Canada: the worlds biggest housing bubble?

Are we the home of the worlds biggest housing bubble?

That’s what they’re saying over at the Atlantic.

How real is Canada’s housing bubble anyway? More real than any other country’s.

 

As realtors like to remind us, every market’s different, but there are three big takeaways here.
1) Rich Chinese buyers tend to make for overheated markets. Some of the priciest housing markets in the world have one thing in common, besides low-interest rates (which prevail most everywhere): Chinese expats. Vancouver, Hong Kong, Singapore, and Sydney are among the most popular destinations for wealthy Chinese looking to hedge their bets, and this exit-strategy buying has helped push prices in these locales into the stratosphere.
2) Housing busts can take awhile. After a decade of boom and bust, prices are back to fair value, below it actually, in the U.S. and Ireland, but still have a way to come down in Spain and Britain. Zombie banks tend to be reluctant to realize losses on bad loans, propping up prices in the process, but eventually reality has its day. The sooner that happens, the sooner housing, and construction, can come back.
3) Housing recoveries can take even longer. It was just 20 years ago that the land below the Imperial Palace in Tokyo was supposed to be worth more than all of the land in California combined. But beware the enduring costs of bad macro policy. Too tight money for too long has kept housing prices in hibernation decades on.
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Londonernow
Member
Londonernow
3 years 11 days ago

Is this article implying policy has been tight in Japan?!? If tight leads to a Debt to GDP in excess of 200%, I wouldn’t even be able to fathom what loose means.

Londonernow
Member
Londonernow
3 years 11 days ago

Is this article implying policy has been tight in Japan?!? If tight leads to a Debt to GDP in excess of 200%, I wouldn’t even be able to fathom what loose means.

Londonernow
Member
Londonernow
3 years 11 days ago

Sorry about the double post. Pope please remove if possible (and this one too).

Thanks,

Guest
Q
3 years 11 days ago

If you want to live in the best place on earth, you’re going to have to make some sacrifices. How about living in your car?

“There’s a whole community of van and car dwellers sprinkled throughout the city’s west side.”

http://www.huffingtonpost.ca/2013/01/27/mobile-living-vancouver-van-dwellers-housing_n_2560651.html?utm_hp_ref=canada-business&ir=Canada%20Business#slide=2030118

Guest
Group Masterbator
3 years 11 days ago

Prediction: 14K party today!

Guest
Name taken
3 years 11 days ago

Wow, he has to pay $200 for parking!

Guest
Groundhog
3 years 11 days ago

10-year bonds continue moving up, now at 2%. Highest since May 2012.

http://www.bloomberg.com/quote/GCAN10YR:IND

Guest
Keeping An Eye On The Pimps
3 years 11 days ago

This is a must read for the bulls who were first disappointed that the 100 year mortgage they had hoped for is not going to materialize to float the bubble.
Now comes the first signs the bond market will crater, and therefore, the central bankers won’t be able to control the spike in mortgage rates.

“It is clear that investors are moving out of US treasuries, which have been seen as a safe haven asset, on expectations that the Federal Reserve’s inflationary policies would weigh on the bond markets”

http://www.livemint.com/Money/9B20U38qMew8W3jJpoE52O/Funds-are-flowing-out-of-US-govt-bonds-into-emerging-markets.html

Bulls get ready for the Waterloo moment of your petty and miserable lives.

Member
bubbly
3 years 11 days ago

@Q:
“There’s a whole community of van and car dwellers sprinkled throughout the city’s west side.”
These people get it – it’s all about location location location. There are some nicely sized lots around Drummond Drive. Great area for a hip tent city.

