’re both vacating their positions soon.
From the article:
Stephen Poloz offered a hopeful assessment of the Canadian economy’s ability to rebound from the pandemic just weeks after the outgoing governor took the central bank into uncharted territory to prevent a depression.
Poloz, speaking at his last press conference before stepping down next month, said the central bank needs to be prepared for a wide range of outcomes. But he’s more optimistic than many pundits on the outlook for recovery, believing the fiscal stimulus that has been unleashed will allow Canadians to quickly pick up where they left off before the crisis.
“We have to be able to manage the risks around those things, so I’m not going to dismiss” dire scenarios, Poloz said during a media roundtable, conducted online. “But, me personally, I do think on balance what I’m hearing, the flow that I’m hearing, is a little too dire, a little bit overblown.”
After spending his seven-year term repairing the damage from the previous recession, Poloz is ending his tenure with the coronavirus shock unraveling his efforts. Canada’s economy is now in the midst of its sharpest contraction since the Great Depression with the unemployment rate at 13 per cent.
The governor has been forced to take unprecedented action just to keep credit markets from seizing up — cutting the benchmark rate to near zero, injecting more than $300 billion of cash into financial markets and undertaking the central bank’s first-ever foray into large-scale purchases of government debt.
Only a few months ago, Poloz foresaw a much calmer end to his term, saying the economy was close to “home,” with inflation near the central bank’s two per cent target and output running at full capacity. Now he’s wrapping up his term watching all those successes vanish.
Yet, Poloz likens the shock more to a temporary pause that may not trigger the types of behavioral changes typically associated with recessions and depressions, in large part due to generous income support that has been doled out by the federal government. Economists and commentators may be too preoccupied with the sharp drop in gross domestic product, he said.
“I’m relatively optimistic, what I find, compared with what the talk is,” Poloz said, adding that the economy is currently tracking the central bank’s best-case scenario of a sharp drop in output of 15 per cent. When the economy gets “turned back on” after the health crisis, “you should see a very rapid return to production.”
Poloz acknowledged there could be scarring effects on productive capacity, with some companies closing. But even here, the destruction caused by the crisis will trigger a wave of innovation and firm creation that will need to be nurtured, he said.
“You can’t be overly preoccupied with short-termism when the economy is trying to grow above trend with new company creation,” Poloz said. “We’re going to have to be patient and allow that to happen.”
When COVID first became a part of our lives in March, many optimists suggested that a decline in the stock market or real estate market was different from previous declines because, “Those were economic recessions; this is a pandemic!”
It’s true, the rapid decline in the DOW Jones from 29,000 to 18,000 in February was not the result of a change to economic indicators, but rather fully and completely the result of a worldwide pandemic.
But it didn’t take long for many, if not most, to conclude that a recession resulting from a pandemic was a recession, all the same.
Does a move to zero percent interest rates scare you?
How about a $300 Billion influx of capital to the financial markets?
What about the words “first ever,” noted in the article above, as they pertain to the Central Bank’s purchase of government debt?
I rarely trust politicians at any level, so call me naive here, but it is nice to see the optimism here from Mr. Poloz. The idea of destruction leading to innovation is forward-thinking, is it not? Sports fans will see the parallel here to the owner of the Washington Capitals, Ted Leonsis, suggesting last week that if sports has to move forward without fans, that “innovation is necessary.”
There are a lot of people out there trying to put a positive spin on a negative situation, and I can’t think of any better example than President Trump bragging about having the most positive COVID tests in the world, because they “do great testing.”
But I’m enthused by Mr. Poloz’ comments above. Even if I’m the only one.
–
So that’s it for today, folks!
China’s takeover. Siddall’s pessimism. Poloz’ optimism.
Even though this is last week’s news, we wouldn’t be responsible real estate enthusiasts if we didn’t look at how an influx of capital from Hong Kong could alter the course of the Toronto real estate market, and I didn’t want to let this pass.
