Well, this was inevitable.
There are now cracks in the federal Liberal caucus over – guess what? – the stress test. Word is that Lib MPs from both the GTA and Vancouver are pressuring finance minister Bill Morneau to trash or modify B-20. It’s negatively affecting middle class jobs, they allege (realtors, mortgage brokers, drywallers, bankers, coffeetruck drivers) while trashing the dreams of young constituents who yearn to be mortgage slaves.
This comes on the heels of a promise made days ago by Tory boss, young Andrew Scheer that if elected his guys will “modify” the test to make houses more affordable. In this case, “modify” probably means “eviscerate”, making houses more expensive and harder to buy. But that’s political logic for you.
Meanwhile, of course, trashing or changing the stress test is not a Morneau decision. It’s not even supposed to be political. Or debated in Parliament. Instead, it was an action taken by the bank cop, OSFI, in order to protect the big lenders from the Bank of Mom.
You may recall two years ago that real estate was going nuts, fueled in part by parental money. Through gifted bags of money (usually taken from a HELOC on the family home), young buyers got around the stress test of the day – which required that anyone with less than 20% to put down be tested. So Junior’s mortgage ended up in a bank’s portfolio, uninsured, despite the kid being a high-risk borrower. That freaked out the regulator, so the test was expanded to cover all buyers regardless of the size of their down. For the last year and a half everyone’s had to prove they can pay the contract mortgage rate plus 2%. This was also extended to any renewer who wanted to switch lenders.
Combined with a slew of new taxes on houses in BC, a foreign buyers tax in the GTA and absurd property valuations, the test (called B-20) helped croak the market. Sales have slid in most places. Toronto prices have fallen 15-20% from the peak. Vancouver is toast.
The stress test apparently punted about 20% of first-time buyers who no longer could borrow, or only borrow less. And now it’s a political football.
Last week the IMF (International Monetary Fund) warned against changing/gutting B-20, but with a federal election just five months away and whiny, entitled, hormone-laden and house-horny moisters comprising the biggest voting block, you can be sure somethings gonna happen.
In recent days the boss of CMHC, Evan Siddall, has knocked heads with the top mortgage association dude, Paul Taylor. They’ve traded barbs in OpEd pieces, speeches and media skirmishes. Taylor wants B-20 blown up, or at least to exempt renewers and lower the rate bar so more young couples can buy. Siddall argues the test reduces economic risk, further chills the market, chisels away at our terrifying pile of household debt and reduces the role of real estate in the nation’s GDP.
Mortgage blogger and broker makes this interesting comment:
“The latest attack by CMHC’s CEO suggests he may not be as objective as he’d like the public to believe. One has to wonder if he’s cracking under all the criticism, or being asked by his friend and Finance Minister Bill Morneau to take heat off Liberal housing policies.”
Ya think?
Siddall works for the feds. CMHC is a wholly-owned government agency. Its minister is the Honourable Jean-Yves Duclos (not exactly a household name) who’s also responsible for Families, Children and Social Development. Duclos’ web site was last updated a year ago, so he may not be the sharpest political operative. Whatever. We know who calls the shots. Ask Jody or Jane.
Trashing B-20 is a tasty thing to do if you’re trying to stay in office (or get there) but relenting on it would seriously skew the market at a time a mortgage war has dropped rates and job creation’s in high gear. It’s hard to see how increasing demand is going to lower house prices. So taking a foot of the brake is a really bad idea, and Siddall’s correct to stand his ground.
Having said that, there’s no reason Ottawa should be the banks’ patsy. By stress-testing renewers looking to switch lenders, Siddall is trapping consumers, denying them choice.
Meanwhile, making it harder for people to borrow more while keeping new borrowers’ debt to minimum level benefits everyone. We are unbridled, undisciplined, reckless piggies when it comes to loans. The combination of inflated house prices and historic debt is a bomb with the potential to blow up the economy. Look south for evidence.
Alas, this is out of our hands. Out of Siddall’s, too. When elections close in, logic leaves. Given our demographics are now dominated by Millennials, the die may be cast. Last time they got weed. This time a pass on debt.
Sigh. Whither Canada?
143 comments ↓
Just go for the HSBC ten year deal at 3.24%. Lock in a bargain rate with no stress test. Rates could go lower, but it’s not much of a downside from there.
First
In cuckoo’s land ‘affordable’ means more expensive.
CMHC is absolutely parasitic agency with the sole purpose of protecting bank profits.
Of course ‘Ottawa’ or whatever we associate with it due to the school and media programming that teaches us that it is the politicians who call the shots (hint: it is a huge, humongous lie) is banks patsy. It is in fact banks pussy.
The economy of this place is long gone. There is some good/world class companies in the resource sector worth considering in long run, the rest is a fake economy based on extracting profits from an indebted populace that has nothing to show for except some crappy substandard housing which it is told is worth millions. It is worth shit.
Time to turn off the lights and leave/the correct time was 5 years ago.
The stupidity of this sheeple is mind blowing.
So let’s say I was a conspiracy theorist and I thought all pro sports were run for the benefit of gambling and marketing syndicates. I think if I wanted the Raptors to become Canada’s team like the Blue Jays are Canada’s baseball team, I’d let them win the championship.
This should help to establish the team Canada wide like those world series wins did for the Jays. That would be very lucrative for the NBA.
Hate on fans :)
Once again: the people who want B-20 repealed or ‘eviscerated’ are those that have Real Estate to sell. They make up false arguments about ‘poor youngsters who can’t buy homes’ but I have yet to see the sort of baleful wailing from those allegedly frustrated ‘would-be buyers’ like we did back in 2017, when ‘Have $1M need a property to buy’ was a thing.
Home prices in Vancouver and Toronto are DOWN. In par because of B20. You can’t argue with results.
Most who do now currently own Real Estate, are content to wait and watch prices fall further.
Or at least until after the statistics are published for the month of May, in about a week’s time.
Even if B-20 were to be modified, it won’t save Vancouver. It won’t happen before July 1st – the assessment date for local properties. Market values will be registered for Vancouver homes and even though the results will not be mailed out for 6 months, you can be sure the bankers will have the figures well in hand well before then.
Better check that HELOC balance!
The Bank of Canada’s key rate has remained at a level that is basically near-zero (emergency) since 2009.
Since the beginning of 2015, Canada is +3 in the rate hikes department while the States is +9.
The stress test basically only compensates for the lack of rate hikes compared to the States since the beginning of 2015.
If Canada had increased rates along with the States (+9 since the beginning of 2015) instead of bringing in the stress test, would that have been even harder on the emergency rate-addicted/dependent Canadian economy?
As Garth noted in 2008: “Interest rates at zero are deathly worrisome, since they show central bankers are all out of bullets.”
When considering the big picture in Canada, the stress test is too little and approximately a decade too late since Canada has had a housing bubble since 2008 (or earlier) – the result of extreme bubble-blowing policy, most of which came after 2000 (with 5% down payments in 1992).
So… it’s been firmly established that getting rid of the stress test would be a really, really dumb thing to do. Cue Pajama PM and his Apple Dumplin’ Gang. Moths to a flame.
On other news, what fresh hell are the Greens spouting? Suddenly Alberta oil is ethical oil? And we should stop importing crude from people who want to kill us and use what we produce at home? There must be a catch.
Either that or Elizabeth May got her bum hummed by riding around town in that fire breathing red Dodge Viper and is finally woke to the joys of internal combustion. Nahhh…..
Seriously, though, my guess is that the Greens have decided to move to a less radical platform for the election, with the hope of taking the balance of power in a Liberal minority win. And then the green knives will come out. Same as it ever was.
Logic in Canada…..
Sigh.. This is the funniest thing and the greatest oxymoron I ever heard.
Garth. You were in federal cabinet. Based on your experience, is getting OSFI to change its guideline really that easy? Aren’t they separate like the Bank of Canada? Does the PM tell Poloz when to change rates and by how much? I don’t think so.
BTW Garth, I meant to ask, what are people to do when rents become unafforable along with real estate ownership?
Do tell.
Thanks!
Thinking of places like San Francisco and the like where a 1 bdrm costs $4k a month (see here for reference so I don’t sound like a crazy person: https://www.rentcafe.com/average-rent-market-trends/us/ca/san-francisco/ ).
Stress Test Mistake?
Does the 2% stress test apply to a ten year locked in mortgage? If so, that seems illogical and a mistake. The ten year lock in should obviate the need you can handle a 2% increase.
Tough call
How much control do we want government to have over citizen choices/finances/bodies/education/etc
#3 Stan Brooks on 05.27.19 at 4:05 pm
In cuckoo’s land ‘affordable’ means more expensive.
CMHC is absolutely parasitic agency with the sole purpose of protecting bank profits.
Of course ‘Ottawa’ or whatever we associate with it due to the school and media programming that teaches us that it is the politicians who call the shots (hint: it is a huge, humongous lie) is banks patsy. It is in fact banks pussy.
The economy of this place is long gone. There is some good/world class companies in the resource sector worth considering in long run, the rest is a fake economy based on extracting profits from an indebted populace that has nothing to show for except some crappy substandard housing which it is told is worth millions. It is worth shit.
Time to turn off the lights and leave/the correct time was 5 years ago.
