Banker Bubble-talk Bundle

There has been a surprising number of comments from lenders and bank economist lately about the idea of an overpriced Canadian real estate market and the risk to irrational buyers.  I thought it might be interesting to round up some of the comments Canadian Bankers and Economists have made in the media recently regarding the housing market and the possibility that some Canadian markets are in a housing bubble.

TD Bank Financial Group economist Pascal Gauthier

..the current momentum is not expected to last beyond the next six to 10 months.  Were it to continue into 2011, there would be more credence to the view that a bubble has formed. But the brakes are currently being applied in the background, which should prevent a bubble from forming between now and then.

BMO Capital Markets deputy chief economist Doug Porter

“Housing has definitely been at the forefront of any kind of a recovery we’ve seen … I don’t think you can find a single segment of the economy, other than maybe bankruptcy lawyers, who’ve thrived more in the last six months or staged a more impressive turnaround.”

“The rapid-fire rebound in Canadian housing is showing no signs of letting up,” Mr. Porter said in a note to clients. “While that may be causing some sweaty palms among bubble-phobes, the quick turn is a vivid illustration that monetary policy still works in this country.”

CIBC senior economist Benjamin Tal

“I challenge the [mortgage lending] industry to come up with research to make sure we know what types of mortgages are in the pipeline. We need to know how many people taking variable rate mortgages at 2.5%, who cannot afford financing a mortgage at 4.0 or 4.5%. If it’s a marginal number, then we’re not creating a bubble — we’re basically seeing monetary policy that is working.

We have to make sure if you take a mortgage now, you have to be able to finance it 200 basis points higher after 2010. If you can’t, then you should probably buy a smaller house or don’t buy a house at all — that the prudent thing to do.”

ING Canada President and CEO Peter Aceto

“You have situations in some markets such as Toronto where people are making multiple offers for homes, they are paying thousands more and waiving conditions. It gives me concern they may not be thinking rationally, and this could lead to problems.  Canadians are also paying their homes off slower and slower, and the concern for me is that they are buying more house than they can really afford.”

“Canadians have been proud internally that we’re very different than the Americans in the way we behave in terms of our spending habits and the way we deal with credit. But over time we have become a lot closer than we think.”

Scotia Capital economists Derek Holt and Karen Cordes

“Is Canada in a housing bubble? Probably, but low rates, mortgage innovation and a relative shortage of new supply are likely too keep it going for a while yet.”

“The Canadian Real Estate Association has reported October sales and prices. The results are a bright spot in the Canadian economy, but with prices up 20 per cent over year-ago levels and at all-time highs by virtually every measure, this is becoming an over-valued asset class in our opinion.”

HSBC Securities Economist Stewart Hall

“… it certainly bears watching. The real estate market is definitely showing very, very robust levels of activity, particularly at this stage of the business cycle, where we have an economy that really hasn’t launched into recovery mode yet. Beyond 2009 and getting into 2010, if we are continuing to throw off these heightened levels of activity, then I will become quite concerned that we are on the cusp of an asset bubble here…”

“And when they pop, it’s rather painful to all and sundry.”

Have I missed any?  If you spot any interesting quotes from lenders or economists share them in the comments section.

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[…] A roundup of bubble comments that the major banks have been making lately.  The prevailing sentiment is that a bubble is forming or has already formed, and come mid-2010 when the Bank of Canada raises rates, we might see the start of a shake-up in the real estate market. Bad news like this is rarely seen in the mainstream media, so when so many noted economists publicly voice this opinion, it’s a good idea to perk up and listen. […]



What land constraints?

There is plenty of land in the Lower Mainland.

