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Canada and New Zealand both have hot housing markets, but only 1 has plan to cool things down – CBC.ca

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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.

The New York Times described “a soon-to-burst real estate bubble.” Reuters declared “Canada’s red-hot housing market has become a bonfire.”

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.

Follow Don Pittis on Twitter @don_pittis

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Factbox-Latest on the worldwide spread of the coronavirus

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(Reuters) -A recent surge in COVID-19 cases could see major parts of Japan slide back into states of emergency with authorities in Tokyo and Osaka looking at renewed curbs, while quarantine-free travel started between Australia and New Zealand for the first time in more than a year.

DEATHS AND INFECTIONS * Eikon users, see COVID-19: MacroVitals https://apac1.apps.cp.thomsonreuters.com/cms/?navid=1592404098 for a case tracker and summary of news.

EUROPE

* The number of coronavirus patients in intensive care units in France edged up on Sunday, amid a nationwide lockdown to try to stem a third wave of infections.

* British scientists launched a trial which will deliberately expose participants who have already had COVID-19 to the coronavirus again to examine immune responses and see if people get reinfected.

* Italy will ease curbs in many areas from April 26, warning caution was still needed to avoid any reversals in the reopening of many long-shuttered activities.

AMERICAS

* Just more than half of U.S. adults have now received at least one COVID-19 vaccine dose, data from the U.S. Centers for Disease Control and Prevention showed on Sunday, with nearly 130 million people aged 18 years or more having received their first shot.

* Dr. Anthony Fauci on Sunday predicted that U.S. health regulators will end the temporary pause on distributing Johnson & Johnson’s COVID-19 vaccine, adding he expects a decision could come as soon as Friday.

* Canada will present a budget with billions of dollars for pandemic recovery measures as COVID-19 infections skyrocket, C$2 billion ($1.6 billion) toward national childcare, and new taxes on luxury goods.

* The Canadian province of Ontario will begin offering AstraZeneca’s COVID-19 vaccine on Tuesday to people turning 40 or older this year.

* Venezuelan President Nicolas Maduro said on Sunday the government has made a second payment to the World Health Organization’s COVAX initiative to access around 11 million COVID-19 vaccines.

ASIA-PACIFIC

* India’s capital New Delhi recorded 25,500 coronavirus cases in a 24-hour period, with about one in three people tested returning a positive result, its chief minister said, urging the federal government to provide more hospital beds to tackle the crisis.

* Pfizer CEO Albert Bourla has agreed to Japanese Prime Minister Yoshihide Suga’s request to supply additional doses of the COVID-19 vaccine, the vaccine minister of Japan said on Sunday.

MIDDLE EAST AND AFRICA

* The coronavirus variant discovered in South Africa can break through the protection provided by Pfizer and BioNTech’s COVID-19 vaccine to some extent, a real-world data study in Israel found.

* Vaccination against COVID-19 is a requirement to perform the Umra pilgrimage to Mecca, Saudi state TV said on Sunday, citing a government official.

* Tunisia on Saturday announced the closure of all schools until April 30, as well as restrictions on movement, to slow the spread of the novel coronavirus.

MEDICAL DEVELOPMENTS

* China’s Sinovac COVID-19 vaccine was 67% effective in preventing symptomatic infection, data from a huge real-world study in Chile has shown, a potential boost for the jab which has come under scrutiny over its level of protection against the virus.

ECONOMIC IMPACT

* Asian shares hovered near 1-1/2 week highs on Monday, helped by expectations monetary policy will remain accommodative the world over, while COVID-19 vaccine rollouts help ease fears of another dangerous wave of coronavirus infections. [MKTS/GLOB]

(Compiled by Krishna Chandra Eluri, Devika Syamnath and Milla Nissi; Edited by William Maclean, Anil D’Silva and Subhranshu Sahu)

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New Zealand says ‘uncomfortable’ with expanding Five Eyes

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new zealand

SYDNEY (Reuters) – New Zealand said it is “uncomfortable” with expanding the role of the Five Eyes, a post-war intelligence grouping which also includes the United States, Britain, Australia and Canada, recently criticised by China.

China is New Zealand’s largest trading partner, and Foreign Affairs Minister Nanaia Mahuta said in a speech that New Zealand sought a predictable diplomatic relationship.

New Zealand will find it necessary to speak out on issues where it does not agree with China, including developments in Hong Kong and the treatment of Uyghurs in Xinjiang, she said in a speech on Monday to the government-funded New Zealand China Council.

In later comments to media reported by New Zealand’s Newshub, Mahuta said New Zealand didn’t favour invoking the Five Eyes for “messaging out on a range of issues that really exist out of the remit of the Five Eyes”.

“We are uncomfortable with expanding the remit of the Five Eyes,” she said.

China’s foreign ministry has repeatedly criticised the Five Eyes, after all members issued a joint statement about the treatment of Hong Kong pro-democracy legislators in November.

Last month, Chinese foreign ministry spokeswoman Hua Chunying said “the Five Eyes have taken coordinated steps to gang up on China”, after Australia and New Zealand issued a joint statement on Xinjiang.

Last year, the Five Eyes discussed cooperation beyond intelligence sharing, including on critical technology, Hong Kong, supply chains and the COVID-19 pandemic, according to a statement by Australia’s Foreign Minister Marise Payne in 2020.

Mahuta’s office told Reuters it couldn’t provide a copy of her comments on the Five Eyes.

Payne will travel to New Zealand on Wednesday for meetings with Mahuta and Prime Minister Jacinda Ardern, the first diplomatic visit between the neighbouring countries since borders reopened both ways.

Canberra has recently endured a rockier relationship with Beijing than Wellington, with Australia’s trade minister unable to secure a call with his Chinese counterpart as exporters were hit with multiple trade sanctions from China.

A diplomatic dispute between China and Australia worsened in 2020 after Canberra lobbied for an international inquiry into the source of the coronavirus pandemic.

China and New Zealand upgraded a free trade agreement in January, when, Mahuta said, trade ministers had held a “constructive” call.

 

(Reporting by Kirsty Needham; Editing by Michael Perry)

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Australia to hold inquiry to examine military suicides

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By Colin Packham

CANBERRA (Reuters) – Australia will hold a Royal Commission to examine suicides among serving and former military personnel, Prime Minister Scott Morrison said on Monday, bowing to public pressure to find ways to stem a mounting toll.

More than 500 have died from suicide since 2001, government data shows, a statistic that has fuelled public anger, including among the prime minister’s own Liberal party.

“I think and I hope it will be a healing process,” Morrison told reporters in Canberra, as he announced his call for a commission to be set up.

“I hope it will be a process by which veterans and families can find some comfort, but it obviously can’t replace the loss.”

The issue became prominent in Australia following a high-profile campaign by Julie-Ann Finney, whose son David, a former naval petty officer, committed suicide in 2019 after he had earlier been deployed to Iraq, East Timor and Bougainville.

Australian troops have been involved in conflicts in Iraq and Afghanistan, and deployed for humanitarian missions in the Pacific.

The United States, Britain and Canada are also exploring ways to reduce suicide rates among serving and former military personnel.

Morrison said he hopes the Royal Commission will begin hearings later this year. Final recommendations are expected in 2023, he said. A permanent national commissioner will be tasked with ensuring the recommendations are enforced.

 

(Reporting by Colin Packham; Editing by Simon Cameron-Moore)

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