Now let me come up for air and check the headlines. Anything new happening, of note?
J G
at 6:59 am
1) HK is not as rich as it used. 20 years ago HK accounts for almost 20% of Chinas wealth, now its down to 3-4%.
2) People from both HK and China (specifically those with money, and ONLY those with money), who can leave have left already. They want better life for their kids. They don’t need the HK protest to tell them what the future brings.
Remember immigration is not a easy process (even if you have money), when we see them at the airport in Toronto it’s like the last step.
J G
at 7:08 am
One big reason for the price boom is late 2015 to 2016 is CNYCAD hitting record high, of course foreign buyers want the best bang for their buck.
J G
at 8:24 am
I forgot to mention the biggest challenge for Chinese investors – capital controls. Only $50k USD per year can leave the country, China really cracked down on that since 2017.
You think you can just go to a bank in China and take out $2M in your account to buy a house in Canada?
Chris
at 9:31 am
Good points, J G.
Concerns over China’s abandonment of “one country two systems” are not new within the past week. Many wealthy have been getting both their capital and themselves out of Hong Kong since 1997. Recent protests, such as the Umbrella movement of 2014 and the extradition bill protests of 2019 would have only solidified these concerns.
However, a couple small things. Hong Kong’s currency is the Hong Kong dollar, pegged to the US dollar, and subject to far fewer capital controls than the Chinese Renminbi. A wealthy Hong Konger would, I believe, have an easier time moving money to Canada than a wealthy mainland Chinese person.
That being said, most people don’t become or remain wealthy by making poor investments. If the Canadian government (read: CMHC) is warning that real estate prices are going to drop 9-18% over the next year, and I’m trying to secure my family’s financial future, why would I buy? There’s no shortage of other assets I can turn to. Swiss one year bonds for example, would be a very safe store of wealth, and have a yield of -0.4% – a far better return than what the Canadian government expects for real estate.
Thomas
at 10:31 am
I really hope that is true but I am not so optimistic. People will still find ingenious ways to get money out of the system. But I agree that it should be considerably lesser than before
Appraiser
at 7:54 am
Trudeau, Poloz and the BoC have done a remarkable job. Everyone gets a pony till this thing blows over. Chaos was the only other option.
Creative destruction (Schumpeter’s gale) is already happening. Only of necessity mind you, and green energy will be one of the biggest beneficiaries of this economic shock.
Long-term GTA real estate looking solid as always, especially with another tsunami of foreign money headed our way.
J G
at 8:16 am
Another tsunami of foreign money? When Where? How?
Chris
at 9:40 am
“Trudeau, Poloz and the BoC have done a remarkable job. Everyone gets a pony till this thing blows over”
Watch taxes over the coming months and years. My money would be on a scaling back of the principal residence exemption of capital gains tax.
“Indeed, over the past 20 years, the average Canadian homeowner has had a tax-free gain of $340,000 in the value of their home.”
– Evan Siddall, President & CEO, CMHC
All this spending, Siddall’s comments, and windfall gains by property owners, primarily older ones (who are typically less likely to vote Liberal), makes me think higher taxes on real estate are on their way. But I could be wrong.
daniel b
at 1:23 pm
i think the principal residence exemption is far harder to eliminate than it might look on first blush, mainly because in a rising market it would make it impossible for people to move. after paying taxes on the gain in the home they’re selling, they’d have to either have to move downmarket from their existing home or find additional capital to even make a lateral housing move. I think economists would tell the government it will make the labour market more rigid and generally cause strange distortions to the market.
Chris
at 4:09 pm
Couldn’t many similar arguments be leveled at the land transfer tax(es)? You’re required to pay those regardless of how the value of your home has changed. At least a capital gains tax would only be due if the proceeds of disposition outweigh your adjusted cost base.
