Scotia & RBC housing reports

Donald sent in a couple of bank reports on the Canadian housing market that were just published.  Yesterday saw the release of Scotia Capitals report “Is There a Canadian Housing Bubble?‘, while this morning RBC released their Housing Trends and Affordability report.  The Scotia report is remarkable for putting the question right out there in the title, but their conclusion seems to be “yes, maybe there is a Canadian housing bubble, but thanks to mortgage innovation, it probably wont bust for another year or so”.

There is no question that Canada is perhaps curiously off-cycle compared to other countries by way of pursuing mortgage innovation while other countries have curtailed such activities. Stronger bank capitalization, more prudent regulatory and managerial oversight, a century’s worth of sounder policies relative to countries like the US in carving out a structurally sounder banking market, work since the mid-1990s to craft a relatively much sounder fiscal environment, and among the more pro-active central banks have all set decent backdrop within with such innovation can occur. Thus far, most of the innovation has been classically Canadian in a conservative sense, but there’s no objectively doubting that the market is changing.

Canadian innovation really only began, however, after the current federal government liberalized the mortgage insurance market in the Spring of 2006. Material innovation has only been characteristic of the Canadian market for 2-3 years, but it is already having a significant impact.

And their note on how amortization terms are changing:

In terms of amortization periods, it was 25 or bust until three years ago when 30, 35, and 40 year amortizations became available. Now, after just three years, 18% of outstandings are over 25 yrs. 10% are 35-40 years. As a share of new mortgage originations, 47% of mortgages originated for new purchases in the past year have had amortizations longer than 25 years, and over 60% of that share has been in 35 and 40 year mortgages. One can no longer get an insured 40 year mortgage in Canada, but uninsured 40 year amortizations are still available.

Remember, this is for all of Canada, we’ve heard anecdotal evidence from banks that greater than 50% of new buyers in Vancouver are opting for longer amortization.

The Royal Bank report remarks less on market forces and steers clear of any ‘bubble’ predictions.  They do note that their ‘affordability’ trends are declining again, particularly in Toronto and Vancouver.

This near-frenzied tone to the market is occurring despite still historically poor, and now deteriorating, levels of affordability.  In the third quarter, RBC’s affordability measures for Vancouver worsened for the first time since early 2008, rising between 1.7 and 4.3 percentage points.  These increases were, in fact, the biggest among major cities in Canada.  Even though the affordability measures fell substantially during 2008 and early 2009, they remain well above long-term averages.

I’m not sure to make of all the cautionary notes coming from banks about housing lately – From INGs CEO warning about a Canadian housing bubble to these recent reports.  It would appear that this attention to the issue should avert some of the ‘nobody saw this coming’ comments that we saw out of US banks and lenders when their market crashed.  One thing is for sure, as long as the CMHC is picking up the risk there’s no way these banks are going to stop handing out big home loans.

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You guys are hilarious, and once in a while even brilliant. Maybe you trash each other, but at least Google loves you. Every time i search on BC realestate up comes something from this blog..

New Vancouverite Tra

I can't help but just laugh my guts out about what is happening in this town (Vancouver), province (British Columbia) and country (Canada). To me, this pipedream looks very much like the 2002-2005 hay days of the California housing boom. I have personally experienced this and can probably write a book about it. I think the title of it would be called “Collusion”. It is merely how all bubbles are created. Collusion, on the part of the government by a way of low interest rates, a drive to increase homeownership at all costs in order to extract political dividends including becoming a subprime lender of last resort (e.g. CMHC in Canada’s case), mortgage and real estate broker and borrower fraud, unwarranted government subsidies to certain segments of the economy, i.e. the construction, real estate and financial intermediation sectors , to… Read more »


"If any of you have questions just ask" Scullboy



I've heard it said imitation is the sincerest form of flattery, therefore I'd like to take a moment to thank the poster who tried to post as me. I think a few well chosen obscentites can shock people, which is why I post the way I do. Your average Vancouver bull is probably the most smug and complacent creature on the planet. Why not try to shock them? We all made the points we wanted to make years ago. What's the point of trying to change the mind of a guy like supraladyboy? Absent additional debate the only reason for posting is the shock value. Bulls like supra aren't smart enough to engage in rational discourse anyway. They are only really good for target practice. So far Halifax has been awesome. The restaurant scene is amazingly diverse. There aren't any… Read more »




Smart Gastown Living is best building in Gastown Vancouver.


