Canada Housing/Debt: Trust me, I'm a landlord.

The Something Awful Forums > Discussion > Debate & Discussion > Canada Housing/Debt: Trust me, I'm a landlord.

triplexpac: Mar 24, 2007; Suck it
Two tears in a bucket
And then another thing
I'm not the one they'll try their luck with
Hit hard like brass knuckles
See your face through the turnbuckle dude
I got no love for you

The housing market is completely normal, what are you talking about

quote:

Couple goes door to door in their desperation to find a house

After 18 months of open houses, eight failed bidding wars and bully offers that left them feeling helpless, yet again, Allan and Roxy Fisch have gone postal in their quest to find a house where they can start a family.

In the last two weeks they�ve hand delivered 1,000 custom-crafted postcards in a handful of Toronto neighbourhoods.

�Young couple interested in buying a house in your neighbourhood,� says the professional-looking marketing effort, which turns the tables on the usual real estate postcards promoting a home for sale. Inside of a perfectly staged living room or pristine Victorian fa�ade, their card features the couples� engagement photo and a desperate plea for help:

�We just got married and are looking for a home in your area where we can start our family. If you�re interested in selling your home, we�d love to learn more.�

The unusual effort is meant to put a face � two, in fact � on the enormity of the challenges facing young buyers in a market where sellers have all of the advantages thanks to demand that continues to far outstrip the number of houses listed for sale.

Total, or active, listings were down 10 per cent across the GTA in April, year over year, and have remained unusually low since the recession.
Allan Fisch, left, and his wife Roxy Fisch, right, have lost out on eight bidding wars in their search for a house.

The couple � like all young buyers looking to break out of condos and into houses � know that every failed bid is costing them time and money, given that real estate prices were up a staggering 10 per cent in April over a year earlier.

�It�s just become excruciatingly painful to go through this process, so we thought, let�s go out and speak to people directly because we know the areas we want to buy in and it�s not like we�re looking for anything unreasonable,� says Allan, who had friends help them deliver the cards in about six neighbourhoods, including Little Italy, Bathurst and St. Clair and long shot North Toronto.

�We just don�t want to go through this same game over and over again.�

The Fisches own a two-bedroom, 800-square foot condo downtown. Roxy, an urban planner by trade, is 31. Allan, an entrepreneur, is 40. They want a backyard without a killer commute.

Problem is, they are looking in what�s become the most competitive price point in the city � $750,000 to $1 million.

�On weekends, we go see three or four houses in an afternoon and it seems like we�re seeing the same people at every house,� says Roxy. �It feels like everybody is looking at the same thing and it�s just not worth it in the end.�

The postcard has paid off, so far, in about a dozen phone calls and emails from strangers saying they may have or know of a house coming up for sale. One recipient posted it on Facebook.

Realtor David Fleming, who has created clever online ads mocking real estate sales tactics like bully bids, warns that sellers are savvy enough to know they�re going to get more via the fiercely competitive open market than through private sales.

�All of our offers have been at or over asking. We bid on one house where there were three or four offers, the seller rejected them all and put the house back up on the market for a lot more money a few days later,� says Roxy.

It�s become de rigueur for sellers to hold off considering offers for a week after the house is posted on the MLS for sale. But increasingly, those listings stipulate the seller has a right to accept pre-emptive offers, commonly called bully bids.

�Why set an offer date if you�re going to accept pre-emptive offers?� Roxy asks in frustration.

In fact, even the Real Estate Council of Ontario is concerned about what it sees as increasingly unfair sales tactics that may be adding to the real estate frenzy � most notably, the growth of bully offers which, in some cases, give a seller just two hours to make a decision, making it virtually impossible for a realtor to alert other potential buyers as required by RECO rules.

The council is now reviewing how to tighten, or at least clarify, the rules of engagement for realtors, says Bruce Matthews, deputy registrar of regulatory compliance for RECO, which is tasked with policing the province�s real estate industry.

�This is no longer just a Toronto problem,� said Matthews in a telephone interview Thursday.

�There�s no question that this supply and demand problem is spreading. We�re seeing bully bids in Ottawa, London and even Windsor now.�

http://www.thestar.com/business/2015/05/06/couple-goes-door-to-door-in-their-desperation-to-find-a-house.html

Windsor!!!

# ? May 8, 2015 15:50

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# ? May 15, 2024 07:15

Baronjutter: Dec 31, 2007; "Tiny Trains"

Why don't they just rent a slightly bigger place near a park?

# ? May 8, 2015 16:16

jet sanchEz: Oct 24, 2001; Lousy Manipulative Dog

My sister gets unsolicited offers on her house in Roncesvalles Village all the time, usually quite low. The person feels that because they casually know my sister she will give them a few hundred thousand dollars off of her house if she ever decides to sell it, people are really just dumb as hell sometimes.

# ? May 8, 2015 16:24

namaste friends: Sep 18, 2004; by Smythe

Is every loving urban planner a loving moron? They're like the mouth breathing psychology students of geography and economics.

# ? May 8, 2015 16:31

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

Why isn't property auctioned in this country? It would seem to be a fairer system for both buyers and sellers than this whole "multiple offers over asking" nonsense.

# ? May 8, 2015 17:06

RBC: Nov 23, 2007; IM STILL SPENDING MONEY FROM 1888

it is, but mostly luxury housing

# ? May 8, 2015 17:07

Postess with the Mostest: Apr 4, 2007; Arabian nights
'neath Arabian moons
A fool off his guard
could fall and fall hard
out there on the dunes

triplexpac posted:

The housing market is completely normal, what are you talking about

The dude from this was on Dragon's Den.

http://www.cbc.ca/player/Shows/Shows/Dragons%27+Den/Pitches/ID/2214203257/

# ? May 8, 2015 17:12

Baronjutter: Dec 31, 2007; "Tiny Trains"

jet sanchEz posted:

My sister gets unsolicited offers on her house in Roncesvalles Village all the time, usually quite low. The person feels that because they casually know my sister she will give them a few hundred thousand dollars off of her house if she ever decides to sell it, people are really just dumb as hell sometimes.

My grandpa is pretty old, in his mid 80's and live alone in a nice 2br bungalow in a very expensive neighbourhood on a hill with a fantastic view. He gets a lot of the same poo poo. People will just come to his door and offer him crazy low-ball prices thinking he's some stupid old man. It really pisses him off.

The worst though is that he has a couple neighbours he hates. They're in their 50's and inherited a huge mansion cut up into apartments, along with a coach house. They live in the house, which is big and nice but a bit dark and hidden by trees. They want his house, they want it bad. They are also really stupid and weird people. Act like they're self-made rental tycoons despite just inheriting the poo poo. But the worst is how they transparently try to "help" my grandpa. They'll constantly check up on him, she'll cook horrible food for him (he's super fussy about food and a good cook) and they generally just try to impose them selves in his life all while telling him he's such a poor old man who needs their help. They jump at any chance to "help" him and constantly tell him how he shouldn't live alone. Every few months he finally blows up at them and tells them to gently caress off and they are transparent as poo poo and just want his house, they act offended and back of for a few months then come back to fuss over him.

They've called a nurse line a few times saying that he's too old to live alone, they've repeatedly tried to tell the authorities that he's senile and has severe dementia and is a danger to him self. A nurse or an OT will come over, assess him, say hes fine. I don't know what the gently caress their strategy is or why they think they'll get my grandpa's house out of their plot.

Their latest deal is to have him GIVE them his house and they'll "let" him rent one of their suites. Not at a discounted rent or anything, they'll just be gracious enough to allow him to move into one of the apartments they own and promise to keep an eye on him. He recently had to go to the hospital and they got really upset at him because he called his daughter who lives near by but didn't inform them. "Why did you bother your daughter and son-in-law?! You don't need them we're right across the street! You can rely on us instead!"

He keeps telling them "you'll know when I'm selling my house because there will be a for-sale sign out front, at that point you can make an offer". But these neighbours know better. If they keep harassing him he'll simply give them his house.

Oh also the neighbour likes to live trap squirrels and then strangle them to death. Really weird dude.

\/ Victoria

Baronjutter fucked around with this message at 18:12 on May 8, 2015

# ? May 8, 2015 17:59

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

^ What the gently caress. That's atrocious behaviour.

Let me guess - Vancouver?

# ? May 8, 2015 18:06

Hubbert: Mar 25, 2007; At a time of universal deceit, telling the truth is a revolutionary act.

Cultural Imperial posted:

Is every loving urban planner a loving moron? They're like the mouth breathing psychology students of geography and economics.

# ? May 8, 2015 18:32

mastershakeman: Oct 28, 2008; by vyelkin

triplexpac posted:

The housing market is completely normal, what are you talking about

Windsor!!!

The entire world wants a detached house with a yard but also a fast commute to a major city's downtown. Boo hoo.

# ? May 8, 2015 19:21

Mantle: May 15, 2004

triplexpac posted:

This grosses me out

http://www.theglobeandmail.com/life...rticle24223818/

Hmmm doesn't sound like foreign buyers or sellers to me...

