Canada's 'housing bubble' deemed close to bursting

[dleung]

Originally Posted by ssiguy

The family was having dinner the other night and my nephew was damn pissed off. His dislike of the nouveau riche Chinese was palpable. Turns out in the last 4 months,, 3 more of his high school friends had left the province and he said all of them due to the cost of living. He gets tired of the politicians trying to "study" the matter when everyone knows it's due to Chinese money laundering.

He said his friends, like himself, feel both angry and demoralized knowing that the province and city don't care about them or their future but are so exclusively fixated on bringing in foreign money. He said that he and his friends also greatly resent not being able to get into university but they allow in thousands of Chinese students who can buy their way in.

He also dislikes what the situation is doing to himself on a personal level. He is the nicest kid around and abhors any form of racism, sexism, and homophobia but he admits the current situation is effecting his views of the Chinese. He said when he sees the Chinese drive their expensive cars he automatically assumes they bought it with dirty money. When he sees the Chinese he assumes they are xenophobic, homophobic, arrogant, and willing to break any law to bring in the almighty dollar.

He says amongst his friends talking about the Chinese in a derogatory way has become somewhat socially acceptable because the Chinese who make all the news in Vancouver are the money launderers who use Vancouver as a place to park your money for a quick get away. He openly admits that when he thinks of the Chinese in Vancouver, he doesn't think of the hardworking people who have been around for decades but automatically thinks of the nouveau riche money launderers.

He actually summed things up quite nicely.........."the Chinese, like their money, have become a dirty word".

Yes... your "nephew"

As quotable in great detail as always, just like with your "brother", "sister in law", "neighbour", etc. It's ok, you don't need fake anecdotes! We won't blame you for having those feelings!

[ssiguy]

Yes, I'm making it all up just for you. All the kids are staying because the wages are astronomical and the housing is so cheap that they have just so many options that it overwhelms them so they leave so they can have fewer options.

[whatnext]

Originally Posted by geotag277

I don't buy that the government is afraid to interfere due to some pending implosion, as if simply by wiggling their pinky finger the entire market would collapse. I think it's just a case of politicians being politicians, in that the general population in Vancouver cannot agree what exactly to do, and it creates an environment where the political capital and willpower is just not there.

You clearly have a case where more density everywhere is needed, yet you have guys like whatnext railing against the entire concept of removing single family housing stock because he thinks everyone should live in his basement suite and the mere thought of condo/apartment/townhome living is "second class".

Then you have guys like whatnext, who complain about foreign investment driving up prices, and yet can't seem to stop talking about that rude Chinese guy down the street who happened to raid the community garden.

It's a politically schizophrenic atmosphere that lends itself directly to inaction. Really, residents of Vancouver should be getting behind every idea - higher density, foreign capital restrictions, affordable housing, basement suites, rezoning - everything should be on the table in all areas. It needs to be a united front.

As it stands, there is zero political fallout from ignoring the problem - as will be proven in the next election.

So you're resorting to lies now, to try to deflect the conversation. Or have you conflated dleung's made up anecdote with something I said?

Shouldn't you just come clean on why you're so defensive? At least dleung doesn't hide behind and ambiguous pseudonym. The sad thing, as ssiguy refers to, is that more people in the Chinese Canadian community to speak up against the serious money-hiders who are wreaking this havoc on Canada's housing market. However, for every Eveline Xia there's someone like you trying desperately trying to discredit, dodge and deflect. The result is that all get tarred with the same brush.

[Drybrain]

Originally Posted by logan5

Montreal has the luxury of being able to grow outwards in all directions. It has 2 x more land than Toronto, which can only spread outwards in roughly a north easterly and north westerly direction. And it has more than 4 x the land that Vancouver has, which can only grow in a south westerly direction. It makes sense that Montreal is easily the least expensive city to buy housing out of the big 3 in Canada.

This foreign investor thing is hog wash.

I'm responding to this a few days late, but:

Hog wash?

Vancouver's prices can't possibly be explained by land constraints alone. They're far, far, far too high compared to the city's economic fundamentals.

As far as Montreal, sure, it looks like it has huge room to grow and sprawl so that might keep prices down. But that's not how Montreal is developing. Half the population lives on one small island, which has basically zero land left for greenfield construction. Yet compared to Toronto and Vancouver, prices are low and increasing only modestly, even right in the most central parts of the city.

