Canada's 'housing bubble' deemed close to bursting

[lio45]

Originally Posted by Acajack

Ce ne sont pas les boomers qui ont fait monter les prix à partir de 1998 environ. La plupart d'entre eux étaient dans la cinquantaine avancée à l'époque et commençaient à vouloir se départir des maisons dans lesquelles ils avaient élevé leurs familles.

Ce sont les générations X et Y qui ont fait exploser le marché. Ça leur a pris du temps avant d'avoir des bons emplois, mais quand c'est arrivé ils ont acheté des propriétés en masse. Il y avait aussi les immigrants.

Dernièrement, je dirais que la hausse (depuis 10 ans environ) est principalement due à la baisse incroyable des taux d'intérêt.

"Ce que les gens peuvent se permettre de payer pour une propriété" est d'abord et avant tout défini en tant que montant du paiement mensuel.

J'ai beaucoup de loyers à Sherbrooke qui sont maintenant au même niveau qu'il y a dix ans, à cause de l'obligation générale de rester quand même compétitif avec l'achat d'une première maison cheapo. Ça m'est arrivé plusieurs fois de perdre des locataires qui étaient là depuis quelques années et qui aimaient leurs apparts, mais qui ont simplement acheté une maison. Avec des taux d'intérêt comparables à l'époque où j'ai commencé en immobilier (~8%), à mon avis, ces couples seraient encore tous ou presque tous à loyer.

Le taux de vacance pour le locatif à Sherbrooke est d'ailleurs beaucoup plus haut maintenant qu'il ne l'était à cette époque, et ça me semble évident que c'est à cause de ça.

[lio45]

Originally Posted by Docere

A lesson about online debating.

Never use "you've been bankrolled by mommy and daddy" as an "argument." First of all it's an ad hominem attack. Second of all, the answer will always be "I'm extremely successful, due entirely to my own talent and efforts."

It's not like this is an anonymous online discussion board or anything.

There are indirect ways to counter-check the accuracy of what someone is saying on here, if they've been here long enough.

[rbt]

So, we're nearly 5 years into this thread. "Close" clearly wasn't the right word to use at the time.

[Stingray2004]

Originally Posted by ssiguy

Many new towers in Vancouver don't include the number 7 because it's bad luck for the Chinese and conversely nearly all homes for sale in Vancouver end with an '8' as it's good luck in Chinese.

Better get your facts straight. Firstly, it's the number "4" that is bad luck for ethnic Chinese in Chinese culture... not "7". And you are referring to Feng Shui, which was all the fad and media focus back when the Hong Kong invasion started to happen circa 1987 onward. IOW, changing one's municipal address to either delete a "4" or add an "8" if permissible.

Don't hear anything about that these days.

Originally Posted by ssiguy

I'm in White Rock and there is a full scale Asian invasion taking place and homes are being torn down at a dizzying rate and the Chinese population is soaring. The other day I saw a for-sale sign and it was sold but instead of having a 'sold' sticker across it it had a 'too late'.

I am in White Rock as well ... and you have consistently made so many illogical statements referencing this area that I sometimes wonder whether ya even reside here. Or live in an alternate universe.

Firstly, I hardly see any "homes being torn down" in WR and those that are are replacing unsightly older stock. And as I have also stated previously, folk moving into my hood have AB and ON license plates in the driveway. And some are also moving from Van City proper.

And I don't see any indication that the "Chinese population is soaring" in WR. Conversely, WR has a large contingent of South Koreans that reside here in order to school their kids in the public school system. Always been the case. Obvious that ya can't tell the difference between a South Korean and an ethnic Chinese.

Finally, those "too late" stickers on sold signs have been around here for ages. Just another marketing gimmick for a "sold" sticker. Sigh.

[someone123]

Originally Posted by ssiguy

If a house in Halifax is worth 250k and there is a 10% drop then they are in negative equity by $25k which no one likes but the home owner would be willing to live with as over the long term it will rise again.

Halifax-Vancouver is an interesting comparison. From an economic perspective (and in terms of geography and natural setting, culture, etc.) the two cities are a lot more similar than most people realise. Population growth is about the same (~1% per year) and I think incomes at this point may be a bit lower in Vancouver; the average Vancouverite may be no more able to afford expensive housing than the average Haligonian.

