
A person walks past multiple for-sale and sold real estate signs in Mississauga, Ont., on May 24.Nathan Denette/The Canadian Press
John Rapley is a political economist at the University of Cambridge and the managing director of Seaford Macro.
When the Bank of Canada decided last month to hold off on further interest-rate rises, many breathed a sigh of relief. In Canada, as indeed in all G7 economies just now, expectations are growing that the worst of the inflation surge has passed.
Some have gone so far as to declare victory in the inflation debate for ”team transitory,” saying inflation was only ever going to be temporary. In fact, to judge from action in bond markets, investors are now betting that rate cuts will start as early as next year. Cue the blog posts that the Roaring Twenties are now back on track.
But the celebrations may be premature. Buried in the notes of last month’s BoC meeting was concern about the impact of Canada’s housing crisis on inflation. While the big increases in mortgage rates should have knocked prices down by now, the bank noted that “the ongoing structural shortage of housing supply in the economy was sustaining elevated house prices.” Owing to this, even though a majority of governors voted to hold rates constant, some favoured a further hike.
Because until Canada brings real estate prices down further, not only will the housing crisis endure, but the economy will probably continue to struggle with a stagflation problem, with prices rising in a weak economy.
The BoC is not the only central bank warning it’s too early to declare victory in the war on inflation. U.S. Federal Reserve governors have been making similar noises, while earlier this week, amid rallying bond markets, Bank of England Governor Andrew Bailey warned that it was “far too early to be thinking about rate cuts.” And scarcely anyone would say that housing prices in Canada are anything healthy for the wider economy.
It’s a bit puzzling that the macroeconomic effects of real estate prices have received so little attention until now. It stands to reason that if the prices of real estate rise, businesses will face pressure to raise costs to cover high rents, and workers will seek higher pay to be able to cover their increased living costs. Indeed, evidence from the U.S. suggests that over time, when the value of real estate has risen relative to other assets, inflation tends to follow. Equally, growth then slows, resulting in the sort of stagflation we have seen of late.
What lessons might Canada infer from the American experience of how to break free from this trap? Since the 2008 financial crisis, the Canadian and U.S. economies have gone onto different paths. Whereas Canada’s per capita GDP had previously tracked its southern neighbour, since 2008 it’s been falling behind.
It may just be that real estate explains the divergence. One significant impact of the 2008 crash was that the value of real estate relative to other assets stopped rising south of the border. Not so in Canada, where real estate took off. Even though many Canadians might not want to hear it, the key lesson from the U.S. may be that if you want to restore economic growth, you need to puncture the housing bubble – and puncture it big time.
Canadian house prices have now stopped rising and begun falling from their peak. But south of their border, real estate prices fell a fifth from their 2007 peak, and in real terms didn’t recover for more than a decade. Canada probably has a way to go yet, and the faith that real estate prices should resume rising soon is probably misplaced.
Moreover, there’s only so much the Bank of Canada can do about this, given the structural conditions underpinning real estate prices. The bank can choke off demand by raising mortgage costs. But it can’t do much to boost supply, which means prices could bounce back quickly if it lowers rates – as happened earlier this year when it paused its rate rises and real estate markets turned briefly upward again.
One of the unusual features of the real estate market is that it tolerates a much higher degree of anti-competitive behaviour than is allowed in other markets. Frequent though the complaints may be that Canada tolerates oligopolies in sectors such as banking, food retail or telecommunications, if a company tries to drive potential rivals out of business with predatory pricing or buyouts and shutdowns, it will likely feel some heat from regulators.
Not so for real estate owners. They can attend a planning meeting to block a new development that will knock down the value of their asset. When combined with zoning restrictions that limit new house supply, it’s understandable the federal Housing Minister would lament that house building is illegal.
Taking all this into consideration, it seems clear that investors looking for a break from high interest costs and the return of rising prices should probably brace themselves for more trouble.