There would definitely be logistical hurdles to overcome, but I still wouldn’t be surprised to see them move towards this in some fashion. Remember during the last election, when that Adam Vaughn memo leaked about a proposed capital gain tax that would gradually decrease for each year you held a principal residence?
condodweller
at 6:21 pm
I really don’t like the idea of taxing gains on homes but if they must do it they can deal with the mobility issue by doing the same thing as the US. They have an exemption as long as you buy a new home within a specific amount of time. If I’m not mistaken this is not limited to principal residences.
Appraiser
at 9:51 am
“Built by Oil’s Riches, Houston Goes 100% Green Years Earlier”
“Houston will begin a new five-year contact in July with NRG Energy Inc. to power all of its city-owned properties, from fire stations to airports, with renewable energy.”
https://www.bloomberg.com/news/articles/2020-05-22/built-by-oil-s-riches-houston-goes-100-green-five-years-early?cmpid=BBD052520_GREENDAILY&utm_medium=email&utm_source=newsletter&utm_term=200525&utm_campaign=greendaily&sref=B0rA5wku
Chris
at 10:02 am
I expect Kyle will be by shortly to scold you about how this is not the S&P 500 blog, not the Canada-wide Average real estate blog, not the opinions from a Vancouver Realtor blog, not the global pandemic blog, and not the Houston renewable energy blog – it is the Toronto Realty Blog!
Chris
at 10:45 am
“Residential rents are falling as the COVID-19 pandemic drags on
Demand is unlikely to pick up soon. Because of the pandemic, immigration has dropped significantly, sapping a key source of rental demand. Colleges and universities may continue to conduct their classes virtually in the fall, keeping students home with mom and dad… Meantime, despite a short-term hiccup to construction, tens of thousands of purpose-built rental and condo units are set to be completed in the Toronto and Vancouver areas this year, ensuring that a steady stream of housing becomes available as demand cools.”
https://www.theglobeandmail.com/business/article-residential-rents-are-falling-as-the-covid-19-pandemic-drags-on/
In other news, from BNN this morning:
“Consumer confidence inches higher in Canada, except for housing
Even as sentiment has improved around the economic outlook and personal finances, expectations around real estate are weakening. Over the past two weeks, almost half of respondents anticipate a drop in home prices, which is a record and about three times above the average for this question”
Kyle
at 11:24 am
Here’s a good TL:DR summary of Evan Siddall’s speech.
https://twitter.com/mortgagejake/status/1263461055327592452
Of course, when he mentions -9 to -18%, he is also talking about a Canada-wide forecast. Given what we know about which Industries are struggling and where the job losses are occurring (i.e. Oil & Gas, small businesses and low wage jobs), it’s reasonable to expect places like Alberta, and many of the rural towns and smaller cities to underperform the average, and a City like Toronto where most of the higher income corporate jobs are to outperform the average.
Chris
at 12:30 pm
“Typical Dustan
I quit after the 6th factual error”
– Ron Butler, in reference to the Instagram video(?) criticism of the CMHC speech
https://twitter.com/ronmortgageguy/status/1263469973059633152
Caprice
at 1:19 pm
“According to DLC’s Dr. Sherry Cooper, Siddall’s claim that 20 percent of mortgages could be delinquent by September borders on the ridiculous.
“It’s kind of bizarre to me,” she says. “Most economists are finding fault with it.”
https://www.mortgagebrokernews.ca/news/why-does-cmhcs-evan-siddall-think-canada-is-headed-for-a-deferral-cliff-329836.aspx
Chris
at 1:25 pm
From the same series of tweets that I shared the other day:
“My #tweetstorm to clarify a few things re @CMHC_ca’s posture… 12% of mortgages are in deferral; that could be 20% by Sept. Deferred mortgages are not in arrears since they are deferred with lender ok. That 20% is *at risk* of being in arrears 90 days after a required payment is missed.”