The stupidity of this sheeple is mind blowing.
—————————————————————-
I used to think people were joking when they suggested you were in a mental facility, but this latest rant has convinced me.
I’d offer to buy you a plane ticket out of Canada, but you’d need to get out of the rubber room first.
And I didn’t know banks owned cats.
“Who were the Private Wealth Management or other bank decision makers involved in these decisions?”
David Enrich, the author of the most recent article at the New York Times, had written an article in March of this year identifying Rosemary Vrablic as the Private Banker at Deutsche Bank to both Trump and Kushner. She is considered one of the most powerful Private Bankers in New York City. Clearly, the Senators wanted to know if a Private Banker could kill a Federally-mandated suspicious activity report for a politically-connected client.
#1 Keith on 05.27.19 at 3:50 pm
Just go for the HSBC ten year deal at 3.24%. Lock in a bargain rate with no stress test.
_______________________
Keith, this is brilliant. Yeah, rates might go down, but I doubt it. Locking into a 10 year, where most banks 5 year sits is not a bad bet. Heck, I’d highly recommend this.
HSBC is honestly keeping the mortgage rates competitive without needing the Bank of Canada to increase rates.
No need to slash the B20 – I say this being a first time home buyer who currently rents. Let the market correct itself.
HSBC 10 year at 3.24%
https://www.hsbc.ca/mortgages/rates/
Incredible. Is this not a godsend for many? Is there some catch?
How are they funding this? I could not find their GIC rates. Perhaps the crack team of blog dogs can find what they pay on a ten year locked in deposit.
Keith at number 1 says no stress test on the HSBC 10 year at 3.24%.
Anyone who can’t afford a rate increase should grab this rate if they can.
#16 Shawn Allen on 05.27.19 at 4:38 pm
HSBC 10 year at 3.24%
https://www.hsbc.ca/mortgages/rates/
Incredible. Is this not a godsend for many? Is there some catch?
How are they funding this? I could not find their GIC rates. Perhaps the crack team of blog dogs can find what they pay on a ten year locked in deposit.
————————————————————–
Two things:
1. Why do you assume they are funding in Canada?
2. What’s the break fee look like? If you break at year 4 are you paying a penalty calculated to year 10 or 5?
#13 Tater on 05.27.19 at 4:36 pm
Leaving aside you pathetic arrogance and unfounded superiority complex:
Which part of my post is precisely incorrect?
#13 Tater on 05.27.19 at 4:36 pm
Banks own everything, including your dirty laundry and the shirt on your back. You just don’t know it yet.
Instead of gutting the stress test, politicians should try to appeal to millennials by proposing a UBI program and reduced income taxes, funded by increased business taxes and a financial transaction tax.
I’d vote for that twice. It’s worth the risk of jail time.
#16 Shawn Allen on 05.27.19 at 4:38 pm
HSBC 10 year at 3.24%
https://www.hsbc.ca/mortgages/rates/
Incredible. Is this not a godsend for many? Is there some catch?
How are they funding this? I could not find their GIC rates. Perhaps the crack team of blog dogs can find what they pay on a ten year locked in deposit.
I posted here a week ago a link to/a detailed explanation on how banks work and how loans are not backed by deposits.
Loans are from made-up money the interest on which does not exist.
Deposits are not needed to fund loans, just for liquidity.
Did you read it?
Of course not, you already know everything.
According to you loans are made from deposits.
I would say what an ignorant sheeple but that would be an offence to the sheepe.
Re Todays canine photo
No such thing as Insanity..Klaus
Will be interesting out on the campaign trail this fall, the barbecue circuit. Liberals are trying to catch up to the other party’s policy agendas and they’ve got the political 1-2 football that is Judy and Jane. Enjoy your summer folks because this fall we will be in for an incredible election! PS. If Scheer gets in, he’ll say “Because it’s 2019!”
The OECD (my old stomping ground) even says that Canada as one big problem…..
https://betterdwelling.com/canadian-housing-is-the-least-affordable-in-the-world-for-local-incomes/?utm_source=Better+Dwelling+Website+Signup&utm_campaign=a6414bc269-fras_jan_112018-3094981_COPY_01&utm_medium=email&utm_term=0_bde8feedee-a6414bc269-194564433
hey Garth, don’t you think it would be better to lower the amortization to 20 years, and get rid of the stress test. Same effect but more money goes back in the pocket of the home owners. What do you think
#6 Victoria Real Estate Update on 05.27.19 at 4:09 pm
The Bank of Canada’s key rate has remained at a level that is basically near-zero (emergency) since 2009…
_ _ _
One has to wonder why an economy with record low unemployment is needing “emergency rates”. The BOC has backed itself into a Japan Trap.
I dont think the housing market is going to change.
5 more months of dreadful sales numbers before the election to stick a spike in the heart of it…..
Dead market walking no matter how much the politicians try and goose it.
The stress test benefits those who are well capitalized at the expense of those who lack higher incomes or substantial down payments. It has brought down prices of the middle and higher level properties for those with $ and caused the prices of entry level properties to go up. I’m not a fan. It is better for people to chose to be a renter (if they want that), then to be forced into it because they can’t qualify for a mortgage because of the stress test.
Someone is still bullish on Canadian RE.
https://www.bnnbloomberg.ca/home-capital-group-could-become-takeover-target-analyst-1.1264622
Personally I find their mortgage portfolio way riskier than what this guy is saying. I also find it suspicious that he speculates about Home Capital being a takeover target without a word about potential suitors. No major bank can touch them – almost none of their recent mortgage originations meet the stress test.
So who would buy them? Maybe some hapless pension fund, like the one that helped bail them out two years ago? Or maybe analysts are just making up some BS trying to pump the stock and squeeze the shorts. Sure worked today.
#4 Not – would that be like expansion team LV Knights totally winning everything out of no where?
They even tell you it’s Sin City. Read up on its provenance.
Why would Mills for for T2 if he drops B20? It’s the complete opposite, in reality, getting rid of B20 is an attack on Mills.
T2 should get OSFI to increase the power of B20 to get votes from that age group!
Sigh. Garth seems to assume we all know this, but apparently many people do not: the stress test is not, and has never been, about manipulating the housing market. Our banks hold mortgages as an asset class, one that constitutes a large portion of their balance sheet. The stress test ensures that those are good quality assets, because if those assets become “impaired” (i.e., worthless), the banks fail and our money stops working. The whole economy comes to a halt.
If some people end up shut out of owning real estate because OUR ENTIRE DAMN COUNTRY CAN’T AFFORD THE RISK OF LENDING TO THEM, so be it.
N.B., I’m a life-long renter.
I was wrong about HCG and the stress test. Apparently they are subject to it along with the rest. So their new originations must meet it.
Still, weird that they are benefiting from increased business from major bank rejections due to stress test then. That’s been their story for the past year.
Trudeau is going to dump the stress test faster than he dumps a Justice Minister! He will do anything to keep his trust fund butt (not to be confused with Gerald Butts) in power.
Prior to the stress test, all mortgages had to qualify at the posted 5-year rate except the 5-year fixed. Everyone who took a short or variable term qualified at 5.34% or whatever was set at the time.
In November 2016, CMHC capped their loan amounts to $1M – which meant all monoline lenders lost a massive portion of their business, and the banks capitalized on it. That had a profoundly negative effect on the market because it decreased competition for mortgage products/rates.
Furthermore, our government’s poor relations with Iran, Saudi Arabia, China, and others had diminished the inflow of new money into Canada and decreased international investments. And, finally, our extremely heavily taxed economy is not making it any more pleasant to invest/live in major cities.
The stress test was the straw that broke the camel’s back, but it’s just one straw of many. Why is it taking all of the blame?
On the face of it, giving those who are renewing mortgages a pass on the stress test seems reasonable. Except a pile of said renewers must be those who were funded by the Bank of Mom/Dad & thus were exactly the reason why the stress test was initiated in the first place. So where does one draw the line? If it is considered unfair to deny those who are currently unable to qualify, is it not equally unfair to give those who should have been refused a mortgage before the stress test came in a pass now?
#125 Tater on 05.27.19 at 4:07 pm
-Sorry to break it to you but,
“The world stage” is an utter joke, being composed mostly of corrupt banana republics and totalitarian *poop* holes.
Just look at the circus that is the UN for proof.
Anyways, your fortune 500 metric is far too simplistic to focus on. Who cares about a fortune 500 company headquarters when it is surrounded by a violent ghetto? Look at how high Chicago is on that list as an example.
It’s well understood that livability is what matters, and
the GTA is consistently ranked among the most livable cities in the world. Livability is a far more useful metric:
Chicago is actually number 44 (near the bottom), Toronto is 7th (near the top).
https://www.businessinsider.com/most-livable-cities-in-the-world-2018-8
The way I see it, you have a choice. You can complain and fight the progress, fixating on all the negatives and glossing over all positives to confirm your selection bias (I guess you didn’t buy GTA RE and you are pissed off renting? Join the club). Or, you can be part of the progress and move forward and grow with it.
It isn’t stopping.
MF
Good explanation, Mr. T.
Whither Canada?
The economy might wither.
