Canada's 'housing bubble' deemed close to bursting

[Acajack]

Originally Posted by someone123

It is true that the foreign buyer tax will be triggered most by Chinese buyers but I don't believe that a significant number of people in BC care principally about the country of origin of the buyer. The huge issues in BC are housing affordability and household debt.

I don't believe that the reaction would be dissimilar if Americans, Brits, Russians, or Indians were buying and using property in a similar way. Or for that matter Ontarians. There are other new taxes that affect Canadians but people don't talk about them as much.

I hear a lot of talk in person about this and the "fault line" in the real estate talks isn't between people of different races, it's between people who have to work for a living in BC and those who might be real estate investors or might benefit directly from that activity (e.g. real estate agents, some developers). The recent arrivals from China who work in Vancouver and need to get a modest apartment or condo to live in generally seem to support the foreign buyer tax. Let us also remember the other 99% of Chinese who still live in China and aren't rich or able to invest in international real estate. They are not being helped by the extreme wealth gaps and the fact that suitcases of cash are leaving their country illegally.

I admit to being deliberately provocative. A bit.

[whatnext]

Metro Vancouver sees world’s steepest plunge in luxury home prices
Global quarterly index ranks 43 world cities for prime real estate price growth; Metro Vancouver comes last

Look how far Metro Vancouver’s prime real estate has fallen. In this quarter’s ranking of luxury real estate price growth across 43 world cities – a chart that Vancouver topped for six consecutive quarters in 2015-16 – the metropolitan region placed dead last.

Knight Frank’s Global Prime Cities Index tracks the top five per cent most expensive real estate in each market. It found that Metro Vancouver’s prime real estate prices have fallen by 11.2 per cent in 2018’s third quarter, compared with the same quarter in 2017. That’s the steepest annual decline of all 43 cities...

https://www.vancourier.com/real-estate/m...-plunge-in-luxury-home-prices-1.23483832

[zahav]

Finally, this is good news!

[1ajs]

what would be interesting is what the global markets are doing

[SpongeG]

from huffington post

Singapore took first place, with 13.1 per cent price growth. Toronto and Vancouver are the only Canadian cities ranked in the report.

But that's just looking at luxury housing. When looking at the overall market, the two Canadian cities reverse roles: Vancouver ranked in 10th place in Knight Frank's assessment of the entire housing market last month, while Toronto saw a steep drop to 137th place, out of 150 cities, down from first place a year earlier.

The city joins other metro areas whose luxury markets have softened recently, particularly Sydney and Hong Kong, both of which, like Vancouver, were high flyers until recently. If these cities have anything in common, it's their link to China's economy — which has been going through a slowdown recently.

https://www.huffingtonpost.ca/2018/11/01/vancouver-luxury-housing-market_a_23578082/

[lio45]

Originally Posted by zahav

Finally, this is good news!

Except for property-owning Vancouverites - for those, it's bad news.

Of course, there's nothing unnatural or wrong about this - one man's gain is another man's loss. That's pretty much how the world works.

[milomilo]

Originally Posted by lio45

Except for property-owning Vancouverites - for those, it's bad news.

Of course, there's nothing unnatural or wrong about this - one man's gain is another man's loss. That's pretty much how the world works.

The imagined losses of those with overpriced houses is far less than the real benefits to the rest of society though when house prices fall. The only way those expensive home owners could have realized their gains is to move away from Vancouver, something many would not want to do. House prices falling could well benefit them, as their income now can afford a different place in Vancouver.

I think many Canadians now have come round to the correct idea that rapidly rising house prices are a bad thing. Retirement planning is much easier if a moderate amount of your income is going into housing and a moderate amount into investments, having all of your retirement savings locked into something you need to live in is not very useful.

Also, why should we care if some lose out? This is how the world works, markets go up and down. Lots of people lost lots of money in the last few weeks on the stock market and rightfully no one is crying for them. I'd hope that anyone buying a million dollar house was financially literate enough to be aware of the risks and plan accordingly, and if they were not and just lucked out in the housing market, then again, who cares?

[someone123]

Originally Posted by lio45

Of course, there's nothing unnatural or wrong about this - one man's gain is another man's loss. That's pretty much how the world works.

Actually I think this is the exception rather than the rule, and it's the pathological case. You can have exchanges where both parties win. This is true of all kinds of market exchanges. A farmer grows a tomato, sells it for $1 to someone else, and both are happy. The farmer decided to sell at $1 and the buyer decided to buy at $1. The buyer probably bought it to eat, not because he is — that he can sell it for $2 tomorrow.

