Real Estate overpriced, Carney contemplates collapse

Commenter painted turtle pointed out a couple of interesting news items. First off, a survey by The Economist shows Canadian real estate overpriced by 23.9%, which is high, but not as high as Australia, Hong Kong and France.

“Singapore, Hong Kong and Australia boast the gaudiest year-on-year price increases, even if the rate of appreciation is down a bit from the summer,” the report states. “House prices in China rose by 9.1 per cent in the year to September, compared with a 12.4 per cent rise in May.”

The Economist’s analysis of “fair value” of housing is based on comparing the ratio of current house prices to rents, with the long term average.

Simply put, the purchase price of a house is divided by the rent it could have earned per year, and the result is the price-to-rents ratio.

A high result could mean a house is overvalued, while a low number means it could be undervalued.

You can see the list over at CTV.

Averaging home prices across an entire country must be kind of tricky though. Especially in a country as big as Canada there’s a big difference between the market in Vancouver and Windsor.

All this talk of overpriced real estate must be getting to Mark Carney, because the Bank of Canada governor just said out loud that an abrupt correction in Canadian house prices is a possibility:

Bank of Canada governor Mark Carney agreed Tuesday that an abrupt correction in Canada’s housing market is possible.

Appearing before the Commons finance committee and responding to a question from Nova Scotia MP Scott Bryson, Carney said he was not predicting a significant drop in prices, but given how far prices have risen and the high level of Canadians’ household debt, it could not be ruled out.

Carney told the committee the bank is limited in what it can do to use interest rate changes to encourage Canadians to reduce their debt.

Read the full article over at the CBC.

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GDP! Yea, you know m
GDP! Yea, you know m
9 years ago

@rollin

"since the average family income is less than 72k, that 15% cut means lots more money out there to juice the market..

by saving a couple of thousand, I can take out tens of thousands more in mortgage..

god, you guys are so fucking pathetic"

it feels good to bang lots of girls too. until they all call your wife at once. just ask tiger.

or anyone who has ever been overleveraged.feels good to get more money, until all the loans are called at once and your brokers on the line with a margin call.

but you keep bangin' away on darla. at least we have free, um, health care.

deathplague
deathplague
9 years ago

@fixie guy: You're an idiot. I said everyone wants healthcare for free and it's not free. You see the fundaMENTAL problem with that? Until people start to figure out in their fucking heads that healthcare does indeed cost money you will likely die waiting for cancer treatment or some other treatment. So go ahead and be proud of that fucked up system.

Dave
9 years ago

@fixie guy:

Nobody said it should be dismantled. It needs to be reformed while we still have time. The alternative is to let the whole thing implode and then we have nothing. Which do you prefer?

fixie guy
fixie guy
9 years ago

deathplague Says: October 28th, 2010 at 9:55 am

: HEALTHCARE IS NOT FREE. It costs lots of money. In Canada people don’t want to pay for it. That is the fundamental problem with our system.

You speak for Rush, not Canadians. We want value for the money we put into the system. Instead it's becoming a political slush fund for, as an example, bolstering immigration, which is one reason I consider Harper's policies anti-Canadian bordering on traitorous. Many countries world wide provide no social services and keep their hands out of your Walmart play money, consider one. Dismantling a system that's part of what makes Canada a desirable place to live is self-destructive dumbfuckery.

Dave
9 years ago

@patriotz:

Deserve is a very strong word. I'm not sure any of us deserve anything. We shouldn't feel so entitled to things.

Medical care covers a pretty wide range of things. Lots of things in our system are currently not free, while other things are. I think we need to get health care spending under control and I think reform is sorely needed. If we start from the concept that everybody is entitled to free medical care, then I think we are doomed to failure.

I think the concept should be more along the lines of reasonable access to a reasonable level of services. Subtle, but it has big implications.

deathplague
deathplague
9 years ago

@patriotz: HEALTHCARE IS NOT FREE. It costs lots of money. In Canada people don't want to pay for it. That is the fundamental problem with our system.

patriotz
9 years ago

@chip:

You and Dave and forgetting (or ignoring) that most low income people are either past or future middle income earners. Like retirees, for example.

