Stressed

Most major banks hiked mortgage costs this week. Not a huge surprise. It’s interesting, though, that the jumps were in their ‘best, discounted’ rates, not the posted ones. For example, at RBC the five-year fixed popped up 15 beeps to 3.89%. At BMO the best fiver also rose, but sits at 3.59%.

Of course, this is not the qualifying rate. That’s where the stress test comes in. In order to borrow funds you must prove you can handle payments at the offered rate +2%, or the stress test rate of 5.35% – whichever is greater. A borrower at RBC, for example, would need the ability to carry the loan at 5.89% in order to get funded.

Wow. Seventeen months ago you could scoop a five-year in the 2% range. No test. The increase is positively Herculean. Or, as they say in Washington, Kanyesque.

Do not discount the market impact. Things are getting s-l-o-w everywhere. Sales have pooped out in Vancouver, Victoria, Edmonton, Calgary the flat places where they grow stuff and even into the mighty GTA. The condo market in Toronto is comatose. Showings no longer mean sales. DOM is growing. Do not believe anyone who tells you otherwise. Those little hairs on the back of realtor necks are terrified. They sense what happens next.

The mortgage stress test is determined by the banks’ posted rates. At RBC the five-year is 5.34%. The first bank to jump above that (today – October 12th) is Scotia, now at 5.44%. If the Bank of Canada ups its benchmark rate 12 days from now (looking like a slam-dunk), everything may escalate by another quarter point.

Even-higher rates should have been in place for a few days, but the bankers have been holding off. No wonder. Their mortgage business is plunging. As discounted rates rise, it’s tougher for people to leap over the stress test hurdle. In most markets sellers have not yet adjusted their prices low enough to meet the reduced credit limits of borrowers. So this standoff has resulted in historically-awful affordability numbers and falling sales. The only way out is for the cost of money to fall (ain’t going to happen) or for prices to tumble (it’s coming). In the meantime, keeping your Audi A7 lease current and your desk fee at Re/Max paid is no picnic.

Some people think the temporary stock market kerfuffle or erupting bond yields will spook central banks into non-action. Maybe, they pray, we’re at the top of the rate curve.

Ha. Fat chance. The Fed has increased eight times, or just about half the number in the usual tightening cycle. Our guys have moved only four times. Meanwhile the North American economy keeps growing and inflation along with it. The cost of living increase is now circa 3% in both countries – at the top of the central bank target. With unemployment in America at a 50-year low and competition for workers now a considerable challenge for companies, wages are going up. Meanwhile Trump is busy slapping tariffs on imports, driving up their cost and adding more inflation.

So central banks aren’t done yet. Not even close. Thankfully bond yields have backed off a little this week (giving some relief to stocks), but we’re in a world where the cost of money will keep creeping up and will never go down until the next recession looms (at least two years out). But even in  a downturn, we’re not returning to 2% five-year mortgages nor is the stress test about to disappear. The real estate party is over, despite what your BIL with fourteen pre-con condos says.

And now the bank regulator that gave us the test is mousing around the rules for equity-based mortgages. This simply means the regulator’s much more concerned about a borrower’s ability to pay than how much net worth they might have. So it doesn’t matter how fat the down payment is on a property or how much equity a renewer may have, it’s all about income.

Expect the banks, therefore, to become even tougher. And also remember that if you’re renewing an existing loan (so many people are this year) and switch lenders, you’ll have to go through the stress test and prove you can handle the payments at 5.34% or above.

Finally, be aware that in a rising rate environment, getting out of a mortgage can be worse that dealing with your ex-spouse.

So there you go. Harder to get a home loan. Stress-test-miserable if you try to switch. Punishing if you leave.

[email protected] won’t have to dress up to be a witch this year.

122 comments ↓

#1 James on 10.12.18 at 4:11 pm

When do you think prices will drop by?

#2 First on 10.12.18 at 4:13 pm

FIRST!!!!!!

#3 Binky rabbit on 10.12.18 at 4:14 pm

This bunny is new around here. Inthe last sentence, what TNL stands for ? I get the TB part.

#4 Karl on 10.12.18 at 4:16 pm

Gartho, great blog. Love your work! Keep it up, you are the light of my life!

Now that we have that out of the way, I have a (very) long term view to live in GTA and am looking to “move up”. I have good equity in my home, household income is strong, and I have the bonus of adding another year at 2.45% to my mortgage (currently just passed year two on a five year term, so would get 4 years at 2.45% on transfer to new home).

If I am an irreversibly moist for housing for the long term, does it not make sense for me to make a move shortly?

#5 Rexx Rock on 10.12.18 at 4:21 pm

Like I said before,you know things are really bad out there when it takes 5 to 7 days to sell a house in Victoria.Very scary,halloween must be coming.The average family income is over $100,000 in Victoria but it may not be enough if there is 2 more quarter point interest rate hikes in the next year or so.Just my thoughts.

#6 Duke on 10.12.18 at 4:22 pm

It sounds like a real horror show begins this Halloween. LOL

#7 NotLegalAdvice on 10.12.18 at 4:27 pm

“So it doesn’t matter how fat the down payment is on a property or how much equity a renewer may have, it’s all about income”.

– Garth

Would this still be true if I gave 20 percent down on a $700k home (so mortgage would be 700k – 140k = $560k) and I make 170k a year and had no debt?

#8 Mike on 10.12.18 at 4:28 pm

Back to troll the “global warming” alarmists. A recent audit of the data used shows flaws with their models:

http://joannenova.com.au/2018/10/first-audit-of-global-temperature-data-finds-freezing-tropical-islands-boiling-towns-boats-on-land/

“Problems include zero degree temperatures in the Caribbean, 82 degree C temperatures in Colombia and ship-based recordings taken 100km inland. The audit has concluded that the studies are deliberately exaggerating temperatures to support a theory of global warming utilizing global averages that are far less certain than what is being forecast.

The audit has revealed that “that climate models have been tuned to match incorrect data, which would render incorrect their predictions of future temperatures and estimates of the human influence of temperatures.” Furthermore, the Paris Climate Agreement adopted 1850-1899 averages as “indicative” of pre-industrial temperatures is “fatally flawed.” The entire Paris Climate Agreement has an agenda to eliminate effectively the advancement of society and attempt to reset the clock to the pre-Industrial Revolution. This entire theory that before the Industrial Revolution, our planet’s atmosphere was somehow pristine and uncontaminated by human-made pollutants has been also proven to be completely bogus.”

BAH HA HA HA…..

#9 Smartalox on 10.12.18 at 4:30 pm

Applying to send jr. to private schools this week. Apparently, (this is Vancouver) being a lowly ‘renter’ entitles me to apply for tuition assistance.

At a 2.5% cap rate, and mortgages renewing ever higher, I wonder at what point that’ll turn around, such that the mortgage holders get a break on fees, and the renters have to pay full freight?

#10 CHERRY BLOSSOM on 10.12.18 at 4:42 pm

In BC and perhaps across Canada homelessness is growing at an alarming rate. so says CBC radio. Ability to find a rental that one can afford is also right now untenable. People are having to move to different Provinces as evidenced by the census. I say stop immigration for a year or two and decrease the demand until municipalities can get up to speed with demand. What harm would it do????

#11 Hobo Joe on 10.12.18 at 4:43 pm

#3 Binky rabbit

[email protected] = The Nice (or Naughty) Lady @ The Bank

#12 Guy in Calgary on 10.12.18 at 4:54 pm

They would likely reduce or remove the stress test before stopping the normalization of rates. It essentially allows for a 2% “cut in rates” without actually reducing them in the event the housing market falls to far too fast.

I will say this yet again: the stress test has nothing to do with trying to cool the housing market. It is in place to safeguard the integrity of banks’ mortgage portfolios. It was a regulatory measure, not a political one. – Garth

#13 reynolds531 on 10.12.18 at 4:58 pm

In a rising rate environment breaking a mortgage is actually easier. If rates are up since you signed you pay three months interest, not the “reinvestment rate” ie difference over the entire remaining term between your rate before discount and current rate.

But yeah breaking stern is never fun. They have you over a barrel.

#14 Steven Rowlandson on 10.12.18 at 4:58 pm

Hi Garth. Do you have any thoughts on this report and how it relates to real estate and the economy in general?

https://www.bnnbloomberg.ca/oil-sands-bitumen-prices-are-actually-in-negative-territory-analyst-1.1151813

#15 John on 10.12.18 at 4:58 pm

Question for anyone who may know:

When purchasing a pre-construction property, does the vendor undertake a means test of any sort against the buyer to ensure they are able/likely to pay at closing?

I know the banks require a certain amount of pre-sales prior to approving financing for the developer, but have not seen much discussion about how the ‘quality’ of those pre-sales is vetted in terms of ability to close.

Any input is appreciated.

John

#16 Prairie oyster on 10.12.18 at 4:58 pm

Renewing this month
3.09 5 year Var
3.49 5 year fixed
3.69 7 year fixed

Curious about that 7 year fixed – too long?

#17 jess on 10.12.18 at 5:05 pm

Corruption & Money Laundering
European Getaway: Inside the Murky World of Golden Visas

How mismanaged ‘Golden Visa’ schemes are enabling corruption on an unprecedented scale, and what EU institutions must do about it

Golden visa schemes offer fast-track citizenship and/or residency to foreign nationals in exchange for lots of cash. European golden visas are particularly appealing, as they give their owners free reign to move throughout the EU, unconstrained by interference or checks.

Currently, four EU Member States sell passports and 12 trade with residency rights. Given the inherent risks, these schemes ought to have the highest standards of due diligence checks so that countries know who they are welcoming in and where their money came from. Unfortunately, that is not what our joint investigation with Transparency International found. ”

https://www.globalwitness.org/en/campaigns/corruption-and-money-laundering/european-getaway/

#18 Andrewski on 10.12.18 at 5:11 pm

And in Vancouver:

https://m.mortgagebrokernews.ca/news/vancouver-residential-inventory-swells-to-4year-high-249206.aspx

#19 Bezengy on 10.12.18 at 5:15 pm

Good job with your interview on BNN today Ryan. I wish there was a way to tie-in our losses with not having additional pipeline capacity to everyday folk’s welfare, something like your old age security, or welfare, or VA check, or child bonus check has been reduced by 50% until we get the trans-can built. I think something like this might hit home to those who think this doesn’t affect them.

