Moody’s – “The government’s moves may have come too late, owing to the build-up in consumer debt that has already occurred.”

In a weekly credit outlook report published Monday, Moody’s analysts William Burn and Andriy Stepanyants said shorter loan amortization periods should immediately cool home sales by requiring increased monthly payments.
“The government’s moves may have come too late, owing to the build-up in consumer debt that has already occurred.” In addition, slowing growth in household disposable income will be a challenge for consumers trying to pay down their debts, they said.
The analysts note that previous mortgage rule changes beginning in 2008 had “some effect” in countering the stimulus provided by historically lower interest rates, yet they “failed to stop Canadian household leverage from increasing.”
“Canadian consumers’ reliance on low interest rates to support high debt loads remains a risk.”

– from ‘Mortgage changes ‘may be too late’: Moody’s’, Financial Post, 25 Jun 2012 [hat-tip pennysaver]

‘Is Canada Too Smug About Its Economic Future?’, Bloomberg, 25 Jun 2012
Excerpt: “..there’s increased grumbling these days that not all is well north of the border—and not just because low interest rates and high housing prices have helped push household debt to the point where Canadians now owe an average of $1.52 for every dollar they earn. Economic growth has slowed, with annualized GDP growth up 1.5 percent in the first quarter, when the Bank of Canada had expected a 2.5 percent increase. Some of that is no doubt due to misery in other parts of the world, which has dampened demand and rattled investors. But it’s not the only factor that’s bothering Glen Hodgson, chief economist at the Conference Board of Canada, a prominent Ottawa-based think tank. Hodgson put out a commentary on June 25 entitled “Don’t Be Too Smug, Canada” that points to other challenges he feels are not being adequately addressed.”

20 responses to “Moody’s – “The government’s moves may have come too late, owing to the build-up in consumer debt that has already occurred.”

  1. Just in!… To summarise for the time challenged… Increased density (but not in areas likely to antagonize existing UltraPrime SFH owners) along mass transit corridors combined with a new, permanent ‘affordable housing’ bureaucracy and… wait for it…. more basement dwellers. That about covers it.

    [CBC] – Affordable Vancouver housing task force reports

    “Strategic building of row housing and the creation of an affordable housing authority are among the key recommendations in an interim report from a task force initiated by Vancouver Mayor Gregor Robertson.

    The Task Force on Housing Affordability report, released Monday, also suggested making transit hubs the priority for locating major new affordable housing developments and creating incentives for other newly built housing to be “suite ready,” increasing the potential for new secondary suites.

    Robertson told a news conference marking the report’s release that the solution lies in building more than just highrises and houses.

    “The term that came up repeatedly was “gentle” density and making sure that we use new forms of housing like stacked townhouses, row houses,” Robertson said.”

    The townhouses and row-homes could be placed in “transition zones,” to have better neighbourhood continuity between large towers and single-family homes, the report said.”…

    • NoteToEd: Wagers on some ‘genius’ naming the new, permanent authority, “GVGDTZC” [Greater Vancouver Gentle Density Transition Zone Commission]?

    • Renters Revenge

      Good summary Nem. It’s amazing the hoops being jumped through, trying to preserve the status quo.

    • Readers’ comments are particularly amusing….

      [G&M] – Vancouver eyes new housing body to end ‘affordability crisis’

      …”A task force on affordable housing recommended that the city set up a separate agency that could negotiate with private developers on deals to build units on discounted city land. The rents would have to be guaranteed at lower rates than usual for new units.”…

      • “Vancouver doesn’t need more housing options. It already has Surrey.”

        “BTW in surrey, there are lots of vacant suites at $800/month and homes detached going for $450,000”

        “‘Affordable Housing’ is simply code for ‘Free Homes’ for Hongcouvers NDP Communists at the expense of hard working Albertan Conservatives. Redistribution of Wealth 101”

        “Here is a solution. If you cant afford shelter in Vancouver than move to another Canadian city that you can afford it.”

        “unless that gov’t or city gives apartment developers free land it’s not feasible to build rental units. landlords cannot rent their brand new apartments at $1500/month to break even.”

        “If the government stayed out of it, people on lower wages and companies would move out of Vancouver driving up wages for service workers (law of limited supply) and drive down the cost of housing. Subsidizing housing is what Spain did.”

        “This comment has violated our Terms and Conditions, and has been removed.”

        and my personal favourite:

        “When I burn a bull on the altar as a sacrifice, I know it creates a pleasing odor for the Lord – Lev.1:9.
        The problem is my neighbors. They claim the odor is not pleasing to them. Should I smite them?”

