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.

HookShot: Dec 26, 2005

Cultural Imperial posted:

http://business.financialpost.com/p...-loans-watchdog

As I've mentioned several times in the past, my condo garage in Mt Pleasant has the most ridiculous loving collection of luxury cars and loving HARLEY DAVIDSONS.

I've posted this picture before, but I believe I win this round.

Whistler 2016 by Hannah, on Flickr

# ? Mar 9, 2016 03:04

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# ? May 9, 2024 22:15

Furnaceface: Oct 21, 2004

Cultural Imperial posted:

http://business.financialpost.com/p...-loans-watchdog

As I've mentioned several times in the past, my condo garage in Mt Pleasant has the most ridiculous loving collection of luxury cars and loving HARLEY DAVIDSONS.

The BMW and Audi dealerships in Barrie have both just completed their second expansions to their lots in the last few years. The roads in this city are packed almost entirely with luxury cars and jacked up pickups. If you live and work in Barrie you do not make enough to own one of those.

e: Scrolling through that article one of the adds that popped up was a BMO add for a car loan. I really hope that is intentional.

# ? Mar 9, 2016 04:27

Femtosecond: Aug 2, 2003

Majuju posted:

It's amazing that Vision is crowing about purpose-built rental when there's SO MUCH condo in the pipeline already at superheated prices and meanwhile purpose-built rental next to city hall is now hitting $1,900 a month for a one-bedroom.

I know that the various Vision schemes for incentivizing developers to build purpose built rentals have been controversial as being a giveaway to developers that doesn't actually create affordable housing, but given that some new condo will have ~12% unoccupied units and some additional amount (I dunno 2-5%? more?) going to dedicated Airbnb rental, it seems like it might not be a bad tradeoff to hand the developer a few extra floors of density to turn that condo into a purpose built rental where you'll have no investors or Airbnb and 100% occupancy. I wonder if local housing activists will change their mind at all on this issue.

If Vancouver wanted to create actually affordable housing they'd have to build and subsidize it themselves like Vienna does.

Speaking of Airbnb I saw a tweet where someone said a similar Vancouver report on the effect of Airbnb is coming in June.

# ? Mar 9, 2016 04:38

The Butcher: Apr 20, 2005; Well, at least we tried.; Nap Ghost

This is kind of interesting... I get a lot of misaddressed emails due to a common name and people apparently being retarded about knowing what their email address is. Just got one that appears to be from a YVR real estate agent talking to a private mortgage broker? as part of setting up a deal.

Won't post the actual content since that seems questionable, but one part stood out to me re: that shadow flipping thing that hit the news a bit ago. Paraphrased and all names / real numbers removed.

quote:

The agreement reads the agents name as the given address of the
Purchaser.Thats a big no no for us.
There is no information about the Purchaser.??? except his name.

So hey props to these guys for at least not wanting to engage with that poo poo.

Other interesting bits:

quote:

Furthermore we feel that he would be doing him an injustice to sign
this type of mortgage loan agreement, because if he is only able to
put down the 35% how would he ultimately be in a position to pay
the balance after 3 years. No indication was given.
The fact that the payments monthly will be calculated in arrears is not
acceptable, (for your future reference) any such contract should
be based on a compounded interest. It works like a mortgage.

After paying the capital gains tax he would be left with insufficient
funds to enter the market again immediately; as he intended to do

quote:

He would not even consider reducing the price. His agent suggested
$770.000.00 remember?
The whole contract is wrought with disadvantages for the seller.
The mandated price was $850.000.00 with the intention of you getting
a full commission.
On $780.000.00 we only cover our costs, as we calculated in your
presence, it was never meant to be a minimum net pay out.
The natural growth of the real estate from the date he got the property
has not been taken into account.
So under no circumstances will we entertain selling for one cent less
than the $780,000.00, so let us revert back to marketing the property
at the mandated price.
While we really do appreciate your active and sincere input, please
aim at getting a higher price than $780.000.00 net
The buyer should preferably be a cash buyer. There is nothing on the
market for this price. This is an ideal investment for a first time
investor. However it is a long term investment.

As far as I can tell reposting this w/o personal info should be kosher but if anyone knows otherwise please let me know and I'll nuke it.

Just thought it was interesting to see a bit of an inside view of an ongoing deal.

The Butcher fucked around with this message at 05:58 on Mar 9, 2016

# ? Mar 9, 2016 05:54

namaste friends: Sep 18, 2004; by Smythe

Wow I had no idea mortgage brokers gave this much of poo poo. I mean, my out of work for 3 year brother in law somehow manages to keep renewing his loving mortgage so obviously they're not all human garbage.

