Where Do We Go From Here With Real Estate Values?

There appears an escalation of the chorus singing that the happy days of real estate may soon come to a crashing end.

Our collective concerns over the past twelve months revolved around the ; European financial crisis, China's housing and banking concerns, the sluggish US economy that requires monetary stimulus to stay ignited, the strong Canadian petrodollar that hurts our global competitiveness.

Low interest rates that is encouraging most of us to consider taking on undue risks,with consumer debts piling up – but at affordable month payments.

And the craziness of terrorism around the world which invades and disrupts our thinking, our plans by creating further uncertainties. Is there one stable place on this planet?

Along with the mantra that interest rates will soon go up and the current party of consumption will end badly for all.

The newest concerns are falling oil prices that will eventually weave itself through our economy creating further uncertainty, cancellation of capital projects, hiring freezes and cuts of head count.

Increasing prices for all our imports as our dollar falls in harmony with the prices of oil.

And reduced tax revenues for our governments who will either cut programs, increase taxes or just borrow more to cover the short fall in taxes.

How bad could it get for real estate prices/valuation?

The International Monetary Fund (IMF) and the Canada Mortgage Housing Corporation (CMHC) have been warning that there is a “moderate degree of overvaluation” based upon their respective models of between 10% to 15% and therefore a pull back or down draft of this amount they can easy see happening with Canadian real estate values.

This week the Bank of Canada’s Governor chimed in stating their model is telling them that the country’s housing market may be over-valued from 10% to as much as 30%, ” as a long awaited soft landing remains elusive.”It was much worse in 1989 to 1992 in Toronto real estate, with prices falling over 40% and remaining there for about a decade.

Can it happen again?

The Bank’s concern is based upon ” a new model” they have developed to assess threats to the Canadian financial system.

These concerns and the eventual perspective moves by the Bank to deal with their concerns has overshot with unintended consequences to our economy and financial system.

The Bank’s concern with worsening “vulnerabilities” points to three areas;

1. The growing subprime mortgage market – where riskier loans are being made it suggests. These are characterized by ; longer terms /amortization and higher loan to value ratios.

2. The substantial growth in auto loans (which are larger and outpacing all other forms of household borrowing and growing at the rate of 9% since 2011 versus 4% a year for overall household credit.)

3. Low interest rate market is resulting in “increased risk taking in the financial markets.”

Our concerns continue with : a threaten future spike in interest rates, an economic slow down here and in China ( and a Banking Crisis in China), the overbuilding of Condo units here in Toronto, and now falling oil prices, falling Canadian dollar and falling TSX – stock market.

Europe is still challenged financially.

The Middle East is always a mess and fighting one battle or another. Russia continues to worry.

Terrorism is now becoming a part of our daily life and so the degree of craziness out there in the world does not fail to surprise and disappoint.

Yes Canada has problems but compared to the rest of the world the problems and disagreements hereare insignificant.

Who wins in 2015 and Where should you and your investments be?

Where would you put your money in this world?Where is there a relatively stable political and economic environment?

Who is welcoming yet has high standards of entry?

Where can you and your money feel safe and secure?

Where can you start a business, buy and own a home and grow your investments?

Canada !

The above are all beyond the reasonable control and influence of most men, women, families and corporations and some governments.

However we still have the power of choice to select our investments, the loans and terms we negotiate, consider and accept. The methods we use tomanage risk and consider the probabilities and insure against most loss.

We believe in Toronto and the GTA offers your business, you and your family the best options.Let us help you invest and land in a great location.

https://www.envoycapitol.com

Envoy Capitol Realty Inc., Brokerage Toronto, Canada

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THE GREATEST MONEY MACHINE and

SILVER BULLET INVESTING , available on Amazon for your

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