Vancouver Real Estate Flip Flops
@VanREflipflops
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FOR ANYONE WHO THINKS EAST #VANRE COULD NEVER CRASH BY 50%
2466 41st Ave E, Killarney Area, East #Vancouver
1455 sq ft home, built in 1912, on a 2692 sq ft lot
Purchased in 1980 for $107,000
Purchased in 1981 for $123,000
Purchased in 1986 for $63,500
That’s a 49% DROP, and
Strong odds the 10 year fixed mtg for insured purchases will be at 2.59-2.79 between oct – Jan 2020
For non insured add .10-.25
HSBC has huge deposits at almost nothing in Europe
Many European banks and insurers and pension funds are buying up Canadian covered bonds which are backed by Canadian homes
The government is making important tweaks behind the scenes to grow this product in an effort to increase the supply of super cheap mortgage money and help atttact these yield starved “investors”
This game will likely go on a lot longer than most suspect but make no mistake when it ends this will be a doozie
Bond prices and stock prices will suffer a devastating bear market lasting at least a few years
Surely it’s game over no later than early 2030s
But in the next 6-9 months you will have a last chance at a lifetime low on the 10 year
#7 Re-Cowtown
I could not believe it myself when I read the story. Albertan’s (Canadians) have been saying the same thing for 40 yrs; keep the money in our country; use it to move on to new things. The radicals ruined it for us.
Thus like Garth’s blog today; the Mills need a good kick in the @ss. Whatever it takes, they need it!
HSBC Funding source for 3.24% ten year mortgages?
#18 Tater on 05.27.19 at 4:43 pm quoted me and asked:
#16 Shawn Allen on 05.27.19 at 4:38 pm
HSBC 10 year at 3.24%
https://www.hsbc.ca/mortgages/rates/
Incredible. Is this not a godsend for many? Is there some catch?
How are they funding this? I could not find their GIC rates. Perhaps the crack team of blog dogs can find what they pay on a ten year locked in deposit.
————————————————————–
Two things:
1. Why do you assume they are funding in Canada?
2. What’s the break fee look like? If you break at year 4 are you paying a penalty calculated to year 10 or 5?
************************************
Well, I don’t remember making that assumption but yes I suspect they fund in Canada. I was asking where if anywhere can they find people to lend to them at say 2.24% locked in ten years so they can make a 1.0% spread?
10 year bank of Canada bond is down close to 1.6% was 1.75% last week. So, they may be able to find pension funds and such to loan them 10 year locked in deposits at say that 2.25%. That could explain it.
The Bank Act makes all mortgages open for repayment after 5 years. No interest rate differential applies. Though I did read the other week that 3 months interest might apply as penalty (not sure that is true). The Bank Act makes these mortgages risky for HSBC since borrowers have the option to pay off with little or no penalty at year if rates are lower. But can stay at 3.24% if that is to their advantage.
CMHC versus Big Banks..
How more incestuous can one get ?
This is Richard, the guy who wrote the letter in Garth’s previous post.
For those who are interested, in the previous thread, I’ve responded to some of the comments directed at me. (For those uninterested, good decision….)
A Response to Rude Angry Stan who quoted me and asked:
#22 Stan Brooks on 05.27.19 at 4:59 pm
#16 Shawn Allen on 05.27.19 at 4:38 pm
HSBC 10 year at 3.24%
https://www.hsbc.ca/mortgages/rates/
Incredible. Is this not a godsend for many? Is there some catch?
How are they funding this? I could not find their GIC rates. Perhaps the crack team of blog dogs can find what they pay on a ten year locked in deposit.
I posted here a week ago a link to/a detailed explanation on how banks work and how loans are not backed by deposits.
Loans are from made-up money the interest on which does not exist.
Deposits are not needed to fund loans, just for liquidity.
Did you read it?
Of course not, you already know everything.
According to you loans are made from deposits.
I would say what an ignorant sheeple but that would be an offence to the sheepe.
************************************
Stan, does it really make sense that banks can lend loans without any cost of funding? Would that not be too good to be true for bank share owners? And why do banks pay any interest on GICs if what you conclude is true.
You misinterpreted the bank of England paper.
The bank paper I believe said that a bank can make a new loan by an accounting entry. Debit Loan receivable from Stan, credit deposit owned by Stan. Stan has a loan and a deposit. The bank has not had to come up with any money. Yet!
But, Stan that is step 1. Have you really even obtained a loan when it is still sitting at the bank in a deposit account waiting to be spent?
Step 2 you spend the loan. Your created-from-thin-air-but-owned-by-you deposit leaves the lending bank and ends up in a different bank. The lending back has to send cash to the bank where your deposit ended up after you spent it. (Or the lending bank gets its account decreased at a settlement bank and the receiving bank gets an increase). You still owe the loan to the lending bank.
Stan, it sounds like you have never taken an accounting course or don’t remember how a simple balance sheet works. Look at any bank balance sheet and you will see loans offset mostly by deposits. I recommend Canadian Western Bank as it is almost a pure lending operation. In fact you may see that deposits EXCEED loans rather than there merely being a small amount for liquidity.
It is cash reserves that they need for liquidity. It seems you are mixing up the two sides of the balance sheet. Cash in the vault or at the settlement bank is a bank assets. Deposits are a liability of the bank owed to tis depositors.
Even though deposits are indeed created by the banking system as a whole they are, and this is important, OWNED, by depositors. The banks pay at least some interest on most deposits.
I invited you to look me up and I will send you a little article I wrote explaining bank balance sheets.
The Bank of England article is not wrong. But it has led to misinterpretations.
You can continue to be angry or you can choose to stop and breath and maybe realize something is not quite right in your assertion that banks have no cost to fund loans.
Just raise the prime rate by 2% and eliminate the stress test. I noticed 7% inflation at Chipotle this year. Almost 15% at the local Pizza restaurant. My rent up 4.5%
Of course corporations don’t need food or shelter and the Government of Canada represents corporations not people. This is why they view inflation as non existent. Computers always go down in price.
Mortgages are funded by deposits, Stan… but it’s not $1 in and $1 out. Not all mortgages would crash at once, so they can loan a multiple of their deposits that yes, creates $$$, but it’s nit really money it’s more like a promisory note.
Probably the last time I’ll take the bait
In another year, Canada will either be in, or entering, its worst recession in decades. We are already treading water, and now US and global growth are slowing down. Canadians are so leveraged that what might have been a mild recession in the past will become a deep one like the US in 2008/9.
Don’t think so? Ask the parents that took $200k on the Heloc for junior’s downpayment, and now find their house valued at $300k less. Bet they are not feeling “wealthier than they think”…
This country sucks now. High taxes, long cold, frigid weather and they give you nothing or close to peanuts in the bank.
This country is made for losers funded by government and the UN. Sorry folks, Canada is not a great country anymore. This is coming from a 4th generation Canadian.
#50 – Sorry folks, Canada is not a great country anymore. This is coming from a 4th generation Canadian
Guessing you’re yearning for the good ol’ days? ha!
Have you done much traveling in this world? The poorest people in Canada lead better lives than 70% of the rest of the world.
Live ‘glass half full’… much better way to get through life
According to Zolo, YoY prices in Toronto are up. Sales are stable, if not a bit higher. I don’t see the cause for alarm.
This economy is a house of cards.
The whole thing has been predicated on an artificial housing market that is deteriorating. The government wants to revive it to suck every last dollar they can to fortify unsustainable public service pensions.
They will not rest until they have sucked every last dollar out of you.
Don’t fool yourself, government economists have known this for years. But this is not a responsible government and the people are drunk on social justice and oblivious to their fate.
You’ve been duped.
#51 yorkville renter
Good points but I have done alot of travelling and noticed; although their lives are certainly not easy but they seem to be much happier (not all), have a good family and friend structures and enjoy the simple things.
Which is better will always be debated but life in this country is not easy.
The Jag saw Evan Siddall interviewed by Amanda Lang recently and the guy oozed common sense and decency. Qualities in low supply these days. Anybody wants a piece of him they will need to go through me. He’s one of those innocents whose face betrays his emotions, and at the end of the interview when the issue surrounding the amount of debt Canadians are carrying comes up one witnesses the wave of concern and resignation that sweeps over him. Enlightening.
It’s not just the mortgage debt, but all the ‘other’ debt piling up. House mad sheeple who beg, borrow and steal their way to put together down payments for themselves or their basement moisters. Did I leave out “lie their asses off”? Rack up those credit cards at 28% and don’t look back at the Mac truck that is gaining on you every second. Mercy. They will crash the economy. The bleating realtors, developers and other interested real estate parties care only about moving the merchandise, not the troubled family economics or lives they leave behind in ruin. Here is a link to a speech given recently (February 2019) by an OSFI representative at the Toronto Economic Club. Give a read of their defense of the stress test and other related issues:
http://www.osfi-bsif.gc.ca/eng/osfi-bsif/med/sp-ds/Pages/cr20190205.aspx
Thank you Evan Siddall for everything you do. The International Monetary Fund also applauded your efforts recently if I am not mistaken.
Viva Stress Test Libre!
> Just go for the HSBC ten year deal at 3.24%. Lock in a bargain rate with no stress test. Rates could go lower, but it’s not much of a downside from there.
Rates could go higher, decreasing the purchase price considerably, more than offsetting a mortgage at a higher rate.