# ? Mar 9, 2016 06:08

The Butcher: Apr 20, 2005; Well, at least we tried.; Nap Ghost

Cultural Imperial posted:

Wow I had no idea mortgage brokers gave this much of poo poo. I mean, my out of work for 3 year brother in law somehow manages to keep renewing his loving mortgage so obviously they're not all human garbage.

The writer is the seller's agent, talking to a potential buyers mortgage broker, AFAIK.

Seems the broker is being the sleezebag and they don't dig it.

It's a bit confusing since I removed the names.

The Butcher fucked around with this message at 06:15 on Mar 9, 2016

# ? Mar 9, 2016 06:12

namaste friends: Sep 18, 2004; by Smythe

http://www.theprovince.com/business/former+wholesaler+lifts+dark+side+vancouver+real+estate/11771306/story.html

quote:

Former 'wholesaler' lifts lid on a dark side of Vancouver's red-hot real estate market

Woman quit the game for moral reasons, cites �elder abuse�

Vancouver�s real estate market has been very good to Amanda. She�s not a licensed realtor, but buying and selling property is her full-time job.

She started about eight years ago as an unlicensed �wholesaler� in Vancouver.

She would approach homeowners and make unsolicited offers for private cash deals. Amanda made a 10-per-cent fee on each purchase by immediately assigning the contract to a background investor. It is seen as the lowest job in property investment, but it is low risk and very profitable. Amanda has done so well that she now owns two homes in Vancouver and develops property in the U.S.

Unlicensed wholesaling is an illicit and predatory business that is quickly growing in Metro Vancouver because enforcement is virtually non-existent.

It�s similar to a tactic currently being examined by B.C. real estate authorities known as �assignment flipping,� which involves legally but secretly trading homes on paper to enrich realtors and circles of investors.

However, unlicensed wholesaling is completely unregulated. Amanda estimates hundreds of wholesalers are scouring Metro Vancouver�s never-hotter speculative market � not including the realtors who are secretly wholesaling for themselves.

Amanda decided to step away from the easy money for moral reasons.

She�s most concerned that wholesalers are targeting B.C.�s vulnerable seniors who don�t understand the value of their old homes. She is also worried about offshore money being laundered, and the resulting vacant homes.

Because wholesalers are unlicensed, they have no obligation to identify their background investors or reveal the source of funds to Canadian authorities who fight money laundering.

�Vancouver seems to be evolving from a residential city into almost like a lockbox for money,� Amanda said. �But I have to live among the empty houses. I�m a resident, not just an investor.�

Amanda said she believes that unethical and ignorant investors are driving B.C.�s housing market at full speed towards a crash. For these reasons, and with the condition that we not use her real name, she came forward to reveal how wholesalers operate.

The calling cards of wholesalers � hand-written flyers offering homeowners �confidential� and �discreet� cash sales � started flooding westside Vancouver homes over the past 18 months. With the dramatic surge in home prices, wholesalers now are spreading into neighbourhoods across Metro Vancouver and Vancouver Island.

In eight years Amanda has never seen the market hotter than it is right now, and her colleagues are urging her to start wholesaling again.

�A lot of money is leaving China, so now every second day people are asking if I can go out and find places for them. They have tons of money,� Amanda said. �They are basically brokering business deals specifically for Chinese investors.�

She said the mechanics of wholesaling schemes work like this:

The investor behind the unlicensed broker targets a block, often with older homes, and gives the wholesaler cash in a legal trust.

The wholesaler persuades a homeowner to sell, offering immediate cash, no subjects, no home inspections, and savings on realtor fees.

While the wholesaler claims to represent one buyer, or in some cases to be the buyer, Amanda said three or four contract flippers are often already lined up, with an end-buyer from China who will eventually take title in most cases. These unlicensed broker deals appear to be illegal.

A veteran Vancouver realtor confirmed these types of deals. The realtors we spoke to have been asked by their brokerages not to comment to reporters, so we agreed to withhold their names.

�I work with some non-licensed flippers,� one said. �They walk on to the lawn of an older house, see the owner and yell, �We�re not realtors!� The owner invites them in, thinks they�re saving a commission � which they are � and loses big-time on the actual sale. I�ve seen it first-hand.�

According to flyers obtained from across Metro Vancouver and interviews with homeowners who were solicited, wholesalers often say they have Chinese buyers willing to pay a premium for quick sales.

Homeowners in Richmond, Vancouver�s east and west sides, Surrey, Langley, Coquitlam, Burnaby, White Rock, Delta and North Vancouver confirmed such offers in interviews.

One resident of Vancouver�s west side Dunbar area said she was annoyed by wholesalers constantly soliciting her, and a man in Surrey said his elderly mother was bothered by wholesalers.

