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What slowdown? Vancouver and Toronto real estate markets still hot and unaffordable for many

What slowdown? Vancouver and Toronto real estate markets still hot and unaffordable for many

Housing prices are once again climbing in Vancouver and Toronto may soon follow

Emelia Symington Fedy with her partner, Christie Watson, and two children in Vancouver — the city the family is leaving because they can't afford to live there.

Emelia Symington Fedy with her partner, Christie Watson, and two children in Vancouver — the city the family is leaving because they can’t afford to live there. (Emelia Symington Fedy)

With recent price declines in Canada’s hot real estate markets, there’s been talk of a slowdown. But, so far, it’s hardly something for prospective buyers to get excited about.

While prices did drop after the introduction of a foreign homebuyers tax in Vancouver last year, they’re once again surging to new highs.

In Toronto, both prices and sales have taken a dive since the same type of tax came into effect in April.

Some had hoped a combination of recent government rule changes making it harder to get a mortgage, higher mortgage rates and the foreign buyers tax might have a lasting effect in cooling the market.

However, Toronto home prices are still up compared to last year and some industry experts predict that, as in Vancouver, the city’s recent dip will simply be a blip.

And as long as Toronto and Vancouver’s real estate markets continue to sizzle, many people will continue to find home ownership out of reach in these cities.

‘I just don’t get to live here,” says Emelia Symington Fedy, who’s moving her family from Vancouver to Halifax because she can’t afford the high cost of housing in her beloved city. “It feels like my lover has jilted me. I’m heartbroken.”

Vancouver downturn dashed

In August 2016, the B.C. government implemented a 15 per cent tax on foreign nationals buying property in Metro Vancouver to help cool skyrocketing house prices. For a time, the tax appeared to be working.

…click on the above link to read the rest of the article…

Quebec Is “Close To Its Limits” As Refugees Flood Across US-Canada Border

Quebec Is “Close To Its Limits” As Refugees Flood Across US-Canada Border

Back in January, Canadian Prime Minister Justin Trudeau, his liberal savior complex in full view, announced that Canada would take in all refugees who are refused entry to the US.

“To those fleeing persecution, terror and war, Canadians will welcome you, regardless of your faith. Diversity is our strength.”

Six months later, some Canadians are starting to question that decision as the country’s resources are stretched to the limit by an unprecedented wave of refugees seeking asylum.

As we’ve reported previously, a crush of migrants hoping to seek refugee status in the US have instead traveled north to Canada, fearing arrest – or worse, deportation – following the November election of President Donald Trump. Thanks to the flow of thousands of migrants from Central and South America flowing across the Canadian border, 2017 is expected to see the highest number of asylum seekers applying for asylum since 2011.

The crush of migrants has already overwhelmed Canada’s legal system, leaving many in an uncomfortable legal limbo.

Now, a wave of Haitian asylum-seekers are occupying most of the spare shelter space in a city where temperatures regularly fall below, as one supervisor at a government-funded aid program told the Montreal Gazette.

“Francine Dupuis, who oversees PRAIDA, a government-funded program to help seekers get on their feet in Quebec, said the number of refugee claimants is unprecedented.

Following a recent wave of Syrian refugees, most are now Haitians fleeing the United States for fear their temporary resident status will be revoked and hoping to find refuge in Montreal’s large Haitian community.

‘It’s unheard of,’ Dupuis said. ‘In 30 years, I’ve never seen this kind of volume or intensity.’

Dupuis said about 90 per cent of asylum seekers coming into Quebec now are Haitian. In July, PRAIDA received 1,200 new requests for refugees, nearly four times more than an average month.

…click on the above link to read the rest of the article…

Canadian Home Sales Crash In June

Canadian Home Sales Crash In June

The Canadian Real Estate Association says home sales in June posted their largest monthly drop since 2010, with the Greater Toronto market leading the decline.

