Canadian Banks could absorb losses in US-style housing crash

Good news for your monday morning!

If Canada saw a ‘US-style housing crisis‘ the big 6 banks could generate enough capital in a few quarters to cover losses.

If Canada were to experience a U.S.-style housing crisis, with house prices falling by up to 35 per cent, mortgage lenders including the country’s big six banks could lose nearly $12 billion, according to a new report from Moody’s Investors Service.

CMHC would also take a hit of about $6 billion if they challenge and reject claims, but if they decided not to they would take about half the loss as it would be more evenly split between the banks and CMHC.

You probably don’t have to worry about a US-style nationwide housing crash, because we have a different mortgage market that is explicitly backed by the government. The main concern would be rate increases and job losses as Canadian debt loads continue to increase:

There was almost $1.6 trillion in mortgage debt outstanding at the end of March, including home equity lines of credit, more than double the amount outstanding 10 years ago.

Read the full article over at the Financial Post.

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[…] –Blame Ottawa –Blame the ALR –Blame immigration –Blame hype –Blame empty homes –Blame early retirement –Blame tax dodgers –Blame yourself […]

franko
Member
franko
Regarding “it’s the ALR stupid” Wondered when this topic would rear it’s head as it plays a HUGE role in the outrageous cost of SFRs. It may have sounded like a great idea 40 years ago when starter homes around Van could still be purchased for $50k, and the market was still absorbing the result of mega-subdivisions in Richmond and Coquitlam. While it remains a touchy issue, could anyone imagine how such an idea would have been received today? The problem with government legislation is that it usually turns out to be permanent rather than being adjusted for changing circumstances. There are hundreds, and probably thousands of small farms that may have been viable in the 70s, but can no longer function economically today. Many of them are now split off by selective rezoning, and have been rendered useless by… Read more »
Tim
Guest
Tim

Sorry, this is bullshit.

Vancouver alone adds housing units at a faster rate than it adds population, and has over 20 years of zoned housing left to build out.

Its_the_ALR_stupid
Guest
Its_the_ALR_stupid

You have to distinguish between ‘all housing units’ and ‘single detached units’. Apartment/condo units have been build more or less in line with population growth. Detached have not. Hence the massive divergence in prices.

It’s not complicated.

Best place on meth
Guest
Best place on meth

David Eby’s “Ask me anything” online town hall at noon today on reddit.

https://www.reddit.com/r/vancouver?mc_cid=242b216a52&mc_eid=e46d1d4b50

Many Franks
Member
Active Member
Nominees for Best Display of Bad Judgment? This one’s got some howlers in it. Couple asking for private home sale didn’t disclose they’re realtors “But I guess one little thing we forgot to mention in there is that we are licensed agents,” he said. He said his wife considered mentioning their jobs in the letters, but he encouraged her not to include it because he thought the recipients would see it as a marketing ploy and throw them out. “I want to apologize if anybody took it the wrong way and if anybody would think that we’re trying to take advantage of anybody.” He said the intention was not for marketing, but to connect with the current owners. “We’re kind of devastated… We have buyers that are outbid every day and we see what’s going on and now we’re in… Read more »
southseacompany
Member
southseacompany

“Blame Ottawa for helping to drive up housing prices”, Financial Post
http://business.financialpost.com/fp-comment/neil-mohindra-blame-ottawa-for-helping-to-drive-up-housing-prices

” One option missing from the debate is not an intervention but a reduction — and ultimately the elimination — of a longstanding interference in the market by the government that has likely been a significant contributor to whatever frothiness housing markets have seen. It’s the subsidy called mortgage insurance.’

