Khushwant Toor writes from Toronto

LAST quarter of year 2008 has dragged the housing market in Canada to its lowest transaction levels. Due to the low sales and longer than average selling periods the Canadian Housing Market has been termed as a buyers market form being a sellers market a year ago.

According to latest sale purchase figures form the Canadian Real Estate Association, since the mid of year 2008 the average house prices across Canada have dropped by 11 percent. An average house which was $316,896 now is valued at $280,880. However, in cities like Vancouver where the average house prices are than the national average the prices have dropped by about 13 percent.

Total sales have slipped by almost 42 percent by the end of 2008. Potential buyers are adopting a wait and watch policy and the banks are more reluctant to lend money now than they were ever.

Economists predict that the housing market will further drop by 10 percent in the next 12 months as the recessions deepen in Canada. The hardest hit would be the western states where the house prices shot up in days. Future of the housing market in the eastern states is also gloomier and will be defined by the job loss rates in these states. Canada's falling housing market is often compared to the United States, where prices nationally have fallen by 20 per cent since their peak in mid-2006, and up to 40 per cent in some cities.

Up to a year and a half ago many new immigrants in Canada were advised by the real estate agents that he/she would be better off buying a house than renting. When asked if he/she would qualify for a mortgage so soon; the real estate agents smiled with a confidence saying no problem leave it up to them. Banks would approve the loan mostly based upon bogus papers presented to them by the mortgage brokers. Surprisingly the tables have turned now. It is lot harder to get a mortgage approved these days. Hanky panky deals get turned down by the mortgage insurance companies a lot now.

This has led the real estate agents and the mortgage brokers finding alternate jobs. More and more real estate agents have started to quit their full time real estate professions and are searching for a steady job.

Consumer confidence level is at a all time low in Canada. Specifically, the real estate home buyers are scared and are holding on to invest, one due to the falling house prices and secondly the unfavorable bank rates being offered in order to purchase a house.

About eight months ago a variable rate mortgage rate was around prime rate minus 0.75 percent, however, the banks have taken an about turn and the rates are around prime plus 1 percent depending upon the credit of the applicant. Although in its latest series of rate cuts The Bank of Canada has lowered its lending rate by 75 basis points, the other Canadian banks have only slashed their rates by 50 basis points, keeping the common consumer at a disadvantage.

After the big boom in real estate since the year 2003 onwards, the year 2004, five year mortgages and year 2006, three year mortgages are up for renewal in 2009, which will further cause prices to fall and defaults to rise due to the higher bank interest rates now.

Mortgage defaults as of September 2009 were just 0.29 percent of the about 3.9 million outstanding mortgages in Canada; however, this number is a 17 percent year-over-year increase. A year ago in a study done by Bank of Canada, it was predicted that if the house prices drop by 23 percent the mortgage default rate will go up to 2.25 percent.

The Canadian Association of Accredited Mortgage Professionals predicts mortgage approval activity to fall nearly 12 per cent to $193 billion in 2008, compared to $218 billion in 2007. Approvals are forecast to fall another 10 per cent to $174 billion in 2009 and another 1.6 per cent in 2010 to $171 billion. That follows a growth rate of about 11.5 per cent annually for the three years ended August 2008.

The detailed data for the last quarter of year 2008 for the Canadian housing market is still to come and will be quite disturbing. Year 2009 may not see a lot of activity from buyers or sellers in Canada.

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Year 2008: The end of the traditional capitalism in sight

Sawraj Singh writes from Washington

THE year 2008 has clearly shown us that the traditional consumerist capitalism is facing the worst crisis since its inception. It has become obvious that mere reforms cannot save the system but a fundamental change is needed. America had become the undeclared leader of the traditional consumerist capitalism since Europe, the birthplace of capitalism, abandoned the traditional consumerist capitalism a long time ago. The present economic-only globalization that completely lacks any ethical aspect was the final extension of the American consumerist capitalism. After the collapse of the Soviet Union, America became confident that its supremacy in the world was guaranteed, but the year 2008 has shown that the illusion of America’s final triumph was just a perception and not reality. The major events of the year 2008 are all pointing in the direction that not only are the days of America as the only superpower of the world numbered, but the traditional consumerist capitalism is on the verge of collapse.