This is the third monthly decline in a row…

Under the covers, it’s Toronto that is suffering the most…

Toronto existing home sales drop 37.7% y/y

  • Average Toronto existing home price fell 5.8% m/m
  • Average Toronto existing home price up 6.3% y/y

Vancouver existing home sales drop 12.2% y/y

  • Average Vancouver existing home price fell 3.2% m/m
  • Average Vancouver existing home price up 2.7% y/y

And as a reminder, there appears to be plenty of room for this to fall further…

IMF Rings The Alarm On Canada’s Economy 

IMF Rings The Alarm On Canada’s Economy 

Shortly after yesterday’s rate hike by the Bank of Canada, its first since 2010, we warned that as rates in Canada begin to rise, the local economy which has seen a striking decline in hourly earnings in the past year, which remains greatly reliant on a vibrant construction sector, and where households are the most levered on record, if there is anything that can burst the local housing bubble, it is tighter monetary conditions. And a bubble it is, as the chart below clearly demonstrates… one just waiting for the pin, which as we suggested yesterday in “”Canada Is In Serious Trouble” Again, And This Time It’s For Real“, may have finally been provided thanks to the Bank of Canada itself.

Now, one day after our warning, the IMF has doubled down and on Thursday issued its latest consultation report, in which it said that while Canada’s economy has regained some momentum, it warned that business investment remains weak, non-energy exports have underperformed, housing imbalances have increased and uncertainty surrounding trade negotiations with the United States could hurt the recovery.

The report – which concerningly was written even before the BOC hiked rates by 0.25% – also said the Bank of Canada’s current monetary policy stance is appropriate, and it cautioned against tightening.

“While the output gap has started to close, monetary policy should stay accommodative until signs of durable growth and higher inflation emerge,” the IMF said, adding that rate hikes should be “approached cautiously”.

Directors noted that Canada’s financial sector is well capitalized and has strong profitability, but that there are rising vulnerabilities in the housing sector…  Directors agreed that monetary policy should stay accommodative and be gradually tightened as signs of durable growth and
inflation pressures emerge.

…click on the above link to read the rest of the article…

“Canada Is In Serious Trouble” Again, And This Time It’s For Real

“Canada Is In Serious Trouble” Again, And This Time It’s For Real

Some time ago, Deutsche Bank’s chief international economist, Torsten Slok, presented several charts which showed that Canada is in serious trouble” mostly as a result of its overreliance on its frothy, bubbly housing sector, but also due to the fact that unlike the US, the average household had failed to reduce its debt load in time.

Additionally, he demonstrated that it was not just the mortgage-linked dangers from the housing market (and this was before Vancouver and Toronto got slammed with billions in “hot” Chinese capital inflows) as credit card loans and personal lines of credit had both surged, even as multifamily construction was at already record highs and surging, while the labor market had become particularly reliant on the assumption that the housing sector would keep growing indefinitely, suggesting that if and when the housing market took a turn for the worse, or even slowed down as expected, a major source of employment in recent years would shrink.

Fast forward to today, when the trends shown by Slok two years ago have only grown more acute, with Canada’s household debt continuing to rise, its divergence with the US never been greater…

… making the debt-service ratio disturbingly sticky.

Making matters worse, recent trends in average hourly earnings show that if the US Federal Reserve is concerned with US wages, then the Bank of Canada should be positively terrified.

…click on the above link to read the rest of the article…

Rosen Slams Canadian Accountants: “Investors Are Being Swindled” – Peter Diekmeyer

Rosen Slams Canadian Accountants: “Investors Are Being Swindled" - Peter Diekmeyer
Bill Morneau was one of the country’s top pension fund management professionals before he went into government. But when Canada’s Minister of Finance recently addressed Concordia University business students, not one asked about the country’s $4 trillion national debt, much of which is pension-related.

That’s not surprising – because, as the Fraser Institute notes, nearly three quarters of those debts are not included in the federal and provincial governments’ financial statements. So, Canadians have no clue how bad the country’s true financial situation is.

This lax reporting is spread throughout the system, including public companies, says one expert.

“Investors are being systematically swindled out of large amounts of retirement savings,” says Al Rosen, a forensic accountant and co-author of Easy Prey Investors, a recently-released book that details shortfalls of Canada’s lax reporting standards.