Besides that, the Montreal metropolitan area is more densely populated than the Vancouver metro area. So the idea that greater Montreal is cheap due to abundant suburban sprawl, and metro Vancouver is expensive due to land constraints, doesn't really square.

[Acajack]

Originally Posted by Drybrain

I'm responding to this a few days late, but:

Hog wash?

Vancouver's prices can't possibly be explained by land constraints alone. They're far, far, far too high compared to the city's economic fundamentals.

As far as Montreal, sure, it looks like it has huge room to grow and sprawl so that might keep prices down. But that's not how Montreal is developing. Half the population lives on one small island, which has basically zero land left for greenfield construction. Yet compared to Toronto and Vancouver, prices are low and increasing only modestly, even right in the most central parts of the city.

Besides that, the Montreal metropolitan area is more densely populated than the Vancouver metro area. So the idea that greater Montreal is cheap due to abundant suburban sprawl, and metro Vancouver is expensive due to land constraints, doesn't really square.

You're right on the mark.

Montreal is generally cheaper due to linguistic, political, demographic and economic factors. Not so much because of land use and availability.

[lio45]

Originally Posted by Xelebes

(Someone who works in finance here. . *ahem*)

You are missing the point of being "debt-free". "Debt-free" does not mean that you are sitting on cash. "Debt-free" means you have the option of leveraging your assets. Leveraging assets is only meaningful if you plan to do something more than what you are already doing with what you have. If you are getting as much utility out of your assets as you want, being debt-free is an enviable position.

No, you're the one missing our point. If you're debt-free and sitting on unleveraged assets, you're clearly not managing your possessions intelligently. It's not the end of the world (you can still live a happy life refusing to swap $10 for $20 because you're content with only $10) but it's definitely not something one should brag about hinting that they're the ones doing it right!

[lio45]

Originally Posted by someone123

Doesn't this advice assume a few things though?

- You can tell what is or isn't risky, and you have the means to ride out rough patches without going bankrupt (I'm guessing you hold valuable assets compared to that 7 figure debt; if not, have you really gotten somewhere yet?). History demonstrates that most people don't have reliable special information (some do well randomly, but they can't repeat that over and over), and the riskiness is generally speaking priced into the investments.
- The opportunity cost of putting your labour into something else isn't that high. I bet your good property investments took some work.
- You can get significant amounts of credit with interest lower than the reliable returns you will get.

I see how it can make sense to take on debt even if you have assets (i.e. don't always randomly sell stuff off to avoid debt at all costs) but for most people I suspect this is niche advice compared to the bread and butter "don't spend too much". I don't think the typical Vancouverite for example would be better off if only they'd leverage themselves a bit further.

Most people who say that debt is bad and being debt-free is good are mostly thinking about consumer debt, which I think really is bad. The norm here is for people to spend beyond their means and to suffer from a lower long-term living standard than they otherwise would have been able to afford as a result.

Sure, for anyone who's at the level where he'd benefit from the advice "don't spend more than you earn buying stuff you don't need", I suppose you can make it more simple with a broad "debt is bad". In fact, I agree that any debt that's the result of "spending" can be considered bad.

But leverage is a great tool, and generally speaking, everyone who knows what they're doing uses it at least to some degree. So, debt is good. I trust you get the difference, but for anyone who doesn't, then yes, just stick to "debt is bad" and probably even "just pay cash for everything, and if you can't buy it yet, then don't".

[Xelebes]

Originally Posted by lio45

No, you're the one missing our point. If you're debt-free and sitting on unleveraged assets, you're clearly not managing your possessions intelligently. It's not the end of the world (you can still live a happy life refusing to swap $10 for $20 because you're content with only $10) but it's definitely not something one should brag about hinting that they're the ones doing it right!

That only applies if one is ideologically wedded to the superiority of debt-free. It is is still wise and intelligent to be debt-free. What you are missing from the whole discussion is utility. If you are taking on debt and have little use for it, then that is unwise any way you look at it. If you take on debt to purchase an item that requires more utility than you can handle, then that is unwise any way you look at it.

