Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Wednesday, September 04, 2013

Canadian House Prices 'Bubbly,' The Economist Says As Feds Mull More Mortgage Changes

Canada’s real estate industry has declared the prospect of a housing market bubble dead, but The Economist isn’t listening.

The U.K.-based magazine has once again declared Canada’s housing market to be “bubbly,” in a survey that shows Canadian house prices to be 30-per-cent overvalued compared to incomes, and 74-per-cent overvalued compared to rental prices.

The survey comes out amid reports that Canada could see another round of mortgage rule tightening, as last year’s round of tightening seems to have done little in the longer term to slow house price growth.

House prices in Canada jumped an average of 8.4 per cent in the year to August, more than triple the rate that incomes are growing. The average house price now stands at $382,373. The number of homes sold jumped 9.4 per cent in the same period.

That likely won’t assuage the Economist’s fears about Canadian real estate. The magazine declared last spring that “a large bubble now looks set to burst” in Canada’s real estate market.

The Globe and Mail reports that the Office of the Superintendent of Financial Institutions (OSFI) appears also to be concerned about an overheated market. The banking regulator has been asking detailed questions of the banks about the impact of last year’s mortgage rule changes, with an eye to tightening the rules yet again.

OSFI has not made up its mind whether it will go ahead with further restrictions on lending, and what those restrictions could be. But the Globe suggests the regulator could crack down on uninsured 30-year mortgages.

Not everyone is worried about a potential bubble. Economists at the big Canadian banks have pointed to the recently strong housing numbers as evidence Canada avoided the price collapse that many had been predicting.

“That deafening silence you hear is the sound of the Canadian housing bears gone quiet,” BMO declared last week. “Not only has the resale market absorbed last year’s round of mortgage rule tightening, but the supposedly at-risk banks have just recorded a unanimously better-than-expected earnings season.”

Economists attribute Canada’s hot housing market to record-low interest rates that the Bank of Canada put into place during the financial crisis of 2008-2009.

In a report earlier this year, the C.D. Howe Institute urged the Bank of Canada to start raising interest rates. The think tank argued keeping them low for too long was leading not only to overly high house prices but also to high household debt, underfunded pensions and excessive risk-taking among businesses.

But a briefing note from Prime Minister Stephen Harper’s office dismissed those complaints, saying they were “at odds” with what other economists have said.

The note also suggested that Canada can’t simply raise interest rates while the U.S. and other trading partners keep theirs low.

"The costs of raising interest rates well ahead of other major economies would likely outweigh the benefits."

Original Article
Source: huffingtonpost.ca
Author: Daniel Tencer

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