Economist: Canadian housing bubble set to burst

You’ve probably heard of the Economist.

That magazine is the latest voice of doom when it comes to our housing market:

The magazine’s dire prediction comes as Canada’s mortgage brokers’ association is warning that the recent slowdown in home sales will continue and lead to large-scale job losses — though some parts of the country will continue to see growth in housing and related employment.

“A large bubble now looks set to burst,” The Economist predicts in its property markets report.

The U.K.-based business periodical found house prices in Canada are overvalued by 73 per cent when compared to rental prices, and 32 per cent overvalued when compared to household incomes.

Read the full Huffington Post article here and the original Economist article here.

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asalvari1
asalvari1
7 years ago

thank you VHB, your data is really appreciated.

VHB
VHB
7 years ago

Here are May numbers so far: May-2013 Total days 22 Days elapsed so far 16 Weekends / holidays 7 Days missing 0 Days remaining 6 7 Day Moving Average: Sales 138 7 Day Moving Average: Listings 266 SALES Sales so far 2060 Projection for rest of month (using 7day MA) 830 Projected month end total 2890 NEW LISTINGS Listings so far 4392 Projection for rest of month (using 7day MA) 1593 Projected month end total 5985 Sell-list so far 46.9% Projected month-end sell-list 48.3% MONTHS OF INVENTORY Inventory as of May 23, 2013 18353 MoI at this sales pace 6.35 Here are May norms: year sell list sell/list 2001 2703 3871 69.8% 2002 3429 4641 73.9% 2003 3279 4673 70.2% 2004 3918 6410 61.1% 2005 4434 5072 87.4% 2006 4297 5789 74.2% 2007 4228 6005 70.4% 2008 3002 7390 40.6%… Read more »

lolol
lolol
7 years ago

@ Hovering

Thanks for sharing, I love these kind of comparisons.
A big WTF to Vancouver’s real estate, is a joke.

many house-horny Vancouverites are still living in their little bubble…
getting a mortgage as a trophy, bunch of fools.

Ulsterman
7 years ago

Did my best today to get the alternative perspective out in the MSM today. Challenged Michael Campbell on the Bill Good Show (May 23 archive, starts @ 10.20am). He said no bubble. I used my current house as an example of a boring suburban house that’s increased 200+% since 2000 while wages are up at best 25%. Household income to price ratios etc. Bill and Michael suggested it was people moving up with equity buying the houses – i countered that that suggested a ponzi scheme and eventually it had to stop. Michael stated that local incomes don’t matter in the LM because we’re world class etc, running out of land, everyone wants to live here. He even alluded to HAM – claimed a friend sold their Burnaby house, had 9 offers, and 8 of the 9 were from people… Read more »

Real Estate Pimp
Real Estate Pimp
7 years ago

@patiriotz. # 40
” Somebody always has to sell, nobody has to buy”
Good Point, particularly when the RE market is collapsing.

Devore
Devore
7 years ago

“Ironically, I believe the only person to have consistently predicted a flat market has been Dave….”

Oh, you mean a +/- 10% “flat market”? That’s not a prediction at all. If the market goes down by more than 10%, that’s a full on disaster, so that’s a nearly 99% safe prediction. I don’t think anyone reasonable has predicted a massive crash.

gokou3
gokou3
7 years ago

“As a matter of fact the net immigration rate (per capita) for Ireland far exceeded Canada (and every other developed country AFIAK) in the first half of the 2000 decade, peaking at 150,000 in 2007. That’s for a population of about 3 million.”

Why confuse the bulls with facts?

Vote Down The Facts
Vote Down The Facts
7 years ago

Not much of a name:

You’re right, it was something like +/- 10%.

Hovering
Hovering
7 years ago

I see this for sale in kits for $1.5 million

http://www.realtor.ca/propertyDetails.aspx?propertyId=13168474&PidKey=-864637971

here is an article for what $1.5 million will get you in the USA (American dollars mind you).

http://www.businessinsider.com/what-15-million-will-buy-in-housing-markets-around-the-us-2012-3#in-carmel-calif-15-million-buys-138-acres-on-a-private-road-that-boast-views-of-the-valley-a-pool-and-a-detached-guest-house-1

please share with everyone you know. we need to stop the madness that is vancouver.

patriotz
7 years ago

“The above mentioned countries don’t have the highest sustained immigration rate in the world. ”

As a matter of fact the net immigration rate (per capita) for Ireland far exceeded Canada (and every other developed country AFIAK) in the first half of the 2000 decade, peaking at 150,000 in 2007. That’s for a population of about 3 million.