Its_the_ALR_stupid
Guest
Its_the_ALR_stupid
I have a question for the group: why does the ALR so rarely get mentioned as a cause of high prices in the region? I get it: low interest rates, Chinese billionaires, CMCH guarantees, and bubble psychology all play a role, but what everyone seems to overlook is the fact that over the past 10 years, nearly zero net single detached houses have been added to the GVRD, and that’s entirely due to ALR restrictions. Meanwhile hundreds of thousands of people have been moved in. It’s simple supply and demand. You have a fixed supply of single detached housing and an ever increasing population, all of which seem to want to live in one. It seems to me you can’t have the ALR, immigration, and affordable single detached houses all at the same time. At most you can have any… Read more »
Zero Down Forty
Guest
Zero Down Forty
Lots of land available for single family lots. British Pacific holds thousands of acres on the side of Hollyburn and only develops a little at a time. BC Govt has sold/is selling nearly 600 acres on Burke mountain, most going to Wesbild. Genstar has 1,200 acres holdings out in Mission. All out of the ALR. And all being only slowly developed. Developers need a lot of financing to develop land/housing and there are no pre-sales in single family, so banks are only going to back a little at a time. And, hey, why flood the market and drive prices down? Plus, SF is now very expensive and there is not a lot of activity in the plus $ 1million market. Last year 80% of sales in Metro were for homes worth less than $1 mil, hence the focus on condos… Read more »
Its_the_ALR_stupid
Guest
Its_the_ALR_stupid

I actually think that proves my point about the ALR. At the moment, the available non-ALR land is controlled by a very small number of land holders, and for reasons we can only guess they have decided to severely limit the speed at which it’s developed. My best guess is that’s for the reasons you mentioned – holding on to limit supply and thus increase prices.

But if the ALR were abolished tomorrow (something I’m not necessarily advocating btw), we would likely see an epic tsunami of new SFH built in the next few years because with more competition (i.e. land owners) it’s much harder to control supply using monopolistic practices like that.

Zero Down Forty
Guest
Zero Down Forty

There are only so many development firms here in Vancouver. It takes a lot of money and a team of experienced people to do major developments. Just releasing land won’t automatically create dozens of new development firms. It would be the same firms buying up the land and developing. Perhaps over time a few more would build themselves up, but it would take a while.

Newcomer
Member
Newcomer
The thing about the ALR is that, while it is very stupid and wasteful and has a major negative impact on the environment, it’s not a big deal. Vancouver has tons of space. If you visit cities that actually don’t have space, like London or Paris or New York, or even Toronto for that matter, you will be immediately struck, on returning to Vancouver, by how much land is just sitting around. There is tons of industrially zoned land sitting empty. There are car dealerships in the middle of town. Houses perch in the middle of lots. We park on the streets. From an international big-city perspective, the place is practically deserted. Which is great. It is as it should be. This is a small city in the mouth of a vast valley, with no industry. You would expect it… Read more »
Hyper-mega-Bull
Member
Hyper-mega-Bull

it’s right of you to bring it up. but it’s a topic that gets almost no traction with moron vancouverites.

the region is in this ridiculous situation for a reason. vancouverites are stupid. they are too stupid to see sinofication before it’s too late and they are too stupid to see that the ALR doesn’t work. and the are so stupid that they think that giving Gregor Bethune Robertson’s developer friends licence to build $1000 per sq foot condos is the solution to all their problems.

Tim
Guest
Tim

The ALR just makes you guys drool at the potential profits eh?

StupidityCheck
Guest
StupidityCheck

Shut up, you idiot.

patriotz
Member

“nearly zero net single detached houses have been added to the GVRD, and that’s entirely due to ALR restrictions.

patriotz
Member

The ALR wasn’t created 10 years ago, it was created over 40 years ago, and clearly there has been a huge increase in the SFH stock since then. What we have had over the past 10 years is a historically high increase in housing prices at the same time as historically low population growth, i.e. a bubble. That’s the reason for the shift away from SFH, developers obviously are going to build something that they can sell.

Its_the_ALR_stupid
Guest
Its_the_ALR_stupid

I never said the ALR was created 10 years ago. I said there has been no net new single houses added to the supply over the last 10 years.

40 years ago when the ALR was created, there was plenty of non-ALR land left on which many single houses were built. And built they were. But since that time we’ve reached the built-up boundary of the ALR and hence have stopped building a material number of new detached houses.

But don’t take my word for it – just look at the data.

http://www.juneconway.com/static/media/med/1603_2371ba1f_HousingStock.JPG

Like I said:
-ALR
-Population growth
-Cheap houses

Choose any 2.

Tim
Guest
Tim

So do you work in the development industry?

Its_the_ALR_stupid
Guest
Its_the_ALR_stupid

No. Do you work in the irrelevant comment industry?

