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Simeon Mitropolitski is a Canadian analyst, of Bulgarian origin, and a former syndicated columnist with the Bulgarian News Agency (BTA). He is the author of several hundred articles dealing with hot political and economic topics, both national and international.
He was part of the first group of Bulgarian intellectuals and students that began the opposition movement that finally put an end to the communist regime in this country in 1989, and in 1996-1997 participated in international observation teams during the elections in several Balkan countries - Romania, Albania and Bulgaria.
In 2002 Simeon and his family moved from Bulgaria to Canada where they live now in Montreal, province of Quebec. Simeon is a Master of Political Science from McGill University and a B.A. of Political Science and History.
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7 May 2004
Canada Market Update:
Interest Rates, Currency, and Downpayment
© 2004, IRED.Com, Inc., Simeon Mitropolitski
Several new interestingly enough developments may influence the real estate market in Canada in the months ahead. The banks already began to higher their interest rates pending the central bank to make the credits more expensive. The Canadian currency has fallen slightly against the US dollar, which could make the Canadian properties again more interesting for the Americans looking for better bargain, but less interesting for those who look only for currency-based speculations. New possibility offered to first homebuyers without substantial savings is to start borrowing without having initial resource for downpayment. All these events can influence the market in one direction or another.
Interest rates
Since the beginning of 2004 the interest rates in Canada have waltzed back and forth in searching for new equilibrium. First, in order to make the Canadian export more competitive on its main export market of the United States, the central bank diminished the interested rates by one quarter, narrowing the margin between the interests in Canada and in America. Later the main American private banks began slowly making more expensive their loans. The reason was to act in anticipation of pending Federal Reserve interest increase and to answer to the higher demand for new loans on the real estate market. The Canadian banks closely linked financially to their American counterparts followed that move. This credit ballet, but especially the private banks recent interest rates' growth, is perceived as signaling the end of the credit paradise for the buyers, a paradise that existed since the beginning of the last economic downturn in the States in 2001-2002.
Currency
Canadian currency was among the first victims of the Canadian central bank interest rates cut. After reaching a record unmatched during the last 10 years against the US dollar, the Canadian dollar began gradually falling. Expectations are that US interest rates will grow faster and larger than in Canada, because the recovery in America is stronger and the interest rates are still lower, so the investors anticipate further short-term depreciation of the Canadian dollar. This has at least two direct consequences on the real estate market in Canada. First, the American institutional investors that bought in Canada in order to resell later with better profit margins because of the Canadian dollar strength will have to look for other countries with appreciating currencies, e.g. Russia. Second, American smaller investors, e.g. retirees will again show up their interest for Canadian properties, which will become more affordable. On the other hand, for the same reasons the Canadian institutional investors will look for properties in the United States, where the US dollar growth will allow additional profit margins.
Downpayment
Interests rates may be rising, but the banks in Canada don't consider the party over yet. New option for those who didn't take part in the previous wave of home buying is the possibility to get a loan without any downpayment. Most banks offer such options. The targeted groups are primarily young specialists and recent economic immigrants that could provide enough income security for the credit institutions but lack substantial savings because of their short work experience. The idea is to keep high demand for residential credits even during time of higher interests.
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See also the directory of companies providing real estate services in, and general real estate information of Canada.
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