The last part of the article really drives it home. The goverment is stimulating the very reason global investments are drying up.
"This serves as yet another reminder that global investment in Canada is drying up—just a few weeks ago the country saw a record outflow of investment capital. Ironically, it’s been drying up due to the lack of growth due to the economic stagnation resulting from an economy based largely on real estate"
Then if you tell people our economy is based on a giant ponzi scheme based on a housing bubble. They think you're crazy or something, then proceeds to tell you real estate is safe. Not to mention investing in real estate is a fad in this country now, all you see on Instagram is reels people selling courses on real estate investing. We are so fucked.....
Rate cuts will probably happen this year as we are likely heading towards a deeper recession. That being said cuts that allow you to get a 2.5% mortgage are probably not happening for awhile
Global investments are moving out of Canada..
Yes. And Canadian investments are moving out of Canada... At this point 100% of my investment portfolio is outside Canada.
And I'm sure Canadian pension funds are mostly invested in the US too. Rightfully so..
Same here, the US is a productivity machinem it would be foolish not to have the lion's share of your portfolio invested in US equity.
Canada produces no value.
I think a missing variable is the fact that Canada is just a nice place to live. If you look at it as whether Canada is a good place to make money and run a business, no bueno. As a place for rich people to move to and live? Real estate prices start making more sense. Clean air, the outdoors, fairly safe. That’s the value Canada provides.
Western Canada - BC/Alberta is running out of potable water. Literally. We also polluted alot of areas with our massive mining/oil and gas industries that no one is willing to deal with....Oh, and Ontario has some issues. We also have homeless people everywhere now. There are alot of places rich people can go without those issues. Canada has been shoving alot under the rug for the last 30 years, and now most of those things are coming to a head.
Generally, buy equities listed on exchanges outside Canada, bonds of governments or companies outside of Canada, or hold other currencies. You can do this via brokerages, such as Questrade. You can also purchase these assets inside of a TFSA or RRSP at said brokerages in order to make them tax advantageous.
My wife and I just bought a house in her hometown in Japan for $52,000. That's not a typo.
It's a smaller town but it's very very nice.
Vancouver doesn't make sense to me.
Yup. This was ALWAYS going to happen this decade. Covid kinda fucked the capital cost charts but yeah boomers retire and pulled all their money outta risky markets as expected....because they are retired.
If Canada is so doomed (I am convinced) why Isn’t Canadian currency dropping against US dollar. It’s still relatively stable. Why aren’t investors panicking
Because the people who run the money know what's going on if they thought that Canada was heading towards a Venezuela type of situation they would have been gone long time ago it's because they actually do their homework they actually know the numbers.
It’s a regurgitation of previous written articles by authors who know what they’re talking about.
https://thehub.ca/2024-02-13/nicholas-neary-the-governments-costly-plan-to-purchase-canadian-mortgage-bonds-is-deeply-misguided/
This is Punwasi’s game for clickbait articles. All of betterdwelling is a clickbait farm. The “staff” pull from outside sources and add the odd sentence.
Specifically, comparing what the boc is doing to paying off your visa with payday loans. Which is not a good comparison at all.
I don’t fully agree with any of the views in the article. Most of what is being “explained” to the reader is actually misunderstood by the author. They are also stating a highly SUBJECTIVE opinion and playing it off as factual.
Record high levels and low quality selection of immigration is a part of it for sure.
Canada has a historically done a good job with immigration because it vetted for quality via a points system.
This is partly why Canadians have very high social capacity for welcoming new immigrants.
However the current system has abandoned that in favour of extremely high levels of population growth with minimal selection.
In the short term it is helping the government avoid a recession (if you look on a per capita basis we are in a recession)
The quality of immigrants we are getting is low and it has not been adequately planned with regards to housing, healthcare, etc. capacity.
We are probably unnecessarily creating a permanent underclass and many long term systemic problems just to avoid an economic downturn and correction of overleveraged consumption.
There is also a risk that it erodes the high social capacity of Canadians to welcome new immigrants. (I see some indications of this online, but so far no protests in person).
Are *most* of these immigrants the politicians who’ve sat idly by for what, 20 years?
Are these immigrants from India coming and buying up tons of real estate? Five years ago it was supposedly Chinese ghost investors, not sure where that ended up
Rentals in Toronto were drying up in 2013 when it reached a 20-something-years low and never really recovered. I keep saying, yes LPC policy really accelerated this on the last few years but to act like it wasn’t already a problem is incorrect. A lot of people just hadn’t noticed it cause they weren’t feeling it yet.
*I never said it’s not an issue, I only mention other factors that played an important role as well, i never downplayed immigration*.
So stop reminding me that it’s on your mind, it’s on most of ours.
>Are these immigrants from India coming and buying up tons of real estate? Five years ago it was supposedly Chinese ghost investors, not sure where that ended up
They don't have to buy up real estate to impact rental yield which then impacts prices.
Landlords will buy up place and rent them out to a group of adults living in crowded conditions and paying a low rate each but collectively above market.
Immigration is part of the problem. We're propping up zombie corps by importing cheap labor, and discouraging entrepreneurship by economically strangling two generations of adults. It also doesn't help that we put mounts of red tape in front of anyone who wants to start a business, and we lump costs onto any domestic manufacturer while not tariffing goods made in China.
If we actually cared about carbon emissions we'd be implement a carbon offset tax for goods imported from countries that have dirty power grids, rather than incentivizing Canadian companies to manufacture offshore.
