John Chan, Financial Service Expert: Mortgages, Insurance & Investments
103 - 1245 West Broadway V6H 1G7 Vancouver, BC, Canada

In terms of securing vaccines for its citizens, Canada have ordered more than any other country.

Higher education does pay off?! Here is a chart that shows the change in employment rate for various groups based on educational attainment for the last few months.

A chart for the traders out there. This chart is a compilation of Dow Jones data from 1900 to 2016. The black line shows the market for the average of all election years from 1900 to 2016. The solid red line shows an average of all years where the incumbent Republican party win. The dotted red line shows an average of all the years where the incumbent Republican loss. It is shocking how different they are. And if you think this pattern will continue, then a Trump loss will be bad for the stock market. I hope this chart shows up well or else you will have to check it out on BNN https://www.bnnbloomberg.ca//the-market-needs-a-stimulus-b.

Here are the results of this year’s UBS Global Real Estate Bubble index. UBS looked at how home prices compare to incomes and rents, and whether mortgage lending and construction spending are excessive compared to the growth in the overall economy for 25 cities around the world. This graphic provides the data for the last 3 years. A score over 1.5 is considered in the bubble territory. A score between 0.5 and 1.5 is considered over-valued. You can see Toronto is as over-valued as ever while Vancouver have cooled off a bit.

An argument for not selling when you are caught in a market crash. When I mentioned in March to not sell because you cannot time the recovery, here is the proof. National Bank put this information together. It shows if you stayed fully invested in the TSX, you would be down only 2.2% on August 5th. If you sold out of the market and just missed a few of the best days, you would be out 19% to 44%. Nobody knew when those best days would be. So either get out before the crash, rebalance before the crash or ride it out. Easier said than done. I know:)

During the financial crisis in 2009, the rate of mortgage arrears topped out at 0.4%. This graph shows the prediction for the arrears rate would top out over 2% if there were no policy intervention and 0.8% with the current policy interventions. Note this graph predicts that the arrears would be greatest around 2021 July. The arrears have not started yet!

This chart is from JP Morgan Asset Management and shows the return of various asset classes over the last 20 years. This serves to give you a baseline as to what various returns should be. This will allow you to set realistic expectations and to know when your financial advisor is over promising. I have to say the average return for a home in the US is of no value to someone buying in Vancouver. Real estate is too location specific to have this value mean anything. However for a conservative estimation, the value for Canada is over 6%! This is quite surprising since it matches the return for the S&P 500. Also equally surprising is that REITs and gold actually did better.

This table is from a recent J.P. Morgan Investment Outlook report. There are a few things we can learn from this table. This table maps out the returns for various investment styles in the US market from the 2007 market peak to June of this year. During this period: 1) Growth stocks out performed value stocks. 2) Large caps did better than small caps. 3) Higher risk means higher return is not always the case since small caps are considered to have higher risk and volatility.

My humble opinion on interest rate. This chart shows central bank policy rate for the US, UK, EU and Canada for the last 15 years. For both the US and Canada, the interest rate at the peak just before Covid-19 is less than half of the rate of the peak before the 2008 financial crisis. It took over 10 years to get the interest rate to half of what it was. For the EU and UK, it is even worse. Now this Covid-19 induced recession/depression is much worse than the 2008 financial crisis. My guess? It will take another decade or more before our interest rate would reach half of this past peak. So 2030, the rate would be around 1% if we are lucky. This is very bad for savers and people on fixed income.

CMHC released their summer report containing their Canadian real estate outlook. This time around they have graphs of key cities and their possible price ranges out to 2022. The blue represents all the possibilities the CMHC sees as probable. Looks like Toronto’s price is expected to recover faster than Vancouver’s.

When CMHC said in a recent report that Canadian real estate may drop 9% to 18% over the next 12 months, they came up with these figures running their best and worse case scenarios through their models. Because reality most likely will be somewhere in-between the two extremes, a graphical representation is actually more revealing of what CMHC is trying to say. Included is one for Canada and one for BC. They are very similar.

