Prices before and after a housing bubble.

The Vancouver real estate bubble is getting attention from outside Canada again.  This time Mish is in Business Insider comparing current prices in massively overpriced Vancouver to what the same price gets you in post-bubble Ireland.  The difference is rather large.

There are some pretty nice houses you can get in Vancouver for only $890k!  Two of them are even potentially liveable and one has even had some upgrades.

The post-celtic-tiger property is pretty decent as well, and a fair sized discount from the original asking price of $6 million.

Now clearly what happened in countries like Ireland was that people who should not have been were extended credit.  Lots of credit.  And since property prices were rising they were viewed as ‘can’t lose’, until they lost.

Have we made credit too easy in Canada, or are we more sensible than that?

UPDATE: reader Anonymouse pointed out that Mish comparing a hotel to a single family home is not a fair comparison. In response Many Franks posted this link about home prices in Donegal from last September:

The average price of a new home in Donegal is estimated at €179,000, representing a drop of 43pc from peak values. New three- and four-bedroom semi-detached houses are cheaper than in most other parts of the country, with averages estimated at €128,800 and €155,000 respectively.

Second-hand homes are estimated to average €165,800, down 3pc from last April and a drop of 41pc from peak values. The cheapest second-hand apartments in the country can be found in Donegal, with the average price of a one-bedroom apartment estimated at €50,000, and €57,500 for a two-bedroom apartment.

 

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chilled
Member
chilled

In conjunction with a recent move, I applied online at two mortgage brokers. Within days I was approved for $650K and $625K mortgages.

This was easier than finding a decent apartment and getting through the application and reference check process.

Have we made credit too easy in Canada? No kidding, eh.

Mr Know It All
Guest
Mr Know It All

I have an assessment appeal tomorrow:

I think I will play the race card as part of my strategy…aka have the assessors checked the background of the purchasers,offshore could this be laundered money….just to lay it our there and see them sweat.

cgh
Guest
cgh

There were some comments in a previous thread (forget which) regarding population growth driving the Vancouver bubble. Here’s something about that:

http://theeconomicanalyst.com/content/population-growth-will-not-prevent-candian-housing-bubble-going-bust

Anonymouse
Guest
Anonymouse

I see all the blogs are beside themselves with happiness at being able to re-post that link about the Irish hotel. But I doubt that East Van house requires 50 staff to be paid on-time. I imagine the hotel loses much more money each month, even when compared to Vancouver’s over-heated market.

Many Franks
Guest

@Anonymouse: So perhaps this would be a better apples-to-apples comparison? It’s only 18 units cobbled together out of a mix of buildings, and it does cost >$5 million. But you’ll be happy to know that it would also require staff to operate.

Anonymous
Guest
Anonymous

@Anonymouse: …I see all the blogs are beside themselves with happiness at being able to re-post that link about the Irish hotel. But I doubt that East Van house requires 50 staff to be paid on-time. I imagine the hotel loses much more money each month, even when compared to Vancouver’s over-heated market….

I’m not sure the difference is that big. At this point in the RE cycle, you’d have pay 50 friends to tell you how smart you are for pouring all that money into a Vancouver dump.

Troll
Guest
Troll

http://www.independent.ie/national-news/hotel-owner-paul-cant-help-smiling-as-he-saves-jobs-and-becomes-a-local-hero-3038468.html

Upstairs in a dining room overlooking Rossnowlagh Bay, Paul is taking another phone call as he helps prepare dinner menus for the first time as owner.

There were no overnight guests yesterday and just four for tonight, but this is March and the season has just started.

LOL, sounds like a good investment.

Anonymouse
Guest
Anonymouse

@Many Franks: “So perhaps this would be a better apples-to-apples comparison?”

Not really, because it’s unclear what the profitability of either business is. Residential listings are surely easier to compare with the information available to us.

Troll
Guest
Troll

@Anonymouse:

Not really, because it’s unclear what the profitability of either business is. Residential listings are surely easier to compare with the information available to us.

SSSHHHHH, you’re getting in the way of some sensationalist bear campfire stories. Stop bringing rational analysis into it, they’re trying to promote their view using bull tactics.

Many Franks
Guest

@Anonymouse: Fine, SFH is OK with me:

The average price of a new home in Donegal is estimated at €179,000, representing a drop of 43pc from peak values. New three- and four-bedroom semi-detached houses are cheaper than in most other parts of the country, with averages estimated at €128,800 and €155,000 respectively.