Guest
Q
3 years 10 days ago

“Bank of Canada Governor Mark Carney, urging central banks to secure “escape velocity” for their economies, said there is still room for more monetary stimulus around the world if needed.”

http://business.financialpost.com/2013/01/28/carney-urges-central-banks-to-achieve-escape-velocity-for-economies-still-room-for-stimulus/

Guest
Q
3 years 10 days ago

High cost of Vancouver real estate is justified because of Vancouver’s “Lululemon culture”! In the Vancouver Sun:

“And who doesn’t want to live in Vancouver? The beaches, the restaurants, the Lululemon culture, the bike lanes.”

http://www.vancouversun.com/business/Shelley+Fralic+have+seen+future+cool+Surrey/7879581/story.html

Member
mac
3 years 10 days ago

Had to comment on this blogpost from last night: @tonight, drinking red wine by the fireplace, we were saying: “we love our home so much, this house is so peaceful and relaxing! ” Then I said: “Well, imagine we owned it, we would be saving to change to roof shingles and the hot water tank, we would still be paying for fixing the furnace (2 weeks ago), the repairs on the gutter (4 months ago) and the drain tiles (last year).” The same place could in fact be a source of constant worries… Wow. Anon… you really know how to… Read more »

Guest
Groundhog
3 years 10 days ago

@Q

Thought the headline was a good one too.
“Shelley Fralic: We have seen the future of cool, and it is Surrey”

I never connected overpriced housing with overpriced jogging pants, but maybe there is some correlation there.

Guest
Many Franks
3 years 10 days ago

From the funny-looking-sheep-with-sharp-teeth tell other sheep not to be concerned about wolves department:

There is no real estate bubble in Vancouver and markets will remain stable in 2013 — as long as interest rates remain low, immigration targets are met and Europe’s economy doesn’t melt down, a panel of real estate developers told more than 1,100 real estate professionals, business leaders and B.C. politicians on Thursday.

And that’s just the opening paragraph.

Guest
Atomic Frog
3 years 10 days ago

Just came back from a trip to China, and here is a few highlites: 1. Housing is also expensive for the locals in the major city. To make it worse, it is harder than here to qualify for a mortgage unless u have connections. The bank need co-signs and stuff like that… 2. 99% of the wealth is controlled by less than 1% of the population (1.3 billion). Well that is still a lot of rich folks. 3. The general middle class and the working class have deep resentment towards the officials/businessmen/professionals who help them like lawyers/accountants. The new communist… Read more »

patriotz
Member
3 years 10 days ago

“It is clear that investors are moving out of US treasuries”

Is it? If I want to get out of US treasuries who do I sell them to?

I think he means that investors are demanding higher yields for US treasuries.

The rest of the article has a “talking his book” feel to it.

Guest
BulbsForSale
3 years 10 days ago

@atomicfrog: Whats the average middle class income like there? Is it low like in Vancouver?

Guest
Atomic Frog
3 years 10 days ago

@BulbsForSale Depending on your definition of general middle class, the average income in monetary terms should be lower than in N. America. But for certain professions like lawyer/accountant/doctor/dentist, I think it should be higher than here. But that is just from what I can see and tell. (for a dr it is obviously more because if u don’t pay them money, they will NOT treat u even if u have life threatening illnesses) The problem in China is that justice is not served by the law, it is served by who u r, who u know, how much $ u… Read more »

Member
Best place on meth
3 years 10 days ago

@Atomic Frog

Obviously the corrupt officials are taking him seriously if they’re suddenly dumping their ill-gotten real estate holdings.

Guest
Groundhog
3 years 10 days ago
Member
Best place on meth
3 years 10 days ago

January 28, 2013 – Moody’s downgrades 6 Canadian banks.

Moody’s Investors Service has downgraded the long-term ratings of six Canadian banks, including Toronto-Dominion, Bank of Nova Scotia, Bank of Montreal and CIBC.

The ratings agency lowered each of its ratings 1 notch, citing high levels of consumer debt and high home prices. Moody’s had put all six banks under review in October.

“High levels of consumer indebtedness and elevated housing prices leave Canadian banks more vulnerable than in the past to downside risks the Canadian economy faces,” Moody’s said in a note.

