by Michael Heath

Housing market dangers are “especially acute” in Australia, Hong Kong, Canada and Sweden, Oxford Economics said, noting this has historically posed a threat to economic activity.

“In all four, valuations are very elevated, there has been a lengthy housing boom, debt levels are high and there is a significant share of floating rate debt,” Adam Slater, lead economist at Oxford, said in a research note.

On the positive side, it notes risks are relatively limited in key markets like the U.S., Germany, France, China and Japan. In addition, across most economies there has been no significant recent rise in mortgage rates, which have even fallen in some cases.

“So, the classic ‘trigger’ for house price declines is largely absent,” Slater said. “However, rising rates are not strictly necessary for prices to start falling.”

House prices are falling in Australia, down almost 3 percent in the year through August in major cities, and 5.6 percent in the Sydney market. Meanwhile, three of the nation’s four major banks raised mortgage rates in recent weeks, blaming higher funding costs. The increases came even as the central bank leaves official rates at a record low.

Oxford said it compared markets across OECD countries from 1970 to 2013 and found a clear negative relationship. Where valuations had risen 35 percent or more above the long-term average over that period, real house prices fell 75 percent of the time over the following five years, it said.

“This points to many OECD countries seeing stagnant or negative real house price growth in the next few years: the scope for a further house price ‘melt-up’ in highly valued markets looks extremely limited,” Slater said.

Stretched valuations also matter because house price changes can have a significant impact on economic activity, Oxford said, citing a sample of 83 house price booms. It also found house prices tended to fall after booms, and often substantially.

“For the G7 countries, we find a positive relationship between consumer spending and real house prices from 1997, albeit possibly weakening in recent years,” Slater said.

Copyright Bloomberg News

Good news for Toronto mortgage brokers—the market appears to have rebounded.

Numbers released by the Toronto Real Estate Board for the month of August reveal an 8.5% boost in sales over the same month last year, signifying an adjustment to market realities spurred by B-20 and the Fair Housing Plan.

In total, 6,839 homes were sold throughout the Greater Toronto Area last month for an average selling price of $765,270—a 4.7% increase over August 2017.

Even more positive is the fact that August marked the third consecutive month of year-over-year sales growth in the GTA.

Garry Bhaura, TREB’s president, credits the buoyant sales figures to homebuyers who held off on purchasing, because of stricter mortgage qualification criteria and the Fair Housing Plan, entering the market.

“It is encouraging to see a continued resurgence in the demand for ownership housing,” he said in a statement.

Much of the load is being carried by Toronto’s hot condominium market, which managed to slog through the languid sales cycle that chilled the city earlier this year.

“The condo market is still on fire—it never slowed down,” said Mortgage Outlet’s Principal Broker Shawn Stillman. “Even month-over-month, the price per square foot is hitting new highs, and they’ve always been strong. Where the weakness is, however, is in the 905 area. People who bought preconstruction within the last year are being hit hard because of the glut of inventory in the 905.”

Last year, the federal government increased its immigration quota by a third and now welcomes 300,000 newcomers. Stillman estimates 40% of them move to the GTA, and that doesn’t even account for migration from within the country.

“Suddenly you have 30,000 to 40,000 more units that are needed,” he said. “I’ve had a lot of clients who are new to Canada, but from the U.S.—I’ve done five of those deals in the last month—and they moved up to Canada for whatever reason, but they’re buying things. These are educated, skilled people making over $100,000 a year and they’re happy to put money down.”

The summer market in Toronto was better than most observers expected. While inventory in the city is low, units moved quickly.

“We’ve had a fantastic summer,” said Shawn Zigelstein, a realtor with Royal LePage Your Community Realty. “I’ve been talking with some other agents and they all had a really good summer because inventory levels are relatively low in the city. Once you get into the suburbs, a few pockets have a high amount of inventory, but in the City of Toronto there’s only two months’ worth of inventory.”

With files from The Canadian Press

We all have debt. It’s inevitable. No one comes into the world with enough money to immediately buy everything we could ever want or need. That’s okay. As long as you keep it under control, you can live a perfectly healthy financial life and, dare we hope, prosper at the same time.

