Canada's 'housing bubble' deemed close to bursting

[big T]

Originally Posted by 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.)

Right. That’s called a Ponzi scheme, not exactly a novel concept.

[whatnext]

A classic sign of how many people could be in trouble in the country's two largest RE markets is the rise in alternative lending. Many amateur property barons mistakenly believed prices would just keep going up and now can't unload them.

...A new study by land registry company Teranet and Toronto real estate broker John Pasalis shows private lenders are especially gaining ground in the market for mortgage refinancings, which are mortgage loans that do not involve a sale of a property. Many homeowners use refinancings to increase the size of their existing mortgages to consolidate and pay off other debts, such as credit cards.

In the second quarter of 2018, 20 per cent of mortgage refinancings in the Greater Toronto Area came from private lenders, a 67-per-cent increase from the same quarter of 2016, the report said.

Private lenders accounted for 6.8 per cent of new mortgages for homes that sold in the second quarter this year, up from 4.9 per cent in the second quarter of 2016...

...Private mortgages have become most popular in the regions of the GTA that also saw the highest percentage of investors buying homes in 2017, led by York region north of Toronto, the report said.

Mr. Pasalis said some buyers have found it hard to charge enough rent to cover the carrying costs on investment properties that were purchased at the height of the market in 2017, and may be seeking refinancings to cover their costs.

“Some people have two or three properties that are negative cash flow, and their debts are going up," he said.(bold mine)

https://www.theglobeandmail.com/business...wing-from-alternative-lenders-not-banks/

[Black Star]

Well...according to the Edmonton Real estate board my Little House on the Prairie has lost 100 grand this year.

A couple of my neighbors took their houses off the market this year. They didn't want to take a wash.

One of my neighbors had to sell because he was transferred to Arizona. He didn't give me a number for what he sold for, but said he took a substantial loss.

https://edmontonsun.com/news/local-news/...wcm/d485da06-6b79-49c3-a8cd-113567a34e53

[240glt]

Originally Posted by lio45

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).

From a Western Canadian perspective, Edmonton's housing prices are pretty affordable. Much more affordable than the other large cities and even less expensive than most of BC. Of course you have to live in Edmonton but that's the trade off I suppose.

My little old house north of the downtown has seen a fair amount of traction and I'm conditional on it right now, hopefully it'll be sold soon. The duplex across the river hasn't seen much action at all. But no one wants duplexes it seems so it may be a little harder to offload.

I wish it were cheaper where we're headed but even in semi-rural Southern Interior of BC it's more expensive than Edmonton. BC tax. Everyone wants to live there so it's — expensive.

[someone123]

Canadian real estate isn't very fungible. It's a big pain to move around the country and there aren't a lot of convenient comparable alternatives. This is part of why real estate prices can escalate so quickly here.

Quebec City isn't a substitute for Edmonton. Hours apart by plane, different language, different economy. Chances are your career in Edmonton is not portable to Quebec City or vice versa.

I do think some substitutes are undervalued. Mostly Ontario outside of the GTA and the Maritimes, particularly for people in the GTA who don't have careers that require living there. I get the sense that a lot of people who scrape to buy a house 45 minutes from their work in Toronto or who spend 70% of their income to rent some dump near the subway would be happier in the long run in Ottawa, Kitchener-Waterloo, or Halifax.

British Columbians are very aware of the Alberta and what the trade-offs are like, but they tend to have a warped view of the eastern end of the country if they have never lived there.

[whatnext]

Originally Posted by 240glt

From a Western Canadian perspective, Edmonton's housing prices are pretty affordable. Much more affordable than the other large cities and even less expensive than most of BC. Of course you have to live in Edmonton but that's the trade off I suppose.

My little old house north of the downtown has seen a fair amount of traction and I'm conditional on it right now, hopefully it'll be sold soon. The duplex across the river hasn't seen much action at all. But no one wants duplexes it seems so it may be a little harder to offload.

I wish it were cheaper where we're headed but even in semi-rural Southern Interior of BC it's more expensive than Edmonton. BC tax. Everyone wants to live there so it's — expensive.

I wonder if Nenshi will see any success with his trip to Vancouver to try and raid tech jobs. For the life of me I can't imagine why tech companies would want to locate in Vancouver with ridiculously high commercial space and even worse housing. The whole rationale about needing to be in a "tech cluster" is just BS in this day and age.

