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CMHC to give Canadian housing market a 'red card' warning

18 Oct 2016

Canada's housing market is in danger of a national affordability crisis and will be given a 'red card' warning by the CMHC. In its forthcoming Housing Market Assessment, the corporation will say that as escalating prices spread from Vancouver and Toronto, there is concern that rising household debts and high home prices could pose an economic risk.

"The conditions we now observe in Canada concern us," CMHC chief executive Evan Siddall wrote in a column for the Globe and Mail.

Victoria, Ottawa, Moncton, Halifax and St. John's are exceptions to the rule with "weak expectation of problematic conditions" but Vancouver, Toronto, Calgary, Saskatoon and Regina are all considered at strong risk of problems.

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Can we have a correction please say Vancouverites

AUG 3,2016

Vancouver residents are backing the new 15 per cent tax on foreign buyers of homes in Metro Vancouver but think the only way that property prices are going to come down is through a market correction.

"British Columbia's new tax has come into force today but while most in the region support the measure, many doubt it will make much difference."

An opinion poll from Angus Reid Institute reveals that 90 per cent of Greater Vancouver residents agree with the government's new tax and 87 per cent also back the proposed tax on vacant homes in the metro region.

However, almost three-quarters of respondents believe that foreign buyers will simply find a loophole to avoid paying the extra 15 per cent and there are few who expect home prices to ease as a result of the measure.

Most (82 per cent) also say the government should have done something sooner and similar numbers believe that the high prices are damaging for the metro region.

A significant market correction, although painful for many, appears to be desired with almost half of respondents say they are hurt by high prices while just 18 per cent say they benefit. Two thirds (64 per cent) would like to see a market correction of at least 10 per cent while 42 per cent hope for prices to drop at least 30 per cent. Among renters, a crash is the hope of 72 per cent.

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Rates could go even lower - this is what brokers need to know

19 Jul 2016

The Bank of Canada won't let sky-high housing prices deter it from cutting rates - what would that mean for key real estate markets? One former banker and current broker weighs in.

"From a Vancouver perspective, I don't know that that would make a huge difference," Ric Wilson, a broker with Mortgage Architects in Vancouver, told "They're already at record lows; another $10 dollars a month per $100,000 [in mortgage cost] won't change things very much."

Further rate cuts could be nigh – despite ever-boiling real estate prices in two Canadian markets and the fact that the current overnight rate target sits at 0.5%. "I don't think of it as something that blocks us from changing interest rates," Poloz recently told the Washington Post when asked whether exposures related to housing would deter the Central Bank from future interest rate cuts.

That may surprise some brokers, as record-low interest rates are often cited as a driving factor behind the historically hot housing prices in Toronto and Vancouver. The Bank of Canada's target rate was slashed to 0.5% in July of last year, and it currently sits at that mark. That's the lowest it's been since the great recession, when it was cut to 0.25%.

But it could go even lower.

"My past life is as an VP at a bank. I think the Western world is stuck in the need for heavy deleveraging and as much as central bankers talk a big game … I think we're almost in a Japan-like cycle of decades of low interst rates to accommodate debt servicing," Wilson said. "I can't guarantee it, but I can't see the room to raise interest rates without causing major economic calamity. So bankers talk a good game because it's prudent."

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Bank of Canada holds trend setting rate at 0.5%

13 Jul 2016

Pressures from global volatility and slow growth in the wake of the Brexit haven't deterred the Bank of Canada from its current monetary policy; the central bank has opted to maintain the overnight lending rate at 0.5%. The Bank Rate is correspondingly 0.75%, and the Deposit Rate is .25%.

While it was widely expected that the BoC would hold status quo on rates, there was some speculation that a rate cut was in order due to Alberta's massive forest fires and the resulting impact on oil production. Flames forced many oil sands projects to shutter, cutting production by an estimated 40% - a gap of 1 – 2 million barrels per day – and costing GDP and estimated $985 million.

"In Canada, the quarterly pattern of growth has been uneven. Real GDP grew by 2.4% in the first quarter but is estimated to have contracted by 1% in the second quarter, pulled down by volatile trade flows, uneven consumer spending, and the Alberta wildfires," states the BoC's release. "A pick-up to 3 ½% is expected in the third quarter as oil production resumes and rebuilding begins in Fort McMurray." While the BoC's projections remain close to those presented in April's Monetary Policy Report, it is reporting a revised forecast due to weaker business investment outlook, and a lower profile for exports as a result of weaker US investment spending.

Real GDP is expected to grow by 1.3% in 2016, 2.2% in 2017, and 2.1% in 2018, as the Liberals make good on their promise to amp up infrastructure spending and investment.

"The Bank projects above-potential growth from the second half of 2016, lifted by rising US demand and supported by accommodative monetary and financial conditions," it states. "Federal infrastructure spending and other fiscal measures announced in the March budget will also contribute to growth."

The BoC adds that consumer spending will also get a boost from the Canada Child Benefit.

While the market volatility following the Brexit has led other nations' central banks to loosen monetary policy, Poloz has stated that Canada's lenders are resilient enough to withstand any fall out. However, it emphasizes hot housing markets are a main contributor to downside risks facing the economy.

"Overall, the risks to the profile for inflation are roughly balanced, although the implications of the Brexit vote are highly uncertain and difficult to forecast. At the same time, financial vulnerabilities are elevated and rising, particularly in the greater Vancouver and Toronto areas. The Bank's Governing Council judges that the overall balance of risks remains within the zone for which the current stance of monetary policy is appropriate, and the target for the overnight rate remains at ½%."

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CMHC releases additional foreign ownership data

by | 13 Jul 2016

The Canada Mortgage and Housing Corporation released information on foreign ownership in Montréal in a bid to address "data gaps." Foreigners own 1.3% of homes in Montreal and 4.9% in downtown Montréal, according to the CMHC's latest Housing Market Insight Report which focused exclusively on foreign investment rates in the Quebec city.

"The presence of foreign investors in the Montréal real estate market is relatively low and concentrated in the condominium segment, especially in the central sectors of the Montréal area," Francis Cortellino principal, market analysis at CMHC said. "These results, presented at a round table on foreign investment organized by CMHC, were corroborated by several industry players."

The Crown Corporation surveyed condo managers in the greater Montréal area, asking them to provide the number of units in their buildings owned by foreigners. And while additional foreign ownership statistics will certainly be welcomed by industry players, even the CMHC acknowledges potential issues with this specific data.

"The data provided by the respondents could be approximate in some cases. The presence of foreign owners could therefore be overestimated or underestimated," CMHC said in the report. "Some respondents had a register with the addresses where condominium owners could be reached. Such registers could help determine the number of owners with an address outside of Canada, in other words, foreign owners."

The CMHC noted foreign owners could use a local address for correspondence. This latest report follows previously released data on foreign ownership in Toronto and Vancouver. To view the latest report in its entirety, click here.

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