Accounting scandals abound

“Investors mistakenly believe that their pension plans, mutual funds and other investments are safeguarded,” says Rosen. “In fact, they are suffering losses that are monumental, compared to individual publicized scams.”

A key challenge, says Rosen, relates to Canada’s use of International Financial Reporting Standards, which “assign excessive power and choice to corporate management, providing them the ability to inflate corporate profits.”

Rosen cites a range of accounting scandals including Valeant, Nortel and Sino-Forest as examples of Canadian laxness.

(In one famous fraud case, Bre-X, auditors couldn’t be bothered to check if the company’s gold mine, its only major asset, actually existed. External accountants instead essentially relied on a manager’s claim that he had “found gold” in the core samples he presented to a valuation firm, when they signed off on the statements).

…click on the above link to read the rest of the article…

Top Canadian Court Permits Worldwide Internet Censorship

A country has the right to prevent the world’s Internet users from accessing information, Canada’s highest court ruled on Wednesday.

In a decision that has troubling implications for free expression online, the Supreme Court of Canada upheld a company’s effort to force Google to de-list entire domains and websites from its search index, effectively making them invisible to everyone using Google’s search engine

The case, Google v. Equustek, began when British Columbia-based Equustek Solutions accused Morgan Jack and others, known as the Datalink defendants, of selling counterfeit Equustek routers online. It claimed California-based Google facilitated access to the defendants’ sites. The defendants never appeared in court to challenge the claim, allowing default judgment against them, which meant Equustek effectively won without the court ever considering whether the claim was valid.

Although Google was not named in the lawsuit, it voluntarily took down specific URLs that directed users to the defendants’ products and ads under the local (Canadian) Google.ca domains. But Equustek wanted more, and the British Columbia Supreme Court ruled that Google had to delete the entire domain from its search results, including from all other domains such Google.com and Google.go.uk. The British Columbia Court of Appeal upheld the decision, and the Supreme Court of Canada decision followed the analysis of those courts.

EFF intervened in the case, explaining [.pdf] that such an injunction ran directly contrary to both the U.S. Constitution and statutory speech protections. Issuing an order that would cut off access to information for U.S. users would set a dangerous precedent for online speech.  In essence, it would expand the power of any court in the world to edit the entire Internet, whether or not the targeted material or site is lawful in another country.

…click on the above link to read the rest of the article…

Saudi Arabia top non-U.S. destination for Canadian arms exports: federal report

LAVs (light armoured vehicles) and components similar to the one pictured above are among the top military exports Canada sends to Saudi Arabia.

LAVs (light armoured vehicles) and components similar to the one pictured above are among the top military exports Canada sends to Saudi Arabia. (Bill Graveland/Canadian Press)

Saudi Arabia has regained its title as Canada’s top non-U.S. destination for exporting military goods after having been narrowly bumped last year by the United Kingdom, according to a federal report on arms sales.

The report, prepared by Global Affairs Canada and tabled in Parliament on Tuesday, reveals that the Saudi government purchased over $142 million worth of Canadian arms in 2016. That accounted for nearly 20 per cent of all Canadian munitions exports reported in the annual filing.

The report does not factor in arms exports to the United States, due to a long-standing exemption agreement. However, as stated in the report, as a general rule shipments to the U.S. account for nearly 50 per cent of all military good exports from Canada.

military exports indexed 2016

The total value of military goods sold abroad to countries other than the U.S. last year nearly reached $718 million. Canada’s NATO partners and traditional allies made up the bulk of the export market, including Australia, which purchased $115.8 million of Canadian-made equipment — second behind Saudi Arabia.

The sales to Saudi Arabia, however, will likely the draw the most attention and potential criticism from human rights groups, which have fought a protracted battle to halt the $14.8-billion sale of light armoured vehicles by General Dynamics Land Systems Canada — a deal approved by the former Conservative government, but green-lit by the Liberals.

The executive director for the anti-armament group Project Ploughshares says the most recent report once again signals an unwillingness on the part of the government to change its stance on Saudi Arabia.