[someone123]

Originally Posted by Drybrain

Vancouver's prices can't possibly be explained by land constraints alone. They're far, far, far too high compared to the city's economic fundamentals.

The population in the Vancouver area increased by about 1% last year but detached housing prices are up about 30%.

[geotag277]

Originally Posted by someone123

The population in the Vancouver area increased by about 1% last year but detached housing prices are up about 30%.

Every region that experiences land shortages fuelling housing prices starts seeing massive gains once land shortage becomes predominant. It is not a new phenomenon. See: London, New York, San Francisco, Hong Kong.

The main difference with Vancouver is that it has a lot less land to begin with.

You will start seeing this in Toronto very soon. In fact you are already seeing it.

[someone123]

Originally Posted by lio45

Sure, for anyone who's at the level where he'd benefit from the advice "don't spend more than you earn buying stuff you don't need", I suppose you can make it more simple with a broad "debt is bad". In fact, I agree that any debt that's the result of "spending" can be considered bad.

Here in BC the average household savings rate has been negative for well over a decade now. A lot of that is probably due to rising real estate values that people borrow against. If real estate keeps going up that is okay. If not, a lot of people will find that they have no retirement savings.

Young people who don't own houses here also seem to have terrible personal finances for the most part.

Maybe we are at that magical inflexion point where the lack of available land is going to push housing prices into the stratosphere and everything will be sort of fine for some people.

But leverage is a great tool, and generally speaking, everyone who knows what they're doing uses it at least to some degree. So, debt is good.

I think we mostly agree. I think debt is good if it helps you to make money or avoid losses, and generally bad if used only to temporarily increase consumption. Canadians have a lot of not so great debt right now, and people in general do a bad job of assessing risk so it can be hard to tell sometimes if a use of debt is a good one. There's a lot of disagreement over BC real estate right now for example.

[whatnext]

Originally Posted by geotag277

The vast majority of people who refer to modern Chinese money laundering are in fact referring to the draconian capital flight law that says any Chinese citizen cannot move more than 10k of their own money abroad. Any one who does this is viewed as a money laundering criminal in the eyes of guys like whatnext.

Nevermind in the same breath they will also condemn the Chinese regime as being the most oppressive in history, this one tiny law kinda sorta works in their favour for their own political gain and so it is of the upmost importance that China (and Canada) properly enforce this draconian capital restriction.

Cognitive dissonance at it's finest.

First, you ignore Canada also has laws about how money enters the country. They are just pathetically enforced.

Second, if you move money out of China, while at the same time running a business there, you're kind of a hypocrite. As I said, make the decision, in Canada or out, no in between.

Still waiting to hear why you feel it is so important for Canada to give Chinese nationals a way to stash their money here.....

[geotag277]

Originally Posted by whatnext

First, you ignore Canada also has laws about how money enters the country. They are just pathetically enforced.

You seem a bit confused. There is no restriction on the amount of money that you can bring into Canada from another country. The only thing you must do is declare it at the border.

Second, if you move money out of China, while at the same time running a business there, you're kind of a hypocrite. As I said, make the decision, in Canada or out, no in between.

Indeed. So if you run a business in Canada, and own a vacation home in Phoenix, you are a hypocrite. Words can mean whatever whatnext wants them to mean I guess.

Still waiting to hear why you feel it is so important for Canada to give Chinese nationals a way to stash their money here.....

I'm still waiting to hear why you tolerate the massive capital outflows of Canada to the USA. We need to stop Canadians from spending their money outside the country.

[eternallyme]

Originally Posted by Drybrain

I'm responding to this a few days late, but:

Hog wash?

Vancouver's prices can't possibly be explained by land constraints alone. They're far, far, far too high compared to the city's economic fundamentals.

As far as Montreal, sure, it looks like it has huge room to grow and sprawl so that might keep prices down. But that's not how Montreal is developing. Half the population lives on one small island, which has basically zero land left for greenfield construction. Yet compared to Toronto and Vancouver, prices are low and increasing only modestly, even right in the most central parts of the city.

Besides that, the Montreal metropolitan area is more densely populated than the Vancouver metro area. So the idea that greater Montreal is cheap due to abundant suburban sprawl, and metro Vancouver is expensive due to land constraints, doesn't really square.