#20 equity on 10.12.18 at 5:25 pm

“So it doesn’t matter how fat the down payment is on a property or how much equity a renewer may have, it’s all about income.”

I never understood this.

With massive equity, let’s say a loan of 30% of current collateral value, where is the risk for the bank?

I thought the regulators have to safeguard the risk for banks? Those banks have nothing to lose with a collateral that valuable.

As a matter of fact, a defaulting borrower like that would be a bonanza, as it could leech that client all the way to zero with some fantastic fines, and then foreclose and STILL get their money back.

A double win for the bank: punitive interest payments, and a repaid principle.

Or is the regulator looking out for the borrowing consumers as well?

Banks don’t want property. They know what’s coming. – Garth

#21 BK on 10.12.18 at 5:26 pm

@ #10 Cherry Blossom. Be careful what you say. There are a lot of sensitive people out there. I am not one of them :)

#22 ts on 10.12.18 at 5:41 pm

Love the dog pic. What breed is that? They are so cute!

#23 yorkville renter on 10.12.18 at 5:46 pm

people are simply too impatient… in this world of instant gratification, of they don’t see prices crash overnight they think it won’t happen.

Patience, grasshopper

#24 young & foolish on 10.12.18 at 5:52 pm

“Banks don’t want property. They know what’s coming. – Garth”

This is sooo true!

Nevertheless, slanty semi-values may be down, but they are proving easy to rent. Values fluctuate (consider equities this week), but is it not down to cash-flow at the end of the day?

#25 oh boy... on 10.12.18 at 5:53 pm

doesnt matter. fed has no choice but to raise rates or it loses all credibility. 25 bps in dec. another 50 bps in the first half of next year, maybe a little more. that takes the 10 year bond yield to 4%. good bye stocks. you thing they have problems now… watch out below.

#26 Stan Brooks on 10.12.18 at 5:57 pm

Yep, the housing market is starting to come down in a big, big way and hungry realtors are horrified.


#10 CHERRY BLOSSOM on 10.12.18 at 4:42 pm
In BC and perhaps across Canada homelessness is growing at an alarming rate. so says CBC radio. Ability to find a rental that one can afford is also right now untenable. People are having to move to different Provinces as evidenced by the census. I say stop immigration for a year or two and decrease the demand until municipalities can get up to speed with demand. What harm would it do????

That is because cost of living is skyrocketing, when compared to real income and wealth.
Showcase being GTA and Vancouver. Pretty soon most of Canada.

Why?

Because of roaring inflation and wage stagflation.
We have a case of a classic severe stagflation, about to become an inflationary depression.

Contrary to what you are told, this is not a high standard of living. It is a case of poor people in a poor country drowning in debt, who can’t afford to live there.

And contrary to what you are told this is not an immigration issue, it is a result of 1.5 – 2 decades of very bad policies – CHMC, BoC for example.

======================

It is scary when people with PHDs like
#153 Shawn Allen on 10.12.18 at 4:08 pm

do not understand the importance of balance of trade.
Cheap WCS ($ 15 vs, 65) means billions less in cash flow in USD from US to Canada, widened trade deficit, less jobs in Canada, less investment/capital outflows, less taxes collected, so less money for health care and programs, cheaper currency, higher inflation and of course higher taxes as a result.

This is where ‘we’ kicks in.
If you believe that you live in some sort of economic vacuum, insulated from the environment around, including all sort and type of consumers/sometimes idiots/ of any shape or form and at any level, you are mistaken.

There is ‘environment’ tax (I call it tax ‘stupidity’) that you always pay. Examples being airport fees, airplane tickets, price of telecoms services, groceries, gas etc.

And housing of course.
When idiots pay millions for houses they can’t afford, that drives inflation up, including rents, impacts renters and savers, retirees.

So who are ‘we’ matters big, big time.

#27 Karl on 10.12.18 at 6:01 pm

Banks don’t want property. They know what’s coming. – Garth

—————————————————

They just want to make sure the mortgages get paid.

What to do, what to do. Sell and rent (not first choice), sell and move up, or stay put and be somewhat disatisfied?

#28 jerry on 10.12.18 at 6:11 pm

“Like I said before,you know things are really bad out there when it takes 5 to 7 days to sell a house in Victoria.Very scary,halloween must be coming.The average family income is over $100,000 ”

This one is hilarious. I’ve never seen so many for sale signs for years in Victoria. Even with a growing population sales cannot match the numbers from even 5 years ago. Many of the homes are just not selling and being taken off or relisted with large price cuts. Realtors are terrified and the industry is trying to do everything they can to paint a rosy picture. The average family income is 89000 here. You would need almost double that to get a mortgage for an average home here

#29 Musty Basement Dweller on 10.12.18 at 6:12 pm

Thanks Garth. Always great to hear the updated news about the chickens coming home to roost right on top of all of these real estate “investors” and real estate agents. Some great news to start the weekend and a rum and coke with. Cheers!

#30 MF on 10.12.18 at 6:32 pm

“Thankfully bond yields have backed off a little this week (giving some relief to stocks), but we’re in a world where the cost of money will keep creeping up and will never go down until the next recession looms (at least two years out).”

-so rates will rise for two years (a blip) and then go down. Got it. So the housing “melt” that was supposed to happen could potentially be a two year blip. Got it.

I thought rates rising was the end of an “era”? Two years is a blip.

And rising bond yields is an ever present issue. At stocks going to be negatively impacted for two years now?

Seems to be decent case for buying RE and just holding on.

MF

Bond yields, not consumer rates. – Garth

#31 yvr_lurker on 10.12.18 at 6:36 pm

Must admit that the sudden decrease in the stock market pulls me into retrench mode. We had 70K in an RESP for my 14 year-old in a conservative balanced fund with BMO, which with the 1.65% MER and now with the sudden decrease, has lost about 2K in the past year. I would have been far better off putting it stuffed in a mattress or buying a 4-year GIC last christmas (since it will be taxable in my kids hands rather than mine when he starts withdrawing it when he is 18). If the market recover by christmas 2018 this is what I will do: I have no problem saving and expanding his nestegg, but I do not want to see it erode due to the vagueries of the “market” when he needs it in 4 years from now. Makes me a bad investor indeed, but I would rather not lose it for him.

#32 Bought The Farm on 10.12.18 at 6:42 pm

Crap – What do mean I have to use my own money to pay extra for animals, crops and quota ?

I heard that Justin was going to take care of everything just like my mom used to – WAAAA!

It sure sucks being a loser millenial.

#33 Eco Capitalist on 10.12.18 at 6:44 pm

Dear gods, fates and powers that be,

Please keep the condo market moving along until my place is sold.

Thanks muchly, Eco-C

#34 Linda on 10.12.18 at 6:47 pm

Garth, I hear what you are saying about the stress test having been implemented to safeguard the integrity of bank’s mortgage portfolios. My question is whether you see that test being rescinded or reduced say within the next two years. Or do you see this test being like income taxes – implemented as a ‘temporary measure’ but now it is in place, will exist in perpetuity?

Why would it be lifted? – Garth

#35 AGuyInVancouver on 10.12.18 at 6:51 pm

….I will say this yet again: the stress test has nothing to do with trying to cool the housing market. It is in place to safeguard the integrity of banks’ mortgage portfolios. It was a regulatory measure, not a political one. – Garth
_ _ _
Which makes one wonder why the government has to insure prudent lending by banks? Shouldn’t they be doing that as part of their responsibility to shareholders? But wait, of course it’s to keep CMHC solvent. Maybe we should just get CMHC out of the housing market, drop the stress test and let interest rates determine who qualifies.

Thank the Bank of Mom. Unqualified borrowers being gifted downpayments to circumvent the original stress test for first-time buyers caused bank mortgage portfolios to be more risk-prone and less insured. – Garth

#36 Mike on 10.12.18 at 6:58 pm

.
All good in Edmonton and Calgary.
Prices holding well against all hikes and B20s.
Keep renting.

Calgary Sept: sales -12.9%, prices -3.8%. – Garth

#37 Miss Awe Gennyst on 10.12.18 at 7:06 pm

DELETED.
BANNED.
DEPORTED.
SENT TO TRUMP’S OFFICE.

#38 FOUR FINGERS WATSON on 10.12.18 at 7:07 pm

Banks don’t want property. They know what’s coming. – Garth
……………………………….

Totally agree. The banks are not run by stupid people. They have sufficient reserves and CMHC insurance to smooth out the bumps. The Big 6 will do well in a rising interest rate environment. Back up the truck……..