    • In other news ‘affordable housing’, Liao Shining (3rd L), deputy chief of staff of Chinese Navy, is welcomed by David Gardam [Commander of Canadian Maritime Forces Atlantic/Joint Task Force GentleDensity TransitionZone Atlantic] after Chinese Navy training vessel “Zhenghe” arrived at Halifax… Liao Shining, barely able to contain his glee upon discovering that Halifax condos were substantially cheaper than those on offer in Vancouver, was overheard to remark that his GentleDensity TransitionZone was larger than his host’s.

      [Xinhua] – Chinese training vessel “Zhenghe” arrives at Halifax port, Canada

      • David Gardam [Commander of Canadian Maritime Forces Atlantic/Joint Task Force GentleDensity TransitionZone Atlantic] : “We trust you find Halifax harbour to your liking”.

        Liao Shining (3rd L), deputy chief of staff of Chinese Navy: “We’ll take it!”

    • I heard an interview with Olga Ilich and Stephen Quinn on CBC’s On The Coast yesterday. Quinn asked Ilich point blank why residents of Dunbar, with low density dwellings, shouldn’t be burdened with density increases like is seen in other parts of the city.

      Indeed the chuckle and the acknowledgement of a “good” question was the same as when Mayor Robertson was asked about foreign ownership during last year’s civic election.

      Not that Dunbar isn’t increasing its density but it’s starting from a handicapped position — its lots are, after all, larger.

      • They could build 2-3 bedroom apartments and 4 bedroom row houses for UBC staff in Dunbar.

      • “They could build 2-3 bedroom apartments and 4 bedroom row houses for UBC staff in Dunbar.”

        Why should UBC staff get preferential treatment? The commute to Richmond from Dunbar isn’t that bad.

      • I also heard part of the interview.
        The bit where Olga tripped over herself trying to get around the ‘stagnant-incomes-versus-steadily-increasing-home-prices’ issue was memorable.

      • Relaxed & Happy Islander

        Wished I would have been listening…perhaps the ‘Creme de la Creme’ (group against city development of rail tracks along the Arbutus corridor) are working behind the scenes.

        I also believe the target for the original development of Dunbar/Mackenzie Hgts were the staff at UBC. The area for years was known as the place where the teachers lived

      • I only meant to suggest there’s a market for it.

      • ah sorry rp1 I thought you were suggesting purpose-built for UBC staff outside of UEL

    • Interesting stuff. Portland, Oregon has been working to implement the same sort of plan with density in transit “centers” and “corridors”. Well-to-do neighborhoods of single-family homes are protected by zoning, while less well-connected neighborhoods are zoned for single-family houses to be replaced by duplexes or triplexes or larger apartment buildings.

      Basically you have to buy relative stability and protection from density policies by buying into one of the right neighborhoods.

      At the same time, developers insist the density the city wants is just too costly to build, so they need a bunch of incentives, hand-outs, and exceptions from code requirements. It’s quite a racket.

      • I should also note that the “affordable” housing that gets built in this system is not affordable for truly poor people, but generally for people a bit below the median. Lots of students and young people who are just in the lower earning phase of life fill up these affordable units, while poor families still go wanting.

  2. In my neck of the US, the terms “townhome” and “rowhouse” are used basically interchangably. It means a generally skinny two or three bedroom unit, with no other units above or below it, but sharing walls with similar units on each side.

    Can someone explain the difference between a townhome and rowhouse in Vancouver. Thank you.

    • More semantics, although rowhouse has the ability to be, but is not necessarily, non-strata where townhouses would be strata. Townhouses can be stacked, with one unit above another, a common form in Europe; there are examples of stacked townhouses in SE Vancouver and they will likely start to be built around Slocan and Kingsway in the coming years.

      After talking to a few developers there are some code impediments to rowhouse but also it’s unclear whether the housing form is the most profitable and desirable compared to other types. Looking at the cost of “executive” (~1500sqft) townhomes in Vancouver, I don’t think people should be realistically expecting a $300K 1500sqft rowhouse any time soon, if ever, within the City of Vancouver’s boundaries. Maybe I’m wrong though.

  3. Ahhh, everything stays the same…As the RE market starting to collapse, the big developers negotiate their work load outside of the market based frame – direct government financed projects like affordable housing or housing financed from the special fund and lots of perks for doing that. Olga Ilich is the political embassador of the Ilich building empire…
    About the affordable housing – I would say they need to do nothing. Lots of empty appartments, TH etc that sit out there and waiting to be sold when the price increases (..).They all are going to be added to a rental pool soon as their owners are trying to time the RE market.

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