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Analysts Warn Of Developing Housing Bubble In Canada




Analysts Warn Of Developing Housing Bubble In Canada

Canada’s major cities have seen continued inflation in house prices for years.

But as the rest of the country flattens, bankers and analysts are warning there may be trouble ahead…


The Hottest Home-Buying Cities In Canada

  • Vancouver leads the pack, with residential property prices in the Greater Vancouver area pushing 30% past last year’s figure for the month of May. The average price of a house near the city is now nearly Can$1.2 million!!! That’s just over $900,000 American.
  • Toronto prices are up 15% over the same period. Average house price: Can$734,000 (US$570,000).
  • The rest of the country averages out to a 13% increase over the last year with an average price of Can$509,500 (US$395,100).
  • Relatively poor performers are Alberta and Newfoundland, where prices have not really grown and the average price has hovered just over the Can$300,000 (US$232,000) mark.

See here the performance of the provinces between May 2015 and May 2016:


As you can glean from the graph, the story is not positive in every part of the country.

Sales volumes are starting to fall in the more expensive regions, leading analysts to predict a slump.

The Canadian Prime Minister has already named this the “Vancouver Housing Crisis”.

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Banks Foretell A Topping-Out

The Bank Of Canada has started telling prospective home buyers in Vancouver and Toronto that prices are likely to stop climbing soon.

This prediction is based on some fundamental laws of economics: when things get too expensive to buy, people stop buying.

When people stop buying, things get cheaper.

Analysts Feeling Queasy

That predicted fall-off in interest and cessation of price growth is what’s worrying analysts.

Capital Economics’ Paul Ashworth says it’s a very big bubble.

He sees a building glut of household debt being caused by the current high prices.

Without a high-price market to sell these properties back into for a profit – a lot of people are going to be a loss.

That loss will domino through the banks and into the economy at large.

Bank Of Montreal economists Doug Porter and Robert Kavcic filed a report on Wednesday that cites the “obvious factor” behind property market growth as low borrowing costs.

However, they also point out that the Vancouver and Toronto are tent-poling the whole market, which is otherwise performing mildly.

That introduces other important factors, like foreign buyers – something BMO and the Prime Minister agree on.

Trudeau Blames The Foreigners!

Justin Trudeau, Canada’s popular new Prime Minister, sees the influx of Asian capital to Canada’s wealthiest cities as a destabilizing factor.

His options, he says, are limited, as action taken at a Federal level to ease growth in Toronto or Vancouver would have to apply across the board. 

That would detriment the smaller markets like Calgary, Montreal, and Halifax.

Banks Unfazed – With One Exception

On the whole, the Canadian banking sector isn’t sweating too much yet.

They claim the risk of a downturn is limited because employment and interest rates remain high.

Ashworth calls that kind of thinking “naive in the extreme.”

One exception in the banking sector is the Toronto Dominion Bank.

TD says a housing market correction is imminent.

They summarize Bank Of Canada’s “fundamental laws of economics” as “Stretched Affordability”.

So When Will It Happen?

TD sees housing prices easing their growth over the next six months due to rising borrowing costs.

They implicitly encourage the government to enact legislation to curb speculation on the housing market.

Without such a move, they foresee solid slowdown indicators emerging over the course of 2017.

Ashworth is less certain on timing, and he admits that his firm has been describing this bubble for the last five years.

However, this year has seen top markets grow 5-10% month-on-month.

That can’t be sustainable at these levels for long, and he notes that the growth of house prices in the top cities already outstrips the highest levels of growth in the US prior to the crash there.

And What Happens Then?

Ashworth stresses that the link Bank Of Canada seems to see between property prices falling and mortgages defaulting is more complicated than they make out.

Like any market, a large factor in its performance is based on human intuition – acting based on anticipated performance.

Right now, the market is growing in part based on anticipated growth – and if the coverage, opinions, and evidence of a coming slump start to convince people, it could self-fulfill just as easily as the growth has.