> The stress test basically only compensates for the lack of rate hikes compared to the States since the beginning of 2015.
This is exactly what they are trying to do. On the one hand low rates bails out the existing borrowers. On the other hand the stress test stops more people diving in.
In theory. In practice it’s not going to work. The damage has already been done and the pain will be felt.
The time for BoC to do their job was over the past 10 years. But Carney didn’t, and son of Carney, Poloz, didn’t.
Too late.
> How are they funding this?
https://bankunderground.co.uk/2015/06/30/banks-are-not-intermediaries-of-loanable-funds-and-why-this-matters/
https://www.rba.gov.au/speeches/2018/sp-ag-2018-09-19.html
Two major national banks stating that banks create money when they lend.
Banks are not intermediaries of funds.
Answer: nobody is funding it.
> Mortgages are funded by deposits, Stan
Nope. Garth you have a finance blog that people have read for years and they don’t know the most basic details.
53 Reality is stark on 05.27.19 at 8:06 pm
Lmao look at this sad litany of complaints cobbled together into one long sad paragraph of drivel.
You can tell who missed out on the housing boom. You can tell who doesn’t have any pension. You can tell who is blaming everyone else for their failures.
Let me guess, it’s “da Guberment’s” fault your toast was burnt today too ?
MF
54 acdel on 05.27.19 at 8:13
I can actually say my life (so far luckily) has been pretty easy.
Please show me one place on planet earth where life is “easy”? That doesn’t exist. Even if you are born into wealth, someone at some point had to work for it.
And people are “happy” in other places because they have no other choice. They either develop a large social/family network or they starve and die. It’s simple. Usually all you have to do is dig a little below the surface to find the rotten underbelly.
Here in the west you can survive by yourself if you wanted to. It’s up to the individual to cultivate meaningful relationships if they want to or not.
MF
Invest in banks and stop crying :)
The end of the Libral party.
Climate Barbie in a bar in Newfoundland braging about how stupid people are
“Just Scream out your talking point, do it often . The idiots will beilive you.”
That clip will be played come election time.
The tree huggers will vote green. The normals will vote for Globalist light. Mad max, Soros vote splitting minion retires.
What an idiot she is.
I might be tempted to overlook that HSBC are totally corrupt crooks to go after their rate, but then sanity set in.
Georgist and the Non Sequitor
Banks are not intermediaries of funds.
Answer: nobody is funding it.
******************************************
True the banking system as a whole creates deposits when they make a loan. And, the deposits rarely leave the banking system. They just get transferred one bank to another. (Rarely taken out in paper cash).
But the fact that the deposits are owned initially by the borrower and then whoever they are spent with and especially that they move from bank to bank is important.
Each bank makes loans that may not be repaid for years. At the outset the created deposit self-funds the loan. But then the deposits then move as the loan is spent. Each individual bank has to compete with interest rates, marketing and services to retain and attract deposits to keep on funding the loans.
The banking system as a whole is not an intermediary, but it seems to me that each individual bank is. Consider Canadian Western Bank that makes loans largely to commercial customers (corporations) and funds these with deposits largely from individuals (not corporations). From the perspective of CWB they sure look like an intermediary.
Is it not too good to be true to think that a bank has no cost of funding? CWB has assets of $29 billion (largely loans of $26 billion). These assets are funded by deposits of $24 billion Debt of $2 billion, and shareholder equity of $2.6 billion. This was at the end of October – fiscal 2018. The market cap of the bank (value of the equity) is about equal to book value $2.6 billion.
This whole nonsense discussion is driven by a few people learning a little bit about how banks work and then jumping to the attractive but very silly conclusion that banks have no cost to fund loans. No, they are not golden geese. Else why would banks trade little over book value and generally at most 2.5 times?
Every bank annual report speaks of its funding sources and funding costs.
None of your links from a major national bank state that “banks have zero funding costs” or words to the equivalent.
The conclusion that banks have no funding costs or that no one funds loans is not a correct conclusion from the fact that loans create deposits.
Consider, I can personally lend you $10 million right now if I stipulate that you must allow me to hold your $10 million as a deposit. But if you want to take your deposit away, I can’t do it unless I attract another person to give me $10 million to hold.
#52 – Isn’t Zola owned by the real estate industry?
Folks, listen to Ross Kay, Howestreet.com May 21st. The Worlds Most Wrongly Answered Question, regarding the B-20 stress test
Say goodbye to Kanada if nuts with World Ending Tomorrow placards get in.
Our leaders are to be Climate Wizards. With just the right amount of social and financial control they will smite the Angry Climate Gods, saving humanity. In only 10 years!
Technology for better buildings, growing food, etc? We don’t need no science progress.
Hey Greenies so nice of you to dove tail with UN Agenda 2030 timeline. Don’t think we didn’t notice.
https://www.greenparty.ca/en/mission-possible
” Holding to 1.5 degrees is not
negotiable. It is do or die”
“The Green Party has Canada’s only comprehensive plan to avoid climate catastrophe.”
“Accept, at every level of government, that climate is not an environmental issue. It is the gravest security threat the world has ever seen.”
“60 per cent GHG reductions against 2005 levels by 2030; zero emissions by 205”
Don’t look now but an ALT lender’s stock is upwards surging:
C : HCG – HOME CAPITAL GROUP INC.
There are now cracks in the federal Liberal caucus over – guess what? – the stress test. Word is that Lib MPs from both the GTA and Vancouver are pressuring finance minister Bill Morneau to trash or modify B-20. It’s negatively affecting middle class jobs, they allege (realtors, mortgage brokers, drywallers, bankers, coffeetruck drivers) while trashing the dreams of young constituents who yearn to be mortgage slaves.
which is what you get when housing is such a big part of the economy
it’s such a big part because debt is such a big part and if it gets any bigger the whole thing is coming down like a house of cards
since the Lib MPs from the GTA and Vancouver know so much, maybe one of them would like to be finance minister. By-the-way, Bill Morneau is from Toronto Centre.
#101 Bobby on 05.27.19 at 10:12 am
For #52 Don,
I encourage you to read a variety of news sources, not just the Tyee or Centre for Policy Alternatives newsletters. I don’t recall any Liberals being indicted but do recall some NDP going to jail after the Nanaimo Bingo scandal. Of course, who can forget Glen Clark’s deck.
***************************
Thanks for the encouragement but, I read everything I can and my search is far and wide.
If you took your own advice, you would agree with me or continue to be blinded by partisanship…your choice. In your Party’s defence you reached back to the 90s, skipping past the last 12 years..nicely done towing the Party line?
So exactly who/what are your news sources. I trust it is more than just post media newspapers and Global TV? If not…YIKES! You can’t find out what’s going on without analyzing all sides of a story.
The reason I became a strategic voter was out of need not desire. I can’t stand corruption and there has been enough. Time to take the medicine and live by the rule of our law.
The show at over yet…pass the popcorn. Time to deal with federal politics.
DELETED
Roof #2 of 3 is shingled.
The black flies are out in force.
Doug, Doug, Doug, Doug.
You are the man.
Ford fest 2020.
Lovin it
#28 crowdedelevatorfartz on 05.27.19 at 5:17 pm
I dont think the housing market is going to change.
5 more months of dreadful sales numbers before the election to stick a spike in the heart of it…..
Dead market walking no matter how much the politicians try and goose it.
******************************
I agree. Sentiment changes fast and it has been going on since last year. 5 months is a long time to wait in this case.
Without the Stress Test prices are still too high.
The everlasting increasing real estate values has been proven wrong.
Then you look at the usual suspects who are lobbying to have the stress test removed/altered. Of course…with their potential clients in mind – those yet indebted squeezed buyers. ah ha
DELETED
I am not sure over the long run it matters whether the stress test is applied to renewals or people shopping lenders or not. Assuming there hasn’t been an income altering event like a job loss or illness, at some point in the future everyone renewing their mortgage will have already passed the stress test, presumably with less equity and lower income.
In addition, if the safety of the banking system is the goal, stress testing people who already have a mortgage does not improve anything. The mortgage is already in the system. All stress testing an existing mortgage does is prevent people from shopping lenders and getting a lower rate, which could conceivably increase the risk of default.
So to me this is another example about how people have such a hard time thinking through the probable outcomes of policies and decisions. Stress testing new borrowers makes sense if the goal is to provide a cushion to the banking system and to borrowers in case of rising rates. Stress testing existing borrowers accomplishes neither of these goals. The stress test should only be applied to existing borrowers in the event they are attempting to borrow more.
————————-
This sort of policy confusion is amply seen in the tax system as well. There really isn’t a good reason for there to be a multiplicity of different taxes placed on various points of economic activity unless the goal is to hire more tax workers. It’s just making something that could be really simple and transparent complicated and opaque. There really only needs to be one tax.
For example, I have long argued that carbon taxes are simply an increase in the HST, and it would have been much simpler to raise the HST if more revenue from consumption taxes is the goal and even if some sort of environmental concern was the goal. With a higher HST, people would buy smaller cars, smaller houses, less of everything really, as they only have so much money. Mission accomplished. No need for a brand new bureaucracy. But that doesn’t sell as well as “saving the planet”.