Now you probably think of debt and prosperity as mutually exclusive. You can’t have both at the same time. But let’s borrow a basic tenant from the self-help field for a moment here in aid of our goal: Focus on the solution, not the problem.

Many people get so caught up in paying off any debt and bill they may have that it dominates all else. It becomes who they are and they focus on the elimination of that debt to the detriment of all other financial goals. Ensuring that your bills are paid on time IS important and gradually reducing your debt IS something you should be doing. But don’t let it distract you from creating some wealth for yourself.

Most financial planners advise that you set up an automatic debt repayment plan. This allows you to focus on savings, prosperity and growth. Having a mindset that is solely about getting out of debt and ensuring that your bills are paid is not going to be healthy financially in the long run. Set up a payment plan and focus on savings and growth together instead. Having debt is a reality that we all face. How you deal with it however is what’s going to set you apart.

Global index says MetroVancouver’s home prices are 65 per cent higher than they should be

Canada has been ranked the world’s third most overvalued country in the world for real estate, at 56 per cent higher than it should be based on typical incomes, according to a global house price index by The Economist.

Canada was beaten only by New Zealand and Australia in the rankings by the U.K.-based financial publication’s research team.

Looking at 22 major global cities, of which Metro Vancouver was the only Canadian city, The Economist reported that Vancouver real estate is valued at 65 per cent higher than it should be, based on local incomes

In terms of real estate values versus median household incomes, Metro Vancouver was deemed the fifth most overvalued of 22 major global cities studied, after Hong Kong, Auckland in New Zealand, Paris, and Brussels in Belgium.

The Economist found that the region’s home prices have risen by more than 60 per cent over the past five years.

Vancouver is followed by London, UK and Sydney, Australia, both of which were deemed overvalued by 50 per cent or above.

Check out The Economist’s interactive graph, which shows how overvalued the real estate in each of 20 countries has been since the 1970s.

New Zealand’s standing in the global index comes as the New Zealand government confirmed August 14 that it will introduce a previously proposed ban on foreign buyers purchasing New Zealand resale real estate. Overseas purchasers will still be able to buy new presale homes, and Australian and Singaporean buyers are exempt from the ban.

One key thing that all people who have financial freedom have in common is that they live below their means. For example, Warren Buffet is worth 10’s of BILLIONS of dollars and he still lives in the same house he bought in 1958 for $31,500! Getting in the habit of living below your means is important. Here’s some tips on how to do it:

Understand What You Have to Spend

Before you do anything else you have to understand your income. If you get paid consistently, this isn’t too hard. If you live on commission or your income is consistent, you have to look at your three month average and use this as your baseline.

Track What You’ve Spent

Look back over the last few months of financial statements and see what you’ve spent your money on, then categorize it. Separate into shopping, eating out, rent/mortgage, utility bills etc.

Now that you see how your money is being spent, how does this make you feel? Are you doing well or is there a lot of work to be done? If you’re reading this article, most likely you need to cut out some spending.

First, Eliminate

This is exactly what it sounds like. Take a look at your bills and see what you can cut out. Did you spend a lot of money on Starbucks? Do you order in a lot? Are you paying for subscription services you barely use? Memberships you no longer take advantage of?  Be ruthless and chop those expenses out. You’ll be surprised at how much ‘extra’ money you have.

Second, Economize

Once you’ve eliminated all you can, economize what’s left. This means find ways to save money on what you do spend. Sometimes this is easy, buying off-brand items at the grocery store, growing your own veggies, getting a lower cellphone or TV plan. Every single dollar helps.

Between Eliminate and Economize, your goal is to take your average level of predicted spending below your income level. That is living below your means!

Finally, Review

Very rarely is the first attempt at a budget perfect. As with anything, practice is key to success. Make sure you review your plan regularly in order to adapt to changes and sort out what is and isn’t working.

Now these tips alone won’t get on the level of the Oracle of Omaha, but it does go to show what a little financial discipline can do.