The idea that Canadian residential real estate prices are rising at an unsustainable pace is no longer just a subject for Twitter rants and COVID-era chats with family. The international media are paying attention.
But while many Canadians worry, the government of New Zealand — a country often likened to Canada for its soaring home prices — is attempting a solution by making it harder to get a mortgage. There’s little doubt Bank of Canada officials are keeping a close eye on the New Zealand experience. There are some here who say we should follow suit.
Asked directly at his most recent news conference last month whether Canada would adopt the New Zealand plan, Bank of Canada governor Tiff Macklem appeared dismissive, implying getting the economy back on track after the pandemic recession was more important.
Economy needs growth
“Do we need measures right now with respect to housing?” said Macklem. “Right now, the economy is weak, we’re just out of the second wave. I think we need the support — we need the growth we can get.”
Just before that news conference, Macklem had told an Alberta audience there were “early signs” of overheating in the residential property market as some people seemed to be buying based on the assumption prices would continue to rise. However, much of the pressure was also due to people looking for more space during COVID-19 lockdown measures, he said.
Monday’s latest data from the Canadian Real Estate Association will offer a fresh reading on whether the property boom is slowing.
Later today, the Bank of Canada is expected to announce it is holding interest rates steady at record lows, something critics here and in New Zealand say has helped inflame house prices, and not just in big cities. With signs the global economy is heating up, those concerns may intensify.
New Zealand Prime Minister Jacinda Ardern received global kudos for trouncing the spread of COVID-19. Now, the country is trying to avoid the possibility of a property meltdown. (Praveen Menon/Reuters)
It is the fear of speculative investment in housing — based on high demand, low rates and rising prices — that has prompted action from the New Zealand government and the Reserve Bank of New Zealand (RBNZ), the Kiwi equivalent of the Bank of Canada.
After COVID-19, “the availability of affordable housing — that was the No. 2 issue identified as being most important,” national pollster Emanuel Kalafatelis told Radio New Zealand last weekend.
But, for the central bank, a more important concern is the effect on the entire economy if house prices are allowed to continue to soar only to come crashing down once interest rates begin to rise.
“We are now concerned about the risk a sharp correction in the housing market poses for financial stability,” RBNZ deputy governor Geoff Bascand said last month. “There is evidence of a speculative dynamic emerging with many buyers becoming highly leveraged.”
Fear of property ‘fire sales’
In an attempt to prevent a speculative bubble from growing, the RBNZ raised the minimum required for mortgage down payments on March 1, and will raise them again on May 1, including even stricter borrowing requirements for investors.
“A growing number of highly indebted borrowers, especially investors, are now financially vulnerable to house price corrections and disruptions to their ability to service the debt,” said Bascand, who is also in charge of financial stability at the central bank. “Highly leveraged property owners, in particular investors, are more prone to rapid ‘fire sales’ that potentially amplify any downturn.”
As of May, most buyers who plan to live in their home will be required to provide a down payment of 20 per cent. Investors will need to put down 40 per cent.
WATCH | Rising demand for single-family homes during pandemic:
New numbers for Vancouver-area real estate highlight a trend seen in cities across Canada: an increased demand especially for single-family homes. The conditions created by the pandemic have persuaded some families to redirect their spending toward housing. 1:58
Jordan Dupuis, a New Zealander who came to Canada to complete a master’s degree in political science and stayed here to work, sees many parallels between the two countries, including prohibitive prices for young people who don’t already have a stake in the real estate market. Unlike Canada, New Zealand banned most foreigners from buying in its housing market back in 2018.
Dupuis, who lives in Toronto, said housing affordability seems to have become more of an issue in New Zealand. However, there’s a similar large “gap between average incomes and the average house price,” he said. Here in Canada, Dupuis used to own a house but sold it in favour of renting.
“The prospect for getting back into the market is very difficult right now,” he said.
No easy fix
Garth Turner, a business journalist, financial adviser and former federal cabinet minister who has long been critical of Canada’s heated housing market, says he believes this country will eventually be forced to follow New Zealand’s lead.
“We’re going to have to do something about this because the average family can no longer afford the average house, not just in Toronto and Vancouver, but in Owen Sound and Squamish and Halifax,” said Turner, author of a book and blog titled Greater Fool: The Troubled Future of Real Estate, where he warns about a potential sharp decline in real estate prices.
So far, the great property crash has not happened in Canada, but Turner says with prices and borrowing climbing ever higher, an eventual rise in rates could have the kind of effect the RBNZ is worried about in New Zealand.
“This is a ticking time bomb in Canadian society right now,” Turner said in an interview.
One of the problems with the New Zealand plan is that while it may act to calm the soaring market, higher down payments are one more barrier making it difficult for young buyers to get a home of their own.
As Jordan Dupuis observed, whether in New Zealand or in Canada, putting a lid on home prices when interest rates are so low, when everyone wants a little more space and people with money are willing to bid prices up, is not a trivial task.