All we need is one tax, probably the income tax with capital gains included at some percentage as income. Set it at the appropriate level and you don’t need any other taxes. You don’t need property taxes, as those have to be paid out of income. You don’t need the HST because that has to be paid out of income. You don’t need carbon taxes because that has to be paid out of income. In fact you need no other taxes. And since we have a graduated tax system, the people who are consuming the most (the rich) would pay a larger amount per dollar earned because they are the big spenders. Right now a person who buys a used Corolla from a dealer pays the same HST rate as a person who buys a brand new Mercedes. If we scraped the HST and raised income taxes by the appropriate amount the person buying the used Corolla would pay a significantly lower rate than the person buying the new Mercedes. Even in the case of property taxes it is generally the case that the people with the big houses have the high incomes, so the taxes are entirely redundant.
Plus things like the HST and carbon taxes are in effect pole taxes and they affect the poor disproportionately. The homeless guy pushing a cart to the bottle depot has to pay HST when he gets a sandwich at 7-11. How is that fair?
Even something like tobacco taxes can be seen as pole taxes. Sure they justify them by saying “it’s for your own good”, but do you think rich people quit smoking for economic reasons? They are already smoking $100 Cuban cigars. They don’t care about the cost. Sure some poor people have to give up cigarettes because they can’t afford them, but if you set the income taxes high enough they won’t be able to afford them anyway. And the same applies to alcohol. Do you think the rich care how much of the $400 they paid for a bottle of fine Scotch or wine was tax? No they don’t. But that same tax applied to Pabst beer makes it unaffordable for the poor.
The proper way to go is a graduated income tax (including capital gains in some amount, start with 50% as is the case now I think because under normal circumstances 50% of the gain, maybe more, was inflation), and no other taxes of any kind.
people come here to cheer b20???
folks, b20 is proof- you dont have a government,
the bank is your sovereign
beg, beg nice
This part contradicts your earlier statement:
> Each individual bank has to compete with interest rates, marketing and services to retain and attract deposits *to keep on funding the loans*.
I think maybe you are trying to say that they need to retain deposits for their loan to deposit ratio?
https://www.investopedia.com/terms/l/loan-to-deposit-ratio.asp
The original poster posed the question of where the funding would come from. Banks create credit. They do not need deposits to do this. What they need is demand to borrow.
The real problem comes in when banks create credit against unproductive behaviour, such as property speculation.
When banks create credit at a rate *greater than* the rate of true growth, we see inflation take hold and people get poorer in real terms.
Land prices are *not* included correctly into inflation figures, even though it’s the main source of our problems. By design.
Now we are boxed into a low credit environment, where only further speculative behaviour seems to pay, leading to a slow death of the West as rentier activity is the only game that pays.
As the Bank of England link states, there is no upper ceiling on how much credit banks can create, other than the willingness to borrow. And when a bubble forms and every person is talking about housing gains, this can get very high indeed.
Again, it really does show the depth of the problem, that people visit this blog every day for years. All “thanks for the info, Garth”, yet we can see very few have any idea how banking works.
Mr. Berlusconi goes to Brussels.
Not a Capra movie.
Just testimony to the screwed up state of Italian politics.
Dolce,
Be free to counter.
#110 Remembrancer on 05.27.19 at 1:07 pm
#106 Ponzius Pilatus on 05.27.19 at 11:32 am
PP, not to be mean and applaud you for supporting the kid, just sharing some life wisdom, if you have to fly somewhere and then drive 300KM for a Junior B tryout, maybe its time to reconsider the dream of the big show…
———-
It was a Junior A tryout.
But I get your drift.
No dream of the big show, just want to see how far he can go.
We go to tryouts in BC and I see cars with Wisconsin licence plates.
I thinks it’s nuts.
#48 yorkville renter on 05.27.19 at 7:00 pm
Mortgages are funded by deposits, Stan… but it’s not $1 in and $1 out. Not all mortgages would crash at once, so they can loan a multiple of their deposits that yes, creates $$$, but it’s nit really money it’s more like a promisory note.
—-
I would like to lend my same $ to several people at the same time and collect interest from all, or pay several bills at the same time with the same $.
I don’t mind if the ones, who accept my same $, as if it was exclusively theirs, call it a promissory note or whatever.
Hook me up, bro.
Property tax last instalment arrived today. For 2019 its $19,278/yr. Happened to be shredding my 2010 receipts. Then it was $10,114/yr. Sewer & water went from $360/yr. to $680/yr. Using the magic formula for doubling your money with compound interest, (interest X years =72) we get 8%/year compounded Vancouver tax increases.
But don’t let that discourage anybody wanting to jump into the market here. When prices drop the assessment goes down & taxes will follow. NO, really, Vancouver City Hall will reign in their spending, not increase the mill rate & let taxes follow the market down. No really.
German Green Party came in second in the EU vote.
They could possibly form a coalition with the Social Democrats who dropped to third.
In the next election.
Greens in Canada are gaining momentum, too.
The Liberals are losing ground.
A NDP/Green coalition could be possible.
@ #31 TurnerNation on 05.27.19 at 5:53 pm
#4 Not – would that be like expansion team LV Knights totally winning everything out of no where?
They even tell you it’s Sin City. Read up on its provenance.
===============================
Yeah, kinda like that
So if we apply those metrics, will it be Boston or St. Louis hoisting the cup this year?
Respectfully speaking I’ve purchased yet another rental unit in the Okanagan. Both sides of a duplex netting over $ 1100.00 cash positive after mortgage including my down payment. I have 4 homes now in the OK plus my own home .. all with a positive return. (Except my own) The last one was purchased only 7 months ago. Always hearing doom and gloom being a land owner.. Right.. ?
I still don’t see “nor agree” with the logic against home ownership…. Sorry.. I’m all in.
OFSI B20 was put in place to protect the big banks balance sheets against repatriation of dollars back to America, a couple of our institutions came close to failing BASEL III rules at the time.
#59 georgist on 05.27.19 at 8:42 pm
> Mortgages are funded by deposits, Stan
Nope. Garth you have a finance blog that people have read for years and they don’t know the most basic details.
The most dangerous are the half educated who think they have it all figured out and stick to the myths and untrues they were told long time ago.
Notice how Shawn Allen is persistently coming with wrong interpretations of and elaborations on key topics despite the existence of sufficient independent research on it, he simply refuses to acknowledge it.
He is not even acknowledging that ‘other deposits’ in the banks balance sheets represent bank made money as to counterbalance the loans in a real-accounting-like form. For him this is somebody’s savings.
The mess we are in is mostly due to that ‘know it all’ ignorant, arrogant, with false sense of superiority attitude.
Hey @Bobby.
How about this >>> https://thebreaker.news/news/basi-virk-tax-trouble/ May 27, 2019.
“Exclusive: The $6M deal that saved BC Liberals from testifying in court turns into tax trouble for Basi and Virk”
Bob Mackin
https://www.reuters.com/video/2019/05/21/a-bubble-looms-over-chinas-heartland?videoId=552773000
Bubble trouble in China, the Worlds largest housing market…now a buyers market?
In Canada, it seems we only have 1 industry now…housing. the government and BOC know this. For years and years I tried to believe that those in power had the nuts to allocate all this new money to the proper sources of industry and benefit all Canadians and drive a real economy. With news of what you say Garth, iv got to throw in the towel…
All government institutions are there to benefit 1 industry, housing and the debt machine. To them, they will do anything now to prop this up. It seems to me, negative interest rates are next. 40 yr am,s..
They will stop at nothing…and death to all other real productive industries.
Canada has become it’s own ponzi scheme.
assets (equity)establish net worth and is Cash when you sell. b20 does not consider net worth in establishing ‘credit worthiness’, only income.
if someone has the cash to buy a house, excellent credit score, low income (pensioner for example), and prefers to have a mortgage and pay the mortgage with his cash, he wont get the loan, thats the b20 fraud
#24 Roger Widdelle on 05.27.19 at 5:04 pm
Will be interesting out on the campaign trail this fall, the barbecue circuit. Liberals are trying to catch up to the other party’s policy agendas and they’ve got the political 1-2 football that is Judy and Jane. Enjoy your summer folks because this fall we will be in for an incredible election! PS. If Scheer gets in, he’ll say “Because it’s 2019!”
————————————
Not so fast.
Some rumours afoot that Twinkle Toes might wait until next spring. The fixed election date law really doesn’t prevent the government from calling an election whenever it wants.
BNS increased its loan loss provision 35%. Prob more to come…
#38 MF on 05.27.19 at 6:15 pm
#125 Tater on 05.27.19 at 4:07 pm
-Sorry to break it to you but,
“The world stage” is an utter joke, being composed mostly of corrupt banana republics and totalitarian *poop* holes.
Just look at the circus that is the UN for proof.
Anyways, your fortune 500 metric is far too simplistic to focus on. Who cares about a fortune 500 company headquarters when it is surrounded by a violent ghetto? Look at how high Chicago is on that list as an example.
It’s well understood that livability is what matters, and
the GTA is consistently ranked among the most livable cities in the world. Livability is a far more useful metric:
Chicago is actually number 44 (near the bottom), Toronto is 7th (near the top).
https://www.businessinsider.com/most-livable-cities-in-the-world-2018-8
The way I see it, you have a choice. You can complain and fight the progress, fixating on all the negatives and glossing over all positives to confirm your selection bias (I guess you didn’t buy GTA RE and you are pissed off renting? Join the club). Or, you can be part of the progress and move forward and grow with it.
