Volatility in Europe:

To many of us Canadians, it may seem that the problems in Europe, although interesting, won’t affect any of us in any real way.

I’m not so sure. The Euro continues to make daily headlines. Why? Because they simply can’t fix its problems… if it could be done, it would have been done by now.

Investors from Europe and around the world are buying US treasuries in large quantities because they feel that it’s the safest place to put their money. This is the only reason the US dollar isn’t dropping further (at the moment) - it’s like the European boat is sinking faster than the US boat… but they are both sinking.

The US congress is completely incapable of creating any compromise over even minor budget reductions. The country continues to spend way above its means and simply creates that money with printing presses. I know what happens to people who continually spend more than they make – it’s simple…..bankruptcy. The US has re-mortgaged so many times, that it would be the same as you or I having a mortgage for double the value of our house. Something has to give.

The EU countries are now being hit with downgrades from the rating agencies. Greece, Italy, Portugal, Austria, and probably France are all technically bankrupt. I believe that the “dominos” will start to fall shortly, and that they will fall all the way to Canada and to the United States. These “failures to pay” will be called “defaults” but what they really mean is insolvency, or more accurately, bankruptcy.

The World Bank is stating openly that we should prepare for a global meltdown.

Volatility in Canada

Our policy makers are showing their concern over the level of debt that the average Canadian is holding. About a year ago I wrote about how the CMHC had to stop loaning money to home purchasers who had only a ~ 2% down payment. Coincidentally a few days later, rules changed the minimum down payment to about 8%. At the same time, the maximum amortization period was reduced from 35 years to 30 years.

Today, Mr. Flaherty says he is considering “a housing intervention.” This would mean that he would be looking at anyone buying a home (or refinancing) having to produce (probably) a minimum of 15% down payment. I believe he should also reduce the maximum amortization term to what it has been for about the last 100 years - 25 years. The logic to this is simply that we would not have a mass of homeowners giving their keys back if the market fell 15% - which could happen. A 25 year amortization means that homeowners start creating some extra equity sooner rather than later. (The difference in monthly payments is relatively small.

Certain markets are going to be hit harder than others. In fact, certain markets may be hit while others are not. Major candidates for correction would be condo markets in Vancouver, Toronto and to a lesser extent Montreal. Single family homes in Vancouver and Toronto will be strongly affected by foreign money (which has artificially increased prices) leaving the market, as the global crisis affects earnings and savings in other parts of the world.

Our mortgage rates are going through a small war, with bankers outdoing each other to get you signed up for larger loan payments. Lovely. Just when we should be cautious about our indebtedness - as we tread water – the banks are throwing us a rock instead of a life jacket.

My Advice:

Make sure you do not have any consumer debt. If you do, make it a priority to pay it off. If you can’t afford to buy something for cash… you can’t afford it. I was fortunate to be taught early in my business career that you should “pay cash for depreciating assets and finance appreciating assets.” I received this advice when I was about 20 and I've never forgotten those words. I can also tell you that if you follow this basic rule you will be financially stable for life.

If you hold US stocks, either directly or through mutual funds, consider selling them… NOW. If you want to stay in the market, consider Canada and pick stocks that have a history of paying quality dividends.

Now... you’ll like this... look at buying real estate, not necessarily for your family but possibly for investment, meaning income property. This could be a single family home, a duplex or a small apartment building. We have proved without a doubt that holding real estate on a long term basis is one of the best investments you can make. I believe that generally (and especially now) properties that have a rental value of $1800-$2800/month are safe. Good real estate market or bad, families need a roof over their heads, and tenants who can afford that level of rent tend to have and keep jobs.

If you are able buy country property, do it, especially if you can create a large garden… even better if you can occasionally rent it.

Next month, I’ll give you more specifics on why you should be considering real estate and the undisputed advantages of owning it.

John Deakin

The autumn edition of MaisonMONTREAL magazine shines the spotlight on some of Montreal's prettiest bathrooms, and our listing at 300 Pinetree in Beaconsfield is in excellent company. The article reads, "Clean lines and a restrained colour palette rule in this Beaconsfield bathroom, which interior designer Sheryl Johnston of Design Essentials created. The homeowners say its former design was crowded so Johnston rearranged the space to include a free-standing Neptune bathtub and an attractive storage tower. The counter is a creamy-coloured quartz that contrasts well with the espresso-coloured vanity. The mirror was custom-made."

» Cliquez ici pour visiter le site web du revue

From the Business section of the Montreal Gazette, September 28, 2011:

MAKING A SWITCH FROM SAILBOATS TO HOME SALES

In the 1970s John Deakin became involved in the sailboat business by founding a company called Canada Yacht Services. At the time he never imagined himself working in real estate.

But after the sailboat business took a turn for the worse, Deakin closed his company in 1977. While his company may not have survived, his entrepreneurial spirit sure did.

Deakin decided to sell a building that he bought at 20 years old and use that money to purchase a waterfront estate in Pointe Claire, which he then cut up and sold.

"Doing that got me interested in real estate, so I registered to get my licence," Deakin said.

"I joined A.E. Lepage in 1980 and I was their top salesman in the West Island until 1983."

After working for A.E. Lepage, the Pointe Claire native bought a RE/MAX franchise in Town of Mount Royal.

"I liked the idea of being a broker and owning my own place," he said. "When I was with Lepage my commission was 50 per cent of whatever I made, but by owning my own franchise I kept 100 per cent."

But Deakin quickly realized that the new undertaking wasn't for him.

"There were two things I didn't really like: one was working in TMR and the other was having to fill the management role myself," he said.

