According to fresh data, the Canadian real estate market is booming again.
In a world where interest on your savings account is in the two-per-cent range and secure investments such as locked-in guaranteed investment certificates aren’t paying a whole lot more, houses are once again feeling like the best place for ordinary Canadians to keep their money.
The question being asked by many young Canadians, who are considering buying their first home and many boomers at the other end wondering when to sell, is whether those house price increases will continue in 2020, or will it all come crashing down.
Most commentators from the real estate industry have been upbeat in their outlooks for the coming year.
While not the 30 per cent increments Vancouver saw at the peak of the boom, new figures from the Canadian Real Estate Association (CREA) out on Monday suggest that if you bought a house in November a year ago, that house was worth 8.4 per cent more in November this year.
As a return on a safe investment in the current market, that’s astounding. And the tax advantage makes it even better.
Covering your assets
For most Canadians who only own one home, Canadian tax law means that the entire eight-odd per cent increase — about $40,000 on CREA’s average priced home and $80,000 on the average million-dollar homes of Toronto and Vancouver — is entirely income-tax free.
Not only that, but the CREA prediction for next year shows prices will rise another, tax free, 6.2 per cent. What is not to like about such staggering returns?
Well, as usual, if making-money were easy, we’d all be multimillionaires. Details matter. And for another thing, if you want to cover your assets, you can’t just look at the bright side.Is now the time to rent or buy? One expert Hilliard MacBeth is still advising young people to avoid the condo market where he thinks prices have become detached from the land value they represent (Don Pittis/CBC)
Over the longer term, Canadian property prices are in all likelihood a safe bet. While prices dip periodically, they almost always recover again. But that can take a decade or more.
In fact, a closer look at that 8.4 per cent rise in prices, according to CREA economist Gregory Klump, tells us that until just the last few months prices have not been doing so well. Effectively, the big percentage increase is based on comparing a high point in November this year with a low point in November a year ago.
Overall, comparing all of 2018 to all of 2019 shows prices are only expected to rise 2.3 per cent by the time this year is over. So that is a detail to remind you that it depends on exactly when you buy and when you sell. And not only when, but where.
“There was an almost even split between the number of local markets where activity rose and those where it declined,” said the CREA report. “Higher sales across much of British Columbia and in the Greater Toronto Area offset a decline in activity in Calgary.”
Too much euphoria?
If you are ever worried that you are feeling a bit too euphoric about the state of the property market and your enthusiasm needs damping down, one useful option is to talk to Hilliard MacBeth, or better yet read his book When the Bubble Bursts.
There aren’t a lot of people who say the Canadian housing market remains overvalued and is heading for an inevitable fall, but MacBeth is not the only one. Swiss bankers at UBS recently put out their latest Global Real Estate Bubble Index, and Toronto had the honour of second place between Munich and Hong Kong. Vancouver came in at No. 6.
“The people who are really suffering in the residential side are the new home builders who have built too much product on the outskirts of Edmonton and Calgary,” said MacBeth, on the phone from Edmonton at the end of last week. “I think the term is ‘immediate availability’ — code for ‘we’re desperate.'”
Canadian Real Estate Association figures are based on resale homes, but in Calgary and Edmonton new home builders who have too much product in the pipeline are really suffering, MacBeth said. (CBC)
He says there are bargains to be had, so long as you don’t think prices are going to go down further yet.
As MacBeth points out, under priced new-builds are not included in the CREA numbers, nor are mortgage defaults, which are often sold quietly by the foreclosing banks. He said that houses withdrawn from the market because the seller is dissatisfied by offer prices also don’t make it into the data.
In some ways, MacBeth says the property market in Alberta and Saskatchewan — currently suffering from a continued downturn in the oil and gas sector — represents a foretaste of what could happen if the wider Canadian economy were to go into recession.
It is something Stephen Poloz in his Bank of Canada year-end speech and news conference last week said he had taken into account. While the central bank sees the large pile of mortgage debt accumulated by Canadians as sustainable, it remains the principal vulnerability for Canada and its financial system.
‘A nasty shock’
“If a nasty shock came along and unemployment in Canada rose significantly … the effect of that shock would be magnified,” Poloz told business reporters. “So we would have a bigger and more prolonged recession than if that debt was not there.”
Poloz was in no way predicting a global or Canadian economy shock this coming year, but he said Bank of Canada modelling shows that even in the worst case, the country’s banking system would remain sound.