# ? May 8, 2015 19:23

jet sanchEz: Oct 24, 2001; Lousy Manipulative Dog

Baronjutter posted:

My grandpa is pretty old, in his mid 80's and live alone in a nice 2br bungalow in a very expensive neighbourhood on a hill with a fantastic view. He gets a lot of the same poo poo. People will just come to his door and offer him crazy low-ball prices thinking he's some stupid old man. It really pisses him off.

The worst though is that he has a couple neighbours he hates. They're in their 50's and inherited a huge mansion cut up into apartments, along with a coach house. They live in the house, which is big and nice but a bit dark and hidden by trees. They want his house, they want it bad. They are also really stupid and weird people. Act like they're self-made rental tycoons despite just inheriting the poo poo. But the worst is how they transparently try to "help" my grandpa. They'll constantly check up on him, she'll cook horrible food for him (he's super fussy about food and a good cook) and they generally just try to impose them selves in his life all while telling him he's such a poor old man who needs their help. They jump at any chance to "help" him and constantly tell him how he shouldn't live alone. Every few months he finally blows up at them and tells them to gently caress off and they are transparent as poo poo and just want his house, they act offended and back of for a few months then come back to fuss over him.

They've called a nurse line a few times saying that he's too old to live alone, they've repeatedly tried to tell the authorities that he's senile and has severe dementia and is a danger to him self. A nurse or an OT will come over, assess him, say hes fine. I don't know what the gently caress their strategy is or why they think they'll get my grandpa's house out of their plot.

Their latest deal is to have him GIVE them his house and they'll "let" him rent one of their suites. Not at a discounted rent or anything, they'll just be gracious enough to allow him to move into one of the apartments they own and promise to keep an eye on him. He recently had to go to the hospital and they got really upset at him because he called his daughter who lives near by but didn't inform them. "Why did you bother your daughter and son-in-law?! You don't need them we're right across the street! You can rely on us instead!"

He keeps telling them "you'll know when I'm selling my house because there will be a for-sale sign out front, at that point you can make an offer". But these neighbours know better. If they keep harassing him he'll simply give them his house.

Oh also the neighbour likes to live trap squirrels and then strangle them to death. Really weird dude.

\/ Victoria

Jesus, that is crazy. I hope you have his will and everything sorted out, these are the types of people who will get a lawyer once he dies and say that he promised them all sorts of poo poo. This happened when my father died, it was brutal, people have no shame. Luckily, my mother was the executor of his estate and told everyone who didn't have anything in writing to fyad.

# ? May 8, 2015 19:40

Baronjutter: Dec 31, 2007; "Tiny Trains"

jet sanchEz posted:

Jesus, that is crazy. I hope you have his will and everything sorted out, these are the types of people who will get a lawyer once he dies and say that he promised them all sorts of poo poo. This happened when my father died, it was brutal, people have no shame. Luckily, my mother was the executor of his estate and told everyone who didn't have anything in writing to fyad.

He's extremely secretive about his will and gets mad for weeks if you bring it up, like just wanting to make sure he's got it sorted out regardless of who gets what. He sadly trusts no one and has a lot of trust issues/paranoia around finances. He had a rough time during the war and a rough time as an immigrant (loving calgary of all places, no wonder he has such strong opinions on canadians) and wouldn't speak to any of us for a good 10+ years but he's mellowed out a bit now that he's older and realized being angry and alone at the end of your life isn't so fun. He really really likes my wife, because she isn't Canadian (canadians are all stupid uncultured scum barely above the lowest form of life: the american). Even though a lot of the reasons he had a very bad time during the war was at the hands of Russians, he still likes my wife better because at least she's not Canadian. My mom is ok but married a god drat canadian, I seem to be ok too because I like to visit europe and knew better than to marry a stupid canadian.

I think he would fit in pretty good in this thread actually. Should buy him an account.

Baronjutter fucked around with this message at 19:56 on May 8, 2015

# ? May 8, 2015 19:53

bring back old gbs: Feb 28, 2007; by LITERALLY AN ADMIN

Baronjutter posted:

I can't speak of the aluminum its self but man I've seen some really lovely aluminum panel installs, like where each panel didn't quite line up with the ones below and the flashing looked really lovely. I don't know how anyone does it and walks away from it. Where's the site super? Where's the developer saying "redo this loving garbage" ? And now it's apparently going to fall off and catch on fire.

Aluminum panels and cedar siding are two materials I like that have been so badly and cheapy over-done people are getting sick of it.

Who do you need to impress with a nice looking building if you've pre-sold the entire thing? All those panels line up perfectly in the CG render.

# ? May 8, 2015 20:23

Juul-Whip: Mar 10, 2008

Isn't that basically criminal harassment? Those people sound like psychopaths imo.

# ? May 8, 2015 20:33

Reince Penis: Nov 15, 2007; by R. Guyovich

I hope that guy trapping and murdering squirrels with his bare hands doesn't kill your grandpa for his house.

It sounds exactly like 'how serial killer X got his start' in some TV crime doc.

# ? May 8, 2015 20:36

Flocons de Jambon: Apr 11, 2015

Inheritance is an unholy ceremony in which all the grifters, greedy relatives, and pious executers have their sacred rites to perform.

# ? May 8, 2015 20:44

jet sanchEz: Oct 24, 2001; Lousy Manipulative Dog

Baronjutter posted:

He's extremely secretive about his will and gets mad for weeks if you bring it up, like just wanting to make sure he's got it sorted out regardless of who gets what. He sadly trusts no one and has a lot of trust issues/paranoia around finances. He had a rough time during the war and a rough time as an immigrant (loving calgary of all places, no wonder he has such strong opinions on canadians) and wouldn't speak to any of us for a good 10+ years but he's mellowed out a bit now that he's older and realized being angry and alone at the end of your life isn't so fun. He really really likes my wife, because she isn't Canadian (canadians are all stupid uncultured scum barely above the lowest form of life: the american). Even though a lot of the reasons he had a very bad time during the war was at the hands of Russians, he still likes my wife better because at least she's not Canadian. My mom is ok but married a god drat canadian, I seem to be ok too because I like to visit europe and knew better than to marry a stupid canadian.

I think he would fit in pretty good in this thread actually. Should buy him an account.

Is he the one who said "Canada is a welfare state for losers"? Or was that someone else's grandpa?

# ? May 8, 2015 20:50

The RECAPITATOR: May 12, 2006; Cursed to like terrible teams.

mastershakeman posted:

The entire world wants a detached house with a yard but also a fast commute to a major city's downtown. Boo hoo.

Move to Gatineau (the Hull sector) and you can accomplish this goal! if you think Ottawa is a major city...

# ? May 8, 2015 21:06

Juul-Whip: Mar 10, 2008

jet sanchEz posted:

Is he the one who said "Canada is a welfare state for losers"? Or was that someone else's grandpa?

Stephen Harper doesn't have any grandchildren.

# ? May 8, 2015 21:08

Baudin: Dec 31, 2009

Baronjutter posted:

He's extremely secretive about his will and gets mad for weeks if you bring it up, like just wanting to make sure he's got it sorted out regardless of who gets what. He sadly trusts no one and has a lot of trust issues/paranoia around finances. He had a rough time during the war and a rough time as an immigrant (loving calgary of all places, no wonder he has such strong opinions on canadians) and wouldn't speak to any of us for a good 10+ years but he's mellowed out a bit now that he's older and realized being angry and alone at the end of your life isn't so fun. He really really likes my wife, because she isn't Canadian (canadians are all stupid uncultured scum barely above the lowest form of life: the american). Even though a lot of the reasons he had a very bad time during the war was at the hands of Russians, he still likes my wife better because at least she's not Canadian. My mom is ok but married a god drat canadian, I seem to be ok too because I like to visit europe and knew better than to marry a stupid canadian.

I think he would fit in pretty good in this thread actually. Should buy him an account.

I think I would get along very well with your grandpa, we have a lot of bad habits in common

# ? May 8, 2015 21:09

Ceciltron: Jan 11, 2007; Text BEEP to 43527 for the dancing robot!; Pillbug

jet sanchEz posted:

Is he the one who said "Canada is a welfare state for losers"? Or was that someone else's grandpa?

That was the rt. Hon. Steven Harper

Edit: gently caress beaten

# ? May 8, 2015 21:13

Femtosecond: Aug 2, 2003

quote:

Is Australia's crackdown on foreign real estate ownership a model for B.C.?
FRANCES BULA
VANCOUVER � Special to The Globe and Mail

Dozens of news stories about housing costs soaring out of reach for many. Anger about the Asian-buyer factor. An uproar over housing left to sit empty. Frustration with government for not doing more to control foreign investment in residential real estate.

Vancouver?

No � Sydney and Melbourne in Australia.

In Vancouver, sales reports show property prices rose substantially during the hot spring selling season this year, and some experts have suggested measures taken in Australia to deal with the issues are examples for Canada and British Columbia.

In Australia, the state collects information on what properties foreign investors have acquired and publishes annual reports.

It also limits what those investors can buy in residential real estate, restricting them to newly built houses and apartments.

Recently, the government announced it would increase fines on anyone found breaking that law, and is forcing one Chinese billionaire to sell a luxury property.

But that has not calmed the debate in Australia. In fact, at least one expert questions whether the measures have papered over the real problem.