Reserve Bank: For every $100 of disposable income New Zealand households have, they have about $170 of debt. Photo / Mark Mitchell
The Reserve Bank of New Zealand (RBNZ) says the country’s financial system “appears robust and in a good position to face potentially looming challenges”.
The regulator recognises the system’s vulnerabilities stem from mortgage holders being very exposed to high interest rates.
This is because elevated house prices mean Kiwi borrowers are particularly highly indebted by international standards. They also tend to fix their debt at short durations, meaning interest rate changes are felt more acutely.
The RBNZ notes that overall, mortgage holders are meeting their repayment obligations and the banking system is in a much better state than it was during the 2009 Global Financial Crisis.
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However, problems could arise if unemployment shoots up or financial conditions tighten.
For every $100 of disposable income New Zealand households have, they have about $170 of debt.
The ratio is similar in Canada, but worse in Australia, where households have nearly $200 of debt for every $100 of disposable income.
In the United Kingdom, Europe and the United States, households have about $100 to $130 of debt for every $100 of disposable income.
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The RBNZ includes these figures in a chapter of its biannual Financial Stability Report, which it released on Monday, ahead of the document being published in full on Wednesday morning.
The point the RBNZ sought to draw attention to is that while it’s wary of the impact high interest rates are having on mortgage holders, New Zealand’s financial system is faring similarly to other advanced countries.
“To date, financial systems have been largely resilient to risks emanating from higher interest rates, but the full impact is still to be seen and some areas of concern are emerging,” the RBNZ said.
Mortgage holders are significant, as mortgage debt makes up 63 per cent of the $551 billion of loans on issue by New Zealand-registered banks.
Turning to other parts of the financial system, the RBNZ noted that while the New Zealand equity market did well during the initial stages of the pandemic, it has since become an underperformer by international standards.
The RBNZ said this partly reflects the higher weighting of interest rate-sensitive sectors in the NZX50 index relative to many overseas indices.
“US equity markets have been buoyed by the strong performance of the technology sector and stronger than anticipated economic activity. European equity markets have profited recently from declining energy prices that increased corporate profits,” the RBNZ said.
It recognised that both here and abroad the commercial property sector faces “considerable headwinds”.
“Higher interest rates and lower demand from tenants, caused by more workers choosing to work from home, have lowered asset valuations and worsened property owners’ loan servicing ability,” the RBNZ said.
“Funding is also becoming more constrained due to tighter lending standards. In the future, decreasing operating margins for property owners and growing difficulties refinancing loans are likely to raise the share of debt past due for repayment.”
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The RBNZ recognised New Zealand banks aren’t as exposed to commercial property as US banks are.
Furthermore, risks to the financial system have been mitigated by tight lending standards.
“So far signs of financial stress have been limited,” the RBNZ said.
Looking at the big picture, the RBNZ said, key financial stress indicators remain “mostly benign compared to expectations, although some areas of stress are emerging”.
“In part, this reflects robust macroeconomic fundamentals, such as low unemployment rates, and past regulatory tightening across many jurisdictions after the GFC,” it said.
“The channels through which higher interest rates impact economies are generally the same, but the impact and transmission speed vary across markets, countries and time.
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“Risks to financial stability will likely be most acute in countries with weakening economic fundamentals.”
Jenee Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
A home on Shaw Street in Toronto that is listed for sale on Sept 28. The country’s typical home price was $741,400 in September, according to the Canadian Real Estate Association’s home price index.Fred Lum/The Globe and Mail
The Bank of Canada says higher interest rates have not dragged down home prices as much as expected, because a shortage of homes in the country is keeping values elevated.
The central bank kept its benchmark interest rate unchanged Wednesday at 5 per cent – up from just 0.25 per cent in March, 2022, when the bank began a series of rapid rate hikes intended to bring inflation under control. Over that same period, the typical price of a home across the country has fallen 13 per cent, a modest decline considering the sharp increase in borrowing costs.