Member
/dev/null
3 years 10 days ago

Moody’s downgrades six Canadian banks – RBC the only one of Big Six banks to escape downgrade

http://www.cbc.ca/news/business/story/2013/01/28/business-moodys-downgrades-banks.html

The ratings agency lowered each of its ratings 1 notch, citing high levels of consumer debt and high home prices. Moody’s had put all six banks under review in October.

“High levels of consumer indebtedness and elevated housing prices leave Canadian banks more vulnerable than in the past to downside risks the Canadian economy faces,” Moody’s said in a note.

Member
vangrl
3 years 10 days ago

true story- friend on facebook updates her status asking friends if they can recommend a VERY affordable financial adviser. A bunch of friends reply with suggestions to: – don’t buy mutual funds – talk to your bank for free – don’t pay a so called “expert” ludicrous fees – do a little studying and open up something self-directed – great guy in North Van – put everything in TFSA before RRSP. you get the idea, they received a bunch of info on investing. their reply: “we need much more basic advice, we’re not investing, we’re going to school and we… Read more »

Guest
spit
3 years 10 days ago

@Groundhog

Great posts, loved the comments especially on the ZH link. My favourite was this one:

http://www.zerohedge.com/news/2013-01-28/mark-carney-leaves-canada-stealth-qe-rising-fastest-pace-2009#comment-3192134

As for the 10 Year bond, it looks like about a 25 bp uptick in a little over a month. I see no stopping this really when you put it together with the charts from the ZH post.

Guest
asalvari1
3 years 10 days ago

vangirl are you telling me that they have hard time doing basic math like addition and subtraction, and they will need help? Well, I am not very much surprised, I have met too many folks that jumped in with,” lets buy it and figure out the carrying cost as we go”.. It really upsets me, but considering the whole f-ing situation here (Vancouver) now, after all these years of madness, all I can say “here we are now, entertain us”. (with Curt yelling voice) Probably they are trying to get help to restructure their expenses, but considering the credit rules… Read more »

Guest
pricedoutfornow
3 years 10 days ago

A friend of mine is hellbent on buying a house (not in Vancouver). I’ve warned her to hold off buying, saying interest rates going up, renting might be cheaper etc. She doesn’t care, her siblings have all leaped in and bought in the past year, so she’s decided it’s time for her to buy too. Only problem? Her income is $32k per year, and she’s dating a guy whose income is questionably, $15k per year (he is self-employed and has little verifiable income, they’ve only been together a year but plan on buying together). The properties they are looking at… Read more »

Guest
Yalie
3 years 10 days ago

always a good way to cement a new relationship, take on a bunch of debt together!

Forget about the relationship – she can always break up with her boyfriend. But she is getting a relative to cosign her mortgage, and you can’t break up with your relatives. I can’t imagine the Hell that Thanksgiving dinner would become if I went bankrupt and in the process took down my mother/father/uncle with me.

Guest
Anonymoose
3 years 10 days ago

There was a post a week ago about the Abbotsford banker and underwater mortgages in the FV. I wanted to add something to that. My wife used to own a condo in Abby that we sold two years ago at about break even. Building was built in 2006/7 and is nice, but nothing that can’t be replicated, which of course has happened. I’ve kept in contact with a few people we met in the building. People are now selling at a loss of 20 to 25% losing 30k to 50k. I heard of one situation where a second owner trying… Read more »

Guest
Crikey
3 years 10 days ago

@Q: ““And who doesn’t want to live in Vancouver? The beaches, the restaurants, the Lululemon culture, the bike lanes.”

LOL! Vancouver Sun and related MSM stories on the city and RE are becoming caricatures of themselves.

You couldn’t write all these shenanigans up and try to pass it off as fiction — no editor would consider it to be remotely believable to a reader.

Guest
Anonymous
3 years 10 days ago

“(do banks actually consider a cosigner, will they dish out more $$ if there’s one in place? Sounds kinda risky to me!)”

