Deutsche Bank: Canada is 63% overvalued

If there was a competition for ‘most bearish outlook’ on Canadian real estate Deutsche Bank would take home the prize.

When local banks say real estate is overvalued in Canada they usually go with a safe 10-20% figure.  The Bank of Canada recently said 10-30% overvalued which is pretty damn bearish, but not quite as extreme as this.

Research by Deutsche Bank chief international economist Torsten Slok even manages to out-bear the Economist Magazines estimations:

Broken down, Slok sees the market as being 35-per-cent overvalued when compared to incomes, and 91-per-cent overvalued when compared to rents. That’s a more bearish assessment than most. The Bank of Canada estimates the market is overvalued by between 10 per cent and 30 per cent.

But those are similar numbers to those at the Economist magazine, which for years has been calling Canada’s housing market overvalued. It pegs the overvaluation at 32 per cent, when compared to incomes, and 75 per cent, when compared to rents.

“Canada is in serious trouble,” reads the title of a chart from Slok’s report, showing Canada’s household debt, as a percentage of income, climb to 50 per cent above current levels in the U.S.

See the charts and read the full article here.

 

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[…] closing all stores -Bank of Canada warns on economy -Oil affects housing? -RE Commissions to fall? -Vancouver lags on rentals -House of cards -Endless HAM chat can end anytime -Did we say budget surplus? nevermind. -Alberta […]

CBC
Guest
CBC

The funny thing is your friends have been wrong for 8 years especially turner

How"s the Group Think going here?
Guest
How"s the Group Think going here?

see above.

Mortgageslave
Guest
Mortgageslave
@Ulsterman “Even my journalist friend in Belfast who correctly predicted the bust there and was pilloried for it thinks Vancouver will never significantly correct. When a guy who correctly predicted a 60%+ correction (in multiple newspaper publications and took a lot of heat for it) thinks this market won’t do anything of significance, it makes me wonder” Love this Statement. There you have it, no bubble here move on everybody, his friends said so. I have a few “friends” who have predictions as well.. Bank of Canada Pimco Robert Shiller BMO RBC Macleans Garth Turner Reuters Bloomberg Forbes Germany Everybody in the US! etc, etc, etc. Does your friend have any good stock tips? Nothing goes up forever. The time has come, it has taken a while but I think we can be confident that a house is the most… Read more »
patriotz
Member

@123: “Regarding the comparisons to late 1985 when Van started taking off”

In late 1985 buying was about the same cost as renting at double digit interest rates. Compare to 2011 when buying was more expensive than renting even at all time low rates.

In other words, RE fundamentals for the two years were pretty much polar opposites and all the other peripheral similarities are just noise.

Slagathor
Guest
Slagathor

Trouble on the horizon for Realturds?

Real estate commissions could fall as new competition heats up.

http://www.cbc.ca/news/business/real-estate-commissions-could-fall-as-new-competition-heats-up-1.2900928

Bobby
Guest
Bobby

Regarding the comparisons to late 1985 when Van started taking off, I completely agree that correlation doesn’t equal causation, but it is kinda freaky the number of correlations. Sidenote: In NO way do I think the same 86-95 outcome is in store.

* 1960 peak birth-year Boomers were turning 25 in 1985, 1990 peak Boomer kids are turning 25 in 2015
* mortgage rates fell in half between 1981-85, and between 2011-2015
* resource prices fell sharply between 1981-85, and between 2011-2015
* our currency fell more than 15% in both periods
* after remaining stable for years oil crashed in late 85 and late 2014
* vacancy rates here fell as Albertans fled west
* even gold began to take off again, note the similarities already of this Jan to Jan 86

Here’s the key difference, note the depth of the 1981 correction compared to 2011.
http://assets0.cms.rew.ca/wp-content/uploads/2013/05/rebgv-av-price-apr2013.jpg