– Evan Siddall, President & CEO, CMHC
https://twitter.com/ewsiddall/status/1264274395964596224
Note that he posted this May 23, a day after the article you shared.
Appraiser
at 1:20 pm
@Chris (and Ron Butler for that matter)
So where and what are the 6 factual errors?
Chris
at 2:10 pm
Well, you’d have to ask Ron Butler what errors he specifically found – you can try contacting him through twitter of the Butler Mortgage website?
If I had to guess though:
– Dustan asks “why does this [debt to GDP] ratio matter?”, Siddall pretty clearly states “These ratios are well in excess of the 80 per cent threshold above which the Bank for International Settlements has shown that national debt intensifies the drag on GDP growth.”
– “******clarifies debt against disposable income”, yes, that’s how the ratio has typically been calculated, is that news to Dustan?
– “media will only ever report 18%”, from the Financial Post report on the speech “The CMHC sees housing prices declining between nine and 18 per cent over the next 12 months.”
– “Throws in comments like ‘debt causes fragility’… debt is also how we all bought our first home. It’s a requirement.”, nowhere has Siddall said that debt should be abolished. Rather, he is warning against excessive debt, as explained above in the debt to GDP ratio impacting economic growth.
– “Deferral is what he meant, not arrears.”, Dustan is correct on this one, and Siddall clarified this shortly thereafter.
– “A 10% DP offers more of a cushion – but then gives no numbers, and no kidding – more money + a bigger cushion”, so does Dustan agree on this point or disagree? He seems to align with Siddall’s opinion but is still frustrated by it?
– “Wait, so what is the goal? GDP figures again? Not home ownership… OK. Hmmmm?”, CMHC’s mandate, as defined in the National Housing Act, is to: “promote housing affordability and choice, to facilitate access to, and competition and efficiency in the provision of, housing finance, to protect the availability of adequate funding for housing at low cost, and generally contribute to the well-being of the housing sector in the national economy.”
– “Then closes by saying that everyone in Canada should own a home (they can afford) – IE 100% ownership”, this is just completely wrong, and would run counter to their mandate – the speech actually ended with “At CMHC, along with my 2,000 colleagues, we remain fully committed to our aspiration that by 2030, everyone in Canada has a home they can afford and that meets their needs. COVID-19 has brought the value of stable shelter into sharp relief, strengthening our resolve.” Not about owning, rather about affordable shelter.
– “It’s all about the Economy. Not homeowners”, again Dusan seems to have a fundamental misunderstanding of CMHC’s role and mandate – their task is not to endlessly promote home ownership (leave that to ReMax), their task is to help Canadians achieve affordable housing and shelter.
By the way, is this Dustan Woodhouse an actual working broker? Or some kind of motivational speaker and author? Hard to tell from his website:
https://bethebetterbroker.ca/
Kyle
at 4:01 pm
Wow you got a lot of time on your hands.
Still don’t see 6 factual errors. Critiques are not the same errors.
Chris
at 6:11 pm
“Wow you got a lot of time on your hands.”
Nice attempt at deflection. Pretty rich, coming from the guy who has had the most comments here every year from 2015 to 2019 (per David’s holiday post). Also, in case you missed the news, there’s a pandemic on, so I’m alright to take 5-10 minutes out of my day to craft that blurb. It’s no NHL playoff game, but it’ll have to do, entertainment wise.
Well, you’ve got my list of criticisms and factual errors of motivational speaker/author/maybe broker Dustan Woodhouse’s Instragram video. If you’d like Ron Butler’s, feel free to reach out to him. He’s pretty responsive to people on Twitter!
jeanmarc
at 1:20 pm
Airbnb hosts are planning to sell off their properties because of the pandemic.
https://www.cnn.com/2020/05/25/tech/airbnb-hosts/index.html
Appraiser
at 1:22 pm
Another encouraging week of sales as per Scott Ingram:
“So all-in-all I’d call it an encouraging week for the rebounding of sales. I take it as consumer confidence returning (and also listings to choose from).”
