Canada's 'housing bubble' deemed close to bursting

[logan5]

How many millioaire chinese live in vancouver then. Toronto has large chinese population so they are likely to have rich chinese immigrantz there buying up toronto property that is appreciating at a rapid rate, just as vancouver does. Overall toronto still bas way more millionaires who are supposedly responsible for driving up housing costs. Oh yeah, toronto has more than twice the amount of land that vancouver does.

[lio45]

Originally Posted by logan5

From demographic researcher David Baxter...


https://pricetags.wordpress.com/page/2/

Vancouver has less than half the developable land that Toronto has, and less than a quarter the land Montreal has. Guess which city has the highest cost housing and guess which has the least.

By the way, Toronto and Montreal have far more millionaires to bid housing out reach in their cities. Why isn't that happening in those cities? Because they're not Chinese millionaires?


http://604now.com/2013/05/13/millionaires-in-canada-which-city-has-the-most/

That would explain Metro Vancouver property prices being slightly higher than Metro Montreal's, yes.

Land constraints can't explain that prices are THAT much out-of-whack with local wages and rents. Only speculation (i.e. real estate as an investment, not as housing) can drive them that high.

Take any city in the world, put all the land constraints and zoning restrictions you want, if the local wages are low, the locals alone won't be able to bid the housing market "to the moon" even if they wanted.

[lio45]

Originally Posted by logan5

How many millioaire chinese live in vancouver then.

No one can tell that -- they're listed as "housewife" or "student" on property records.

[casper]

Originally Posted by lio45

No one can tell that -- they're listed as "housewife" or "student" on property records.

The description listed on the property records is irrelevant. It is a useless field on a form that plays no role in either the sale or any analysis of the sales data.

Somewhat dated, but national 2005 average household net worth is $148,350. Average principle residence is $180,000 with a $90,000 mortgage.
http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/famil110-eng.htm It is that low. The country even today is still full of very affordable places to live, but is not in the core of our major cities.

This article has some better date http://www.moneysense.ca/save/financial-planning/the-all-canadian-wealth-test-2015-charts/ .... Have a look at the share the wealth graph. Here is the base numbers:

Average CDN Numbers based on age group:
under 35 - $75k (individual) $290k (family of 2+)
45-55 - $300k (individual). $850k (family of 2+)
55+ - $400k (individual), $1M (family of 2+)

Towards the bottom there is breakdown if where the wealth comes from (property, investment etc.).

[whatnext]

Originally Posted by logan5

From demographic researcher David Baxter...

Vancouver has less than half the developable land that Toronto has, and less than a quarter the land Montreal has. Guess which city has the highest cost housing and guess which has the least.

By the way, Toronto and Montreal have far more millionaires to bid housing out reach in their cities. Why isn't that happening in those cities? Because they're not Chinese millionaires?


http://604now.com/2013/05/13/millionaires-in-canada-which-city-has-the-most/

Vancouver has always been more expensive than Toronto and Montreal, at least in my memory and that goes back a while. That graph merely explains why, it does not explain the magnitude of recent price increases. 20% jumps in one year aren't explained away by constraint, which has always been there.

[Berklon]

The idea that the outrageous price increases in Vancouver are due to land constraints is absurdly ridiculous. It's laughable that it's still being brought up.

[logan5]

Victoria is not a big city, but it is situated on a very small peninsula, hence home prices are now approaching Toronto levels. Or is Victoria another ripple effect city, like Surrey, Langley, Abbottsford. How many ripple effect cities can there be?

A particular cities number of millionaires does not correspond with home prices, while land constrained cities line up almost perfectly with high home prices.

[logan5]

Originally Posted by Berklon

The idea that the outrageous price increases in Vancouver are due to land constraints is absurdly ridiculous. It's laughable that it's still being brought up.

There is far more evidence support my stance. Theres a lot of Chinese resentment fuelling this.

[ssiguy]

That millionaires list is a joke.
The Chinese don't declare their income. Richmond is "technically" one of the poorest cities in the country........enough said.

[cornholio]

Originally Posted by logan5

Victoria is not a big city, but it is situated on a very small peninsula, hence home prices are now approaching Toronto levels. Or is Victoria another ripple effect city, like Surrey, Langley, Abbottsford. How many ripple effect cities can there be?

A particular cities number of millionaires does not correspond with home prices, while land constrained cities line up almost perfectly with high home prices.