�I would posit that the reason why Australia�s housing has boomed is because of debt-financed speculation,� said Philip Soos, co-author of an 810-page book called Bubble Economics, published by the World Economics Association last year.

�It is always the perception here that it is the Yellow Peril [driving up housing prices]. But it�s mostly domestic investment that is to blame.�

Mr. Soos, an economist at Deakin University in Melbourne, said Australia�s housing-price climb started 15 years ago � long before China�s middle class emerged and started trying to invest globally � and it has become an unsustainable bubble.

His research showed that Australia now has the third-highest ratio in the world of household debt to gross domestic product, at 115 per cent. (Canada is down the list, at 92 per cent.)

That ratio is a sign that people are taking on mortgage debt far in excess of what the local economy would normally sustain.

Mr. Soos said that has been the result of state policies encouraging speculation in housing, which has inflated prices far beyond what relatively small outposts such as Sydney and Melbourne warrant.

Australian citizens, like Canadians, do not have to pay capital gains when they sell a personal residence, no matter how much it appreciated in value.

They also get to keep 50 per cent of the capital gains in an investment property. And they can write off operating losses on investment properties against their salaries.

As a result, Mr. Soos said, �our secular religion is property investment. It�s seen as the pathway to riches and early retirement. These policies have created an army of mum and dad investors.�

Mr. Soos said the real estate, finance and insurance industries are all profiting wildly by this speculative market � far more than the people in the middle � so they press governments not to tamper with any of those tax breaks.

Many people do not even bother renting out their investment properties because they expect to make their gains on rising prices. Mr. Soos did a study of water use in Melbourne and found that 60,000 homes did not use any water for a whole year.

But he said that was not primarily driven by foreign investors.

Mr. Soos said a recent Credit Suisse analysis indicated foreigners buy only about 15 per cent of the new homes.

Another academic who has specialized in housing concurs.

�It�s domestic investment that has pushed housing prices up,� said Dallas Rogers, an urban-studies specialist at the University of Western Sydney. And, he added, while Chinese money is definitely coming into the Australian market, it is not in any larger quantities than the U.S. and British money that used to be invested.

As well, he argues in public opinion pieces that the amount of foreign investment, even though it is rising, is still a tiny fraction of the investment pie in the country.

He has joined the public fray recently by calling for the Australian government to stop focusing on race issues and develop housing policy that encourages both domestic and offshore investors to put their money into new housing developments that are affordable.

# ? May 8, 2015 22:12

namaste friends: Sep 18, 2004; by Smythe

Frances Bula is a loving moron.

# ? May 9, 2015 05:19

namaste friends: Sep 18, 2004; by Smythe

quote:

The debt �crisis� in Canada? If your paycheque is $100,000 plus, that means you

They are professionals with university degrees, living in thriving economic regions like British Columbia, Alberta and Ontario, and earning at least $100,000 a year. They are also in hock for close to two times their annual salaries.

According to newly released data from Statistics Canada, 71 per cent of all Canadian families carried some form of debt in 2012 � yes, that includes mortgages, but it also includes a growing pile borrowed to buy cars, new kitchens and many of the fashionable material trappings of the modern middle-class lifestyle.

What that means is that the vast majority this debt isn�t due to out-of-control credit cards or the working poor digging a hole just to pay for groceries. The Canadian debt nation is mostly made up of middle and upper earners.

It wasn�t always that way. Canada used to be known as a nation of savers: In 1982, we stockpiled 20 per cent of our annual income. But by 2014 that rate was down to 3.6 per cent � and at the end of last year our combined debt was $1.82-trillion, greater than the total value of what we produced in goods and services.

Today, households with at least $100,000 or more in total income account for 37 per cent of all debt in Canada. Households with income of at least $50,000 but less than $100,000 represent 38 per cent.

quote:

Even Americans, who we like to think are more spendthrift than us are managing to save more than Canadians. In fact, we are second only to Greece in the growth rate of household debt.

Not surprisingly this has spurred major international watchdogs like McKinsey, Fitch and Moody�s to call our consumer debt level �unsustainable,� and in �urgent� need of monitoring. But is our new relationship to debt really a crisis � or a new, necessary, normal?

More than ever before, Canadians are socialized into debt at an early age and are living with it longer, sometimes through an entire life cycle. By the time most young people graduate from high school, they�re already taking on student debt to get through college or university, have credit cards, and are responsible for car loans or leases.

quote:

And once they move on to mortgages they have so much debt they may carry it through to retirement: Statscan found that the number of families 65 and over carrying debt had jumped from 27 per cent in 1999 to a whopping 43% in 2012.

Craig Alexander, senior economist at Toronto Dominion Bank is matter of fact about that reality: �We made debt almost free,� he says. �We shouldn�t be surprised that debt has risen.�

But a lifetime of easy money isn�t just used for instant gratification. It�s noteworthy that borrowing for short-term spending is actually on the decline � personal loans fell more than 16 per cent last year according to a report by the Royal Bank of Canada, and even credit card debt slowed in the last quarter of 2014, rising only 2.7 per cent.

Louise Wallace, who runs a marketing and design business in Salmon Arm, B.C. describes her family as middle class � �Every average that is out there, I�m pretty much right on it,� she says. But after going back to school in her 30s and becoming an entrepreneur she found herself so deep in debt that she ran a blog for a year called 365 Debt Defying Acts, with daily tips to help others (and herself) cut down what she owed.

�I certainly dispute this idea that my debt is a result of bad choices,� she says. �My debt is a result of trying to build a living. I�m not jetting off to Mexico, and buying big screen TV�s.

The vast majority of household debt is actually for what many of us consider the basics of middle class life: education, cars, and most significantly homes. Incomes haven�t gone up much, but prices have, so credit has filled the yawning gap.

The car loan business, for example, ballooned to $64-billion from just $16.2-billion seven years ago. Renovation spending has also been climbing for 15 years � hitting a record $63.4 billion in 2013, 3.7% of total Canadian gross domestic product. And installment loans � now available for everything from skidoos to funerals � have spiked.

Mortgage debt, however, is what is truly driving debt nation. As Jim MacGee, professor of economics at University of Western Ontario in London, explains, �The primary reason that household debt has gone up so much is because housing prices have risen so dramatically. It takes more debt to purchase the same house today than it did in 1999, because housing prices have increased more than the amounts that mortgage rates have declined.�

That�s obviously great news if you own a home � particularly if you�re at an age where you can liquidate those assets and downsize in the near future. While some seniors carry debt into retirement, according to a study by the Bank of Montreal others now enjoy nine times more wealth than 25-34 year olds, up from a wealth gap of four times in the 1980s.

For many younger Canadians, the fear is that the gap will only get bigger, and houses more expensive. So they�re stretching their budgets on homes they might not otherwise feel they can afford, says David MacDonald, an economist with the Canadian Centre for Policy Alternatives. �It�s not worth saving up because you�d have to put off home ownership for much longer,� he observes.

Really, the only way for many younger Canadians to finance the middle class life they�ve grown up with is to borrow. �On average, younger Canadians are developing an awareness of debt by necessity, which is a new development that wasn�t there before,� says Paul Kershaw, professor at the University of British Columbia�s School of Population & Public Health.

Of course a life funded on borrowed cash has considerable risks. Consider that between 1976 and 1980, the typical 25- to 34-year-old working full time spent 38 per cent of their annual income on housing. From 2006 to 2010, the same group had to allocate 46 per cent of their annual income to pay the average mortgage, according to a research paper published by Prof. Kershaw.

That leaves a huge proportion of Canadians vulnerable to fluctuations in borrowing rates. Even so, experts do not see U.S.-style foreclosures if interest rates go up. They believe it would slow down the economy as more consumers skip purchases to pay off their houses � but not spark a full-blown financial meltdown.

In fact, taking on some debt may be wise given the structural changes to our economy. We�ve stopped saving money to buy things the old-fashioned way and started to borrow at cheap rates because we�ve figured out that the same low interest rates that punish our bank accounts also give us enormous purchasing power.

Investment strategies have changed too: instead of �safe� places to park our money, like savings accounts or fixed-income GICS, we are investing our future nest eggs into residential real estate. It�s no coincidence that the national savings rate has dropped dramatically during the past 20 years as housing became an attractive investment. Consider that massive mortgage a new kind of forced savings for a society of debtors.

Meanwhile, structural change has also affected our psychology around money. Debt is no longer a dirty word. �Canadian culture has shifted to a point where debt is much more acceptable,� observes TD�s Alexander. Even declaring personal bankruptcy, which he said would have been a humiliating last resort in the 1970s, has lost some of its stigma.

�You can�t hide in shame,� says Wallace. �That�s what motivated me [to start a blog], because I realized that I wasn�t the only one, I�m average. And I find average very challenging. There must be hundreds of thousands of me trying to find a way to do it.�

That unprecedented approbation of debt also applies to carrying it through the life cycle. Our parents and grandparents took on debt to buy houses and cars with the intention of paying it down � and off � eventually. Not many of us think that way any more, especially not younger Canadians.

�It is rational for Canadians to carry more household debt,� says TD�s Alexander.

