The chart mashup above was prompted by an observation from a reader (S.B.) that the technical structure of the Vancouver housing market is now within momentum levels for a trend change to the downside as soon as the next retest and failure of the recent highs completes; the setup being the "anti-trade". S.B. made earlier observations here "3 Vancouver Views" Sept 2016 and "Simple as ABCD" May 2016; thanks SB.
The evidence of serious downward repricing has this provincial government attempting to goose the demand side of the market with free ZIRP money provided by you and me dear tax payer. Not only will we tax payers supply the down payments to people who don't qualify under the already sub prime CHMC lending standards, but we are additionally collectively subsidizing the banking and mortgage industry that has little or no lending risk and we are continuing to feed the provincial government tax collector via the property transfer tax. "In total the property transfer tax brought in $1.53 billion for the government, $605 million more than budgeted" said BC Finance Minister Mike de Jong CBC NEWS July 2016.
Ontario and Toronto are also implelled to goose the fence sitters into buying into the market:
Ontario land transfer tax rebate doubled to $4K for first-time homebuyers. City News November 2016.
Taxation and picking electoral sectors to reward or punish has created overly complex bureaucracies that exist in their own bubbles far removed from those they claim to serve. Every election brings new promises of reform (kiss that recent electoral reform goodbye) and at some point in the election cycle we hear that tax reform is on the agenda but reform never seems to make the cut. We may have to wait for a new generation of engineers armed with big data and new algorithms to simplify the tax structure. My favoutite is The Automated Payment Transaction Tax. It would do away with the tax department and with having to pay for the accounting and filing of overly complicated annual tax filings. The problem in this country is not the absence or lack of money creation.
Political ideology at all levels of government since the post war "invention" of CMHC has destroyed any possibility of a social contract that includes affordable housing as a basic right of tax payers. It appears to me that governments at all levels in Canada will continue to promote and urge Canadians to add even more household debt to their balance sheets that are already at historic levels nationally and globally. Although the Federal Government appears on the surface to be more rational than the provincial governments by warning Canadians who already have high levels of debt, they are not concerned with Canadian Banks who continue to be sheltered by tax revenue from the private sector. What they are concerned with is a RECESSION and THEIR OWN FEDERAL CASH FLOW. Is it irony or finger wagging and buck passing? The government is hooked on the commodification of real estate; it's a cash cow with a golden udder of debt that we are all attached to.
Here is the Federal Government at work:
CHMC Promotions Oct 2016 by the Globe and Mail
Warning from the Bank of Canada:
Hilliard MacBeth posted an interesting chart comparing the BIS housing price index data of Australia, Canada, U.S. Germany and Japan. I have mashed it up here adding inset charts of the BIS (Bank of International Settlements) debt service ratios and debt to GDP. Here is Hilliard's original post from December 9, 2016.
And the charts left are from the OECD via the IMF showing the recent ranking of cities with respect to house price to rent and house price to income ratios.
Canadians in Vancouver and Toronto are up against extreme increases in housing costs and no doubt conversations around the kitchen table probably include migration to more affordable housing jurisdictions and employment opportunities.
Hilliard MacBeth makes the point that in Germany there is a much higher population density than in Canada "Munich is more than 4 times as dense as Toronto and 5 times more packed than Vancouver." and that "In Canada, home ownership is at record high levels of about 70 percent, similar to the U.S. in 2005, while in Germany comparable numbers are 45 percent."
The idea of development land scarcity and the current regime of letting the market place dictate land values in Canada is of course absurd. We need reform, not a wild west of house flippers, money laundering and consumption at any cost.
I covered this observation in early 2014 with my post of "German Housing", and I regularily publish the census density of Canada as well. The point is really about the Social Contract we should be developing. We have an under supply of affordable housing in Canada because we the electorate do not have representation.
The housing and bond bubbles are reflections of the ignorance bubble that we the electorate are in and it's not likely to change.
The last two properties of Umberto Eco's list of 14 that define fascist ideology are cogent to our predicament:
"Selective Populism" – The People, conceived monolithically, have a Common Will, distinct from and superior to the viewpoint of any individual. As no mass of people can ever be truly unanimous, the Leader holds himself out as the interpreter of the popular will (though truly he dictates it). Fascists use this concept to delegitimize democratic institutions they accuse of "no longer represent[ing] the Voice of the People."
"Newspeak" – Fascism employs and promotes an impoverished vocabulary in order to limit critical reasoning.
Critical thinking might as well be outlawed in the new world order of truthiness.
Word of the Year: "Post Truth"
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History, Charts & Curated Readings
Balance Of Trade
Rent Or Buy