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3 Canadian housing market concerns that experts are worried about this month

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Just a month ago, industry experts seemed relatively pleased with the direction the Canadian housing market was heading in — home sales and prices were rising at a moderate clip, after months of slumping activity. But now, things may have started to change.

This week, new reports on high household debt levels and falling home prices have given some industry watchers pause, as the current rising interest rate environment could exacerbate both issues.

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For a closer look at some of the issues facing the market this month, Livabl has rounded up the latest expert commentary to keep you in the know.

Household debt is on the rise

The second quarter of 2018 saw an uptick in household debt, in a country that already has some of the highest debt levels in the world

Rising interest rates have made the picture even more precarious, according to the latest report from the Canada Mortgage and Housing Corporation (CMHC). The ratio of debt-to-disposable income rose three percent in both Toronto and Vancouver in the second quarter, from 239 and 205 percent to 242 and 208 percent, respectively.

“With interest rates on the rise, highly indebted households could see their increased required [mortgage] payments exceed their budgets,” reads the report from the federal housing agency. “Highly indebted households have usually few debt consolidation options to respond to increasing debt services costs.”

The Bank of Canada hiked the overnight rate to 1.75 percent in October, triggering a corresponding rise in mortgage rates. As rates continue to climb in 2019, Canadians could begin to struggle to make their monthly payments.
“It is a vulnerability that has to be closely watched should interest rates continue to move higher,” writes Brent Weimer, CMHC’s senior housing researcher, in a statement.

New construction facing new headwinds

The Canadian new construction market has been posting solid numbers throughout the fall — but that could be about to change.

“On a trend basis, housing starts appear to have troughed, with some upward momentum of late,” writes Fotios Raptis, a senior economist with TD, in a recent note.

Housing starts provide a way to track the health of the new homebuilding market, while measuring the growth of new housing supply. And, according to Raptis, they could plateau in the new year, thanks to series of policy measures introduced in 2018.

“Going forward, higher interest rates and affordability constraints in major [markets] (GTA, Greater Vancouver Area) could act to hold the pace of new residential construction,” he writes.

But a steep drop off in starts doesn’t appear to be in the cards — ultimately a strong demand for new housing will keep the numbers in the green in 2019.

“A steep downturn in homebuilding nationwide appears unlikely,” writes Raptis. “Canada’s population is on the rise, medium-term income growth should remain healthy, and most markets are generally not overbuilt.”

Home prices are falling

It was another month of sliding home prices for the national housing market in November. The Teranet-National Bank Composite National House Price Index fell 0.3 percent, following a 0.4 percent drop in October.

“Home price weakness in some major metropolitan areas is evidenced by a second consecutive decline in the national Composite Index,” writes Marc Pinsonneault, a senior economist with the National Bank, in his most recent analysis.
According to Pinsonneault, stricter mortgage qualification rules and higher interest rates are to blame for what he deems a “significant” cooling of demand across the country.

“For instance, in Vancouver, November was a fourth month in a row without a rise in home prices, for a cumulative drop of 1.8 percent,” he writes. “In Toronto, prices declined over the last three months, for a total loss of 0.4 percent.”

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Covid-19 altering Canadians’ housing needs: RBC

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Amid a pandemic-driven shift in demand as well as a surge in new listings, the Canadian housing market remained strong in August, RBC Economics reports.

Citing preliminary data from local real estate boards, RBC said that markets in many areas of the country remained “red hot” in August.

“But the bigger story might be that Covid-19 is now prompting more people to sell,” the report said, noting that new listings surged in urban centres such as Toronto, Ottawa and Vancouver.

“We think this in part reflects the pandemic altering the housing needs of many current owners — who are opting to move, something they might not have considered just a few months ago,” it said.

RBC noted that the Toronto market saw new listings jump 57% year over year in August, powering a 40% increase in home sales.

Sales were up more than 20% from July’s near-record levels, it said.

“Clearly, [that] market has fired on all cylinders this summer, making up for the major disruption caused by Covid-19 in the spring,” RBC said.

The primary drivers of sales activity and higher prices were low-rise homes, including single-detached homes, RBC reported.

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RBC’s customer base makes it a favourite of cyber attacks – security experts

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Royal Bank of Canada is among the most targeted institutions by cyber attacks due to its broad customer base, according to an analysis by Palo Alto Networks.

From December 2019 up to present, cybercriminals have been establishing malicious pages disguised as websites by major companies to conduct phishing attempts and other similarly invasive attacks.

RBC ranked third in the most spoofed domains list, more than streaming giant Netflix and professional networking portal LinkedIn. PayPal and Apple ranked first and second, respectively.

“When you look at the broad customer base that RBC has, it makes sense, especially when you compare it to some of the other big names,” said Jen Miller-Osborn, deputy director of threat research at Palo Alto Networks. “These attackers are going after [domains] where they can make the most money, so they’re focusing on these organizations that have really broad customer bases because that really ups the number of potential victims.”

In an interview with BNN Bloomberg, Miller-Osborn outlined what consumers should be looking out for to filter our fraudulent emails.

“Typically, the ones that are going to be scam-related are trying to invoke some sort of emotional response,” Miller-Osborn said. “So they might say something like ‘Someone tried to change your password, click here to say whether or not that was you,’ or ‘Click here to confirm this charge on your statement,’ or ‘We’ve locked your account for strange activity.’ Essentially, things that will make people anxious and will make them want to click first, and not take a step back and pause to think, ‘Is that really the kind of email that my bank would usually send?’”

Other red flags include misspellings and basic grammar errors in the message, especially the sender line.

“Attackers try to closely mimic domain names, so you might see the number zero substituted for ‘o’, or a one substituted for the letter ‘l’. Little thing like an extra ‘s’ or ‘c’ in the name. These things, people tend to glance over very quickly and not notice.”

Miller-Osborn said that these measures should be done in concert with the most effective step in deflecting a spoofing attempt: Calling the bank and asking them if the email that they supposedly sent was legitimate.

 

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Queen confirms new home at Windsor Castle with Buckingham Palace for ‘selected events’

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The Queen will be returning to Windsor Castle in a matter of weeks, with Buckingham Palace only used for ‘select events’.

Her Majesty and her husband Duke of Edinburgh will first spend time privately at Sandringham when they leave Balmoral next week, Buckingham Palace confirmed.

She had been spending summer at her retreat in Aberdeenshire amid speculation that she would not return to the capital amid the coronavirus pandemic.

A spokesperson said: “The Queen and The Duke of Edinburgh will depart Balmoral Castle during the week commencing September 14 to spend time privately on the Sandringham Estate.

“Subject to the finalisation of the autumn programme, Her Majesty’s intention is to return to Windsor Castle in October and to resume the use of Buckingham Palace for selected audiences and engagements.

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