Garth's only a fearmonger if a housing correction is fearful. In my books, it's the bulls, the "buy now or be priced out" people, and the "the cost of home ownership will take 60% of your take home pay, suck it up" people, who are really dealing in fear. All those developers hyping condos into overnight lineups: that's fear.



"expats in Canada have the best quality of life and found it among the easiest places in the world to integrate with the local population,Dubai stinks".-HSBC BANK INTERNATIONAL.


i've seen that show too. to be fair, the realtor does sometimes tell the victims to lower their expectations. my favorite episode was when she told the buyers replacing the countertops would add $30,000 to the value of the home. i guess that explains all the granite countertops.



Who cares if he agrees with you or not? Do you really need the validation of a fearmonger?

Again, I thought you didn't believe in graphs. Strange that you are now trying to predict the future off one.


"Where did all the good commentators go?"

Seriously. Still appreciate the posts but the comments have become moronic.


"Dubai struggled to ease fears of debt default Thursday…"

Interesting how all this info was revealed on the day the US stock markets were closed due to Thanksgiving.

I'll be watching the reaction tomorrow on the New York Exchange after Wall St. has been able to take a deep breath and count to 10.


other ted,

Thanks for the explanation. I agree with you, pitchforks are indeed needed!


Aren't you embarrased to admit publicly watching that show a few times? LOL

Or maybe you are watching it for anthropological research?




I just realized the taxes are damn high in NS. Hope I didn't make the wrong decision coming here. Food prices are also sky high. Someone lied to me about how good this place is, now I want to go back to Vancouver.

other ted

arit I have seen property virgins a few times. I saw that episode yesterday and was disgusted with the fools. HOw the show usually goes is the gapped tooth realtor eggs on the clients. She almost always gets the virgins to go over bid. I saw one time over 100k over. Then she congratulates them on having there property cherry popped. And then there is my favourite when the homeowner is entertaining mulitple offers. The young idiots bid over asking. And then the realto/host comes back and tells them the owner wants them to do better. No counteroffer nothing. And of course not knowing if they were the best bid or not already the young victims go even higher. If it were me I would say make my next offer lower. And if not your fired. This shouldn't even be… Read more »


What do you say when people tell you that you might as well buy now, since everything is relative..

Upcoming higher interest rates may mean lower prices, but your over all monthly mortgage payment will work out the same..


58 X Drachen Says:

November 26th, 2009 at 3:30 pm


And we don’t have any of that smelly black gunk just lying around in pools everywhere (not in BC anyhow).


Neither does Dubai (well, not much at least, compared with the other gulf states), which is their problem.


# 56 Drachen:

Congrats on being picked up by Garth (and good info!):

The 1980's will go down as an era that seeded a lot of future economic turmoil.


49 X CMHC or bust

That is truly scary, and one wonder how much of this has gone on.



And we don't have any of that smelly black gunk just lying around in pools everywhere (not in BC anyhow).

Speaking of which, apparently energy derived from Alberta's oil sands causes more pollution than an equal amount of energy derived from any other source on the planet.


55 – Yup, the tide has just gone out on Dubai, and left them naked. We'll find out over the next year or so how many others have sold their swimwear and are praying the tide doesn't go out…


Hey, my letter's featured on Garth's blog today.

I wonder if that means he agrees with my CMHC/MBS generated/enhanced bubble theory?


So you think we can have a sustainable economy based on RE, hot money, and tourism? Well maybe not…

Dubai strives to ease default fears

Dubai struggled to ease fears of debt default Thursday after its move to delay repayments at two flagship companies shook confidence in the Middle East as a centre for investment and a source of capital.

Dubai's debt problems, a hangover from a property boom that produced the world's tallest building, have shaken trust among Western investors who turned to the oil-exporting Gulf region for help during the global financial crisis.

But it's different here. It rains a lot. 🙂

Canadian born Chines

@Oh La La: Shut the F up, just don't visit the blog, ok.


@Oh La La: I don't want the blog to be closed down. I don't know if there's much more from an analytical standpoint that I (or most) could learn right now, so that type of commentary is no longer of crucial importance.

It's posts like #49 that keep me reading this blog. I'd love to see some enterprising young journalist take this up as a story, interviewing the people at TD, and folks and the CMHC and the Canadian government.