In Vancouver people point out that there isn't much single family housing construction. Halifax is around 2/3 multi-unit and 1/3 single family dwelling. Vancouver's around 3/4 multi-unit and 1/4 single. Again the numbers are actually very similar, even though people sometimes argue that the multi-unit construction in Vancouver is special. I don't think Halifax really has any land shortages of the kind people talk about in Vancouver relating to the ALR and mountains (Halifax also has water and areas that can't be built on, like most cities).

I'm not saying the cities are identical but some of the things that people think are special about Vancouver are not. On the other hand, my completely unscientific observation is that people in Vancouver tend to be more speculative and think that real estate prices will rise whereas people in Halifax are usually sceptical. I don't think housing prices in Halifax have gone up much in real terms if you correct for the quality of new construction, which is getting nicer and nicer (driven by rising incomes and low interest rates?). Vancouver prices of course have a proven track record of growing at a rate much higher than inflation.

[cornholio]

Interesting article that points out how existing homeowners are being hurt. For those that think all homeowners are loving the speculative debt driven foreign cash fueled bubble.
http://business.financialpost.com/invest...-existing-homeowners-cant-afford-to-move

Skyrocketing housing prices in Toronto and Vancouver are now preventing even existing homeowners from being able to upgrade into a new home.

While much has been made of the plight of first-time homebuyers who have to contend with lack of affordability in both markets, TD Economics notes that higher prices are now locking out those who bought entry-level homes years ago and are hoping to upgrade.

This has further worsened the supply of entry-level homes in both markets, exacerbating what TD calls “buyer gridlock.”

She also pours cold water on the argument that both cities are sellers’ markets. While the sales-to-listings ratio shows that homes are readily bought up in Toronto and Vancouver, price appreciation for entry-level homes have lagged the gains for trade-up homes, worsening the gridlock.

This is readily seen in the condo market, where entry-level buyers have increasingly found themselves. Price gains for condos have consistently lagged appreciation for detached homes by a wide margin in recent years.

Most worrying, when looking at incomes-to-prices, Caranci notes that ratios in both cities are beginning to mirror those seen during the peak years of the U.S housing boom.

Finally, there are the economic stability risks that all of this has created. At no time in history have Canadians ever been so indebted.

“This too eats into future savings for retirement and carries risk for the broader economy that the next economic down cycle will be more extended than previous ones,” said Caranci.

[ssiguy]

Stingray..........you are right and I'm glad you caught my mistake as it is the#4 as apparently it is associated with the word 'death'.

As far as Asians I see a LOT more Asians in the area and when my brother was selling his place she said {she has been in the biz for 25 years} that it is only in the last 2 years where the number of Chinese buyers has soared. My brother's place {sold at $1.6} was shown just 4 times and one was to an East Indian and the other 3 to Chinese. All 4 parties wanted to know the legality of tearing down the house & trees. The house is only 30 years and in good shape but it's days are certainly numbered.

There are a lot of housing demolitions going on in the area especially of 1960s & 70s homes in Surrey due to their land size and cottage type homes in White Rock due to their views.

As far as the "too late" sign. I have never seen one before. It was just off Mac's on North Bluff on the way to Ocean Park.

[Pinion]

Originally Posted by someone123

Halifax-Vancouver is an interesting comparison. From an economic perspective (and in terms of geography and natural setting, culture, etc.) the two cities are a lot more similar than most people realise. Population growth is about the same (~1% per year) and I think incomes at this point may be a bit lower in Vancouver; the average Vancouverite may be no more able to afford expensive housing than the average Haligonian.

Is it Vancouver proper that grows 1% per year? I have a hard time believing the metro is growing that slowly.

[geotag277]

Originally Posted by cornholio

Interesting article that points out how existing homeowners are being hurt. For those that think all homeowners are loving the speculative debt driven foreign cash fueled bubble.
http://business.financialpost.com/invest...-existing-homeowners-cant-afford-to-move

Again, this simply makes sense to me. As single family detached homes become more scarce and inventory falls, especially as a % of residents, they will become more and more "out of reach".

And also again, it seems that condo and townhome and multi-family home pricing "stagnating" is a sign that the building of such housing stock is moderating the price increases in the market, so should be continued (and in fact, "over built" to actually reduce prices).

This idea that you buy a condo and upgrade to a house is an artifact of a different age when Vancouver and Toronto were 1/2 the size they are now.