Victoria is a ripple effect. Not only that it's probably the SECOND most popular city for wealthy Chinese in Canada, behind Vancouver. Victoria is very much tied to Vancouver and allways has been. As for the ripple effects they are very real.

Your land constraint arguments simply don't hold water. Land constraints lead to market premiums for land intensive housing forms, and the market naturally adjusts by building less land intensive housing, like smaller lots. That has all happened a long time ago in Vancouver. What is happening now is a simple speculative bubble fueled by two things, foreign cash being the most important one, and low interest rates being the most dangerous one. And regardless Vancouver nor Victoria is even close to being out of land, and especially not close to runing out of places to build cheap family friendly condos and townhouse.

[casper]

Originally Posted by cornholio

Victoria is a ripple effect. Not only that it's probably the SECOND most popular city for wealthy Chinese in Canada, behind Vancouver. Victoria is very much tied to Vancouver and allways has been. As for the ripple effects they are very real.

Your land constraint arguments simply don't hold water. Land constraints lead to market premiums for land intensive housing forms, and the market naturally adjusts by building less land intensive housing, like smaller lots. That has all happened a long time ago in Vancouver. What is happening now is a simple speculative bubble fueled by two things, foreign cash being the most important one, and low interest rates being the most dangerous one. And regardless Vancouver nor Victoria is even close to being out of land, and especially not close to runing out of places to build cheap family friendly condos and townhouse.

Vancouver has been out of land for decades. You need to go Surrey to find a new lot to build a house on.

Victoria is the same. You need to go to Sooke or Sidney or the West shore. Victoria proper has no virgin land available for housing development.

[geotag277]

Originally Posted by geotag277

Graphs like this are the elephant in the room for those who think foreign capital controls are a silver bullet. In other markets affected by foreign ownership, you would expect to see a balanced trend across housing stock types. In Vancouver (and Toronto - where foreign buying is even worse) - it is centered on single family detached homes.

Multi family may be up year over year, but the trend in pricing is exponentially more stable than single family housing.

I can certainly see how foreign buying is pushing up the top end of the market - the 20 million dollar condos and some of the 4-10 million dollar houses in West Vancouver - but I find the claims that these purchases are affecting the property prices in Delta, Maple Ridge, and Langley more than a little far fetched. No one is selling a house in West Vancouver to move to Delta or Maple Ridge.

Vancouver needs to build more multi family, and the only way to do that is by rezoning these inefficient single family homes, and unfortunately by doing that a consequence will be making these single family detached homes even more expensive and the land they sit on even more valuable. It's something that should have been done decades ago and this is the simply the result of the urban planning land use failure to recognize the constraints. Again, see the graph above.

The best path forward now is land use policies that recognize the reality and the city working with developers on building out sustainable multi family projects which meet Vancouver residents needs - including a flood of three bedroom and more family units as well more variety across the luxury to basic spectrum.

The fact of the matter is the real estate industry has several intrinsic assumptions that need to be challenged by the City of Vancouver. Most important is the assumption that real estate can only ever increase in value. Developers left to their own devices will always be greedy, seeking the highest profit margin developments which push high profit margin luxury to appeal to the top end of the market and ever increasing "comps".

The most profitable car company is Porsche for a reason, and Vancouver's housing starts look dominated by Porsche mentality. There needs to be Camry and Accord alternatives and that needs to be part of the land use and developer partnerships with the city.

[whatnext]

Originally Posted by geotag277

Graphs like this are the elephant in the room for those who think foreign capital controls are a silver bullet. In other markets affected by foreign ownership, you would expect to see a balanced trend across housing stock types. In Vancouver (and Toronto - where foreign buying is even worse) - it is centered on single family detached homes.

Multi family may be up year over year, but the trend in pricing is exponentially more stable than single family housing.

I can certainly see how foreign buying is pushing up the top end of the market - the 20 million dollar condos and some of the 4-10 million dollar houses in West Vancouver - but I find the claims that these purchases are affecting the property prices in Delta, Maple Ridge, and Langley more than a little far fetched. No one is selling a house in West Vancouver to move to Delta or Maple Ridge.

Vancouver needs to build more multi family, and the only way to do that is by rezoning these inefficient single family homes, and unfortunately by doing that a consequence will be making these single family detached homes even more expensive and the land they sit on even more valuable. It's something that should have been done decades ago and this is the simply the result of the urban planning land use failure to recognize the constraints. Again, see the graph above.

The best path forward now is land use policies that recognize the reality and the city working with developers on building out sustainable multi family projects which meet Vancouver residents needs - including a flood of three bedroom and more family units as well more variety across the luxury to basic spectrum.