#39 Homeless in B.C on 10.12.18 at 7:14 pm

There has been a lot written on this blog, both by Garth and the blog dogs, about the lies and deceit prevalent in the RE business. The RE cartels have nothing on the propaganda machine that is foreign big oil and gas in Canada. The Canadian Association of Petroleum Producers (CAPP) is the propaganda ministry for big oil. They spend millions in the MSM to convince you that what is good for big oil is good for Canadians. CAPP and the media are so good at what they do that a large percentage of people believe the bs that is produced, even some of the people that are smart enough to read Garths blog.
Right now the talking heads are snivelling about the $50 discount between WTI and WCS oil. They are spewing the line that a pipeline will eliminate this discount and that somehow Canada will get part of that $50.
The discount exists because WCS is heavy sour and WTI is light sweet. Heavy sour needs expensive upgrading to make it acceptable for refining into value added products like diesel and gasoline. Or it can be blended but still at extra cost. This is the reason for the discount and all the pipeline in the world won’t change that. Are we to believe that it costs $50 a barrel to ship bitumen offshore and once it arrives some greater fool is going to pay more for it?
When you see the slogan “We have to get our oil to market!” you need to understand that the “We” in that statement is Big Foreign Oil and they are correct when they say “our oil”. Once it is extracted from the ground Canada nor any gov’t owns it. It belongs to the extractivists.
In Alberta the Ralph Klien Royalty is 1% on “any oil products price below $40 or until completion” (Alberta Energy Ministry petroleum royalty regs) So we get 1%, not of the $70 price of WTI but of the $15/barrel price of undiluted bitumen. We get 15 cents a barrel and offshore the jobs and value added.
The are a whole bunch of politicians and other paid puppets who think this is a good deal and we need to spend 4.5 billion plus billions in other subsidies to support this stupidity.
The TransMountain pipeline is 1100 kilometers long has 18 pumping stations with 5000 HP pumps pushing heavy product through 36 inch pipe at approx. 12 MPH. It delivers 98000 litres per minute at 900 PSI. If this line is breached it will spew out toxic, explosive product at a huge rate of flow. The response time for the Husky Energy (Chinese company) breach in Saskatchewan was 15 hours.
If you live within the blast radius of this beast and complain about it, you are a foreign funded eco-radical.
But hey, we have to get it built because Albertans need to buy new pick up trucks.
Does it get anymore stupid than this? Why would foreign oil companies build upgraders and refineries in Canada? They would have to pay expensive Canadian labour, higher royalties and taxes on their profit. If they offshore it they just pay 1%.
If you think that the tarsands (and it is tarsand not oilsand) is such a big income generator for us then where has all the wealth gone? I think all can agree that $billions have come out of that hole in the ground near Ft Mac. Where are all our brand new buildings, bridges and highways. Hospitals, schools etc. Why don’t we have a huge royalty fund like Norway? Where are our Soveriegn Wealth Funds? Why don’t Canadians get regulars dividend checks like the Saudis?
We have homeless camps, food banks and underfunded hospitals, Do they have those in Saudi?
You are getting royally ripped off folks, and voting for the status quo that has done nothing for the last 70 years will not change anything.
Will end this rant now,

#40 Eco Capitalist on 10.12.18 at 7:15 pm

Garth, I hear what you are saying about the stress test having been implemented to safeguard the integrity of bank’s mortgage portfolios. My question is whether you see that test being rescinded or reduced say within the next two years. Or do you see this test being like income taxes – implemented as a ‘temporary measure’ but now it is in place, will exist in perpetuity?

Why would it be lifted? – Garth

———————————————————

Well, after the GFC the Americans enacted Dodd-Frank to try and prevent a repeat, yet May of this year saw them roll back large chunks of it. So, ignorance or stupidity jump to mind. I guess the real question here has to do with OSFI. Do they make policy or merely enact policy? Could an evil government make them remove it, or is it solely up to them?

#41 Millmech on 10.12.18 at 7:32 pm

Next on the hit list;bank prime rates going up.

#42 TS on 10.12.18 at 7:33 pm

#36 – I want more of whatever you’re smoking. Alberta RE hasn’t appreciated in over a decade in nominal terms. At least you can mail in the keys in AB.

#43 paul on 10.12.18 at 7:36 pm

2 Guy in Calgary on 10.12.18 at 4:54 pm

They would likely reduce or remove the stress test before stopping the normalization of rates. It essentially allows for a 2% “cut in rates” without actually reducing them in the event the housing market falls to far too fast.

I will say this yet again: the stress test has nothing to do with trying to cool the housing market. It is in place to safeguard the integrity of banks’ mortgage portfolios. It was a regulatory measure, not a political one. – Garth
—————————————————————–
The COOLING will be just a side effect, it will be good for you. I am here from the Government to help.

#44 For those about to flop... on 10.12.18 at 7:41 pm

Pink Pumpkins being carved in Richmond.

These guys were already fighting a losing battle and now it seem the have thrown up the white flag.

They were previously asking 1.53 after starting off at 1.69 which would have stopped the bleeding but now they are asking for 1.48 and screaming out medic.

Better get something done or else there is a possibility of financial Exsanguination…

M44BC

8540 Wagner Drive, Richmond paid 1.6 June 2016 ass 1.56

Now asking 1.48

Mar 6:$1,698,000

Sept 19: $1,538,000
Change: – 160000.00 -9%

https://www.zolo.ca/richmond-real-estate/8540-wagner-drive

https://www.bcassessment.ca/Property/Info/QTAwMDA1V1g1VQ==

#45 SoggyShorts on 10.12.18 at 7:43 pm

#99 Stan Brooks on 10.12.18 at 12:25 am
#12 SoggyShorts on 10.11.18 at 5:34 pm

It sounds like you are finally seeing the light.

I completely agree that it’s entirely possible for your personal cost of living to go up by 10% if you live in a bubble city and your spending is heavily weighted towards shelter.
But 75% of Canadians do not live in the GTA/LM. This brings the average WAY down.

Also, weighting is very important: As higher earners in AB our shelter costs are just under 10% of income, so even if rent doubled it would only increase our COL by 10%. If you are spending 50% of income on shelter and it doubles, then you have a 100% COL increase.

Bottom line:

If you replace the sentence
“The real inflation rate is 10%”
with
“My personal cost of living went up by 10%”
Then I have no argument with you.

#46 Ex-Cowtown on 10.12.18 at 8:01 pm

#20 equity on 10.12.18 at 5:25 pm
“So it doesn’t matter how fat the down payment is on a property or how much equity a renewer may have, it’s all about income.”

I never understood this.

With massive equity, let’s say a loan of 30% of current collateral value, where is the risk for the bank?

I thought the regulators have to safeguard the risk for banks? Those banks have nothing to lose with a collateral that valuable.

As a matter of fact, a defaulting borrower like that would be a bonanza, as it could leech that client all the way to zero with some fantastic fines, and then foreclose and STILL get their money back.

A double win for the bank: punitive interest payments, and a repaid principle.

Or is the regulator looking out for the borrowing consumers as well?

Banks don’t want property. They know what’s coming. – Garth

++++++++++++++++++++++++++++++++++

Everyone uses the term “collateral” but that isn’t correct. It should be called “ransom”. The banks, unlike Negan, don’t want half your sh*t, or even T2, who wants all your sh*t.

The banks don’t want any of your sh*t. They just want to make sure you pay your loan back. All of it… every cent…+ penalties, surcharges, fees etc.

Gawd I love owning bank stocks! It’s like owning a vig on Negan’s action!

#47 crowdedelevatorfartz on 10.12.18 at 8:02 pm

@#1 james
“When do you think prices will drop by?’
++++
Its a secret.
If he tells you.
It wont be a secret.

#48 MF on 10.12.18 at 8:03 pm

Bond yields, not consumer rates. – Garth

-Aren’t mortgage rates for consumers to buy real estate set in the bond market?

MF

#49 SoggyShorts on 10.12.18 at 8:11 pm

#152 Stan Brooks on 10.12.18 at 4:02 pm

Somebody here was arguing that gas prices would not go to $ 2 CAD by 2023 in order to justify 8-10 % yearly increase.

Guess what? It is already close to $ CAD 1.70 in BC.
*******************************
Just when I thought you were starting to understand…

When you said “I guarantee Gas will be over $2 in 4 years” but are only talking about BC how is anyone supposed to know that?

My rebuttal earlier (and now) is that gas is about $1.20 here in AB, so I still don’t think it will be $2 here in 4 years (which is 2022 BTW not 2023)

If you say “Gas prices” without specifying where then readers can only infer that you mean average across Canada.
Just like with your 10% inflation. Now we finally know that you mean that your personal cost of living has gone up 10% (and not national inflation) it makes more sense.

#50 Ace Goodheart on 10.12.18 at 8:14 pm

RE: “As the posted rate rises, so does the IRD – the interest rate differential. That determines the penalty to be paid when a mortgage is pulled early (such as when you sell).”

You’re wrong on this Garth.

The interest rate differential falls as the posted rate increases comparable to your locked in rate.

What is being calculated, is the amount of interest that the bank can get on your prepayment amount, at the current rate, compared to the rate you are paying.

If you are at 2% and the current rate is 4%, then your interest rate differential is -2%, ie, the bank makes money if you pay your mortgage early.

People paying their mortgages early now, will always pay three months’ interest, as that will be higher than the IRD.

Check the calculator at one of the big banks here and you’ll see what I mean:

https://www.cibc.com/ca/mortgages/calculator/mortgage-prepayment-calculator.html

#51 the Jaguar on 10.12.18 at 8:23 pm

” This simply means the regulator’s much more concerned about a borrower’s ability to pay than how much net worth they might have. So it doesn’t matter how fat the down payment is on a property or how much equity a renewer may have, it’s all about income.” Garth.

Good for OSFI, though they come to the party a little late given the level of indebtedness of the average Canadian. Their website indicates an additional concern of theirs is ‘fraudulent income’. Guess they noticed the ink on some rental leases and other paperwork was still a bit wet and not lining up with what showed up on taxation documents. If only they would get down on their knees and propose marriage to the Canada Revenue Agency. The liar loans might scurry into the dark moldy corners from where they sprang. The problem with equity lending is that it is done to protect the lenders, not the folks who want a home and shelter. If people can’t afford the house it is only a matter of time until they look down and see quicksand. The lender gets out of the jam easily because the amount owed is far less than what the property can be sold for, but the guy trying to give his family a home and get ahead in life just loses it all. His equity, his house and his self esteem. Who can applaud such behavior? Not me.
If property markets fall far from their initial inflated valuations in some locations it could get unpleasant. As always there will be finger pointing. The blame game is the favourite sport of many. With no trophy.

#52 The Real Mark on 10.12.18 at 8:29 pm

“When purchasing a pre-construction property, does the vendor undertake a means test of any sort against the buyer to ensure they are able/likely to pay at closing? “

Not really. The construction deposit represents the only solid guarantee of performance that the vendor has. Even though the vendors have theoretical recourse to the contractee’s finances, by the time that the legal process of enforcing such actually plays out, the vendor is often bankrupt. I personally saw this play out in the mid 1990s in what was, at the time, the outskirts of the GTA.