�A guy walked up and he offered $700,000 cash within a day, and he said I would save on the realtor fees,� said Zack Flegel, who lives near 119th Street and Scott Road in Delta.

�He also says he will give me $100,000 cash and move me into a $600,000 house. He said he has a bunch of properties. He was talking about my house like it was a trading card. We don�t have abandoned homes yet like Vancouver, but this is how it happens, right?�

After the offer is accepted, the wholesaler assigns the purchase contract to the investor for a 10-per-cent markup, Amanda said. But some wholesalers aren�t content with making $100,000 or more per sale.

�People were going in and offering, for example, an 80-year-old widow, she bought the house for $70,000 and it is now worth $800,000 and they were offering her $200,000,� Amanda said. �So they are making $300,000 or $400,000 (after assigning the contract).

�And you are socializing with other wholesalers, and it is hard to hear them say, �Oh this whole street is filled with seniors whose partners are dropping off like flies.� Or, �They just want to get rid of it, they have no clue what their house is worth, and it�s the whole street.��

Amanda said her father died recently. She pictured her mother being targeted by wholesalers and resolved never to play that role again.

�There are elements of this that are elder abuse, absolutely.�

In a recent story that deals with implications of rising property taxes rather than predatory real estate practices, the Financial Post reported that, especially in Vancouver and Toronto�s scorching markets, �it�s not uncommon for some Canadian seniors to be unaware of the value of their location.�

B.C.�s Superintendent of Real Estate, Carolyn Rogers, conceded the potential for elder abuse as reported by Amanda.

�We would welcome an opportunity to speak to (Amanda) and assuming she gives us the same information, we would open a file,� Rogers said. �The conditions in the Vancouver market right now present risks ... and seniors could be an example of that.�

It is illegal for wholesalers to privately buy and sell property for investors without a licence, Rogers said. She said her officers have approached some wholesalers recently and asked them to become licensed or cease their activities.

A review of the superintendent�s website shows no enforcement orders, fines or consumer alerts filed in connection to unlicensed wholesalers making cash deals and flipping contracts.

Amanda said that over the past year she learned of new levels of �layering and complexity that I didn�t see five years ago� in wholesaling and assignment-clause flipping.

�Five years ago I didn�t see realtors wholesaling, and I didn�t see people calling me so that I would get them a property and not assign the property to them, but work as a �partner� and I would attach a 10-per-cent fee.

�And then they would assign it to their boss and attach 10 per cent, and then that person�s boss would attach 10 per cent. I�ve been watching over the last month, and it has got astounding.�

Amanda said some wholesale deals involve only unlicensed brokers and pools of offshore cash organized informally, and some appear to involve realtors and brokerages hiding behind unlicensed wholesalers.

�I�ve seen it from the back end. We have friends in the British Properties and the realtor said he will buy their property for $2 million. And then six months later it was sold for $3.5 million. When I�m looking at that, it is a pretty clear wholesale deal.�

Darren Gibb, spokesman for Canada�s anti-money-laundering agency, FINTRAC, confirmed that unlicensed property buyers have no obligation to report the identity or sources of funds of the buyers they represent.

However, Gibb said, if realtors are involved in �assignment flipping� it is mandatory that they and unlicensed assistants make efforts to identify every assignment-clause buyer and their sources of funds.

Vancouver realtors confirmed that money laundering is a big concern in assignment-flipping deals, whether organized by an unlicensed wholesaler or a realtor.

�When you are a non-realtor broker you no longer have to play by any rules,� one Vancouver realtor said.

�There is a role for assignments, but nobody is asking where the money came from. We are creating vehicles for money laundering.

�No person in their right mind wants to buy your house once, and sell it three more times in a small window of opportunity, unless they have a whole pool of people lined up trying to get their money out of the country. The higher the prices go, these vehicles to get money out of the country get bigger and bigger.�

NDP MLA David Eby and Green MLA Andrew Weaver commented that allegations of unlicensed brokers targeting seniors and participating in potential money-laundering schemes call for direct action from Victoria and independent investigation, because these concerns fall outside the jurisdiction of the B.C. Real Estate Council and its current ongoing review of real estate practices.

�It is very troubling to me,� Eby said, �that not only do we have a layer of real estate agents that are acting improperly and violating the rules, but there might be this additional layer who are not bound by any rule and have explicitly avoided becoming agents for that reason.

�This unscrupulous behaviour is targeting seniors who need money for retirement. What kind of society is that?� Weaver said.

scooper@postmedia.com

twitter.com/scoopercooper

CRACKDOWN ON CHINESE CAPITAL FLIGHT 'WILL IMPACT' LOCAL REAL ESTATE

When China�s stock market crashed and the government rapidly devalued the yuan last year, newly rich Chinese raced for the exits.

