Some investors and finance experts warn that Canada might face a real estate bubble because home prices are skyrocketing ahead of incomes. Buyers borrow huge amounts of money to purchase average homes and often resort to subprime lenders that charge higher rates. Canadians are already heavily indebted and rising home prices are something to worry.
Is the Bubble Going to Burst?
The issue has seen a lot of media attention recently, and bubble warnings surface almost on a daily basis. Lower rates are associated with overbuilding, rising household debt, bloated real estate values, and overvaluation. The bubble might burst in case of recession because household incomes would drop. Many homeowners will get into the position where they are unable to keep up with large monthly payments and will default. Rising interest rates might have the same effect on the real estate market. Borrowers holding variable rate loans will pay more in interest charges to the point where they can’t afford to own a home. At the same time, many worry that rock-bottom interest rates tempt more and more Canadians into taking more credit at a time when real estate prices are already sky-high. If the bubble bursts, many homeowners will be left with negative equity. This means that consumers will be in no position to use credit, whether installment or revolving, to protect the estate market from further collapse. Economists warn that if the bubble bursts, the Canadian economy will face a long and serious recession.
Bad credit lenders have a role to play when home prices are record high: https://www.lifeoncredit.ca/the-most-popular-bad-credit-lenders-in-ontario/ Estimates show that about 5 percent of mortgages in Canada are subprime loans. These are high-rate loans offered to risky borrowers. Given that home prices in Vancouver and Toronto are red-hot, many home buyers are unable to make a down payment of 20 percent and resort to bad credit lenders. They offer mortgages with a lower down payment in exchange for higher rates. Thus borrowers pay more money toward interest charges.
The share of loans offered by subprime lenders has doubled over the last 2 years: https://www.lifeoncredit.ca. This is a source of concern given that banks are subject to tighter regulations since the financial crisis. According to CIBC, this may cause risk to shift from regulated financial institutions to unregulated lenders that serve high-risk borrowers. Risky customers are borrowers with fair and poor credit and those with a history of seriously delinquent accounts, foreclosure, maxed out cards, multiple and excessive debts, and other credit issues. These customers are risky in that they have poor credit management skills and are more likely to default compared to borrowers with stellar credit and a solid payment history. They are usually turned down by major banks and unions and look for alternative sources of financing. Subprime lenders are one option for borrowers with less than perfect credit who want to finance the purchase of a home: https://www.lifeoncredit.ca/bad-credit-personal-loans-in-canada/. As a rule, however, risky consumers who default don’t have valuable assets for lenders to seize, except for their homes. What is more, Canadians have about 55 percent equity in their homes, which is a figure comparable to the U.S. average 10 years ago. Some borrowers also use their credit cards to make a down payment, adding more debt toward high-cost mortgage balances.
The good news is that the share of subprime mortgages in Canada is lower than the share in the U.S. (24 percent) when the bubble burst. What is more, buyers who put less than 20 percent down are required to purchase home-loan or mortgage insurance. Borrowers who apply for high loan-to-value mortgages buy insurance which can be purchased from private companies or CMHC: http://www.cmhc-schl.gc.ca/en/co/buho/?WT.mc_id=BPRD150012C_01. Fannie Mae and Freddie Mac in the U.S. were privately owned while CMHC is government owned. Moreover, the regulatory system in the U.S. is rather complex, and different bodies have overlapping functions and responsibilities. The Office of Superintendent of Financial Institutions in Canada is the main regulatory body that oversees mortgage insurers and federally regulated entities such as pension funds, loan companies and trusts, insurance companies, and banks.
Wealth management spans across different financial services and products, including portfolio management, financial planning, investment advisory, estate planning, tax and accounting services, and estate planning, among others. Financial institutions offer complex and advanced solutions to multinationals, non-bank entities, and local businesses. Bankers have extensive industry experience across different sectors, including corporate card services, finance management, and others.
Wealth Management Services
Private banks offer a selection of services to high net worth individuals, families, and businesses, including succession planning, philanthropy services, and investment advice. Bankers serve key clients, charitable organizations, entrepreneurs, professionals, and individuals. They offer financial services and wealth advisory to help customers manage their wealth and make tax-efficient investments. In addition, private bankers offer custom insurance solutions, asset protection, and international and domestic estate planning. Wealth management services span a wide array of products and activities, including trust services, capital markets execution, comprehensive wealth management, and discretionary investment advice. Financial services are offered to institutions, corporations, and individuals, including corporate and business banking, investment insights, and more. Managers also offer professional advice on charitable activities and donations, inter-generational legacy, and efficient vehicles for giving. Philanthropy services educate and support customers and help them to identify effective levels of involvement, fields, and causes. Wealth advisory and tax advice is also offered to help clients plan their financial future and reach their long-term goals. Specialist services are available to private customers, including wealth planning, transfer of wealth, and strategic borrowing. Risk management helps customers to manage volatility and risk and enhance their investment performance. Managers also offer strategic advice on portfolio diversification.
Asset management aims to preserve and increase the value of intangible and tangible assets, including real estate holdings, facilities, goodwill, and intellectual property.