Likewise, contractees don’t tend to do a lot of due diligence on the solvency of the vendor. Which means that their downpayment/deposit/performance bond can easily be lost without much recourse outside of being an unsecured creditor in the bankruptcy process.

“Values fluctuate (consider equities this week), but is it not down to cash-flow at the end of the day?”

Cash flows, net of reasonable long-term expenses, are paltry to non-existent on housing in Vancouver/Toronto, and very weak compared to comparable local investments. Sentiment is shifting towards other asset classes. Rising long-term bond rates make small net RE cash flows paltry and pathetic compared to the returns available in other asset classes. Once an asset class goes into physical oversupply, there is very little that even changes to monetary policy can do to revive it.

#53 Long-Time Lurker on 10.12.18 at 8:34 pm

#97 commoncents on 10.10.18 at 11:06 pm
Hi, long time follower… never write. I would love to hear how you would invest 200k. I am helping a NPO and we are about to designate future operating budgets to Term GIC’s. There is no interest to make a profit, but idle money is wasted. Our yr end is Dec 31 and our next BOD is Oct 23. I talked to the bank and the juvenille behind the phone (the investment banker) who previously offered us 2.76 is now saying that it may grow approx. .10 to .25 in a month or so. No deadline for investing, so I wonder if its worth waiting until late Nov to sign. Any thoughts?

>The yield % is unlikely to go down and has a chance of going up so you could wait. You could lock in 100k now and 100k later if you want to hedge.

#4 Karl on 10.12.18 at 4:16 pm
Gartho, great blog. Love your work! Keep it up, you are the light of my life!

Now that we have that out of the way….

>Best suck-up here ever!

#27 Karl on 10.12.18 at 6:01 pm

…What to do, what to do. Sell and rent (not first choice), sell and move up, or stay put and be somewhat disatisfied?

>Karl, you still haven’t figured it out? You asked that weeks ago. You have a home which is going to lose value as interest rates rise. Now you want to move into an even more expensive home which is going to lose even more value as interest rates rise. Is this a good idea?

Best: sell & rent. Next best: stay put. Worse: move up.

#54 Spectacle on 10.12.18 at 8:36 pm

#17 jess on 10.12.18 at 5:05 pm
Corruption & Money Laundering
European Getaway: Inside the Murky World of Golden Visas

How mismanaged ‘Golden Visa’ schemes are enabling corruption on an unprecedented scale, and what EU institutions must do about it

Golden visa schemes offer fast-track citizenship and/or residency to foreign nationals in exchange for lots of cash. European golden visas are particularly appealing, as they give their owners free reign to move throughout the EU, unconstrained by interference or checks.

Corruption trial of former government aides begins today
http://www.vancouversun.com › news › story

In addition to this, we have local foreigner friendship society paying for “rides ” to the vote! Yup, elegal, and worse if they are not citizens. So pretty corrupt.
Hey, it’s the same guy who had a private fundraiser for Trudeau a while back…..whose heritage home was Arson, confirmed, and refuses torepair it.

How ugly, my country has been bought and sold by foreign interests.

Apology of links do not work.

Jess, got a link to this?

#55 TalkingPie on 10.12.18 at 8:45 pm

I found it strange that the second largest housing market in Canada wasn’t talked about when it lagged the other large markets, and now I find it stranger still that no one is talking about it when it’s among the strongest of the nation’s markets.

Montreal detached posting close to 6% gains year over year. That’s nowhere near what Toronto and Vancouver were doing at their peaks, but it’s better than what they’re doing now!

Despite considerable increases in cost of living compared to renting an apartment in the city, I’m still feeling pretty good about my decision to buy a house off the island. I don’t expect it to ever serve as a winning lotto ticket, but I’m fairly confident it’ll match or outpace inflation while being a nice place to live – you know, what a house is supposed to be.

#56 For those about to flop... on 10.12.18 at 8:52 pm

Testing,testing.

This property could be a test case of things to come.

There has been a bit of talk about what would happen if the city goes duplex crazy.

May I present this duplex as an example of current conditions.

This half duplex sold 27 days ago and was is basically brand new.

Originally asking 1.38

Then 1.32

Sold for 1.25

Assessment 1.61

So you can build the glam house and get maybe 2.2 if lucky ,or do it this way and scrimp a bit on quality ,and get a bit more, and maybe two buyers to deal with unless you live next door.

The buyers chose this option for 1.25 on a relatively bust street over a brand new detached infill house for roughly 950k,so something must have impressed them.

The sellers terminated the listing twice and then reduced the price,also of note it went nowhere near assessment.

As McCartney sang

Someone’s knockin’ at the door

Somebody’s ringin’ the bell…

M44BC

https://www.zolo.ca/vancouver-real-estate/2308-east-33rd-avenue

#57 FOUR FINGERS WATSON on 10.12.18 at 8:57 pm

#39 Homeless in B.C
Re:your pipeline rant

Light crude oil continues to account for the largest share of Alberta’s conventional production, at 54.1 per cent in 2017, but is expected to decline over the forecast period as the share of heavier crude oil increases. As shown in Table S4.1 [HTML], medium crude oil accounts for the second-largest portion, followed by ultra-heavy oil and heavy crude oil.
Heavy oil accounts for only 19% of Alberta’s production.
https://www.aer.ca/providing-information/data-and-reports/statistical-reports/crude-oil-production

#58 YVROptimist on 10.12.18 at 9:07 pm

RE: #39 – Homeless in BC. I think you have hit the nail on the head. I doubt very much now that the LNG pipeline is being built that the new Trans Mountain pipeline will ever see the light of day. And that may not be a bad thing.

#59 Pipeline on 10.12.18 at 9:20 pm

Guys do some research on Jason Kenny’s connection to DT and think Keystone!

#60 Long-Time Lurker on 10.12.18 at 9:49 pm

Prediction:
Venezuela’s Maduro is finished.

#61 Deplorable Dude on 10.12.18 at 9:59 pm

#88 AB Boxter….yesterday….”My theoretical basket of ‘quality’ dividend stocks in Canada is now down over 13% YTD.”

Depends how you look at it…..my portfolio of 15 Canadian quality dividend growth companies is currently churning out 4.47%….and increasing.

So far 11 of those companies have increased their dividends this year, giving me an income growth of 6.58% ytd.

I don’t really care what the share prices are doing short term…it’s noise….I don’t need to sell those stocks to live off.

#62 BlorgDorg on 10.12.18 at 10:02 pm

“your BIL with fourteen pre-con condos says”

Wow, it’s like you know *exactly* who my BIL is. By the way, he’s a realtor leveraged up to his eyeballs in pre-con condos. Best investment ever, he tells me. Buy now or never, he tells me. He sure has a real nice leased BMW.

#63 Smartalox on 10.12.18 at 10:08 pm

Flopper @#56:

That half-duplex sold for 22% below assessed (back in July 2017). Wow. Kind of makes you wonder what the OTHER HALF paid, whenever they bought their place.

Also, if that assessment reflects the value in July 2017, there are going to be a lot of surprised property owners at the mail box (and very soon thereafter, at the banks) in January 2019!

#64 Danforth on 10.12.18 at 10:24 pm

Hi Garth,
We know everyone’s portfolio has just seen a big set back – this is the standard comings and goings of markets. It started the last few days of September, and then the market layed a big fat egg.

Q: What is the % haircut that a properly balanced portfolio should have seen in the last 14 days?

I’m trying to balance what I experienced on my savings compared to what others might have seen, or could/should have.

Tx!

#65 The Real Mark on 10.12.18 at 10:33 pm

I tried to move out of my mom’s basement this week

I went to a bank, but they wanted to see proof of employment

I told them that I worked at Nortel

The struggle is real

#66 Shawn on 10.12.18 at 10:39 pm

Why are bonds and stocks falling at the same time?

#67 n1tro on 10.12.18 at 10:40 pm

#8 Mike on 10.12.18 at 4:28 pm
Back to troll the “global warming” alarmists. A recent audit of the data used shows flaws with their models:
http://joannenova.com.au/2018/10/first-audit-of-global-temperature-data-finds-freezing-tropical-islands-boiling-towns-boats-on-land/
“Problems include zero degree temperatures in the Caribbean, 82 degree C temperatures in Colombia and ship-based recordings taken 100km inland. The audit has concluded that the studies are deliberately exaggerating temperatures to support a theory of global warming utilizing global averages that are far less certain than what is being forecast.
The audit has revealed that “that climate models have been tuned to match incorrect data, which would render incorrect their predictions of future temperatures and estimates of the human influence of temperatures.” Furthermore, the Paris Climate Agreement adopted 1850-1899 averages as “indicative” of pre-industrial temperatures is “fatally flawed.” The entire Paris Climate Agreement has an agenda to eliminate effectively the advancement of society and attempt to reset the clock to the pre-Industrial Revolution. This entire theory that before the Industrial Revolution, our planet’s atmosphere was somehow pristine and uncontaminated by human-made pollutants has been also proven to be completely bogus.”
——————
But, but, but….all those scientist and the credentials told me its my fault for climate change!

#68 reynolds531 on 10.12.18 at 10:46 pm

#50 ace

Where did that quote come from? I don’t see Garth saying that in detail.

You’re right of course, if the bank can reinvest in a new mortgage at a higher rate it’s good for them. Unless no one bites. One rare instance where a bank contract works in your favor.