The bottom line: Going into debt is not about a �lesser work ethic, or poorer judgment with respect to the housing market� than our parents or grandparents, says Prof. Kershaw. �I don�t know how you escape becoming more comfortable with debt. Because that�s the marketplace we live in.�

Sure we�ve changed who we are � a nation of borrowers, not savers. Now the challenge is how to manage a country that�s deep in hock � and not likely to climb out.

tl;dr there's no moral hazard in borrowing money in Canada.

also, lol, when interest rates go up there won't be a meltdown, there will just be less consumer spending TOO loving BAD MOST OF THE GDP COME SFROM CONSUMER SPENDING poo poo FOR BRAINS

Btw, who the gently caress runs a marketing business in SALMON ARM

# ? May 9, 2015 05:26

HookShot: Dec 26, 2005

Lexicon posted:

Why isn't property auctioned in this country? It would seem to be a fairer system for both buyers and sellers than this whole "multiple offers over asking" nonsense.

Because a person's biggest purchase of their life should definitely not involve the emotion and panicked decisions involved in auctioning homes.

My husband worked in a RE related business in Australia and it's the stupidest thing ever and I am super happy we don't have it here for a multitude of reasons.

# ? May 9, 2015 06:02

UnfortunateSexFart: May 18, 2008; ð» ððð« ð·ððð·
ð ð ð ð« ð®ð ð¾ð ð ð¡ððð

Baronjutter posted:

Aluminum panels and cedar siding are two materials I like that have been so badly and cheapy over-done people are getting sick of it.

You tellin me you wouldn't spend $300k on a unit here?? (near me, terrible trucking route industrial area)

This is what the pre-sale render looked like

# ? May 9, 2015 07:10

etalian: Mar 20, 2006

Cultural Imperial posted:

tl;dr there's no moral hazard in borrowing money in Canada.

also, lol, when interest rates go up there won't be a meltdown, there will just be less consumer spending TOO loving BAD MOST OF THE GDP COME SFROM CONSUMER SPENDING poo poo FOR BRAINS

Btw, who the gently caress runs a marketing business in SALMON ARM

runaway debt especially in housing, it's so unlike the US pre-recession credit bubble.

# ? May 9, 2015 07:10

Baronjutter: Dec 31, 2007; "Tiny Trains"

Reverse Centaur where is that? Langford? Or probably mainland somewhere? It's such an absolute perfect specimen of cheap "west coast" condo design. Metal siding? Check. Cedar? Check. Aluminum panels? Check. Slightly whimsical non-90 degree architectural element? Check. Fake window pattern on fire wall? Check and check.

# ? May 9, 2015 07:17

UnfortunateSexFart: May 18, 2008; ð» ððð« ð·ððð·
ð ð ð ð« ð®ð ð¾ð ð ð¡ððð

Baronjutter posted:

Reverse Centaur where is that? Langford? Or probably mainland somewhere? It's such an absolute perfect specimen of cheap "west coast" condo design. Metal siding? Check. Cedar? Check. Aluminum panels? Check. Slightly whimsical non-90 degree architectural element? Check. Fake window pattern on fire wall? Check and check.

North Van, near Marine Drive. Directly north of downtown, 10 minute commute in good traffic (which never exists). The whole length of the street is getting four storey woodframe shitboxes despite never being a residential neighbourhood - about a dozen have gone up in the last five years.

# ? May 9, 2015 14:08

I would blow Dane Cook: Dec 26, 2008

Disgusting

quote:

China's most wanted fugitives in Australia

The sprawling display-style homes of Atwell, a melting pot of fly-in, fly-out mine workers, young families and a growing Asian community on the southern fringes of Perth, is the epitome of blissfully bland suburbia.

Yet here is where one of China's most-wanted "corrupt officials" resides, his name, photograph and personal details plastered on a Communist Party list of 100 alleged criminals who have absconded overseas � 10 of whom are believed to be hiding in Australia.

Neighbours describe Hu Yuxing as a quiet family man, frequently spotted going for evening walks with his wife and young grandchildren.

But when a Fairfax Media reporter approached Hu at his home and identified himself as a journalist, the 59-year-old stopped unloading cardboard boxes from his white Mercedes and erupted with the ferocity of a man on edge.

Despite protests that he was there merely to ask questions and hear his account, the bespectacled Hu rained flurries of blows on our correspondent.

"It's the Chinese government [to blame]," his wife screamed, urging the reporter to leave them alone. They were Australian citizens and had done nothing wrong, she said.

Hu was left on his driveway, chest heaving and swaying with rage as our reporter retreated with a bloodied lip, sore neck, and a smashed camera wrestled out of his grip and flung onto the front lawn.

Back in Hu's old stomping ground of Taiyuan, the capital city of the northern coalmining hub of Shanxi province, the government-controlled state media breathlessly catalogue Hu's alleged crimes.

As the head of Taiyuan's housing reform office, Hu, who turns 60 this month, was depicted as overseeing billions of yuan in funds earmarked for the city's social housing developments.

But a 2002 audit uncovered hundreds of millions in unauthorised loans and investments, as well as sweetheart deals to Hu's favoured property developers � including one owned by his younger brother.

All told, Hu is accused of being responsible for amassing more than 350 million yuan ($71.7 million) in bad debts.

"With the funds in hand, Hu became one who could 'command the wind and rain' with his extensive connections," said one report in the Taiyuan Daily, denouncing Hu as "vermin".

"With Hu fleeing overseas, the people have been deeply hurt by the great and irreplaceable financial loss of housing funds."

After the red mist subsided, Hu was subsequently reached by telephone at his home in Atwell but declined to elaborate beyond protesting his innocence.

"I don't care about anyone else. Out of the 100 people, 99 of them are related to bribery and corruption, but on my [charge] they say I've abused power," he said. "This shows that the conflict with the Chinese government is different. I can very responsibly, 100 per cent tell you that I have been wronged."

PRESIDENT'S CRUSADE

The rot of corruption institutionalised within the Communist Party, and the groundswell of public discontent it engenders, is seen by President Xi Jinping and his close supporters as the central threat to its legitimacy, and the long-term survival of one-party rule.

Since being elevated to the top job two years ago, Xi has embarked on an anti-corruption crusade of unprecedented intensity and reach, with the dual objective of purging political rivals and consolidating his personal authority.

It is against this backdrop of political life-and-death that Xi's war on corruption has gone global, and assumed prominence in China's foreign policy agenda.

Having already signalled its intent to seek greater international police and government cooperation to track down economic fugitives that have absconded overseas, China's anti-corruption authority, the Central Commission for Discipline Inspection, last month published a most-wanted list of 100 corrupt officials who are scattered across the globe.

The online dossier came complete with photographs, dates of birth, personal identification document numbers as well as accompanying Interpol notices with their alleged crimes and dates they fled China.

As well as the 10 believed to have fled to Australia, the list named 40 suspected to be hiding in the United States, 26 in Canada, and 11 in New Zealand.

The list is the latest push from Chinese authorities, who last year launched "Operation Fox Hunt" to root out its so-called "foxes" hiding overseas. At the start of this year, the hunt was widened by the equally vividly-named "Sky Net" operation, which co-opts the powers of the police and prosecutors together with the central bank and the party's secretive Organisation Department, giving investigators greater scope to investigate illicit money flows and the misuse of passports.

The release of the list has been interpreted by some as designed to increase pressure on western governments like Australia, Canada and the United States to do more to help China. These Western countries, have so far been wary of the explicitly politicised nature of the fugitive hunt and more broadly of China's government-controlled judiciary.

While there is acknowledgement from Western diplomats in Beijing that the topic is likely to continue being raised as a priority by China at high-level meetings, they argue their Chinese counterparts are cognisant that any assistance would have to be consistent with existing international protocols, and crucially, in accordance with the laws of the relevant countries.

"Both countries have made it clear that neither country wants to be a haven for ill-gotten gains or proceeds of corruption," an American embassy official in Beijing told Fairfax Media.

"[But] we're not going to not uphold US legal standards just because someone anywhere comes to us and says you need to hand this person over; it's just not how it works. It's the same message we give to everybody but we've been giving it a lot to them [China]."

Australian officials have remained tight-lipped over the extent to which Chinese authorities have formally requested assistance, and the Australian response. But they are also quick to point out that any law enforcement cooperation would be consistent with international obligations and respective laws.

There is also the view that the campaign is ultimately targeting a distinctly domestic audience, aimed at showing progress in China's efforts to tackle corruption, while deterring any officials contemplating fleeing.

Most importantly, the public naming of the fugitives is designed to pressure those on the list into handing themselves in.

A spokesperson from the Attorney-General's Department said last month that Australia and China have "a productive law enforcement relationship, including in the areas of mutual assistance in criminal matters and police-to-police assistance", but that "as a matter of longstanding practice, the Australian government does not comment publicly on specific law enforcement co-operation".

The mutual assistance treaty for criminal matters between the two countries allows for information sharing and for Chinese police to request for suspect assets to be restrained and seized � but only if the quality of evidence is deemed adequate by Australian legal standards.

This is seen by the Chinese as a more efficient route to make it harder for its fugitives to remain in Australia, with a lack of a ratified extradition treaty between the two countries making repatriation difficult, though not impossible.

As well as Hu Yuxing, Fairfax Media has confirmed at least four others on the list have had documented links to companies or properties in Sydney, Melbourne and Adelaide.

