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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Mick Murphy
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Mick Murphy

Access to mainland China’s biggest bankcard spreads to Vancouver

http://www.biv.com/article/2014/11/access-mainland-chinas-biggest-bankcard-spreads-va/

Westside Realtor
Guest
Westside Realtor

Go Home ET.

Tiger
Guest
Tiger

From New York to Hong Kong, what other cities around the world have done to curb absentee owners

http://www.bcbusiness.ca/sites/default/files/uploads/vacanttaxes.png

southseacompany
Member
southseacompany

“ANALYSIS: Overvalued housing prices and how to read them: Don Pittis”
“Looking for signs the housing market is a house of cards? Read on”
CBC News

http://www.cbc.ca/news/business/overvalued-housing-prices-and-how-to-read-them-don-pittis-1.2898003

“From the Bank of Canada’s warning to last week’s devastating analysis from Germany’s Deutsche Bank that claimed a 63 per cent overvaluation, it seems we are being told once again that we think our houses are worth a lot more than they really are. “

NT
Guest
NT

Check out the top line in both of the following data tables from the Bank of Canada:

Latest household credit numbers for Canada (to the end of November, 2014):

http://credit.bankofcanada.ca/householdcredit

Latest business credit numbers for Canada (to the end of November, 2014):

http://credit.bankofcanada.ca/businesscredit

kabloona
Member
kabloona

Oops, what happened to my Federal budget surplus?

😉

Little chance of federal budget surplus in 2014-2015: TD report

http://www.cbc.ca/news/business/little-chance-of-federal-budget-surplus-in-2014-2015-td-report-1.2899104

“The federal government will likely face a budget deficit for the next two fiscal years, before returning to surplus in 2017-18, TD economist Randall Bartlett says.

Bartlett`s research note released Tuesday morning flies in the face of the government’s repeated assurances that a $1.6-billion surplus is on the way.

In mid-December, Prime Minister Stephen Harper said there was “no doubt that the government will balance its budget next year.”

“Even with dramatically lower oil prices,” said Harper, “we will balance the budget.”

According to Bartlett, those dramatically lower oil prices are the reason a surplus is unlikely…”

VanRant
Member
VanRant

China is in big trouble…

“We’ve got the biggest debt bubble that the world has ever seen and credit is continuing to grow twice as fast” as the economy, Chu, “We’ve got deflation looming on the horizon.”

patriotz
Member

@3: “From New York to Hong Kong, what other cities around the world have done to curb absentee owners”

Neither are just “other cities” – both have home rule.

Do you think Crusty will give it to Vancouver if the city asks really nicely?

space889
Guest
space889

@patriotz – why not? when the desperate need for money and getting re-elected are combined, politicians will do some pretty crazy things.

Oracle
Guest
Oracle

Hey Fake WSR, I am seeing plenty of HAM curling my Delta neighborhood. I am anticipating a jump in both sales and prices this spring.

I might just buy another one, and flip it later in the year, figure I can make an easy $60k, for doing perhaps 20 hours of work.

But you are too dumb to understand how markets and economics work, hence you will live in your moldy basement suite for life along with the other irrational permanent bears here. Losers.

Delta Force
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Delta Force

@#10

Delta detached benchmark up 0.1% YOY. Median price down 0.7% YOY. Average price down 4.6%.

http://www.fvreb.bc.ca/statistics/Package%20201412.pdf

Delta not so hot.

@Delta Force
Guest
@Delta Force

It’s not Oracle posting. It’s the child WSR using multiple aliases and doing multiple upvoting. No wonder so many have left this blog. Only a few posters here now using multiple aliases.

@Admin
Guest
@Admin

Can you ban post #10 IP? It’s westside. simething tells me it’s his blog. Let’s see what happens.

