Canada's 'housing bubble' deemed close to bursting

[ssiguy]

Yes Zolo provides inventory levels for each city but suffice to say that overall inventory is up 40% compared to this time last year with SFH leading the way. Here are some specific numbers for those who are not familiar with Vancouver suburbs to help put things into perspective and why many houses are selling vastly under asking as the panic of `sell now or you will never sell` mindset takes hold. Stats for SFH sales and inventory for Oct 8 to Nov 5th/ 2018 compared to same period last year.

City....................population.................# SFH sales.................# SFH inventory

Burnaby..............235,0000...................13.............................519
Delta...................103,000.....................5..............................469
Coq & Port Coq.....203,000.....................9...............................647

[Martin Mtl]

Montreal's housing market to remain strong over the next 2 years: CMHC


While Vancouver and Toronto’s housing markets will see moderation and Calgary’s market will continue to flounder, Montreal’ is anticipated to see relatively high growth in 2019 and 2020.

According to a new report by Canada Mortgage and Housing Corporation (CMHC), housing starts will remain high due to the continued strong pace of condominium and rental housing construction.

“In the condominium segment, construction will increase thanks to a steady demand supported by employment growth and also to significantly lower inventories of new and existing condominiums for sale,” reads the federal agency’s latest Housing Market Outlook.
Activity in the resale market will also see an upward trend through 2020, with factors such as expected growth in full-time employment amongst Millennials fuelling much of the demand. But some of these gains will be moderated by the anticipated rise in mortgage rates and limited supply, which will keep market conditions “favourable to sellers.”

For these reasons, the growth in the average price of homes will likely be higher than the annual average of about 2.5% experienced over the last few years.

Although condominium and housing starts will remain high, the same cannot be said for single-family detached homes. The supply entering the market is low, and land scarcity and densification trends are curbing the starts of this low-density housing type.

As for Montreal’s rental housing demand, it will increase slightly faster than supply, which is forecast to lower the vacancy rate even further.

“Demand [for rental housing] will be supported by rising net migration over the forecast horizon, mainly as a result of the significant numbers of immigrants and non-permanent residents who will settle in Montreal,” continues the report.

“As for supply, many new units will be added to the rental housing stock from now until 2019, given the high levels of starts that have been observed for more than two years now. The average rent will increase, thanks to the generally higher rents for newer apartments and also to the tighter rental market conditions, which will reduce the supply of dwellings for rent.”

SOURCE: http://images.dailyhive.com/20181108001705/montreal-cmhc-2018-2.jpg

[MonkeyRonin]

Are we starting to see new condo projects in Vancouver being cancelled as a result of the market yet? It's great to see prices cooling off, but there are still a few towers I'd like to see finished first! (the Kengo Kuma one, in particular)

[whatnext]

From this week's Economist:

Why house prices in global cities are falling

..House prices in big global cities increasingly move together. What happens in London has a growing influence on what happens in New York, Toronto and Sydney—and vice versa. And trouble is brewing in some of these other markets, too...

Property used to be thought of as an inflation hedge. But in recent years it has become a substitute for low-yielding Treasury bonds—a safe asset in which the globally mobile can store their wealth. After years of rapid price rises, houses in the most favoured markets are overvalued. Rising bond yields, tighter mortgage credit and shifting politics are now combining to push prices down..

...And prices are falling in some of the dearer cities, in response to a variety of forces. The yield on Treasury bonds, the world’s benchmark safe asset, is rising. A tightening of credit standards on mortgages in Australia and Canada has squeezed housing in cities there. Uncertainty about Brexit has made London a place of political risk rather than a refuge from it. Meanwhile, capital is moving less freely. Governments are charier of Russian money. China is shaking down its super-rich for taxes and is zealous in its policing of capital outflows.

A corollary of stronger links between global cities is a kind of “waterbed” effect. For instance, when taxes were levied on foreign homebuyers in Vancouver in 2016, the market cooled, but Toronto took off. There are buyers who will compare prices in, say, Mayfair in London and Park Avenue, New York. They look for value. But it is vanishingly scarce. The market is turning. Those who bought at the peak, or are hoping to sell, will slowly adjust to a new reality.

https://www.economist.com/finance-and-ec...ouse-prices-in-global-cities-are-falling

[ssiguy]

The above article is true about Australia where the entire country`s real estate is grossly overvalued but only partly true for Canada.