Brookfield Asset Management
Managers help investors to achieve high shareholder returns and manage assets such as renewable power facilities, office buildings, commercial properties, and others. Brookfield Asset Management specializes in infrastructure assets such as timber, utilities, transportation, and energy. The company develops, manages, and operates real estate holdings in Australia, Europe, and North America.
Burgundy Asset Management
Customers benefit from investment management, including family offices, endowments, foundations, and private customers. Burgundy Asset Management offers the full array of management services through its operations and compliance, relationship management, and investment team. The goal is to build strong and lasting client relationships and help customers build wealth.
Credential Asset Management and Mutual Funds
Credential Asset Management specializes in mutual funds and offers clients access to a number of vehicles. Customers are offered the chance to invest in mutual funds such as AIC, Fidelity, AGF, and many others. Investors in Canada can choose from over 4,000 funds available, along with flexible solutions such as RESPs, RRIFs, RRSPs, and term deposits. Credential Asset Management also offers merchant and small business financing programs, commercial leasing, and business accounts.
Financial Planning and Services
Financial planners and financial advisors help customers to organize their finances and offer services such as estate and tax planning, insurance, investment, and retirement planning, and risk and cash flow management. They use different strategies and methods to predict asset values and cash flows. Financial planning helps businesses to achieve their short- and long-term strategic goals and develop financial plans for customers.
Investment bankers serve governmental agencies, corporations, and individual customers. They help clients with complex and large transactions, lend money, and offer strategic advice. Bankers offer corporate finance advisory, structured solutions, and ratings advisory. Investment advisors focus on securitized products, analytics, derivatives, securities, and commercial banking. Offshore banking is another options, with banks usually located in low tax jurisdictions. They offer a selection of financial products and multiple benefits, including tax efficiency, expat advice and expertise, and a selection of investment and savings products in different currencies. Private banking also covers a range of services and products such as investment-related advice, fund transfers, and various preferential banking services.
Different financial institutions offer money management services, including banks and finance companies. Customers are offered a selection of services and tools that allow them to transfer money, review their account activity, and pay bills. Banks also offer savings, checking, high-interest, and money market accounts to help customers manage and grow their savings.
There are many plans and flexible solutions for employees who are near retirement. Financial institutions offer retirement planning options and plans such as pension plans, registered retirement savings plans, personal pension plans, and others. Another option is to open a tax-free savings account which can serve as an emergency fund as well. This is also a good idea if you need funds to finance medium- and short-term projects. Other options include locked-in RSPs, locked-in retirement income funds, registered retirement income funds accounts, and others.Read More
There are certain factors to consider when buying real estate in Atlantic Canada – location, climate, history of the property, and others. The good news is that rentals and cottage real estate are increasingly attractive and booming and more and more cottagers choose to buy estate in Atlantic Canada. Some choose to relocate while others buy vacation homes and investment properties to diversify their portfolios.
Location and Climate and Other Factors
While many people choose to buy or build close to the ocean, there are other areas worth considering. Atlantic Canada is also about woodland areas, lakes, and beautiful views. Climate and weather conditions are also important considerations. Newfoundland and Nova Scotia, for example, are colder, rainy, and foggy. If you choose to buy a cottage in a place with a colder climate, it is a good idea to install a pellet stove or a fireplace. Obviously, each province and place is different in terms of features, location, access to beaches and entertainment, etc. Some people choose to buy real estate in Prince Edward Island because of the quick and convenient access to beach locations. In general, the location is an important factor, i.e. whether you wish to live in the countryside, town, or a large city. Check whether the property you want to buy is located in a sustainable community and whether there are parks and other recreational facilities nearby. Safety and ease of transportation are important considerations. The type of home you want to buy in Atlantic Canada is yet another factor. You can choose from different types such as carriage or link homes, row houses, duplexes, single-family semi-detached homes, single-family detached homes, and others. Other options include apartments, mobile homes, and modular and manufactured homes. If you plan to apply for a mortgage loan and are coming from the U.S., you will find that mortgages are easy to find: https://www.lifeoncredit.ca/can-i-get-a-mortgage-with-bad-credit/. Brits usually settle around Quebec and Newfoundland because there are plenty of ski resorts and leisure opportunities around and the flight from Britain is about 5 – 6 hours. In terms of location, small towns usually have low crime rates because everybody knows everybody.
When buying real estate, consider how many bathrooms and bedrooms your family needs and whether you want to have a swimming pool and fireplace. Real estate agents advertise homes with a hobby space, storage facility, air conditioning, energy-saving features, and so on.
This may come as a surprise, but there are islands on sale in Atlantic Canada. You can buy a small lot or a huge lot of over 100 acres. A lot of about this size will cost you about $4 million, but this depends on the location. Many properties are located close to international airports and recreational facilities. There are smaller lots as well, with prices varying from $30,000 to $50,000. Other properties are more expensive, from $800,000 to $2,000,000.
Professionals you can contact for help and advice include contractors and builders, land surveyors and appraisers, home inspectors and insurance brokers, lawyers, mortgage brokers, and real estate agents.