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.
Nova Scotia RCMP say their investigation into two suspicious deaths earlier this month has concluded that one man died by homicide and the other by suicide.
The bodies of two men, aged 40 and 73, were found in a home in Windsor, N.S., on Sept. 3.
Police say the province’s medical examiner determined the 40-year-old man was killed and the 73-year-old man killed himself.
They say the two men were members of the same family.
No arrests or charges are anticipated, and the names of the deceased will not be released.
RCMP say they will not be releasing any further details out of respect for the family.
This report by The Canadian Press was first published Sept. 16, 2024.
For the first time in their history, members of the Cree community of Nemaska received a visit from a sitting Quebec premier on Sunday and were able to share first-hand the story of how they were displaced by a hydroelectric project in the 1970s.
François Legault was greeted in Nemaska by men and women who arrived by canoe to re-enact the founding of their new village in the Eeyou Istchee James Bay region, in northern Quebec, 47 years ago. The community was forced in the early 1970s to move from its original location because members were told it would be flooded as part of the Nottaway-Broadback-Rupert hydro project.
The reservoir was ultimately constructed elsewhere, but by then the members of the village had already left for other places, abandoning their homes and many of their belongings in the process.
George Wapachee, co-author of the book “Going Home,” said community members were “relocated for nothing.”
“We didn’t know what the rights were, or who to turn to,” he said in an interview. “That turned us into refugees and we were forced to abandon the life we knew.”
Nemaska’s story illustrates the challenges Legault’s government faces as it looks to build new dams to meet the province’s power needs, which are anticipated to double by 2050. Legault has promised that any new projects will be developed in partnership with Indigenous people and have “social acceptability,” but experts say that’s easier said than done.
François Bouffard, an associate professor of electrical engineering at McGill University, said the earlier era of hydro projects were developed without any consideration for the Indigenous inhabitants living nearby.
“We live in a much different world now,” he said. “Any kind of hydro development, no matter where in Quebec, will require true consent and partnership from Indigenous communities.” Those groups likely want to be treated as stakeholders, he added.
Securing wider social acceptability for projects that significantly change the landscape — as hydro dams often do — is also “a big ask,” he said. The government, Bouchard added, will likely focus on boosting capacity in its existing dams, or building installations that run off river flow and don’t require flooding large swaths of land to create reservoirs.
Louis Beaumier, executive director of the Trottier Energy Institute at Polytechnique Montreal, said Legault’s visit to Nemaska represents a desire for reconciliation with Indigenous people who were traumatized by the way earlier projects were carried about.
Any new projects will need the consent of local First Nations, Beaumier said, adding that its easier to get their blessing for wind power projects compared to dams, because they’re less destructive to the environment and easier around which to structure a partnership agreement.
Beaumier added that he believes it will be nearly impossible to get the public — Indigenous or not — to agree to “the destruction of a river” for a new dam, noting that in recent decades people have come to recognize rivers as the “unique, irreplaceable riches” that they are.
Legault’s visit to northern Quebec came on Sept. 15, when the community gathers every year to remember the founding of the “New Nemaska,” on the shores of Lake Champion in the heart of the boreal forest, some 1,500 kilometres from Montreal. Nemaska Chief Clarence Jolly said the community invited Legault to a traditional feast on Sunday, and planned to present him with Wapachee’s book and tell him their stories.
The book, published in 2022 along with Susan Marshall, is filled with stories of Nemaska community members. Leaving behind sewing machines and hunting dogs, they were initially sent to two different villages, Wapachee said.
In their new homes, several of them were forced to live in “deplorable conditions,” and some were physically and verbally abused, he said. The new village of Nemaska was only built a few years later, in 1977.
“At this time, families were losing their children to prison-schools,” he said, in reference to the residential school system. “Imagine the burden of losing your community as well.”
Thomas Jolly, a former chief, said he was 15 years old when he was forced to leave his village with all his belongings in a single bag.
Meeting Legault was important “because have to recognize what happened and we have to talk about the repercussions that the relocation had on people,” he said, adding that those effects are still felt today.
Earlier Sunday, Legault was in the Cree community of Eastmain, where he participated in the official renaming of a hydro complex in honour of former premier Bernard Landry. At the event, Legault said he would follow the example of his late predecessor, who oversaw the signing of the historic “Paix des Braves” agreement between the Quebec government and the Cree in 2002.
He said there is “significant potential” in Eeyou Istchee James Bay, both in increasing the capacity of its large dams and in developing wind power projects.
“Obviously, we will do that with the Cree,” he said.
This report by The Canadian Press was first published Sept. 16, 2024.
NEMASKA – For the first time in their history, members of the Cree community of Nemaska received a visit from a sitting Quebec premier on Sunday and were able to share first-hand the story of how they were displaced by a hydroelectric project in the 1970s.
François Legault was greeted in Nemaska by men and women who arrived by canoe to re-enact the founding of their new village in the Eeyou Istchee James Bay region, in northern Quebec, 47 years ago. The community was forced in the early 1970s to move from their original location because they were told it would be flooded as part of the Nottaway-Broadback-Rupert hydro project.
The reservoir was ultimately constructed elsewhere, but by then the members of the village had already left for other places, abandoning their homes and many of their belongings in the process.
George Wapachee, co-author of the book “Going Home,” said community members were “relocated for nothing.”
“We didn’t know what the rights were, or who to turn to,” he said in an interview. “That turned us into refugees and we were forced to abandon the life we knew.”
The book, published in 2022 by Wapachee and Susan Marshall, is filled with stories of Cree community members. Leaving behind sewing machines and hunting dogs, they were initially sent to two different villages, 100 and 300 kilometres away, Wapachee said.
In their new homes, several of them were forced to live in “deplorable conditions,” and some were physically and verbally abused, he said. The new village of Nemaska was only built a few years later, in 1977.
“At this time, families were losing their children to prison-schools,” he said, in reference to the residential school system. “Imagine the burden of losing your community as well.”
Legault’s visit came on Sept. 15, when the community gathers every year to remember the founding of the “New Nemaska,” on the shores of Lake Champion in the heart of the boreal forest, some 1,500 kilometres from Montreal. Nemaska Chief Clarence Jolly said the community invited Legault to a traditional feast on Sunday, and planned to present him with Wapachee’s book and tell him their stories.
Thomas Jolly, a former chief, said he was 15 years old when he was forced to leave his village with all his belongings in a single bag.
Meeting Legault was important “because have to recognize what happened and we have to talk about the repercussions that the relocation had on people,” he said, adding that those effects are still felt today.
Earlier Sunday, Legault had been in the Cree community of Eastmain, where he participated in the official renaming of a hydro dam in honour of former premier Bernard Landry.
This report by The Canadian Press was first published Sept. 16, 2024.