StupidityCheck
Guest
StupidityCheck

It’s a sacred cow here. Everyone’s afraid to touch it. I agree it’s a big part of the problem, hopefully people will wise up one day.

southseacompany
Member
southseacompany

“What if low interest rates are the problem, not the solution?”, Financial Post

http://business.financialpost.com/fp-comment/what-if-low-interest-rates-are-the-problem-not-the-solution

“In most walks of life, it’s pretty obvious that if what you’re doing isn’t working, you should try something else. In the world of central banking, however, the strategy has been to do more of what isn’t working, providing trillions of dollars and euros of liquidity via quantitative easing and even sending official interest rates in some countries into negative territory.”

CanNeverThinkOfAGoodName
Member
CanNeverThinkOfAGoodName

http://vancouversun.com/news/local-news/west-end-real-estate-takes-off-on-value-of-densification-plan

I’ve heard for a long time that the west end would get developed and the current buildings turned into taller ones, but the way this is being handled does not leave a good taste in my mouth. Why not leave it to owners to decide whether or not to develop their spot of land. What does it even mean to own if a developer, eyeballing the thing, can get owners pushed out.

YLTNboomerang
Member

Just flew in from Seattle today, I sooooo want to move there now! But that is not the point of my post. I wanted to take a photo of this add just past customs but I know they don’t want cell phones used there, the massive add was almost all in Chinese except for the phone number and the words: “Immigrate to Vancouver in 6months”

I swear, they put these words in English just to piss off the locals.

Tim
Guest
Tim
Sellnoworbeprucedin4evah
Guest
Sellnoworbeprucedin4evah

I sooo want to move there too. Can they put in a program for displaced Canadians ?!? 🙁

Combat roach
Guest
Combat roach

Greedy fuckers, there is absolutely nothing attractive about Chinese except the fact that they have money right now. Otherwise who sane would build society or community with them?

paulb
Member

New
387
Sold
420
TI:8615

http://www.paulboenisch.com

Combat roach
Guest
Combat roach
Sellnoworbepricedin4evah
Guest
Sellnoworbepricedin4evah

Data produced by the Real Estate Board …

Combat roach
Guest
Combat roach

For bankers, the smell of real estate profit in Vancouver is being overwhelmed by whiff of something worse

http://www.scmp.com/news/world/united-states-canada/article/1979084/bankers-smell-real-estate-profit-vancouver-being

StupidityCheck
Guest
StupidityCheck
Best place on meth
Guest
Best place on meth

I hope it’s not the whiff of excrement on the sidewalks, otherwise we’ve truly lost this city.

Combat roach
Guest
Combat roach

Looks like Vancouver got some serious competition. What will BC government do now, get on the plane to some trade/marketing mission?

“Last year, 7.5 million Chinese traveled to Thailand more than any other nationality. Asian Review says: “Sales to foreigners in Thailand surged 140% last year, with Asian buyers accounting for 80% of the total.” Hong Kong, Singaporean & Mainland Chinese investors have flocked to Thailand taking advantage of the depressed Thai Bhat, enjoying exotic holidays and investing in real estate which offer attractive returns. ”

http://www.prnewswire.com/news-releases/global-edge-investments-see-thailand-real-estate-demand-soaring-300287721.html

Best place on meth
Guest
Best place on meth

Those would be condos, as Thailand does not allow foreigners to buy houses or land – which is fortunate for them or their country would be scooped up like shrimp on a buffet.

http://shanghaiist.com/2016/03/19/thai_media_slams_greedy_tourists.php

Best place on meth
Guest
Best place on meth

Just noticed the comments:

A netizen from Fujian wrote, “Us mainlanders act like locusts abroad, no matter where we go, not a blade of grass grows.”

Hey, someone in that shitty country who actually gets it, unlike the brainwashed clown on this blog who makes excuses for rapacious, barbaric behaviour.

ostritch
Member
ostritch

Meth is on fire 2nite.

StupidityCheck
Guest
StupidityCheck

That guy from Fujian is clearly a racist scum!