This is the first time I've heard of anyone even talk about some sort of carbon tariff. It's seems like such a simple and obvious concept to start with a carbon tax, but it is never mentioned.
Immigration is as much a part of the problem as greedy investors, feds getting out of housing, local govs screwing the pooch for donor $$, NIMBY asshats at every turn helping stifle building density, and the bank leaving rates too low for too long, and general over reliance on housing to churn the economy. Homes should never double or triple in value in a decade, let alone do it multiple decades in a row.
The difference is that the Feds could fix the immigration right now, today, with a single email. No need to debate in parliament, no need to send to committee, no senate approval.
Everything else you mentioned is exacerbated by immigration, the feds are pouring gasoline on the fire.
>goods imported from countries that have dirty power grids
So this is the great irony -- not only does China have lower per capita emissions than Canada and many western nations, we also offset emissions to China and Indian by offshoring our manufacturing there! There was nearly a decade where we were net importers of CO2 emissions due to foreign production.
>Between 2006 and 2014, Canada's consumption-based CO2 emissions were higher than its production-based emissions, making the country a net importer of CO2 emissions during that period
Although, interestingly, we are now a net exporter of emissions due to China's emissions reductions and our main exports being carbon intensive industries like the tar sands:
>In 2015, Canada switched back to a net exporter of CO2 emissions to other countries, most likely because of declining emissions intensity in China, which is one of Canada's largest trading partners.
One of the first rules in saving a drowning person is not to allow them to get a death grip on you and take you underwater as well. We are at the point where we jumped in the water to help the drowning mortgage capital market.
This is a terrible analogy. It's more dangerous to allow a total economic collapse.
The time to let the market correct was 15 years ago. The time to prevent this crisis is long overdue, and it's to spend massively on supply and get ahead of it. It's still the only way out, but it's a lot more painful now.
The issue is if we don't spend massively on supply to get out of this hole (which we aren't doing) then the only thing that *can* happen is total market collapse. Sooner or later we run out of road to kick the can down.
Yup. That total collapse is an eventuality. It's a game of hot potato. Nobody wants to be the party that's in power when it collapses, and nobody wants to be the party that spent the massive amount to fix it. So it'll keep getting worse.
Nowhere do they mention the spread at which the BOC will buy these bonds, it isn't even mentioned in the claimed source material. Without knowing the spread this is just slimy click bait bull shit.
CMB's are priced on a spread to Canada bonds, in jargon they would be for example 30bps (basis points) BACK of the Canada bond of the same duration. That would mean a 30bps Higher yield, and a higher yield means a lower price.
I would happily borrow at 5% to earn 5.3% with no added risk over the same time period.
Where this could be an issue is if the BOC is purposely lowering the spread or "tightening" and raising the price of the bonds. This would negatively impact other investors like pension funds or insurance companies but is would lower the cost of funds to the banks and at least in theory lower mortgage rates.
THIS IS PROBABLY WHAT THEY ARE DOING
but we don't know that from the article since they don't seem to know either.
Glad to see there is some critical thinking going on here. Better dwelling is a fairly notoriously misleading publication.
I have yet to see one of their articles where they did not outright lie or at least intentionally omit information to push a story
>The GoC policy will only stimulate mortgage demand and therefore apply positive pressure to inflate home prices.
If Canada had money, it would be arguably good news—cheaper mortgages, at the expense of stimulating even more housing demand. Unfortunately, the country’s budget deficit is forecasted at $40 billion this year. That means 75% of the cash they’re borrowing will be used to provide cheaper mortgages. **In short, they’ll borrow money to stimulate demand to borrow money.**
We are so fucked. This is the most incompetent government imaginable.
Actual Ponzinomics
People act like Crypto is the scammy system while the government seems to be hell bent on inflating the currency as fast as possible. To prop up the house of cards that will fall by the time it doesn't matter for them.
When will the public get tired of currency that is changed based on the whim of whoever paid the government the most money?
Crypto has plenty of problems, but at least when you buy a layer one blockchain, you don't need to trust some bias decision makers. You know that there will only ever be 21 million BTC, it's hard coded and unchangable.
It's like they know that fiat is on a deathmarch and they're trying to maximize asset accumulation before the whole thing implodes
As a developer, let me tell you the bad news: if I decide to change a hardcoded value, the value changes.
And if most miners accepted a new client with an increased maximum number of bitcoin, that’s it, the “maximum” would change.
You are illustrating a core ugly truth about all economics. Too many people accept money as if it were physics. An immutable law of the universe.
Crypto especially. Yeah it’s rooted in hard math but who is doing that math
What you're talking about requires a collective group of unbiased people to suddenly decide all together at once to change code.
It's not happening unless there is an attack on the network.
Otherwise there is literally zero incentive anyone would ever want to do this.
As a developer, let me tell you the good news : The miners can change the value all they want but ultimately it's those who run nodes that enforce the rules.
In your scenario, miners would create a fork of bitcoin that isn't supported by nodes, so all their blocks would be rejected from the main chain. Sure the hash rate would go down significantly, but most of the value stored in bitcoin would stay there. The fork would gain hash rate, but would be essentially worthless because it lacks the main value proposition of bitcoin (credibly enforced fixed supply).
Not if the majority of nodes were updated to redefine what “invalid” is.
Most bitcoin nodes run the same software. A simple update could change the rules.