Tiger
Guest
Tiger

1)Sony to close all its stores in Canada

https://www.google.ca/search?q=Sony+to+close+all+its+stores+in+Canada&oq=Sony+to+close+all+its+stores+in+Canada&aqs=chrome..69i57j69i60&sourceid=chrome&es_sm=122&ie=UTF-8

2)Collapsing oil prices hit B.C. residents working in Alberta

https://www.google.ca/search?q=Collapsing+oil+prices+hit+B.C.+residents+working+in+Alberta&oq=Collapsing+oil+prices+hit+B.C.+residents+working+in+Alberta&aqs=chrome..69i57j69i60&sourceid=chrome&es_sm=122&ie=UTF-8

Westside Realtor
Guest
Westside Realtor

Coffee talk this AM.

Colleague mentioned she will be working with some HAM (Hot Alberta Money) looking to sell their investment ppties here (condos), I suspect that some marginal buyers jn that market will become sellers as the oil job/income losses mount.

MORE DOWNSIDE AHEAD.

WSR

history
Guest
history

People here, perhaps, began to Live The Analysis, yknow, they ‘became the change they seek’.
For instance, in my case, back in 2012 and only until recenty, I lived in my vehicle.

Others refinanced their houses (sold the house to themselves), so they could fly aimless around, resort to resort, while others used the money to play the stockmarket.

history
Guest
history

Yeah, Target will do anything to move merchandise. @:-)

southseacompany
Member
southseacompany

Reuters; “Canadian home prices drop in December: real estate group”.

http://ca.reuters.com/article/businessNews/idCAKBN0KO1MA20150115

“Sales of existing homes in Canada slumped in December, led by declines in Calgary and Edmonton, as tumbling oil prices hurt home buyer demand in the resource-dependent region of the country, the Canadian Real Estate Association (CREA) said on Thursday,”

Loon
Guest
Loon

Target pulling out of Canada, closing all 133 stores, it wasn’t too hard to see that coming:

http://m.news1130.com/2015/01/15/target-to-pull-out-of-canada-close-its-133-locations/

@wsr
Guest
@wsr

Whats your beef with surrey
post #111 is obviously you because you also follow up with some brilliant wsr insight on the next post.

wsr jmho = waited, so romeo just missed home ownership

CBC

Mister Obvious
Guest
Mister Obvious

@114 Ulsterman

The question is not whether Vancouver RE prices will collapse like a house of cards. I think we can conclude by now that is fairly unlikely.

The real question is whether Vancouver RE will remain, as it is today, a poor investment with little upside going forward. In other words, an expensive repository for dead money.

Ulsterman
Member
Royce Mc said, “There used to be more cogent conversation and analyses presented in relation to real estate data here, along with discussion of policy as well.” I think it’s because after what, 8 years of having the same discussions people just get bored and go away. There’s only so long smart commentators can continue to contribute to these boards before they lose the faith and find other things to do. Sure, if you’ve only been predicting the demise of the market for a couple of years you’re full of fire and spit, but give it 6, 7, 8 years or more and eventually many people just lose interest. It’s the same old arguments. Any macro-economic change that you would think portends to a correction in prices is held up as “THIS is it!” But sadly it never is. I’ve… Read more »
Mortgageslave
Guest
Mortgageslave
Vancouver hpi -.35% m/m. There you have it, prices are falling. I dont even trust this number as it’s open to manipulation (real estate agency has been shown to lie and are self serving). This was coming regardless if oil crashed (see past 6 month trend), its blatently obvious. Add in all the external factors and its Easy to see what is coming. Tell me something….does anybody bullish on real estate actually see this trend, the run real estate has been on and the exernal bearish factors and actually think this trend wont continue? Cmon, really? I actually feel sorry ffor softy, cbc and the rest of the cheerleaders. Its amazing how blind people can be when your so biased in your opinion. The writing is on the wall, time to call your agent. Btw, my landlord (swear to god… Read more »
Westside Realtor
Guest
Westside Realtor

Barb’s sample size is growing daily, and the trend is strengthening.