The reality is that most Canadians live in cities with reasonably affordable real estate. Quebec, Atlantic Canada, and the Praries have housing prices pretty much in line with local incomes. Even in Ontario, outside the Golden Horshoe and espercially the GTA, most areas still enjoy fairly accessible housing. Toronto is certainly overvalued by probably upwards of 25 to 30% and the rest of the GGH probably by 15 to 20% but other major centres like Ottawa, London,and Windsor are still relatively in line with historic norms and local incomes and all of Eastern, SW, and Northern Ontario are very affordable outside those key cities.


It is BC that is grotesquly overvalued to the point of nearly being comical if the repercussions weren`t so devestating. Depending on the area the entire province is overvalued by 30 to 50% and Metro Vancouver by a whopping 70%. Remember Vancouver prices have to drop 40% just to get `down` to Toronto`s current levels.


Housing is very localized so it is disingenous to make sweeping statements about `national prices` when in reality there is no such thing.

[whatnext]

Originally Posted by ssiguy

The above article is true about Australia where the entire country`s real estate is grossly overvalued but only partly true for Canada.

The reality is that most Canadians live in cities with reasonably affordable real estate. Quebec, Atlantic Canada, and the Praries have housing prices pretty much in line with local incomes. Even in Ontario, outside the Golden Horshoe and espercially the GTA, most areas still enjoy fairly accessible housing. Toronto is certainly overvalued by probably upwards of 25 to 30% and the rest of the GGH probably by 15 to 20% but other major centres like Ottawa, London,and Windsor are still relatively in line with historic norms and local incomes and all of Eastern, SW, and Northern Ontario are very affordable outside those key cities.


It is BC that is grotesquly overvalued to the point of nearly being comical if the repercussions weren`t so devestating. Depending on the area the entire province is overvalued by 30 to 50% and Metro Vancouver by a whopping 70%. Remember Vancouver prices have to drop 40% just to get `down` to Toronto`s current levels.


Housing is very localized so it is disingenous to make sweeping statements about `national prices` when in reality there is no such thing.

Though one has to wonder whether the recent changes regarding HELOCs will affect young buyers in those smaller centres who may have been getting HELOC money from their parents in the big city for a down payment, or those buying second homes in these smaller places:

...Canada’s No. 1 player in HELOCs, Toronto-Dominion Bank, just changed a key policy on Tuesday.

For people applying for a separate new mortgage and keeping their existing HELOC, TD is requiring that applicants prove they can afford a theoretical monthly payment based on the limit – not the outstanding balance – of that HELOC.

TD joins a small number of other lenders, including Royal Bank of Canada, in applying this new policy.

It’s a stealth rule change if there ever was one. As of the time this is being written, the Office of the Superintendent of Financial Institutions (OSFI), Canada’s banking regulator, hasn’t explicitly claimed responsibility for it.

Without a doubt, this could incrementally depress the cottage, second-home and rental markets. We’re not talking a market crash, here, but every credit-policy tightening adds up and weighs on home prices...

https://www.theglobeandmail.com/investin...t-tougher-for-canadians-with-a-heloc-to/

[LeftCoaster]

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.

Well except that it isn't BS. Tech companies continue to cluster and few break from that trend. New clusters slowly emerge but you don't see very many random one off tech companies in non-established hubs.

Calgary is actually an excellent example of this, where they have piles of empty office space but tech firms still flock to Vancouver, Toronto, Ottawa, and Montreal because that is where the talent is.

[Andy6]

Originally Posted by ssiguy

The above article is true about Australia where the entire country`s real estate is grossly overvalued but only partly true for Canada.

The reality is that most Canadians live in cities with reasonably affordable real estate. Quebec, Atlantic Canada, and the Praries have housing prices pretty much in line with local incomes. Even in Ontario, outside the Golden Horshoe and espercially the GTA, most areas still enjoy fairly accessible housing. Toronto is certainly overvalued by probably upwards of 25 to 30% and the rest of the GGH probably by 15 to 20% but other major centres like Ottawa, London,and Windsor are still relatively in line with historic norms and local incomes and all of Eastern, SW, and Northern Ontario are very affordable outside those key cities.


It is BC that is grotesquly overvalued to the point of nearly being comical if the repercussions weren`t so devestating. Depending on the area the entire province is overvalued by 30 to 50% and Metro Vancouver by a whopping 70%. Remember Vancouver prices have to drop 40% just to get `down` to Toronto`s current levels.


