Is the Canadian Housing Market in trouble 2015?
If you’d rather just read my conclusion scroll to the bottom of this blog post, if you want to know how I came to my conclusion read this post in its entirety.
If you think the Canadian housing market is going to crash, you could be right however chances are the Canadian housing market won’t crash. The province to watch out for in 2015 is Alberta, if the price of oil remains low (which I expect it to be) the Alberta economy will struggle. The province of Alberta differs from British Columbia, Quebec and Ontario because a lot of the people that RESIDE in Alberta only live there because of the HIGH PAYING JOBS! If those high paying oil jobs in Alberta leave so will those people. A limited supply of high paying jobs in Alberta means people will leave and they might abandon their Albertan homes.
For the most part Canadians pay their mortgages on time, however in Alberta a lot of people only have mortgages because ALBERTA DOESN’T HAVE RENTAL CONTROLS! This is the reason why Albertans lead the nation per person in mortgage ownerships
The reason I wish the CMHC was never created
Until the creation of the CMHC I was against rental controls… Actually allow me be a bit more specific. The moment Mortgage backed securities were guaranteed via the Canadian taxpayer via CMHC I changed from being against rental controls to being for rental controls.
My personal opinion and the basis of my opinion is because the CMHC was originally created for rental and public housing programs for low-income families. Now in 2015 the CMHC is being used to help the banks and speculators make more money, lure people out of the rental markets and into the housing market. This is being done obviously to get more money via taxes, raise the cost of living and also to prop up the Canadian banking system.
If you’re wondering this is one of the reasons the cost to live in Canada is getting so high. Because of the high cost of living homelessness is still a problem in Canada, and minimum wage is still a problem. Higher minimum wages mean less employers are willing to hire more employees, it also means less Canadians are willing to take the risk to start a business.
Being that Canadian taxpayers are on the hook if the housing market crashes, government should have also made sure that those same GOVERNMENTAL levers assisting in the rise of home ownership were also involved in the rental markets. I wouldn’t have any problem with speculators in the housing markets if Canadian taxpayers weren’t on the hook if the housing market crashed.
However the government has actually artificially created an unnecessary increase in the cost of living by allowing the rental and lease markets to paralyze future growth, which may contribute to a slow down in consumer spending and a slowdown in LENDING!
Alberta, Alberta, Alberta I hope your housing market doesn’t crash!
A wise man once told me not buy a house with expectation that it will rise in value. Individuals with mortgages will see a lot of their equity disappear overnight all over Canada if Alberta’s housing market ever crashes! Remember for the most part equity for mortgage holders is controlled in large part by the banking industry. There are a lot of speculators in the Canadian housing market and many of them are there only because of CMHC. These speculators are in the housing and rental sectors jacking up rent prices which contributes to less consumer spending.
If Albertans start to abandon their homes the Banks will tighten lending all over Canada, furthermore if this happens, I don’t expect a crash, but what I do expect is for the BoC to lower interest rates again and again and again… to solve the problem and what effects will this have the Canadian economy?
An even lower loonie…
I personally can’t get the $0.69 USD to purchase $1 CAD out of my head and this will increase in the cost of living because our biggest trading partner is the U.S, and don’t forget that when the Canadian dollar goes down employees with unions are going to request a pay increase to match inflation, furthermore government will have to address welfare and minimum wage paying jobs that will also request a pay increase.
Nobody talks about bringing the cost of living down anymore – Who will go on strike first?
In a competitive capitalistic environment prices for goods and services are usually supposed to come down, however government people don’t even talk about costs of living anymore. If you read or watch the news all you hear are people talking about is their fear of deflation and how the Canadian economy needs more inflation to sustain itself.
I’ve written about this before however I’ll talk about it again; a few years back people were discussing the bringing back a gold standard currency and my argument was if the dollar should be backed by anything it should be backed by OIL. Well in January 2015 the price of a barrel of oil has declined and is declining which is causing the US Dollar to rise.
Because of the current thinking of the planet; people interpret this as deflation when in actuality what the declining price of oil is supposed to mean is the price of your currency is RISING which is supposed to bring the costs of goods and services DOWN! Which in turn is supposed to fuel consumer spending…. However… The Canadian government is addicted to debt and it needs to keep consumers in debt because it fears Canadians NOT in debt will save money which government believes will lead to deflation.