…click on the above link to read the rest of the article…

China’s “Ghost Collateral” Arrives In Canada, “Heralding A Crisis”

China’s “Ghost Collateral” Arrives In Canada, “Heralding A Crisis”

Two weeks ago, a key China-linked concern that made headlines back in 2013 and 2014 reemerged after an extensive analysis by Reuters reporter Engen Tham found that China’s “ghost collateral” problem, or collateral that was either rehypothecated between two or more loans, or simply did not exist, had not only not gone away but was still as prevalent as ever if not worse.

The report, a continuation of extensive reporting conducted on this site, said that 60% of all loans issued in China’s system are backed by property, and that China’s property values are “wildly misleading, which is part of the reason that China’s credit rating was recently downgraded.” Reuters reported that Chinese lenders are prone to fraud with loan officers turning a blind eye to the quality of collateral and knowingly accepting dubious and even fraudulent documents.

Now, in a follow up by the Vancouver Sun’s Sam Cooper, the real estate reporter explains that China’s “ghost collateral” problem has jumped across the Pacific and is threatening the Canadian banking system.

As Cooper notes, “as a result of the flood of money pouring from Mainland China into Vancouver real estate in recent years, some financial experts say they believe Canadian banks are directly exposed to shadow lending in China and the risks of so-called “ghost collateral”, collateral that may not exist or is used continuously to secure loans for multiple borrowers.”

And the stunner: “Postmedia confirmed that Canadian banks are allowed by the federal regulator, the Office of the Superintendent of Financial Institutions, to accept collateral from China to secure real estate mortgages in B.C.

“OSFI does not dictate what type of collateral (federally regulated banks) can accept,” spokeswoman Annik Faucher said. “Whether the borrower is foreign or domestic, OSFI (allows) financial institutions to compete effectively and take reasonable risks.”

…click on the above link to read the rest of the article…

All Heck Breaks Loose in Toronto’s House Price Bubble

All Heck Breaks Loose in Toronto’s House Price Bubble

“It’s fear.”

During the first two weeks in May, according to preliminary data from Toronto Real Estate Board, home listings surged 47% from the same period last year even as sales plunged 16%. The average selling price dropped 3.3% from April – and this, after a 33% year-over-year spike in home prices in March and a 25% surge in April. Something is happening to Toronto’s blistering house price bubble.

Canada’s largest alternative mortgage lender, Home Capital Group, which focuses on new immigrants and subprime borrowers turned down by the banks, is melting down after a run on its deposits that crushed its funding sources. The industry is worried about contagion.

At the same time, the provincial government of Ontario announced a slew of drastic measures, including a 15% tax on purchases by non-resident foreign investors to tamp down on the housing market insanity that left many locals unable to buy even a modest home.

It comes after Bank of Canada Governor Stephen Poloz warned in April that home prices are in “an unsustainable zone,” that the market “has divorced itself from any fundamentals that we can identify,” that there was “no fundamental story that we could tell to justify that kind of inflation rate in housing prices,” and that “It’s time we remind folks that prices of houses can go down as well as up. People need to ask themselves very carefully, ‘Why am I buying this house?”’

A few days ago, Moody’s Investors Service downgraded Canada’s six largest banks on concerns over their exposure to the housing bubble and household indebtedness that ranks among the highest in the world.

Now even the relentlessly optimistic industry begins to fret:

…click on the above link to read the rest of the article…

$100 Increase In Monthly Mortgage Payment Would Sink 75% Of Canadian Homeowners

$100 Increase In Monthly Mortgage Payment Would Sink 75% Of Canadian Homeowners

According to a new survey from Manulife Bank, nearly 75% of Canadian homeowners would have difficulty paying their mortgage every month if their payments increased by as little as 10%.  And, given that the average house in Canada costs roughly $200,000 and carries a monthly mortgage payment of $1,000, that means that most Canadians couldn’t incur and $100 hike in their monthly mortgage payments without possibly going under.  Per CBC:

The bank polled 2,098 homeowners — between the ages of 20 to 69 with household incomes of $50,000 or higher — online in the first two weeks of February.

Fourteen per cent of respondents to Manulife’s survey said they wouldn’t be able to withstand any increase in their monthly payments, while 38 per cent of those polled said they could withstand a payment hike of between one and five per cent before having difficulty. An additional 20 per cent said they could stomach a hike of between six and 10 per cent before feeling the pinch.