#69 NoName on 10.12.18 at 10:47 pm

interesting, on a paper is like this.

prohibits airlines from “bumping” passengers who’ve already boarded a plane;

requires the FAA to set minimum standards for seat width and seat pitch;

establishes minimum standards for how much rest time flight attendants get between shifts;

makes it illegal to store a dog or other animal in an overhead bin;

prohibits passengers from using mobile phones to make voice calls during flight;

bans e-cigarettes from planes;

requires airlines to refund passengers for “services they paid for but did not receive”;

mandates that airlines allow passengers to check strollers if they are traveling with small children;

requires the government to look into whether it’s “unfair or deceptive” when airlines say flights are delayed due to weather if there are actually other factors involved.

lets the FAA require airlines to let pregnant women board airplanes first;

creates a task force to study sexual harassment and misconduct among airline employees;

increases the penalties for interfering with cabin crew or flight crew;

requires the FAA to consider whether to allow supersonic airplanes over the continental U.S.;

allows the Justice Department, Homeland Security, and other federal law enforcement agencies to hack or shoot down privately owned drones if they deem them a threat;

requires the FAA to work on regulations to allow “regular flights of package-delivery drones,” as Amazon wants to do;

authorizes $1.68 billion for relief for Hurricane Florence, which hit the Carolinas last month;

requires the FAA to set up an “Office of Spaceports”;

and

tells the FAA to set up an “aviation consumer advocate,” so that when you have something bad happen to you on an airplane, and you don’t know who to tell, you’ll have at least have someone to complain to.

https://www.inc.com/bill-murphy-jr/president-trump-just-signed-a-law-that-radically-changes-life-for-airline-passengers-flight-attendants-airlines-almost-nobody-even-noticed.html

but in realty will be more like this

https://www.youtube.com/watch?v=m5W2tqHQh_U

#70 Lil'Tay on 10.12.18 at 10:50 pm

RexxRock: Like I said before,you know things are really bad out there when it takes 5 to 7 days to sell a house in Victoria.
_____________________________________________
You must live in a special area not covered by the board.

In Victoria

SFD: median = 789,000, 46 days to sell
Townhouses median = 550,000, 43 days to sell
Condos = 409,000, 33 days to sell

46 days, not 5 to 7. Or maybe you meant to put the two numbers together at 57 days.

SFD median 3 years ago = 550,000
Townhouses median 3 years ago = 410,000
Condos 3 year ago = 290,000

This is about 100K higher on all segments than smokanagan following virtually the same uptick from 2016 until now.

Except in the smokanagan time to sell is pushing closer to 100 days.

When you live in a place like Victoria and it is listed on the UBS report you are pegged to be another Vancouver.

Victoria is over priced (an understatement) and overrated. A lot of snowflakes on the island too. Although the Island is probably a better option for retirees than living inland BC where they get ravaged by wild fires every year and choked out by chimney smoke that hangs in the valley all winter, bottle neck traffic on the two roads that they have, plus homelessness galore and dirty needles everywhere.

#71 Ponnaps on 10.12.18 at 11:07 pm

“Those little hairs on the back of realtor necks are terrified. ”

Autotrader has an astounding number of 2016-18 used cars on sale in a 100km radius of where I live in the GTA
Mercs – 678
BMW – 393
Audi – 238
Porsches – 112(?!?!?!?)

#72 Ponnaps on 10.12.18 at 11:19 pm

Instead of all these unpleasant tactics to cool the market using various taxes, stress tests , what have you why not simply make property ownership solely the right of those who have citizenship.. no PRs, WPs, foreigners.. cut down the craziness of demand, make property available only for those who vowed allegiance to this country… such a decision wont impact the political class either cos only citizens can vote in any case

property ownership to only citizens aka those who have committed their futures to the country.. makes sense to me..

#73 FIVE FINGERS WATSON on 10.12.18 at 11:32 pm

#72 Smoking Man on 10.10.18 at 9:19 pm
Who all remembers my Batman and Camel Toe lessons.

————————-

We don’t care about your Halloween costume.

#74 Dolce Vita on 10.12.18 at 11:41 pm

#39 Homeless in B.C

Per NEB the value of oil exports was about $67 Billion in 2017 (about $48B heavy, $19B light). 3.3 Mb/day. A fraction of that shipped by rail (July 2018: about 206 thousand bbl/day).

Higher than $48B when other fuels included.

Pipeline cost to ship is 1/3 of rail per bbl and getting cheaper vs. rail.

Norway has a population less than Toronto and is not in the top 20 proven oil reserve countries. US $1 trillion fund. They are saving for when their fossil fuels run out. US $27 billion of that is used by their Gov. last year – becoming more like the Canadian system.

Canada system is to take royalties and put them to good use right away as they see fit, be it schools, highways, pensions, you name it, rather than putting it in a showy fund or dispersing it out as money to citizens.

Nothing wrong with that.

Germany, the leader in the use of green tech has about 32% of electricity from renewable energy at a huge cost, for example, renewable energy electrical bill surcharges: $37.5 billion/83 million people. They admit that without fossil fuels for electricity, their economy would grind to a halt.

Of course nothing from Germany about fuels for transportation and the like.

We are getting there with cleaner, renewable energy sources (primarily for electricity).

Germany managed to compress a 50 year energy transition cycle to 25 years, but it cost them. They still rely on coal heavily due to cost.

I think patience that green tech innovations will come and your vision will come true, but in a generation I think.

In the mean time, oi and gas a huge contributor to wealth in Canada. Subverting that with NIMBY thinking (West Coast and pipelines) is hardly the stuff of nation building. That is not the solution.

Throwing subsidy money from oil and gas at renewables will not work either, plain and simple, the technologies are not there yet and come at a great cost.

Renewables will take a generation at least to implement them (and that fast per the German model which is extraordinarily fast). No one can wave a magic wand and overnight we are all green and it made economic sense. Infrastructure has to be built and it takes time, a lot of time.

You also have to look at the livelihoods of people in direct or indirect fossil fuel industries. Their jobs have to be replaced with those in renewables otherwise high unemployment, that cannot be done overnight.

Wait a generation, but for now, we are stuck with fossil fuels. I have a green vision to but the reality of time to change over an economy from one energy source to another tempers that enthusiasm.

Milk fossil fuels for all and as responsibly as we can in the meantime. But, keep an eye open to economically viable renewables, invest in them as they are our future.

#75 Sunny on 10.12.18 at 11:49 pm

There is big demand of rental housing in Vancouver and adjoining areas. It’s driving rents higher than possible mortgage. On top of this there is ownership pride and surety of a shelter on your head.

#76 AisA on 10.12.18 at 11:52 pm

“I will say this yet again: the stress test has nothing to do with trying to cool the housing market. It is in place to safeguard the integrity of banks’ mortgage portfolios. It was a regulatory measure, not a political one. – Garth”

Bruh, you’re gonna have to copy and paste that until next fall unless you want the finger tip callus equivalent of playing wack a mole on the keyboard for a good year.

#77 jpm on 10.12.18 at 11:58 pm

Garth, when selling my home I was thinking about vendor financing where I am the bank and hold the mortgage while they buyer makes payments to me and I get some interest on it. Is this a good way to sell my home? I haven’t heard much out there on this. Is it a good idea and if so why and if it’s not why?

#78 Damifino on 10.13.18 at 1:03 am

#58 YVROptimist

I doubt very much now that the LNG pipeline is being built that the new Trans Mountain pipeline will ever see the light of day
———————————-

I too have my doubts about the Trans Mountain pipeline, but it has nothing to do with the recently approved LNG facility. The probable demise of the TMP has mostly to do with ineptitude on the part of the federal Liberals.

The TMP was looking like toast for a long time regardless of the BC government’s recent decision to hypocritically begin cashing in on it’s own abundant fossil fuels.

#79 Ian on 10.13.18 at 1:24 am

Karl:

Long Time Lurker is right, sell and rent. There is no option two and three.

You should have sold in early 2017 but take whatever you can get before you lose more equity!

#80 Smoking Man on 10.13.18 at 1:36 am

You know who is stressed?
Hillary. She just lost her security clearance.

She siked her rabid dogs. The newly schooled, called for civil war.
Why?

Democrats are going to get decimated at the mid terms.

Everybody knows liberalism is a mental disorder.

Then there is Climate Barbie. Pushing the IPPC Global warming bull shit. I read the report. Cost you 600 bucks to fill up your gas tank.

Butts has orgasms at that thought. Poor prick. Newfee jokes made him mental. He wants revenge.

Sadly for him. Red wave in November.

Bet accordingly dogs. Market will go orbatil after mid terms. Great time to buy. … Short bonds.

Dr Smoking Man
PhD Herdonomics.

#81 Stan Brooks on 10.13.18 at 1:55 am

#39 Homeless in B.C on 10.12.18 at 7:14 pm

Agree on mismanagement of oil revenue and on the lack of public investment funds for the future.

But as SoggyShorts says (who sees deflation somewhere but fails to point out for whom, in what and where): It is individual experience.

Some people like wild bill and T2 have trust funds, numbered companies, french villas, careers set by/bought by their daddies so we should not complain.

#82 will on 10.13.18 at 2:30 am

I want to know what train line that is and where it is heading.

#83 AB Boxster on 10.13.18 at 3:16 am

Deplorable Dude on 10.12.18 at 9:59

I don’t really care what the share prices are doing short term…it’s noise….I don’t need to sell those stocks to live off.

————————
Fair enough.
It takes a fair stomach to accept 5% dividends on a portfolio value that declines by double that.
Canadian dividend payers have been fairly pathetic over the past 3 years,while the us index funds have risen massively and still paid a small dividend.
(Eg XSP)

Even with increasing dividends, on a declining portfolio this is a tough way to grow wealth.

#84 jane24 on 10.13.18 at 4:52 am

Well RE in Britain is now officially dead. People here never got into flipping and cheap renos as there is never enough product on the market to do it but that limited product is now not moving at all. I have friends listed at fair prices with no action at all. Maybe Brexit, maybe affordability, maybe that it is cheaper to add that extra bedroom or bigger kitchen then move. Stats do say that the average British homeowner moves only every 23 years and that has not changed either.

It is not adult kids living in basements killing the market as we don’t have basements and the average kid here still moves out at 21 years into a rental to party according to stats.

Not interest rates as there are still loads of 5 year fixed mortgages for under 2%. My daughter got one 2 months ago with only 10% down for 2.19%. So there is more going on than just the cost of money. Money is still very cheap here.

i think it is just the cycle Garth and that with everything happening in the world right now and stocks very volatile folk just want to stay put in both countries.

#85 Under the radar on 10.13.18 at 5:44 am

15-John
Most new construction contracts in the GTA require the buyer within 60 days or less to prove they qualify for a mortgage or provide proof they can pay for the property. This usually involves showing a mortgage pre approval from the bank for the mortgage and the source of the balance due on closing.