“If it had an easy fix, we would have fixed it by now,” he said.
VANCOUVER – Contract negotiations resume today in Vancouver in a labour dispute that has paralyzed container cargo shipping at British Columbia’s ports since Monday.
The BC Maritime Employers Association and International Longshore and Warehouse Union Local 514 are scheduled to meet for the next three days in mediated talks to try to break a deadlock in negotiations.
The union, which represents more than 700 longshore supervisors at ports, including Vancouver, Prince Rupert and Nanaimo, has been without a contract since March last year.
The latest talks come after employers locked out workers in response to what it said was “strike activity” by union members.
The start of the lockout was then followed by several days of no engagement between the two parties, prompting federal Labour Minister Steven MacKinnon to speak with leaders on both sides, asking them to restart talks.
MacKinnon had said that the talks were “progressing at an insufficient pace, indicating a concerning absence of urgency from the parties involved” — a sentiment echoed by several business groups across Canada.
In a joint letter, more than 100 organizations, including the Canadian Chamber of Commerce, Business Council of Canada and associations representing industries from automotive and fertilizer to retail and mining, urged the government to do whatever it takes to end the work stoppage.
“While we acknowledge efforts to continue with mediation, parties have not been able to come to a negotiated agreement,” the letter says. “So, the federal government must take decisive action, using every tool at its disposal to resolve this dispute and limit the damage caused by this disruption.
“We simply cannot afford to once again put Canadian businesses at risk, which in turn puts Canadian livelihoods at risk.”
In the meantime, the union says it has filed a complaint to the Canada Industrial Relations Board against the employers, alleging the association threatened to pull existing conditions out of the last contract in direct contact with its members.
“The BCMEA is trying to undermine the union by attempting to turn members against its democratically elected leadership and bargaining committee — despite the fact that the BCMEA knows full well we received a 96 per cent mandate to take job action if needed,” union president Frank Morena said in a statement.
The employers have responded by calling the complaint “another meritless claim,” adding the final offer to the union that includes a 19.2 per cent wage increase over a four-year term remains on the table.
“The final offer has been on the table for over a week and represents a fair and balanced proposal for employees, and if accepted would end this dispute,” the employers’ statement says. “The offer does not require any concessions from the union.”
The union says the offer does not address the key issue of staffing requirement at the terminals as the port introduces more automation to cargo loading and unloading, which could potentially require fewer workers to operate than older systems.
The Port of Vancouver is the largest in Canada and has seen a number of labour disruptions, including two instances involving the rail and grain storage sectors earlier this year.
A 13-day strike by another group of workers at the port last year resulted in the disruption of a significant amount of shipping and trade.
This report by The Canadian Press was first published Nov. 9, 2024.
The Royal Canadian Legion says a new partnership with e-commerce giant Amazon is helping boost its veterans’ fund, and will hopefully expand its donor base in the digital world.
Since the Oct. 25 launch of its Amazon.ca storefront, the legion says it has received nearly 10,000 orders for poppies.
Online shoppers can order lapel poppies on Amazon in exchange for donations or buy items such as “We Remember” lawn signs, Remembrance Day pins and other accessories, with all proceeds going to the legion’s Poppy Trust Fund for Canadian veterans and their families.
Nujma Bond, the legion’s national spokesperson, said the organization sees this move as keeping up with modern purchasing habits.
“As the world around us evolves we have been looking at different ways to distribute poppies and to make it easier for people to access them,” she said in an interview.
“This is definitely a way to reach a wider number of Canadians of all ages. And certainly younger Canadians are much more active on the web, on social media in general, so we’re also engaging in that way.”
Al Plume, a member of a legion branch in Trenton, Ont., said the online store can also help with outreach to veterans who are far from home.
“For veterans that are overseas and are away, (or) can’t get to a store they can order them online, it’s Amazon.” Plume said.
Plume spent 35 years in the military with the Royal Engineers, and retired eight years ago. He said making sure veterans are looked after is his passion.
“I’ve seen the struggles that our veterans have had with Veterans Affairs … and that’s why I got involved, with making sure that the people get to them and help the veterans with their paperwork.”
But the message about the Amazon storefront didn’t appear to reach all of the legion’s locations, with volunteers at Branch 179 on Vancouver’s Commercial Drive saying they hadn’t heard about the online push.
Holly Paddon, the branch’s poppy campaign co-ordinator and bartender, said the Amazon partnership never came up in meetings with other legion volunteers and officials.
“I work at the legion, I work with the Vancouver poppy office and I go to the meetings for the Vancouver poppy campaign — which includes all the legions in Vancouver — and not once has this been mentioned,” she said.
Paddon said the initiative is a great idea, but she would like to have known more about it.
The legion also sells a larger collection of items at poppystore.ca.
This report by The Canadian Press was first published Nov. 9, 2024.