Are you saying that my Mom doesn't deserve free medical care?

chip
chip
9 years ago

@patriotz:

"We can’t afford this income tax cut without cutting spending. Get it?"

Yet you're the one calling for a credit for non-taxpayers (ie, more spending), and face it, you're hardly a proponent of small govt now, are you.

"Completely wrong. For a given dollar of tax cut the lower the income of the person who gets it, the more stimulus you get."

You're confusing the ratio of spending per dollar with the total amount of dollars spent. 50% spent of $50 saved is a lot less than 30% spent of $600 saved.

"I’m just opposed to increasing income inequality from what it is now."

Even if it means restraining productive earners and the wealth they spin off into the economy, thus making us all poorer.

Dave
9 years ago

@patriotz:

Fair? The people who pay no tax should get an equal break to those paying the most? No thanks. Lower income people get more back from the government than they put in.

equitiesfool
equitiesfool
9 years ago

Thousands of dollars? How much provincial tax does someone pay if they make 72k? Roughly $4,000. So 15% cut means $600 extra per year for someone who made 72k.

Keep on Rollin'
Keep on Rollin'
9 years ago

hahahah bears…

here is another example of a measure to support the RE market that you failed to pontificate on or predict…as usual

since the average family income is less than 72k, that 15% cut means lots more money out there to juice the market..

by saving a couple of thousand, I can take out tens of thousands more in mortgage..

god, you guys are so fucking pathetic

patriotz
9 years ago

@chip: “Instead he proposes a 15% across the board cut in provincial income tax which first, the province can’t afford” In 1982 the BC govt was spending about $2500 per capita. This year it is spending $8300 per cap, or about 50% more per person after accounting for inflation. If we can’t afford it now how did we survive in the past? We can't afford this income tax cut without cutting spending. Get it? What spending cuts did Gordo propose? “and second, is highly regressive – the more money you make the bigger the benefit.” The more you make you the more taxes you pay, so for any tax cut to have a stimulative effect it’s inevitable. Completely wrong. For a given dollar of tax cut the lower the income of the person who gets it, the more stimulus you… Read more »

fixie guy
fixie guy
9 years ago

If provincial spending is adjusted to offset reduced revenue that's one more local economic stimulus out the window. If it's not, it's more pain offset to the future. My guess is it will be the latter and objecting it's unrealistic to expect accelerated growth on the heels of the past ten years will be painted as negative and ignorant of BC's BPoE status.

chip
chip
9 years ago

@patriotz: "Instead he proposes a 15% across the board cut in provincial income tax which first, the province can’t afford" In 1982 the BC govt was spending about $2500 per capita. This year it is spending $8300 per cap, or about 50% more per person after accounting for inflation. If we can't afford it now how did we survive in the past? "and second, is highly regressive – the more money you make the bigger the benefit." The more you make you the more taxes you pay, so for any tax cut to have a stimulative effect it's inevitable. "So the gap between the haves and have nots becomes even bigger." We could all be equally poor, I guess. "The people at the bottom, who pay no provincial income tax at all, get nothing." Well, if they're paying no tax… Read more »

patriotz
9 years ago

"Running out of land" department:

UK house prices fell more sharply than expected this month as the downturn which began in the summer gathered pace.

The data from Nationwide came as a senior Bank of England policymaker warned that the government's spending cuts will damage Britain's economic growth.

Nationwide's monthly house price index showed that house prices fell by 0.7% in October, nearly twice as steeply as economists had expected. This takes the quarter-on-quarter fall to 1.5%, the biggest decline since April 2009.

October's fall took £2,376 off the value of the average UK home, which now costs £164,381.