Having studied the central bank’s predictive scenarios, MacBeth is not so sure. But of course gloom, especially in the property market, is one of his specialities.
He is still advising young people to avoid the condo market where he thinks prices have become detached from the land value they represent. He is advising people to rent, and notes that construction companies working on purpose-built rental properties will continue to do well, selling them to pension funds for the reliable stream of future income they represent.
“So will 2020 be the year of recession in Canada? I suspect it will, and if that’s the case, then it will be a particularly challenging time for Canadians because we’ve never gone into recession with private-sector debt levels — both corporate and household — at such high levels,” said MacBeth.
That may be the minority view, but now you’ve been inoculated. It’s safe to go back and read some real estate optimism about how property has nowhere to go but up in 2020.
VANCOUVER – The union representing port supervisors in British Columbia is formally challenging the legal and constitutional authority of the federal labour minister to order them back to work.
In a legal document dated Tuesday, International Longshore and Warehouse Union Local 514 says it’s questioning whether the order issued by Labour Minister Steven MacKinnon last week violates the right to collective bargaining and the right to strike.
The union says these rights are protected by the Charter of Rights and Freedoms.
It says the questions will be considered by a panel of the Canada Industrial Relations Board on Dec. 9 and 10.
This isn’t the only challenge the federal government is facing on this issue, as the union representing port workers in Montreal also announced last week it intended to challenge the federal government.
MacKinnon stepped in on Nov. 12 to get ports in both B.C. and Montreal moving again after employers locked workers out.
His order directed the board to order all operations to resume and move both sets of talks to binding arbitration.
This report by The Canadian Press was first published Nov. 19, 2024.
VANCOUVER – Hurricane-force winds of more than 120 km/h are hitting parts of the British Columbia coast and more than 150,000 BC Hydro customers are without power as a “bomb cyclone” develops off Vancouver Island.
Environment Canada has issued more than 50 warnings, advisories and alerts related to the storm, covering most of Vancouver Island and other coastal areas and stretching deep into the Interior.
The weather agency says the worst of the storm is expected overnight when winds in the central and north coast could peak at 120 km/h, though the remote Sartine Island was already seeing winds exceeding 130 km/h Tuesday afternoon.
But it says risks, including coastal flooding, power outages and fallen trees, could continue long into Wednesday.
Meteorologist Cindy Day says there’s nothing alarmist about Environment Canada calling the system a “bomb cyclone,” which is a non-tropical storm caused by a rapid drop in atmospheric pressure at its centre.
Day says that when used appropriately, such scientific language is necessary and can help people better prepare for the impact of extreme weather events.
She said the term “bomb cyclone” had been used by scientists for decades to describe “a low-pressure system that is undergoing explosive cyclogenesis,” or the creation of cyclonic air circulation.
Day said terms like “bomb cyclone” and “atmospheric river” could help paint a picture that allowed people to better understand and prepare for various weather systems.
In British Columbia, an atmospheric river originating near Hawaii has long been known as a “pineapple express.”
“So, an atmospheric river — right away, people start to think, ‘OK, it’s a narrow band of moving water,'” Day said.
“It does give you the sense that this is going to be a steady event and that there’s not going to be time for the ground to absorb the rain. It’ll continue to rain and eventually cause flooding because of that concentrated rainfall.”
In British Columbia, the government called for the creation of a scale to rank the power of atmospheric river events in 2021, in the wake of a devastating system that brought widespread flooding and shut down the Trans-Canada Highway and other key roads.
But Environment Canada said the next year that implementing such a scale for public warnings was premature.
Day noted that she had received “a lot of grief” for using the term “bomb” in relation to meteorological phenomena, with some accusing her of trying to sensationalize weather events.
“I really believe that if they’re used in the proper context, that they’re not alarmist,” she said.
“As long as the people know that they’re getting their information from a qualified source, and that source (or) that person is using the terms correctly and not shouting out ‘bomb’ every time there’s an area of rain coming in, I think it’s really important to understand those words and to take them seriously and to know that they’re based in meteorological fact, in science.”
Environment Canada said Tuesday that the bomb cyclone 400 km off Vancouver Island coast would remain offshore, but its effects would be widespread.
“Strong easterly winds have developed over North Vancouver Island this afternoon. These winds will intensify through the night,” it said, bringing powerful winds through mainland inlets and valleys of the central and north coasts.