I doubt Greater Montreal is denser than Greater Vancouver. That may be true looking at CMA boundaries, but much of the land in Greater Vancouver is not developable (mountains), while all land around Montreal is. If you look at the built-up areas, I would think Vancouver far outdoes Montreal. Also there is still greenfield available to build even on the Island of Montreal (particularly in the west but also in the east).

[Acajack]

Originally Posted by eternallyme

I doubt Greater Montreal is denser than Greater Vancouver. That may be true looking at CMA boundaries, but much of the land in Greater Vancouver is not developable (mountains), while all land around Montreal is. If you look at the built-up areas, I would think Vancouver far outdoes Montreal. Also there is still greenfield available to build even on the Island of Montreal (particularly in the west but also in the east).

These are good points but that's not the main reason that Montreal is cheaper than Vancouver.

The fact that the central part of the urban area is on an island and that the number of crossings are limited and extremely congested acts as a deterrent to suburban sprawl to some degree in the Montreal area.

So that's a "physical" barrier as well.

Montreal is not like a classic sprawlsville on the plains with no wide river crossings and unlimited flat land that's easy to develop and connect to the rest of the city with a simple strip of asphalt.

[Drybrain]

Another reason that I don't really buy the "there's no more land in Vancouver" explanation for high housing prices is that most of the Vancouver metro area looks something like this.

The region is chock full of single-family neighbourhoods just begging to be rezoned to a higher density. Even some duplexes and stacked townhouses would be great.

We hear a lot about demolition of heritage houses in places like Shaughnessy, and that's a shame, but the huge majority of the region and even the city proper is full of dull suburban houses that no one at all would miss if they were knocked down and the lots subdivided.

It's not a land-supply problem as much as a land-use problem.

[Drybrain]

Originally Posted by eternallyme

I doubt Greater Montreal is denser than Greater Vancouver. That may be true looking at CMA boundaries, but much of the land in Greater Vancouver is not developable (mountains), while all land around Montreal is. If you look at the built-up areas, I would think Vancouver far outdoes Montreal. Also there is still greenfield available to build even on the Island of Montreal (particularly in the west but also in the east).

Fair point. Still, large parts of Montreal's CMA consist of water, and the CMA extends further from significant suburban development than Vancouver's.

Point is that Vancouver isn't some hyper-dense megatropolis that can't possibly accomodate more people within its land area. Hong Kong comparisons are quite a stretch.

[Acajack]

Originally Posted by Drybrain

Another reason that I don't really buy the "there's no more land in Vancouver" explanation for high housing prices is that most of the Vancouver metro area looks something like this.

The region is chock full of single-family neighbourhoods just begging to be rezoned to a higher density. Even some duplexes and stacked townhouses would be great.

We hear a lot about demolition of heritage houses in places like Shaughnessy, and that's a shame, but the huge majority of the region and even the city proper is full of dull suburban houses that no one at all would miss if they were knocked down and the lots subdivided.

It's not a land-supply problem as much as a land-use problem.

There isn't a city in Canada that doesn't have an appreciable amount of sprawl on its outskirts. This includes Vancouver and Toronto.

[mistercorporate]

There are 4 major new investment sources: China, Russia, India and UAE in that order. Their major foreign economic investment destinations are the US, UK, Canada, Australia, NZ, in that order. Notice something they have in common? Thats right, they speak English primarily.
Their major foreign recreational investment destinations are the Meditteranean, South East Asia and the Black Sea coast, in that order. What do they have in common? Warm weather or rich culture. Montreal isnt competing with Toronto and Van, its barely on the radar for these foreign investors and geographic factors encouraging sprawl dont register either. Its competing with the Cote-fricking-d'Azure and dominating the franco foreign real estate investment flows into Canada.

[ssiguy]

The thing that discredits this idea that prices are high due to land restraints is "who is buying these houses"?

Just because Vancouver has less land available doesn't mean their boss will give them a raise. The maximum amount allowed by CMHC qualifications is the same across the country so how are all these Vancouverites affording these million+ homes?

BC has had a negative savings rate every year this millennium so they sure aren't saving the down payments.

Certainly many Vancouverites have money due to being able to "cash out" but who is buying those homes that allow them to do it?