Sunday, March 24, 2013

The lay of the land...

As we head into the last week of March, there are many diverse forces pulling our RE up and down. Here are some of them.

For the Bears:

1) We are at high levels of inventory

2) the MOI, even with the recent up-tick in sales is comfortably over 6.

3) Inter-Provincial Migration is negative

4) The CMHC is on the defensive, and is probably past the most reckless days. 

5) It looks like houses are now selling at Assessed. The bidding wars are a thing of the past (almost)

6) Prices are probably down 5-8% yoy. 'The top is in' - for now!

7) There has been a moratorium on Entrepreneur class and a cap on Investor classes entrants into Canada. These were announced some time ago but are likely now having more effect.

8) Crack down on tax-evasion. Which means the many loop-holes for tax-avoidance and local avoiders,  as well as the satellite families:

On the international front, the CRA will be able to make use of a new Stop International Tax Evasion Program, giving it major new powers of oversight and information collection. It will be enabled to pay individuals with knowledge of major international tax non-compliance a percentage of tax collected as a result of information provided. Certain financial intermediaries, including banks, will be required to report their client's international electronic funds transfers of CAD10,000 or more to the CRA. 

The CRA's process for obtaining information concerning unnamed persons from third parties, such as banks, will also be streamlined. In a more explicitly administrative vein, the Foreign Income Verification Statement will be revised to require reporting of more detailed information, and the reassessment period for taxpayers who have failed to report income from a specified foreign property on their annual income tax return, and failed to properly file their Statement, will be extended.

Of course one of the largest tax avoidance areas in BC is our Billion dollar drug industry. Not sure if that will be targeted or not.

9) The NDP are likely to win the next Provincial election and that may change the speculation psychology somewhat.

For the Bulls:

2) The banks are still trying their best to keep the party going, eg the super low 5 years rate at BMO, and Flaherty had to phone Manulife to tell them to withdraw the 2.89 % 5 year rate. Kudos to Flaherty (who has belatedly become a financial conservative). And to his critics - you know as soon as it hits the fan and starts to unravel the banks will be lining up at the tax-payers door, bleating and whining for bail-outs.

That's what they did in 2009 and that is what happened in the US.

Better to bring this party to an end, while it will still be a a huge bust and not BK of the Government.

3) Seen the winter they had out North? Sure we have had all rain and grey skies, but the trickle of Eastern Baby boomers coming here to escape the winters could increase as they hit their retirement years (also increases our healthcare costs)

4) As a Realtor told me recently.." when I pick up an investor from Shanghai at the air-port, they are here to buy. Not waste my time or theirs. Over the week-end they will find something". 

Just Shanghai BTW has the a population which is 70% of all Canada's. 

171 cities in China have a population over one Million people.

We have 5, with Edmonton near enough to make it 6.

5) rates are still VERY low historically and unlikely to move any time soon. Every day there is a new debt crisis somewhere. 

6) The Government can talk tough now, but what happens if the market starts to drop. can they withstand the pressure from the lobbyist and from home-owners? Of course there isn't much else we can do. We are now in a deficit position, rates are near zero, and the CMHC has already mortgaged the taxpayer to the hilt. But never rule out political foolishness.

So where does this all get us? Close enough to make it interesting. No crash and enough pulling and pushing to make every month's data worth pouring over for clues. So far I would have to say the bears have a slight advantage, lets see if it keeps up.