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?
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.'”
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.
Follow Don on Twitter @don_pittis
Canada's GDP grew by 3% in July as more sectors reopened – CBC.ca
Canada’s economy continued its recovery in July from the first wave of COVID-19, with the country’s gross domestic product expanding by three per cent.
Statistics Canada reported Wednesday that all 20 sectors of the economy grew as businesses continued to reopen and tried to get back to some sense of normal after lockdowns in March and April.
Output in agriculture, utilities, finance and insurance businesses, as well as real estate rental and leasing companies, clawed back to where it was before the pandemic struck. Retail trade businesses accomplished the same feat the month before, in June. But despite July’s growth, all other types of businesses still have yet to get back to their previous highs.
The biggest expansions in the month were in hotels/restaurants (up 20.1) and arts/entertainment/recreation (up 14 per cent), but those figures come off a very low base and are still facing the deepest slump versus year-ago levels, Bank of Montreal economist Benjamin Reitzes said of the numbers.
All in all, GDP was six per cent below February’s level, Statistics Canada said.
The three per cent gain was in line with what economists had been expecting. It was about half as much as the 6.5 per cent increase seen in June.
While StatsCan is still calculating the final numbers, its early projection for August shows an expansion of just one per cent, which suggests that Canada’s economic recovery is running out of steam as it appears a second wave of the virus is hitting some parts of the country.
TD Bank economist Sri Thanabalasingam said based on the July numbers, those fears are well founded.
“Slowing and uneven growth are indications that the Canadian economy is transitioning from the rebound phase to a more challenging stage of the recovery,” he said.
“Even without restrictions, consumers and businesses may rein in spending activity in response to rising caseloads. The second wave is now upon us, and the course of the recovery will depend on our success in containing it.”
Canada reports 1,657 new coronavirus cases, 13 new deaths on Tuesday – Global News
A new set of restrictions are in store for the Montreal, Quebec City and Chaudière-Appalaches regions to stem the tide of COVID-19.
Those three areas are officially in a red zone, the province’s highest alert level for the health crisis, starting Thursday.
Here is a guide to the tightened measures and partial lockdown aimed at limiting the second wave of the novel coronavirus.
How long is the partial lockdown?
Quebec has placed those three regions in its highest alert level for nearly a month.
The new rules are set to last Oct. 1-28 — if all goes well. Premier François says he hopes to lift restrictions if the situation improves, but can’t make false promises.
What’s closed in red zones?
Bars, theatres, cinemas, casinos, museums and libraries are closed for at least four weeks starting Thursday.
Dining rooms in restaurants have also been ordered to shut down, but takeout and delivery are permitted.
Schools and daycares remain open, but the sanitary rules put in place are still in effect.
Gyms, retail stores, hair salons and other beauty care businesses remain open.
Private professional health services are allowed to operate, but only for services that require the patient to be physically there.
Places of worship are allowed to accommodate a maximum of 25 people and must keep a register.
Community organizations are also permitted to stay open.
Can I have someone over to my house?
The short answer is no. Quebecers who lived in designated red zones are prohibited from inviting others to their homes.
There are a few exceptions, however. The government says informal caregivers, individuals offering support or labour for planned work are permitted.
People who live alone are also allowed to welcome one other individual into their residences.
Quebec Premier pleads with young adults to do their part to stop the spread of COVID-19
Can I visit loved ones in long-term care homes?
Visits are limited in long-term care homes and private seniors’ residences located in red zones.
The goal is to keep the health crisis from sweeping through those facilities like it did during the deadly first wave.
The province says visits for humanitarian purposes are allowed. Informal caregivers are allowed to visit the elderly, but it’s limited to one person at a time and a maximum of two people per day.
Are private gatherings okay?
Private gatherings are not allowed in red zones.
Are gatherings in public places permitted?
Social gatherings in public places are also prohibited.
There are two exceptions: gatherings are allowed at funerals and places of worship. There is a maximum of 25 people allowed and a register of everyone attending must be maintained.
Montreal Mayor Valérie Plante, for instance, has urged all city dwellers to steer clear of socializing in parks.
What about protests?
The province says protests or rallies are permitted, but all attendees must wear a mask to curb the spread of the virus.
Can I travel to other parts of Quebec?
Quebecers in red zones are asked not to travel to regions that aren’t as hard hit by the health crisis.
There is no ban, but the province says people should avoid heading to designated green, yellow and orange zones.
Essential travel such as for work and freight transportation is allowed.
Can I go to Ontario or elsewhere in Canada?
It is strongly advised that people in Montreal, Quebec City and Chaudière-Appalaches do not travel outside of the province.
© 2020 Global News, a division of Corus Entertainment Inc.
Passengers at 11 more Canadian airports face mandatory temperature checks – CTV News
Transport Canada is expanding mandatory temperature screening to all passengers in 11 additional airports across the country.
The department announced on Tuesday that temperature screening has begun at airports in St. John’s, N.L. Halifax, Quebec City, Ottawa, Toronto (Billy Bishop), Winnipeg, Regina, Saskatoon, Edmonton, Kelowna, B.C. and Victoria.
“Since the beginning of the pandemic, Canadians have come together, made sacrifices, and done their part to help limit the spread of the virus,” Transport Minister Marc Garneau said in a news release.
“Our government has expanded temperature screenings to major airports across the country to support these efforts and as another measure in our multi-layered approach to help protect the safety of the travelling public and air industry workers.”
This is an expansion of the temperature screening program that began on June 30 at four of Canada’s busiest airports: Montreal, Calgary, Vancouver and Toronto (Pearson).
Any passenger found to have an elevated temperature without a medical certificate with a reason for this elevation will not be allowed to continue their travel and will be told to book another flight at least 14 days later.
All employees who work within the restricted area of an airport will also be subject to temperature screening.
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