“Normally, house prices move pretty lockstep with interest-rate increases,” Bank of Canada senior deputy governor Carolyn Rogers said at a news conference Wednesday, where she was discussing the bank’s decision not to hike its rate further. “As interest rates come down, house prices go up a bit. And they’ll come off as interest rates come back up,” she said.
“We’re not seeing the decline in house prices that we would expect,” she continued, adding that there is a “structural lack of supply” of housing in Canada, and that until it is fixed, “interest rates on their own are not going to help us get back to a housing affordability situation or solution.”
Bank of Canada Governor Tiff Macklem, who joined Ms. Rogers at the news conference, said structural problems in the housing market are contributing to high inflation and impeding the bank’s efforts to cool growth in consumer prices.
Bank of Canada’s Tiff Macklem: 10 quotes from today’s interest rate announcement
The typical home price across the country fell as much as 17 per cent after the Bank of Canada started raising interest rates last year. But home values started to rebound in February this year after the central bank said it would take a break from hiking rates. That break lasted four months, and home prices have started to fall again. The country’s typical home price was $741,400 in September, according to the Canadian Real Estate Association’s home price index.
The average monthly rent in Canada has topped $2,000, and typical home prices in Toronto and Vancouver are more than $1-million. The cost of housing in smaller cities is significantly higher than it was before the pandemic, with home prices up by at least 50 per cent in places such as Guelph, Cambridge and Barrie in Ontario.
The federal government has taken steps intended to spur the creation of more housing. It recently announced a tax break designed to help developers build more rental units, along with plans to boost government-backed financing for the sector. The Ontario government has also cut taxes for new rental home construction.
Rob Carrick: Looking past high interest rates at the next big risk to your personal finances
Ms. Rogers welcomed these government efforts. “We’re really pleased to see the degree of focus that governments are putting on this issue right now,” she said. “That’ll help if we can address that structural imbalance. Not only will that help housing affordability, it’ll help inflationary pressures, too.”
Ms. Rogers noted that the bank’s target is not to reach a specific level of interest rates or mortgage rates. The focus, she said, is on bringing inflation back under control.
The central bank’s interest-rate decisions directly affect variable-rate mortgages, which have become more expensive with every rate hike. Many of these borrowers have not had to face higher payments, though, because most Canadian banks automatically extend the lengths of amortization periods in these cases, to keep payments steady. Those borrowers will eventually have to make higher payments when their mortgage terms end and they are required to go back to their original amortization periods.
Ms. Rogers said the Bank of Canada is paying close attention to the mortgage renewal cycle. Three of Canada’s largest lenders have disclosed that about 20 per cent of their residential mortgage borrowers are seeing their balances grow, because their monthly payments no longer cover all the interest they owe.
Maybe loan workouts will be a little easier.
Federally regulated lenders, such as banks, still play a major role in commercial real estate financing. As commercial real estate encounters headwinds, borrowers will often need relief from those lenders, but regulated lenders typically cower in fear about doing anything that might cause regulators to raise their eyebrows or ask difficult questions. This mentality often leads regulated lenders to behave with a level of flexibility, creativity, cooperation, and speed reminiscent of the Internal Revenue Service. Result: workout negotiations can become difficult or impossible. Sometimes a loan that might have been “saved” if given more time and TLC instead goes into default and foreclosure.
The federal bank regulators may have tried a bit to change that dynamic when they recently issued a joint policy statement on commercial real estate loan accommodations and workouts. Whether anything has actually changed will, of course, remain to be seen.
The policy statement opens by recognizing “the importance of financial institutions working constructively with CRE borrowers who are experiencing financial difficulty.” It refers to a policy statement issued in 2009, another time when commercial real estate also faced problems. Today’s policy statement doesn’t purport to revolutionize bank regulation, but it does reaffirm that lenders should exercise some flexibility and judgment in dealing with borrowers in trouble. It restates two general principles from the 2009 guidance:
(1) Financial institutions that implement prudent CRE loan accommodation and workout arrangements after performing a comprehensive review of a borrower’s financial condition will not be subject to criticism for engaging in these efforts, even if these arrangements result in modified loans with weaknesses that result in adverse classification.
