without a proper depression there is no recovery in sight. i dont think we have seen the depression phase yet. canadian currency will continue to depreciate. at the end of every depression there are losers and winners. which side do you want to be on? :concentrate:

It seems like there has been a real fear about Canadian economy these days. Unfortunately, the Canadian economy has been built mainly on speculation, natural resources, and consuming capitalism.
Decreasing interest rate would let the Canadian economy rely more on real estate and consumer debt to survive. Looks like it won't help too much in the long run. no housing bubbles anytime soon in vancouver

Do you even remember when a USD cost $1.50Cdn, it wasn't that long ago...

Doesn't need help in the long run. As long as it helps them this election. That's all Canadian politics is make short sighted goals and policies to help you get elected for next elections.

This. We're also not THAT far removed from the days of $0.60USD per CAD.

Working in a sector where the lower CAD is preferred, the immediate effect on me is positive. However, I do understand that it probably isn't good for the long run economy.

For the people who bought with cash and are not living in their properties while paying the strata fees and/or property taxes, I don't think this drop in the CAD will really make them pull out. As long as they are holding on to the property, there is a chance it will go back up.
The minute they fire sale, they will realize their losses.

But of course, all this is merely speculation, and how many of them bought at the height of the market?
Some of them might have bought when the market was 20% lower than the peak, which is still lower than it is now so their potential losses may not be as great as we may think.

until you're looking for a new tenant and carrying that extra USD mortgage

As you said, many bought these based on speculation and future expectation.

Let's say that CAD will continue to drop (which is likely the case since Fed will likely be increasing its benchmark rate later this year) and no real turnaround until 2016 or later, it means that a Chinese owner who paid for his property in USD back in 2011 not only wiped out any gain it achieved for the last few years but also they'd continue to lose value (USD term).

All it takes is few owners who decides to call it quit (stop losses) and send a shockwave throughout the market. What kind of shockwave? A message that the RE is no longer increasing in value (CAD term), and its value, in respect to the owner's original currency is continuing to drop.

How many will have the financial power and psychological stability (the thought of having his assets to continue to drop) to sit out this wave, which could take years to just recover to its original point? That'd be the question.

Yes, but you are talking about value decreasing in relative to another currency. If inflation does not creep up sharply, then purchasing power still remain the same within Canada. I can see your argument to be valid for foreign investors whom are seeing their investment diminish relative to their home currency, but in a broad assumption that those investor would be cash positive enough to ride the waves or hedge against other investment vehicles.

Hehe,

As much as I want the RE market to tank with foreign investors pulling out. I see the opposite.

People holding USD (or CNY or HKD) will find CAD RE now 20% cheaper.

What I'm trying to say is, there's always two sides to our weakening currency and lowered overnight rate.

If anything, if foreign investors pull out. Downtown 1 bedroom condos will take a huge hit.

Is that really 'all' that it will take though? Foreign money may have sparked the market here, but the critical mass was achieved when long time local owners cashed in on their equity and/or combined with cheap credit then re-bought properties in different value areas and drove those respective prices up too, and so on and so forth.

So if the foreign money decides to pull out of their properties from an investment standpoint and cut their losses or not buy property here to begin with, I don't think it will make everybody else down the line do the same too--since these people need their homes to actually live in. Not saying it won't cool the market, it will, but it will take a lot more than 'a few' of these owners to mark the change you are proposing.

If the CAD continues to drop relative to whatever native currency the investor is using, you could argue that it may cause an increase in RE market activity, as that native dollar now buys more CAD than previous. Just my uneducated opinion.

When I drive by west vancouver , vancouver west

I see a a lot of new houses for sale, and it seems like nobody is buying.

I still see a lot of the foreign money still happening, hasnt slowed down yet, but we will see in the next few months.

Here's the other thing, a lot of the chinese money is just happy that its now out of china with all the corruption crackdown. Even if the market goes down 20%, they are happy to get 80% rather than nothing. With the chinese government increasing their crackdown, the money is just going exit china faster.

I think 2015 RE prices will be higher than 2014 prices. but time will tell, I really hope I'm wrong as I think high real estate prices are bad for our economy.

The buyers in vancouver for RE are not your average joe, we're talking about $1.5 million + for west side and east van averaging over $1 million. New spec homes in east van are going for $1.4 million +

The thing is inflation will go up because Canada does not produce nearly enough product to serve the domestic market. Next time when you are at your supermarket grabbing everything you need, check how many of them were actually made in Canada? I can assure you that there won't be many, not even produce.