Bloomberg calculated that US$1 trillion left the country in 2015, with the highest outflows in December.

Much of that money was destined for hot West Coast real estate markets from Vancouver to Los Angeles. In Vancouver it�s debated whether President Xi Jinping�s government can stop the flood.

Seattle lawyer Dan Harris �� an expert on facilitating trade with Chinese businesses � said that since January, China has aggressively clamped down on capital flight.

Harris said U.S. realtors are calling his firm more and more often for help in getting cash out of China for luxury home sales that were easily completed in the past.

�That will impact real estate in Vancouver and Seattle,� Harris said in an interview.

�If anyone thinks the Chinese government will not stop people from sending $3 million out to buy a house in Vancouver? Wow. I don�t know what they know that I don�t.�

Harris said Chinese companies seeking to invest in North American real estate started having trouble about three months ago as business transfers were examined more closely.

Sometimes Chinese companies and their western advisers seem to be asking lawyers for criminal aid.

On his China Law Blog, Harris reported that an adviser from an unidentified English-speaking country asked his firm to set up a fake legal battle between a Chinese company and an artificially created shell.

�The Chinese company wanted us to represent it in a completely fake arbitration that it would lose, so that it could then send $3.5 million to its own U.S. company, so that � no doubt � in turn that U.S. company could buy a house somewhere in the United States.�

# ? Mar 9, 2016 06:40

Risky Bisquick: Jan 18, 2008; PLEASE LET ME WRITE YOUR VICTIM IMPACT STATEMENT SO I CAN FURTHER DEMONSTRATE THE CALAMITY THAT IS OUR JUSTICE SYSTEM.; Buglord

Look at me I'm blowing the whistle for moral reasons after I made enough to own 2 yvr homes and now speculate real estate in the US. My morals

# ? Mar 9, 2016 07:27

cowofwar: Jul 30, 2002; by Athanatos

quote:

B.C.�s Superintendent of Real Estate, Carolyn Rogers, conceded the potential for elder abuse as reported by Amanda.

�We would welcome an opportunity to speak to (Amanda) and assuming she gives us the same information, we would open a file,� Rogers said. �The conditions in the Vancouver market right now present risks ... and seniors could be an example of that.�

It is illegal for wholesalers to privately buy and sell property for investors without a licence, Rogers said. She said her officers have approached some wholesalers recently and asked them to become licensed or cease their activities.

A review of the superintendent�s website shows no enforcement orders, fines or consumer alerts filed in connection to unlicensed wholesalers making cash deals and flipping contracts.

Lol.

# ? Mar 9, 2016 14:02

sbaldrick: Jul 19, 2006; Driven by Hate

HookShot posted:

I've posted this picture before, but I believe I win this round.

Whistler 2016 by Hannah, on Flickr

Why is that car parked outside.

I know the answer is the garage is packed with crap like a ski-doo but still.

# ? Mar 9, 2016 19:00

meatcookie: Jun 2, 2007

sbaldrick posted:

Why is that car parked outside.

I know the answer is the garage is packed with crap like a ski-doo but still.

How can people know how awesome you are if you keep it all hidden away in a garage?

# ? Mar 9, 2016 19:26

Employee 2-4601: Aug 31, 2001

sbaldrick posted:

Why is that car parked outside.

I know the answer is the garage is packed with crap like a ski-doo but still.

Well that and because how else are people supposed to know you have a Ferrari FF?

# ? Mar 9, 2016 19:41

etalian: Mar 20, 2006

cowofwar posted:

Lol.

I like the other articles about real estate agents not collecting information such as how the client was going to pay for the house.

# ? Mar 9, 2016 22:35

HookShot: Dec 26, 2005

sbaldrick posted:

Why is that car parked outside.

I know the answer is the garage is packed with crap like a ski-doo but still.

I like to assume it's because they have a better, more expensive ferrari in the garage.

# ? Mar 9, 2016 23:18

namaste friends: Sep 18, 2004; by Smythe

https://twitter.com/dbcurren/status/707695838055821312

lol

# ? Mar 9, 2016 23:41

MickeyFinn: May 8, 2007; Biggie Smalls and Junior Mafia some mark ass bitches

Cultural Imperial posted:

https://twitter.com/dbcurren/status/707695838055821312

lol

What? Why? I confess that it is a dream of mine to go to Vancouver and drop an American nickel on the floor and have a few hosers come out of the woodwork to literally lick my boots.

# ? Mar 10, 2016 00:01

namaste friends: Sep 18, 2004; by Smythe

Oil is going up in price and apparently the Canadian economy is 'recovering'. The BoC held overnight rates today.