Guo Liaowu, 49, sat on the board of South Australia-based iron ore developer Centrex Metals as a representative for major Chinese shareholder Wuhan Iron and Steel for less than a year, before leaving the company abruptly in late 2010.

Former colleagues suggested to Fairfax Media that the mining executive, apparently motivated by a desire to remain in Australia, disappeared after his Chinese bosses attempted to recall him home.

Yao Geng, a former Shanghai-based executive at Minmetals, is accused of fleeing China in 1998 after embezzling more than 20 million yuan. He was listed as a director of Cafe Bondi (Aust) Group as recently as April 2013.

Tang Dongmei, an accountant from Fujian province charged with corruption and one of three women among the fugitives believed to be in Australia, is believed to reside in the affluent Melbourne suburb of Kew.

Also in Melbourne's inner-east is Zhou Shiqin, a 63-year-old former railway authority employee wanted for embezzlement, who left China for Australia in 2007.

The trouble for Chinese investigators has often not so much been locating its wanted fugitives in Australia, but finding a way to bring them back.

In several cases confirmed by Fairfax Media, Chinese police have been in constant communication with their alleged suspects through telephone conversations or via relatives still on the mainland, hoping to convince them to return voluntarily.

In a sign of the pressure on local authorities to deliver prized scalps amid the fervour of Xi's nationwide anti-corruption campaign, two Chinese policemen travelled without Australian authorisation to Melbourne to try and convince one of their suspects, Dong Feng � now a tour bus driver in Glen Waverley � to return to China, prompting a furious response from Canberra.

Zhou declined to be interviewed when reached by Fairfax Media, but a close family member said she too had been wronged and that they had been in contact with Chinese police for "a long time" to try and clear her name. But Chinese police, the relative said, were only interested in getting her to return to China.

"We have evidence at hand, they just don't want to consider it," the family member said. "They just want to carry out a political campaign � they're not really trying to use legal processes to resolve things."

http://www.watoday.com.au/business/china/chinas-most-wanted-fugitives-in-australia-20150508-ggwgku.html

# ? May 9, 2015 15:22

tsa: Feb 3, 2014

Bloody Hedgehog posted:

Sure, but a lot of places are like that. But these new mixed building are liking having a council estate in your basement.

Say what you will about the crazy prices in Vancouver or wherever, but people did shell out a lot of money to live someplace nice. At least with separate entrances you continue to live someplace nice, as opposed to the place where you have to tell your daughter to step around the dirty, snoring man in the lobby, and the guy doing god knows what in the corner.

It's basically identical in function to a gated community. Which I'm sure most goons hate too but there's really nothing new or noteworthy about it. Makes more sense when you realize the 'rich' units have a completely different set of amenities and it's more like two different developments that share a building than what people typically think of.

Another similar setup is to have a shared lobby and different elevators but the basic concept is the same.

Baronjutter posted:

Where are they getting their stats from? It actually sounds like the cries of "RICH CHINESE DISTORTING THE MARKET" actually ring true. About half of housing spending and a large majority of condo sales? That's insane. That's actually something to be alarmed about and maybe look at some policy changes.

The effect of it has always been bigger than most people admit, the most common rebuttal is that it is only a small percentage of real estate but what people forget is this is more like a carefully balanced scale. It just takes a little push to send the thing tilting out of control.

HookShot posted:

Because a person's biggest purchase of their life should definitely not involve the emotion and panicked decisions involved in auctioning homes.

My husband worked in a RE related business in Australia and it's the stupidest thing ever and I am super happy we don't have it here for a multitude of reasons.

In the states with most auctions you only see a picture or two of the building, or maybe a quick walk-through. The problem isn't that information asymmetry is leading to houses being sold out-of-wack with market prices, anyway- it's that market prices are completely nuts.

# ? May 9, 2015 16:34

namaste friends: Sep 18, 2004; by Smythe

Do you guys remember that freedom 35 rear end in a top hat?

The globe wrote about him here:

http://www.theglobeandmail.com/report-on-business/economy/canada-debt-risks/article24327561/

His name's Kevin Stone. He makes 50k/year and has 520k in debt and he thinks he's Warren Buffett.

quote:

Lee Robbins and his wife purchased a $438,900 home � and were left with $430,000 in debt. (Darryl Dyck for The Globe and Mail)
Growing up in subsidized rental housing in Victoria, Lee Robbins always dreamed he would own a house by the age of 30.

He reached that goal two years ago when he and wife Cara bought their dream home: a 1960s three-bedroom, two-storey house within biking distance of his workplace.

Like many people in their 20s and 30s buying real estate in costly cities, they had to stretch financially. Closing costs and other fees cut into a modest profit from the sale of their condo, so Mr. Robbins took $12,000 from his line of credit to put together the minimum 5-per-cent down payment, leaving the couple with a $438,900 home � and $430,000 in debt.

In many respects, the Robbinses are the typical young Canadian family. Now 32, Mr. Robbins is a supervisor at Shaw Communications Inc. Ms. Robbins, 33, is a graphic designer. Together, they earn roughly $110,000 a year, although that�s been reduced while Ms. Robbins is on maternity leave. They have two sons, aged 3 and 3 months.

�When we got into the house we realized there�s obviously no fat in the budget,� Mr. Robbins says, so the couple paid down their credit cards and got rid of their second car.

The mortgage costs alone are manageable, but the extra $500 a month the couple has dedicated toward paying off Mr. Robbins�s line of credit within the next 2-1/2 years has put a considerable dent in their cash flow.

�I�m not a fan of debt. I like to save to buy what you need,� Mr. Robbins says. �But it�s not realistic to think somebody is going to save $400,000 to get a house. You�re going to get outstripped by the market. There�s some debt that is just a fact of life today.�

It�s become a fact of life for most Canadians as the costs of buying a home, getting an education and affording a car have risen faster than the incomes that pay for them. For some, debt has become a lifeline, filling the void left by a job loss, or an unexpected life change. For others, credit is a way to live well beyond their means.

For many, debt has simply become a necessity.

Individually, Canadians may not believe they have a problem. But collectively, the country�s insatiable appetite for household debt has caused headaches for policy makers, made Canada look risky to global investors and raised concerns over the country�s financial stability.

On average, Canadians had credit-market debts worth a record 163.3 per cent of their after-tax incomes in the fourth quarter of last year, up from about 110 per cent in 2002. Meanwhile, income growth has failed to keep pace and the household savings rate has dwindled to just 3.6 per cent, a near-five-year low. In 1982, the savings rate was 19.9 per cent.

Now, several additional factors are fanning risk: Low oil prices are denting investment and hiring in energy-exposed provinces such as Alberta and Newfoundland. The country�s labour market is starting to reflect the impact of crude�s plunge, with natural resources job losses in three of the past four months, while the retail sector is also trimming headcount.

At the same time, lower borrowing costs have fuelled home sales, driving prices higher.

The mortgage market has ballooned. Residential mortgage debt in Canada has more than tripled � to a record $1.3-trillion from $423-billion in 2000. And the pace of borrowing only accelerated after a surprise interest rate cut in January, a Royal Bank of Canada report showed this month.

Meanwhile, the share of mortgage lending by the less-regulated �shadow banking� sector, while still small, has doubled since 2012, CIBC research shows.

On the ground, signs of a squeeze are mounting. Bankruptcy trustees say they�re fielding more calls in Western Canada. In Alberta, the province with the highest debt-to-income ratios in the country, consumer insolvencies are already rising (and so are employment insurance claims). Credit counselling firms are seeing more seniors in trouble � an age group that has traditionally been debt free.

There are also signs that Canada�s housing boom is reaching a tipping point. Outside of Toronto and Vancouver, the market has largely gone cold, with prices flat in many cities and falling in places such as Calgary, Regina, Quebec City, Moncton and St. John�s.

A chorus of voices � many of them from outside the country, such as the International Monetary Fund, Moody�s, the Organization for Economic Co-operation and Development and McKinsey � have cautioned Canada over high household debt loads. The Bank of Canada warns that debt-to-income levels will climb even higher, though it is betting on a recovery in the second half of the year.

The central bank estimates that home prices are about 20 per cent overvalued, roughly the point where the bank�s own research says housing market corrections tend to occur. While Governor Stephen Poloz has said he is not worried about a crash, even a slow and steady decline in home prices could have a devastating effect on the economy, which has relied heavily on consumer spending for growth since the global financial crisis.

A chart-by-chart breakdown of the factors contributing to Canada's rising household debt levels.

Not everyone struggles with debt. In fact, nearly a third of Canadians are debt free. But a small, highly important, share of households are drowning in debt and could pose a major risk to the economy.

�You really have to look at the extremes, as opposed to just talking about averages. There�s a group of one to two million people out there that really scare me,� says Moshe Milevsky, finance professor at the Schulich School of Business at York University.

�If you have enough people that run into financial difficulties, eventually it aggregates and you have cities that are in trouble and you have neighbourhoods that are in trouble and eventually that affects consumption. At some point people that have misfortune stop spending and if enough of them do it, then it�s a risk to the economy.�

There are several scenarios that could play out should Canada remain on its current path, experts say. In the most optimistic outlook, oil prices recover, house prices don�t crash, and people whittle away at their debt as the economy resumes growth. But even in this case, it is unlikely consumers would be able to sustain their pace of spending, a key driver of growth for years.