(2) Modified loans to borrowers who have the ability to repay their debts according to reasonable terms will not be subject to adverse classification solely because the value of the underlying collateral has declined to an amount that is less than the outstanding loan balance.
Those general principles sound pretty good, if regulated lenders dare to apply them. The regulators’ guidance also encourages use of short-term measures to help borrowers through rough patches, rather than declaring those borrowers in default. Short-term or temporary accommodations “can mitigate long-term adverse effects on borrowers by allowing them to address the issues affecting repayment ability and are often in the best interest of financial institutions and their borrowers,” according to the regulators.
As always, valuation matters. The regulators want lenders to think hard about value, but value might depend on context. For example, if a lender intends to work with its borrower so a project can achieve stabilized occupancy, then the lender can consider “as stabilized” market value in assessing the collateral – provided that the appraisal’s assumptions and conclusions are reasonable. On the other hand, if the lender expects to foreclose, then it would need to consider in its analysis a lower “fair value” analysis of the collateral. As is so often true, “value” involves a judgment call rather than something fixed, immutable, scientific, and objectively determinable. (Letitia James might disagree.)
The regulators want to look past temporary “financial difficulties” associated with a borrower’s industry, before a lender needs to classify a loan as nonperforming.
The regulators’ stated principles do seem to give federally regulated commercial real estate lenders some room to “kick the can down the road.” That strategy worked out rather well after 2009 and the Great Financial Crisis.
It may be different this time, though. In 2009, commercial real estate distress seemed driven by overall panic in the financial system. After a while, the panic faded. Then commercial real estate recovered and did just fine. In contrast, today’s distress comes mostly from a huge increase in interest rates driven by inflation. No one expects rates to go down soon. Today’s rates generally track historical rates as they existed for decades before the Great Financial Crisis ushered in a decade and a half of artificially cheap money. They may merely reflect a return to the norm. If so, rates seem less likely to go down and take the pressure off commercial real estate borrowers that need to refinance. Borrowers, lenders, and the regulators will eventually have to figure out how to deal with that. In the meantime, some breathing room can’t hurt.
In this episode of the Smart Property Investment Show, Phil Tarrant sits down with Julie Brennan from Finni Mortgages, herself a former employee of a bank’s lending department, to discuss the differences between using a broker or going direct.
The duo outline how traditional banking has been changing, with digital tools giving mortgage seekers more transparency and the ability to do a lot of their own research. They outline which option allows the greatest flexibility, and discuss why it’s important to ensure a loan is tailored to the borrower’s specific circumstances.
They also share the major mistake that many investors might make with a loan when adding more properties to the mix, and discuss the importance of getting trusted advice from key people during the buying process.
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A broker is a real estate agent that is licensed and has completed additional training, working independently, and can hire other agents to start their brokerage firm.
Beleaguered Metro Bank calls in consultants to help find a buyer

- Adviser in talks with lenders, hoping to secure a deal before markets open
- JP Morgan Chase and HSBC both considered a bid for the challenger bank
- Metro is reportedly looking for a lifeline of up to £600m
Metro Bank has called in consulting giant Ernst & Young as it scrambles to find a buyer.
The adviser has been in talks with lenders over the weekend, hoping to secure a deal before markets open today, according to reports from Bloomberg.
Banking heavyweights JP Morgan Chase and HSBC both considered a bid for the challenger bank before deciding against it because of concerns about the extra capital any new buyer would have to put in.
Santander UK is also being advised by George Osborne’s firm, Robey Warshaw, about mounting a takeover, according to reports by Sky News.
Metro – which was set up in 2010 – is reportedly looking for a lifeline of up to £600m.
Its shares crashed last week after the bank confirmed that it was seeking to bolster its capital position.
It recently rejected a takeover approach by Shawbrook, a so-called challenger bank.