Housing is very localized so it is disingenous to make sweeping statements about `national prices` when in reality there is no such thing.

Australia’s population is much more concentrated into a few large metropolitan areas. There are nowhere near the number of small cities and large towns there in comparison with Canada. So it makes sense that their real estate market would be more uniform.

[vanman]

Originally Posted by MonkeyRonin

Are we starting to see new condo projects in Vancouver being cancelled as a result of the market yet? It's great to see prices cooling off, but there are still a few towers I'd like to see finished first! (the Kengo Kuma one, in particular)

Nope.

[LeftCoaster]

Originally Posted by MonkeyRonin

Are we starting to see new condo projects in Vancouver being cancelled as a result of the market yet? It's great to see prices cooling off, but there are still a few towers I'd like to see finished first! (the Kengo Kuma one, in particular)

Cancelled? No.

Sales have slowed but are still there for the lux projects. Kengo Kuma, the Butterfly and some of the other big projects are already sold so no worries there. Seeing how the Jenga Building and Robert Stern's two tower projects sell will be a big indicator on the health of that segment of the market. My prediction is that if they are priced around $3,000 psf both will sell, but at a slower pace than the last 2-3 years have seen.

[240glt]

Pretty sharp departure from the overheated market that dominated the interior for a number of years

Real estate sales forecast slow across Okanagan

Don’t expect a real estate boom in 2019 and 2020, says a CMHC report.

Taylor Pardy, a B.C. market analyst with Canadian Mortgage and Housing Corporation, said the Okanagan overall will see a slowdown in housing sales and price growth due to rising mortgage interest rates and slowing population growth.

Pardy said the market characteristics for Kelowna are about the same for the South and North Okanagan as well

https://www.vernonmorningstar.com/news/real-estate-sales-forecast-slow-across-okanagan/

[whatnext]

Originally Posted by LeftCoaster

Well except that it isn't BS. Tech companies continue to cluster and few break from that trend. New clusters slowly emerge but you don't see very many random one off tech companies in non-established hubs.

Calgary is actually an excellent example of this, where they have piles of empty office space but tech firms still flock to Vancouver, Toronto, Ottawa, and Montreal because that is where the talent is.

I meant BS in the sense that there is no real reason they need to cluster. It's not like Finn and Harley working at Hootsuite are saying "Hey let's meet Levi and Sarah from Amazon down at 33 Acres for a craft beer and talk tech".

A rational business decision would be to look at office space costs and what your employees have to pay for housing. And what about the foreign workers, do they really care whether they're in Calgary or Vancouver. My ribbing of Albertans aside, Calgary isn't some awful hell hole, there's a lot to offer and it is way cheaper than Vancouver.

[megadude]

As someone who has worked in commercial real estate, and heard stories from lease brokers and developers, etc., I can add a couple things to this discussion on location.

Even if office space or industrial warehouse space is cheaper, and you can pay lower wages/salary in the smaller city or non-traditional location for that particular industry, the decision is often driven by emotions.

Yes, where the talent pool is seems to be the #1 driver over the past eight years or so as I've been noticing in industry newsletters. For instance, all 5 of the big accounting firms had regional offices in downtown Hamilton. Now there is only 1. Consolidating with the TO office is part of the reason, but surprisingly, the biggest factor they mentioned was locating where the talent pool is even though you have a nice school in Hamilton and a good amount of people. It kinda didn't make sense to me but that's what I keep reading.

Personally, I'd love to see places like Hamilton maintain and gain head offices or big regional offices so more professionals would live there or up in the mountain in Ancaster and such and take some pressure off the GTA housing market, even if it only helped slightly. Plus I live in Halton region and would have no problem commuting the other way if my job moved there.

As for the emotional part, the higher ups who call the shots and are the ones travelling the most to network with industry people, they want to be where the action is. They'd rather take a cab for a meeting or conference instead of having to fly out every couple of weeks. And these are guys that are used to doing business and hobnobbing with the other elites face to face. They'd rather sit down at a steak house and do business with their peers then do it over a time delayed video conference call.

And they're the ones who can afford to actually buy a house in Vancouver so they're good.

I know of a couple of instances where offices were moved from one part of a city upon lease expiry to a different part because that's where the CEO lives. Of course, they didn't actually say that.