The fact of the matter is the real estate industry has several intrinsic assumptions that need to be challenged by the City of Vancouver. Most important is the assumption that real estate can only ever increase in value. Developers left to their own devices will always be greedy, seeking the highest profit margin developments which push high profit margin luxury to appeal to the top end of the market and ever increasing "comps".

The most profitable car company is Porsche for a reason, and Vancouver's housing starts look dominated by Porsche mentality. There needs to be Camry and Accord alternatives and that needs to be part of the land use and developer partnerships with the city.

As you don't live here, it is not surprising that you are totally misinterpreting the graph.

Up until recently the price of attached and condominium weren't rising as quickly precisely because they were more closely tied to local incomes. SFH a favourite target of offshore money was not.

However, as the West Side, Richmond and West Vancouver have slowly been been sold off to offshore money you are starting to see more an more of a spillover into outlying markets.

‘I’ve never seen anything like it’: House price gains in Fraser Valley now rival Vancouver
http://globalnews.ca/news/2624064/ive-ne...ns-in-fraser-valley-now-rival-vancouver/

Fraser Valley sale prices up 31 per cent over last year
http://www.bcbusiness.ca/real-estate/fraser-valley-sale-prices-up-31-per-cent-over-last-year

The suburbs are hot.

New sales figures show the heat of the housing market isn’t confined within Vancouver’s city limits, with suburban areas showing the largest increases in average home prices over the last year, and some regions soaring by more than 45 per cent...

...“It’s a rippling effect, it starts in Vancouver and it gradually moves out. What we’re finding now is people are even being priced out of South Surrey, so anybody looking for a single-family house in South Surrey, they have to pretty much start at a million dollars. So they move to Langley now. And now Langley is getting almost priced-out,” Morris said. “That’s what we’re finding now: people are waiting in lineups to buy condominiums in Langley — I mean, who ever heard of that?”
http://www.theprovince.com/business/ripp...soar+metro+vancouver/11960985/story.html

[GreaterMontréal]

56km from City core...

in Montréal, 56km -

Ste-Hyacinthe - 60k , not part of the CMA
Granby - 84k , not part of the CMA
Joliette - 51k , not part of the CMA

why ''56km away from city core'' ?

[csbvan]

Originally Posted by logan5

There is far more evidence support my stance. Theres a lot of Chinese resentment fuelling this.

People used to be more about that argument, but thankfully economists have begun to focus on the leading problem- foreign investment and speculation. I don't think land constraints would ever have driven home prices as high as they currently are. A factor, but not the substantial factor. The latest bank to say that foreign speculation is the leading cause of the housing crisis is BMO. Note, they discuss how home building in both Toronto and Van is relatively healthy. Land constraints are what they see as the number 2 cause for high prices, and they make a point of saying that foreign investment is the problem that requires the most urgent attention:

New government housing policy should focus on foreign investment, speculation: BMO
Warnings of dangerous overheating in Vancouver and Toronto’s real estate markets are mounting, but home prices in those two cities are unlikely to decelerate on their own anytime soon, according to a BMO analysis released June 15.

BMO economists Doug Porter and Robert Kavcic concluded that any new government policies to cool down the housing market should be directed towards reigning in “foreign investment, speculation and land restrictions, in that order.”

Porter and Kavcic pinpoint several factors behind nosebleed-level price accelerations concentrated in those two Canadian cities. A demographic surge of young people aged 25-40 (prime homebuying years) combined with the reluctance of baby boomers to downsize means there is a lot of pressure being placed on the detached home market.

They also point out that all of Canada’s net job growth over the past year has occurred in Vancouver and Toronto, and the “urbanization” trend — urban service jobs will increase, while resource and manufacturing jobs have decreased — will continue to attract workers to cities.

Demand from foreign buyers is also playing a significant role in these two markets, and is also beginning to play a role in Montreal.

“While many downplay this factor ('it’s only X% of the buyers!'), Economics 101 will tell you that the marginal buyer sets the price; and, if you introduce a wave of new buyers on an already tight market, prices will soon reach for the sky as the demand curve shifts even slightly to the right,” Porter and Kavcic write.

“Excess global savings sloshing around have driven many asset prices rocketing higher in recent years — bonds, commercial real estate, infrastructure, private equity, residential real estate in Manhattan and London — and now that wave has washed upon Canada’s biggest cities.”