Metro, which has 2.8m customers and 76 branches, needs cash to refinance a £350m debt within a year.
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It has been suggested that the Bank of England’s Prudential Regulation Authority (PRA), which supervises banks, has also been in conversations with several British lenders to rally interest in Metro.
Danni Hewson, an analyst at AJ Bell, said: ‘The clock is ticking for Metro Bank. Every minute of doubt is costly – depositors lose confidence, investors become nervous and the cost of securing the bank’s future goes up.’
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.
By Emma James, Senior Reporter For Dailymail.Com
16:47 22 Sep 2023, updated 20:01 22 Sep 2023
- Mark Gadner, 73, was followed home by three armed men after going to a bank
- The suspects jumped out and surrounded his car on the drive of his Dallas home
- He is urging others to be more aware of their surroundings after the incident
Blood-curdling doorbell cam footage shows the moment a gang of robbers descended on an elderly investment expert in his BMW after following him home from the bank.
Mark Gardner found himself surrounded by three men as he pulled into the driveway of his $1.1million property in Dallas, Texas, on Tuesday.
Footage shows the terrifying moment that three men jumped out of a silver vehicle and surrounded his blue BMW 5-Series sedan.
All three pull out weapons and point them at Garner, 73, and his stepson who was in the vehicle at the time.
They start to tap on the window with the muzzle of the firearm as one attempts to hide his identity by clutching a coat to his face.
Gardner had just left a bank and returned to the property, which DailyMail.com is not revealing the location of after the family expressed concerns over retaliation.
‘I feel the message has to get out. Never ever did I think something like this would happen,’ he told WFAA.
He added: ‘I said call your mother right away and tell her to go hide in the house. I’m calling the police.
‘They took the butt of the gun and kept pounding it. ‘Give it up! Give it up!’
‘Maybe they think they’re invincible. But if they think they’re that tough wait till they get to prison.’
The investment expert is calling for anyone with information to contact the police, and is hopeful that they will be arrested.
Gardener added that he is thankful he backed up into the spot, so he could drive off, and is urging others to be more aware of their surroundings.
Video caught on the home security system shows the three men jumping out of the car in what police say is a ‘jugging’ incident.
‘Jugging’ is when someone follows a person leaving a bank with a large amount of money then burglarizes them at their next stop.
As the blue BMW pulls into the drive they run up to the car, attempting to break in by smashing their elbows against windows.
All three appear to have handguns and are left clinging onto the car as Gardener managed to drive off.
Dallas Police Department confirmed that the incident happened at around 1pm on Tuesday, September 19, with multiple suspects following Gardner to a home from the bank and tried to steal his money at gunpoint.
Law enforcement are urging those who take out large amounts of cash to conceal it before they leave so it can’t be seen, and to call 911 if you believe you are being followed.
By Marinos Kyneyiros*
The prices in the Cyprus real estate market have been going up in recent years. This increase is mainly due to higher costs of construction materials and growing demand. As a result, both rent prices and home/apartment sales are on the rise.
Lately, it’s become noticeable that many property owners, land developers, and individuals are asking for unusually high selling prices and significantly higher rents for their properties. With our extensive experience in the Cyprus real estate market, we can distinguish when prices make sense, align with data, or become unreasonable. While we’ve previously discussed the impact of increased demand and reduced supply on real estate prices, there are currently some prices that don’t conform to the traditional and logical trends of the Cyprus real estate market.
The Central Bank of Cyprus data for the first quarter of 2023 is revealing. The House Price Index indicates a 7.7% increase compared to the same quarter last year. Specifically, house prices have risen by 6.6% annually, and apartments have seen an 8.4% increase. These increases are significant, considering, for example, that an apartment that was €150,000 in the first quarter of 2022 now sells for €163,000, and a house that was €250,000 now goes for €265,000.
This situation raises concerns, especially because higher interest rates are making it more challenging for households to afford buying homes or apartments. Additionally, rising rental prices are straining the finances of tenants, causing significant problems for them.