To a degree I agree with that because people who practice the habit of saving usually make wiser investment decisions and are usually the people that wind up becoming rich and/or comfortable in retirement. Money has less value to people who are deeply in debt. People living in debt will usually get into more debt which in turn forces them into the rat race and pretty much forces them to continue working well into what should be their retirement years.
Canadians are addicted to debt and the Canadian banks are now focusing their attention to Investments!
Next to Switzerland Canada has the best banking system on planet earth and if the banks don’t lower interest rates to match the BoC’s interest rate any fool should interpret this as the Canadian banking system correlating the Canadian dollar to the price of crude oil what does that mean? It means a stronger Canadian currency lessons the value of your house!
So regardless of what the BoC does with interest rates the banks will see debt (mortgage is a debt) as a disease it wants limited exposure too. Again this will go back to costs of living, if in the banks mind the Canadian dollar is more valuable than it was it will ask government for more funding or insurance to protect itself against losses, this insurance will be passed on to the Canadian consumers in some way shape or form.
As an example Scotiabank a bank that basically went untouched during the U.S economic downturn recently cut 1,500 jobs near the end of 2014, you can read more about this for yourself clicking the link below.
Scotiabank like other Canadian banks are going to focus more on investments, profitable investments! People!!! Interest rates are almost ZERO and Canadian housing market according to the BoC is overvalued by as much as 30% you can read more about that here:
The price of oil is down, HIGH PAYING ALBERTAN jobs are dependent on oil and in my personal opinion even if the price of oil goes up again the oil industry should expect price volatility now and in the future. The energy sector is competitive now. Germany is showing the world that fossil fuel dependency is no longer necessary plus Asian and European countries looking to grow are reconsidering the amount they’re willing to invest into fossil fuels. In short….
THE WORLD IS CHANGING…. and in my personal opinion Canada is heavily invested in what appears to be industries that will be negatively affected by this change.
In America as an example the only areas of real estate that are making record profits are the areas where the rich and powerful live. In Canada things are different, almost every property is overvalued, condos in Toronto and Vancouver as an example aren’t only overvalued but also carry hefty maintenance costs which are passed on to Canadian renters, which in turn leads to Canadians spending less, which in turn causes the Canadian government to pass rules and regulations to spur growth, which increases the cost of living which causes employees with UNIONS to ask their employers for a pay increase, which causes employers to stop hiring which… I hope you see my point here…
Is the Canadian housing Market in trouble for 2015?
If Albertans pay their mortgages – the country should be fine, however if the housing market in Alberta crashes all of Canada will feel the pain. One other factor to watch out for are the big 5 banks. Will they lower rates for the spring season? Do the big 5 banks want to take on more EXPENSIVE low paying debt?
Like it or not if oil price remains low the value of the Canadian currency will actually be high it might be low against the United States Dollar but it will be cheaper to purchase oil and what this means to the banks is that it will be a good time for them to invest and make easier, faster, larger gains in other emerging industries instead of having their money tied up in low paying SLOW mortgage payments.
Banks are in this for the money and if they expect interest rates to be low for an extended period of time mortgage loans will no longer be a priority for them. The expectation for banks was to sucker people into purchasing low interest mortgages so they could make record profits when interest rates went back up. However….
If the expectation is that interest rates will be near zero for the next 3 – 15 years the Canadian housing market starts to look less favourable to the banks especially as more private foreign lenders join in on all the fun. You see unlike the government and the average person the Banks actually look at COSTS and being that BoC has signalled that it’s in financial trouble the Canadian Bankster cartel may in the future request some sort of insurance for tying it’s money up in all these cheap mortgages.
Despite what most people might think in my personal opinion now is a good time for Canadians to start saving money and investing in safe liquid investments. My basis for this thinking is if this Canadian government continues on it’s current path there will be a lot of opportunities for people to make a lot of money in short periods of time, but as is always the case these opportunities will only be there for the people who don’t have ALL their money tied up in debt or fixed low paying assets!
In low interest rate environments MORE Million and BILLIONAIRES are created because 0% interest rates equal more flexibility for the smart investors. Don’t join the herd and drown yourself in debt that yields you low returns do the opposite and look for the best and safest investment opportunities you can find. Credit Card companies as an example haven’t lowered their rates, credit card companies still may offer teaser rates but for the most part Credit card companies have done nothing to lower their rates.
Now is your time to build wealth invest in safe liquid investments! Whether rates go up or go down opportunity awaits in the Canadian market to make a lot of money in a short period of time!