Then there�s the messy scenario. In this instance, an economic shock hits households that have no cushion left in terms of savings. Job losses ensue. People may want to draw on assets, but those assets, mainly homes, aren�t liquid. The cash crunch would threaten financial stability and could worsen an economic slowdown, raising the spectre of foreclosures, bankruptcies, slumping house prices and a hit to banks that could put pressure on governments to support them. As the U.S. financial crisis proved, it would take many painful years to recover from such a credit-binge-induced hangover.

Of course, there�s another side of the household ledger. While debt has been growing steadily, asset values have been rising even faster. As a result, net worth is higher, leading some to argue that concerns over household debt are overstated.

A similar argument was made to justify high debt loads in the United States � until the recession hit and thousands of people wound up under water, losing their jobs and their homes. While there are key differences between the U.S. then and Canada now � particularly in the size of subprime markets � it was mortgage debt that spurred the rapid increase in debt levels in the U.S. as house prices rose.

Then the bubble burst.

Assets are vulnerable to booms and busts � and few continue rising forever. Debt, on the other hand, sticks around even when asset prices decline. And many assets � primarily homes and pensions � are not liquid, nor do indebted people necessarily want to liquidate them.

With so much wealth tied up in real estate, it could be difficult to cash out when times get tough. �This could exacerbate the impact of an economic shock,� said Bob Dugan, chief economist of the Canadian Mortgage and Housing Corp. this week.

While economists are divided on the degree to which household debt is a danger, most say it bears close watching. �The risks are higher than a year ago,� said Moody�s Analytics senior economist Mark Hopkins.

New housing construction in Calgary is shown in June, 2014.
In the fall of 2010, Mark Carney � then-governor of the Bank of Canada � raised new red flags about rising consumer debt.

The debt-to-disposable-income ratio was above 150 per cent and rising, driven by a booming housing market fuelled by record-low interest rates.

�Low rates today do not necessarily mean low rates tomorrow,� Mr. Carney warned in a December, 2010, speech. �Risk reversals when they happen can be fierce: the greater the complacency, the more brutal the reckoning.�

While the interest-rate reckoning never came, concern at the highest levels of government prompted efforts to cool the single largest driver of household debt: a red-hot real estate market.

In 2011 and again in 2012, finance minister Jim Flaherty clamped down on mortgage rules, eventually reducing the maximum amortization period to 25 years from 35 years.

Despite the warnings and regulatory changes, home prices have continued a historic climb � nearly doubling in the past decade. Mortgage debts have risen with them, doubling since 1999.

For many young buyers, escalating home prices have meant going deeply into debt to gain a foothold in the market.

Victoria�s Mr. Robbins says the trade-off is worth it; high housing debt allowed him to buy a house close to work, leaving more time with his family while offering the freedom that comes with owning a home.

�I don�t really need to worry about a landlord raising my rent,� he says. �I don�t need to worry about what I can and can�t do to the place. I can have pets and parties here and kids.�

Not everyone agrees with his choice. Mr. Robbins says a fair number of friends are renters who adamantly oppose going into debt to buy into Victoria�s costly housing market.

�I definitely have that debate pretty consistently,� he says. �There�s no financial sense, there�s just peace of mind.�

The willingness of young buyers to go deep into debt for a home is one of the biggest reasons home prices have continued to rise.

To find out how record debt levels are impacting household finances, we created a diagnostic tool that looks at nine aspects of your financial and personal life. Answer the questions and you'll find out how big an issue your debts are, and how your situation compares to other Globe readers.

In an April survey on first-time buyers by Genworth MI Canada, the private mortgage insurer, nearly half reported taking on additional housing debt beyond their mortgages, mainly for renovations, repairs and furniture. More than a quarter had received financial help from their parents to afford a down payment, a number that rose to 40 per cent in costly Vancouver.

An extended period of low mortgage rates and rising home prices have only encouraged many buyers to dig themselves even deeper in debt for a house. �It�s always amazing to me the number of people who have $2- to $3-million dollar mortgages and they�re stretched on them,� says Ross McCredie, head of real estate agency Sotheby�s International Realty Canada. �People come in and say, �I really want to buy this house; I think it�s a great long-term investment.� Well long-term could be five years from now and interest rates could be up 2 to 3 per cent.�

Rising prices and demand from young buyers for large mortgages have helped shift the composition of household debt away from credit cards and loans, toward mortgages and home-equity lines of credit.

At $1.3-trillion, residential credit now makes up more than 70 per cent of total lending to consumers, the highest level since August, 1999, according to Royal Bank of Canada.

Meanwhile, mortgage lending by the �shadow banking� sector has also grown, Canadian Imperial Bank of Commerce chief economist Benjamin Tal found. Lenders to �non-prime� borrowers represented 8 per cent of new mortgages in Ontario alone in the fourth quarter of last year.

Early indications suggest people ramped up the pace of mortgage debt after the Bank of Canada�s Jan. 21 interest-rate cut. As of March, mortgage debt had grown by 5.3 per cent compared with a year earlier, RBC said, matching February�s rate as the fastest pace in two years.

Global investors are taking notice. Having survived the 2008 financial crisis relatively unscathed, Canadian consumers are now seen by many outside the country as being dangerously overleveraged. Short positions against the major banks hit their highest point since the financial crisis this year, says Prabhdeep Sagoo, an associate director at Nasdaq.

�There are a lot of investors in the U.S. that successfully bet against the U.S. housing market crash and they made a lot of money out of it and they were hopeful of creating that same trade with Canada,� he says.

In an apples-to-apples comparison, Canada�s debt-to-income ratio remains below that of the U.S. peak. Still, recent history south of the border shows it�s worth paying attention to who is getting in over their heads, and why.

�What the financial crisis showed us is that when you have rising real estate prices and rising household debt, it can be a deadly mix. You have to manage each carefully,� said Susan Lund, Washington-based McKinsey partner, in a February interview. (McKinsey�s study this year showed Canada had the second-biggest jump in household debt-to-income ratios of any country other than Greece between 2007 and the second quarter of 2014).

It is crucial to monitor household debt levels closely, she said � in particular, which segments by income or demographic group seem to be slipping under water. And policy makers need to tighten lending standards and reduce mortgage size limits when markets are overheated.

�Be mindful that the value of a house doesn�t necessarily always go up. Swings in house prices can create large swings in net worth and people�s ability to pay that mortgage,� says Scott Fulford, assistant professor of economics at Boston College who studies household finances. �Housing is an investment like any other. If prices are increasing at a rate that seems unsustainable, be careful.�

Kevin Stone is among those Canadians considered 'highly indebted.' (Darryl Dyck for The Globe and Mail)
Vancouver�s Kevin Stone is precisely the type of guy who is putting policy makers in a cold sweat. The 27-year-old earns about $50,000 a year working as a graphic designer, but has roughly $520,000 in debt.

Of the $3,000 to $4,000 he earns in monthly employment income, Mr. Stone spends $1,500 on interest costs on his debts alone.

Not that Mr. Stone minds being so deeply in debt. Quite the opposite: he relishes it.

Not long after he graduated from school in 2008, Mr. Stone quickly realized he would not be able to live a comfortable life in Canada�s most expensive city on his modest working income alone. He began researching investing and discovered one thing that millionaire investors, huge corporations and even governments all seemed to have in common.

�They basically all do the same thing, they borrow money and then they invest,� he says.

Taking a page out of the playbook of billionaires such as Warren Buffett and companies such as Starbucks, Mr. Stone began loading up on debt to invest in real estate, the stock market � and even farmland.

�The more I learned about money, the more I realized how a lot of finance revolves around debt,� he says. �The world of debt affects everyone. It�s so big because it�s all around us.�

But not everyone is swimming in debt.

Turns out, a small group of people carry much of the nation�s debt. About 12 per cent of households are considered �highly indebted,� with a total debt-to-gross income ratio teetering above 250 per cent, according to the Bank of Canada. This percentage has been steady over the past few years, but it is almost double its level from 2000.

These 12 per cent of households � most of whom are in British Columbia, Ontario and Alberta � carry about 43 per cent of overall household debt. They also tend to be homeowners (it�s no coincidence they live in provinces with the highest property values), have lower income levels and are usually younger.

Obtaining the education of her dreams, a legal degree from the University of Ottawa, has left 27-year-old Amy Kishek $150,000 in debt. Now she feels her debt could prevent her from becoming the kind of lawyer she wants to be.

Prof. Milevsky, at Schulich, estimates one to two million Canadians are deeply in debt, spending as much as half their income on debt payments alone.

They are not necessarily the poorest families. In many cases, they are well-off, although not the highest-income earners. Often, they have stretched themselves for a mortgage, which would be manageable except that they also haven�t cut back on other luxuries, such as vacations or restaurant dinners, to pay down their debt load. As a result, they end up sacrificing their savings and often believe they can fill in that gap with the rising value of their homes.