# ? Mar 10, 2016 00:02

McGavin: Sep 18, 2012

It was low juuust long enough for US-based retailers to justify raising their prices.

# ? Mar 10, 2016 00:44

HookShot: Dec 26, 2005

Yeah that chart totally tells the whole story guys.

# ? Mar 10, 2016 02:11

namaste friends: Sep 18, 2004; by Smythe

When people like you look at graphs do you just look at the line and look for a graph with a comparable curve and go lol that vox article i read last year about misleading graphs said

# ? Mar 10, 2016 03:44

HookShot: Dec 26, 2005

Cultural Imperial posted:

When people like you look at graphs do you just look at the line and look for a graph with a comparable curve and go lol that vox article i read last year about misleading graphs said

You're just jealous you don't have a first year university stats class under your belt :smug:

# ? Mar 10, 2016 03:55

PittTheElder: Feb 13, 2012; Yes, it's like a lava lamp.

HookShot posted:

Yeah that chart totally tells the whole story guys.

Quiet down, we've stopped the hemorrhaging, that clearly means we'll be fine by next month.

# ? Mar 10, 2016 04:06

PT6A: Jan 5, 2006; Public school teachers are callous dictators who won't lift a finger to stop children from peeing in my plane

PittTheElder posted:

Quiet down, we've stopped the hemorrhaging, that clearly means we'll be fine by next month.

Nah, it means I'm booking my trip to Spain before Saudi does some stupid poo poo again.

# ? Mar 10, 2016 04:16

Pixelboy: Sep 13, 2005; Now, I know what you're thinking...

The Butcher posted:

So hey props to these guys for at least not wanting to engage with that poo poo.

Actually, that's them saying "clean up the paperwork so we have plausible deniability."

# ? Mar 10, 2016 07:13

Pixelboy: Sep 13, 2005; Now, I know what you're thinking...

MickeyFinn posted:

What? Why? I confess that it is a dream of mine to go to Vancouver and drop an American nickel on the floor and have a few hosers come out of the woodwork to literally lick my boots.

Wait a few more weeks.

# ? Mar 10, 2016 07:16

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

Pixelboy posted:

Wait a few more weeks.

What happens in a few more weeks?

# ? Mar 10, 2016 07:21

I would blow Dane Cook: Dec 26, 2008; Can't post for 19 hours!

It begins

quote:

Australia's median capital city house price falls for first time in three years

The median capital city house price has fallen for the first time in three years.

The price across all capital cities fell, albeit marginally, to $695,788 in the December quarter, dragged down by a decline in the Sydney market. The 0.4% decline followed 13 consecutive quarters of growth in the weighted average median house price, the Real Estate Institute of Australia said.

The institute president, Neville Sanders, said strong growth in Hobart, Canberra and Brisbane and marginal increases in Darwin and Perth were unable to offset falling median house prices in Sydney and Melbourne. Adelaide recorded no change over the quarter.

�Sydney, the strongest market in the recent years, showed the largest decrease in median prices, leaving some commentators speculating whether the city�s housing market has reached its peak,� Sanders said. Sydney�s median house price fell by 2.5% in the quarter.

The median house price for the capital cities was up 7.4% compared with the December quarter of 2014, with rises in each of the capitals except Perth.

�Annual growth is still strong but lower compared to what we observed over the last couple of years,� Sanders said.

Median house prices in Australian capital cities

� Australian median house price $695,788 (down 0.4% in December quarter)

� Sydney down 2.5% to $1,025,478

� Melbourne down 0.1% to $718,000

� Hobart up 9.8% to $392,000

� Canberra up 3.7% to $593,000

� Brisbane up 3.2% to $490,000

� Darwin up 0.5% to $608,750

� Perth up 0.4% to $535,000

� Adelaide steady at $430,000

http://www.theguardian.com/business/2016/mar/10/australias-median-capital-city-house-price-falls-for-first-time-in-three-years

# ? Mar 10, 2016 13:34

Saltin: Aug 20, 2003; Don't touch

Cultural Imperial posted:

Oil is going up in price and apparently the Canadian economy is 'recovering'. The BoC held overnight rates today.

lol if you think the CAD:USD exchange rate has anything to do with Canada. Our dollar was never that strong, even when we were at par - the USD was weak. We've recovered a bit lately for the same reason.

# ? Mar 10, 2016 16:33

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

It's funny reading The Big Short and seeing things in your day-to-day life that reflect it. I just finished a bit where it talked about how mortgages with low intro rates were ticking time bombs, and this morning I walked by CIBC (I believe) where they were advertising their low introductory rates.