Yes, CAD just became 20% cheaper, but the general opinion is that it would move even lower. If you were an investor, would you risk coming in right now or when the CAD finally stabilizes after 2016? By that time, if the housing market is dropping, the same investor would again wait until the housing market shows stability because no one wants to catch a falling knife.


The problem is again focusing on the general view of the market. When investors start to pull out of the market, what message will this send to the market? It will say Vancouver housing is no longer attractive, so we are leaving. Then the entire market cools to a point that the only way to sell is by giving massive discount.

The domestic market will be the one leaving to carry this mess, unfortunately. Nevertheless, a drop in valuation creates a lot of problems. Say one bought a house for 1M and put 200k as deposit and needs to renew his mortgage in 2016. Any valuation below the 1M market basically wiped the buyer's equity originally invested. In the absolute worst case scenario, which happened in the US, was that the property is under water; meaning it's actually worth less than the amount still owed on mortgage. This creates a massive psychological and financial stress because buyer would realize their 200k equity is gone and now they need to find another 20% DP in order to continue to qualify for the mortgage they were paying, however low rate they can get.

This whole thing would create a chain effect pressuring down the prices of RE further and further. And no investor will be wanting to invest into this market because they know their money is worth so much more 6 months from today; be it domestic or foreign. This was how Japan got itself into the lost decade; even though it makes no sense to keep money in bank, the value of money actually increases (in RE term) over time while price of everything else is soaring.

This is of course the worst scenario... but from the latest policy, I can imagine it being totally possible.

Yes, but if the price increase can't keep up with currency fluctuation, no foreign money would want to come in. Let's say if CAD will drop another 10% in 2015 and house price increase another 5%. By buying today, a buyer will effectively be losing 5% in one year. Why not just wait until the end of the year and buy it at 5% discount?

most ppl (including me) bought their US properties for pennies on the dollar and used Cdn debt for 2 reasons:

1) it is hard to get cheap mortgages in the US as a foreigner (cheap defined at 3.5%, the run of the mill line of credit on a Cdn property)
2) this investment was never just a real estate play, it was always a currency play too - if one invested in US property not considering the latter, they were lucky, not smart.

it's funny how sentiment changes.

for the last few years on the argument of fundamentals only i've said real estate is a dumb investment, financially you will do better off elsewhere (s&p500, especially now that USD has gone up 20%, your s&p500 has gone up 20% on currency alone, though this is a dual edged sword)... now that the economy is looking as shaky as i thought it was a while ago, i'm seeing a real movement from bullishness to concern/bearishness.

will be an interesting 12 months. glad i'm on the sideline with my popcorn.

popcorn+energy=growth

just like money

I think the critical point is when summer result comes out and the housing market activity by then (since we are discussing on Van's RE). If there is no good news on 2Q performance and housing market is not performing as it should, (it supposed to be the best season for RE) this will change RE investors' mood greatly as it means they would have take on a full half year until the market will come to life again in Spring 2016. Whether or not they want to take the risk between that entire period....

BoC revised its forecasts yesterday along with its rate cut. But I think they might be overly optimistic because it's most likely we will see GDP contraction on a seasonally adjusted YoY basis or something more. There must have been something really bad going on with BoC's data to justify such a drastic move. Sure interest rate effects take time, but usually central banks take that into consideration too.

ECB just announced a huge QE pkg until Sep 2016.

You can forget any effect of BoC rate drop now because the Euro is competing at full scale with any other currencies for USD. (US business basically)

indeed, and really Canada killed off it's manufacturing base a long time ago - will take time for that to come back (if it even does)

let's not forget Cdn labour is really quite expensive vs. US, so that differential may not be countered by the cdn/USD

Oh man, the Eurozone... what I mess I live in here. Proof that socialism and mass immigration (combined, a very bad combo) does not work within the context of healthy economy.

On the bright side, I can finally afford my long-planned European trip with Euro this low thanks to my mainly USD-based portfolio. :fuckthatshit:

Care for a coffee when I get there 4444? :D

I'm deeply disappointed in our conservative government at the moment… shameless attempt to band-aid a failing economy until the election. I do believe the conservatives will get another term in office but I very much doubt they will once again benefit from a majority in the house.

Let's assume the conservatives make a 3rd term, I believe the writing will be on the wall, they know the economy is about to take a shit kicking, and they accept that a 4th term will be highly unlikely. So they do what's right and let the chips fall as they may while the great economic reset button gets pushed.

I digress, this is after all, the real estate thread.

This morning I was crunching some numbers, trying to understand what my financial situation will look like when I return to Vancouver in the fall.

So let's assume that prices remain where they are, and that I can only afford 20% down.