Combat roach
Guest
Combat roach

http://ei.marketwatch.com//Multimedia/2015/07/07/Photos/ZH/MW-DP612_chinab_20150707185656_ZH.jpg?uuid=7cff9f28-24fb-11e5-b47e-c8844fb5d6d3

After China fraud boom, Nasdaq steps up scrutiny of shady listings

“As a global exchange we need to be focused on determining if any of the key players are from places subject to U.S. sanctions and are legally obligated to take that into account, along with anti-money-laundering rules.”

http://www.marketwatch.com/story/after-china-fraud-boom-nasdaq-steps-up-scrutiny-of-shady-listings-2016-06-20

Combat roach
Guest
Combat roach

And yet space claims they aren’t scumbags and criminals by default…

StupidityCheck
Guest
StupidityCheck

He gets 0.5 RMB for every post. That why he so beezee!

Best place on meth
Guest
Best place on meth

He should get a raise, the fucker’s been working hard toeing the party line, defending disgusting behaviour and promoting the motherland.

Also, he should be deported.

Spacecase
Guest
Spacecase

HMBull.. I think it’s clear that we are at the delusion/euphoria phase of the bubble. The suspect lending occurring now is rampant at the lowest rates in history. 30% + are rushing in with less than 10% down and will kill the market for everybody in the years to come. This is a classic bubble and even somebody as clueless as Space can see what is coming. This springs rush to get in pretty much put the nail in the coffin.

space889
Member
space889

Scotia bank has been pulling back in new mortgage lending in lower mainland and likely other big 5 banks too.

Sellnoworbepricedin4evah
Guest
Sellnoworbepricedin4evah

Not entirely. Depends on your net worth. They are pulling back on ‘poorer’ folk for sure. Not on HNW clients. At all.

Oracle
Guest
Oracle

No one is buying with anything less than at least 20% down. High end being bought with cash. 90% of detached homes in Vancouver are over a million. No CMHC needed.

You’ve drank the koolaid if you think this boom is due to CMHC.

Hyper-mega-Bull
Member
Hyper-mega-Bull

>rushing in with less than 10% down

nope.

For CMHC-insured mortgage loans, the maximum purchase price or as-improved property value must be below $1,000,000

average price for a detached house in GREATER vancouver is over $1 million.

vangrl
Member
vangrl

and 60% of uninsured mortgages have amortization rates higher than 25 years

Shut It Down Already
Guest
Shut It Down Already

Which means some cost less than one million, by definition.

Oracle
Guest
Oracle

Space:

Of course most people here aren’t racist. I’m South Asian and I am against open immigration from South Asia and Asia. Big business is behind this charade.

With respect to Vancouver, it’s not the Chinese immigrants to blame. Far from it. It’s our politicians and the bureaucrats (put in positions of power by big business to influence policy) that are to blame.

Uncontrollable Immigration does not benefit those who do not own housing and/or those who work for a living in an unprotected field.

BubbleTea
Guest
BubbleTea

Having these Chinese millionaires in Canada does nothing for our economy and our way of lives. They do not create jobs except for Chinese Restaurants and Lambo dealers. They do not pay taxes and takes advantage of our social systems. They drive cost of housing through the roof for people living here. They love to show their wealth which is not earned in Canada but from corruption or from the backs of pleasant back in China. Banned this specific group of immigrants.

space889
Member
space889

I’m not saying you personally, though I don’t agree with a lot of what you say. However, you can’t deny that 80% of so called bears, lead by BPOM & rest of team, do blame Chinese for everything and no bones of their hate and racism.

Oh wait, I forgot….they aren’t racists cuz Chinese isn’t a race and they only hate about 1 Billion Chinese from a particular region, not every Chinese on the planet.

CanNeverThinkOfAGoodName
Member
CanNeverThinkOfAGoodName

What’s 1% of 1 billion, Space?

BubbleTea
Guest
BubbleTea

“SFU professor Josh Gordon has released a detailed study that says stating the facts about Chinese buyers is not racism.”
Do you think pointing out that many purchases of B.C. homes are being made by wealthy foreign investors is “racist”?
Poll: Tuesday, June 21, 2016
No. 94% 471 votes
Yes. 5% 26 votes
Not sure. 1% 6 votes
http://vancouver.24hrs.ca/2016/06/20/china-syndrome-paralyzing-bcs-politicians

space889
Member
space889

Stating most of the luxury buyers is Chinese is not racism. Calling 1 billion Chinese people locust, scum, criminals, etc simply because they happen to be born in a particular country is. If you can’t see the difference between two and use that as a justification for behavior on this blog then you are just a fing idiot & yes, a racist.