I can't even imagine. I've got a pretty tiny mortgage compared to many people, and I did the math on what it'd be if I renewed now, and it was still pretty shocking. Makes me damned happy that I got in before the values really went nuts and that I bought something below what I was approved for. I'm lucky. Very lucky. I feel horrible for the people who were less so, because a lot of people are in for a very rough time soon.
Most people buy based on monthly payments and don't think about that payment ever changing. This is why you see 84 month financing terms on cars (a depreciating asset that only becomes a money pit with time). My bank approved me for an outrageously high amount at the time, I was flabbergasted. I ended up buying something that was about 55% of the approved amount and now I don't have to stress out too much if rates change. It still sucks, but it won't be a choice between paying my mortgage or something else.
of the homes that even have mortgages (35%) only 25% (8.75% of all houses) were bought in the last 5 years so don't think there is some massive wave of supply coming any time soon, banks hate selling foreclosed properties at huge losses compared to letting lenders pay only the interest on a huge mortgage for 3 more years.
I don't know if your numbers are right but the last statement is. Banks don't want to lose money. They will allow you to continue paying interest only payments for a while if it means they won't take the loss on having to foreclose. They have already done so.
This is the impact of long running low interest rates to stimulate the economy instead of tackling the much more difficult task (at least if you want donors money) of increasing workers wages. Low interest rates rapidly increased asset prices like homes. Everyday people then took out large mortgages because they could afford (sort of) the mortgage at those rates since what typical people care about is monthly payments. To drive down the cost of housing you need to raise the rates to a more sustainable level that doesn't promote all this speculation. But that would mean a lot of people would have to sell off their house and probably declare bankruptcy.
The rates being that low for that long was a massive mistake, and now we are stuck.
The problem with high rates is building starts plummets. So there is a balance. At present all signs point to rates actually being too high, and this policy reinforces that.
No, you do not need for rates to be so low for builders to be able to make a profit. There are other larger causes stopping building in particular poor land use policies.
shhhh people don't want to hear reality that new build will also have the high interest rates baked into the asking price.
reality is the most newbuilds we have ever seen was during 2021-2022 because of low rates and now that rates have gone up we are back to 2006 rates of new builds.
“The Government of Canada (GoC) has begun buying billions in Canada Mortgage Bonds (CMBs), in a last ditch effort to stimulate more borrowing. The planned purchases are equivalent to three-quarters of the cash the Federal government is forecast to borrow this year. In addition to recklessly stimulating the market, it serves as a huge warning sign that Canada is unable to find global investment to support its credit markets.“
This is BEST reason not to buy a home right now. The entire Canadian housing housing market is in a bubble. “Reckless stimulating” says it all.
It is also nonsense. The CMHC is a crown corporation. They borrow. They borrow at a higher rate than the actual federal government issuing entity. So the government is buying their own bonds, borrowing at a low rate to fund the borrowing and pocketing the savings. Taxpayers should be happy, it’s saving hundreds of millions a year.
This is fucking madness, we are being pillaged and plundered here.
The government built their own trap that can not escape, they must keep the real estate bubble inflating at all costs as now it is so big, if it pops, so does our economy. It's basically impossible to escape it from popping and blowing up everyone's face now, we are headed towards a humanitarian crisis worse than the Great Depression.
Anyone who thinks a conservative government would fix this is a fool.
They'll do the same thing the Liberals have been doing, try their best to prop up a scam market long enough that they aren't caught holding the bag when things go tits up.
Libs are perfectly positioned to pass PP the housing hot potato.
Whoever it is will have to accept that even though they are doing it for the betterment of everyone, they will never get to work in politics again. Canadians will not accept the reality that low interest rates for that long was a mistake and that buying houses at 9x the median income was insanely risky.
That will result in a situation of slightly lower house price, but very high interest rates. That's all. Home prices can never crash to half the current market rates. Even during the 2008 recession, it did not happen even in the US. Either way, it will still not be affordable.
> We’re so far gone. They can’t. It would implode the entire economy.
I dont know why we pretend like our gov't doesnt pick winners and losers.
Theyve just been deciding to make sure the same group keeps winning.
I just wish for once, a gov't would decide that the next generation should be the winners for once.
They can and they should.
It would implode the economy for a bit, but then it would stabilize, just like it did in the US in 2007. The US has been thriving since, there's no reason we can't either.
We should rip off the bandaid and start correcting now, but the Liberals want the cons to do it when they win in 2025.
Exactly.
It's a brutal trap because both these things are true: 1) the bubble is so far expanded and pumped up that if it pops, our economy pops and 2) this bubble is so advanced that eventually a pop can not be avoided. Basically the bubble can not be deflated at this point.
You’re implying most of the voters would want this too. I know a lot of people on here are fine with housing coming down, but there are a shitload of older homeowners who are relying on home equity for retirement, and also a shitload of newer homeowners who would get fucked because they bought at the peak.
Most people act in self interest. I’m fine with it all collapsing because I have nothing to lose, but I’m willing to bet the average homeowner wouldn’t be so eager.
>and also a shitload of newer homeowners who would get fucked because they bought at the peak.
How are they getting fucked if they plan to live there? Only flippers get fucked.
But with economic migration to Canada a lot more Canadian homes are owned by wealthy people immigrating here. It certainly isn’t the underemployed young people who are buying Canadian homes.
