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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.
…click on the above link to read the rest of the article…
Oil-price drop impact on Canada lessened thanks to foreign ownership
Finance department memo says foreign ownership of energy sector higher than reported by StatsCan
Canada has been partly insulated from the sharp drop in oil prices because so much of the energy sector is foreign owned, says an internal Finance Canada document.
The Feb. 20 memo says up to half of Canada’s oil and gas sector is owned by foreign investors, higher than reported by Statistics Canada using different calculations.
- Analysis: Job figures show oil-price drop hasn’t sunk employment
- Oil price drop creates winners and losers
“As a result, the potential negative wealth effects of lower oil prices on consumption may be considerably less than might appear,” says the memo for deputy minister Paul Rochon.
Statistics Canada reported in December that about 37 per cent of Canada’s oil and gas extraction sector was under foreign control in 2012, or about $206 billion of the $563 billion total. But the agency uses a method that ignores who owns shares in widely held Canadian energy companies.
Up to half in foreign hands
By estimating the number of foreign stockholders, and adding them to foreign owned or controlled firms, Finance Canada economists suggest that between 40 per cent and 50 per cent of the energy sector is in non-Canadian hands.
NDP finance critic Nathan Cullen says high foreign ownership levels help explain why so little value-added activity is done in Canada’s oil patch. (Adrian Wyld/Canadian Press)
“A significant amount of foreign capital was brought into Canada to expand oil and gas production,” says the document. “These foreign investors benefited as energy prices increased, but are sharing capital losses with Canadians as prices fall.”
A copy of the memo, with a key section blacked out, was obtained by CBC News under the Access to Information Act.
…click on the above link to read the rest of the article…