You buy a condo and if you save up enough you can upgrade to a bigger condo. People need to reset their expectations and realize it is not sustainable for everyone to be able to own their own nice little plot of land in Toronto and Vancouver.

Canadians have been so so so slow on the up take for realizing that single family detached housing is not a sustainable solution to our biggest cities (except perhaps Montreal). Another artifact of our overly conservative and behind the 8 ball culture.

[lio45]

Originally Posted by cornholio

Interesting article that points out how existing homeowners are being hurt.

Well, yeah, obviously! But you'll also have to agree with me that it's utter nonsense to qualify that as "being hurt".

Imagine a New Yorker saying "my Brooklyn property has quadrupled in value lately, but the Manhattan property I should normally be graduating to at this stage of my career has sextupled in the meantime, so it's further out of reach than I would have expected. I'm being hurt financially!! Woe is me!"

Yeah, no, we certainly don't have the same definition of what being hurt financially is.

If you can't easily trade anymore your cheap-🞵🞵🞵 cookie-cutter starter Vancouver bungalow that you bought a long time ago and which is currently worth millions for a nicer SFH that's currently worth many more millions (as one used to be able to do), then so be it, but it's STILL been very good financially for you, no question about that. And if you wanted you could trade that cheap bland bungalow for a true mansion in Calgary, Montreal, even Toronto, and have money left over.

[lio45]

Originally Posted by someone123

Halifax-Vancouver is an interesting comparison. From an economic perspective (and in terms of geography and natural setting, culture, etc.) the two cities are a lot more similar than most people realise. Population growth is about the same (~1% per year) and I think incomes at this point may be a bit lower in Vancouver; the average Vancouverite may be no more able to afford expensive housing than the average Haligonian.

In Vancouver people point out that there isn't much single family housing construction. Halifax is around 2/3 multi-unit and 1/3 single family dwelling. Vancouver's around 3/4 multi-unit and 1/4 single. Again the numbers are actually very similar, even though people sometimes argue that the multi-unit construction in Vancouver is special. I don't think Halifax really has any land shortages of the kind people talk about in Vancouver relating to the ALR and mountains (Halifax also has water and areas that can't be built on, like most cities).

I'm not saying the cities are identical but some of the things that people think are special about Vancouver are not. On the other hand, my completely unscientific observation is that people in Vancouver tend to be more speculative and think that real estate prices will rise whereas people in Halifax are usually sceptical. I don't think housing prices in Halifax have gone up much in real terms if you correct for the quality of new construction, which is getting nicer and nicer (driven by rising incomes and low interest rates?). Vancouver prices of course have a proven track record of growing at a rate much higher than inflation.

Vancouver unlike Halifax is at the right spot to be the gateway for people sucking money out of the world's most populated country. That's a huge difference between the two.

In an alternate version of our planet where the PRC is geographically located where Ireland currently is (with no changes in how easily Canada lets potentially unsavory capital flow in), the three pricey global real estate markets of our era would likely be Manhattan, London, St. John's.

[whatnext]

Originally Posted by lio45

Well, yeah, obviously! But you'll also have to agree with me that it's utter nonsense to qualify that as "being hurt".

Imagine a New Yorker saying "my Brooklyn property has quadrupled in value lately, but the Manhattan property I should normally be graduating to at this stage of my career has sextupled in the meantime, so it's further out of reach than I would have expected. I'm being hurt financially!! Woe is me!"

Yeah, no, we certainly don't have the same definition of what being hurt financially is.

If you can't easily trade anymore your cheap-🞵🞵🞵 cookie-cutter starter Vancouver bungalow that you bought a long time ago and which is currently worth millions for a nicer SFH that's currently worth many more millions (as one used to be able to do), then so be it, but it's STILL been very good financially for you, no question about that. And if you wanted you could trade that cheap bland bungalow for a true mansion in Calgary, Montreal, even Toronto, and have money left over.

You make the common mistake many Vancouver-boosters do in making comparisons to NYC. Vancouver is not even remotely in the same class as New York or London. I was born here and trust me it's not even close. More like Denver or San Diego.

What many outsiders don't seem to get is that it is the Chinese money coming down from the top that is causing this housing gridlock. There is literally no other factor in that market. And there is absolutely no logic in saying Metro Vancouverites should be deprived of the dream of owning a SFH because someone thinks the Mainland Chinese are more deserving of owning Canadian property.