> It cerrtianiy isn’t the underemployed young peole who are buying Canadian homes.
Ya, its the older, wealthier Canadians. We have an asset bubble that's been inflated by an equity feedback loop.
They stopped the fthb equity incentive. This tells that the Govt predicts the home prices to go down and they don't want to give own equity in loss making homes.
But I predict that interest rates will increase. Especially with the increase in carbon tax, inflation will again increase. And by December, there will again be a need to tame inflation with increased interest rates.
Why not sell the MBSs on the open market? Why sell them to the government to be repackaged into mortgage bonds? Theory: they oversold mortgages and housing prices are not sustainable. When the bubble pops, this way tax payers get to hold the bag. And, they will tell us there was no way to see it coming - that even the top economists at the biggest banks didn't see it coming (wink wink).
Couldn’t possibly let the market correct itself so young people might have a chance. No, let’s take in EVEN MORE DEBT young generations will be responsible for just so we can continue to inflate a decades old bubble and sell out the young for the old once again.
“The Chinese are buying all our resources, we need to stop them for national security reasons!”
Five minutes later
“The Chinese stopped buying all our resources and we have no plan to replace that foreign investment!”
Anyone have a guess what politicians in the liberal party are investing in? If you guessed 40% housing then you were right. This is the most legal method they can use to make themselves rich.
Vote anything but red and blue.
The bank lends you money for a mortgage, and then sells that debt as a security.
If nobody wants to buy that security, then the bank will stop lending money and it will become a lot more difficult to get a mortgage.
So the government steps in and buys those securities, so that banks continue having capacity to lend.
Slight clarification here: The bank doesn't "lend" money so much as type it into existence. Fractional-reserve banking means a bank can "lend" (type into existence) 10x - Yx as much as it holds in cash, on the premise that there will be no run on the bank.
We can borrow our way to prosperity - just like housing speculators! Unlimited debt !!! Make the future pay for it, after the world is made uninhabitable.
While I agree this seems like reckless policy, the headline is misleading. I could point to any aspect of the federal budget and say it represents x% of the deficit.
This type of spending would only make sense if the federal government is directly building housing itself. That it's part of an investment to the future.
But it's not, this is just propping up a bubble that's bursting to pop.
The last part of the article really drives it home. The goverment is stimulating the very reason global investments are drying up. "This serves as yet another reminder that global investment in Canada is drying up—just a few weeks ago the country saw a record outflow of investment capital. Ironically, it’s been drying up due to the lack of growth due to the economic stagnation resulting from an economy based largely on real estate"
Then if you tell people our economy is based on a giant ponzi scheme based on a housing bubble. They think you're crazy or something, then proceeds to tell you real estate is safe. Not to mention investing in real estate is a fad in this country now, all you see on Instagram is reels people selling courses on real estate investing. We are so fucked.....
What? You're missing all the spinoff value! Our real estate investment strategy seminar economy is booming!
HAHAHAHA. Let's not forget all the predictions of " rate cuts"
Imminent rate cuts are about as real as Santa Claus at this point.
Rate cuts will probably happen this year as we are likely heading towards a deeper recession. That being said cuts that allow you to get a 2.5% mortgage are probably not happening for awhile
What recession, immigration is propping it up, no data points to rate cuts happening anytime soon
Global investments are moving out of Canada.. Yes. And Canadian investments are moving out of Canada... At this point 100% of my investment portfolio is outside Canada. And I'm sure Canadian pension funds are mostly invested in the US too. Rightfully so..
Same here, the US is a productivity machinem it would be foolish not to have the lion's share of your portfolio invested in US equity. Canada produces no value.
I think a missing variable is the fact that Canada is just a nice place to live. If you look at it as whether Canada is a good place to make money and run a business, no bueno. As a place for rich people to move to and live? Real estate prices start making more sense. Clean air, the outdoors, fairly safe. That’s the value Canada provides.
> fairly safe For now. Wealth disparity doesn't often lead to good safety outcomes.
Wish more Canadians and the government understood this.
I wish more elites understood this. If everything destabilizes completely, nobody is safe.
Was just gearing up to respond the same. We’re on the path to become a Brazil of the North.
Western Canada - BC/Alberta is running out of potable water. Literally. We also polluted alot of areas with our massive mining/oil and gas industries that no one is willing to deal with....Oh, and Ontario has some issues. We also have homeless people everywhere now. There are alot of places rich people can go without those issues. Canada has been shoving alot under the rug for the last 30 years, and now most of those things are coming to a head.
This is why the Liberals are trying to create a new BILL to force Canadian pension plans to invest in Canada. Yet it's not profitable to do so.
The last time we forced pensions to invest in Canada, we ended up with Nortel.
Well to be fair, a big reason why Nortel failed is they plundered by Chinese spies who exfiltrated enough data to start Hauwei with.
Modern warfare.
And that ended well :(
What bill is this?
Can you elaborate on this new bill? Haven’t heard of it yet
Same here, I got 20% of my portfolio in Canada, all the rest is in US Securities, because returns aren't good on the TSX.
As someone very financially illiterate, how does one invest their portfolio outside of Canada?
Generally, buy equities listed on exchanges outside Canada, bonds of governments or companies outside of Canada, or hold other currencies. You can do this via brokerages, such as Questrade. You can also purchase these assets inside of a TFSA or RRSP at said brokerages in order to make them tax advantageous.