It isn’t stopping.
MF
—————————————————————–
Bought my first place in 08, sold my last one in 2016. I have no bitterness whatsoever about the housing market. I’ve been renting quite happily for the past 3 years and if the rent to own ratio stays as skewed as it is, I’ll continue to rent. So, please don’t project your bad decisions and subsequent bitterness to me.
Let me guess, you’ve never lived or worked outside of Toronto, have you? So you just don’t know what you’re talking about. London, NYC, SF, HK are all world class cities. With excellent public transit, culture, industry and opportunity. Toronto is, was, and will continue to be an also ran when measured against those cities.
Doesn’t mean Toronto isn’t a fine place to live.
#19 Stan Brooks on 05.27.19 at 4:51 pm
#13 Tater on 05.27.19 at 4:36 pm
Leaving aside you pathetic arrogance and unfounded superiority complex:
Which part of my post is precisely incorrect?
—————————————————————-
Banks don’t own cats.
And as for my superiority complex, let me be clear: I am certain I’m superior to you. Everyone else here, nope. But you? Oh yes.
@#84 Political Pontificating
“A NDP/Green coalition could be possible.”
*****
Nothing would surprise me.
Scheer, the younger version of Harper, seems about as approachable as a rattlesnake in a slowly heating skillet.
The most uninspiring, dreadful choice for leader since Joe Clark.
As for a Green/NDP coalition…..joining with the Libs……
prepare for much, much higher taxes.
I’ll hold my nose and vote Conservative , if only to end the embarrassment of the last 4 years of politically correct lecturing from a rich kid with half his father’s intellect and twice his mother’s looks.
( He looks great until he opens his mouth and begins to speak…… a shame that)
#77 Nonplused on 05.27.19 at 11:21 pm
This sort of policy confusion is amply seen in the tax system as well. There really isn’t a good reason for there to be a multiplicity of different taxes placed on various points of economic activity unless the goal is to hire more tax workers. It’s just making something that could be really simple and transparent complicated and opaque. There really only needs to be one tax.
For example, I have long argued that carbon taxes are simply an increase in the HST, and it would have been much simpler to raise the HST if more revenue from consumption taxes is the goal and even if some sort of environmental concern was the goal. With a higher HST, people would buy smaller cars, smaller houses, less of everything really, as they only have so much money. Mission accomplished. No need for a brand new bureaucracy. But that doesn’t sell as well as “saving the planet”.
All we need is one tax, probably the income tax with capital gains included at some percentage as income. Set it at the appropriate level and you don’t need any other taxes. You don’t need property taxes, as those have to be paid out of income. You don’t need the HST because that has to be paid out of income. You don’t need carbon taxes because that has to be paid out of income. In fact you need no other taxes. And since we have a graduated tax system, the people who are consuming the most (the rich) would pay a larger amount per dollar earned because they are the big spenders. Right now a person who buys a used Corolla from a dealer pays the same HST rate as a person who buys a brand new Mercedes. If we scraped the HST and raised income taxes by the appropriate amount the person buying the used Corolla would pay a significantly lower rate than the person buying the new Mercedes. Even in the case of property taxes it is generally the case that the people with the big houses have the high incomes, so the taxes are entirely redundant.
Plus things like the HST and carbon taxes are in effect pole taxes and they affect the poor disproportionately. The homeless guy pushing a cart to the bottle depot has to pay HST when he gets a sandwich at 7-11. How is that fair?
Even something like tobacco taxes can be seen as pole taxes. Sure they justify them by saying “it’s for your own good”, but do you think rich people quit smoking for economic reasons? They are already smoking $100 Cuban cigars. They don’t care about the cost. Sure some poor people have to give up cigarettes because they can’t afford them, but if you set the income taxes high enough they won’t be able to afford them anyway. And the same applies to alcohol. Do you think the rich care how much of the $400 they paid for a bottle of fine Scotch or wine was tax? No they don’t. But that same tax applied to Pabst beer makes it unaffordable for the poor.
The proper way to go is a graduated income tax (including capital gains in some amount, start with 50% as is the case now I think because under normal circumstances 50% of the gain, maybe more, was inflation), and no other taxes of any kind.
———————————————————–
———————————————————–
What about all those people who don’t earn anything in Canada? (Students who is funded by their parents located in foreign countries yet are able to buy large multi-million dollar homes?)
Would they effectively pay no tax if we were to stop collecting consumption taxes? (while still using our roads, social services etc)
They probably pay more in property tax than you do in income tax. – Garth
#30 Rating Ranter on 05.27.19 at 5:46 pm
Someone is still bullish on Canadian RE.
https://www.bnnbloomberg.ca/home-capital-group-could-become-takeover-target-analyst-1.1264622
Personally I find their mortgage portfolio way riskier than what this guy is saying. I also find it suspicious that he speculates about Home Capital being a takeover target without a word about potential suitors. No major bank can touch them – almost none of their recent mortgage originations meet the stress test.
So who would buy them? Maybe some hapless pension fund, like the one that helped bail them out two years ago? Or maybe analysts are just making up some BS trying to pump the stock and squeeze the shorts. Sure worked today.
————————————————————-
His first job out of school and he hasn’t been doing it for a year yet. Speaks to the quality of guests BNN can get.
His thesis is also poor. Mainly rests on P/B is low and LTV are around 60%. Which is all well and good, but you shouldn’t care about average LTV, you need to know about what percentage are 90% LTV. Those are
the ones where default will happen as prices fall.
Home Cap doesn’t give that level of detail, but they do disclose that 85% of their book has an LTV below 75%. So, 15% is above that threshold. Those loans are in danger of going negative.
I was short Home Cap in early 2017 and expect I will be again before this cycle is over.
They probably pay more in property tax than you do in income tax. – Garth
#77 Nonplused on 05.27.19 at 11:21 pm
“All we need is one tax, probably the income tax with capital gains included at some percentage as income. Set it at the appropriate level and you don’t need any other taxes. You don’t need property taxes, as those have to be paid out of income. ”
But in this scenario, there would not be any property tax either.
Will never happen. – Garth
@#89 Don
““Exclusive: The $6M deal that saved BC Liberals from testifying in court turns into tax trouble for Basi and Virk”
******
Another excellent News article from The Breaker that the maine stream media in BC have pointedly ignored for over a decade ( 16 YEARS after the RCMP raided the Provincial Legislature……)
And now it may be a CRA tax ruling on hush money paid to the lawyers of two defendants that finally shines a light onto the entire sordid BC Rail affair…
Pathetic.
But the Sheeple wanting houses, have an inquiry on”Money laundering foreigners” to focus on..
Canadian “Justice” is a joke.
One hopes Gordon Campbell and Christy Clark sat up and took notice when The Breaker article was emailed to them.
16 years later and we finally may get some answers.
But I’m not holding my breath.
#96 Tater on 05.28.19 at 8:02 am
Banks don’t own cats.
And as for my superiority complex, let me be clear: I am certain I’m superior to you. Everyone else here, nope. But you? Oh yes.
That was pure emotions, no brains involved.
Who are the over 2 trillions in private debt owned to?
The banks.
Who backs their risky high ratio mortgages, the over 1 trillion insured by CMHC and private insurers at no cost or risk for the banks? You and me as taxpayers. They don’t even count these liabilities as risk.
I know that you being the super-rich, super-intelligent, good looking, successful person don’t mind paying for all that as well as overpaying to all oligopolies that control the insurance, telecom, retail, pharmacy utilities, … practically all markets in exchange for crappy services… while well, I do.
The control of markets by protected oligopolies is a fact that does not need your acknowledgement.
As for the superiority complex, sure.
Keep believing in it. And measure those balls each morning, hope you won’t need the microscope some day…
Tater, that was my feeling as well. Who would take them over? None of the major lenders, as their loan book is full of rejects from those same banks. Speculating about takeovers without identifying a potential suitor is empty-speak.
DELETED
Meanwhile, of course, trashing or changing the stress test is not a Morneau decision. It’s not even supposed to be political. Or debated in Parliament. Instead, it was an action taken by the bank cop, OSFI, in order to protect the big lenders from the Bank of Mom. – Garth
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Whatever happened to laissez-faire?
The more rules and regs there are, the more things get screwed up.
“The more restrictions and prohibitions there are, the poorer the people will be.The more laws and commands there are, the more thieves and robbers there will be.”
~ Lao Tzu
Let the chips fall where they may.
Idiots who want to buy houses with money they don’t have should go for it.
Banks who want to greedily lend those idiots money should go for it.
Once they learn their lessons the hard way, they’ll figure it out for themselves.
Until of course the next wave of fools with short memories come along.
This country needs a strong leader like Stan Brooks. I propose a blog dog party led by the great Stan Brooks. Are you up to the task Stan?
Crayon version for Shawn Allen:
We (the central bank) create money (a promise to pay) out of thin air and lend it (basically give it away for free) to the commercial banks, who then turn around and lend it back to us at interest. After this initial process, then your diatribe concerning balance sheets would apply.
