Daily Market Update

RBC chief says we could see prices drop 15 per cent
The chief executive of the Royal Bank of Canada says that there could be a price drop of as much as 15 per cent when interest rates rise. But David McKay isn’t joining the list of doom-mongers; instead he says a correction would be “healthy” for Canada’s economy. The Bank of Canada recently made a rare statement on over-valuation of the housing market and put its figures somewhere between 10 and 30 per cent. McKay says that he doesn’t believe the story will end badly, but rather that an easing of the low supply-high demand-low rates triangle would be a good thing, especially for those trying to enter the market. Read the full story.
 
Ontario downgraded by Fitch
Credit agency Fitch has downgraded the long-term debt rating for Ontario over concerns that the provincial government may not hit targets for balancing the budget. The Liberal government expects to get the books to balance by 2017-18 but Fitch says that it will have more limited options available to try to eradicate the $12.5 billion deficit in the proposed timescale. Ontario’s credit rating has been downgraded from AA to AA- however Fitch has noted that the government have demonstrated ability in tackling the deficit and have changed the outlook forecast from ‘negative’ to ‘stable’. Read the full story.
 
Chinese property buyers increasing in Washington State
Realtors in Washington State are reporting an uptick in interest from Chinese buyers especially in high-end properties. The state is second only to California in the places Chinese property buyers are interested in and numbers continue to grow. Chinese students now make up around half of the 7,300 of the international students at the University of Washington and as trade links increase there will certainly be more interest.  Read the full story.

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COMMENTS

  • by John Walter 2014-12-22 8:52:08 AM

    15% drop???? How much does he want to bet? Lets put some money behind that mouth!!!!!

  • by Jim Reid Broker/ Economist 2014-12-22 10:43:10 AM

    Duh- the only criteria RBC gives for saying a 15% drop in house prices is coming is the Bank's desperate hope for interest rate increases to boost their profitability. I don't recall house prices dropping when rates soared past 20% back in 1979! It isn't interest rates that cause price declines.
    Anyway, there is no shortage of funds as banks and others improve their liquidity from newly minted money. So rates ain't going up other than in their speculative mind sets.
    Over supply and/ or reduced housing demand causes prices to decline. This is not going to happen in the GTA or the rest of Canada except in local markets where industries slow down or relocate and they fire their wage slaves. Since the USA arbitragers have manipulated the $CDN to fall, our industries have cheap goods to sell. There aren't going to be a lot of layoffs as the USA grows their economy on the backs of cheap/ discounted Canadian labour and material costs.

    Merry Christmas and a Happy and Propsperous Canadian New Year.

  • by Wayne Ryan 2014-12-22 1:20:31 PM

    I'm not saying that I agree with the RBC report but to say prices didn't drop in 1981 when interest rates jumped up past 20% is not accurate. In many markets prices dropped up to over 50% and a lot of people went bankrupt. I remeber it well because my interest rate went from 10% to 18.5% and it nearly did me in!!!

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