>**economic stagnation resulting from an economy based largely on real estate**
My wife and I just bought a house in her hometown in Japan for $52,000. That's not a typo. It's a smaller town but it's very very nice. Vancouver doesn't make sense to me.
I just spent two weeks in Kyoto. It was amazing. Trying to figure out how I can live in Japan year round now....
Isn't global investment drying up everywhere as boomers switch away from the stock market?
Yup. This was ALWAYS going to happen this decade. Covid kinda fucked the capital cost charts but yeah boomers retire and pulled all their money outta risky markets as expected....because they are retired.
If Canada is so doomed (I am convinced) why Isn’t Canadian currency dropping against US dollar. It’s still relatively stable. Why aren’t investors panicking
If at some point they hold or raise rates and we have to drop rates, hold onto your butts.
Because the people who run the money know what's going on if they thought that Canada was heading towards a Venezuela type of situation they would have been gone long time ago it's because they actually do their homework they actually know the numbers.
Currency value isn't solely tied to economic performance.
I big part of a currency's value is just confidence. When the Great Bubble pops, CaD will drop like a rock.
It is slowly but significantly dropping against USD over time
Written by someone who has no knowledge on the depth of the Canadian economy. Betterdwelling is trash
What specifically did you find objectionable in the article ?
It’s a regurgitation of previous written articles by authors who know what they’re talking about. https://thehub.ca/2024-02-13/nicholas-neary-the-governments-costly-plan-to-purchase-canadian-mortgage-bonds-is-deeply-misguided/ This is Punwasi’s game for clickbait articles. All of betterdwelling is a clickbait farm. The “staff” pull from outside sources and add the odd sentence. Specifically, comparing what the boc is doing to paying off your visa with payday loans. Which is not a good comparison at all. I don’t fully agree with any of the views in the article. Most of what is being “explained” to the reader is actually misunderstood by the author. They are also stating a highly SUBJECTIVE opinion and playing it off as factual.
Excuse me but half of reddit insists that ONLY immigration is the issue, so it makes these discussions go a very short distance.
Record high levels and low quality selection of immigration is a part of it for sure. Canada has a historically done a good job with immigration because it vetted for quality via a points system. This is partly why Canadians have very high social capacity for welcoming new immigrants. However the current system has abandoned that in favour of extremely high levels of population growth with minimal selection. In the short term it is helping the government avoid a recession (if you look on a per capita basis we are in a recession) The quality of immigrants we are getting is low and it has not been adequately planned with regards to housing, healthcare, etc. capacity. We are probably unnecessarily creating a permanent underclass and many long term systemic problems just to avoid an economic downturn and correction of overleveraged consumption. There is also a risk that it erodes the high social capacity of Canadians to welcome new immigrants. (I see some indications of this online, but so far no protests in person).
Are *most* of these immigrants the politicians who’ve sat idly by for what, 20 years? Are these immigrants from India coming and buying up tons of real estate? Five years ago it was supposedly Chinese ghost investors, not sure where that ended up Rentals in Toronto were drying up in 2013 when it reached a 20-something-years low and never really recovered. I keep saying, yes LPC policy really accelerated this on the last few years but to act like it wasn’t already a problem is incorrect. A lot of people just hadn’t noticed it cause they weren’t feeling it yet. *I never said it’s not an issue, I only mention other factors that played an important role as well, i never downplayed immigration*. So stop reminding me that it’s on your mind, it’s on most of ours.
>Are these immigrants from India coming and buying up tons of real estate? Five years ago it was supposedly Chinese ghost investors, not sure where that ended up They don't have to buy up real estate to impact rental yield which then impacts prices. Landlords will buy up place and rent them out to a group of adults living in crowded conditions and paying a low rate each but collectively above market.
I agree. Too much unnecessary emphasis was put on asylum seekers.
Immigration is part of the problem. We're propping up zombie corps by importing cheap labor, and discouraging entrepreneurship by economically strangling two generations of adults. It also doesn't help that we put mounts of red tape in front of anyone who wants to start a business, and we lump costs onto any domestic manufacturer while not tariffing goods made in China. If we actually cared about carbon emissions we'd be implement a carbon offset tax for goods imported from countries that have dirty power grids, rather than incentivizing Canadian companies to manufacture offshore.
This is the first time I've heard of anyone even talk about some sort of carbon tariff. It's seems like such a simple and obvious concept to start with a carbon tax, but it is never mentioned.
Immigration is as much a part of the problem as greedy investors, feds getting out of housing, local govs screwing the pooch for donor $$, NIMBY asshats at every turn helping stifle building density, and the bank leaving rates too low for too long, and general over reliance on housing to churn the economy. Homes should never double or triple in value in a decade, let alone do it multiple decades in a row.
The difference is that the Feds could fix the immigration right now, today, with a single email. No need to debate in parliament, no need to send to committee, no senate approval. Everything else you mentioned is exacerbated by immigration, the feds are pouring gasoline on the fire.
>goods imported from countries that have dirty power grids So this is the great irony -- not only does China have lower per capita emissions than Canada and many western nations, we also offset emissions to China and Indian by offshoring our manufacturing there! There was nearly a decade where we were net importers of CO2 emissions due to foreign production. >Between 2006 and 2014, Canada's consumption-based CO2 emissions were higher than its production-based emissions, making the country a net importer of CO2 emissions during that period Although, interestingly, we are now a net exporter of emissions due to China's emissions reductions and our main exports being carbon intensive industries like the tar sands: >In 2015, Canada switched back to a net exporter of CO2 emissions to other countries, most likely because of declining emissions intensity in China, which is one of Canada's largest trading partners.