"But I kept it going until 1986, at which time I decided to come back to Pointe Claire."

And so 25 years ago, he founded Deakin Realty on Lakeshore. The company has since become a successful family business with four brokers including Deakin's wife, Nancy.

"Nancy, my wife of almost 37 years, has worked with me since the boat business," Deakin said. "She is my partner in life as well as business and she joined Deakin Realty in 1987 as a full time agent and broker."

The team also consists of the couple's son, Jay, who joined the firm 10 years ago, and Nancy's brother, Brian Kemp.

"We all grew up in Pointe Claire, so it's lovely to be able to have our place of business here," Deakin said. "Our philosophy is we simply tell people the truth, whether it helps us to sell a property or not; knowledge and honesty are the keys to success in any business."

One advantage of having a small, tight-knit team is that personal service is always delivered to clients directly from one of the brokers and not through an assistant, he added.

Deakin Realty's business consists of 70 per cent residential, 20 per cent commercial and 10 per cent rental properties.

They are focused largely in the West Island, including a huge number of waterfront properties.

"I started in residential but I probably should have gone into commercial 20 years ago," Deakin said. "Mostly because that's a Monday to Friday business, whereas residential real estate can be 18 hours a day, seven days a week; I've even sold houses on Christmas Day."

But working with people is the most rewarding part of the job, he continued.

"Clients are always so gracious in thanking you," Deakin said. "A big part of our job is psychology; people get hugely stressed when purchasing homes because it's such a large transaction.

"You have to keep people calm and rational. It takes a lot to keep clients focused and not caught up with minor details."

It's a huge responsibility to take on, but one he wouldn't trade, he added.

"You get to be a part of something very special," Deakin said.

"Helping people find homes to live in and build families in."

But at 59 years old, Deakin says he's looking to lessen the load at this point.

"I'll never fully retire, I'll just do things differently," he said. "My son has started to take on more and more clients now and I'm sure that trend will continue; at this point Jay and Nancy do more work individually than I do."

Luckily, Deakin says his son is a natural when it comes to the family business.

"Jay is fantastic, he's a huge asset to our company," he said. "I think he took the best qualities from both Nancy and I; When you watch him work, it's evident that he's just born to do this."

Deakin Realty recently underwent a rebranding of the company and made a large investment in their website and online marketing.

"This is where the business is going so we decided it was time to modernize and make the most of the technology that is available to us by offering clients professional photos, floor plans and a convenient way of shopping," Deakin said.

For more information visit deakinrealty.ca or call 514-695-2575.

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Le supplément « Report on Business », du Globe & Mail de Toronto, a rapporté récemment certains événements susceptibles d’affecter notre clientèle. Dans un article, Grant Robertson écrit que le Bureau du surintendant des institutions financières (BSIF) laisse entendre que le fait de contracter des prêts sur la valeur nette d’une maison (emprunter jusqu’à 85 % de la valeur estimée d’une maison) est « une combinaison qui peut s’avérer dangereuse » et enjoint les banques à observer des pratiques prudentes à l’égard des prêts.

La situation actuelle pourrait en effet inciter les banques à assouplir leurs normes dans un environnement où la demande de prêts diminue.

L’une des principales préoccupations de la BSIF porte sur la perspective d’une détérioration de l’économie et d’une hausse du chômage combinées à une baisse du prix des maisons. Cela aurait évidemment un effet désastreux sur les Canadiens qui ont emprunté de fortes sommes d’argent sur la valeur de leur maison.

Si la valeur des prêts augmente et que celle de la propriété diminue, les propriétaires de maison pourraient se retrouver coincés. Le ministère des Finances a pris des mesures l’an dernier afin de baliser certaines pratiques d’emprunt à fort pourcentage en faisant passer de 85 % à 90 % le maximum des lignes de crédit garanti et en augmentant de 5 % à 10 % la mise de fonds initiale, deux changements très significatifs.

Ce que cela signifie, c’est que si vous songez à faire une demande de ligne de crédit garantie, vous feriez bien de le faire maintenant. Je ne vous suggère pas nécessairement de l’utiliser immédiatement, seulement de la mettre en place.

Si vous êtes troublés (comme propriétaire) par les rumeurs qui ont circulé récemment à propos du prix des maisons, sachez que je m’inquiéterais sérieusement si je vivais à Toronto ou à Vancouver, pour la simple raison que « ce qui monte (trop vite) va redescendre (tout aussi vite) ». Notre marché dans l’Ouest de l’Île demeurera solide tant que les taux d’intérêt ne commenceront pas à grimper. J’ai laissé entendre il y a 18 mois, quand tout le monde s’inquiétait à propos d’une hausse des taux d’intérêt, que je serais étonné que cela se produise. Nous avions peur d’emprunter de l’argent à des taux fixes dépassant 4 % alors que nous aurions dû emprunter à des taux d’intérêt variables d’environ 2,25 %. Je n’entrevois aucun mouvement, sauf à la baisse – OUI, je veux dire moins de 1 % (le présent taux d’intérêt débiteur de la Banque du Canada).

Comme toujours, n’hésitez pas à communiquer avec nous pour toute question concernant le financement hypothécaire. Nous sommes à votre service et nous faisons affaire avec de nombreuses institutions prêteuses afin d’établir la meilleure hypothèque adaptée à votre situation.

À bientôt, John Deakin

The Deakins are pleased and proud to announce the birth of their 2nd grandchild, Sophia. Her parents Lindsay Deakin and Stephan Triendl are presently living in Vancouver. Everyone is doing very well.