[lio45]

Originally Posted by someone123

Canadian real estate isn't very fungible. It's a big pain to move around the country and there aren't a lot of convenient comparable alternatives. This is part of why real estate prices can escalate so quickly here.

Quebec City isn't a substitute for Edmonton. Hours apart by plane, different language, different economy. Chances are your career in Edmonton is not portable to Quebec City or vice versa.

I do think some substitutes are undervalued. Mostly Ontario outside of the GTA and the Maritimes...

St. John in NB seemed totally undervalued to me, last I checked (probably a couple years ago already, time flies! but it's all in this thread).

If I didn't have any roots already, I'd consider moving there and buying an entire revenue portfolio.

[240glt]

Originally Posted by whatnext

I wonder if Nenshi will see any success with his trip to Vancouver to try and raid tech jobs. For the life of me I can't imagine why tech companies would want to locate in Vancouver with ridiculously high commercial space and even worse housing. The whole rationale about needing to be in a "tech cluster" is just BS in this day and age.

I really doubt it. There's a reason they're clamoring to Vancouver and the mayor of Calgary pleading them to come fill that city's empty office towers I can't see making any appreciable difference.

[CityTech]

The problem with the Maritimes is the high taxes. Moving to Halifax from Ontario means paying higher income tax, and for middle income people it's not a trivial difference. For someone making $60,000 a year, provincial income taxes alone will cost you $220 a month more in Nova Scotia than they will in Ontario (not to mention the higher sales tax--15% in Nova Scotia vs. 13% in Ontario). That takes a lot of the cost-of-living advantage of the east coast out of the picture.

[rousseau]

Originally Posted by someone123

Canadian real estate isn't very fungible. It's a big pain to move around the country and there aren't a lot of convenient comparable alternatives. This is part of why real estate prices can escalate so quickly here.

No kidding. I feel envious about the choices that Americans have when it comes to flitting about the country in search of new employment, new experiences, a fresh start etc. The closest thing we have to that is (was?) the draw of the Alberta oilfields. Probably Toronto to an extent, as well. Or Vancouver/BC if you're on the Prairies. Montreal if you're in Quebec.

My sister and her husband live in a college town in New York. He does some sort of web programming voodoo from a home office for a major company, and has standing offers to move to Boston, Denver and San Jose (though they won't because my sister is at a university and so is fairly tied to one place). The Canadian equivalent in his field is probably Waterloo, not exactly a heart-poundingly exciting destination.

Originally Posted by someone123

I do think some substitutes are undervalued. Mostly Ontario outside of the GTA...I get the sense that a lot of people...would be happier in the long run in ...Kitchener-Waterloo...

Or Hamilton. Or Guelph. I've met lots of Toronto transplants who vehemently declare that they'll never move back to the big city because they've become accustomed to a slower pace of life.

[hipster duck]

Originally Posted by rousseau

No kidding. I feel envious about the choices that Americans have when it comes to flitting about the country in search of new employment, new experiences, a fresh start etc. The closest thing we have to that is (was?) the draw of the Alberta oilfields.

I agree. Americans are rightfully worried that opportunity is increasingly being concentrated in a handful of coastal cities. That has been the Canadian reality - maybe worse - all along.

Canadians are reasonably good at starting up businesses, but they're not very good at scaling them up to a decent size, or holding onto their successful companies without having them get bought out. This matters for hiring, since it means that fewer companies seem to reach that size where they begin to hire for a diversified group of skills, or a size where some employee quits and starts a competitive firm down the street, building an industrial cluster. As such, very few Canadian cities offer a very diversified set of employment opportunities and the number of cities where a professional couple with two niche jobs can both expect to find meaningful employment can probably be counted on one hand (certainly two).

We may blame Canada's "small" size, but we're not really a small country. Countries that are a quarter of our size, like Sweden, somehow manage to build and support giant global corporations across a diverse suite of industries, while a small country like Taiwan has thousands of small and medium enterprises all competing with each other within the large tech space.

The geography of employment in Canada really has to improve. I fear we are getting close to a situation where we work at branch offices of foreign companies in Toronto and a handful of other cities, and everyone else is just cutting each other's hair and installing each other's drywall everywhere else.