The productive aspect of our housing market when it works properly is like this too. You can make more housing and sell it and everybody can be better off. It's just the buying and reselling of existing property that is zero sum in dollar terms, but even that can produce more or less value depending on who gets what. In the hyperinflation and tax subsidy case the whole system gets gummed up and you end up with grandmas living along in giant places while young families live in overcrowded apartments and eventually give up and move away.

[misher]

Originally Posted by milomilo

The imagined losses of those with overpriced houses is far less than the real benefits to the rest of society though when house prices fall. The only way those expensive home owners could have realized their gains is to move away from Vancouver, something many would not want to do. House prices falling could well benefit them, as their income now can afford a different place in Vancouver.

I think many Canadians now have come round to the correct idea that rapidly rising house prices are a bad thing. Retirement planning is much easier if a moderate amount of your income is going into housing and a moderate amount into investments, having all of your retirement savings locked into something you need to live in is not very useful.

Also, why should we care if some lose out? This is how the world works, markets go up and down. Lots of people lost lots of money in the last few weeks on the stock market and rightfully no one is crying for them. I'd hope that anyone buying a million dollar house was financially literate enough to be aware of the risks and plan accordingly, and if they were not and just lucked out in the housing market, then again, who cares?

Yes but stock markets don’t go down because a bunch of envious/jealous people who don’t own those stocks want them for cheaper so they push the government to attack the stockholders so they sell it for cheap and take a loss.

Word it however you want but that’s a simple summary of what happened. Rest of Canadian housing market recovered because after interst rates killed sales but not BC because we got a ton of new legislation attacking homeowners that had no research behind it and because new taxes are being planned so people are scared. Btw the increased school taxes don’t even go to schools ������ the speculation tax does not hit speculators and the empty homes tax is mainly a tax on developers waiting for permits approvals (takes a few years). We love to word our taxes to sound good to trick people. Imagine if they called the school tax an union labour tax (as the money goes to pay the increased labour costs as the NDP exclusively awards contracts to unions that supported their campaign).

If the government suddenly came in and introduced 5+ taxes on your stocks how would you feel? Would you feel it’s the market naturally going down?

[someone123]

Originally Posted by misher

Yes but stock markets don’t go down because a bunch of envious/jealous people who don’t own those stocks want them for cheaper so they push the government to attack the stockholders so they sell it for cheap and take a loss.

Word it however you want but that’s a simple summary of what happened.

Unfortunately the situation is too complicated for a simple summary to describe it accurately.

For example we could make your analogy more accurate by specifying that these stocks were also granted a 100% capital gains exemption. That detail alone completely changes everything. Another detail we could add to your story is that people from around the world were allowed to buy these stocks with suitcases of cash, and the rules made it impossible to tell who owned what.

[whatnext]

The luxury home market crashed for the simple reason that the Mainland Chinese buyers disappeared. Period.

Capital outflow controls at home, the sharing of tax data between Canada and China all helped drive foreign interests out of that market (despite several deceitful posters claiming they were never the problem).

[milomilo]

Originally Posted by misher

Yes but stock markets don’t go down because a bunch of envious/jealous people who don’t own those stocks want them for cheaper so they push the government to attack the stockholders so they sell it for cheap and take a loss.

Word it however you want but that’s a simple summary of what happened. Rest of Canadian housing market recovered because after interst rates killed sales but not BC because we got a ton of new legislation attacking homeowners that had no research behind it and because new taxes are being planned so people are scared. Btw the increased school taxes don’t even go to schools ������ the speculation tax does not hit speculators and the empty homes tax is mainly a tax on developers waiting for permits approvals (takes a few years). We love to word our taxes to sound good to trick people. Imagine if they called the school tax an union labour tax (as the money goes to pay the increased labour costs as the NDP exclusively awards contracts to unions that supported their campaign).

Stock markets can go up or down for any number of reasons including government actions. In the end though the important point that needs to be made is that high housing prices are almost entirely a bad thing and should be discouraged. The best thing that could happen to Vancouver in the long term is for the housing market to be completely destroyed today, for all the current winners to have their 'gains' wiped out and the market reset. Then have policies put in place to ensure enough supply is built to ensure the disaster doesn't happen again, and any speculation is quickly nipped in the bud.

Speculation and investment should be done elsewhere, not in the housing market, where it destroys normal people's ability to live comfortably.

[someone123]

Originally Posted by milomilo

Stock markets can go up or down for any number of reasons including government actions. In the end though the important point that needs to be made is that high housing prices are almost entirely a bad thing and should be discouraged. The best thing that could happen to Vancouver in the long term is for the housing market to be completely destroyed today, for all the current winners to have their 'gains' wiped out and the market reset. Then have policies put in place to ensure enough supply is built to ensure the disaster doesn't happen again, and any speculation is quickly nipped in the bud.