# ? Mar 10, 2016 16:57

Femtosecond: Aug 2, 2003

Jumpingmanjim posted:

It begins

http://www.theguardian.com/business/2016/mar/10/australias-median-capital-city-house-price-falls-for-first-time-in-three-years

Why are houses in Darwin so expensive? Insane remoteness? Hobart is a real deal in comparison.

# ? Mar 10, 2016 17:50

MiddleOne: Feb 17, 2011

Femtosecond posted:

Why are houses in Darwin so expensive?

Survival of the dumbest.

# ? Mar 10, 2016 17:52

namaste friends: Sep 18, 2004; by Smythe

http://www.macleans.ca/economy/economicanalysis/why-negative-interest-rates-wont-work/

quote:

Why negative interest rates won�t work
Bank of Canada Governor Stephen Poloz is a big fan of metaphors, so here are a few to explain why negative interest rates are a bad idea for Canada

There are two things to consider when it comes to Stephen Poloz; one is a certainty, the other is increasingly likely.

We know for a fact that the governor of the Bank of Canada loves to use metaphors in describing the economy and monetary policy. When oil prices soared he compared them to valuable old hockey cards. He once said his communication style resembled a duck. He even noted the similarity between the manufacturing sector and a maple tree.

While it isn�t a certainty, it is increasingly likely that Poloz and his colleagues at the Bank of Canada will lower their policy interest rate into negative territory at some point, should the economy continue to deteriorate. A growing number of economists and market watchers expect the central bank to follow in the footsteps of the European Central Bank, the Swiss National Bank and the Bank of Japan in embracing negative rates. As it stands, the Bank of Canada�s key interest rate is 0.5 per cent, which leaves two quarter-point rate cuts before it hits zero. Beyond that, negative interest rates are a possibility Poloz himself has raised, although he has been careful to say he doesn�t expect to use them.

His professed optimism aside, there are reasons to believe the Canadian economy may continue to worsen. For one thing, the full effects of the oil crash have probably yet to be felt. More workers will be laid off, more capital spending plans curtailed and more supply will hit the housing market in places like Calgary and Fort McMurray.

Speaking of real estate, the single biggest threat to the economy is that those markets that remain extremely elevated�Vancouver and Toronto�come crashing down. So much of the nation�s economy is now driven by real estate that a housing bust would surely cause a serious recession.

Negative interest rates are now quite probable (perhaps in tandem with quantitative easing). The problem is, negative interest rates won�t help the economy. So with a nod to Stephen Poloz, it�s only fitting that we use three metaphors to explain why.

Pushing on a string
This adage, attributed to John Maynard Keynes, has often been used to illustrate the point that monetary policy can be very effective in cooling down an economy but much less potent when the economy is weak and interest rates are already very low. You can pull the economy back if it�s tied to a string, but you can�t push it forward. At this point, further cuts by the central bank may not induce banks to lend, or to pass on rate cuts to consumers.

Louis-Philippe Rochon, a professor of economics at Laurentian University, is in the camp that says negative interest rates won�t work because they amount to pushing on a string. In essence, if banks are pessimistic about the economy, they will be hesitant to lend, irrespective of what the central bank does. As he explained recently:

�As we have seen with respect to the last two [Bank of Canada] rate decreases, banks have been unwilling to pass through the full effect of the decreases and will continue to resist. It is possible that by lowering rates to zero or below, banks will pass only a tiny portion of this to borrowers.�

In an interview, Rochon said the Swiss National Bank�s foray into negative rates is instructive for Canada: even though the central bank�s interest rate has fallen below zero, mortgage loan growth has slowed and rate cuts have not been fully passed on by banks. In addition, non-mortgage loans haven�t taken off since the SNB instituted its sub-zero policy.

Throwing Gas on the Fire
Let�s say the Bank of Canada does cut its interest rate below zero, possibly because of a continued and worsening situation in resource-dependent provinces. In this scenario, even if banks don�t pass on all of the central bank�s policy easing, there�s a chance that mortgage rates nevertheless do come down somewhat. This is not something the central bank should encourage. As it is, Canada is in the midst of a huge housing bubble that has left the country�s households in record levels of debt. Throwing gas on the housing fire would only make the eventual crash even worse.

If a central bank cuts rates in the forest�
How banks and consumers react to possible negative interest rates in Canada depends on the health of the economy when they are introduced. At the moment, banks are still lending and consumers are still borrowing. But post-housing bubble, both banks and consumers could turn ultra-cautious. Banks may be in no mood to lend, particularly if they don�t deem many people or companies credit-worthy borrowers. And consumers might enter a state of debt aversion, deciding that it�s better to pay off existing debts than borrow more, even at ultra-low interest rates.