[…] 5 December 2009 · Leave a Comment This from realtor Maggie Chandler’s blog 1 Dec 2009 (hat-tip to Starving Artist at […]


#11 Patriotz, I meant that foriegn investors 'can't' buy CDN bonds at .40% compared to the 3.75% they can get from the Oz bonds. Its a case of 'they won't' buy CDN bonds because the CDN government is buying up all its own debt to keep from having to go into the open market. Sorry for the confusion. PS Garth has done again on his latest posting, suggested reading for sure. #32 T192, 1)Debt obligations are a liability. Its costing Canadians plenty to utilize the 800 billion used to backstop the CMHC debt orgy as debt instead of capitalizng into other areas of the economy. Thats a philisophical argument though and I am not on the side of socialism in the marketplace. It always ends badly for the taxpayer. 2)The failure stats are not public information so we don't really… Read more »


So, you all remember when Vanoc gave the DTES crack whores and all other prostitutes a flyer about how to deal with Olympic vistors. I think it said something like "Be nice and don't say anything bad about Vancouver'. Well obviously Vanoc is saying to the Olympic committee "hey guys, we've greased up the pig, now get out there" with the purchase of 100,000 condoms to be distributed amognst the Olympic organizers. These cracked up yahoos will be cruising the streets on your dime!!!! Is this also why Campbell decided to close all the elementary schools? So that a few stray kiddies might get dragged in to the bushes by a 'visitor'. Of course he'd have diplomatic immunity and get away with it. This is our gift to the world. Abundant whores and poverty stricken single moms desperate enough to… Read more »


San Fran in Van: whoa there cowboy, homework time. apart from some macroeconomic differences vancouver is not like san fransisco due to much stronger in-elasticity of demand. you have to get into factors like immigration trending, land constraints, etc that can be specific to a region. you have to put in a bit more work than paraphrasing garth turner.


Excuse me, that's "current account", not "current exchange".


@oneangryslav2: I think what the original poster implied (or this was how I interpreted it anyway) was not that foreigners can not buy these bonds but that they are unwilling to, given the low coupon rates. Yes, foreign purchasers of Canadian debt would get low yield combined with exchange rate risk. But the real reason there is little holding of Canadian debt abroad is that the country hasn't had to borrow abroad – until very recently Canada had a longstanding current exchange surplus. In other words, Canada had been lending to the rest of the world, not the other way around. Note that USD debt has a low yield as well but is widely held abroad, for the simple reason that the US has to borrow abroad. As well a number of the US's trading partners (e.g. China) have an… Read more »

San Franciscan in Va

How do we captalize on that? I am thinking of shorting the Canadian housing market. The problem I have encountered so far is that 1) there are few publicly traded home builders (if any), 2) no tradable sector-wide indices (except banking which I would ignore for the moment as banks in Canada have been smart to pass on the mortgage risk to the government thanks to the explicit guarantee through entities like CMHC. The only exception being the confluence of multiple risk factors to bring about systemic risk in the financial system just like in the U.S.), 3) most financial bellweather companies outside of banks and holders of income producing real estate (e.g. pension funds, life companies, REITs etc) are also privately held and not tradable. The problem is that the market appears to be much more closed and not… Read more »


@San Franciscan in Vancouver: Things are different here, for the moment at least. We're living inside a bubble and our reality is distorted because we're inside the bubble rather than outside.

San Franciscan in Va

I am not sure why everyone seems to be bickering around here about the future of housing prices in Canada. Housing prices are just outside of the economic fundamentals. They are most out of whack in the foremost western provinces in Canada. An October 2009 IMF report even confirmed that. Knowing the track record of the IMF, I wouldn't necessarily rely on their technical analysis, however it is still a point of reference. In my opinion, it is almost with mathematical certainty that housing prices in Canada are destined to go down, i.e. return to long-range equillibrium – whatever that may have been for the last 30+ years based on income, rent and occupancy and population levels and growth prospects of the latter etc. An example for a long-range (30 year +) housing price equillibrium given at last year's California… Read more »


@Dave: God… Your predictions are so bad that you keep bringing up an instance where you were somewhat close (but still wrong) as an example of how prescient you are. That's really sad. I'm calling for prices to fall TO 40% of what they are now, a 60% correction. My prediction, from about a year and a half ago (no I'm not going to waste the time to look it up, if you want to go right ahead) was that prices would fall in the fall of 2008 and either flatline or trend upwards in the spring of 2009, then the serious drop would start in 2010 with prices reaching bottom winter 2011 or later at 60% or more off current prices with a stabilization point of approximately 60% of current prices. If you want to bother to look for… Read more »


You can say what you want about Dave, but his penmanship is impeccable – a rare quality these days.