It said winds would gradually weaken Wednesday night as the system drifted further offshore.
Heavily populated areas including Victoria and the Sunshine Coast were forecast to be hit by winds of up to 100 km/h.
The province said in a statement Tuesday that the Ministry of Emergency Management would work closely with communities to ensure preparedness and that the River Forecast Centre was monitoring weather patterns and river conditions.
It said the transportation ministry would also have maintenance contractors watching conditions so crews can respond quickly to flooding or debris buildup.
BC Ferries cancelled numerous sailings for later Tuesday between the Lower Mainland and Vancouver Island, including ships leaving from Tsawwassen, Horseshoe Bay, Swartz Bay and Nanaimo, citing a “deteriorating weather forecast for high winds in the Strait of Georgia.”
Sailings for the late afternoon or evening service on Tuesday have also been cancelled between Metro Vancouver and the Sunshine Coast and Vancouver Island and the northern Gulf Island.
The agency said in a statement that those changes were done “out of an abundance of caution,” adding there is also a “strong risk” of cancellations on major routes on Wednesday.
“As things can change quickly in the event of severe weather, we encourage all passengers to check for updates before travelling, and to remain flexible with travel plans today and tomorrow, as the weather conditions can change rapidly,” it said Tuesday.
The warnings about the bomb cyclone came after much of Metro Vancouver saw its first snowfall of the season Monday night.
This report by The Canadian Press was first published Nov. 19, 2024.
VANCOUVER – Air traffic control audio shows a Boeing 767 cargo jet reported a “flight control problem” involving a mechanism on its wings used to slow the aircraft just before it skidded off a runway at Vancouver’s airport at high speed.
Conversations between the pilots on the Amazon Prime Air jet and air traffic control reveal that the plane was experiencing a problem with its “leading edge slats,” and was carrying about 10,000 kilograms of fuel.
In other recordings the tower tells awaiting emergency responders that the jet was “coming in fast,” while data from the Flightradar24 database shows the plane was travelling at a ground speed of about 200 km/h when it left the runway.
The Transportation Safety Board said it’s investigating after the flight went off the end of the north runway at about 1:45 a.m. on Tuesday.
None of the three-person crew was hurt, but the airport said the north runway will remain closed for about two days as the jet sits in a grass field, nose down, with engines on each of the mud-splattered wings touching the ground.
Vancouver airport CEO Tamara Vrooman says there was “no risk” at any point of the plane breaching the runway’s “secure” perimeter, which separates it from the McArthurGlen Designer Outlet shopping mall and its parking lot.
Vrooman says that all flights originally scheduled for the day were moved to the south runway, and only about 5 per cent of flights experienced any disruptions due to the move.
Flightradar24, a global flight tracking database, says the plane operated by Cargojet Airways left Hamilton, Ont., just after midnight eastern time and its flight path shows it continued 500 metres past the end of the runway in Vancouver before coming to a stop.
The audio recordings of air traffic control in Vancouver show the crew reported problems with the plane’s control systems about 20 minutes before landing, with one crew member requesting time to run a checklist to try to resolve the issue.
An air traffic controller said they wanted to keep the plane “close to the airport,” while the crew tried to find a solution, but control also asked if emergency responders should be ready.
“Yeah, we can bring out the fire trucks just for precaution,” a crew member told air traffic control.
The crew also confirmed to air traffic control that it had no dangerous cargo on-board, other than the fuel.
According to the U.S. National Aeronautics and Space Administration’s Beginner’s Guide to Aeronautics, slats and flaps on an aircraft’s wings are deployed to both slow a plane for landing as well as generate lift.
At the time the jet slid off the runway, Environment Canada’s weather station at the airport showed light rain and snow had been falling for about 90 minutes.
The safety board’s website says runway overruns can damage planes and, in the worst cases, lead to injuries or deaths.
The board says the consequences can be particularly serious when there isn’t enough room at the end of a runway or a suitable system to stop planes.
“This closure will have an impact on YVR operations and flight schedules, but aircraft continue to arrive and depart on our south runway,” the airport said in an updated statement Tuesday.
“We encourage passengers to check with their airlines for current flight schedules and status before heading to YVR.”
Vrooman did not offer a specific timeline for the removal of the jet, but she said that cargo would be removed before crews build some sort of roadway through the grassy area where the plane came to a stop in order to pull it out of its current location.
This report by The Canadian Press was first published Nov. 19, 2024.