http://www.guardian.co.uk/business/2010/oct/28/uk

I.Investor
I.Investor
9 years ago

The inability to sell the Olympics village is a precursor for gloomier times to come in Vancouver real estate. I would look down south for much better deals as a serious investor. The Hst, strong loonie doesn't help things either. True there is the Chinese factor but that alone is not enough to sustain the market even with new wealthy immigrants from india and the middle east and iran there are far more attractive destinations and you can only get a very small percentage of these new millionaires to invest in vancouver when elsewhere is far more lucrative. The government will not let the CMHC and banks fail but look at Ireland and Greece this year and in Canada with so much debt accumulated in property we are treading on very thin ice. I look at a market correction as… Read more »

patriotz
9 years ago

You've heard some people say that we can't have a RE bust here because people can't just walk away from their houses? Well in Spain not only are mortgages recourse like here, but mortgage debt is immune from bankruptcy. How's that for debt slavery? Did that prevent a RE bust? Not only are Spanish mortgage holders personally liable for the full amount of the loan, but throw in penalty interest charges and tens of thousands of dollars in court fees, and people can end up, like Mr. Marbán, facing a mountain of debt. Bankruptcy is not the answer, either. Mortgage debt is specifically excluded here. “Effectively, you can never get rid of this debt,” said Ada Colau, a human rights lawyer who works for Plataforma, a new advocacy group formed both to give legal advice to homeowners and to push… Read more »

patriotz
9 years ago

@rp:

Most Americans had never seen a nationwide housing bubble before, the last one being in the 1920’s.

The US had never seen a nationwide housing bubble before, period. And certainly not in the 1920's, as you can see from the graph below.

There was a massive RE bubble in Florida in the 1920's, but nationwide, prices were below the long term trend.

http://www.nytimes.com/imagepages/2006/08/26/week

patriotz
9 years ago

Gordo at his absolute worst. He should have simply defended the HST as rational, efficient, and necessary for fiscal soundness and growth of the real economy.

Instead he proposes a 15% across the board cut in provincial income tax which first, the province can't afford, and second, is highly regressive – the more money you make the bigger the benefit. So the gap between the haves and have nots becomes even bigger. The people at the bottom, who pay no provincial income tax at all, get nothing.

If he was really interested in mitigating the impact of the HST on consumers he would have proposed a fixed, refundable credit which everyone would get equally, similar to what Ontario has done.

realpaul
realpaul
9 years ago

So..Gordo's done a runner on the NDP…15% tax reduction.for everyone under 70 grand…..the union pricks must have pissed in their boots tonight…..the lumpenproletariat will be voting for the LIBS inside the dark safety of the ballot box. Good move Gordo. Of course the wise person is going to say…."whats the catch"….well taxes up the ying yang on everything else of course. But…..decent politics I'll concede that much. The 15% will provide leverage for a rise in house prices if history has anything to say. I would have thought that it was going to just be the free daycare that was going to juice up the market with suddenly available cash that wasn't going for childcare expenses. What will this add up too in new disposable cash…..close to a grand a month ++++. Leverage a grand ( todays house prices indicate… Read more »

GDP! Yea, you know m
GDP! Yea, you know m
9 years ago

anonymous

step 1. go to chinahush dot com

step 2. type pollution in the search box.

step 3. click on amazing pictures link.

step 4. move there

GDP! Yea, you know m
GDP! Yea, you know m
9 years ago

dont get so butthurt man, i didnt make china a sh*thole.

Anonymous
Anonymous
9 years ago

@GDP! Yea, you know me!:

So there's ghost town there. So what? The link you posted contains photos which look nothing like the "shith*le" you speak of. Looks better than Surrey, that's for certain.

But hey, you've made it evident that you'll just insult anybody who disagrees with you. Classy.

GDP! Yea, you know m
GDP! Yea, you know m
9 years ago

yea, anonymous, thats what im doing ass, just those two things. oh and this.

http://www.youtube.com/watch?v=0h7V3Twb-Qk

and the dozens of other articles, news reports, academic papers, business reports, and web posts saying the same thing.

but you keep on saying: omg, he based his opinion on the karate kid! you gotta be kidding me!

i hope that indignation thing works out for you.

(and if i linked to the world bank post in the same post i mentioned the karate kid, wouldnt a normal person have been able to distinguish between the anecdotal and the factual? in your case, no. go troll someplace trolly troll trollface)

Anonymous
Anonymous
9 years ago

@GDP! Yea, you know me!:

"watch the beijing olympics- china looked great. watch the new karate kid movie, filmed on location in beijing, and you realize it makes surrey look like paradise. china is kind of a shith*le. "

You're basing your opinion of China on the Olympics and Karate Kid? You've got to be kidding me?