Bubble Lad

Ignore the first link

Bubble Lad

Your joke of the day, courtesy Remax.

Bubble Lad

Your joke of the day, courtesy Remax.

Look for it tomorrow as a thinly re-written puff piece in the Vancouver Sun.


@Drachen: I did say prices would recover after correcting, but I did not predict the level of the recovery. I don't remember your predictions of the above. All I recall is that you have been calling for a 40% correction. Feel free to back up your assertion, not that I won't take you on your word. My predictions have all been mostly correct. As far as calling for a listings peak, you have to admit that I was more correct than anybody else including yourself. I said listings would peak after the Summer of 2008 and not continue rising as had been the general bearish sentiment. I picked a number and barely missed it. You are splitting hairs. Imagine if I had said the DOW would correct to 6,500 a couple years ago. Would you really say I was wrong… Read more »

Starving Artist

Maggie's latest post…

"If memory serves me right, it’s been early 2007 since we’ve seen lineups for Vancouver condo pre-sales but that changed on Saturday as the investors lined up (in the rain) to take advantage of the low prices at The Mark, on Seymour and Pacific.

Onni’s new building will be 41 storeys and prices started at $325,000. Given that completion will be 2013, it’s a no brainer that investors can only win as this is one of the final sites available in Yaletown and we assume prices will be higher in 2013 than they are now."

Hahah yes…. no brainer indeed


None actually. As I said before, neither of our predictions have diverged from what has happened so far. I predicted a drop followed by a rise, followed by a big drop. You predicted a drop followed by stable prices (and they rose quickly instead of being stable) so technically I've been more accurate than you so far.

I've told you all that before. Did you forget or are you just being disingenuous again?

Also, on one out of five predictions you have not been proved wrong YET on the other four you failed. Don't forget those predictions when you showcase your record.

You know I wouldn't call you out so often if you weren't so systematically dishonest about this sort of thing.



Endangering futures? That cuts both ways.

I don't just look at technical analysis (i.e. graphing). I also look at fundamental valuation. I look at all the data and consider different opinions.

You have your beliefs and I have mine. I am not trying to sell anybody a 'bill of goods'. People are free to make their own minds up.

Again… the facts are that I have been quite accurate to date. How are your predictions doing again? How many years have you been wrong now?



I am betting you have never thrown a punch in your life. I bet you would piss yourself if I so much as raised my hand to you.



That's ummm… Unnecessarily violent don't you think?

I mean he's selling us a bill of goods that he doesn't appear to entirely believe in, he's disingenuous and he encourages people to spend recklessly and endanger their future financial well-being and he's determined to use a system of forecasting that's proven inaccurate in testing over a system that's proven accurate in testing.

All of which makes him a bad person but all of us have our bad sides don't we?

I say beating him up now will prove nothing, wait until AFTER the real estate collapse when he's curled up in a foetal position contemplating how he could have been so terribly terribly wrong, THEN kick him while he's down.

Nah, might hurt your toe, he's not worth that.

Merry Christmas!


And some services may be trivial to some people but be non-trivial in the big picture.

[…] position of being able to experience both, first hand. This lengthy anecdote and opinion from San Franciscan in Vancouver at 3 Dec 2009 12:06 pm […]


If I saw Dave and punched him in the mouth he wouuld probably fall to the ground and cry.

Then we he finally got back on his feet he'd claim that it was him that hit me and that his teeth are now worth more because they are in the street.

Then I'd hit him again and he'd be out cold.

Only to get up and say that it never happened.

At that point I'd smack him and he wouldn't get up