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
China passes law to cut homework pressure on students
China has passed an education law that seeks to cut the “twin pressures” of homework and off-site tutoring in core subjects, the official Xinhua news agency said on Saturday.
Beijing has exercised a more assertive paternal hand this year, from tacking the addiction of youngsters to online games, deemed a form of “spiritual opium”, to clamping down on “blind” worship of internet celebrities.
China’s parliament said on Monday it would consider legislation to punish parents https://www.reuters.com/world/china/china-drafts-law-punish-parents-childrens-bad-behaviour-2021-10-18 if their young children exhibit “very bad behaviour” or commit crimes.
The new law, which has not been published in full, makes local governments responsible for ensuring that the twin pressures are reduced and asks parents to arrange their children’s’ time to account for reasonable rest and exercise, thereby reducing pressure, said the agency, and avoiding overuse of the internet.
In recent months, the education ministry has limited gaming hours for minors, allowing them to play online for one hour on Friday, Saturday and Sunday only.
It has also cut back on homework and banned after-school tutoring for major subjects during the weekend and holidays, concerned about the heavy academic burden on overwhelmed children.
(Reporting by Steven Bian and Engen Tham in Shanghai; Editing by William Mallard)
Red Cross warns aid groups not enough to stave off Afghan humanitarian crisis
The Red Cross on Friday urged the international community to engage with Afghanistan’s new Taliban rulers, saying that aid groups on their own would be unable to stave off a humanitarian crisis.
Afghanistan has been plunged into crisis by the abrupt end of billions of dollars in foreign assistance following the collapse of the Western-backed government and return to power by the Taliban in August.
The International Committee of the Red Cross (ICRC) has since increased its efforts in the country while other organisations were also stepping up, Director General Robert Mardini said.
But he told Reuters that support from the international community, who had so far taken a cautious approach in engaging with the Taliban, was critical to providing basic services.
“Humanitarian organisations joining forces can only do so much. They can come up with temporary solutions.”
The United Nations on Thursday announced https://www.reuters.com/world/asia-pacific/un-sets-up-trust-fund-peoples-economy-afghanistan-2021-10-21 it had set up a fund to provide cash directly to Afghans, which Mardini said would solve the problem for three months.
“Afghanistan is a compounded crisis that is deteriorating by the day,” he said, citing decades of conflict compounded by the effects of climate change and the COVID-19 pandemic.
Mardini said 30% of Afghanistan’s 39 million population were facing severe malnutrition and that 18 million people in the country need humanitarian assistance or protection.
The Taliban expelled many foreign aid groups when it was last in power from 1996-2001 but this time has said it welcomes foreign donors and will protect the rights of their staff.
But the hardline Islamists, facing criticism it has failed to protect rights, including access to education for girls, have also said aid should not be tied to conditions.
“No humanitarian organisation can compensate or replace the economy of a country,” Mardini said.
(Reporting by Alexander Cornwell; Editing by Angus MacSwan)
Coronavirus: Non-essential travel advisory lifts – CTV News
Canadians should carefully weigh any future decisions on taking foreign trips even though the federal government has lifted a global advisory asking them to avoid non-essential travel, health officials cautioned Friday.
Dr. Theresa Tam, Canada’s chief public health officer, said the government would be providing more specific information about the severity of COVID-19 in various countries to help Canadians decide where they should consider travelling.
“The pandemic is very much alive. There are definitely still risks involved in travel,” Tam said Friday. She said it was too soon for the government to give a “blanket” recommendation on all travel, but said being fully vaccinated and assessing the level of the pandemic in any potential destination are key.
“Now is not the time to just freely go wherever.”
The government announced Thursday that it was lifting the global advisory asking Canadians to avoid non-essential travel outside the country, but it was continuing to advise against travel on cruise ships.
The global travel advisory was put in place in March 2020 as the COVID-19 pandemic hit.
Dr. Howard Njoo, the deputy chief public health officer, said Friday that Canadians should ask themselves a series of questions before they plan to travel abroad.
Njoo urged Canadians assess the “epidemiological situation” of COVID-19 in any potential travel destination “because there is great variation between different countries and even within countries, as we’ve seen here in Canada.”
They should also look at the level of vaccination rates in those country “because that’s an indication of what community transmission in that region may be.”
Canadian travellers should also ask themselves what they actually want to do when they get to another country. “For example, if you’re going to go on solitary nature hikes, that’s one thing. But if you’re thinking of going on a cruise with a lot of people in an enclosed space, that’s another thing,” said Njoo.
Canadians should also weigh the “culture for individual protection measures” in where they are thinking of travelling, such as whether masks are commonly worn, or not, he said.
“We know that the situation is not the same in all parts of the world. There are regions in the world that are still suffering from the severe consequences of COVID-19,” he said.
The government of Canada’s website now shows advisories for each destination country, as it did prior to the pandemic.
It also urges Canadians to ensure they are fully vaccinated against the novel coronavirus before travelling abroad, and to stay informed of the COVID-19 situation at their destination.
The move comes as the federal government announced it had reached an agreement with the provinces on a new national vaccine passport for domestic and international travel.
Prime Minister Justin Trudeau said Thursday that provinces and territories have agreed to adjust their own vaccine passports to give them the same look, feel and security measures based on the international standard for so-called Smart health cards.
Several have already started distributing proof-of-vaccination documents, including Newfoundland and Labrador, Nova Scotia, Quebec, Ontario, Nunavut, Saskatchewan, Northwest Territories and Yukon.
Canada opened its borders last month to non-essential international travellers who have received both doses of a Health Canada-approved COVID-19 vaccine, and to fully vaccinated travellers from the United States in August.
The U.S. government recently announced that its land borders will reopen to non-essential Canadian travellers on Nov. 8.
This report by The Canadian Press was first published Oct. 22, 2021
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