Given that this is just the most unpredictable factor at play, Ashworth plucks an inflection point out of some thin well-educated air: 20%.

If Canada sees a 20% fall in the top markets, he foresees a danger of the price fall and loan foreclosure combo becoming a self-reinforcing feedback loop.

Put more succinctly: a Canadian crash.

Let’s hope he’s wrong.

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STUDY: Number of Billionaires Doubles in Last Decade




Number of Billionaires Doubles in Last Decade
Image via Shutterstock

The number of billionaires has doubled in the past decade and the world’s wealthiest 2,153 people controlled more money than the poorest 4.6 billion combined last year, the charity Oxfam said Monday.

Meanwhile, unpaid or underpaid work by women and girls adds three times more to the world’s economy each year at least $10.8 trillion than the technology industry, the Nairobi-based charity said in its “Time to Care” report.

Women around the world work 12.5 billion hours combined each day without any pay or recognition, while the world’s 22 richest men have more wealth than all the women in Africa.

“It is important for us to underscore that the hidden engine of the economy that we see is really the unpaid care work of women. And that needs to change,” Amitabh Behar, CEO of Oxfam India, told Reuters.

“Our broken economies are lining the pockets of billionaires and big business at the expense of ordinary men and women. No wonder people are starting to question whether billionaires should even exist,” Behar said ahead of the annual World Economic Forum in Davos, where he will represent Oxfam beginning Tuesday.

“Women and girls are among those who benefit least from today’s economic system,” he added.

There will be at least 119 billionaires worth about $500 billion attending Davos this year, according to Bloomberg, with the highest contingents coming from the US, India and Russia.

“The very top of the economic pyramid sees trillions of dollars of wealth in the hands of a very small group of people, predominantly men,” the Oxfam report said.

“Their wealth is already extreme, and our broken economy concentrates more and more wealth into these few hands,” it said.

To highlight the inequality, Behar cited the case of a woman called Buchu Devi in India who spends up to 17 hours a day walking almost two miles to fetch water, cooking, preparing her kids for school and working in a poorly paid job.

“And on the one hand you see the billionaires who are all assembling at Davos with their personal planes, personal jets, super rich lifestyles,” he said.

“This Buchu Devi is not one person. I in India encounter these women on a daily basis, and this is the story across the world. We need to change this, and certainly end this billionaire boom.”

Behar said that to remedy the problem, governments should make sure above all that the rich pay their taxes, which should be used to pay for amenities such as clean water, health care and better schools.

“If you just look around the world, more than 30 countries are seeing protests. People are on the street and what are they saying? That they are not to accept this inequality, they are not going to live with these kind of conditions,” he said.

Source: New York Post
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Pump Prices to Edge up After Attack on Iranian General, but Long-Term Effect Unclear

Editorial Staff



By Jeff Ostrowski, The Palm Beach Post, Fla.

Motorists soon will see the effects of President Donald Trump’s decision to kill a prominent Iranian general. Whether pump prices rise a little or a lot depends on how quickly international tensions intensify.

Florida gas prices climbed an average of 7 cents a gallon in the past three days and could increase an additional 5 cents, AAA – The Auto Club Group said Monday.

The 7-cent increase was coming even before the U.S. air strike Thursday that killed Iranian Maj. Gen. Qassem Soleimani. That hike was a result of a rise in the price of crude oil in December.

News of the targeted killing of Soleimani sent crude oil surging nearly $2 per barrel on Friday. An increase of that magnitude typically translates to a 5-cent hike at the pump, AAA said.

The U.S. benchmark for crude oil traded Monday just above $63 per barrel, the highest level since May 2019. The price of oil makes up about half the price of a gallon of gas.

“What happens in the Middle East can have a direct impact on Americans’ daily lives by influencing what they pay at the pump,” said AAA spokesman Mark Jenkins. “Crude prices rise when there’s a threat of war, because of concerns over how the conflict could hamper supply and demand.”