[lio45]

Originally Posted by whatnext

You make the common mistake many Vancouver-boosters do in making comparisons to NYC. Vancouver is not even remotely in the same class as New York or London. I was born here and trust me it's not even close. More like Denver or San Diego.

Wow, you couldn't be further from having gotten me correctly! Have you read the post I made 5 minutes before you made yours? Scroll up...

What many outsiders don't seem to get is that it is the Chinese money coming down from the top that is causing this housing gridlock. There is literally no other factor in that market.

Completely agree with you on that, and if you look up my posts for the last few years in this thread you'll see that it's what I've always said.

It's not the first time I point out in this thread that I'm thoroughly convinced that if we could travel back in time a few decades and wave a magic wand to relocate China to the other side of Canada, the completely insane Canadian real estate market right now, the one where a property values graph for the last couple decades would be appearing to be heading "to the moon" and where houses with addresses in 4 would be worth less than normal while houses with addresses in 8 would be worth more than normal, would be St. John's.

And there is absolutely no logic in saying Metro Vancouverites should be deprived of the dream of owning a SFH because someone thinks the Mainland Chinese are more deserving of owning Canadian property.

Completely disagree with you on that one, though.

And if any "Metro Vancouverites" insist on a suburban lifestyle with a large lot and a sprawling house, they can choose Abbottsford or Chilliwack.

[whatnext]

Originally Posted by lio45

Wow, you couldn't be further from having gotten me correctly! Have you read the post I made 5 minutes before you made yours? Scroll up...

Completely agree with you on that, and if you look up my posts for the last few years in this thread you'll see that it's what I've always said.

It's not the first time I point out in this thread that I'm thoroughly convinced that if we could travel back in time a few decades and wave a magic wand to relocate China to the other side of Canada, the completely insane Canadian real estate market right now, the one where a property values graph for the last couple decades would be appearing to be heading "to the moon" and where houses with addresses in 4 would be worth less than normal while houses with addresses in 8 would be worth more than normal, would be St. John's.

Completely disagree with you on that one, though.

And if any "Metro Vancouverites" insist on a suburban lifestyle with a large lot and a sprawling house, they can choose Abbottsford or Chilliwack.

Sorry if I misunderstood your first points, but I still say you're dead wrong on the last.

Saving for a city house on a 33' x 120' lot should not be an unattainable dream. As little as 10 years ago you could get those for $600k. There is no logic in saying that homes closest to Vancouver's three biggest job generators (Downtown, UBC and YVR airport) should be locked up by people who aren't even working! And working folk should be expected to commute in from Abbotsford if they want a home? It doesn't make sense.

[geotag277]

Originally Posted by whatnext

You make the common mistake many Vancouver-boosters do in making comparisons to NYC. Vancouver is not even remotely in the same class as New York or London. I was born here and trust me it's not even close. More like Denver or San Diego.

New York City: 34,490 km²

London: 8,382 km²

Denver: 21,793 km²

San Diego: 11,720 km²

Vancouver: 2,878 km²

Vancouver is in a "class" of it's own.

The driver of moderating real estate prices for single family homes is the ability of the city in question to continually provide them for incoming residents. Vancouver lost that ability in the 90s and people are still clinging to this dream that it is possible for all 2.5 million Vancouverites to own their own land. It is not. Let it go.

New York and London (and Montreal as a Canadian example) are excellent examples of cities where people embraced the concept of multi family living and have used it as a tool to help moderate housing prices. Vancouver is twenty years late to the party and the continued resistance is only digging a deeper hole.

The cognitive dissonance in guys like whatnext and cornholio have really never been louder. On one hand they cry that it isn't possible to build our way out of it, yet when they post articles about multi-family developments stagnating in price or even there being absorption risk to these properties which puts downward pressure on prices, they cry foul and say this is yet another sign of something bad.

The evidence is right there in front of you. The run away train is single family homes. Build more multi family. At this point you are just sticking your fingers in your ears and saying "La la la".

[lio45]

Originally Posted by geotag277

New York City: 34,490 km²

London: 8,382 km²

Denver: 21,793 km²

San Diego: 11,720 km²

Vancouver: 2,878 km²

Vancouver is in a "class" of it's own.