In his December speech, Poloz actually alluded to the likelihood that borrowers won�t meaningfully respond to further rate cuts, noting that, �There is evidence that consumers and businesses respond less to interest rate declines when interest rates are already very low. And there is evidence that their responsiveness is also lower when confidence is low and they are trying to reduce debt.�

History shows how ineffective rate cuts are when widespread deleveraging occurs. When the Japanese commercial property market collapsed, the Bank of Japan cut rates close to zero. But overleveraged companies weren�t tempted to take out new loans; they were busy repairing their balance sheets. This phenomenon, dubbed a balance sheet recession by economist Richard Koo of the Nomura Research Institute, could come to Canada and blunt the impact of negative interest rates. To use a famous philosophical question as our metaphor, if a central bank cuts rates in the forest but no borrowers are around to respond, does it help the economy?

The heavy lifting
For all the talk of negative rates and unconventional measures, it�s notable that even Stephen Poloz admits that monetary policy can only do so much. He acknowledged as much in his December remarks, observing that �the circumstances under which it may be appropriate to consider unconventional monetary policies are also those under which fiscal policy tends to be most effective.�

Said another way, if the economy gets much worse, the ballooning federal deficit will have to get much bigger. If we can use one more metaphor, the heavy lifting must be done by the federal government, not the Bank of Canada.

# ? Mar 10, 2016 20:47

Freezer: Apr 20, 2001; The Earth is the cradle of the mind, but one cannot stay in the cradle forever.

Have negative interest rates had the intended effect anywhere they have been attempted?

# ? Mar 10, 2016 20:55

Furnaceface: Oct 21, 2004

Freezer posted:

Have negative interest rates had the intended effect anywhere they have been attempted?

Nope. Poloz is an idiot. But we already knew that.

# ? Mar 10, 2016 22:21

Fuzzy Mammal: Aug 15, 2001; Lipstick Apathy

Freezer posted:

Have negative interest rates had the intended effect anywhere they have been attempted?

Sure, they export deflation to everyone else, similar to a devaluation. If you mean, "Do they stimulate the economy the way reducing rates normally does?" then no not really.

# ? Mar 10, 2016 22:28

namaste friends: Sep 18, 2004; by Smythe

Furnaceface posted:

Nope. Poloz is an idiot. But we already knew that.

Why is Poloz an idiot?

# ? Mar 10, 2016 22:46

I would blow Dane Cook: Dec 26, 2008; Can't post for 19 hours!

Femtosecond posted:

Why are houses in Darwin so expensive? Insane remoteness? Hobart is a real deal in comparison.

Big natural gas development being built.

# ? Mar 10, 2016 23:21

Baronjutter: Dec 31, 2007; "Tiny Trains"

Jumpingmanjim posted:

Big natural gas development being built.

LNG raises house prices?? Someone should tell BC this, we could invest in LNG and keep prices going UP!

# ? Mar 10, 2016 23:25

cowofwar: Jul 30, 2002; by Athanatos

If you don't want a distorted market then you simply regulate speculators out.

# ? Mar 11, 2016 00:22

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# ? May 9, 2024 22:15

namaste friends: Sep 18, 2004; by Smythe

http://news.nationalpost.com/news/canada/radical-proposal-to-fix-vancouvers-real-estate-crisis-build-high-really-really-high

quote:

A radical proposal to fix Vancouver�s real estate crisis: Build high � really, really high

Vancouver architect Richard Henriquez has a solution for Canada�s least affordable city. Get vertical. Build higher, without limits. Ignore the fussy horizontalists, people who �go crazy� when any new tower is proposed for Vancouver�s downtown.

Built on a natural peninsula surrounded by water, the downtown area already resembles a man-made forest, at least when viewed from a distance. Just 5.8 square kilometres, not including Stanley Park, the downtown peninsula is already stacked with concrete and glass.

But there are only a handful of towers that might be called skyscrapers, and nothing more than 600 feet in height.

For various reasons, none of which make any sense, Henriquez says, tall is anathema in Vancouver. It should be just the opposite. Tall towers mean less congestion at ground level, with more living space up top, he notes.

In a city that preaches high residential density, its determination not to reach for the sky seems oddly counter-intuitive.

Local developer Jon Stovell has for years campaigned for taller buildings. Last month, he delivered a speech to developers in which he advocated towers up to 1,000 feet in the downtown area.

�Let�s finally let go of our bucolic fishing village past and embrace the reality of a city that we have become in the eyes of the world,� he told his audience.

According to Stovell, his company�s proposal for a modest, 300-foot tall residential tower downtown was shot down, because it would cast a shadow on a city street for 17 minutes a day in winter months.

�We need to get ahead of the scarcity of homes in Vancouver,� he said.