Property is a townhouse in North Van with a tandem garage, purchase price is 650K.

650K - 20% down (130K) = 520k to mortgage, no CMHC insurance needed.
3.49% 4 year fixed term, set to weekly payments, would cost about 2707$/month.

Then the property taxes and strata fees work out to 650$/month.

Add up some basic costs then;
2700$ Mortgage
650$ Prop tax/Strata
250$ Utilities
150$ Cable/Porn Connection
200$ Both Cell Phones
500$ Golf Lease Payment
300$ Insurance on Golf/GT3/Home

That brings us to 4750$ of after tax income, for basic living costs, no fuel, no food, no repairs/maintenance of the house of vehicles, no furniture, no social spending, etc.

Annualized that is 57,000$ net or 72,000$ gross, which is median household income in the GVA, and IMO on the high end for most single income earners in Vancouver. (So how the EFFF do normal income earners afford to live lol)

So now on to my specific situation, if I relocate to Vancouver and keep my current position, I will (like my Director) have to fly back and forth to Edmonton every week, essentially having to maintain a flight pass and second residence in Edmonton which I estimated will cost me 4000-45000$/month between shared accommodation with my brother (He's going back to UNI to be a doctor), flight costs, and food etc.

At this time I will be grossing 22600/Month as a contractor, which is a lot of money for most people, so how do my finances look in this situation;

4750$ Vancouver minimum living costs
1200$ Assumed additional costs for food, gas, health care, maintenance, etc.
4500$ Edmonton residence costs, food, etc.
6000$ Personal and corporate taxes (Low tax rates thanks to dividends)

For a grand total of 16450$/month to live and work. I would be able to save roughly 4-5000/month tops. (Factor in the odd vacation, additional costs related to owning a Porsche, eventual costs of having a child, and that number shrinks a fair bit I would say)

Keep in mind, with all the above, I have no pension or benefits btw.

My situation is extreme in many ways and by 2017 I should be working out of the Vancouver office, so that eliminates 4500$ of spending every month. Having said that, my situation is also extreme in that my income puts me in the top 1% of income earners in Canada, and I still feel like living my relatively basic existence (Minus the GT3, but it really doesn't cost me very much money) it's insane to believe the current cost of housing is anything but ludicrous.

Employment numbers IMO are going to be a major driver of the economy very soon, and the only thing the government can do to prop those up and see an immediate impact is though infrastructure projects. The oil sands are largely done the capex intensive initial development, manufacturing sector is pathetic, and housing starts are clearly not where they were a few years ago.

So you have
- dwindling jobs in the oil sand (Which IMO is huge to the Canadian Economy)
- dwindling jobs in residential construction (Housing starts have slowed down considerably)
- dwindling jobs in commercial construction (They won't be building new stores if they aren't building new neighbourhoods, and companies aren't exactly rushing in to build new manufacturing facilities due to our labor market costs)
… and all this on the heels of 5 years worth of emergency interest rates.. so will another .25% make any difference… probably not.

Interestingly enough, one way the dying loonie does benefit the country is that it makes vacations out of country more expensive, likely resulting in more domestic vacations and spending.

Oh, and Canadians are have more debt now than at any point in history, more than Americans have ever had as well. (Ref. debt to income ratios)

Shits cray mang.

Agreed - my relatives from HK are currently in town just to buy a house in Vancouver West, to rent it out! They put down a $2M offer a few days ago.

Recently they also bought an apartment for their son in HK, so a house here seems like a good deal to them... :whistle:

What, we live in a warm climate where there is no freeze or snow? :suspicious:

Kinda obvious when you say there won't be much Canadian produce. But I'm just nit picking this one statement because there is 90% local produce in the stores during the summer months.

As for the RE, prices go up and down like a roller coaster. Always has, and it always will into the future. I

Like what Gulu said, after all the up in the RE in the past 10 years, minus the sight hic up in 08, it is about time for some down. Nothing wrong with it. It's all part of the game. Now's the time to sit back and enjoy the show and be ready to jump in when the market is at the bottom again.

what are peoples thoughts on mortgage renewals right not?

5 year fixed at approx 2.89%
5 year variable at what was 2.49% (should now be lower)

is there any chance the BoC be lowering the rate in the next year or two? (crystal ball anyone?) what about raising?? i would think the last thing their going to do with a struggling CDN economy would be to raise it (hence they fact they just lowered it) but say oil goes back up (eventually) and our dollar starts climbing again (slowly) they're not just going to turn around and raise the rate?

obviously I'm over simplifying this and really don't have a good grasp of all the in's and out's, just trying to make an educated decision on my renewal which is up at the end of April.