Many Franks
Member
Here’s a chuckle: Barbara Yaffe: Vancouver lagging behind nation’s rental property boom Despite a low vacancy rate and investor interest, builders in Metro Vancouver are thwarted by a “chronic shortage of sites, municipal bureaucratic barriers and the cost of land,” reports David Goodman, a prominent Vancouver realtor specializing in multi-family real estate. “We are in a mess, and it will have serious social and economic implications.” […] Goodman scoffs at the city’s reassurances. He says high land values, and construction costs as much as 30 per cent more than in Toronto, as well as a shortage of suitable development sites, combine with obstructionist city policies to make creation of new rental housing an uphill battle. Vancouver has prohibited demolition of deteriorating rental buildings — structures Goodman calls “60-year-old dreck”. And so, “1,500 inefficient older rental buildings” are occupying 750 acres… Read more »
StupidityCheck
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StupidityCheck

I’ll second the motion to have WSR/fake Oracle/CanucksBoy/CrashComing/Romeo Jordan banned. He’s really stinking up the place. In the meantime, I’ll just ignore and down vote his posts.

StupidityCheck
Guest
StupidityCheck

@11,

You read the report incorrectly. Delta detached benchmark is UP 5.4% YOY and average price is UP 4.5%.

patriotz
Member

@14:

If buying is more expensive than renting, it immediately follows that a developer will make more money selling a property as condos than renting it out.

That’s why rental accomodation isn’t being built. It’s the case everywhere there is a bubble, regardless of local regulations.

Being unable to admit this simple fact results in the kind of contortions exibited in the article.

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

>Do you think Crusty will give it to Vancouver if the city asks really nicely?

i don’t know patriotz, and neither do you.

in order for us to find out, the city would have to ask.

what’s the downside of taxing foreign money? if it isn’t a significant market factor some super rich corrupt foreigners will be out a few thousand dollars, the city will be a bit richer, and property prices will remain unchanged. with that kind of downside taxing them is a no brainer. so why oppose it?

of course, if it does work and prices correct to the point where they make sense it will expose the “blame the conservatives for juicing the market” narrative that patriotz pushes.

what’s more important, knowing the truth or appearing to be right to a bunch of internet people who don’t even know who you are?

patriotz
Member

@18: ” so why oppose it? ”

I am on record in this forum supporting higher taxes for offshore owners.

What I have a problem with is those who pretend that CoV can do something about it. This simply lets the provincial government off the hook.

And no, I don’t know if Crusty would ever grant CoV such powers if asked, just as I don’t know if Crusty would ever revoke Bob Rennie’s Order of BC.

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

there you have it people, patriotz is in favor of a foreign ownership tax, but doesn’t want to ask for it because the province may say no.

does that make sense? only if you use bear logic.

CanucksBoy
Guest
CanucksBoy

The problem with any of these “foreign tax” is that it is not just the current whipping boy – the xenophobically hated HAM that will get whacked but also so-called ” locals” – such as those out working in Alberta or the States but intending to come back to BC or settle in BC later on.

Furthermore, during the inevitable downturn – the market will be begging for any buyers – irrespective of nationality to buy up excess inventory –
HAM, whether it is myth or reality is just a by-product phenomena of a booming market – boom vanishes – HAM vanishes.

Buy v. Rent
Guest
Buy v. Rent

“buying is more expensive than renting”

Lets examine this often used phrase: buying is more expensive than renting. Presumably, when this phrase is used the comparison being made is between monthly rent and monthly mortgage payments. Some people think that it is better to rent than buy because buying is more expensive than renting.

But to determine whether one is more “expensive” than the other, the thing being purchased must be considered.

Renting purchases you the right to occupy an dwelling. Buying purchases you land and a building. The thing purchased when buying is the right occupy a dwelling PLUS an asset that can be bequeathed to your kids upon death or borrowed against or sold to fund other activities. So buying should be more a lot more expensive than renting because you get a lot more.

Buy v. Rent
Guest
Buy v. Rent

In fact, if renting is ever cheaper than buying, it is a market imbalance that will likely be corrected when land prices rise and renting becomes cheaper than buying.

Buy v. Rent
Guest
Buy v. Rent

Correction:

In fact, if BUYING is ever cheaper than RENTING, it is a market imbalance that will likely be corrected when land prices rise and renting becomes cheaper than buying.

Royce McCutcheon
Member
Royce McCutcheon

@Buy v. rent:

You know that some landlords expect to turn a profit, right?

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