Both Vancouver and Toronto are now showing signs that speculation is in play: Porter and Kavcic find evidence of speculative behaviour in the increase in number of Vancouver properties being bought and sold within 12 months, and the recent steep increase in condo prices.

The two economists said policy makers should focus on foreign buyers who seek to use real estate as a safe haven, rather than wealthy landed immigrants. Recent policy moves to increase how much homebuyers need to put towards their down payments have focused on domestic buyers; those measures will “simply crowd out the domestic buyer and leave the field wider open for foreign capital inflows.”

The real estate industry and B.C. government have long emphasized supply problems as the main driver of price increases, especially in Vancouver which has a limited land base because of its location between mountains and water. That’s true when it comes to single family homes, say Porter and Kavcic, because a drive towards density in both cities has made detached homes “a highly-coveted relic of the past.” However, the economists call total homebuilding activity in both cities “relatively healthy.”

https://www.biv.com/article/2016/6/new-government-housing-policy-should-focus-foreign/

[geotag277]

Originally Posted by geotag277

Again, this is the elephant in the room of any discussion about foreign capital in Vancouver. There is only one run away train.

Regarding ripple effects from West Vancouver to Maple Ridge, it a question of volume. Arguing West Vancouver 4 million dollar mansions are causing Maple Ridge to increase by double digits year over year is like saying a 2000 sqft penthouse condo is causing the 400 sqft one bedroom to increase in price.

West Vancouver has always been a super luxury super expensive part of Vancouver. The super top of the market generally only effects the super top of the market. Ie. Comparing penthouses to penthouses and comparing West Vancouver mansions with West Vancouver mansions. There isn't enough luxury housing stock even available to create the kind of ripple effects being posited here.

Not to mention, it's the worst kept secret in real estate that multi family developments like condos are the most advertised and most marketed towards foreign investors. The fact that multi family prices have been moderating/flat/relatively sustainable growth over the past 20 years while single family detached homes have been the run away train is a serious argument against this idea that restricting foreign capital will suddenly make single family detached houses affordable to the general Vancouver population.

I already showed you how Vancouver properties were generally unaffordable 20 years ago with 10 - 20 % interest rates and much higher taxes. Vancouver should never have been allowed to become more expensive than Toronto and the fact that massive rezoning didn't happen when it needed too is what is causing the land to become so valuable.

People are going to be sorely disappointed in the results of foreign capital controls generally on the Vancouver market. That West Vancouver mansion you were never going to be able to afford might get a price cut, but single family detached houses will never be generally affordable to Vancouver residents again (and really haven't been for almost a generation).

Again, many of you are comparing a city of 2.5 million with your childhood experience in a city of around 1 million or less - and even back then the developmental constraints were obvious.

[ssiguy]

Greater Vancouver is actually not growing that fast..........about 1,2% but the OK and VI and zipping right along.

Long time residents are cashing out and leaving. You house may be worth $2 million but that is just on paper. It means nothing until you actually sell it. When they do sell it they realize that unless they want to downsize into a condo, they are still stuck with buying a house in an extremely wealthy area..........you may get a ton of money for your house but then you have to pay a ton to get another one.

This is where the boom V! and OK takes place.........Vancouver cash-outs.

[Pinion]

.

[casper]

Originally Posted by ssiguy

Greater Vancouver is actually not growing that fast..........about 1,2% but the OK and VI and zipping right along.

Long time residents are cashing out and leaving. You house may be worth $2 million but that is just on paper. It means nothing until you actually sell it. When they do sell it they realize that unless they want to downsize into a condo, they are still stuck with buying a house in an extremely wealthy area..........you may get a ton of money for your house but then you have to pay a ton to get another one.

This is where the boom V! and OK takes place.........Vancouver cash-outs.

I know a couple of people who have been trying to buy in the Victoria market and it is difficult in Victoria proper. Many houses end up in a bidding war situation with individuals coming from Vancouver that have cashed out there. Typically coming in with unconditional cash offers.

Has not hit suburban Victoria as badly yet. My friends ended up in Sidney due to affordability issues.

Should have a positive effect on some the stalled condo developments.

[geotag277]

Originally Posted by Pinion

Again, that chart is a year old, and a lot has changed in the last year. My old condo had been flat for 10+ years, then went up $100k recently (30%+ increase).

The chart shows a multi-decade trend. Your one year results are cute, but multi family has good and bad years over those two decades, some years are very very good, some years are flat. The trend is that multi family is stable relatively flat, while single family detached housing is a run away train.

Foreign capital is not the explanation why.