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Canadian Mortgage Insurer Tells US Hedge Funds Why Canada’s Housing Bubble Is Immortal. Hilarity Ensues
Canadian Mortgage Insurer Tells US Hedge Funds Why Canada’s Housing Bubble Is Immortal. Hilarity Ensues
Home prices in Canada’s two largest metro areas have been red-hot for years. In May, the average selling price for all types of homes in the Greater Toronto Area jumped 11% from a year ago to C$649,600 on a 6% increase in sales. In Greater Vancouver, the composite benchmark price for all homes rose 9.4% to C$684,400 on a 23% increase in sales.
But these overall price changes paper over what’s happening with detached homes,whose prices soared 14% to C$1,104,900 in Vancouver and 18% to C$1,115,120 in Toronto.
Already last summer, Fitch fretted about overvaluation in housing and the high debt burden relative to disposable income of Canadian households. At about the same time, seven in ten mortgage lenders expressed concerns in a poll by FICO that home prices were in a “bubble” that could burst any time. Last October, the Bank of Canada thought that the housing bubble could threaten Canada’s financial stability.
This January, Deutsche Bank estimated that homes in Canada were 63% overvalued. In March, the IMF warned that high household debt levels and the “overheated housing market” are two risks it would “need to keep an eye on.” In April, the Economistdetermined that home prices in Canada were overvalued by 35% when compared to incomes, and 89% when compared to rents.
Now hedge funds are trying to engineer ways to short the Canadian housing market one way or the other, because surely this would be another “short of a lifetime.”
Maybe they’re right: beyond Toronto and Vancouver, the housing market is already drifting lower.
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House prices may stay high in Canada: Here’s why
Seemingly insatiable overseas demand is one of main reasons the gloom-mongers have been wrong
If you’ve been listening to all the warnings from foreign banks about a Canadian house price crash, that sounds smart. But before you congratulate my chum on her forethought, you should know she made that decision several years ago.
- Average house price in Canada up 9.5% to 448, 862
- Ontario house prices may be 25% overvalued, Fitch says
Of course, since then Toronto house prices have only continued their dramatic rise. Although Toronto and Vancouver lead the way with soaring real estate, prices in many other Canadian cities continue to rise.
In the face of a series of recent reports of houses selling for hundreds of thousands of dollars over their asking prices, I thought it a good time to look at why all the gloom-mongers have been wrong, and why they may still be wrong. At least for a while yet.
The question is no small matter for older boomers trying to capture the value of their homes. For most Canadians a home is their single biggest asset.
People heading into retirement could have their plans seriously upset if house prices fell by 63 per cent, as one international bank projectedearlier this year.
On the other hand, if prices continue to rise by nearly 10 per cent a year, as they did this year, it would be difficult for boomers to find a more lucrative, tax-free income on an investment worth up to a million dollars.
Boomers aren’t the only ones watching this market. New buyers would be even worse affected.
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Short-Sighted Politicians Are Fuelling Canada’s Housing Crisis
Short-Sighted Politicians Are Fuelling Canada’s Housing Crisis
Many homeowners in Vancouver and Toronto have become “equity-millionaires” in the last few years due to unusually high appreciation of their homes thanks to persistently strong demand by foreign investors, mostly from China. In their haste to park their money overseas in a hurry, most of them don’t even bother to make a trip to view their investments. The Wall Street Journal article, “The Mechanics of Moving Cash Out of China,” reveals the clandestine, if not outright illegal ways that wealthy mainland Chinese are bringing their funds to Hong Kong, and from there on to other parts of the world. Most of it ends up invested in their favourite foreign destinations — the US, Australia, and Canada. It is a crime for any mainland Chinese to bring more than $50,000 out of the country, but many wealthy Chinese are, nonetheless, smuggling out billions.
Transfer of money from Hong Kong to Canada is legal, but no one is really paying attention to its origin. It seems that for the B.C. Premier, our Federal Finance Minister Joe Oliver, and our Prime Minister Stephen Harper, the influx of dubiously obtained money from China is of little concern. In fact, judging from their latest comments, they seem to be quite content with it. A CTV News report from May 14 quoted Prime Minister Harper as saying that limiting foreign investment in housing is not something he is “contemplating at the current time.”
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‘Corrections In Progress’ In Most Canadian Housing Markets: Teranet
‘Corrections In Progress’ In Most Canadian Housing Markets: Teranet
House prices fell in February in eight of 11 major housing markets measured by the Teranet/National Bank House Price Index.
“In some markets there have clearly been corrections in progress,” National Bank senior economist Marc Pinsonneault said in a statement.
“The monthly retreat in Calgary was the fourth in a row, for a cumulative decline of 2.3 per cent. In Winnipeg it was the fourth in five months, for a cumulative decline [of] 3 per cent.”
Prices fell 0.11 per cent in Toronto, but are still up 7.3 per cent from a year ago. Vancouver was one of the three cities to buck the trend, with prices up 1.46 per cent in February (an annual pace of around 18 per cent), and up 2.7 per cent from a year ago. Victoria and Hamilton are the other two cities seeing house price gains.
East of Toronto things look somewhat worse. Ottawa-Gatineau clocked the fastest decline in house prices in February, with house prices falling more than 2 per cent in February — an annual pace of some 24 per cent.
One aspect to note is that house price declines in Alberta’s cities were no worse than declines in other parts of the country, contrary to the sharper correction some economists had been calling for in the oil-exporting province.
The overall 11-city index was flat for the month. But thanks mostly to strength in house prices last year, prices in the 11 cities are still up by 4.4 per cent from a year ago.
This is where house prices are rising and falling across Canada.
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Some Toronto area gas stations run out of fuel
Extreme weather blamed, but some analysts say Canada lacks refinery capacity
Motorists are pulling up at some Toronto-area gas stations to find that the pumps are dry.
The oil companies that supply fuel in the area have said it’s a temporary situation, caused by extreme winter weather and a power outage.
But Natural Resources Canada says southern Ontario and other parts of Canada may face frequent gasoline shortages in the future, as nearby refineries are already operating at capacity.
Without new refining capacity “supply interruptions could become more frequent and increasingly difficult to manage,” the government agency says in an online report.
Canadians increased their consumption of gasoline by two per cent or 800 million litres in the first nine months of 2014, to 38 billion litres.
“Petroleum companies are suggesting this is logistics. I sense there’s product issue somewhere as the weather is not likely to have contributed to this shortfall, which covers the entire Golden Horseshoe,” said Dan McTeague, with GasBuddy.ca, which tracks the price of gasoline.
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In wake of Canada attacks, Toronto police drill for disaster | Reuters
In wake of Canada attacks, Toronto police drill for disaster | Reuters.
(Reuters) – About 100 police, firefighters and other emergency workers held a disaster-response drill in downtown Toronto’s deserted financial district on Sunday following a week that saw two soldiers killed on Canadian soil.
Security in normally relaxed Canada has been tighter in the days since a gunman shot dead a soldier in Ottawa before charging into the parliament building and another man ran over two soldiers with a car, killing one, outside Montreal.
Toronto emergency responders donned oxygen tanks and yellow full-body hazardous material suits shortly after dawn, set up decontamination tents and practiced how they would respond in an office tower that had received a suspicious package.
The drill had long been planned and was not a reaction to the twin attacks that police said had been carried out by men they described as home-grown radicals, officials said.
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