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

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

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

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

Thanks,

Q
Guest
Q

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

Group Masterbator
Guest
Group Masterbator

Prediction: 14K party today!

Name taken
Guest
Name taken

Wow, he has to pay $200 for parking!

Groundhog
Guest
Groundhog

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

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

Keeping An Eye On The Pimps
Guest
Keeping An Eye On The Pimps

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.

bubbly
Member
bubbly

@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.

Q
Guest
Q

“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/

Q
Guest
Q

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

mac
Member
mac
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 get your romance on… red wine, fireplace, presumably hot babe or wife and you deliver a lecture on costs of owning vs. renting? And then go on to list out the repairs?Maybe this real estate obsession is something to knock… Read more »
Groundhog
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Groundhog

@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.

Many Franks
Guest
Active Member
Many Franks

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.

Atomic Frog
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Atomic Frog
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 leader vowed to stop corruption; witch hunting is only for show. The folks who get caught are mostly staged or framed. 4. Harmony in the society is ALL for show only. The govt official can do anything to MAKE YOU… Read more »
patriotz
Member

“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.

BulbsForSale
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BulbsForSale

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

Atomic Frog
Guest
Atomic Frog
@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 have, that sort of thing. The last communist leader vowed to build a “middle class” society. Ten yrs later, the new leader is now all about combating corruption (well at least that is what he said publicly, but no one… Read more »
Best place on meth
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Best place on meth

@Atomic Frog

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

Groundhog
Guest
Groundhog
Best place on meth
Member
Best place on meth

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.

/dev/null
Member
/dev/null

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.

vangrl
Member
vangrl
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 need advice from an expert on how to handle our mortgage, it’s getting complicated and a little stressful” now these are really nice folks, I wish them no harm, and I feel a bit bad about posting this, but they… Read more »
spit
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spit

@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.

asalvari1
Guest
asalvari1

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 it may be really difficult. I hope they have cushion and can find a way to restructure..

p.s. “it’s getting complicated and a little stressful” does not seems to me as great condition to be in.. probably they will list soon.