May 14, 2015

Investors Are Seeking A Safe House For Their Wealth

CBC News reports from Canada. “B.C. Premier Christy Clark is ruling out a tax increase for foreigners buying homes in Metro Vancouver, as an online petition calling for a restriction on foreign investment gathers nearly 18,000 signatures. Clark said the government is trying to tackle the growing challenge of home ownership in Metro Vancouver, but is ruling out applying an additional tax on foreign buyers. ‘That is good for first-time owners, but not for anyone who is counting on the equity in their homes to maybe get a loan or use the money to finance some other projects,’ Clark said.”

“The average two-storey detached home is now selling for more than $1.27 million in Vancouver. But any sudden change could have unintended consequences for those who already have invested in a home, the premier said. ‘By moving foreign owners out of the market housing prices will drop,’ she said.”

The Province. “As concern mounts about foreign investment and money laundering in Metro Vancouver, Vision Coun. Geoff Meggs says he believes ‘there is a really serious’ issue in regional housing, but senior governments must initiate any response. Meggs was interviewed after The Province reported that politically connected Vancouver developer Michael Ching, also known as Muyang Cheng, 45, faces charges of corruption and graft in China. Cheng, who is the son of former Hebei governor Cheng Weigao, denies all of China’s charges. He is fighting against China’s campaign to repatriate him.”

“The Province shared with Meggs information forwarded by a Province reader, from an article recently published by a firm of Chinese-speaking realtors. ‘The new leadership in China is enforcing policies that hammer down on financial corruption (and) the already lively real estate market in Vancouver is further taking giant leaps forward as a result of the Chinese anti-corruption policies,’ the article in Greater Vancouver Estate Guide says. ‘Experts predict that with the increasing strictness of the anti-corruption policies in China, it will continue to cause cash to flow into the Vancouver housing market.’”

“The article concludes that whether wealthy investors are seeking to live in Vancouver or find a ’safe house for their wealth … tapping into the patterns of these trends will help both buyers and sellers make the right and easy choice.’ The firm that published the article claims that 80 per cent of its clients are from Mainland China, and these are the only buyers that can afford to bid currently on homes in Vancouver and West Vancouver.”

The Richmond Review. “Some residential blocks have been entirely rebuilt with mansions in Richmond, but at issue for some is not all the houses are lived in. ‘I’ve talked to people who have three and four houses in their immediate area that are vacant. It’s like living in an Alfred Hitchcock movie. It’s not a neighbourhood,’ said Coun. Carol Day.”

“Brian and Linda Cooper live in the Blundell neighbourhood next to a mansion built a few years ago. It’s sold at least three times—and has even been renovated once—but it’s never been lived in. Plenty of other new homes are sitting vacant nearby, said Linda Cooper. ‘The neighbourhood’s gone. I’m so happy that my children grew up in a neighbourhood where there was no gates,’ she said. ‘Our kids all walked to school, they all got to know each other. Now I swear I have not seen children in our neighbourhood for years.’”

“An idea from Coun. Harold Steves could help slow the pace of demolitions in the first place. ‘The houses are going down, just dropping like flies,’ he told his council colleagues. ‘I think we need a program where we put a huge fee on house demolitions and have those houses saved again.’”

The Globe & Mail. “Consumer advocates are raising concerns about the escalating use of home equity lines of credit, warning that many people are finding it hard to resist the temptation of such a huge and easily accessible borrowing option. For many people, home equity lines of credit have replaced credit cards as their top source of borrowing. Outstanding balances on lines of credit soared to $266-billion in March, 2015, from $100-billion in 2005 and just $35-billion in 2000, according to Statistics Canada.”

“Crucially, they have also climbed as a proportion of all personal loans outstanding – now accounting for 59 per cent of Canadians’ non-mortgage personal debt, up from just 30 per cent in 2000.”

“Laurie Campbell, CEO of Credit Canada Debt Solutions Inc., which provides counselling to people with debt problems, says home equity lines of credit allow many people to borrow far more money than they used to be able to with credit cards or other loan options. Many banks require customers to pay only the interest on their credit lines, so the principal can grow rapidly over time.”

“With house prices so high, lines of credit can easily run into hundreds of thousands of dollars, making it hard to hit a debt wall. But that doesn’t mean everyone is making wise choices about how to use the debt, Ms. Campbell said. She said she was pushed to take a line of credit when she moved her investments to a new financial institution, but turned it down. ‘I was kind of made to feel like I was really missing out by saying no,’ she said.”

From Reuters. “While prices stayed at record highs in Toronto and Vancouver and in the nation as a whole, corrections were underway in some other major cities, so the flat readings in Toronto and Vancouver could herald the start of a broader market cooling. ‘Excluding the recession year 2009, the monthly change is tied with that of April 2013 for the smallest April advance in 17 years of index data,’ the Teranet-National Bank Composite House Price Index said.”

“Finance Minister Joe Oliver, speaking to reporters, reiterated the Conservative government’s position that the market is not over-inflated. ‘We’re monitoring the residential market as we always do, and we don’t believe we’re in a bubble. If there is a decline, we think it would be a soft landing, but I’m not predicting that,’ Oliver said.”

“The Teranet–National Bank House Price Index rose 0.2 per cent in April from a month earlier and stood 4.4 per cent higher than the same time last year, a notable slowdown from March, when prices rose 4.7 per cent for the year. But in 9 of the 11 cities that make up the index, prices are still below their peak levels, and ‘a price correction…is underway,’ in eight markets across Canada, wrote National Bank senior economist Marc Pinsonneault. ‘It remains that the big picture is not one of generalized strength, despite the stimulus provided by historically low mortgage rates,’ he wrote.”

“Prices fell for the month in Ottawa-Gatineau, Victoria and Hamilton. Halifax, Quebec City, Montreal and Winnipeg have all also seen price declines in the past few months, though April marked a slight rebound. Home prices have also fallen nearly 2 per cent in over the past six months in Calgary, although they ticked up slightly for the month in April. Prices were still 3 per cent higher than they were a year ago.”

“Ottawa’s housing market has been the hardest hit over the past year, with prices falling more than 6 per cent over the past eight months on the back of a glut of new housing supply and the federal government belt-tightening, along with the uncertainty that comes with an election year. The capital city was the only market to see an outright price decline over the past 12 months, with prices 2.3 per cent lower than they were last April.”

Bits Bucket for May 14, 2015

Post off-topic ideas, links, and Craigslist finds here.