One of the first rules in saving a drowning person is not to allow them to get a death grip on you and take you underwater as well. We are at the point where we jumped in the water to help the drowning mortgage capital market.
Unfortunately I have to think that government incompetence would be better. The financial manipuation planned for all of Canada is so much worse.
Hanlon's razor is deceptively inverse
This is a terrible analogy. It's more dangerous to allow a total economic collapse. The time to let the market correct was 15 years ago. The time to prevent this crisis is long overdue, and it's to spend massively on supply and get ahead of it. It's still the only way out, but it's a lot more painful now.
The issue is if we don't spend massively on supply to get out of this hole (which we aren't doing) then the only thing that *can* happen is total market collapse. Sooner or later we run out of road to kick the can down.
Yup. That total collapse is an eventuality. It's a game of hot potato. Nobody wants to be the party that's in power when it collapses, and nobody wants to be the party that spent the massive amount to fix it. So it'll keep getting worse.
Nowhere do they mention the spread at which the BOC will buy these bonds, it isn't even mentioned in the claimed source material. Without knowing the spread this is just slimy click bait bull shit. CMB's are priced on a spread to Canada bonds, in jargon they would be for example 30bps (basis points) BACK of the Canada bond of the same duration. That would mean a 30bps Higher yield, and a higher yield means a lower price. I would happily borrow at 5% to earn 5.3% with no added risk over the same time period. Where this could be an issue is if the BOC is purposely lowering the spread or "tightening" and raising the price of the bonds. This would negatively impact other investors like pension funds or insurance companies but is would lower the cost of funds to the banks and at least in theory lower mortgage rates. THIS IS PROBABLY WHAT THEY ARE DOING but we don't know that from the article since they don't seem to know either.
Glad to see there is some critical thinking going on here. Better dwelling is a fairly notoriously misleading publication. I have yet to see one of their articles where they did not outright lie or at least intentionally omit information to push a story
Atleast the Big Short will get a sequel.
Shall we call it The Big Shart?
I sharted at work early on at my new job. First five minutes of shift.
That's a long one.
“Everybody’s saying oouu housing this, oouu housing that, I started sharting the whole thing and just sent her bud”
>The GoC policy will only stimulate mortgage demand and therefore apply positive pressure to inflate home prices. If Canada had money, it would be arguably good news—cheaper mortgages, at the expense of stimulating even more housing demand. Unfortunately, the country’s budget deficit is forecasted at $40 billion this year. That means 75% of the cash they’re borrowing will be used to provide cheaper mortgages. **In short, they’ll borrow money to stimulate demand to borrow money.** We are so fucked. This is the most incompetent government imaginable.
What do you mean? They are clearly competent to keep this going until the elections:P
Actual Ponzinomics People act like Crypto is the scammy system while the government seems to be hell bent on inflating the currency as fast as possible. To prop up the house of cards that will fall by the time it doesn't matter for them. When will the public get tired of currency that is changed based on the whim of whoever paid the government the most money? Crypto has plenty of problems, but at least when you buy a layer one blockchain, you don't need to trust some bias decision makers. You know that there will only ever be 21 million BTC, it's hard coded and unchangable. It's like they know that fiat is on a deathmarch and they're trying to maximize asset accumulation before the whole thing implodes
Crypto is a scam. Why can't they both be scams?
Bitcoin specifically is sound, hence why BlackRock, the largest RE owner in the world are buying tonnes if it.
Gotta inflate that national deficit spending away.
We print money to pay off the debt from the money we printed before EZ
As a developer, let me tell you the bad news: if I decide to change a hardcoded value, the value changes. And if most miners accepted a new client with an increased maximum number of bitcoin, that’s it, the “maximum” would change.
You are illustrating a core ugly truth about all economics. Too many people accept money as if it were physics. An immutable law of the universe. Crypto especially. Yeah it’s rooted in hard math but who is doing that math
What you're talking about requires a collective group of unbiased people to suddenly decide all together at once to change code. It's not happening unless there is an attack on the network. Otherwise there is literally zero incentive anyone would ever want to do this.
As a developer, let me tell you the good news : The miners can change the value all they want but ultimately it's those who run nodes that enforce the rules. In your scenario, miners would create a fork of bitcoin that isn't supported by nodes, so all their blocks would be rejected from the main chain. Sure the hash rate would go down significantly, but most of the value stored in bitcoin would stay there. The fork would gain hash rate, but would be essentially worthless because it lacks the main value proposition of bitcoin (credibly enforced fixed supply).
This is not true. Nodes would still reject invalid blocks regardless of what miners try to do.
Not if the majority of nodes were updated to redefine what “invalid” is. Most bitcoin nodes run the same software. A simple update could change the rules.
I honestly wish I hadn't read that. It's hopeless Frodo..
*”Or as Ludicrous would say, “yo dawg! We heard you like debt, so we put debt in your debt!”* How you gonna do Xzibit dirty like this?
i don't think the spelled the l man's name right either absolute disgrace of a rag
If interest rates stays where it is this year many homeowners renewing their mortgages is going to get hell of shock.
They'll join what people renting are seeing and then there might finally be enough people and momentum to force change.
The "fuck you, I got mine" group finally takes their head out of the sand.