Oil analyst Tom Kloza of energy firm OPIS agreed that pump prices in Florida likely will rise about 5 cents a gallon in the coming days.

“Then I have a hunch that things are going to calm down,” Kloza said Monday. “I don’t think we’re looking at $3 gas.”

The national average pump price Sunday was $2.585, while the Florida average was $2.526, AAA said.

Kloza expects only modest increases in part because of the timing of the attack. January is always a slow month for gas consumption in the United States.

There’s also the reality that sanctions leave Iran unable to export oil. Complicating the calculus is Iraq’s response to the U.S. attack. The drone strike on Soleimani took place in Baghdad, and some Iraqi politicians considered the assault an affront to Iraqi sovereignty.

While there’s no Iranian oil supply to be disrupted by a war, Iraq is an important producer.

Trump keenly watches oil prices and realizes that a price spike might erode his support in this year’s presidential election, Kloza said.

At the same time, Kloza added, “This president has proven to be unpredictable.”

Trump’s response has been typically uneven. Delivering an official statement at the Mar-a-Lago Club in Palm Beach, Trump’s tone was measured. He said the targeted killing was designed to pre-empt Soleimani’s planned attacks on American diplomats and soldiers.

“We took action last night to stop a war,” Trump said Friday. “We did not take action to start a war.”

However, over the weekend, Trump took to Twitter to threaten attacks on Iranian cultural sites.

“The United States just spent Two Trillion Dollars on Military Equipment,” Trump wrote Sunday on Twitter. “We are the biggest and by far the BEST in the World! If Iran attacks an American Base, or any American, we will be sending some of that brand new beautiful equipment their way…and without hesitation!”

##IFRAME_1##Iran has vowed vengeance, but military experts say the nation isn’t powerful enough to wage a direct war against the U.S.

“It’s still far too early to know how much of an impact this conflict will have overall on prices at the pump,” AAA’s Jenkins said.

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Stocks Rally Despite Impeachment News

Editorial Staff



Stocks rose on Thursday as investors looked past the news of President Donald Trump’s impeachment as well as mixed U.S. economic data.

The Dow Jones Industrials advanced 53.85 points to begin trading at 28.293.13

The S&P 500 recovered 4.93 points to 3,196.07

The NASDAQ added 19.39 points to Wednesday’s all-time record, at 8,847.12.

The S&P 500 is up nearly 7% since House Speaker Nancy Pelosi launched a formal impeachment inquiry in September.

Cisco Systems was the best-performing Dow component, rising 1.6%. The consumer staples and real estate sectors led the S&P 500 higher, gaining 0.4% each. Micron Technology shares also contributed to Thursday’s move higher. Conagra shares surged more than 14% and were on pace for their biggest one-day gain since Oct. 16, 1989.

Micron shares climbed 3.5% on the back of strong quarterly results. The chipmaker posted earnings per share and revenue that topped analyst expectations.

On the economic data front, weekly jobless claims fell to 234,000 from 252,000 the week before. However, economists expected claims to fall to 225,000.

Meanwhile, the Philadelphia Federal Reserve’s business conditions index fell to 0.3 in December from 10.4 in the previous month. Economists expected the index to slip to 8.

The Democrat-led House of Representatives voted Wednesday to impeach Trump for abuse of power and obstruction of Congress. Trump became only the third president to be charged with high crimes and misdemeanors and will now face a trial in the Republican-controlled Senate.

Prices for the 10-Year U.S. Treasury were lower, raising yields to 1.94% from Wednesday’s 1.93%. Treasury prices and yields move in opposite directions.

Oil prices gained seven cents to $61.00 U.S. a barrel.

Gold prices moved forward $1.80 at $1,480.50 U.S. an ounce. Copyright © 2019 Media Corp. All rights reserved.

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