#86 Shawn Allen on 10.13.18 at 7:53 am

Homeless in BC at 39 understands the “We Myth”

saying:

“When you see the slogan “We have to get our oil to market!” you need to understand that the “We” in that statement is Big Foreign Oil and they are correct when they say “our oil”. Once it is extracted from the ground Canada nor any gov’t owns it. It belongs to the extractivists.”

*****************************
Exactly, the extracted oil belongs to corporations and not to “we the people”.

A giant discount on Canadian oil hurts them and hurts taxes but the difference in impact between an oil worker who loses his job or someone with a big direct stake in the oil sands and a government worker or a retiree on pension is night and day. Hence the “our” oil etc. is misleading.

Income down 100% (fired oil worker) is a lot different than taxes maybe up a couple percent (eventually) for the unrelated worker.

#87 Remembrancer on 10.13.18 at 8:11 am

#82 will on 10.13.18 at 2:30 am
I want to know what train line that is and where it is heading.
——————————————————————
Hell.

#88 Shawn Allen on 10.13.18 at 8:37 am

Winners Win…

I have observed that on average winners continue to wind and losers continue to lose. It’s harsh and mean but generally true.

Exhibit “A” is Garth who tells he has a $million liquid by age 30 and went on to do all kind of things some of which he has revealed include being an MP at around the age of 40. That ended when the conservatives went down to an incredibly low 2 seats around 1993 and even then Garth tells us he came very close to retaining his seat. He has been a successful broadcaster and best-selling author. An MP once again and a cabinet minister. Then finding himself unemployed but with ample resources he built a very large investment business and somewhere in there found time to restore the Belfontain general store and a BMO heritage bank building. And I am sure I have missed a bunch of stuff.

So, with no doubt challenges and a few false starts along the way Garth has kept on winning.

Call this sucking up if you want but it is true. I will balance it though by saying he seems to be more than a bit nasty (I could use other words) in his responses at times and he was dead wrong (most of us were) on house price predictions for about a decade but nevertheless persevered with this enormously successful blog.

He is a great of example that Winners Win…

You still can’t borrow the Gulfstream. – Garth

#89 MB on 10.13.18 at 8:39 am

Glad we locked in about 3 years ago at 2.54% after 8 years of floating a variable rate mortgage. Looking forward to paying off the entire mortgage in 2020 and never having to deal with a stress test. Only stress will be where to invest the additional cash flow in a rising rate environment.

#90 Stan Brooks on 10.13.18 at 9:05 am

#74 Dolce Vita on 10.12.18 at 11:41 pm

Royalties and taxes? Fact check:


Canada’s oil and natural gas industry paid a total of $15 billion CAD to federal, provincial and local governments in the form of taxes and royalties annually from 2013 to 2016 (average).

https://oilandgasinfo.ca/oil-gas-you/economic-benefits/

The government’s total net cash flow from the petroleum industry is estimated to NOK 264 billion in 2018 and NOK 286 billion in 2019. This represents a significant increase in revenues since 2017, mainly due to higher oil and gas prices.

https://www.norskpetroleum.no/en/economy/governments-revenues/

For 2018 Norway has 43 CAD billions net cash flow into federal coffins, we have 15.

Big difference.

https://en.wikipedia.org/wiki/List_of_countries_by_oil_production

Canada at 3.6 million barrels per day, Norway at 1.6 million barrels per day.

So on 40 % of our oil production they have 3 times the benefits for the government.

#91 Stan Brooks on 10.13.18 at 9:07 am

Corrected:

Our government had 15 billion in oil revenue from royalties and taxes in 4 years, so less than 4 billion per year.

So Norway has 10 times our benefits to the government (over 40 billion CAD per year net for the budget) on 40 % of our oil production.

#92 crowdedelevatorfartz on 10.13.18 at 9:16 am

@#56 Flop

“The sellers terminated the listing twice and then reduced the price,also of note it went nowhere near assessment….”
+++++

Sign of the precipice…
That being said.

I cant believe someone would pay even 1.25 for half a duplex in a market that is obviously falling.
I talked to a guy across the street at work who owns his business.
He just bought a house in Port Coquitlam on a busy street.
I’m sure the sellers were “high fiveing” at their luck to be able to find a greaterfool at this stage.

One wonders when the potential buyers out there realize this market is toast and its better to wait this one out.

#93 crowdedelevatorfartz on 10.13.18 at 9:22 am

“You still can’t borrow the Gulfstream.” – Garth

+++++

G5 or G7 ?

http://www.gulfstream.com/aircraft/gulfstream-g550

https://www.wingsoverquebec.com/?p=7395

Yo Billy Bob.

Wanna stop flying “big tin” and be Garth’s private skyjock?
It pays less but I hear the Amazons can also cook.

#94 Remembrancer on 10.13.18 at 9:40 am

#86 Shawn Allen on 10.13.18 at 7:53 am
Exactly, the extracted oil belongs to corporations and not to “we the people”.
————————————————————–
Anyone using this “we the people” stuff must be thinking of another country… Let me help:

http://publications.gc.ca/collections/Collection/CH37-4-3-2002E.pdf

That said, its hard to tell but is this a case for a) building refineries in AB at source and piping refined oil west to deep water BC ports for export instead of oilsands or tarsands or whatever, b) nationalising the petro industry and continuing as-is or a combination with “a”, or leaving it in the ground?

#95 Still in cowtown on 10.13.18 at 9:45 am

9 Homeless in B.C on 10.12.18 at 7:14 pm
[…]
Right now the talking heads are snivelling about the $50 discount between WTI and WCS oil. They are spewing the line that a pipeline will eliminate this discount and that somehow Canada will get part of that $50.
The discount exists because WCS is heavy sour and WTI is light sweet. Heavy sour needs expensive upgrading to make it acceptable for refining into value added products like diesel and gasoline. […]

Last week while WCS traded in Alberta at WTI less $40 that same barrel of oil traded for WTI less $5 on the U.S. gulf coast. So yeah, if you can get it to a world market you will get a world price. Cost to rail it is $20…. cost by pipe is half of that.

#96 jess on 10.13.18 at 9:49 am

https://www.afr.com/business/mining/the-documents-glencore-doesnt-want-the-ato-to-see-20181007-h16c8v

Bermuda, which is a tax resident of Britain.

But in the new structure, profits and dividends that are streamed upwards from Canada and South America go past Australia to GIIL, the British resident Bermuda company.

Under British law, dividends from overseas operations are tax free.

The ATO inquiry is likely to focus on the huge debt flows that drove Project Everest.

Joint International Taskforce on Shared Information & Collaboration.

https://www.afr.com/news/policy/tax/tax-office-targets-deloittes-ey-kpmg-pwc-as-tax-scheme-promoters-20181008-h16cjz

ATO inquiry is likely to focus on the huge debt flows that drove Project Everest
https://www.afr.com/business/mining/the-documents-glencore-doesnt-want-the-ato-to-see-20181007-h16c8v

PwC admits it designed ‘aggressive’ tax structure to avoid MAAL

The 2016 scheme, which was outlined in The Australian Financial Review on Tuesday, was seen by the ATO as being designed to avoid the Multinational Anti-Avoidance Law by using a foreign partnership arrangement.

#97 Capt. Serious on 10.13.18 at 10:00 am

Isn’t a recession more likely to hit Canada earlier than the US, given we are more leveraged to real estate? I mean, I would expect consumer spending is going to go down as it gets harder to take out HELOCs and as people need to re-allocate money to pay for higher mortgage costs when their mortgages renew. Plus, they’ll feel poorer when their local housing market is going down.
Good times ahead. Good times.

#98 For those about to flop... on 10.13.18 at 10:00 am

Crowdie 18 at 9:16 am
@#56 Flop

“The sellers terminated the listing twice and then reduced the price,also of note it went nowhere near assessment….”
+++++

Sign of the precipice…
That being said.

I cant believe someone would pay even 1.25 for half a duplex in a market that is obviously falling.
I talked to a guy across the street at work who owns his business.
He just bought a house in Port Coquitlam on a busy street.
I’m sure the sellers were “high fiveing” at their luck to be able to find a greaterfool at this stage.

One wonders when the potential buyers out there realize this market is toast and its better to wait this one out.

———–

Morning Crowdie,here is another duplex sale that I put up on my blog last night.

The sellers got burned but they were asking identical 1.25 and someone thought it was necessary to offer 1.30 to soften the blow…

M44BC

/////////////////////

Recent sale report.

Since I’m on duplex duty let’s see what happened with this sale 7 days ago.

The details…

6240 Neville st,Burnaby.

Paid 1.35 April 2016

Sold 1.30 October 2018

Assessment 1.30

So they lost around 8% after expenses but still got more than the 2017 build for this 12 year old build

Strange times indeed…

M44BC

https://www.zolo.ca/burnaby-real-estate/6240-neville-street

#99 Steve French on 10.13.18 at 10:10 am

My balanced portfolio took a 2.95% hit this week.

‘Tis but a flesh wound. In the meantime I’m drinking the pain away.

This one’s for the Smoking Man:

“Here I Am, I’m Drunk Again” – Moe Bandy
https://www.youtube.com/watch?v=V3vILUtU7Sg

#100 For those about to flop... on 10.13.18 at 10:12 am

Here’s one for you to read while having your morning cuppa.

The grumps on the blog need a second serve…

M44BC

“Visualizing the Largest Coffee Exporters Across the Globe.

Drinking coffee means that you will live longer. So says a host of recent research. Even if the exact cause of increased longevity isn’t caffeine, about 2 out of 3 American adults drink a cup of coffee every day. That means the market for getting a cup o’ joe is absolutely enormous, and we decided to figure out which countries are responsible for supplying most of us with our daily morning ritual.

We found the data for our visualization at the CIA World Factbook. We placed a circle on a world map corresponding to the market size of exports leaving each country in 2017, the latest year for which numbers are available. This lets you easily see which countries (and which continents) lead the world in coffee exports.