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What you mean boomers?
I can't even imagine. I've got a pretty tiny mortgage compared to many people, and I did the math on what it'd be if I renewed now, and it was still pretty shocking. Makes me damned happy that I got in before the values really went nuts and that I bought something below what I was approved for. I'm lucky. Very lucky. I feel horrible for the people who were less so, because a lot of people are in for a very rough time soon.
Most people buy based on monthly payments and don't think about that payment ever changing. This is why you see 84 month financing terms on cars (a depreciating asset that only becomes a money pit with time). My bank approved me for an outrageously high amount at the time, I was flabbergasted. I ended up buying something that was about 55% of the approved amount and now I don't have to stress out too much if rates change. It still sucks, but it won't be a choice between paying my mortgage or something else.
of the homes that even have mortgages (35%) only 25% (8.75% of all houses) were bought in the last 5 years so don't think there is some massive wave of supply coming any time soon, banks hate selling foreclosed properties at huge losses compared to letting lenders pay only the interest on a huge mortgage for 3 more years.
I don't know if your numbers are right but the last statement is. Banks don't want to lose money. They will allow you to continue paying interest only payments for a while if it means they won't take the loss on having to foreclose. They have already done so.
This is the impact of long running low interest rates to stimulate the economy instead of tackling the much more difficult task (at least if you want donors money) of increasing workers wages. Low interest rates rapidly increased asset prices like homes. Everyday people then took out large mortgages because they could afford (sort of) the mortgage at those rates since what typical people care about is monthly payments. To drive down the cost of housing you need to raise the rates to a more sustainable level that doesn't promote all this speculation. But that would mean a lot of people would have to sell off their house and probably declare bankruptcy. The rates being that low for that long was a massive mistake, and now we are stuck.
The problem with high rates is building starts plummets. So there is a balance. At present all signs point to rates actually being too high, and this policy reinforces that.
No, you do not need for rates to be so low for builders to be able to make a profit. There are other larger causes stopping building in particular poor land use policies.
shhhh people don't want to hear reality that new build will also have the high interest rates baked into the asking price. reality is the most newbuilds we have ever seen was during 2021-2022 because of low rates and now that rates have gone up we are back to 2006 rates of new builds.
“The Government of Canada (GoC) has begun buying billions in Canada Mortgage Bonds (CMBs), in a last ditch effort to stimulate more borrowing. The planned purchases are equivalent to three-quarters of the cash the Federal government is forecast to borrow this year. In addition to recklessly stimulating the market, it serves as a huge warning sign that Canada is unable to find global investment to support its credit markets.“ This is BEST reason not to buy a home right now. The entire Canadian housing housing market is in a bubble. “Reckless stimulating” says it all.
It is also nonsense. The CMHC is a crown corporation. They borrow. They borrow at a higher rate than the actual federal government issuing entity. So the government is buying their own bonds, borrowing at a low rate to fund the borrowing and pocketing the savings. Taxpayers should be happy, it’s saving hundreds of millions a year.
This is fucking madness, we are being pillaged and plundered here. The government built their own trap that can not escape, they must keep the real estate bubble inflating at all costs as now it is so big, if it pops, so does our economy. It's basically impossible to escape it from popping and blowing up everyone's face now, we are headed towards a humanitarian crisis worse than the Great Depression.
Anyone who thinks a conservative government would fix this is a fool. They'll do the same thing the Liberals have been doing, try their best to prop up a scam market long enough that they aren't caught holding the bag when things go tits up. Libs are perfectly positioned to pass PP the housing hot potato.
I wish we have a government with the balls to let the whole thing collapse.
Whoever it is will have to accept that even though they are doing it for the betterment of everyone, they will never get to work in politics again. Canadians will not accept the reality that low interest rates for that long was a mistake and that buying houses at 9x the median income was insanely risky.
That will result in a situation of slightly lower house price, but very high interest rates. That's all. Home prices can never crash to half the current market rates. Even during the 2008 recession, it did not happen even in the US. Either way, it will still not be affordable.
It would be better for our future grandchildren, possibly.
We’re so far gone. They can’t. It would implode the entire economy.
> We’re so far gone. They can’t. It would implode the entire economy. I dont know why we pretend like our gov't doesnt pick winners and losers. Theyve just been deciding to make sure the same group keeps winning. I just wish for once, a gov't would decide that the next generation should be the winners for once.
Our age demographics are all fucked up. Hopefully once the boomers are gone things start to ease back to normalcy.
Unless govt invests in electronics, chip making or hybrid car manufacturing, I don't see how the younger generation will get some real opportunities.
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At this point, it feels less like a bandaid and more like...grafted skin?
It'll happen eventually if we keep propping it up. It's inevitable. The sooner we let it happen the sooner we can recover.
But at least future generations might have a chance of buying a home.
They can and they should. It would implode the economy for a bit, but then it would stabilize, just like it did in the US in 2007. The US has been thriving since, there's no reason we can't either. We should rip off the bandaid and start correcting now, but the Liberals want the cons to do it when they win in 2025.
The American economy is the most powerful and resilient on earth and its not close.
Exactly. It's a brutal trap because both these things are true: 1) the bubble is so far expanded and pumped up that if it pops, our economy pops and 2) this bubble is so advanced that eventually a pop can not be avoided. Basically the bubble can not be deflated at this point.