In this way, the commercial banks are stuffed with OUR money from the outset plus the spread. This is your golden goose, Shawn. This is the central scam. I am sure you are aware of this by now, but for some reason you are unwilling to acknowledge it. I’m honestly curious as to why?
“They probably pay more in property tax than you do in income tax. – Garth”
A buddy of mine who lives in a prestigious area of Toronto pays $60k a year in property tax. So yes, the fearless bearded financial sage that runs this blog is correct that some Canadians pay more in property tax than others earn in wages…
Klaus the lost dog found.
He has been commenting today under various aliases. Mercifully, no eye contact was made.
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Here is an @JustinTrudeau Tweet + Animated GIF that looks put together by some 1960’s Lucy in the Sky with Diamonds Sock Hop Cheer Leader and the thing is, he’s complimenting somebody about the 1 million jobs since 2015 (“you’ve created”) and of course taking credit:
https://twitter.com/JustinTrudeau/status/1133111195261652993
I wonder if that “you’ve created” would be theose EVIL Canadian SMBs (you know, those evil doers that employ about 85% of Canadians) that Justin and his Dilettante Trust Fund side kick Bill called:
TAX CHEATS.
Would the “you’ve created” be them?
Surprised that got deleted, Garth. Stan started the p*ssy and b*lls talk. I just asked him to stop.
Be less graphic. – Garth
Easy Money Made by Banks?
#82 akashic record on 05.27.19 at 11:55 pm
#48 yorkville renter on 05.27.19 at 7:00 pm
Mortgages are funded by deposits, Stan… but it’s not $1 in and $1 out. Not all mortgages would crash at once, so they can loan a multiple of their deposits that yes, creates $$$, but it’s nit really money it’s more like a promisory note.
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I would like to lend my same $ to several people at the same time and collect interest from all, or pay several bills at the same time with the same $.
I don’t mind if the ones, who accept my same $, as if it was exclusively theirs, call it a promissory note or whatever.
Hook me up, bro.
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So own bank shares. Banks leverage their owners’ share equity by lending deposits that are indeed created by the banking system but owned by bank customers. The leverage is typically in excess of 10 to 1. The deposits are free to move from bank to bank and each bank must compete to retain deposits even though created by banks via loans.
You can get in on this deal by owning bank shares.
But be aware that leverage can be risky. If any borrower (except insured / guaranteed borrowers as in CMHC) default on the loan the bank still owes the deposits to the owners of the deposits (say the seller of a house).
If 10% of bank loans were to default the share owner equity would be completely wiped out.
This is why Bank analysts start to freak when credit losses edge upward even from very low levels.
Stan meanwhile has changed the channel and apparently given up on challenging the FACT that bank deposits are not cost free even over time even though initially created cost free ( a bit analogous to children)
If you want to vote Trudeau Liberal then you want a 25% to 50% tax on your house. Don’t believe, read the Toronto Sun article today front page.
Your house will become like an RRSP over night.
DELETED
#86 JPN on 05.28.19 at 12:20 am
Respectfully speaking I’ve purchased yet another rental unit in the Okanagan. Both sides of a duplex netting over $ 1100.00 cash positive after mortgage including my down payment. I have 4 homes now in the OK plus my own home .. all with a positive return. (Except my own) The last one was purchased only 7 months ago. Always hearing doom and gloom being a land owner.. Right.. ?
I still don’t see “nor agree” with the logic against home ownership…. Sorry.. I’m all in.
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The Okanagan is an interesting market. The price appreciation has been spectacular but the run has been faily short – 3 years. The previous 7, the market was mostly flat, low single digit growth. So the return the past 10 years is good – around 50% – but nothing like other BC markets. Further to this, vacancies are almost non existent. Before we bought here we wanted to rent and there was zero suitable inventory available for us (2 dogs, boat). As in, nowhere to rent.
So I can see there being some good opportunities to add to a rental portfolio. Money is still stupid cheap, inventory is up the past 10 months, and even though prices are going lower, I don’t believe that this market gets hit like YVR. Because it’s still a somewhat affordable place to live, that hasn’t seen the crazy 10 year growth that YVR saw.
I propose a battle in the octagon between Tater and Stan Brooks. Best way to settle this on going battle is a mano to mano fight to the finish in the octagon. Are you gentlemen up to the task?
#107 Eks dee Siple on 05.28.19 at 9:38 am
Crayon version for Shawn Allen:
We (the central bank) create money (a promise to pay) out of thin air and lend it (basically give it away for free) to the commercial banks, who then turn around and lend it back to us at interest. After this initial process, then your diatribe concerning balance sheets would apply.
In this way, the commercial banks are stuffed with OUR money from the outset plus the spread. This is your golden goose, Shawn. This is the central scam. I am sure you are aware of this by now, but for some reason you are unwilling to acknowledge it. I’m honestly curious as to why?
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Commercial banks can borrow as a last reset from the central bank but typically never do.
Central banks can create money out of thin air and use it to buy things like bonds from commercial banks. That is true. There is no huge benefit to the commercial banks in that transaction. They simply sell bonds at market value to the central bank and get deposits (cash) at the central bank in return.
Are we now turning to bashing central banks?, I thought the topic was that commercial banks are a scam lending cost-free deposits.
To my knowledge, each commercial bank in Canada has deposits at the Central Bank and no borrowings from the central bank.
Notions that banking is a scam is something proposed by misinformed people based on a misinterpreted grain of truth or two. Some of these people are looking for excuses for their own failures to get ahead in the economy.
I have tried to explain banking here to the 100% best of my honest ability. Others can judge if I am more credible than the likes of Stan. Stan calls me half-educated. With more letters after my name than in it, over-educated might be a more accurate description or insult.
For the love of god, can people who think banks literally mint deposits and then hold them at no cost please go and buy bank shares. Perhaps they can borrow at today’s cheap rates to do so.
@#112 Scott Crombie on 05.28.19 at 10:24 am
If you want to vote Trudeau Liberal then you want a 25% to 50% tax on your house. Don’t believe, read the Toronto Sun article today front page.
Your house will become like an RRSP over night.
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read the Toronto sun lol
@#115 Dana
I second the Octagon Battle.
The 1st prize for the winner being a free vasectomy and the second prize will be no internet access for 1 year…..
That way we all win.
#114 Mattl
I still don’t see “nor agree” with the logic against home ownership…. Sorry.. I’m all in.
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There is no logic ‘against’ home ownership. Homes are an asset like any other. If one pays far too much for a residential home driven by speculation and low interest rates to levels of 12 times income in hopes of roping in a future greater fool, they take an unnecessary risk. In the meantime, such ‘investments’ can’t generate return that makes the risk worthwhile.
Try your Okanagan business plan in Dunbar or even Burnaby. Go ‘all in’ there and let us know how it works out. You may want to start with, say, ten of the slapdash condos coming online in the Brentwood area. Within a year or two you could have them all rented out and be enjoying a negative 5% cap rate with no greater fools in sight.
If you didn’t pay too much for your investments and are able to achieve a decent return after all taxes, carrying costs and opportunity costs, then you are not a fool and no one here would suggest that. More power to the person capable of doing all the math.
fishman: When prices drop the assessment goes down & taxes will follow. NO, really, Vancouver City Hall will reign in their spending, not increase the mill rate & let taxes follow the market down. No really.
when the assessment goes down Van City Hall will increase the mill rate
by the way, mill rate is kind of a technical term, I mean coming from a fishman
No one really cares about debt unless they are old school types. They the debtors and bystanders either think they will be dead before it is a problem, some greater fool will bail them out or it is someone else’s contracted mess and it is not their obligation. With this kind of thinking a responsible lender wouldn’t lend a cent without a serious down payment and serious liquid collateral pledged against a loan.
Oh Buoy Keep on lol because in life their are consequences and they catch up to even you. Canada is going down the tubes like Venezuela. Europe and other lost socialist states are not laughing now.
Even Sweden and the Nordics are starting to feel it. Nobody wants to talk about reality, keep you head in the sand. Trudeau Liberals forgot about near extinction just years ago. I dare him to do it.
#119 Damfino:
That quote on going all in wasn’t mine. I responded and agreed that the Okanagan MAY be slightly different and provided my reasoning.
Personally I am in ,but not all in, one personal residence is enough for me. No interest in being a landlord, if I did I would rent out our suite that sits empty. Or build a carriage house in the back acre. But no interest TBH.
And no I wouldn’t go all in, in Burnaby or Dunbar TODAY, although those that did 7, 10, 15 or 20 years ago have made a fortune. A further 30% of the already 15% in Burnaby only puts us at 2012 prices for a SFH. So don’t lose too much sleep over those in Burnaby that have been in for 5+ years, particularly those that own one home, live in it, and have benefited from historically low interest rates.
I never had the guys to borrow even 4x my income so I’m not one of those guys that killed it, but I sure wish I had gone big when I entered the RE market in 2006.
I was just thinking last night about the amount of taxes our household pays. It’s a pretty low amount.
Before I lift a finger to actively avoid a single tax this year, I already got 20K back just between our tax return and the CCB from last year. I jumped on an income tax calculator and ran Ms. IH’s and my own incomes, and it spit out a total income tax payable of 23K combined (Fed+Prov), so we got all but 3K of it back right off the bat.