[SignalHillHiker]

We are the second-cheapest city in Canada to buy a home in average price per square foot, behind Moncton. Yet we have among the highest average home prices in the region. So that says a lot about the McMansion — going up around the city.

[megadude]

I too feel a little envious of the choices Americans have. I still prefer the Canadian way of life, but I do wish we had more comparable choices.

My cousin is from Fort Lauderdale but went to school in NYC. She got her first job there, then moved on to Philly then back to NYC and then to DC before finally going back to FLA after 13 years of being away. She hates so much about FLA but said she after all these years the colder weather was finally getting to her.

As well, the moves she made were basically lateral in terms of weather, or an upgrade in the end, if you're into humidity.

I'm a massive sports fan, and if I followed her moves, I'd still have access to all the major sports plus MLS, and major college ball in the area. Plus the once a year events like racing, tennis, golf, etc. I'm also a serious angler and following those moves I'd still have easy access to a tonne of lakes, rivers, reservoirs and the ocean.

For me, here, there is no equivalent. Same for many other people, just for different hobbies or lifestyles.

Closest thing for me might be Windsor, albeit I'd still have the inconvenience of crossing an international border. But that's in terms of hobbies and entertainment choices. My job does not exist in Windsor or virtually anywhere else in Canada other than maybe two other cities. Though if I found a decent job there I'd definitely have a bigger house than I have now!

[someone123]

Originally Posted by CityTech

The problem with the Maritimes is the high taxes. Moving to Halifax from Ontario means paying higher income tax, and for middle income people it's not a trivial difference. For someone making $60,000 a year, provincial income taxes alone will cost you $220 a month more in Nova Scotia than they will in Ontario (not to mention the higher sales tax--15% in Nova Scotia vs. 13% in Ontario). That takes a lot of the cost-of-living advantage of the east coast out of the picture.

It is true that the income and sales taxes are higher but the overall calculation is much more complicated and the net result depends on what you value. In the Halifax section a few people have posted about moving into their new downtown apartments. One of these won an award as the nicest newly-constructed rental in the country (it has a swimming pool, gym, etc.). The walk score is ~100. The price in a brand new 600 square foot unit seems to be ~$1400 a month, and the bigger ones are around $2k. I know people here in Vancouver who are paying that for basement suites in mediocre neighbourhoods with only bus service. If they moved to Halifax they'd earn their current wage or more.

I don't mean to sound like a cheerleader. A given person might or might not like these alternatives. But a lot of people seem completely unaware of them and the Vancouverites I know are mostly conservative and hesitant to try something new even if their life situation is pretty grim. Americans will related life stories about how they lived in San Diego for a while then moved to Seattle, then tried a couple years in Pittsburgh because of an interesting job offer, etc. Meanwhile here in Vancouver a significant share of young professions live in basements but think moving east of the Rockies is equivalent to being sent to the Gulag.

I think Americans do have better options and there are a bunch of reasons for that. But one problem with Canadians is that they are insular and conservative, and this causes a chicken and egg problem when it comes to diversifying the number of economically vibrant areas that are able to attract a significant number of nationwide migrants.

[someone123]

Originally Posted by hipster duck

Canadians are reasonably good at starting up businesses, but they're not very good at scaling them up to a decent size, or holding onto their successful companies without having them get bought out.

I don't want to get too specific but I was involved with a small Canadian company that was trying to scale up. It was in an unprotected industry and had to compete with American firms that could sell to Canadian companies; North America is one big market in this industry. The Canadian company had to go to American investors for funding, so it had to open an extra office, and eventually it was managed remotely by Americans. Its competitors were American companies that got maybe 5-10x more funding (a lot of new markets seem to be race-to-monopoly type situations where you win by using piles of cash to squeeze out competitors). When the company wound down most of the people who worked there moved on to very desirable jobs at American companies, so I would guess that the Canadian talent was comparable to the talent at the competitors, if not better.

It is a real uphill battle for many growing Canadian companies. Our economy is wide open in some ways, open to American firms that grew up in a less regulated and much larger domestic market. In other ways it's heavily regulated so startups can't happen at all or aren't allowed until years after competitors are already established in the US.

[SpongeG]

CMHC expects housing starts and sales to slide over next 2 years

Income, employment support demand for housing, but they're expected to slow, agency says
The Canadian Press · Posted: Nov 06, 2018

Canada Mortgage and Housing Corp. says the country's real estate market is expected to moderate over the next two years as the growth in housing prices begins to slow to be more in line with economic fundamentals.

