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If you’re American. Or Chinese.
The company logo of the Bank of America and Merrill Lynch is displayed at its office in Hong Kong on March 8, 2013. (Photo: Bobby Yip/Reuters)
That’s according to Bank of America Merrill Lynch Global Research, which has begun focusing on the Great White North’s mortgage finance system as its real estate makes global headlines.
The bank’s conclusion may be tough for Canucks to hear, especially after the national average sale price climbed 5.4 per cent in August from a year prior, the Canadian Real Estate Association (CREA) reported this week.
But look at the issue through a foreign currency lens and it actually makes sense.
“Homes are cheaper on both a U.S. dollar adjusted and Chinese renminbi basis than in 2010-2014,” the bank said in a note released on Tuesday.
“Despite the high rates of home price appreciation, the continued appeal of Canadian real estate is reflected when adjusting home prices for the substantially weaker Canadian dollar…
During the financial crisis in 2008, Canadian banks were the envy of the world. So well regulated, our schedule A banks steered clear of the sub-prime mortgage crisis that led to the collapse of Lehman Brothers and almost took down the American economy. Others did much of the same. The U.K. had a similar meltdown with giant Bank of Scotland needing government bailout funds to stay in business.
All told, the U.S. banks drained almost $1 trillion dollars of taxpayer funds to prevent a complete shutdown of the American economy. House prices tanked. Foreclosures spread like a virus. People lost homes. Families were uprooted.
At the time, Canadians proudly declared that this could never happen here. We have strict regulations. Our selective schedule A banks cannot lend to sub-prime clients. All this was true — many of us know that getting a first-time mortgage from a Canadian bank is like getting security clearance to work at NORAD…
Top Performers: Conrad Neufeldt
– canadianmortgagetrends.com
Young homeowners: Invest or pay down debt?
– moneysense.ca
Q: I’m 21 and I’m currently purchasing a home in Calgary for $300k. I can afford to put roughly $1,500 away per month after all my expenses and mortgage payments are paid. I was unsure as to whether I should attempt to pay down my mortgage (at a rate of 2.7% on a five-year fixed) or invest the money and accrue roughly 6% to 8% annually. I was leaning more towards the investment route as I am young and will be using the property as a rental when I eventually decide to move on to the next place.
— Liam, Calgary, Alta.
Ayana Forward is a certified financial planner in Ottawa:
Hi Liam, you are definitely on the right track as both options will help you grow your net worth.
Investing in a diversified portfolio of equities and fixed income securities would help to diversify your assets so that all of your wealth isn’t tied directly to real estate. It is important that you understand the risks involved with investing in securities and that there are no guarantees that you will consistently make a 6% to 8% annual return…