There are many possible takeaways from this long article. The main ones I want to point out are: 1) Forced selling is coming 2) Penalty to break a fixed rate mortgage at a bank can be surprisingly large 3) Portable mortgage requires a new qualification process to determine if the mortgage can be moved to the new property. https://www.cbc.ca//bu/mortgage-penalty-pandemic-1.5588741

Lots of predictions about how much Canadian real estate prices will go down. This is the first one I have seen that has broken it down to cities. It is from credit agency DBRS Morningstar. The first column indicates how over valued they thought the real estate was during their 2019 analysis. The other two columns show the range of price drops predicted over the next 3 years. In comparison the following are predictions for a 12 month period. CMHC predicted 9 to 18%, Scotiabank 4%, CIBC 5 to 10%, RBC 7%, BMO 5% and Re/Max 5%.

Have you ever wondered how Korea became such a successful country? Seems like from out of nowhere they have built a very enviable electronic, industrial, music and movie industry. I am sure this topic can fill a book or two. I don’t have that kind of time, but here are a couple of charts I came across that gives us a peak into some of the reasons.

The employment numbers released Friday shows the unemployment rate at 13%, just below the postwar record of 13.2% in 1982. The rate of decline in employment is unprecedented. Because there have been talks of slowly lifting COVID-19 restrictions, many believe the worse maybe behind us and this is reflected in how the stock market reacted on Friday.

This is an interesting graph from a recent BC Real Estate Association report that tries to shed some light into what the recovery in home sales would look like. Hardly a guarantee but it is interesting to see how other recessions have affected sales in BC in the past and how it compares to this one.

Zoocasa also compared Vancouver condo prices in Feb 2020 vs Feb 2018 and the down payment needed to buy them.

Zoocasa came up with a comparison for Vancouver Detached House prices in Feb 2020 vs Feb 2018 and the down payment needed to buy them. Large differences in down payment required occur when the benchmark price drops below one million dollars. This is when you can buy CMHC mortgage insurance to allow you to put down 5% on the first $500,000 and 10% on the next $500,000. Once above a million, you will need 20% down payment.

It was a brutal day in the markets. Corona virus fears and the oil price war provided a double whammy for the TSX and it dropped over 10% today. Oil prices dropped over 30%. The S&P 500 and Nasdaq both dropped over 7%. If you haven’t already set your money aside, there is no point selling off now because you can’t time the recovery. If you need the money urgently, then you have no choose but to sell at a low, but short-term money should have been in something safer. There is no consensus on the progression of the spread of the corona virus. It will get worse before it gets better. So, volatility will be with the markets for a while.

According to a recent survey by Sotheby’s the majority of urban Canadians want to ‘age in place’. This is actually a very complex financial issue and most people do not plan far enough ahead. You need to do a cash flow analysis to see if in the future you need to access the equity in your property to supplement living expenses. And if so, how much, in which way and how much equity will be left behind. If you or someone you know are thinking of retiring and wonders if aging in place is an option, please feel free to contact me for help. https://www.citynews1130.com//majority-urban-canadians-ag/

How depressing! According to The Canadian Cancer Society approximately one in two Canadians will be diagnosed with cancer in their lifetime. The good news is that the survival rates are the best ever. If you have the cash flow consider buying a critical illness policy to cover any cost associated with recovery. There are plans that return all your money if you do not make a claim by the end of the term. Ask your insurance advisor about it.

People will try to get an edge in investing anyway they can. This graph shows the result of a research paper that looked into stock growth in conjunction with the phase of the moon. It turns out the 15 calendar days that surrounds a new moon produces higher gains in the market than the 15 days around a full moon. And this effect is seen in all of the G-7 economies. No explanation of the mechanism though

This graphics is from this article in the Vancouver Sun https://vancouversun.com//b-c-s-population-grew-by-70000-l. In it, it says that between 2018 July to 2019 July the population in Vancouver alone rose 40,000. The average family size in Canada is 2.5. That means in one year, we needed 16,000 more units just to keep with the increase demand. If we assume 8 unit per floor and 20 floors per condominium, that would mean 100 new buildings. Does this sound right?

The headline might be a bit dramatic but this is a very serious issues for people owning condos or planning to. https://bc.ctvnews.ca/insurance-issues-could-cause-b-c-cond

This article recaps nicely how Vancouver real estate got so expensive. https://thetyee.ca//Gov-Real-Estate-Vancouver-Housing-Una/

This chart compares the cost of renting versus the cost of ownership. As you can see the carrying cost is always higher than the rent. So, the only reason for someone to buy a condo to rent out would be for the price appreciation. If you think the market will be flat, then there are better places to put your money. This chart also shows how the cost of buying a condo has gone up over the last 10 years and corroborates the fact that more people are forced to rent as they cannot afford to buy.