A cosigner is supposed to help contribute to the payment. It is not the same a a guarantor who is just there in case of default. A cosigner is one of the co-borrowers. Anyone who cosigns should have no problem paying for part of the mortgage because that is what they are agreeing to do.

Guest
oneangryslav2
3 years 10 days ago

@vangrl #23:

what more advice can you give someone besides telling them that it has to be paid every month?

That’s what I used to think, also. But now your mortgage doesn’t have to be paid every month:

Guest
Crikey
3 years 10 days ago

@Anonymoose “these sellers are trying to “move up” but are basically losing their down payments in the process.” There’s “moving up” and then there’s idiocy. These sellers can’t be faulted for trying to move up, but the way they are doing it is a reckless gamble… with predictable results for many of them who try. Also taking into consideration another topic in this thread — co-signing for a purchase, I can’t decide which one is worse. But if there were to be a “10 Commandments of RE for Dummies”, those two would be have to be right up there… 1.… Read more »

Guest
CashedOut
3 years 10 days ago

Just to follow up on the ski, golf, swim/surf etc discussion:

At the canucks open scrimmage a few weeks back I noticed that the pregame montage characterizes Vancouver as a city where you can ski, golf and kayak in the same day.

Fwiw

Member
bubbly
3 years 10 days ago

@vangrl
“we need much more basic advice, we’re not investing, we’re going to school and we need advice from an expert on how to handle our mortgage, it’s getting complicated and a little stressful”

They are going to school and they have trouble paying the mortgage? Isn’t “going to school” a well paid profession??? Someone should tell the bank!

Guest
rp1
3 years 10 days ago

#16 ” I want to get out of US treasuries who do I sell them to?”

The Fed?

Guest
Some Guy
3 years 10 days ago

Went to a few open houses yesterday (tri-cities), lots of people milling around, a couple of realtors mentioned ‘motivated sellers’ and ‘room for negotiation’ much more openly than anything I encountered last year. I guess we’ll see if potential buyers and motivated sellers translates into sales a couple of weeks down the line.

On the topic of the weak rental market, realtor mentioned that the suite in one place would have rented for $900 last year, but probably $850 now.

Guest
Democrass
3 years 10 days ago

More sleazy realtor stories. Here is one from Toronto where a realtor and a paralegal forged a judge’s signature on a fake judgment against two people that they were suing. You gotta love “professions” which no code of conduct or ethics.

Law Times
“A Toronto paralegal and a real estate agent forged a judge’s signature on a fake default judgment against two defendants they were suing, Superior Court Justice Michael Penny has found.”

Guest
Landbaron
3 years 10 days ago

http://www.theglobeandmail.com/globe-investor/personal-finance/financial-road-map/renters-want-a-house-but-if-not-at-least-their-house-in-order/article7920860/?cmpid=rss1

“There may very well be a time where she can purchase a home for significantly less than a home costs now.”

Sooner than they think I bet

Guest
Anonymous
3 years 10 days ago

“And who doesn’t want to live in Vancouver? The beaches, the restaurants, the Lululemon culture, the bike lanes.”

Who has time to go to the beaches? Most importantly When is sunny and warm enough to go to the beaches?

Who has money left to go to over-priced restaurants. You pay easily $10 even at a food court these days.

What is the “Lululemon culture”? Does that mean we like walking outside looking like we just rolled out of bed?

Who wants to deal with Vancouver drivers on the road? I value my life. Thank you very much.

Member
DaMann
3 years 10 days ago

Groundhog, or anyone

10-year bonds continue moving up, now at 2%. Highest since May 2012.

http://www.bloomberg.com/quote/GCAN10YR:IND

For the bond market illiterate ( me), as the yields go up on long term bonds then so do interest rates and mortgage rates? Just trying to figure out what exactly that means.

Guest
Anonymous
3 years 10 days ago

…….The beaches, the restaurants, the Lululemon culture, the bike lanes……

Hey! No slagging Lululemon! Lululemon has done more to save Assess then Noah’s Ark.