In its 2018 housing market outlook released Tuesday, the national housing agency projects housing starts and sales are both expected to decline in 2019 and 2020.

It predicts housing starts for single and multi-unit starts will fall to between 193,700 and 204,500 in 2019, while sales are anticipated to be between 478,400 and 497,400 units. Prices are anticipated to range between $501,400 and $521,600.

"Our key takeaway from this year's outlook is moderation in Canada's housing markets for 2019 into 2020," Bob Dugan, chief economist at the CMHC, said in a statement.

"Housing starts are expected to decline from the higher levels we've seen recently. We expect resales in 2019 and 2020 to remain below recent peaks, while prices should reach levels that are more in line with economic fundamentals such as income, job and populations growth."

...

https://www.cbc.ca/news/business/housing...illV8Iq0__d_s3eV-uTA3UWdmh5Yau5jdncMVzmc

[ssiguy]

Here are the latest SALES stats from Metro Vancouver for markets over 50,000 for the period of Oct 8 to Nov 5/2018 compared to the same 4 week period of 2017. Some of the numbers border on the surreal. All sectors are down significantly and SFH are taking the worse hit which is normal as all housing booms start at the top of the market and all crashes start there as well.


City...........................SFH sales % /Townhome sales % /condo sales % {+ or - }

Vancouver..................-69/ -35/ -41
North Van...................-70/ -36/ -50
Richmond...................-73/ -62/ -49
Burnaby......................-81/ -59/ -59
Delta..........................-90/ -20/ -25
Coquitlam....................-90/ -29/ -64
Port Coquitlam.............-85/ 0 / -39
Langley........................-81/ -27/ -29
Maple Ridge.................-73/ -3/ -33
New Westminster..........-61/ -79/ -52
Surrey........................-76/ -44/ -62

[240glt]

Originally Posted by ssiguy

Here are the latest SALES stats from Metro Vancouver for markets over 50,000 for the period of Oct 8 to Nov 5/2018 compared to the same 4 week period of 2017. Some of the numbers border on the surreal. All sectors are down significantly and SFH are taking the worse hit which is normal as all housing booms start at the top of the market and all crashes start there as well.


City...........................SFH sales % /Townhome sales % /condo sales % {+ or - }

Vancouver..................-69/ -35/ -41
North Van...................-70/ -36/ -50
Richmond...................-73/ -62/ -49
Burnaby......................-81/ -59/ -59
Delta..........................-90/ -20/ -25
Coquitlam....................-90/ -29/ -64
Port Coquitlam.............-85/ 0 / -39
Langley........................-81/ -27/ -29
Maple Ridge.................-73/ -3/ -33
New Westminster..........-61/ -79/ -52
Surrey........................-76/ -44/ -62

Wow, that is significant. Significant is almost not strong enough a word.

I'm more curious if that trend will extend to other overheated housing markets in the province. A number of smaller centres have very high prices as well.

From today's Vernon Morning Star

Vernon condo prices among B.C.’s highest

https://www.vernonmorningstar.com/business/vernon-condo-prices-among-b-c-s-highest/

[kwoldtimer]

Originally Posted by ssiguy

Here are the latest SALES stats from Metro Vancouver for markets over 50,000 for the period of Oct 8 to Nov 5/2018 compared to the same 4 week period of 2017. Some of the numbers border on the surreal. All sectors are down significantly and SFH are taking the worse hit which is normal as all housing booms start at the top of the market and all crashes start there as well.


City...........................SFH sales % /Townhome sales % /condo sales % {+ or - }

Vancouver..................-69/ -35/ -41
North Van...................-70/ -36/ -50
Richmond...................-73/ -62/ -49
Burnaby......................-81/ -59/ -59
Delta..........................-90/ -20/ -25
Coquitlam....................-90/ -29/ -64
Port Coquitlam.............-85/ 0 / -39
Langley........................-81/ -27/ -29
Maple Ridge.................-73/ -3/ -33
New Westminster..........-61/ -79/ -52
Surrey........................-76/ -44/ -62

Are there comparable numbers showing the changes in the number of homes on the market?

[giallo]

Damn. Metro Vancouver is in full scale crash mode right now. It's definitely needed, but those numbers are nuts.