Real estate agents, who regularly interact with sellers, buyers, and tenants, often face complaints about the prices being offered. In recent months, many colleagues have received criticism from potential buyers and tenants. It’s important to note that real estate agents don’t set the selling or rental prices for apartments and houses. As the Estate Agents Registration Council, we are committed to clarifying these roles in the property market in the near future. However, excessive price increases should not be left to chance, as they can harm the entire sector and the economy.
*Marinos Kyneyiros, MRICS, President of Real Estate Agents Registration Board
By Stephen Johnson, Economics Reporter For Daily Mail Australia
Updated: 03:39 30 Aug 2023
Australia’s next Reserve Bank boss is warning prospective homeowners to be wary about buying a house on the Gold Coast or in an idyllic town on the NSW coast.
Michele Bullock delivered a climate change speech in Canberra on Tuesday night suggesting 7.5 per cent of Australian homes are in postcodes where climate change could cause property prices to fall by five per cent or more by 2050.
‘To capture the physical climate risks to residential housing, climate hazard data were used to measure the expected increase in insurance costs due to climate-related damage – such as more frequent flooding and more damaging cyclones – which were translated into housing price falls,’ she told her audience at Australian National University.
A colour-coded map illustrated the regions around the country that would be the worst affected with tomato red areas around the Gold Coast and Tweed Heads, suggesting price falls of five to 10 per cent in three decades because of flooding.
This area south of Brisbane is popular with people from Sydney and Melbourne, who move there for the warmer climate, making south-east Queensland by far Australia’s biggest destination for interstate migration.
Most of the New South Wales north coast was coloured pink, denoting house price falls of two to five per cent, with dots of tomato red at Byron Bay, Ballina and Lismore which have suffered from flood damage in recent years.
Tomato red dots were also placed on the NSW South Coast in national park areas and towns on the outskirts of Melbourne, Adelaide and the Tasmanian city of Devonport.
Mallacoota, in Victoria’s north-east corner, also featured, having been the scene of devastating summer bushfires in early 2020.
Areas of regional Western Australia were coloured maroon, suggesting price falls of more than 10 per cent.
This included Geraldton, 400km north-west of Perth, which is prone to cyclones.
Areas north including Carnarvon were coloured tomato red.
A Climate Vulnerability Assessment by the Australian Prudential Regulation Authority, the banking regulator, showed losses on bank lending ‘would increase in the medium-to-long term’ but Ms Bullock said ‘this would not cause severe stress’.
Ms Bullock, who replaces Philip Lowe as Reserve Bank of Australia governor on September 18, suggested climate change could push up unemployment in pockets of Australia.
‘Unemployment could be persistently higher if people are unable or unwilling to leave a region that has suffered from extreme weather and related job losses,’ she said.
‘Climate impacts vary significantly across regions – an impact may be small in aggregate, but extreme for a local community.’
But Ms Bullock has recently suggested the jobless rate will need to rise from a recent 48-year low of 3.5 per cent to 4.5 per cent for inflation to fall back within the 2 to 3 per cent target, down from 6 per cent now.
‘If unemployment remains too low for too long, inflation expectations will rise, which will make it harder for the monetary policy authorities to bring inflation back down,’ she told the Australian Industry Group forum in Newcastle in June.
Based on June’s figure, that would see 149,309 Australians would lose their job by mid-2025, with unemployment in July rising to 3.7 per cent.
Protesters stormed her Sir Leslie Melville Lecture, attempting to hand her a giant JobSeeker cheque.
‘Hey Michele, you say 140,000 people should lose their jobs, how do you justify that?’ the protesters yelled out.
‘The cost of living crisis is driven by corporate greed.’
A Climate Council report released last year predicted 90 per cent of homes in the Victorian city of Shepparton would be uninsurable by 2030 – and now they are severely flooded.
In October, five months after that report was released, Shepparton in Victoria’s north was bracing for a 12.2 metre flood peak, surpassing the levels of 1974.