Canada's 'housing bubble' deemed close to bursting

[swimmer_spe]

Originally Posted by travis3000

Im locked in at 1.8% on my house until April 2026. I don't expect to see those rates again anytime soon. But my hope is that the current 5 year fixed rate of 5.4% drops down to around 3.5% or so by the time my renewal is ready. I was paying 3.79% in 2018 and managed that just fine. So I know I can do it.

Now 5% or higher would be painful. Would have to start eliminating some luxuries and start some strict budgeting.

Why do you live house poor?

[travis3000]

Originally Posted by swimmer_spe

Why do you live house poor?

Ummm I don't lol. I think if anyone had their rate go from 1.8% to 5.4% they'd start to cut back on luxuries. I could still afford it but some tweaking of the budget would have to happen.

[swimmer_spe]

Originally Posted by travis3000

Ummm I don't lol. I think if anyone had their rate go from 1.8% to 5.4% they'd start to cut back on luxuries. I could still afford it but some tweaking of the budget would have to happen.

That is the definition of being house poor.

https://www.investopedia.com/terms/h/housepoor.asp

""House poor" is a term used to describe a person who spends a large proportion of his or her total income on homeownership, including mortgage payments, "

[travis3000]

Originally Posted by swimmer_spe

That is the definition of being house poor.

https://www.investopedia.com/terms/h/housepoor.asp

""House poor" is a term used to describe a person who spends a large proportion of his or her total income on homeownership, including mortgage payments, "

If that's the definition of house poor then anyone in Canada with a mortgage would fall into that category.

My definition of house poor is when you're so strapped with house bills that you can't travel, can't afford a car, can't go out to dinner, can't buy new clothes, can't afford special events or weddings, etc. Feeling a little "stretched" when your mortgage surges by $1000 per month would be something that every single Canadian would feel under these circumstances.

[Rollerstud98]

Originally Posted by travis3000

If that's the definition of house poor then anyone in Canada with a mortgage would fall into that category.

My definition of house poor is when you're so strapped with house bills that you can't travel, can't afford a car, can't go out to dinner, can't buy new clothes, can't afford special events or weddings, etc. Feeling a little "stretched" when your mortgage surges by $1000 per month would be something that every single Canadian would feel under these circumstances.

Yeah thinking mine is going to go up by $4-500 a month next year. Already looking to eliminate certain things to balance it out. Didn’t realize that made me house poor lol. Eliminating “cable” tv and reducing internet cost, not going to hurt my life much.

[swimmer_spe]

Originally Posted by travis3000;9724331[B

]If that's the definition of house poor then anyone in Canada with a mortgage would fall into that category. [/B]

My definition of house poor is when you're so strapped with house bills that you can't travel, can't afford a car, can't go out to dinner, can't buy new clothes, can't afford special events or weddings, etc. Feeling a little "stretched" when your mortgage surges by $1000 per month would be something that every single Canadian would feel under these circumstances.

That is the real truth, and is something that needs to be fixed.

I am happy that we are not house poor. A good way to look at it is my spouse and I take home about the same. My pay covers all bills and all debt with very little afterwards. That means that more than half is for enjoying life. For us, an increase of a few % will barely be noticed. I talked to my parents about the 80s and the 27% interest for a house. I learned that our life is good till about 10% interest. We are locked in for 3 more years. An interest rate of 5% will really not affect us.

We are living the life of not being house poor.

[ssiguy]

Originally Posted by yaletown_fella

Decision makers who bought into keynesian economics and the idea that deflation is the worst thing that could happen to society (they still believe this , unfortunately) . The delusional pursuit of limitless growth ,cheap credit, and stupid dreams at the expense of stability and upward mobility.

No country has EVER brought in true Keynsian economics except for Norway and God knows it worked out great for them. Canada wouldn't have such astronomical debt levels {both personal & government} if we had had the logic to do it. Unfortunately, Keynes' economic theory doesn't mesh well with our corrupt political system.

People fluff off Keynes because he supported wide scale gov't spending in bad economic times and people say this just results in huge deficits. Of course they forget the other equally important portion of his economic theory...........that spending money is not new debt but rather spending the money they saved up during the economic good times.

[swimmer_spe]

Originally Posted by ssiguy

No country has EVER brought in true Keynsian economics except for Norway and God knows it worked out great for them. Canada wouldn't have such astronomical debt levels {both personal & government} if we had had the logic to do it. Unfortunately, Keynes' economic theory doesn't mesh well with our corrupt political system.