Member
mac
3 years 10 days ago

Here’s some speculative bear food for y’all.

Remember this one?

http://tarashave.com/v973429-804-123-w-1st-av

The agent took an ad on craiglslist claiming the owner paid something like 1.1M original price. And is now selling at 33% off. All the way down to 729K asking. We saw it when it was 849K asking. Well, now the owner or resident has packed up and left. There is no one in the unit. What gives? Maybe it was a rental. Maybe the owner went back home to wherever.

Guest
Groundhog
3 years 10 days ago

@DaMann

Yes. Mortgage rates don’t generally change on a day-to-day basis along with bond yields, but if bond rates rise by say .25% and stay .25% higher, then mortgage rates will generally follow.

The 10-year rate could jump to 2.25% next week for a day, then fall back down to 2%, and you wouldn’t see mortgage rates change, but if it stayed at 2.25% for a couple weeks, then you might see mortgage rates increase. Make sense?

However, I think variable rates are a little more influenced by the BOC overnight rate.

Guest
Chabar
3 years 10 days ago

@Anonymous

What is the “Lululemon culture”? Does that mean we like walking outside looking like we just rolled out of bed?

This is the “Lululemon culture”: http://travel.ca.msn.com/photogallery.aspx?cp-documentid=30567563&page=8

Guest
Landbaron
3 years 10 days ago

@bubbly

Co-signing parents who are going to take the brunt of the downturn and ruin their retirement.

The banks don’t care as long as someone else with ‘equity’ signs the documents.

I’ve seen a lot of this in my age group and it amazes me as I’m 35!!

patriotz
Member
3 years 10 days ago

Icesave: Icelandic government wins compensation ruling The court says that Iceland did not have to compensate Icesave customers in the UK because the relevant European directive did not oblige the government to set a minimum amount for compensation, nor did it force the state to pick up the tab if banks themselves could not pay. That is, if you lend money to a business (i.e. make a bank deposit) and there’s no government guarantee, you’re not entitled to get your money back. What a concept. Anyone who still thinks that K. O’Leary isn’t full of it should listen to his… Read more »

patriotz
Member
3 years 10 days ago

And from someone who actually believes in free enterprise:

Iceland Wins! “Icesave” Lawsuit Dismissed, Court Orders EC and EFTA to Pay Costs

Guest
gokou3
3 years 10 days ago

Re #42 mac: “http://tarashave.com/v973429-804-123-w-1st-av The agent took an ad on craiglslist claiming the owner paid something like 1.1M original price. And is now selling at 33% off. All the way down to 729K asking. We saw it when it was 849K asking. Well, now the owner or resident has packed up and left. There is no one in the unit. What gives? Maybe it was a rental. Maybe the owner went back home to wherever.” This building is fugly. And $671 maintenance fee for a 1004SF place? WTF? The swimming pool+sauna+jacuzzi probably costs each unit $200+/month to maintain since it’s… Read more »

Guest
ReadyToPop
3 years 10 days ago

“The outcome would have been different only if the Fed and others had reacted back in 2004, 2005, 2006” to curtail subprime mortgage lending, Mr. Poole, now a senior fellow at the libertarian Cato Institute, said on Friday in an interview on CNBC. The transcripts show that the Fed entered 2007 still deeply complacent about the housing market. Officials knew that people were losing their homes. They knew that subprime lenders were blinking out of business with each passing week. But they did not understand the implications for the rest of the nation. Days Before Housing Bust, Fed Doubted Need… Read more »

Member
Devore
3 years 10 days ago

http://www.vancouversun.com/business/rental+units+rise+Vancouver/7880342/story.html

New rental units are on the rise in Vancouver
City approves 1,021 such developments for construction, up from zero in 2009

New numbers from the city of Vancouver show 1,021 rental units were approved for development in 2012, more than three times that of 2010 and 2011, when an average of 328 units were approved. No new rental units were approved in 2008 or 2009.

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