Top 10 Countries Exporting the Most Coffee

1. Brazil: $4.6B

2. Vietnam: $3.5B

3. Germany: $2.64B

4. Colombia: $2.58B

5. Switzerland: $2.2B

6. Italy: $1.6B

7. Indonesia: $1.19B

8. Honduras: $1.16B

9. France: $1.07B

10. Belgium: $.94B

What insights can be gleaned from our visualization? First and most obviously, export statistics don’t only take into consideration where a particular product is initially produced. For example, Germany and Switzerland are both prominently displayed on the visualization, but that’s not because farmers are able to grow massive amounts of coffee beans there. Instead, they import green coffee beans from less developed parts of the world, roast it, and then ship it around the world. Roasting and flavoring coffee beans takes a lot of electricity and water, resources that developing parts of the commonly don’t have in abundance. It therefore makes a lot of sense to locate these activities close to where rich consumers throughout Western Europe live.

Taking a step back and looking only at countries where coffee beans actually grow, there are a few major players with over $2B in exports, namely Brazil ($4.6B), Vietnam ($3.5B) and Colombia ($2.58B). Combined, they account for 32.7% of the entire world’s exports. Any of these countries alone generate more coffee beans than the entire continent of Africa, a testament to how underdeveloped the industry is there. Ethiopia, Africa’s largest coffee exporter ($938M), doesn’t even crack the top ten rankings.

And yet the international coffee market is relatively dispersed among dozens and dozens of different countries. Only two account for more than 10% of the global export market, and 17 different nations contribute between 1-5% each. That means there’s no shortage of options when it comes to getting your daily fix of caffeine.”

https://howmuch.net/articles/world-map-of-coffee-exports

#101 Steve French on 10.13.18 at 10:16 am

Lord knows Smoking Man would quit, if he could….

———————

Moe Bandy – “Bottle’s Holdin’ Me”

https://www.youtube.com/watch?v=PXSowqAidO0

Now I live across town from the only one I love
No woman wants a man that drinks too much
I know she’d take me back again if I could quit for good
Lord knows I’d quit if I could.

I’m not holdin’ the bottle the bottle’s holdin’ me
I could win back all I’ve lost but I’m not free
In my darling’s loving arms that’s where I wanna be
I’m not holdin’ the bottle the bottle’s holdin’ me.

My friends come around me but they can’t stop the rain
The way you could if you were mine again
And when that evening sun goes down they all hit for home
And leave me here all tied up alone

I’m not holdin’ the bottle the bottle’s holdin’ me
I could win back all I’ve lost but I’m not free
In my darling’s loving arms that’s where I wanna be
I’m not holdin’ the bottle the bottle’s holdin’ me.

I’m not holdin’ the bottle the bottle’s holdin’ me..

#102 IHCTD9 on 10.13.18 at 10:36 am

#4 Karl on 10.12.18 at 4:16 pm

If I am an irreversibly moist for housing for the long term, does it not make sense for me to make a move shortly?
—————

Spin the wheel and take your chances. Lower interest rates now, or lower house prices later.

Personally, I’d rather buy at lower house prices and higher rates. You have to pay the asking price no matter what, but there is quite a bit you can do to reduce how much interest you end up paying.

This is provided you have the cash flow horsepower to do so, and you don’t max yourself out going as big as you can go.

#103 jess on 10.13.18 at 10:40 am

54 Spectacle on 10.12.18 at 8:36 pm

chaos
re:vote tampering…how about swiping /messing with one’s name off a registration databases /redistricing
gerrymander…hacking the vote

Election-Hacking Lessons from the 2018 Def Con Hackers Conference

By Sue Halpern

August 23, 2018
https://www.newyorker.com/news/dispatch/election-hacking-lessons-from-the-2018-def-con-hackers-conference

e.g.
“In a blistering dissent, Justice Sonia Sotomayor wrote that: The Court today goes out of its way to permit the State of Texas to use maps that he three-judge District Court unanimously found were adopted for the purpose of preserving the racial discrimination that tainted its previous maps. […] It means that, after years of litigation and undeniable proof of intentional discrimination, minority voters in Texas—despite constituting a majority of the population of the State—will continue to be underrepresented in the political process. ”

=============================
separate but equal
https://en.wikipedia.org/wiki/Plessy_v._Ferguson
Plessy and Ferguson Foundation

In 2009, Keith Plessy and Phoebe Ferguson, descendants of participants on both sides of the 1896 Supreme Court case, announced establishing the Plessy and Ferguson Foundation for Education and Reconciliation. The foundation will work to create new ways to teach the history of civil rights through film, art, and public programs designed to create understanding of this historic case and its effect on the American conscience.[45]
Plaque at railyard site

Historians gathered with the Plessy and Ferguson families and a member of the Louisiana Supreme Court in New Orleans on February 12, 2009, to unveil a historical marker to memorialize the case.[10] “It is no longer Plessy v Ferguson. It is Plessy and Ferguson”, said Keith Plessy in a radio interview.[46] The marker was placed on the corner of Press and Royal Streets, near the location of the former railway station where Plessy had boarded his train.[46]

The Supreme Court’s blessing of Ohio’s move to remove a half million voters from the rolls because they missed two elections should scare you. But dig this: At least 100,000 of those voters, mostly in Democratic areas, actually only missed one election. Being on the Crosscheck list and not returning a postcard was counted by GOP Secretary of State rules as a “missed” election.

For more on voter caging and
https://www.gregpalast.com/did-the-supreme-court-just-legalize-caging/

https://thehill.com/homenews/campaign/410839-53k-georgia-voter-registration-applications-on-hold-in-kemps-office-reportVoting rights become a flashpoint in Georgia governor’s raceVoting rights become a flashpoint in Georgia governor’s race

By Ben Nadler | AP
October 9

ATLANTA — Marsha Appling-Nunez was showing the college students she teaches how to check online if they’re registered to vote when she made a troubling discovery. Despite being an active Georgia voter who had cast ballots in recent elections, she was no longer registered.

“I was kind of shocked,” said Appling-Nunez, who moved from one Atlanta suburb to another in May and believed she had successfully changed her address on the voter rolls.

“I’ve always voted. I try to not miss any elections, including local ones,” Appling-Nunez said.

She tried re-registering, but with about one month left before a November election that will decide a governor’s race and some competitive U.S. House races, Appling-Nunez’s application is one of over 53,000 sitting on hold with Georgia Secretary of State Brian Kemp’s office. And unlike Appling-Nunez, many people on that list — which is predominantly black, according to an analysis by The Associated Press — may not even know their voter registration has been held up.

Tuesday is Georgia’s deadline to register and be eligible to vote in the November General Election.

Kemp, who’s also the Republican candidate for governor, is in charge of elections and voter registration in Georgia.

Corruption & Money Laundering
European Getaway: Inside the Murky World of Golden Visas

How mismanaged ‘Golden Visa’ schemes are enabling corruption on an unprecedented scale, and what EU institutions must do about it

https://www.globalwitness.org/en/campaigns/corruption-and-money-laundering/european-getaway/

=============

#104 Deplorable Dude on 10.13.18 at 10:44 am

#83 AB Boxter….’Even with increasing dividends, on a declining portfolio this is a tough way to grow wealth’.

My priority is stable growing income, which is what happens with increasing dividends…:-) mine are already up over 6% ytd.

Those juicy dividends keep paying out…regardless of market hiccups :-)

Tough way to grow wealth? I’ll disagree. Big fan of the Tom Connolly dividend growth strategy. 12% annualised if you can pick good quality companies and stick it out for the long term.

I live off the income from stable companies with intrinsic value. Market corrections are noise, prices will recover and grow,I try to ignore it. I don’t have to worry about selling in a falling market which is an issue with folks living off the 60/40 model.

It’s a simple model I understand, I like it. Not for everyone as you say.

#105 AB Boxster on 10.13.18 at 11:25 am

#86 Shawn Allen on 10.13.18 at 7:53 am

Once it is extracted from the ground Canada nor any gov’t owns it. It belongs to the extractivists.”

*****************************
Exactly, the extracted oil belongs to corporations and not to “we the people”.

—————————————————
Actually Shawn. The majority of oil in Canada belongs to the people of Alberta and Newfoundland.

There is no collective ‘we’ own the resource.

Never heard Canadians talk about collective ownership of the forests of BC, or of the dairy industry in Quebec, or of the Quebec Hydro.

But somehow the feds think that oil and energy is something that they must managed for all Canadians.

Well scuse me.
Alberta has managed it just fine.
We found it and developed it and manage it as a world class resource, with best environmental record in the world.

And we have been forced to share a huge amount of its value with pathetic Canadian provinces that have no fiscal control yet still want their pet government projects funded, for the benefit of their citizens.

That’s why the rest of Canada sees it as their resource.

Wealth from it is used to fund the mediocrity of the Canada’s failing regions.

There will either be a pipeline built or there will be a separatist movement in Alberta, the likes that Canada has never seen.

If this province cannot be successful in Canada, then what is the point of being part of it?

‘Oh Canada, our stoned and mediocre land.’

#106 Steven Rowlandson on 10.13.18 at 11:40 am

“The average family income is over $100,000 ”

One of the greatest myths of our time. A myth that is killing our country in many ways.

#107 Shawn allen on 10.13.18 at 12:02 pm

Norway has a bigger one….

As mentioned above by Stan,
Norway collected a lot more in oil royalties than Alberta and has an enormously larger fund as a result.

I think this can be explained by norway’ Oil being cheaper to produce even though it was under the sea and Norway’s oil being lighter and more valuable as well as far closer to market.

In Norway there was plenty of profit left over even after big royalties.

In Alberta the oil sands in particular are high cost production and lower value heavy (until upgraded) and far from market and now land locked with insufficient pipes to take away. So, Alberta oil and especially the oil sands simply will not bear much in the way of royalties or fees charged up front for extraction rights.

Alberta chose to live with very low royalties but gets the jobs and economic activity that resulted.

The fund also suffered greatly because Alberta spends the money and this allowed low income taxes and no provincial sales tax. Possibly that was a bad choice but once that path was chosen it seems impossible to change as the population won’t support higher taxes and a sales tax in order to build up a big heritage fund.