Speculation and investment should be done elsewhere, not in the housing market, where it destroys normal people's ability to live comfortably.

A better comparison for housing is the food market because they are both necessities.

If you have a silo full of grain and the price goes through the roof you are nominally rich, sure, but this reflects a big decline in living standards for most people. There are probably people starving in this situation. And maybe the whole social order of your country will collapse and you will be murdered or your country won't be functional enough for you to exchange your surplus grain for more useful items.

Vancouver housing is not there yet and it seems to be slowing down but it was heading in that direction (though admittedly the rest of Canada provides a release valve). A lot of people are homeless and many more are in precarious housing situations. It doesn't take a lot of unfair homelessness to cause social problems, e.g. the guy living in a tent wonders why he shouldn't just burn down some houses he will never possibly be able to afford. It only takes a small percentage of the population to cause things to fall apart. I find that a lot of people who think in terms of good or bad investments forget this. If you "win" too much the losers will chop your head off or burn your house to the ground and your respective bank account balances will be moot. It has happened again and again in human history in cases of inequitable distribution of necessities.

[milomilo]

Oh I agree, housing is the one necessity that people wish to be unaffordable, but that's madness! Would we cheer on a situation where half the population had all the grain and the the other half couldn't afford it? Of course not! But that is what many wish for with housing, and they are wrong to think that way. Everyone would be richer if house prices were at a stable, affordable rate and people put their nest egg in something else.

[240glt]

New numbers for Edmonton released, Good for buyers, bad for anyone trying to sell, which is of course exactly what I'm trying to do right now

But great news on the affordability side and anyone looking to scoop up a deal

SFH- avg price $426k - down 1.3% from Oct 2017
Duplex/row- avg price $333k - down 2.2%
Condo- avg price $221k - down 8.8%

SFH sales down 14% from Oct 2017
Duplex/row down 31%
Condo sales down 5%

https://edmontonjournal.com/news/local-news/edmonton-home-prices-sales-plunge-housing-report

[lio45]

Originally Posted by someone123

Actually I think this is the exception rather than the rule, and it's the pathological case. You can have exchanges where both parties win.

Sure, but I wouldn't say it's exceptional to have winners and losers.

For example, when oil fell off a cliff a few years ago. Alberta's economy was powerfully hit; layoffs, etc.; meanwhile Easterners were happy to pay less at the pump; the low loonie brought some American Manufacturing back to Central Canada; but we complain that it's now much pricier to spend winter in the south. There were all kinds of opposite effects, but not everyone was equally impacted.

[lio45]

BTW, I've been on record for 10+ years on this forum saying I wouldn't touch the crazily inflated Vancouver market with a 4,000 km pole (which is what it would take to touch it from here...) because those values were absolutely injustifiable therefore at risk of a serious correction.

So count me among those who aren't shedding tears for the people who did the opposite of what I've been recommending.

(During that decade, though, as we can now see in retrospect, it was still very possible to make money by buying what's basically a hot potato, and unloading it to someone else reasonably soon and at a profit. I may find it crazy to invest in something greatly inflated, but that doesn't mean there's not a nonzero chance it will inflate even further, and if that happens, it will have turned out to be a good lucky decision.)

[lio45]

Originally Posted by 240glt

SFH- avg price $426k - down 1.3% from Oct 2017

That's absolutely insane. Around here, $426k gets you a pretty big multiplex.

The SFH average here is probably $150k-$200k, but you can find something much cheaper than that (especially if you're willing to accept that it won't be turn-key).

[lio45]

Originally Posted by lio45

That's absolutely insane. Around here, $426k gets you a pretty big multiplex.

Prices have gone up lately so that amount only gets you a sixplex in a central Quebec City neighborhood these days.

https://www.realtor.ca/Inscription/Multi...3%A9bec-Qu%C3%A9bec-G1N3L1-Saint-Sauveur

https://www.realtor.ca/Inscription/Multi...3%A9bec-Qu%C3%A9bec-G1K1S4-Saint-Sauveur

https://www.realtor.ca/Inscription/Multi...3%A9bec-Qu%C3%A9bec-G1K1V9-Saint-Sauveur

(obviously those are asking prices, not transaction prices)


It's amusing to me that the average free-and-clear SFH-owning Edmontonian could sell and "downsize" move into one sixplex unit in another city that's pretty much in the same order of magnitude (there's likely nothing you can't find in Quebec City, except a NHL team, though if we raise the standard to "a NHL team that does not —" the two cities are now tied......) while getting the net income from the extra five units from now on.

[Mister F]

Originally Posted by misher

If the government suddenly came in and introduced 5+ taxes on your stocks how would you feel? Would you feel it’s the market naturally going down?

Housing is a basic necessity of life. Stocks aren't.