Meanwhile in Toronto a house is $1m+ while salaries are 100k-150k.
While Canada as a whole has recently seen some small increases to the cost of housing on the back of increasing lumber and labour costs, the country has a whole has remained largely stagnant, even falling in some cases. The gigantic gains seen, which bring up the country average, are limited to the prime agricultural areas, namely Toronto and Vancouver, where farmers are now willing to pay more than developers for undeveloped land. Something that is historically unusual.
>The gigantic gains seen, which bring up the country average, are limited to the prime agricultural areas, namely Toronto and Vancouver, where farmers are now willing to pay more than developers for undeveloped land. Something that is historically unusual.
Why is farmland in those areas so sought after? Were canadian farmland historically underpriced? Is the land just really good farmland? Are speculators buying it because of global warming?
Further, the way into these sectors is to buy what we call quota. Dairy farmers in Ontario imposed a price cap on quota back in 2006 in an effort to make it accessible to young farmers. While the fair market value of quota has likely doubled in the meantime, the maximum price you can pay is what it was in 2006. This means that there is even more cash floating around, that historically would have been tied up in quota purchases, in which to buy farmland with.
2. Increased profitability in agriculture in general. The US ethanol subsidy program of 2007 set the stage for significant increases in the price of field crops. As that program winded down and prices were coming back down, the US midwest got hit with three major weather events over the intervening years that decimated their crops, boosting prices again for those who had one. Not to mention that the US Farm Bill has been modified over the years to be more favourable to foreign countries like Canada.
It's interesting because back in the 2000's that was the main talk about how Urban Sprawl was going to ruin everything!
If not, the injury is self inflicted.
Kelowna? Calgary? Halifax? Are those places being driven up by farmland demand?
Welcome to Europe :)
The pato-developer thing comes from the fact that many of these new apartment complexes often make huge compromises on quality or amenities. A common complaint is very thin walls or apartments with windows facing a few meters from neighbors. Search in youtube for pato developer and you will see some really comical videos.
It is very not ideal, but even so it provides a huge pressure relief on housing demand and kind of allows young people the ability to afford something to start a family. Real estate is even so often used as an investment but I think with the current interest rate hikes the crazy valuations on the main cities will come down.
At least in something.
It's not clear to some countries stick almost exclusively to fixed rate mortgages, and others stick almost exclusively to variable rates, but the people in "variable rate countries" have saved a lot of money historically.
Fixed rates are always a better option for the person borrowing the money as you can refinance if rates go lower, lowering your monthly payment.
Variable rate loans are far more regulated for a reason.
Check how variable rates and fixed rates have compared over time
Basically, the "fixed rate" very rarely was smaller than the floating rate.
Banks know how to calculate the rate ceiling and you're rarely going to win by betting against it. (Why would they risk borrowing it at a smaller cost than the given interest rate at a given time?)
Sure there's a risk of interest shock, that risk is not zero. You can mitigate it by a) not buying something overvalued and b) having a big enough downpayment
Well that's obviously expected. But by taking an fixed rate loan you're basically betting that the rate will increase in the future. Of course there's a risk that the interest rates will stay close to zero for the next 30 years like in Japan.
A lot of banks do charge you a penalty for repaying before the (fixed interest) term in case of fixed rate mortgages.
I'm sure the central bank would step in to prevent the roughly 60% of homeowners/voters from being negatively affected.
What you can’t have is millions of bag holders underwater with mortgages on homes valuations cut in half.
They slice up the loans and sell them as MBSes to the Fed and pension funds.
If interest rates go up ~1% - pension liabilities decrease ~12%: https://www.pentegra.com/wp-content/uploads/2016/12/The-Impa... This is not terrible for pension funds.
The Fed doesn't need bailed out...
Well, there is sovereign default but if the US does that, then we'd better hold on tightly to our breeches, from Kamchatka to Patagonia.
The US Government defaulting wouldn't impact the Fed's ability to continue to buy infinite sums of assets.
There's no reason that the US Government couldn't default and the Fed buy absurd amounts of treasuries until interest rates remain low or go even lower.
Honestly I’m of the opinion we won’t see any serious rise in rates. Too many mortgage holders and indebted governments would be broken.
Just look at the last month. The Fed threatens a few hikes that would push a 10 year bond to 2.5-3% and the market crashes.
And the thing is, maybe it would be better to blow off some of that steam in small bursts than find our <<after>> that 2 days ago was the point of no return.