#108 Shawn allen on 10.13.18 at 12:13 pm

Who owns the oil?

Some think Canadians do. Actually it is provincially owned mostly until an exploration license is sold or given and then the exploring company basically owns it albeit royalties may be due as oil is produced.

But what of Alberta’s oil? Do albertans own it?

Certainly as an albertai I own no oil individually.

And do albertans really own it collectively? Maybe it is so where is my dividend? And what of the fact that any Canadian can move at will to Alberta? In what sense do albertans really collectively own the oil?

They sort of do but it really it is the government or the Alberta crown that owns the oil and controls it (until sold in the ground to a producer) Sure we get to vote in a government.

Point is my ownership of Alberta’s oil is very indirect and I have no direct say in royalties or dividends or use of the money.

I would have to invest directly in small oil company if I wanted oil to be duly mine in any direct sense.

#109 jess on 10.13.18 at 12:14 pm

Supreme Court Enables Mass Disenfranchisement of North Dakota’s Native Americans
By Ashoka Mukpo, Staff Reporter, ACLU
October 12, 2018 | 5:00 PM

https://www.aclu.org/blog/voting-rights/supreme-court-enables-mass-disenfranchisement-north-dakotas-native-americans

=========================

2 address choices the state legally provided to the students to register their vote . Out of the total number of students 10k -8k are black

2 weeks before registration deadline, the state recanted the validity of the provided addresses with no recourse!

bottom line:
voting suppression at its finest

According to the Texas Observer, for more than 30 years all Texas high school principals have been required by state law to distribute voter registration applications to all students who will turn 18 that school year. In fact, the law also states applications must be given to students at least twice a year. But according to a new report, the lack of enforcement shows at least 180,000 high school seniors over the last two years have been left without the option given to them.

Specifically, 82 out of 232 counties in Texas that have public high schools with more than 20 seniors enrolled never made a single request for high school voter registration forms, which equates to more than 180,000 potential voters, failing to take the “first basic step in complying with the high school voter registration law,” the report finds.

https://www.texastribune.org/2018/10/11/campaign-congressional-candidate-mike-siegel-disputes-account-workers-/

Campaign for congressional candidate Mike Siegel disputes account of worker’s arrest

A campaign field director was delivering a letter to county officials about voter registration problems at Prairie View A&M.

by Andrew Eversden and Emma Platoff Oct. 11, 20186 PM

https://www.texastribune.org/2018/10/11/campaign-congressional-candidate-mike-siegel-disputes-account-workers-/

https://www.scarymommy.com/report-texas-high-schools-not-registering-students-vote/

#110 AGuyInVancouver on 10.13.18 at 12:16 pm

You still can’t borrow the Gulfstream. – Garth
—-
I hear Belinda’s got a secondhand one available.

#111 Reality is stark on 10.13.18 at 12:21 pm

This is a comedy.
Financial crisis hits.
Drop interest rates to artificially inflate non-productive assets to keep people from jumping out of buildings.
Raise taxes.
Allow public servants to continue to overcharge for their services.
Raise land transfer taxes to steal back the artificial money you created.
Ultimately the private sector becomes much worse off as the incentive to live here wanes.
Now that the real estate party is over you will get to languish in Canadian poverty as GDP gets crushed.
Prosperity in this country going forward is predicated on cost control.
We have to stop being stupid.

#112 Shawn allen on 10.13.18 at 12:24 pm

AB Boxster at 105

Okay it seems AB Boxster personally developed the oil and owns it too.

He also defines himself I guess as much more of an albertans than a Canadian.

Raised in Nova Scotian and living in Alberta now 29 years I consider myself a Canadian period. I have only one citizenship.

As far as sharing with other provinces Alberta writes no Chequers. Simply the federal government spends less income tax in Alberta than it collects there.

AB boxster and all us albertans pay the same federal tax rate as anyplace in Canada but we tend to have higher incomes. What is to complain about there?

I am not rude enough also to point out that Alberta was once just part of the North west territories and effectively owned by the four original provinces and was only granted full resource rights circa 1929 long after it became a province around 1905.

#113 jess on 10.13.18 at 12:44 pm

jane said: “Well RE in Britain is now officially dead. People here never got into flipping and cheap renos as there is never enough product on the market to do it but that limited product is now not moving at all. ”

=======
with no basements …. but some seem to be renting out their garden sheds

https://www.theguardian.com/society/2012/may/09/london-landlords-desperate-tenants

OR

https://www.zedfactory.com/zed-pod

#114 NoName on 10.13.18 at 12:51 pm

#100 For those about to flop… on 10.13.18 at 10:12 am

Interesting thing about that covfefe list, 3 out of 10 countries that export lots coffee, also rank in top 10 arms exports.

related and unrelated to coffee and guns
https://www.youtube.com/watch?v=SljTf7QPw8s

#115 Remembrancer on 10.13.18 at 3:09 pm

#106 Steven Rowlandson on 10.13.18 at 11:40 am
“The average family income is over $100,000 ”

One of the greatest myths of our time. A myth that is killing our country in many ways.
—————————————————————-
For instance? BTW where is that # from?

I hate to be accused of being a government shill, but seems like 3/4 of the “facts” posted in the comments come from sites like “my-baseless-conspiracy-theory-site-that-supports-my-bias-or-particular-version-of-crazy.com”

Hell, we pay for StatsCan, should at least look at it… e.g. https://www150.statcan.gc.ca/n1/daily-quotidien/170913/dq170913a-eng.htm

#116 Remembrancer on 10.13.18 at 3:20 pm

#114 NoName on 10.13.18 at 12:51 pm
#100 For those about to flop… on 10.13.18 at 10:12 am

Its guns or butter as a trade off, so guns and coffee are compatible exports from a macroeconomics pov…

#117 45north on 10.13.18 at 3:25 pm

Guy in Calgary: They would likely reduce or remove the stress test before stopping the normalization of rates. It essentially allows for a 2% “cut in rates” without actually reducing them in the event the housing market falls too far too fast.

Garth’s reply: the stress test has nothing to do with trying to cool the housing market. It is in place to safeguard the integrity of banks’ mortgage portfolios.

B20 was done hand-in-glove with the banks:

Just listen to Dave McKay, who happens to be in charge of the Royal Bank: “We need some of this policy change, particularly the B-20 change, as we are in a highly stimulative monetary policy environment. We needed to layer on some type of policy change; now that the Bank of Canada feels more comfortable raising rates, that’s supposed to be the brake on the economy that we all like to see.”

B20 is in the interests of the banks. Collectively and individually. The die is cast.

#118 45north on 10.13.18 at 3:31 pm

Andrewski: from your link: Using September 2018 data from the Real Estate Board of Greater Vancouver, VANCITYliving noted that Metro Vancouver’s inventory of detached, attached, and apartment residences increased by 36% on a month-over-month basis. This figure represented a markedly sharp pace of growth, from 3,881 listings in August to 5,279 in September.

and from the same link: The total number of properties listed for sale on the MLS® system in Metro Vancouver was at 13,084 in September, rising by 10.7% from the month prior.

I think the number of detached, attached and apartment residences should be about the same as the number of properties. I mean a property can be a retail store which is not a residence, so total number of properties is greater but there’s something here I don’t understand.

#119 45north on 10.13.18 at 3:33 pm

equity: With massive equity, let’s say a loan of 30% of current collateral value, where is the risk for the bank?

Garth’s reply: Banks don’t want property. They know what’s coming.

that’s yuge! Up to now property was pretty good collateral. But let’s stick with the question. Say the bank makes a loan for 30% of a property. The borrower defaults so the bank takes the property and sells it for 50%. So the bank nets 20%. That’s a win. Well no it isn’t because in an environment where prices are falling, the sale drops the price of comparable properties – in which the bank has a stake.

So with the flick of a switch there’s been a devaluation. Silent and sudden.

#120 AB Boxster on 10.13.18 at 3:51 pm

Shawn allen on 10.13.18 at 12:24 pm
AB Boxster at 105

Okay it seems AB Boxster personally developed the oil and owns it too.i
—————————

Many in my family have been involved in the Alberta oil patch.
I hoped to become another until the ahole Trudeau 1 decided to kill the Alberta economy in the 1980s.

As an Alberta I do own this resource. Kind of hypocritical how you left Nova Scotia, where there are no jobs and came to Alberta where there are jobs ,primarily because of the energy industry that Albertans created.

Nice of you to have such heartfelt feelings of being a Canadian.

I felt that way once.
Oh until eastern Canadians decided that our energy product was inferior to products sold to them by Saudi Arabia and Nigeria.
And after BC decided that should American oil and tankers were ok, and it was fine to landlocked Alberta energy products.

Or until the idiots in the federal government decided to review only Alberta projects such as pipelines , based upon upstream and downstream stream emissions , and in terms of the intersectionality of gender and equity, all the while giving a total pass to any other project in Canada such as Quebec’s concrete plants that spew massive amounts of pollution, or Ontario’s auto industry that produces produces a product that create pollution (unlike a pipeline).

That you are a proud Canadian despite the total hypocrisy of all of the above, speaks volumes.

Canada is a once great country, rapidly descending into regional fiefdoms, because of divisive policies of the regions and the stupidity of Canadians who have elected the morons that put their regional priorities, above what is in the interests of a real country.

Sadly, Canadians have become virtue signalling fools, like the current PM who prefers to pit the regions against one another.

While the rest of the world is doing what is needed to build strong economies, Canada is a hypocritical mess that can’t build a effing pipeline to recognize the value of its resources, and with a government that thinks that the most important thing in life is gendre equity.

Canada has become a joke.

Happy to be Albertan though.
Happier after the next provincial election.

#121 C on 10.13.18 at 11:45 pm

Garth why do you feel mortgage rates will not drop back down to 2%? I don’t know about the stress test being around or not but do you not think that during the next down turn the BoC will drop rates back too or below where we were before?

#122 ozy - what about the RENTS on 10.15.18 at 12:07 am

what about the RENTS – how much are these going up in 2019?