People fluff off Keynes because he supported wide scale gov't spending in bad economic times and people say this just results in huge deficits. Of course they forget the other equally important portion of his economic theory...........that spending money is not new debt but rather spending the money they saved up during the economic good times.

So, we are doing great with Reaganomics/Trickle down economics?

Fact is, there have been and are very bad things that we have brought in.

[casper]

Originally Posted by Rollerstud98

Yeah thinking mine is going to go up by $4-500 a month next year. Already looking to eliminate certain things to balance it out. Didn’t realize that made me house poor lol. Eliminating “cable” tv and reducing internet cost, not going to hurt my life much.

Despite the desire of the Governor of the Bank of Canada to encourage employers not to raise salaries that is happening for a good percentage of the population. Not everyone, but some. That will add a few more dollars into peoples wallet that helps partially compensate for increased borrowing and other costs.

[Coldrsx]

Prohibition on the Purchase of Residential Property by Non-Canadians Act Loi sur l’interdiction d’achat d’immeubles r sidentiels par des non-Canadiens
AMENDMENTS NOT IN FORCE MODIFICATIONS NON EN VIGUEUR
Current to August 28, 2022 5   jour au 28 ao t 2022
AMENDMENTS NOT IN FORCE MODIFICATIONS NON EN
VIGUEUR
— 2022, c. 10, s. 236 — 2022, ch. 10, ar t . 236
Repeal Abrogation
236 The Prohibition on the Purchase of Residential
Property by Non-Canadians Act is repealed.
236 La Loi sur l’interdiction d’achat d’immeubles
r sidentiels par des non-Canadiens est
abrog e.

[swimmer_spe]

Originally Posted by Coldrsx

Prohibition on the Purchase of Residential Property by Non-Canadians Act Loi sur l’interdiction d’achat d’immeubles r sidentiels par des non-Canadiens
AMENDMENTS NOT IN FORCE MODIFICATIONS NON EN VIGUEUR
Current to August 28, 2022 5   jour au 28 ao t 2022
AMENDMENTS NOT IN FORCE MODIFICATIONS NON EN
VIGUEUR
— 2022, c. 10, s. 236 — 2022, ch. 10, ar t . 236
Repeal Abrogation
236 The Prohibition on the Purchase of Residential
Property by Non-Canadians Act is repealed.
236 La Loi sur l’interdiction d’achat d’immeubles
r sidentiels par des non-Canadiens est
abrog e.

https://laws-lois.justice.gc.ca/eng/acts/P-25.2/page-1.html

"Short title

1 This Act may be cited as the Prohibition on the Purchase of Residential Property by Non-Canadians Act.
The following provision is not in force.

Marginal noteefinitions

2 The following definitions apply in this Act.

common-law partner, in relation to an individual, means a person who is cohabiting with the individual in a conjugal relationship, having so cohabited for a period of at least one year. (conjoint de fait)

control has the meaning assigned by the regulations. (contrôle)

dwelling unit means a residential unit that contains private kitchen facilities, a private bath and a private living area. (local d’habitation)

Minister means the federal minister designated under section 3. (ministre)

non-Canadian means

The following provision is not in force.

(a) an individual who is neither a Canadian citizen nor a person registered as an Indian under the Indian Act nor a permanent resident;
The following provision is not in force.

(b) a corporation that is incorporated otherwise than under the laws of Canada or a province;
The following provision is not in force.

(c) a corporation incorporated under the laws of Canada or a province whose shares are not listed on a stock exchange in Canada for which a designation under section 262 of the Income Tax Act is in effect and that is controlled by a person referred to in paragraph (a) or (b); and
The following provision is not in force.

(d) a prescribed person or entity. (non-Canadien)

permanent resident has the same meaning as in subsection 2(1) of the Immigration and Refugee Protection Act. (résident permanent)

prescribed means prescribed by regulation. (Version anglaise seulement)

residential property means any real property or immovable, other than a prescribed real property or immovable, that is situated in Canada and that is

The following provision is not in force.

(a) a detached house or similar building, containing not more than three dwelling units, together with that proportion of the appurtenances to the building and the land subjacent or immediately contiguous to the building that is reasonably necessary for its use and enjoyment as a place of residence for individuals;
The following provision is not in force.

