23 Oct

Bank of Canada raises red flags over Toronto, Vancouver, Calgary housing markets Add to …


Posted by: Jaime (James) Fleming

These are stories Report on Business is following Wednesday, Oct. 22, 2014.

Central bank cites housing
The Bank of Canada is raising red flags about the Toronto, Calgary and Vancouver housing markets.

Those are, of course, key markets in Canada, where real estate values differ widely across the country.

In its monetary policy report today, the central bank said housing activity “has been more robust than anticipated, buoyed by continued very low mortgage rates and exhibiting strength beyond a rebound from weather-depressed levels earlier in the year.”

However, it highlighted big regional divergences colouring this picture.

Housing markets in eastern Canada “appear to show signs consistent with a soft landing,” given slower price increases and sales volumes.

“This contrasts with major cities in Ontario, Alberta and British Columbia, where housing markets are generally robust and much tighter,” it said.

“While a good part of the strength can be explained by favourable demographics and strong employment gains in parts of the country, it nonetheless suggests that household imbalances could increase further,” the central bank warned.

It did not cite specific cities. Nor did it say they were headed for trouble. Indeed, in an interview with The Globe and Mail’s Carrie Tait, senior economist Randall Bartlett of Toronto-Dominion Bank said the sky’s not falling.

Thus, I took it as a warning sign.

“Simply, this is the main reason the bank would be extremely reluctant to consider cutting rates (in a stress situation),” said chief economist Douglas Porter of BMO Nesbitt Burns.

“They have frankly been surprised at the underlying strength in housing and consumer spending, and now explicitly tie that to low interest rates,” Mr. Porter said.

“There is no more brave talk about a soft landing for housing.”

Over all, Bank of Canada Governor Stephen Poloz and his colleagues noted “renewed vigour” in residential real estate. They also noted stronger car sales.

“Housing activity has been more robust than anticipated, buoyed by continued very low mortgage rates and exhibiting strength beyond a rebound from weather-depressed levels earlier in the year,” it said in the report.

“Housing starts have remained broadly in line with demographic demand in recent months,” it added.

“However, sales of existing homes have picked up noticeable since the beginning of the year, to a four-year high … This is contributing to sizable increases in house prices, although the national picture continues to mask important regional divergences.”

According to the Teranet-National house price index, home prices in Canada rose 0.3 per cent in September from August and 4.9 per cent from a year earlier.

Notably, Calgary, Toronto and Vancouver were well above the national average, at 9.5 per cent, 7.4 per cent and 6.5 per cent, respectively.

Just this week, Moody’s Investor Service also flagged concerns of Canadian home prices, warning the housing market and swollen household debt levels are a risk.

Mr. Porter noted the shift in the central bank’s tone over the past six months where housing is concerned.

“Earlier they were convinced (perhaps bravely so) that the housing market was on course for a soft landing,” Mr. Porter said.

“Now, they are openly suggesting that it has been stronger than they expected, and thus the associated risks with household debt ‘are edging higher,’” he added.

“The focal point of that ‘stronger than expected’ housing market has been in Calgary, Toronto and Vancouver, as we (and others) have noted. Most of the rest of the country is not seeing particular strength in housing.”

What’s important here is that the strength in various housing markets is “localized,” as Mr. Porter put it, and thus “broad” policy measures are not necessarily the best way to deal with it.

As in, “higher interest rates would hit all markets, including many cities that don’t need cooling.”

Remember that former Bank of Canada chief Mark Carney and the late Jim Flaherty, Canada’s finance minister at the time, each took measures as household debts got out of hand.

Mr. Carney threatened to raise interest rates, and Mr. Flaherty brought in a series of measures.

As The Globe and Mail’s Barrie McKenna reports, the Bank of Canada also held its benchmark overnight rate at 1 per cent today, bringing to more than four years its longest rate freeze since the 1950s.

The sudden drop in the price of crude has become a new wild card for the Bank of Canada, our Ottawa correspondent writes, knocking the wind out of inflation and delaying any move to hike interest rates.

The central bank said inflation risks remain “roughly balanced,” but it pointedly dropped the word “neutral,” a hallmark of its monetary statements for the past year. This comes after Mr. Poloz indicated he wants to move away from an explicit commitment on future changes to its key rate.

The most significant shift in the bank’s latest economic forecast centered on inflation, where the bank said that patchy global economy is pushing some prices up, while depressing others. There is strong growth in the U.S. and weakness virtually everywhere else in the world.

A news conference by Mr. Poloz, which was to have come later in the morning. was cancelled, as was a scheduled appearance before a parliamentary committee by Mr. Poloz and senior deputy Carolyn Wilkins.


22 Oct

5 simple suggestions from someone who has attained financial freedom so that you can do the same!


Posted by: Jaime (James) Fleming

The current state of the economy has left many of us in dire conditions. For many the ability to simply make ends meet is something that has become impossible to do. Sometimes no matter how hard you work, it just seems like you simply do not have enough to keep your head above water. Hello, my name is Peace Hyde, and welcome to my weekly column a Piece of Peace where I share with you some motivational words that is helping me as I embark on my personal journey to be the best I can be.

Today I would like to share with you on the topic: THE PATH TO FINANCIAL FREEDOM!
There are 5 main principles that have helped me in my personal financial planning that I believe can help anyone who is currently struggling to cope. As a young student, I struggled with debt and poor money management skills, which in the long run meant that my personal freedom was taken away because I had to work around the clock to get myself out of Debt! I learnt from a very young age that the key to achieving financial freedom lies in efficient planning and discipline.
1.    Living within your means.
We live in a world with so many wants and desires. Sometimes the temptation to belong or to be seen to belong to a certain social class means that, we go over and above what is financially comfortable for us. Spending more than you earn is never a smart thing to do! How we feel people will perceive us forces us to do things that we are not financially ready to do. Please do not let the societal pressures force you to do things you cannot handle.  Always spend what you can comfortably afford and not a cedi more.
2.   The earlier you invest what you do not spend, the more money you will have in the end.
The benefit of saving is something that I am sure we are all aware of. However saving alone is not enough. What is also important is how soon you begin saving. Most of us go through our young years without a care in the world or much thought to what we spend our money on. The earlier you start saving, the more money you will have aside for a rainy day!
3.   Track Your Spending
Make sure you know what you’re spending your money on. You can do this manually by saving receipts, or you can use technology to help by tracking your spending with your phone or iPad. Always know where you financially stand.
4.   Set up a Budget
Creating a budget is simply writing down what you want to spend your money on, how you’re spending it now, and adjusting to reach your goals. It can be a simple list or a more complicated chart. Either way, writing down what you plan to spend your money on helps you stick to your plan and avoid impulse buying. Separate your “needs” and “wants”, making sure you have enough for your needs, while saving for your wants.
5.   Learn How Credit Works & Use It Wisely
Credit is getting something before you pay for it and promising to pay it back later. When you borrow money on credit you have to pay interest to use that money. Sometimes it is best to only buy things you can afford. You may get the product immediately on interest today, but the long-term financial burden may not always be worth the short-term rewards.
We are in very turbulent economic times where every single cedi counts. Do not be a victim of poor financial planning. Take control of your financial situation today and remember, you do not have to be rich before you start being smart with money.
Thanks for your time today. As always remember not only to be yourself, but be the best version of yourself because everyone else is taken.
Much love,
Peace Hyde.