Second-hand homes are estimated to average €165,800, down 3pc from last April and a drop of 41pc from peak values. The cheapest second-hand apartments in the country can be found in Donegal, with the average price of a one-bedroom apartment estimated at €50,000, and €57,500 for a two-bedroom apartment.

Anonymouse
Guest
Anonymouse

@Many Franks:

Those stats are perfect (if a little old). So I have to ask – why the need for pointless comparisons between an Irish hotel and an East Van house?

Many Franks
Guest

@Anonymouse: You’ll have to take that up with Mish. I’d say it’s a hyperbolic example demonstrating that values are skewed here, and it implies that similar disparities exist further down the scale, i.e. SFH-to-SFH. Unless you want to read it as a literal recommendation that a Vancouver SFH shopper should look instead at Irish hotels…

Anonymouse
Guest
Anonymouse

@Many Franks: “You’ll have to take that up with Mish. ”

Why? Other blogs (vreaa and this one) thought it was worth re-posting. Frankly they’d have been better off posting the stats that you found instead.

Many Franks
Guest

@Anonymouse: Again, I can’t speak for the folks who run either of those blogs. But as a reader of all three, I’d say you’re reading too much into it. It’s basically this, but with $890K as a metric. It’s germane to local real estate, it brings in the international perspective, and it shows what happens when a property bubble pops. Seems pretty relevant to me.

WFT?
Guest
WFT?

@Anonymouse:

You fool. The point is that the previous selling price of the Donnegal Hotel was $6,000,000. It now sold for $890,000. That is a drop of 85% percent.

And when compared to Vancouver, which place has prices more out of line with underlying value? You have to agree (unless your are a disingenuous shill) that Vancouver is more out of wack.

And that means that Vancouver will get wacked just like ireland.

Supersogs
Guest
Supersogs

Buried deep inside the business section, out today:

http://www.vancouversun.com/business/prices+drop+sharply+this+year+report/6254346/story.html

“B.C. home prices are headed south this year before rising slightly in 2013, according to a quarterly forecast by the Canadian Real Estate Association. The forecast average drop of four per cent – the biggest decline in the country and far steeper than the 1.1-per-cent forecast drop nationally – will bring the average price of a residential B.C. property down to $539,100 from $561,300 in 2011.”

Keep in mind this predicted 4% drop are numbers from the ever positive CREA. But don’t worry, because based on no facts, loose predictions and arbitrary numbers validated by the Easter bunny: “However, the average price is expected to rise 0.5 per cent to $541,800 in 2013.”

Yay

Best place on meth
Member
Best place on meth

@WFT?:

85% off sounds pretty good, but I don’t know if that could ever happen in Vancouver because we have rich fleeing Chinese with suitcases full empty of cash.

Best place on meth
Member
Best place on meth

@Best place on meth:

Ah ha, strike-through effects only work in the preview now, not in the actual post.

VMD@work
Guest
VMD@work

[TD to Halt Non-Prime Mortgage Lending ] effective March 31, 2012.
– banks are de-risking…

“A spokesperson said, “With today’s announcement, we have eliminated any non-prime lending in mortgages.”

The move was made “As part of a regular review of TD’s secured lending risk management strategies.””

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2012/03/tdfs-to-halt-non-prime-mortgage-lending.html

Dante
Guest
Dante

“Donnegal Hotel was $6,000,000. It now sold for $890,000. That is a drop of 85% percent.”

85%! Maybe rains to much in Donnegal…Ooooups

VMD@work
Guest
VMD@work

@VMD@work:

Interesting timing for TD to de-risk from non-prime loans… TD just sold the “Largest US Dollar Covered Bond Deal Of 2012” earlier that day.

http://www.foxbusiness.com/news/2012/03/05/td-bank-sells-largest-us-dollar-covered-bond-deal-2012/

gordholio
Member

I need enlightenment. Is “non-prime” the same as “sub-prime?”

/dev/null
Member
/dev/null

@VMD@work: Wow! That TD spokesman is really mis-informed. Everyone knows that there is no sub-prime mortgage lending in Canada.

jesse
Member

@VMD@work: From the article: “TDFS mortgages comprised just 0.2% of TD’s overall mortgage book, he noted.”

Subprime!

Troll
Guest
Troll

@WFT?: You’re just for entertainment right?

Because that post was one of the dumbest I’ve seen.

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