(b) a part of a building that is a semi-detached house, rowhouse unit, residential condominium unit or other similar premises that is, or is intended to be, a separate parcel or other division of real property or immovable owned, or intended to be owned, apart from any other unit in the building, together with that proportion of any common areas and other appurtenances to the building and the land subjacent or immediately contiguous to the building that is attributable to the house, unit or premises and that is reasonably necessary for its use and enjoyment as a place of residence for individuals; or
The following provision is not in force.

(c) any prescribed real property or immovable. (immeuble résidentiel)

The following provision is not in force.

Marginal noteesignation of Minister

3 The Governor in Council may, by order, designate any federal minister to be the Minister for the purposes of this Act.
The following provision is not in force.

Marginal noterohibition

The following provision is not in force.

4 (1) Despite section 34 of the Citizenship Act, it is prohibited for a non-Canadian to purchase, directly or indirectly, any residential property.
The following provision is not in force.

Marginal note:Exception — persons

(2) Subsection (1) does not apply to
The following provision is not in force.

(a) a temporary resident within the meaning of the Immigration and Refugee Protection Act who satisfies prescribed conditions;
The following provision is not in force.

(b) a protected person within the meaning of subsection 95(2) of that Act;
The following provision is not in force.

(c) an individual who is a non-Canadian and who purchases residential property in Canada with their spouse or common-law partner if the spouse or common law-partner is a Canadian citizen, person registered as an Indian under the Indian Act, permanent resident or person referred to in paragraph (a) or (b); or
The following provision is not in force.

(d) a person of a prescribed class of persons.
The following provision is not in force.

Marginal note:Exception — circumstances

(3) Subsection (1) does not apply in prescribed circumstances.
The following provision is not in force.

Marginal note:Foreign state

(4) For greater certainty, nothing in subsection (1) is to be construed as hindering a foreign state from purchasing residential property for diplomatic or consular purposes.
The following provision is not in force.

Marginal note:Non-application

(5) Subsection (1) does not apply if the non-Canadian becomes liable or assumes liability under an agreement of purchase and sale of the residential property before the day on which this Act comes into force.

The following provision is not in force.

Marginal note:Validity

5 The contravention of section 4 does not affect the validity of the sale of the residential property to which the contravention relates.
The following provision is not in force.

Marginal note:Offence

The following provision is not in force.

6 (1) Every non-Canadian that contravenes section 4 and every person or entity that counsels, induces, aids or abets or attempts to counsel, induce, aid or abet a non-Canadian to purchase, directly or indirectly, any residential property knowing that the non-Canadian is prohibited under this Act from purchasing the residential property is guilty of an offence and liable on summary conviction to a fine of not more than $10,000.
The following provision is not in force.

Marginal notearty to offence

(2) If a corporation or entity commits an offence, any of the following persons that directed, authorized, assented to, acquiesced in or participated in the commission of the offence is a party to and liable for the offence whether or not the corporation or entity has been prosecuted or convicted:
The following provision is not in force.

(a) an officer, director or agent or mandatary of the corporation or entity;
The following provision is not in force.

(b) a senior official of the corporation or entity;
The following provision is not in force.

(c) any individual authorized to exercise managerial or supervisory functions on behalf of the corporation or entity.

The following provision is not in force.

Marginal note:Order

The following provision is not in force.

7 (1) If a non-Canadian is convicted of having contravened section 4, the superior court of the province in which the residential property to which the contravention relates is situated may, on application of the Minister, order the residential property to be sold in the prescribed manner and under prescribed conditions.
The following provision is not in force.

Marginal note:Terms

(2) Subject to the regulations, the superior court may make the order subject to any terms that it considers appropriate.

The following provision is not in force.

Marginal note:Regulations

The following provision is not in force.

8 (1) The Governor in Council may, on the recommendation of the Minister after consultation with the Minister of Finance, make regulations
The following provision is not in force.

(a) defining “control” for the purposes of this Act;
The following provision is not in force.

(b) respecting what constitutes a purchase for the purposes of this Act;
The following provision is not in force.

(c) respecting the making of orders under section 7; and
The following provision is not in force.

(d) prescribing anything that by this Act is to be prescribed.
The following provision is not in force.

Marginal notearagraph (1)(c)

(2) Regulations made under paragraph (1)(c) must provide that no non-Canadian receive from the proceeds that results from a sale of a residential property ordered under section 7 more than the purchase price they paid for the residential property."

I am all for this. I'd bet most Canadians are too.

[MolsonExport]

Originally Posted by Innsertnamehere

Things will probably drop in 2024 or 2025 a bit, but don't expect it to go back to 2021 rates or even 2019 rates.