Combat roach
Guest
Combat roach

Most of the luxury buyers of anything in the foreign countries are Chinese scumbags and criminals. This is a fair statement and not racist at all. Just look what is driven in Vancouver and by whom? No way those dickheads would make that kind of money in a regular way. They can even hardly get into those cars and let alone to drive them.

space889
Member
space889

You obviously know right? Given that you have made fortunes and run business in that part of the world. Every single rich person in China must absolutely be a corrupt scumbag. No possible alternatives.

CanNeverThinkOfAGoodName
Member
CanNeverThinkOfAGoodName

I don’t know Space. It’s usually a poor idea to generalize about people.
However… if you wanted to propose a generalization having to do with rudeness, and show-offy cars, and not knowing the rules about right-of-ways, and speeding through laneways, and hogging space on the road by size of car and distracted driving, and general over the top crass materialism … I will take it under consideration. Is there a group that fits that description in your view?

CanNeverThinkOfAGoodName
Member
CanNeverThinkOfAGoodName

What do you say, Space? Gangsters and other lawbreakers?

Best place on meth
Guest
Best place on meth

Correct.

Best place on meth
Guest
Best place on meth

They weren’t born criminals, they were raised that way.

StupidityCheck
Guest
StupidityCheck

Shut up, you locust.

space889
Member
space889

Right back at you racist scum.

StupidityCheck
Guest
StupidityCheck
southseacompany
Member
southseacompany

“O’Leary on real estate: ‘It self corrects, we always survive'”, BNN video

http://www.bnn.ca/Video/player.aspx?vid=887858

“Kevin O’Leary weighs in on the subject of Canada’s red-hot housing market and potential issues that could be created by government intervention.”

southseacompany
Member
southseacompany

“He (Morneau) knows that if they try to manipulate this market and it corrects, they’ll own it. It’ll be all over their suits.”

patriotz
Member

The bubble itself has been created by government intervention. What he really should be saying is if the government eases off on the juice, but his conclusion is right.

patriotz
Member

Oh I should add that Canada’s housing market is not “red-hot” (ask someone in St. John’s for example), but BNN comes from Toronto which thinks it’s Canada.

OPENHOUSEMASSACRE
Guest
OPENHOUSEMASSACRE
space889
Member
space889

About time!!!

Hyper-mega-Bull
Member
Hyper-mega-Bull
space889
Member
space889

Care to eat beef in India or pork in ME?

Hyper-mega-Bull
Member
Hyper-mega-Bull

know what else you can’t eat in indian and the middle east?

dogs.

space889
Member
space889

btw, pigs are also closest genetic relative to humans, having even more genetic similarity than various species of monkeys.

Best place on meth
Guest
Best place on meth

Is that why the chinamen were eating each other in the 60’s?

Because they tasted like pork?

space889
Member
space889

No, but at least we are edible, unlike you. Probably not even fit for vermins.

CanNeverThinkOfAGoodName
Member
CanNeverThinkOfAGoodName

That’s such a short time ago. The 1960s.

space889
Member
space889

You know what else is a short time ago? You being born. But good thing there are lots of ways to fix that mistake. Why don’t you take the first step and help make the world a better place?

Best place on meth
Guest
Best place on meth

Now I know why the Japanese killed so many of you.

Best place on meth
Guest
Best place on meth

I know, the Americans were putting men on the moon while the barbarians were eating each other.

space889
Member
space889

While Canadians like you were busy saying, hey, if we wanted to do it, we would do it so much better than those arrogant Americans.

CanNeverThinkOfAGoodName
Member
CanNeverThinkOfAGoodName

Quiet down, Space. Do you have no clue about grace or courteousness or responsible land stewardship or good government? At some point trading insults stops being clever if that’s the only thing you know how to do. There is more to the good life than you can imagine, and more to building a creative, innovative culture than you can imagine.

