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The housing market has entered the twilight zone

Colin Campbell on banana republics and condo lawsuits


 

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In Ottawa, the leader of the NDP—the NDP—accused the Conservative finance minister, Jim Flaherty, of “banana republic behaviour” for his efforts to intervene in the economy and influence mortgage rates.

Meanwhile, Flaherty’s one-time ally in his anti-debt fight, Bank of Canada governor Mark Carney, has declared the household debt problem solved— apparently, a debt-to-GDP ratio of 165 per cent is no longer anything to worry about.

In Vancouver, a former prime minister, Kim Campbell, made headlines this month for filing a lawsuit in which she’s trying to get out of a 2007 condo purchase and recoup a $368,000 deposit. The Canadian housing market, it seems, has entered the twilight zone.

It’s getting harder and harder to tell what’s sensical and what’s nonsensical. Even the Tory cabinet can’t seem to agree if it should be concerned about Canadians taking on big mortgages at discount rates, with the Tories’ Small Business Minister Maxime Bernier joining Thomas Mulcair in his criticism of Flaherty.

There is nothing encouraging in all this.

The eternally upbeat Canadian Real Estate Association is now forecasting a bad year ahead, with only Manitoba and Alberta expected to see sales gains.

More serious trouble can be seen in the Teranet-National Bank house price index, which recorded its sixth straight month-to-month decline in February. That has been blamed on Flaherty’s recent effort to tighten mortgage rules. Nevertheless, such price declines, coming after a long period of slumping sales, are a sign of a market that’s increasingly out of balance.

Flaherty helped create the housing bubble by relaxing mortgage rules early in his tenure and now seems intent on making sure he can at least say, “I told you so,” when trouble arrives along with rising interest rates.

Campbell’s lawsuit alleges her unit was delayed by over a year. But anyone who has bought a condo in Vancouver can sympathize with her action. A study last week estimates that 15 per cent of condos in the downtown are empty. House prices have as much to do with human psychology as they do location, and when some of our best and brightest appear to lose faith, it doesn’t bode well for the rest of us.


 

The housing market has entered the twilight zone

  1. “Even the Tory cabinet can’t seem to agree if it should be concerned about Canadians taking on big mortgages at discount rates …. ”

    Adam Smith – Wealth Of Nations:

    It is the highest impertinence and presumption… in kings and ministers, to pretend to watch over the economy of private people, and to restrain their expense… They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of their subjects never will.

  2. ‘Even the Tory cabinet can’t seem to agree if it should be concerned about Canadians taking on big mortgages at discount rates ….”

    it’s no disagreement. It’s related to the size of the loan. If you overextend yourself because you take out too much debt with an expectation that you’ll see low interest rates forever… you’re a fool.

  3. One of these days the Canadian people, their
    elected politicians and their Governor of the Bank of Canada really should have
    a discussion about the staggering amount of debt which is being piled up in this
    country every year by Governments (Federal, Provincial, and Municipal),
    businesses, and consumers.

    The total government (federal,
    provincial and municipal), business and household debt outstanding in
    Canada at the end of December 2012 was $5.25 Trillion. From the end of December
    2011 to the end of December 2012 the total debt outstanding in Canada increased
    by $269 Billion. For that 366 day period the total debt outstanding in Canada
    increased at a rate of $735 Million per day.

    If you do not believe the above statistics check out the bottom line of
    Statistics Canada’s latest credit market summary data table which can be seen at
    the following link:

    http://www5.statcan.gc.ca/cansim/pick-choisir?lang=eng&p2=33&id=3780122

    If you do not believe the above statistics check out the bottom line of
    Statistics Canada’s latest credit market summary data table which can be seen at
    the following link:

    http://www5.statcan.gc.ca/cansim/pick-choisir?lang=eng&p2=33&id=3780122

  4. like..wow man…are you going to try to get one of those sunny sides of mars lots…holland is selling them…do they still call them…holland…anyway…twilight zone…not bad..but the dark side…at least wait til they install the windmills

    • Free tulips with your purchase. Everybody loves tulips.

  5. Hello Colin, how would you say the montreal condo market is doing?

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