What is so hard to comprehend able that?

Why do you have such difficulty appreciating that china’s RE is going down (fact) and so is ours?

Do you have dementia?

WSR

@As I see it.
Guest
@As I see it.

Thanks for the comments Oracle (CBC, Reality Check, Etc)

Is life that boring as Surrey housewife you can’t find something better to do that repeat the same drivel here over and over again? Instead of changing your name come up with some new material.

southseacompany
Member
southseacompany

“Markets eye Bank of Canada rate cut for first time as oil rout damage deepens”, Financial Post

http://business.financialpost.com/2015/01/14/markets-eye-bank-of-canada-rate-cut-for-first-time-as-oil-rout-damage-deepens/

“Collapsing oil prices and a weakening economy are pushing markets to start pricing in a potential interest rate cut by the Bank of Canada this year.”

“Those expectations grew Tuesday after Bank of Canada deputy governor Timothy Lane gave a speech in Madison, Wisc., that economists saw as tilting more dovish than usual. Mr. Lane’s speech focused on the economic effects of dropping oil prices, which has become a central concern for policymakers in Canada.”

“Markets this week have begun pricing in the possibility that the Bank of Canada might cut interest rates in the next 12 months, something not seen since oil prices began their downward trek in July of last year.”

As I see it.
Guest
As I see it.

Shut it down already:

I see this money being moved in this way all the time with immigrants who have holdings overseas. They are careful though, Revenue Canada will track wires over $10K, plus it gives them away for that item on their tax return regarding holding more than $100 overseas.

But what’s more perplexing is people voting this down. They think homeowners come here to pump up the market. Wow. No owners come here (except patriot). Now repeat.

StupidityCheck
Guest
StupidityCheck

Softy said, “It’s going to be a soft landing:”

You said that years ago and you’ve been wrong. Time to change your opinion. Right softy?

Shut It Down Already
Guest
Shut It Down Already
Barb, whilst I appreciate you provided some facts to back up your argument (a rarity in these parts), I agree with CBC – the sample size is incredibly small, and possibly too small to draw any strong conclusions. The market as a whole is showing signs of strength, but you could always find a subset of the market to contradict that if you chose one that’s small enough. Think how MOI in the high double digits for months if not years has affected Okanagan. Now think that Vancouver’s MOI is ~5 right now and rarely exceeds 10. IF things fall apart at the seams it’s going to be way more obvious than people think. All this talk of a listings surge the last 2 weeks is clearly nonsense on stilts, except in the minds of actors like WSR. Lowest inventory… Read more »
southseacompany
Member
southseacompany
“Sell Canada! Investors bet against loonie, bank stocks as oil collapses”, Financial Post. http://business.financialpost.com/2015/01/14/sell-canada-investors-bet-against-loonie-bank-stocks-as-oil-collapses/ “The sell orders are piling up on Canada. From Bank of America Merrill Lynch and Fidelity Investments to exchange-traded funds, investors are betting against the country’s currency, equities and even its once-vaunted bank stocks as oil collapses.” “Canada’s ratio of household debt to disposable income rose to a record 162.6% between July and September, according to data released last month. Benchmark interest rates of 1% have fanned a house-buying frenzy that sent 2014 sales up 6.7% in Toronto and 16% in Vancouver.” ““Given the high cost of production of Canadian oilsands, unless you think oil is going back to US$70 or US$80 a barrel they’ll suffer and we think that’ll have collateral damage to the financial sector in Canada,” Brian Leung, global equity strategist at Merrill… Read more »
Softy
Guest
Softy

Why does the truth get voted down on this site? From Wikipedia:

Hawala or Hewala (Arabic: حِوالة‎, meaning transfer), also known as hundi, is an informal value transfer system based on the performance and honour of a huge network of money brokers, primarily located in the Middle East, North Africa, the Horn of Africa, and the Indian subcontinent, operating outside of, or parallel to, traditional banking, financial channels, and remittance systems.