The global economic crisis: This is the worst economic crisis since the Great Depression of the thirties.  However, this crisis is much deeper than the Great Depression. The Great Depression was primarily a crisis of the American economy, but the present crisis is global and is the crisis of the traditional capitalist system itself. It raises questions whether the system has lost its relevance and has become outdated. Without a fundamental and radical change, there is no hope of coming out of this crisis. The old Unipolar  world will be replaced by a Multipolar world and instead of the western domination of the last two centuries, Asia will become the leading region of the world.

Barack Obama’s victory: Obama’s victory represents a willingness of America to consider a radical change. President Bush was a champion of the traditional consumerist capitalism. His utter failure has convinced many Americans that his rightist policies of sticking to traditional capitalism will neither work for America nor for the world because the time has come to basically change these policies. Obama was elected because many Americans feel that he is the one who can change these policies. Will Obama be able to bring the needed change? It is not easy to answer this question at this time. However, he was elected because people believe that he is capable of bringing the change. The future depends upon the American ruling class; whether they want a peaceful transition or want to put up a last fight before they accept the change.

Beijing Olympics: The Beijing Olympics were very different than any other Olympics ever held. They sent a clear message that the era of western domination is over and the twenty-first century is “Asia’s Century.” By winning more gold medals than America, the Chinese gave the world a clear message that China will shortly replace America as the most powerful country of the world.

Russia’s Rise: The year 2008 showed that whereas the American influence is declining in the world, the Russian influence has started rising. Russia’s quick victory in Georgia, Russia’s joint naval exercises with Venezuela, Russia’s growing relation with Iran, Russia’s installation of a new missile system close to the borders of Poland and the Czech Republic, Russian ships crossing the Panama Canal, and Russia’s revival of its alliance with Cuba all represent the rise of the Russian influence in the world.

Maoists come to power in Nepal: Maoists created history by coming to power in the Hindu Kingdom of Nepal. This is the first time that the communists have come to power in a country by democratic means. The net result of this victory will be a relative gain of the Chinese influence in South Asia at the expense of the American and the Indian influence.

Terrorist attack on Mumbai: The terrorist attack on Mumbai can play a very significant role in the shift of the balance of power in the world. If the American ruling class chooses to go for a third world war instead of a peaceful change, than it will encourage India to attack Pakistan. This conflict has the potential for escalation to a third world war that will be fought in Pakistan and Afghanistan. America, India, Israel, and the other western capitalist countries will be on one side and the Islamic world, Russia, China, and a majority of the third world countries on the other side. Unlike the first or second world war, the third world war will more than likely give the final blow to the old world capitalist system.

Cuba remains Socialist: America was counting on Cuba reverting to capitalism with the departure of Fidel Castro. However, it has become clear that Cuba has chosen to remain socialist long after Fidel Castro is gone. Cuba has developed close relations with China and has revived its relations with Russia. Cuba remains the most vocal opponent of the American policies in South America. Cuba remains committed to oppose the western capitalist model of development.

The year 2008 has shown that the days of the traditional consumerist capitalism and the western domination are numbered. The only thing that will be decided is that if the transition to a new system will be a peaceful change or will there be a third world war. A peaceful transition will be the best thing that can happen at this time. Guru Granth Sahib, the holy book of the Sikhs, represents the highest evolved form of eastern philosophy and spirituality. It has a concept of an alternate model of development to the western capitalistic model of development. Guru Granth Sahib advocates a true global community based upon the principles of universal concern and universal well being as an alternative to the present capitalistic globalization that lacks any ethical perspective.

[Sawraj Singh M.D. F.I.C.S. Chairman, Washington State Network for Human Rights]

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