Then what happened?

http://www.nuim.ie/nirsa/research/documents/WP69_The_changing_face_of_Irish_migration_2000_2012.pdf

paulb
7 years ago

New Listings 231
Price Changes 131
Sold Listings 123
TI:18353

http://www.paulboenisch.com

jesse
7 years ago

Some Guy, I could say that a slight bump in Vancouver’s population growth last year could be translating into better sales in 2013 than 2012, as new entrants will tend to wait some months before purchasing.

Boombust
Boombust
7 years ago

#37, Realitycheck,

If a cheap house is all you want out of being a citizen of Canada, then buggar off and emigrate somewhere else.

Buh-bye!

jesse
7 years ago

Some Guy, yes the mortgage rate renewal gap will close, but only at the end of 2013. For the remainder of 2012 renewal conditions are superb.

In terms of population growth I think you’re correct that’s an issue as well, however I don’t have Vancouver-specific data and only data for BC-wide population growth. We won’t know Vancouver’s population growth as of mid 2013 until early 2014. Since 2008 Vancouver’s population has held up better than other areas of the province:
graph

bon jovi
bon jovi
7 years ago

had a afogato with friend of mine to tell me his BIG news. He decided to sell his condo due to financial problems. I was puzzled to hear that because he and his wife have secured government jobs. Well here is the problem. He used to live in that condo and after he bought the house he decided to rent a condo. After all expenses his was cash positive of only $150. A side note he had 35 year amortaziation. Brutal. He could not make more than measly 150 even with that long amortazation. He only had one tenant for that 2 year period. So after he told the tenant that he will raise the rent in March he did not get very positive response from them, so anyway they waited another month and told him that they will be… Read more »

ReadyToPop
ReadyToPop
7 years ago

Global markets face a witches’ brew of new risks as Japan’s monetary adventure wobbles, China slows further and the US Fed prepares to shut the spigot of dollar liquidity.

Veteran fears ‘beginning of the end’ for Japan as bond market buckles

CullBull
CullBull
7 years ago

““Bulls, get ready for a sub 100 sales day.” — Whoops, never mind”

Exactly. The bulls are back in charge. See you in 10 years bears!

Troll
Troll
7 years ago

“Bulls, get ready for a sub 100 sales day.” — Whoops, never mind.

Anonymous
Anonymous
7 years ago

…He was already asking a shade under what he paid at the peak in 2007. I think this gentlemen will be waiting a long time for the market to “recover”. As someone mentioned here already we have not even seen the big drops in SFH and Duplexes in Whistler yet like in the condo’s….. This guy is smoking in the shower. He hasn’t realized that lower prices are the recovery. And SFH’s have dropped quite a bit: at one time, you couldn’t find a SFH for less than $1M in Whistler. Now there are plenty. Not to worry though, they’ll be plenty more SFH available at even lower prices as time moves forward. Whistler’s ‘jump the shark’ moment was when they put up that ridiculous Peak to Peak ‘attraction’ instead of adding more ski lifts – but then, they knew… Read more »

Not much of a name...
Not much of a name...
7 years ago

@VDTF

Wasn’t Dave’s flat prices are those that are +/- 10% over a period of time? I’m not quite sure, he tended to change the goalposts a little bit.

Anonymous
Anonymous
7 years ago

Canadians are not eligible for the Green card lottery. You need to go down on a sponsored NAFTA visa, or whatever their entrepreneur classification is.

Vote Down The Facts
Vote Down The Facts
7 years ago

“As I recall his definition of a “flat” market is that prices today are the same as at some time in the past.”

Then you recall incorrectly.

Some Guy
Some Guy
7 years ago

@21 Jesse “but there are some factors that concern me”

Would add to the list:

4) We’re approaching the end of five year mortgage resets to much lower interest rates (right now people whose mortgages are expiring after 5 years will get a much lower rate when they renew, by this winter/next spring that will no longer be true, so that will remove a source of additional borrowing from the market)

5) Weak population growth numbers (self-explanatory).

On point 5, anecdotally, it’s rare that I talk to anyone in their 30’s or 40’s who *isn’t* considering leaving Vancouver. This strikes me as unusual.

jesse
7 years ago

RBC Housing Trends and Affordability: http://www.rbc.com/economics/market/pdf/house.pdf “With home resales slumping to levels 40% below their 10-year average by the third quarter of 2012, the question for the Vancouver-area market was whether activity was on its way to test the lows reached during the 2008-09 recession (57% below the 10-year average). While developments late in 2012 and in the first quarter of 2013 may not provide the definitive answer, they suggest that the market correction that began in earnest in 2011 may be close to its bottom in terms of home resales. The dizzying slide in resales in the area steadied in the latest two quarters. However, the price orrection may not be over, despite recent signs of stabilization. Buyers continue to hold the upper hand in the area and market conditions are unlikely to tighten meaningfully in the short term.… Read more »