Not sure this is apples to apples. Your land area for Greater Vancouver doesn't even include Abbottsford and Chilliwack, which are places that are pretty clearly in Vancouver's orbit. In contrast, that 34,000 square km for NYC extends to include parts of Connecticut and Pennsylvania.

I'd guess someone from Abbottsford probably goes into Vancouver's downtown at least as often as someone from the New Haven area in CT goes to Lower Manhattan... likely much more often, IMO.

I know it's tricky to compare these things, because you could argue that these places are within NYC's orbit, but then the entire US could be considered to be, in a way.

Anyway, it seems obvious that land constraints alone do not explain Vancouver's insanity. They're a small component of it, while the flow of money from the PRC is an enormous component -- nearly single-handedly responsible for the insanity.

(Low interest rates and land constraints are likely the only other significant two factors...)

[geotag277]

Originally Posted by lio45

Anyway, it seems obvious that land constraints alone do not explain Vancouver's insanity. They're a small component of it, while the flow of money from the PRC is an enormous component -- nearly single-handedly responsible for the insanity.

No one thing alone is going to explain anything. The signs were there since the 90s that land was the primary factor in Vancouver's pricing, again, when Vancouver was only slightly larger than Ottawa is today, and now it is at a critical junction where the genie is not going back in the bottle.

If PRC money was "the primary factor", why are multi family unit pricing stagnating? Why is there significant "absorption risk" to multi family developments? Why are only single family detached homes the runaway train?

Land constraints are the primary factor.

[someone123]

Originally Posted by lio45

Vancouver unlike Halifax is at the right spot to be the gateway for people sucking money out of the world's most populated country. That's a huge difference between the two.

I was basically suggesting this, but I'll leave it to you to argue it.

My population numbers come from the population estimates for CMAs: http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/demo05a-eng.htm

Vancouver's year-over-year growth from 2014-2015 was 2,475.7 -> 2,504.3, about 1%. The 3-year average is closer to 1.3%. For Canadian cities this is fairly average population growth, but it is still common to read arguments from real estate agents and the like that population pressure (generated because Vancouver is so much more desirable than any other city, which also justifies the high prices) is what is chiefly responsible for causing prices to rise by 30% per year. But why is population pressure so much worse in 2016 than it was in 2010 if the population has barely changed?

If you take immigration out of the picture, few people are moving to metro Vancouver at all now.

I think what we have is mostly a speculative bubble built up around a nucleus of foreign investment and fuelled by low interest rates.

[someone123]

Here are historical real estate prices in a district of inner Tokyo, a place that had dramatically higher land pressures in 1980 than Vancouver experiences today, and where land pressure (in the sense of land area available per person) has continually increased:


Source

Here's Hong Kong, another city that people like to use as a comparison for Vancouver. It has also experienced housing price declines during periods of growing population and land pressure:


Source

Hong Kong experienced another price drop in 2015-2016.

[geotag277]

Originally Posted by someone123

Vancouver's year-over-year growth from 2014-2015 was 2,475.7 -> 2,504.3, about 1%. The 3-year average is closer to 1.3%. For Canadian cities this is fairly average population growth, but it is still common to read arguments from real estate agents and the like that population pressure (generated because Vancouver is so much more desirable than any other city, which also justifies the high prices) is what is chiefly responsible for causing prices to rise by 30% per year. But why is population pressure so much worse in 2016 than it was in 2010 if the population has barely changed?

Percentages don't matter as much as absolute growth. Only a handful of Canadian cities grew by 30k people. Toronto also grows by about 1.3%, but that equals 70k people - almost half the entire city of Moncton.

That's why it's a bit of a fool's errand to compare a city like Halifax to a city like Vancouver - they are fundamentally different growth pictures.

Also, again, as I explained before, if single family detached housing accounts for 30% of the population in 1995 - it stands to reason that the 30% wealthiest people will be able to afford those homes. If single family detached housing accounts for 5%, the bar moves to top 5%. And so on. The fact 30k people are moving to Vancouver every single year is putting upward pressure on the single family detached housing stock - especially as many people do not want to move and/or do not want to leave Vancouver (which one would have to do if they wanted to continue to live in a single family detached home).

If you take immigration out of the picture, few people are moving to metro Vancouver at all now.

What is your source on this? I know several people in Alberta who are moving to Vancouver. Vancouver's economy is strong and it's unemployment rates are low, and people across Canada continue to flock there for opportunities.