Add it all up, and that means 72 per cent of homeowners polled couldn’t withstand a hike of just 10 per cent from their current record lows.

Of course, such a huge sensitivity to small budget fluctuations isn’t a great sign when we’re in the midst of record-low interest rates and about to enter a period of sustained hikes.

“What these people don’t realize is that we’re at record low interest rates today,” said Rick Lunny, president and CEO of Manulife Bank.

 If mortgage rates increase by as little as one percentage point, some borrowers could be facing a hike of 10 per cent on their monthly bills. A bigger mortgage rate hike would bring more pain.

Meanwhile, 45% of millennials in the same survey said they had to borrow money from their parents to purchase their home and 25% admitted they have no savings.

…click on the above link to read the rest of the article…

Canadian banks set to reveal quarterly earnings amid housing & debt concerns

Ratings agency Moody's downgraded the credit ratings for Canada's big banks earlier this month, citing concerns that over-stretched borrowers and high house prices have left lenders vulnerable to potential losses.

Ratings agency Moody’s downgraded the credit ratings for Canada’s big banks earlier this month, citing concerns that over-stretched borrowers and high house prices have left lenders vulnerable to potential losses. (Dillon Hodgin/CBC)

The Canadian banks are expected to benefit from rising U.S. interest rates and fewer bad loans in the oilpatch as they start reporting their latest quarterly results this week, but analysts say worries about the housing market and consumer debt remain key concerns.

“The reality is that given all of the fears about the Canadian mortgage market, I think that even if the results are good, people will dismiss them as being backward-looking,” said analyst Meny Grauman of Cormark Securities.

The Bank of Montreal will kick off the earnings parade on Wednesday, followed by Royal Bank, TD Bank and CIBC  on Thursday. Scotiabank will report May 30.

Edward Jones analyst Jim Shanahan said fee income from trading activities and other types of charges was a key driver of earnings growth last quarter.

That likely moderated during the second quarter, but a strengthening in net-interest margins — stemming from U.S. interest rate hikes in December and March — will likely pick up some of the slack, he said.

BMO and TD are most likely to benefit from the rate increases, Shanahan said.

The banks could also see some improvement in their loan loss provisions as stability has returned to the oilpatch.

“From a credit perspective we should see some continued improvement within the oil and gas portfolios,” Shanahan said.

However, analysts said concerns about high home prices, debt-laden consumers and a liquidity crisis at mortgage lender Home Capital Group  could all weigh on the bank stocks.

…click on the above link to read the rest of the article…

‘The worst scenario’: What if Canada’s real estate bubble bursts?

‘The worst scenario’: What if Canada’s real estate bubble bursts?

A repeat of Toronto’s 1989 crash could have devastating effects on the entire economy

Builders work on a new home in North Vancouver in 2016. The average home price in Canada climbed by 10 per cent to $559,317 in April, the Canadian Real Estate Association says.

Builders work on a new home in North Vancouver in 2016. The average home price in Canada climbed by 10 per cent to $559,317 in April, the Canadian Real Estate Association says. (Canadian Press)

It’s the question lingering behind every headline. It’s whispered among homeowners, would-be buyers and sellers, economists and policy-makers. What actually happens if Canadian real estate prices crash?

On the one hand, a crash might be good for some Canadians already priced out of the market. And even a dramatic 40 per cent drop in prices would set homeowners in markets like Toronto or Vancouver back, what, two or three years?

But there are broader concerns for the market and the economy itself that could prove devastating.

Home prices are notoriously off the charts. Everyone from the governor of the Bank of Canada to the chatty guy in your local cafe has said, repeatedly, that this increase in prices is not sustainable. But what that means, precisely, is vague.

The latest numbers from the Canadian Real Estate Association show the average home price in Canada climbed by 10 per cent to $559,317 in April. Notably, the number of sales in Toronto’s red-hot market fell by almost seven per cent but prices continued to rise.