OPENHOUSEMASSACRE
Guest
OPENHOUSEMASSACRE
space889
Member
space889

And yet I don’t see those in ME / India demanding you Caucasian Canadians stop eating beef or pork. And India at least isn’t calling such practice barbaric, backward, or savage.

oh yeah, Canada is also a big horse meat exporter too.

OPENHOUSEMASSACRE
Guest
OPENHOUSEMASSACRE

Caught On Tape: What Happens In China When You Don’t “Exceed Expectations”Chinese Manager Spanks Employees For Not Working Hard Enough.

http://www.dailymail.co.uk/news/peoplesdaily/article-3650132/Chinese-boss-smacks-employees-BUTTOCKS-huge-wooden-stick-didn-t-work-hard-enough.html

https://www.youtube.com/watch?v=sUw72A_Y1pQ

space889
Member
space889

Seems like some of the bears on this blog could use some of this punishment.

CanNeverThinkOfAGoodName
Member
CanNeverThinkOfAGoodName

You have not exceeded my expectations, Space. You need to go read a book, k? No pictures, just words.

space889
Member
space889

What?? There are non-picture English books? Wow…I didn’t realize that your pathetic culture has surpassed grade 2 level so quickly.

CanNeverThinkOfAGoodName
Member
CanNeverThinkOfAGoodName

I guess it must be the younger people who get paid the .50 rmb for each post someone keeps mentioning, probably as kind of a summer job.

BubbleTea
Guest
BubbleTea

He then spanks them with what looks like a stick. Reports say he later also cut and shaved their hair.

Oracle
Guest
Oracle

Even Garth acknowledged that a 35% crash in Vancouver would bring prices to late 2014 levels.

He further reiterated that a crash is not likely to happen.

Then he said foreign money is a myth.

Then the locals on his site buy it. Hahaha. Got to be the dumbest people on the planet.

space889
Member
space889

Like the bears who continuously refuse to admit they were wrong for 10 years running and that the crash is just around the corner? This year is THE year it will happen? That they will finally be vindicated and get to laughs and mock all those people who refused to listen to their sermons?

Oracle
Guest
Oracle
This game is over. If you don’t have a detached home by now, you are going to become a second class citizen in your own country. The 10 year visitor visa was issued over a million times in 2015. These people are not counted in population stats. All of these people are millionaires. I applied for my extended family overseas, only the millionaires got the 10 year visa. It’s also renewable. Canada has been sold out. Nothing can be done now. Millions of rich folks are gonna come here BUT not pay income taxes. That is for the locals to pay. Unbelievable. That locals take it without a peep. Oh the lot I have that someone was offering me $500,000 over what I paid last year …. $700,000 over now I kid you not.
Rofl
Guest
Rofl

So why don’t you sell it?

Oracle
Guest
Oracle

Because That’s the only real estate I own. Renting otherwise. If I sell, may not be able to get back into market.

I’m of the camp that believes in HAM. If you look at Shanghai prices , then Vancouver could in fact triple in prices from here.

Rofl
Guest
Rofl

That pretty much sums up the bubble mentality right there.

MikeS
Member
MikeS

Got to ask the Federal Finance Minister about their plans. Definitely sounds like they don’t want to make weak markets any weaker with any policy. Says he’s going to have some kind of announcement on Thursday. Made it sound like they (the federal government) can’t control prices.

It was amazing how much people under 35 wanted to talk to me more afterwards, and how those older than that disagreed completely.

Ulsterman
Member

Random anecdote on the crazy state of housing. I’ll be renting a house in San Diego for a couple of weeks this summer from a retired friend. We met today to exchange money for keys. He told me he bought a bungalow in Tswwassen in Nov 2014 because, “I knew prices where heading up and if i didn’t buy before the spring i would get priced out.” Paid $545k. Put 50k in renos into it. Now assessed at $1.1m. Doubled in 18 months. He’s confident when the big, new shopping development is completed and when the new bridge is eventually done, he’ll make a lot more. Who am i, the renter, to argue with the guy who doubled his money?

Rofl
Guest
Rofl

How did he “know” prices were going up? Is he living in the house, or is he another speculator?

YVR
Guest
YVR

He still has the same house. No extra money. Money you can spend.

Shut It Down Already
Guest
Shut It Down Already

Way more than doubled (due to leverage).

But also zero (because he’s not sold yet).