�I hate to use the clich� keeping up with the Joneses, but it�s people that don�t quite earn as much as their neighbour, but want to look like they do,� Prof. Milevsky says. �That�s what�s worrisome. You�re in a neighbourhood where everyone around you seems to be doing good, so you step it up a little bit more. It�s tough to have pity on people who are going to have to lapse their golf membership fee at some point, but they�re going to have an issue because they�re not saving enough and they believe that real estate will get them out of trouble.�

While he�s diversified his investments beyond the housing market, Mr. Stone would easily qualify as one of the country�s �highly indebted� people. His debt-to-income ratio is closer to 1,000 per cent.

So far banks have been willing to extend him more credit despite his debt load. Lenders are primarily concerned with whether Mr. Stone can afford the monthly interest payments � which he can because of low interest rates.

�That�s what the banks look at, which is kind of strange,� he says. �I would expect them to look at the overall debt amount in terms of dollars, but I guess time is money so if you have longer to pay it back that�s better for the bank as well.�

Mr. Stone acknowledges some people might think he�s playing a risky game. But he says he monitors his investments carefully. If he plays his cards right, he hopes to earn enough from investing to become financially independent by age 35.

Debt gets a bad rap, he insists. The real problem with debt is that too many people simply don�t understand how to use it properly.

�There�s this inherent risk that people associate debt with, but there is another risk of not using debt,� he says. �If somebody never ever got into debt, then that person probably wouldn�t be able to afford to get a higher education, buy a home, even get a car. It would just really limit their potential in life to do anything.�

But many people are living on a razor�s edge. More than half of Canadians would find it tough to meet their financial obligations if their pay was delayed by just a week, a poll last year by the Chartered Professional Accountants of Canada found. And more than half don�t save on a regular basis.

Older Canadians are increasingly heading into retirement with debt, market research firm Ipsos Reid has found. The portion of people over the age of 65 owing money rose to 52 per cent last year from 47 per cent in 2009.

In some cases debts are compounded by job losses heading into retirement. Canadians were among the most likely in the world to say they had semi-retired because of a lack of job prospects, behind only Australia, according to a global study in April by HSBC Bank.

In British Columbia, bankruptcy trustee Blair Mantin says call volumes have climbed by a third in the past three months compared with last year.

He is seeing more seniors in trouble, more young families who have bought houses they can�t afford to carry and � lately � more skilled trades people who were directly or indirectly employed in the oil patch. Work for them has dried up and they�re running out of money.

The trigger is typically �a catastrophic event, a life event � so a job loss, a medical issue, a relationship breakdown � typically something forced their hand,� says Vancouver-based Mr. Mantin who is vice-president at Sands & Associates.

�Usually it�s a short-term income interruption or one of those life changes � and no one�s saving in the emergency fund any more.�

A credit card being used at a store in Calgary on May 5, 2015. (Todd Korol for The Globe and Mail)
For Jennifer Gignac, who lives in northern Ontario, it was a job loss that ratcheted up the financial pressure. She has a bachelor of science in geology from Acadia University in Nova Scotia and, by 2006, began work as a geologist for exploration companies in the hunt for gold, nickel, copper and zinc.

She was laid off in 2013 and depressed market conditions in the region have made it hard to find work in her field. She�s a homeowner and single mother of two children, ages 3 and 5. At one point, her debt grew to $60,000 due to the loss of income on top of renovations and repairs.

�A lot of young people entering the work force don�t think to save for rainy days and they feel invincible,� said Ms. Gignac, 32, who lives in Atikokan, Ont., and is now starting her own consulting and environmental business.

Luck can turn � a car accident, a cancer diagnosis, a job loss � �and then suddenly it�s difficult to make ends meet.�

Across Canada, most households aren�t prepared for a turn in fortunes. Half of non-retired households don�t have a special reserve fund for unexpected financial emergencies, according to a March CPA report. Though asset prices have been rising, gains in net worth have been far slower for those in lower-income groups.

�The perception is they�re in control. But when you peel that onion, there�s vulnerability out there,� said Chartered Professional Accountants president and CEO Kevin Dancey, adding that interest rates can�t go much lower while carrying costs and consumer prices are set to go higher.

The ingredients for heavy debt loads and skimpy savings are all in place: The Bank of Canada�s key lending rate has remained below 2 per cent since 2008, the longest stretch of low rates in its 80-year history. House prices have never been higher. Access to credit has never been easier. Wage and income growth have not kept pace with spending.

Fault lines are starting to show, especially in spots where households are overly leveraged and the economy is showing cracks. Alberta�s natural resources sector has shed 20,900 jobs since September alone, and jobless rates in both Alberta and Newfoundland are expected to tick higher. Economic growth has slowed this year. Wage growth has been sluggish for years. But consumer spending has roared ahead, year after year.

Since 1999, Ipsos Reid has been running its Canadian Financial Monitor, a survey of 12,000 households a year that collects monthly information on the banking habits and financial health of Canadians. Its series shows a dramatic trend. Average household debt in Canada swelled to $100,000 last year, a 54-per-cent increase from 2002 when it was $65,000. Over the same 12-year period, household income grew by just 34 per cent, to $71,000 from $53,000.

All types of debt have mushroomed in the past decade, not just mortgages. Total debt in lines of credit grew to $144.9-billion, more than quadruple 1999 levels, according to a Statistics Canada 2012 survey of financial security. The median line-of-credit debt soared to $15,000 in 2012 from $6,600 13 years ago. Auto loans have grown, and the median amount Canadians are carrying on their credit cards has also climbed.

Increasingly young Canadians are entering the work force already deeply in debt. Postsecondary graduates face more than $15-billion in federal student loans, according to the Canadian Federation of Students. By including provincial student loans, private loans and money from family, that figure rises to as much as $23-billion.

Across Canada, total household credit now stands at a record $1.8-trillion as of March, according to RBC, with every type of debt � from personal lines of credit to credit cards � up from a year earlier. The pace of borrowing has ramped up after slowing in 2013.

What�s been missing from the debate about household debt is a true understanding of exactly how much debt is enough, Prof. Milevsky says. Not all debt is bad and there is a downside to having too little debt, since it can be difficult to grow wealth through savings alone. But often Canadians base their borrowing decisions on how much someone will lend them, whether or not it�s appropriate for them.

�Just because a bank is willing to lend you money, doesn�t mean you should take it,� he says. �There should be a greater, broader discussion on optimal debt levels. How much debt do you really need?�

Naomi Boyle declared bankruptcy in 2012 and is still climbing her way out. (Darryl Dyck for The Globe and Mail)
Naomi Boyle is frank about how her money troubles stem from overspending. But she also wishes access to credit hadn�t been so easy.

Her debts were incurred while she was living and working in Edmonton, though she now lives in Victoria. At one point she was maxed out to $220,000 in credit card, mortgage and line of credit debt. She spent too much on clothes, in particular. She unexpectedly lost her job, and everything spiralled.

She declared bankruptcy in 2012 and is still climbing her way out. She spent years in shame because of her debt problems, and hopes others will seek help sooner than she did if they need counselling.

�There are always casualties in the economy when it goes up or down. When we�re prosperous, we think there�s no bottom. And then when there is the bottom, you think � how am I going to get out because I�m drowning,� Ms. Boyle, 62, says.

The irony isn�t lost on Ms. Boyle that all her debt accumulation happened when she was living in the province with the hottest labour market and strongest growth in Canada.

Alberta occupies a unique spot in Canada�s debt story. All that job, wage and economic growth and consumer confidence have sent debt loads soaring.

Households in the province are �most definitely� the most leveraged in Canada, says Ipsos Reid vice president Michael Hsu. �The combination of a younger population and the third-most expensive real-estate market in Canada means the need to get a big mortgage if one is planning to own a home in that province.�

The debt-to-income ratio in Alberta was about 177 per cent last year compared with 141 per cent nationally, the Ipsos Reid data show. And debt loads have risen much faster: by 28 per cent in the past five years in Alberta compared with 10 per cent nationally.

The sharp rise in debt has given Alberta an outsized influence over Canada�s housing market.

The prospect of earning high salaries in the province�s oil industry has drawn large numbers of young people to the province, many of whom have become homeowners. Alberta represents roughly 12 per cent of Canada�s population, but made up nearly a quarter (23 per cent) of all new mortgages insured by Canada Mortgage and Housing Corporation last year.

Albertans paid smaller down payments than buyers in other provinces, averaging 7 per cent equity for new CMHC-insured mortgages, compared with 9 per cent in Ontario and most of Atlantic Canada. Albertans also take on the largest mortgages. Last year, the average newly insured mortgage in Alberta was for $325,481, compared with $238,135 nationally.

Of Canada�s six largest cities, residents in Calgary and Vancouver have the highest ratios of debt-to-disposable income and debt payments to income, according to Environics Analytics.

Over the course of this year, �I do expect the situation to still worsen � the labour market to shed more jobs over the next three or four months for sure, and as a result I�d expect to see more defaults and increased numbers of personal bankruptcies,� said Todd Hirsch, chief economist at ATB Financial. That said, he doesn�t see insolvencies spiking as high as they did in 2009, as oil prices begin to improve, the pace of layoffs eases and as challenges are confined chiefly to energy-related sectors.

But fortunes can change quickly. Randy Rigel went from pulling a paycheque of close to $6,000 every two weeks as an oil services worker to, on Jan. 15 of this year, no income at all.

