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Flaherty: All clear on the bubble front

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102 Comments

The Honorable Jim Flaherty has popped up in the media again with his regular scheduled reassurance that there is no Canadian housing bubble.

OTTAWA – There is no sign that Canada has a housing bubble, Finance Minister Jim Flaherty said on Tuesday, dismissing the idea the country was facing the same kind of property crisis as Ireland.

“The evidence is not there that Canada has a housing bubble. In fact, the evidence with respect to affordability of mortgages in Canada is solid and we have a stable market,” he told the House of Commons finance committee.

“It’s a long, long stretch to compare our housing market with that of Ireland,” he said.

No property bubble, nowhere, no how. Does that clear everything up?

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MrBear

@Anonymous: "It’s ridiculous to claim that people with mortgages can’t afford to eat or buy furniture. This is why some find it difficult to take bear arguments seriously."

Especially when you make up the bear arguments yourself. Because I didn't say what you claim I did.

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Dave

@YLTNboomerang: Those kind of deals have been going on forever. If you want to use your anecdote as evidence for a general drop in rental rates then you need to first define the baseline and then define the wider trend. I suspect you have done neither. So in the meantime, I will continue to believe the CMHC has the best data out there. It is also worth noting that CMHC produces a secondary market report which surveys condo and basement suite rentals. For the last 3 years bears keep telling me that rent is going down. Many a bear has made the exact anecdotal claims you are making. Yet since that time, CMHC has continued to collect rental data and it continues to support my position that rent is still going up. Until CMHC or some other party presents data… Read more »

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YLTNboomerang

@Dave:

Here's some anecdotal evidence on falling rent (and not the BS from purpose built rental data): Our lease expired and I was happy to go month-to-month to allow flexibility in upgrading however our landlord was pressuring us to sign a 1 year lease. I told him rents are dropping and I want the freedom to move to a bigger place if one becomes available. He offered to drop rent if we sign a lease.

Now why would he do this if rents are increasing due to a balanced supply of rental accommodation?

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Pinebeetles

@Dave: This is beautiful. In one comment you bring up the shift to condos run by amateur investors not being captured by the data as a reason that rents are rising, then conveniently ignore that same argument is used by many as to why the data doesn't show true vacancy rates.

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Dave

@fixie guy:

The real vs nominal discussion is quite simple. There is no discussion to have. Either you understand it, or you don't. Is there a role for using real numbers? Of course. Does inflation matter? Of course. Until you can show me that mortgages are indexed to inflation, then my point stands.

I'm not sure why you are struggling with this. Others understand it just fine.

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Dave

@Yalie:

Yes, I agree that this is what the data shows. However, I am not sure the data captures the shift of rentals from purpose build buildings to newer condos, which command about 50% higher rent. I wonder what the data would look like if one were to correct the index proportional to the percent of each market segment over time. My point, which you agree with, is that rents are going up in nominal terms.

As to whether an apparent real drop in rental rates is evidence of over building, I have to disagree. I think vacancy rates would be a better measure to use. Vacancy rates in 1998 (prior to this boom), were higher than they are at present. That doesn't support the theory of overbuilding.

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patriotz

@Dave:

Patriotz strongly believes that prices must be tied to rents and can’t exceed a certain multiple of rent.

Oh come on off it Dave, try to polish your BS better than that.

I believe in facts, and the fact today is that prices are massively out of proportion to rents in BC, as I have already said in this thread.

The other fact is that this is a temporary condition which cannot last long term, because it's a Ponzi scheme in which buyers must run out, as I and other posters have explained repeatedly.

That is true for both stocks (substitute earnings for rents) and RE and is the root cause of all asset busts.

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Anonymous

Taxpayers likely to lose Olympic Village land price: Expert

Read more: http://www.theprovince.com/business/Taxpayers+lik…

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logic

Dave Says:

November 24th, 2010 at 10:27 pm

:

Not if I charge rent in gold. 2 ounces per month for rent.