https://twitter.com/areacode416/status/1264935215744651264
Chris
at 1:30 pm
“Consumer confidence inches higher in Canada, except for housing” – Bloomberg Nanos Canadian Confidence Index
Appraiser
at 1:27 pm
“COVID-19 may be the catalyst — not the cause — of a painful but useful economic transformation: Don Pittis”
https://www.cbc.ca/news/business/coronavirus-economic-change-1.5581084
Numberco owner of real estate
at 2:12 pm
I have always thought the possibility of buying real estate with 5% down is ridiculous. Yes, real estate is expensive is major Cdn cities and 5% is a lot of money, but sufficient buyers who are so leveraged have the potential to cause a systemic risk. Canada, just like the US, has no mandatory education on personal finance. So people (young?) need to be told not to have just a 5% down payment.
As for where this market is headed, no one knows. We can argue and debate to the moon where this is headed but it is a fruitless debate.
jeanmarc
at 2:20 pm
Poloz states things are overblown yet now he states higher indebtedness.
https://www.bnnbloomberg.ca/poloz-economic-shock-from-covid-19-to-lead-to-higher-indebtedness-1.1440817
Bal
at 5:11 pm
Yep…all are playing guessing game….Poloz, Don pitts, CMHC, Remax, David and his gang( including me)….lollol
Caprice
at 8:39 pm
Typical clickbait headline by BNN. He is talking about government debt, not consumer.
Side note, CERB payments now expedited for international students (no need to show work permit), temporary foreign residents and refugee claimants.
https://nationalpost.com/news/no-need-to-show-proof-of-work-permit-to-get-cerb-ottawa-tells-temporary-foreign-residents
Bal
at 9:41 pm
How is that fair? Even international students are getting CERB….bullcrap
condodweller
at 10:55 pm
They are paying higher tuition than Canadian students and they have to eat too… I know I know, most likely their parents can cover expenses but I digress.
jeanmarc
at 7:33 am
Selfie boy is trying to win more votes for the next election. Free money for all who apply. Fraudsters will have a field day. Canada will be paying for this for decades to come.
Cal
at 5:26 am
Since you brought up China, here it goes:
https://www.theglobeandmail.com/canada/british-columbia/article-bcs-money-laundering-fuelled-by-offshore-and-drug-money-inquiry/
“According to a report from B.C.’s expert panel on money laundering in real estate, approximately $5-billion was laundered through that sector in 2018, increasing housing prices by at least 5 per cent that year alone.”
Pragma
at 12:19 pm
I see many people here and around pointing to Poloz’s comments as a bull argument, my reply to that would be… you really don’t know anything about central banking. OF COURSE he’s going to say that, what else can he say. Have you ever in your life ever heard a central banker say “things are going to get worse” or the “the market is underpricing risk”. 90% of the job of a central bank is to project confidence. You HAVE TO say things are fine, things are manageable, things are under control. Can you imagine a central bank coming out and saying things might be worse than expected? That would be a scary day.
Chris
at 12:58 pm
Spot on, as usual, Pragma.
As Steve Saretsky puts it, “It was just a few months ago, Poloz gave the all clear, suggesting the economy was close to “home” as he prepared to sail off into the sunset. Since then, the Bank of Canada has pumped $300B of cash into the financial system, more than tripling their balance sheet during their first foray into Quantitative Easing. Actions speak louder than words.”
The tone and content of the CMHC speech last week were also surprising, given how restrained they typically are. For reference, here was their assessment of the GTA housing market in Q1 2017:
“…continued detection of moderate evidence of overheating… The continued rise in house prices could not be explained by fundamental economic drivers, such as income and population growth, and therefore strong evidence of overvaluation was detected.”
Pretty tame, considering GTA average price had just climbed 33.2% YoY in March 2017.