No one is saying the end is nigh. Most are still banking on that ambiguous “soft landing” policy-makers have talked about for years. But, for the sake of argument and for a better understanding of the risks, let’s talk about what a real crash would look like.

CANADA-HOUSING/

A ‘Sold’ sign is stands at an empty lot in a new subdivision in Calgary in 2015. Canadian home prices are off the charts, and a lot of people say they are not sustainable. But what that means is vague. (Reuters)

…click on the above link to read the rest of the article…

“Canada Hasn’t Seen A Bank Run Such As This In Decades” – Finance Minister Says Home Capital Bailout Is Possible

“Canada Hasn’t Seen A Bank Run Such As This In Decades” – Finance Minister Says Home Capital Bailout Is Possible

When we first said three weeks ago that the spectacular, sudden implosion of Canada’s largest alt-lender Home Capital Group or HCG – whose fate we had followed closely since 2015 – was Canada’s own “New Century Moment“, the parallels were more than just the obvious: like in the US, it took the market nearly a year to realize the full implications of the subprime collapse which first manifested in the failure of New Century and its subprime lender peers. When all was said and done, the world’s central banks had to pump (and still do) trillions into the financial system to stop it from disintegrating.

Slowly but surely, Canada is starting to appreciate just how serious the Home Capital failure is, and how the unprecedented bank run that has led to 94% of retail deposits fleeing the troubled lender…

… is just the first step of what will likely be a very painful process, which will likely culminate with either a government bailout, or a financial system on the verge of panic.

Today, the Globe and Mail has published an in-depth report putting the HCG pieces together, or as the G&M itself puts it, the “dramatic story of a financial institution’s near-collapse.”

It was late in the evening on Sunday, April 30, when lawyers working for Home Capital Group Inc. dialled into a call with lawyers representing the company’s new lending syndicate. The troubled mortgage lender had negotiated a $2-billion credit line just days earlier, emergency money the board felt was needed to survive after a high-profile run on deposits at subsidiary Home Trust. The company planned to draw down the first $1-billion from it the next morning, May 1.

 …click on the above link to read the rest of the article…

Canadians fight floods across the country

Canadians fight floods across the country

Thousands in Central Canada, the Atlantic and B.C. spend the weekend struggling with rising water levels

Erick Miner comforts a cat rescued by boat from a home Saturday on Rue Saint-Louis in Gatineau, Que., as rising river levels and heavy rains continue to cause flooding.

Erick Miner comforts a cat rescued by boat from a home Saturday on Rue Saint-Louis in Gatineau, Que., as rising river levels and heavy rains continue to cause flooding. (Justin Tang/Canadian Press)Poster of video clip

​Across the country, thousands of Canadians are spending the weekend in a desperate struggle with rising floodwaters caused by unusually persistent rainfall.

More than 400 Canadian Forces personnel were deployed to western and central Quebec on Saturday as high water continued to threaten hundreds of residences, including some in the Montreal area.

Another 800 troops will be added to that total by the end of Sunday, officials have since announced.

More than 130 Quebec communities have been hit by flooding, with an estimated 1,900 homes affected and more than 1,000 people forced to leave.

Floodwaters in Quebec are expected to peak today due to continued rain in most of the affected areas.

Premier visits flooded area

Quebec Premier Philippe Couillard visited the flooded Montreal-area community of Rigaud yesterday and urged people to heed authorities if they recommend they leave their homes.

Rigaud Mayor Hans Gruenwald Jr. declared a state of emergency Sunday morning and ordered a mandatory evacuation of the region’s flood zones, saying authorities could no longer guarantee the safety of residents.

Montreal Mayor Denis Coderre said he is also evaluating whether to declare a state of emergency after three dikes gave way in the Pierrefonds-Roxboro borough, in the city’s north end.

Homes have been evacuated in Pierrefonds, as well as on the two nearby islands, Ile-Bizard and the smaller Ile-Mercier.

flooding-central-eastern-western-Canada-military

Canadian forces have been deployed to help affected communities cope with rising water levels, including 80 soldiers in Gatineau, seen leaving their temporary headquarters here. (Ashley Burke/CBC)

…click on the above link to read the rest of the article…

Olduvai II: Exodus
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