Our consumption taxes are already hideously low for a home owning family of four, just due to how we consume. Yet there is some low hanging fruit to pick on the energy consumption front – which will be done mainly for the fun of the project itself.
I’m starting to think I don’t really need to go off the deep end at all. In a strange twist of policies and programs, the IHCTD9 household seems to be awash in government handouts, tax deductions and benefits that damn near eliminates all the income taxes paid in a year.
Not sure how this is supposed to work. It probably won’t. Some day, some poor Canadian Politician is going to have a very tough list of decisions to make.
#105 dharma bum on 05.28.19 at 9:32 am
Meanwhile, of course, trashing or changing the stress test is not a Morneau decision. It’s not even supposed to be political. Or debated in Parliament. Instead, it was an action taken by the bank cop, OSFI, in order to protect the big lenders from the Bank of Mom. – Garth
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Whatever happened to laissez-faire?
The more rules and regs there are, the more things get screwed up.
“The more restrictions and prohibitions there are, the poorer the people will be.The more laws and commands there are, the more thieves and robbers there will be.”
~ Lao Tzu
Let the chips fall where they may.
Idiots who want to buy houses with money they don’t have should go for it.
Banks who want to greedily lend those idiots money should go for it.
Once they learn their lessons the hard way, they’ll figure it out for themselves.
Until of course the next wave of fools with short memories come along.
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It’s a bad idea because those who don’t participate in debt perversion and play by the rules, always end up picking up the tab when all hell breaks loose.
#115 Dana White on 05.28.19 at 10:35 am
I propose a battle in the octagon between Tater and Stan Brooks. Best way to settle this on going battle is a mano to mano fight to the finish in the octagon. Are you gentlemen up to the task?
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Yep.
#103 Raging Ranter on 05.28.19 at 9:15 am
Tater, that was my feeling as well. Who would take them over? None of the major lenders, as their loan book is full of rejects from those same banks. Speculating about takeovers without identifying a potential suitor is empty-speak.
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The banks didn’t want them at $10 a share, not sure why they’d show up here at $20.
Plus, if the banks wanted to be in this market it would be trivially easy to put together some underwriting criteria and go after it. No need to pay a premium to take over HCG
#53 Reality Is Stark.
Problem is people don’t want to hear about it or believe it. For many years Garth and others have been warning about debt, rising RE, etc. Most think it’s chicken little.
Many peeps under 40 don’t believe anything could ever go wrong. They will never loose their job, bank would never take their home, life is awesome. The new vibe is just make the minimum monthly payment forever. So who cares how much a home costs? They have never seen a serious downturn (Nortel anyone?).
Maybe it should all go free market. Take restrictions off, and no protection either. People think $1 million + for a shoebox in Toronto is ok. Well alright then, let the chips fall where they fall.
#123 Mattl
Quite right. It was not your quote. It was a pasted quote from #86 JPN to which you were responding. Thanks for clarifying. Sorry about that.
Ha, ha, ha haven’t seen this one about the Very Stable Genius in Washington.
https://www.youtube.com/watch?v=k-LTRwZb35A
My father laughed and said it reminded him of Wile E. Coyote when he was a kid on TV. Super genius!
https://www.youtube.com/watch?v=STeVTzWelns
I hope the Liberal govt increases the stress tests for mortgages. A reasonable example as to why is in a strata lakeside condo I invested in in BC, some owners from Alberta who also obtained mortgages for their units, have chronically been in serious arrears or on payment since they first bought in. They do a financial tap dance to pay their fees and they cost other owners who pay in a timely manner more money to collect the arrears!!
#122 Jack Frost on 05.28.19 at 11:58 am
…Even Sweden and the Nordics are starting to feel it.
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I read an interesting article a little while ago that that dealt with the easy success Swedish Women receive when immigrating to the USA. It looks like some of the Swedish Women themselves have had about enough of the SJW agenda back home:
“Several of the Swedes in the US thought that gender equality had gone too far in Sweden. They thought the Swedish gender equality project had turned into a perfection project, requiring you to be both successful and beautiful, with a toned body, a family and children all at once.”
http://sciencenordic.com/blond-sexy-and-immigrant
The article focuses on how “whiteness” causes their success. Just ignore that part and replace with “Beautiful Woman” whenever they mention “white”. Every Man alive knows it wouldn’t make a rip of difference what colour the Women were as long as they were Western savvy, and beautiful. The results would be the same: Win Big.
They come here and hook up with a successful Man, and are instantly way ahead of what they had back in Sweden.
“The US is a crazy country. It’s almost impossible not to succeed here! ”, says Ebba, 43, who moved from Sweden to the US five years ago.”
More will come, they will win big – they don’t even need a reason to leave given what they stand to gain in North America.
You seem to think milenials want the stress test scrapped? its actually the boomers, and anyone else who owns property that wants that. They are trying to protect their assets. Anyone under 40 just wants prices to come down and it doesnt matter really how that happens. I am not sure you are correct in your assessment of who wants what here… and milenials don’t vote enmasse, old people do.
correcting the injustice that was criminalization of a harmless plant has only to do with common sense, and not ages. it should have been legalized in the 70s when all the racism and classism that fueled prohibition was first brought to light.
Regarding Lesser Ape’s purchase of a 5-BR detached from yesterday’s post:
Good decision. If you have the money, want a house in Vancouver, and are in position take advantage of this dip in housing value, then go for it. A house will always be a store of value and even if it fluctuates, it’s still yours.
Just that fact that you read Nicholas Nassim Taleb suggests you’ve probably thought about this carefully. Good luck.
#126 Tater on 05.28.19 at 1:07 pm
#115 Dana White on 05.28.19 at 10:35 am
I propose a battle in the octagon between Tater and Stan Brooks. Best way to settle this on going battle is a mano to mano fight to the finish in the octagon. Are you gentlemen up to the task?
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Yep.
Was that a threat? Should I be scared?
You need anger management boy. Relax, have a beer or two. If you feel sexual frustration go to the Mint/Gentleman’s club on Yonge, south of Steels.
You have 1 hour on my account/quote Stan Brooks.
I dont get why Garth is so upset with the BC government for finally having the courage to deflate the ridiculously overpriced market there. Garth has been harping on and on about how the real estate market is far too big a share of the economy and now is blasting BC for making it difficult for people to buy real estatte?? Which is it Garth??
Yes there will be a recession cause by these extra taxes but the problem is not the taxes..the problem was created years ago when mortgage rates were kept artificially low by incompetent central bankers..and when the feds decided 30+ year mortgage rates would be cool..and so forth. Now the real estate bubble notably in BC and Toronto is popping..bubbles poppping are ALWAYS painful no matter who pricks the bubble but its not the fault of government and central bank policy in the past and of course a lot of dumb people speculating.
I say let it crash..lets get on with it..and yes it will create a hell of a recession but thats how we rebuild the fundamentals of our phony economy thats built on excessive debt.
Of those “who yearn to be mortgage slaves.”
Isn’t that really the fundamental reason for the housing insanity, a form of hysteria that drives people not only to pay through the nose but to fight for the right to pay through the nose, abandoning all sense of personal dignity? After all if people refused to pay the prices they’d go down. Image I conjure up is a group of people fighting each other for the chance to lick the boots of an overlord laughing at them and whipping them in the ass as they beg for a taste of his dirty sole.
Lots of that toxic masculinity flowing here today. Unfortunately it sounds more like a couple of housewives arguing at bingo than it does sound like Arnold or Clint.
My property taxes might cross the $2,000 threshold this year.
Speaking of taxes, do any of you know what the break fees will be when Doug abrogates the contract between the Beer Store and the Province?
Whither Canada indeed. And now for something [not] completely different.
#107 Eks dee Siple
Show off.
THAT was good (the crayon verisimilitude).
Suggestion, if you ever decide to dis Justin please make it pink.
PS:
Slow on the uptake here on your Commenter name, got it, cute. Former disciple of?
Garth, if they amend B20 it will be seen as Liberal desperation by Canadians. They are a well educated and savvy bunch, I trust in that. It will make those waiting for prices to drop all that more determined to defy the attempted outcome of such a change.
The epitaph will read Liberal RE meddling become the Law of Unintended Consequences. Another nail in their October 2019 coffin.
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Honest to God, this May in Italia the worst in 40 years (rain and cold) per my relatives and Meteo Italia. Here is the forecast for my home town of EU YVR:
https://i.imgur.com/oAgCwPG.jpg
Note the upper right, and a bit in the upper left corner, backgrounds have been lightened. And they changed Light Rain by adding some rays of sunlight.
I bitched to Microsoft a few weeks ago to not make the “Rainy” backgrounds quite so dreary…you know, bad enough looking out my window and having that replicated worse on my PC screen.
On rare occasions, it pays to bitch.
Buonanotte e Ciao di EU YVR (my herbs are beginning to hate me for the lack of light).
#61 MF
Good on you; and I really mean that. You said it yourself that your life was good; just consider (no not the greedy) that stats say that many are just are just a couple of a hundred bucks away from poverty. Many hold two to three jobs on top of whatever life throws at them. Some are lucky and others just work there way thru it with a smile on there face.
Where is all the growth and higher interest rates you guys were touting just months ago? Come on, this is probably the 4th or 5th time it never panned out. The economy is toast and you guys know it.