———————

2 ounces a month? yup, that would keep your as stoned as you seem to be…

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Yalie

This is the UBC Sauder data clearly showing that over the last 10 years, rents have steadily gone up in nominal terms (the blue line) but DOWN in real terms (red line):

http://cuer.sauder.ubc.ca/cma/data/ResidentialRea…

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stagnate

Yalie, if you have any data showing real rents are falling please post it. the data i've seen shows more people got rent increases than decreases this year and that other rent measures were flat. rental contracts are a market, some do better than others.

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fixie guy

@ #85 Dave Says:"We already covered this. Nominal vs real… yada yada yada… bravo son… "

Ah yes, I recall, you discarded entire fields of basic economics and finance to falsify a conclusion. When you were asked if you understood why inflation is important to banks, loans and mortgages you disappeared, as expected to lay low and make the same idiotic assertions later. Which is why I suspect marketing, advertising or PR as part of your work life. Maybe politics? Facts don't matter, just repeat the same falsehoods until they're accepted.

I'll make you the same offer I do to all real deniers. Let me hold your money for 20 years. You'll get no interest but I'll give you back exactly the same number of dollars you left me. Guaranteed.

Yadda yadda youngster.

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Yalie

Dave – can we at least agree that rents have gone up in nominal terms but down in real terms?

If that's true, then we just have to decide which one matters more. I get that you think nominal is more important from a buyer's perspective, since their mortgage does not increase with inflation, but the price they can charge to a tenant does.

But that's got nothing to do with my point. I'm arguing that falling rents constitute objective evidence that there has been over-building in Vancouver. From this perspective it's REAL rents, not nominal ones, that matter.

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Spec

We measure value in Canada in 2010 in (Canadian) dollars. This is how the vast majority of our economy works. Goods/services are exchanged in dollars. Dollars.

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Dave

@jesse:

Not if I charge rent in gold. 2 ounces per month for rent.

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jesse

@Dave: "Using gold prices, rents have gone through the roof"

Actually that's backwards. If measured in ounces of gold, rents have been plummeting.

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stagnate

yalie says: So the question is, are we building too much in Vancouver? The best way to see that is with rents, which are clearly falling.

your post is good up to that point, but rents are not falling so you should have left that out. the data i've seen shows a decent balance with development and population growth. low interest rates help move demand to the ownership side, higher interest rates likely would create more interest in a renters premium.

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Dave

@fixie guy:

We already covered this. Nominal vs real… yada yada yada… bravo son… go have a cookie…

I prefer to measure rent in gold. Using gold prices, rents have gone through the roof. Gold is the only real money. Let's see you weasel your way out of this contrived argument.

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fixie guy

@ #76 Dave Says:"Post it up. Let’s see the evidence."

Really? Sauder is pictures Davey, but here you go:

http://cuer.sauder.ubc.ca/cma/data/ResidentialRea…

How are you going to weasel your way around the fact that real rent growth has been predominantly negative for the past decade? Let me guess….

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logic

sorry, you lost me at "botheration"…

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5 Vancouver BC

@Dave: Patriotz is wrong because renting is a choice and the saving is hiding in the mobility and botheration.Rents increase is always on the card for stability.Those who think they are saving on rents by moving actually increasing the rent for same place which is getting more expensive for the previous tenant.

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Dave

@jesse:

I can agree to that. I have yet to see any robust evidence of 'rents clearly going down'.

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jesse

@Dave: Tthere is pretty good evidence rents are increasing. I think, however, landlord incomes are under pressure due to higher vacancy rates and accepting riskier tenants.

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Dave

@Anonymous:

I missed that part of the discussion. N=1 does not a trend make. I want more than one data point. Anybody have something better than CMHC? If not, then it's pretty hard to argue against their data set which shows rents going up.

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Best place on meth

@5 Vancouver BC:

You lost me at "Dave is right".

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