�I was blindsided,� says Mr. Rigel of Calgary, who was hauling heavy equipment for a pipeline company. He had never set aside an emergency fund because �it never looked like it was going to go south. And then it just hit at once.�

That comes as little surprise to bankruptcy trustee Grant Bazian, president and CEO of MNP Ltd. �We have noticed more people calling, in Alberta, in northern B.C. and in southern Saskatchewan, because of the problem with the oil patch. But I don�t think it�s hit yet. I think it�s just starting.�

If oil prices stay low, he foresees more bankruptcy filings as layoffs or reduced overtime dent people�s cash flow. Already, consumer bankruptcies in the province jumped 19 per cent in February from a month earlier.

And there�s usually a lag between oil prices and consumer bankruptcies. As layoffs happen, people first tend to �live off savings, they�re living off their credit, they�re getting any home equity loans they can to try and survive it. A lot are moving back home, if they came from out East, they�re going back to where the cost of living is less, especially in the Maritimes,� says Mr. Bazian.

Alberta could offer insights, as a kind of leading indicator, on how household imbalances unwind, said Thomas Davidoff, assistant professor of economics at the University of British Columbia.

The province seems like �the canary in the coal mine,� he says. �If we don�t see a bunch of defaults and bankruptcies in Alberta, then that says Canada is pretty robust, Canadians are reluctant to go bad on their debts. Because you have unemployment combined with probably declining house prices, and that�s a great way to get to people dishonouring their debts.�

Phil Stewart-Burgoyne racked up $35,000 in debt between 2007 and 2009. (Justin Tang for The Globe and Mail)
At 58, Phil Stewart-Burgoyne is entering what was traditionally considered retirement age with lingering debts.

He has worked continually since the age of 13. He wound up earning $62,000 a year as a forklift operator at McKesson Canada in Ottawa, until one day � May 3, 2007 � he couldn�t work any longer. At first, he was diagnosed with depression but eventually he was told he has a degenerative muscular disease.

He has been on disability ever since. Between 2007 and 2009, he racked up $35,000 in debt, due in part to a gambling addiction. But he also blames easy access to credit cards at a time when he had little financial wherewithal. At one point, he was taking out cash advances from one credit card to pay off another and was at the brink of bankruptcy. Debt collectors were on his case.

He sought credit counselling in 2009 and is now living frugally and uses only prepaid credit cards.

�When you�re young, you tend to live beyond your means because you don�t care. But you�ve got to look at the consequences. All it takes is one serious thing� to go wrong, and life can spiral, he said.

Increasingly, people at or in retirement age are also staggering under debt loads, a group that has traditionally been debt free. It�s a shift Mr. Mantin, the bankruptcy trustee in Vancouver, is seeing as some are supporting adult kids, while others are living on very low fixed-income payments. Easy access to credit has compounded the problem, he says.

�It was rare to see someone in retirement a number of years ago. Now it�s every week, week in and week out,� he said.

Is this simply reflecting the demographics of an aging population? �It�s outsized, compared to what it should be,� Mr. Mantin said.

The growing trend of seniors heading into retirement with high debt loads could be sign of things to come for today�s working-age Canadians who are only now starting to dig themselves into debt to afford student loans, cars and houses.

The tipping point may be different for various provinces or age groups. For those in Calgary, it could be a job loss while people in Vancouver may be more vulnerable to falling house prices. And while chief risks may be concentrated in Alberta, there are trouble spots elsewhere � Newfoundland could well see more oil-related job losses while people in Prince Edward Island and Nova Scotia have high non-mortgage debt such as auto loans, leaving them vulnerable to rate hikes. Monthly bankruptcy stats, though volatile, showed increases in consumer insolvencies in every province in February.

There are some positive indicators: Canada�s debt-service ratio, or interest on debt paid as a portion of disposable income, is near a record low. Banks have been more prudent lenders than in the U.S. People have been paying down their principal at a faster rate. Economic growth could spring to life later this year, lifting incomes with it. And, maybe, the era of low interest rates is here to stay.

Even so, some signals bear watching. That debt-service ratio can be seen as a leading indicator of households� ability to make their debt payments, said Diana Petramala, economist at TD Bank. In terms of risk to financial stability, �we think this is one of the most important ratios to keep an eye on.�

In the U.S., that ratio rose ahead of the financial crisis. Run-ups in the ratio can point to higher credit-card and mortgage delinquencies with a nine- to 12-month lead time, she said. That measure is low in Canada now, but most of the acceleration in debt in Canada lately has come from areas like lines of credit, credit cards and auto loans. This shift to higher interest-bearing types of credit � combined with sluggish income growth � suggests the debt-service ratio will rise this year, and increase further next year as interest rates go up, she said.

�People often say, will Canada experience a U.S.-style housing crisis and a U.S.-style debt de-leveraging crisis? And I always used to say, no. I think it�s going to experience a Canadian-style housing crisis,� said Mr. Hopkins, of Moody�s. Rather than millions of people suddenly under water, it�s more likely that households will be constrained in spending, he said. �My concern is people feel really over stretched, and they say, so we bought an expensive house but now we�re cash poor. And that�s the best case scenario � that�s if interest rates go up slowly.�

Another possibility is a regional bump � that lower oil prices slam households in some cities, like Calgary, but the pain doesn�t spill into the rest of Canada.

Then there is the more harsh scenario. A worsening labour market or economic shock could lead to a surge of households under water, said Prof. Davidoff. This situation could see asset prices � namely house prices � topple, and those one-in-eight households, in particular, get into trouble.

That scenario seems all too real to Ms. Boyle, 62, who incurred her debts in Edmonton before moving to Victoria.

Since declaring bankruptcy, she has only been sporadically employed and is currently looking for work as an office administrator.

For now, she�s recalibrated her aspirations and learned to live within her means. She also takes solace in her grandchildren, ages 6 and 9. Her grandson is already learning about money management. He has three pots labelled �spend,� �save� and �give.� Each week, $1 from his parents goes into each.

�By the time he�s 18, he�s going to understand that you only buy what you can afford.�

Follow Tavia Grant on Twitter: @taviagrant

Much better article than the one from the Financial Post.

Anywho, Canadians are loving dumb but I shouldn't be judging people for spending money because that's rich hating right?

# ? May 9, 2015 17:14

Baronjutter: Dec 31, 2007; "Tiny Trains"

I knew someone who bought a house without even seeing the 2nd floor. They saw the outside, flipped out (they were already hyped from the realtor's description, the neighbourhood and all that) and they both just went into NEW HOME OWNER MODE. They ran around the main floor, she gushed about the kitchen and they both started babbling about their plans for the living room. Then they saw the nice back yard and were like "yep, we're buying this. Show us the paperwork".

I guess they saw the 2nd floor before they officially bought it, but they did the bulk of the paperwork/made their office before they even went upstairs. They knew 2 of the bedrooms were upstairs, no bathroom, so why bother looking, it's just 2 bedrooms.

Turned out fine, there's no horror story at the end of this tale. But they almost brag to people "we loved this house so much we bought it before we even knew there was a 2nd floor!". I can't imagine dropping 300k on a house (ok this was like 15+ years ago) and not even looking at half of it. No inspection, nothing, just "eeeeeeeeee i loooooove it!!!" like it's a pair of pretty shoes. Hell at least people try on shoes.

# ? May 9, 2015 17:15

namaste friends: Sep 18, 2004; by Smythe

How is it even loving legal to finance your loving downpayment? I guess that sort of ~due diligence isn't needed when there's no sub prime and your country's financial system is the envy of the world.

# ? May 9, 2015 17:18

HookShot: Dec 26, 2005

tsa posted:

In the states with most auctions you only see a picture or two of the building, or maybe a quick walk-through. The problem isn't that information asymmetry is leading to houses being sold out-of-wack with market prices, anyway- it's that market prices are completely nuts.

In Australia generally the house will have a few open houses before the actual auction, which is generally done in a big hall with like 100 other properties up for auction that weekend. So at least people have the chance to see what the home actually looks like.

Sure, market prices are completely nuts, but do you really want to see John and Jane Smith pay an extra $50,000 because in the heat of the moment another couple wanted to pay more than they did, and so risk their future by going over what they had planned on spending because of the pressure that inherently comes in an auction?

Not to mention Real Estate agents driving the price up with things like fake bidders, etc. Which yes, does happen on a regular basis.

# ? May 9, 2015 17:29

RBC: Nov 23, 2007; IM STILL SPENDING MONEY FROM 1888

it's also illegal to price homes below market value but obviously we're just not enforcing that anymore because thats obviously not a problem

# ? May 9, 2015 17:35

Meat Recital: Mar 26, 2009; by zen death robot

Single family homes are going to destroy this country.

# ? May 9, 2015 18:28

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# ? May 15, 2024 07:15

etalian: Mar 20, 2006

Cultural Imperial posted:

How is it even loving legal to finance your loving downpayment? I guess that sort of ~due diligence isn't needed when there's no sub prime and your country's financial system is the envy of the world.

With sloppy underwriting the main lender probably doesn't care where the money comes from.

# ? May 9, 2015 19:21

The Something Awful Forums > Discussion > Debate & Discussion > Canada Housing/Debt: Trust me, I'm a landlord.

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