Maybe it peaks at 4%, but I'd be surprised to see it drop below 2.5% any time soon. And that's coming from someone who's got a big mortgage at a very low rate and is likely going to be burned big time in 2025 when it comes up for renewal.

yeah. My mortgage is manageable but still large, and I am on a variable rate, so each hike means months and years added to my payout schedule.

[Innsertnamehere]

I’m on a fixed mortgage at 2.19%, renews in 2025.

I’ll probably switch to a variable rate at renewal which will mute a bit of the rate increase, but I’m expecting payments to go up $500/month at minimum.

Mind you, given inflation that basically just brings my mortgage payment back to about the same it was in real terms when I first took it out in 2020, but still, houses are supposed to get cheaper the longer you pay your mortgage!

I am thankful I took a fixed rate though. I was kicking myself in 2020 when 1.6% fixed rates were being thrown around, but now it’s paying off. We’ll have to see where things are in 2025, hopefully not where they are heading right now.

[MolsonExport]

Christ, I never got offered a 1.6 fixed rate...I think the lowest I got for variable was 1.9.

I should have shopped around.

[niwell]

We were debating what was best when we purchased in March, especially as fixed rates had started to go up and it would have been lower variable. I had a feeling things were going to start going up significantly so pretty happy we're locked in at 2.65% until 2027. Though our mortgage isn't really big enough that it would break the bank (thankfully).

[jonny24]

We started off at 3.29% in 2018, but when rates plunged we did a blend--and-extend down to 2.29%, then used a loophole to break that and get a new 5 year term at 2.09%, locked in until 2026. Not as low as a lot of other people got, but given how things have shot up I remain very happy about what we did.

The best part though is what we've done since then - kept the payment the same as our original terms. So we're paying something like 30% extra every payment, which will definitely blunt the impact of higher rates come renewal.

You could argue that the extra money would be better off invested... But there's the "ideal" and there's "real life". In real life I can convince my wife to pay extra on the mortgage MUCH easier than I can get here to save any more, so mortgage it is!

[WarrenC12]

I'm riding an adjustable variable rate mortgage. My booze budget is decreasing just when I need it the most!

[casper]

The Bank of Canada is being overly aggressive relative to its peers.

European Central Bank just bumped its prime rate making its biggest increase ever.

"The ECB's benchmark is now 1.25% for lending to banks. The Fed's main benchmark is 2.25% to 2.5% after several large rate hikes, including two of three-quarters of a point. The Bank of England's key benchmark is 1.75%, and the Bank of Canada on Wednesday raised its benchmark by three-quarters of a point, to 3.25%"

https://www.ctvnews.ca/business/european...argest-ever-interest-rate-hike-1.6059792

[thewave46]

Originally Posted by casper

The Bank of Canada is being overly aggressive relative to its peers.

European Central Bank just bumped its prime rate making its biggest increase ever.

"The ECB's benchmark is now 1.25% for lending to banks. The Fed's main benchmark is 2.25% to 2.5% after several large rate hikes, including two of three-quarters of a point. The Bank of England's key benchmark is 1.75%, and the Bank of Canada on Wednesday raised its benchmark by three-quarters of a point, to 3.25%"

https://www.ctvnews.ca/business/european...argest-ever-interest-rate-hike-1.6059792

EU countries are in a pickle.

One currency, multiple government debtors, multiple economic outlooks.

All and wonderful to jack up the rates that the German government pays for debt, but the Italians are looking pretty shaky with rates climbing.

Being the (relative) hawk is an OK look for the Bank of Canada in my opinion.

[ssiguy]

Originally Posted by casper

The Bank of Canada is being overly aggressive relative to its peers.

European Central Bank just bumped its prime rate making its biggest increase ever.

"The ECB's benchmark is now 1.25% for lending to banks. The Fed's main benchmark is 2.25% to 2.5% after several large rate hikes, including two of three-quarters of a point. The Bank of England's key benchmark is 1.75%, and the Bank of Canada on Wednesday raised its benchmark by three-quarters of a point, to 3.25%"

https://www.ctvnews.ca/business/european...argest-ever-interest-rate-hike-1.6059792

The US doesn't have to be as hawkish because the Greenback is very strong which is helping keep a lid on import prices. Indeed the BoC has been much more direct in it's interest policies and that's a good thing and seems to starting to have the desired effect.

The BoE and Euro CB have been much more restrained which is why their inflation rates are soaring while their currencies are plunging to decade lows against the Greenback unlike the CDN$ which has been holding up quite well.