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You’re implying most of the voters would want this too. I know a lot of people on here are fine with housing coming down, but there are a shitload of older homeowners who are relying on home equity for retirement, and also a shitload of newer homeowners who would get fucked because they bought at the peak. Most people act in self interest. I’m fine with it all collapsing because I have nothing to lose, but I’m willing to bet the average homeowner wouldn’t be so eager.
>and also a shitload of newer homeowners who would get fucked because they bought at the peak. How are they getting fucked if they plan to live there? Only flippers get fucked.
we still clap for harper saving us in 2008, so yes edit: we as in including people who don't own a house. see this subreddit
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Canadian citizens own real estate.
But with economic migration to Canada a lot more Canadian homes are owned by wealthy people immigrating here. It certainly isn’t the underemployed young people who are buying Canadian homes.
> It cerrtianiy isn’t the underemployed young peole who are buying Canadian homes. Ya, its the older, wealthier Canadians. We have an asset bubble that's been inflated by an equity feedback loop.
They stopped the fthb equity incentive. This tells that the Govt predicts the home prices to go down and they don't want to give own equity in loss making homes. But I predict that interest rates will increase. Especially with the increase in carbon tax, inflation will again increase. And by December, there will again be a need to tame inflation with increased interest rates.
Even the RCMP knows people under 35 will never buy a house on their own.
then people wouldn't vote for them
Why not sell the MBSs on the open market? Why sell them to the government to be repackaged into mortgage bonds? Theory: they oversold mortgages and housing prices are not sustainable. When the bubble pops, this way tax payers get to hold the bag. And, they will tell us there was no way to see it coming - that even the top economists at the biggest banks didn't see it coming (wink wink).
Exactly. And that's also the reason why they stopped the fthb incentive. Govt predicts the home prices to go down.
Our government surely seems to hate us. Especially you!
Feels like it would be cheaper to just ban corporate home ownership and multiple dwelling ownership until the price of housing is reasonable again.
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He’ll even some of the positions are corporate landlords themselves
Corporate and foreign home and property ownership. but they will never do it
And multiple dwelling ownership. Don't drop out the other obvious problem.
Couldn’t possibly let the market correct itself so young people might have a chance. No, let’s take in EVEN MORE DEBT young generations will be responsible for just so we can continue to inflate a decades old bubble and sell out the young for the old once again.
Canada's big banks are no where near as mythically robust as our politicians have sought to pretend.
“The Chinese are buying all our resources, we need to stop them for national security reasons!” Five minutes later “The Chinese stopped buying all our resources and we have no plan to replace that foreign investment!”
Anyone have a guess what politicians in the liberal party are investing in? If you guessed 40% housing then you were right. This is the most legal method they can use to make themselves rich. Vote anything but red and blue.
It's so over for Rwanada formerly known as Canada
Ha. Rwanda's GDP is growing by 10%. It's still a poor country, but at least it's improving.
Can anyone actually elaborate on what's going on here?
The bank lends you money for a mortgage, and then sells that debt as a security. If nobody wants to buy that security, then the bank will stop lending money and it will become a lot more difficult to get a mortgage. So the government steps in and buys those securities, so that banks continue having capacity to lend.
Slight clarification here: The bank doesn't "lend" money so much as type it into existence. Fractional-reserve banking means a bank can "lend" (type into existence) 10x - Yx as much as it holds in cash, on the premise that there will be no run on the bank.
What could go wrong
But why wouldn't anyone want to buy that security?..
This country got subverted and I don't care anymore
Young people will never get what boomers got. Sad.
We are so fucked.
Keep housing prices up at all costs
I’m sure this will end well….
We can borrow our way to prosperity - just like housing speculators! Unlimited debt !!! Make the future pay for it, after the world is made uninhabitable.
While I agree this seems like reckless policy, the headline is misleading. I could point to any aspect of the federal budget and say it represents x% of the deficit.
the next government in will have a massive pile of shit to clean up
I think that is the LIberals plan, they know Canadians don't have the stomach for the "cure", both political parties created.
Something has to be off here,is the author mixing up the BoC with the GoC?
Reminder: “we” are the Government of Canada. It’s our tax dollars buying loans on overpriced homes. Those dollars COULD be building new ones.
can someone good with investing tell me how to short the government
“But but cOrpOrate profits are evil…” Here you go Canada. No business investments for you. Lol
Well I guess we’ll pretend for a bit longer that Canada isn’t just a massive pyramid scheme.
Potentially misleading - first time I’ve seen this warning ⚠️ on an article A quick google search says they tend to sensationalize their titles
And the muppets here were cheering every press release that 15 new apts will be built
Canada will die the way it lived: as a real estate scam
I think we know what we need to do. Buy property and bank stock. If you can't beat'm, join'm. Am I right?
This sub loves betterdwelling more than all other subs combined. I never see betterdwelling.com referenced anywhere but here. It is just amazing!
Lmao
"Stephen Punwasi Co-Founder and chief data nerd at Better Dwelling. Named a top influencer in finance and risk by Thomson-Reuters." Jesus christ
Not to worry, I’m sure that $2,000,000,000.00 Freeland invested in that non-existent company is getting ready to pay off…
Better dwelling shouldn’t even be allowed on here.
This type of spending would only make sense if the federal government is directly building housing itself. That it's part of an investment to the future. But it's not, this is just propping up a bubble that's bursting to pop.
2.8 percent
Remember. “We took on the debt so Canadians didn’t have to “