Appraiser
at 3:16 pm
Oh please Pragma…tell us everything you know about central banking.
“90% of the job is to project confidence”?
That’s the level of your analysis?
Really?
You’re an oracle.
Fearless Freep
at 4:22 pm
Pragma simply trusts no one. “Everyone’s got an agenda” is his credo. His opining therefore is always tinged by that mistrust of his fellow beings. IOW he’s just as biased as everyone he criticizes.
Chris
at 4:41 pm
Pretty rich that appraiser criticizes someone else as being an “oracle”, despite his own previous bold and incorrect predictions about Covid-19 essentially being nothing to worry about.
Meanwhile, fearless freep emerges to launch into strange accusations about Pragma’s level of trust in other people.
Top notch commentary, fellows.
Pragma
at 8:26 am
Ha Indeed! It’s just the years of experience across many markets. A central banker will always say things are manageable. A big commercial farm will always underestimate their crop. OPEC will always “agree” to a deal. Do as I say not as I do. I apply a large discount to proclamations, commentary, forecasts,… It has served me quite well.
Kyle
at 11:11 am
If you’re familiar with Government Agency Heads they don’t make statements about what others are saying (especially such strong ones), unless it’s to quell misinformation that has gone viral.
Such as that time when Stats Can, made a statement to smackdown that nonsense about unoccupied dwellings that was being perpetuated by the bears. If you look closely at the timing of Poloz’s comments (i.e. a couple of days after Siddall’s went viral), it can be seen as a direct response to Evan Siddall’s projections that the bears are now latching on to.
Caprice
at 4:06 pm
“Despite coronavirus, GTA real estate prices are rising slightly”
https://globalnews.ca/news/6981723/coronavirus-gta-toronto-real-estate-prices/
“Any listing that’s going on the market is holding back and getting offers, and they’re getting 20-25 offers. There are 25 people offering on the house, there are 24 who are not getting the house and going to the next house.”
Chris
at 4:13 pm
“There are more opportunities to buy condos than single-family homes as rental markets soften, Cuevas says.
“There are a lot of vacancies in condos at the moment.”
But the pandemic isn’t going away any time soon, and agents were reluctant to predict what it would mean for Toronto-area real estate markets as time goes on.
“I think we’re more in wait-and-see mode,” Ortiz says. “We’re going to have a lot of action right now. I think it’s going to last until the next flu season, that could be another COVID season, and that would really be bad for us.”
Cuevas was also reserved.
“I am optimistic that the market will swing up, but I don’t think it’s going to be a normal market,” he says. “It’s going to be a challenge. It’s not going to be anything normal.”
Bal
at 5:17 pm
Chris- I noticed that prices are up in some areas…..so the market is definitely picked up…looks like everyone started to run again…lollol
Chris
at 5:36 pm
As John Pasalis said, need to see how things play out over coming months, especially as government programs and mortgage deferrals come to an end.
Bal
at 5:46 pm
Yep…i am waiting and watching….watching and waiting…lol
Grace W
at 7:32 pm
I definitely think we will see some activity from Hong Kongers – some of whom are already Canadian citizens (I believe the number that keeps on being thrown around is that approx. 300K Canadians reside/work in Hong Kong). Some of them may have a place to temporarily live in (immediate fam, relatives, friends, etc) but some of them, mainly the “kids” (of parents that immigrated in the 90s) that are now 30-40 age range, likely with a family of their own, would be looking to have their own home (and not live with their parents). This is likely the “golden age” range that would return to Canada permanently – they have kids to raise and protect. They would be fluent in both English (having grown up in Canada) and Cantonese, and would likely be the perfect candidates financially to buy homes (many are high-income professionals). If they already own a home in Hong Kong, even better. They definitely have the funds to buy something in Canada – our real estate is considered “cheap” by Hong Kong standards. Toronto prices look better than Vancouver prices of course – but it will depend on where their family/friends are – job prospects, etc.