REAL PRICE of HOUSING of Vancouver, Toronto and Calgary Single Family Detached and the Bank of Canada $CAD Commodity Index & 5 Year Fixed Mortgage
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The chart above shows the "real price" of Vancouver, Toronto & Calgary SFDs when looked at from the point of view of the BoC Canadian Commodity Index (CCI) and Borrowing Costs (retail 5yr Mortgage) which are the main input costs apart from operating expenses and tax.
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In August 2018 commodity prices dropped after failing to break above resistance. Is this a trend change or will CPI inflation (now 3%) and $CAD deflation move commodity prices back up on a trend since July 2017. |
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Mortgage rates remained at their near term highs keeping real housing prices on the downtrend.
The CCI train wreck into the March 2009 Pit of Gloom saw a 44% crash in just 7 months. Oil is slippery, CMHC is worried, and so is the Department of Finance Canada (DEC 2016). The oil majors are moving out of Alberta.
Major European Banks Are Backing Away From The Oilsands.
The decision by Europe's largest bank, HSBC, to halt funding for new projects in the oilsands has some wondering if other financial institutions, including U.S. banks and pension funds, will eventually follow suit — and what the impact that might have on Canada's energy sector. HSBC last Friday became the latest European bank to announce that it would no longer finance new greenfield oilsands, coal power plant and arctic drilling projects. It follows BNP Paribas and ING, both of which made similar announcements in the past year. HuffPost April 28, 2018
A massive number of oil and gas wells, facilities and pipeline segments stand to be added to the already bulging files of the Alberta Orphan Well Association in the wake of the likely failure of Sequoia Resources Corp. Calgary Herald March 8, 2018
Over the past three years Canada, and specifically Alberta, have seen an unprecedented exit of capital. This has been caused by several factors... There are three reasons for this: higher operating costs, limited access to markets for their product and an unfriendly political climate. BOEreport.com March 30, 2017
In October 2017, Alberta Energy Regulator listed almost 4,000 orphaned properties in Alberta
In March 2017, Conoco Phillips divests majority of Alberta assets for $17.7 billion
In March 2017, Marathon divests oil assets to CNRL for $2.5 billion
In March 2017, Shell divests oilsands assets to CNRL for $7.25 billion
In December of 2016, Shell sells Montney and Deep Basin assets to Tourmaline for $1.4 billion
In December 2016, Statoil sold its Canadian Thermal Oil assets to Athabasca Oil Corp for $582 million
In October of 2016, Koch Oil Sands issues letter to AER requesting canellation of SAGD project
In June 2016 Chevron announced it was looking to unload more assets in Western Canada
In April 2016, Murphy Oil sold its 5% interest in Syncrude to Suncor for $937 million
In November 2015 ConocoPhillips sold a massive land package
In February 2015, Shell withdrew an application for a new oilsands mine
In December 2014, EOG Resources divested the majority of its Canadian assets
In September 2014 Statoil put an oilsands project on hold for 3 years as it grappled with rising costs
In March 2014, Apache sold a large portion of their Western Canada assets for $374 million
In February 2014 Devon Energy sold $3.125 billion of assets to CNRL
There should be no more surprise BoC rate cuts if the federal government mandate plan is to use their fiscal powers, but as we know, the government can surprise us at any time, eg: the new Mortgage Stress Test, the CMHC credit tightening and offloading of risk onto the retail lenders; the threat of new chilling tax and CRA penalties and of course policy flip flops by the federal government like its reversal on electoral reform.
The experiment of ZIRP to NIRP monetary policy from November 2007 to July 2017, combined with CMHC's out-of-control insurance scheme (also add in the BC Gov't Sub Prime Cash give-away) has been a terrible social experiment in the service of political power and it has replaced affordable housing with indentured mania. Is there a better way?
Since July 2017, the Bank of Canada retail 5 year fixed mortgage rate (aqua dotted plot line) has moved up off its outstanding record low of 4.64% and is currently at 5.34% although street vendors are pushing sub 3% variable rate mortgages while the stress test weeds out the weak hands.
The end is in site for fire sale mortgage rates as the major banks push their rates up which forces the real cost of housing (dotted city plot lines) relative to those rates to turn down.
Albertans are wary of the Trumpster who vows to unleash energy supply 2.0. And when credit is a lifestyle employer as it continues to be in Canada, appraisers will eventually be in demand again.