On paper at least, taller buildings are the most obvious response to Vancouver�s interminable real estate crisis. This is a city where a moss-covered shack on a tiny residential lot sold last month for more than $2.4 million. It�s where neighbours protest the pending demolitions of 1990s-era McMansions, banal boxes that their putative saviours once loathed. And it�s where dubious house-flipping schemes net brokers huge, undeclared profits.

Vancouver has no room for more single-family houses. Front yard, backyard and garage are luxuries from a bygone era; the city�s residential blocks are filled in.

Stovell refers to the �horseshoe� of single family houses that surrounds Vancouver�s downtown core. It occupies 70 per cent of the city�s land mass, yet only 30 per cent of the population lives within the area. Increasing density in leafy, expensive neighbourhoods is political suicide.

Henriquez offers his own cheeky response: He designed a massive 2,500-foot-high building that would occupy at least seven downtown blocks with self-contained residential and commercial pods placed up and down its open frame.

His city within a city will never be built, Henriquez concedes, because it�s impractical. The design is really intended as a �provocation,� a whimsical scheme to stimulate discussion about the bunched-up, red-tape place Vancouver has become. The building concept and model are on display at the Museum of Vancouver, as part of an exhibition called Your Future Home: Creating the New Vancouver.

A �New Vancouver� must get over its vertigo, Henriquez says. Never mind the consequences of living high: the isolation, the potentially hideous and alienating Dubai factor, the concerns about reaching people in medical distress, the inevitable Big One, the earthquake that could knock everything down.

The city has relaxed some of its long-enforced height restrictions, inch by inch, in a few selected locations downtown. In an effort to increase density (and perhaps to please developers who supply campaign cash to city politicians), a few 500-feet-plus skyscrapers have been built or are in the planning stages. Meanwhile, office towers are being shoehorned into places where such buildings were never contemplated, such as public plazas.

A new car dealership will be seven storeys in height, four of them underground. A 63-storey �turning tower� is close to completion after years of construction and financing delays, plus a desperate rebranding exercise that left it saddled with the �Trump� logo.

A proposed new city art gallery is designed as a tower because, its Swiss designer noted last fall, �Vancouver is a vertical city � if we designed a museum that is lower, it would have been dwarfed by all that is around it.�

Brent Toderian, Vancouver�s former city planner, is a tower enthusiast but has some concerns with the push for more height. He wonders if the city�s downtown peninsula is reaching its population limit.

The area has boomed over the past 30 years, growing from 40,000 residents to more than 100,000 today, with another 45,000 people expected by 2030, according to city officials. It already accounts for about one-sixth the city�s total population, yet it occupies just five per cent of Vancouver�s total land supply.

In some respects, the core is becoming a victim of its own success: People chose to live downtown for the convenience and the high quality of life. And while luxury condominiums downtown can sell for $1,500 a square foot and up, most of the peninsula remains relatively affordable, at least compared to Vancouver�s traditional, residential neighbourhoods, where the average price of a single-family house is now almost $2 million.

But Toderian wonders whether the peninsula may be reaching peak density. �There is some erosion of our public spaces downtown,� he says. �You cram too much in, and density becomes unpopular.�

The city�s current assistant director of planning responsible for downtown suggests there�s no limit to the number of people who can live and work on the peninsula. �It is not overbuilt,� says Kevin McNaney. The city still tries �to accommodate as much as we can.�

Height restrictions have been relaxed in certain pockets, but there�s no plan to do away with them entirely. �We regulate heights for a variety of reasons aside from protected public views,� McNaney says. �To maintain the character of heritage areas, to avoid shadow impacts on parks and shopping streets, to produce an overall dome-shaped skyline with the tallest buildings in the (centre) and scaling down to the water.�

The city also defers to its so-called view corridors, which are a series of 27 narrow, open spaces preserved between existing downtown towers. The gaps are meant to offer glimpses to the scenic north shore and mountains, from other parts of the city.

�In order to reduce urban sprawl,� explains a City of Vancouver website, �the City considers higher buildings that don�t impact the protected view corridors.�

That�s nonsense, says Henriquez. View corridors have forced architects to make unfortunate compromises in their designs. The result: Weird building shapes, wind tunnel effects, tighter spaces between office towers.

�And who benefits? A few people living to the south,� he says. �It�s nuts. Downtown Vancouver is just a tiny speck in a sea of beautiful scenery. You want a view of the mountains? Look a little to the east or west.�

Or find the best view you can find downtown, and buy it. And prepare to move up again, when the next tall tower is built.

yes supply is the only way to undistort the market

why don't we just stop this stupid charade and just come up with the developer/realtor equivalent of the SRED because lol they create jobs

# ? Mar 11, 2016 00:24

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

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