As for industrial, you can set up in any old building off the 401 in small town Ontario for a cheap rate and pay less to the local workforce as opposed to being in Mississauga, but the owner, or the managers or VPs or engineers or what have you, they tend to be from the big city and are not interested in moving outside the region, especially if they set down roots with their family.

And like mentioned above, the people running these places don't want a two or three hour drive to the airport every time they have to go to a face to face meeting with a client or for a conference.

I get the sense many of the mid size or bigger industrial operations in small cities are there because the owner is from the area and has that emotional attachment. It's where they started and where they grew the company. They are proud members of the community and would have it no other way.

Anyway, yes, technically they don't have to cluster, but if they're trying to attract the top tier of the talent pool, and have the money to pay them well and pay higher leases rates and still be profitable, then they're going to locate in the industry hubs despite the potential savings of being elsewhere. And the executives hold a lot of sway when it comes to where they want to live and work. Doesn't always make sense but such is the human condition.

[SpongeG]

Chinese buyer interest in Metro Vancouver's homes reaches 2-year high: report

Kenneth Chan Nov 12, 2018

There appears to be a resurgence in Mainland Chinese interest in buying real estate in Vancouver, almost exactly two years after the BC provincial government enacted its foreign buyers’ tax.

According to recent data released by Juwai, a major international real estate website in China, buyer inquiries from the country during the third quarter of 2018 skyrocketed by 131% — the highest level in two years.

In contrast, inquiries from the previous quarter hit their lowest level since 2015, with Chinese demand falling significantly during the first half of 2018. Analysts at Juwai say this matches with official local data showing foreign buyers in Metro Vancouver accounting for just 1% during the first two quarters.

Compared to the same quarter in 2017, the numbers for the latest quarter were 30.4% higher.

...

http://dailyhive.com/vancouver/vancouver-housing-market-juwai-november-2018

[whatnext]

Originally Posted by SpongeG

Chinese buyer interest in Metro Vancouver's homes reaches 2-year high: report

Kenneth Chan Nov 12, 2018

There appears to be a resurgence in Mainland Chinese interest in buying real estate in Vancouver, almost exactly two years after the BC provincial government enacted its foreign buyers’ tax.

According to recent data released by Juwai, a major international real estate website in China, buyer inquiries from the country during the third quarter of 2018 skyrocketed by 131% — the highest level in two years.

In contrast, inquiries from the previous quarter hit their lowest level since 2015, with Chinese demand falling significantly during the first half of 2018. Analysts at Juwai say this matches with official local data showing foreign buyers in Metro Vancouver accounting for just 1% during the first two quarters.

Compared to the same quarter in 2017, the numbers for the latest quarter were 30.4% higher.

...

http://dailyhive.com/vancouver/vancouver-housing-market-juwai-november-2018

This story has surfaced a couple times recently. It's almost the real estate cartel is trying prime the pump by promoting it. It's certainly not born out by cratering SFH sales in Metro Vancouver.

Also, given that China's real estate market is slowing it seems unlikely.

[LeftCoaster]

Originally Posted by whatnext

I meant BS in the sense that there is no real reason they need to cluster. It's not like Finn and Harley working at Hootsuite are saying "Hey let's meet Levi and Sarah from Amazon down at 33 Acres for a craft beer and talk tech".

A rational business decision would be to look at office space costs and what your employees have to pay for housing. And what about the foreign workers, do they really care whether they're in Calgary or Vancouver. My ribbing of Albertans aside, Calgary isn't some awful hell hole, there's a lot to offer and it is way cheaper than Vancouver.

I'm not involved in the industry but they are key clients of ours and everything these companies talk about is the fight for talent. So much of their business revolves around this it's easy to mistake the real estate division for the HR division, and in some companies the two are joined. So while a company may be able to save a few bucks by locating in an area where office space is cheaper, they instead go to the talent as that's clearly a more important deciding factor for them. Further to this they actually spend more on real estate in their build-out by creating beautiful work spaces all in an attempt to persuade the best and brightest to work for them rather than a competitor.

The proof is really in the pudding. If it were BS companies like Amazon would be setting up shop in Detriot and Calgary, not NYC and DC.

[whatnext]

Originally Posted by LeftCoaster

I'm not involved in the industry but they are key clients of ours and everything these companies talk about is the fight for talent. So much of their business revolves around this it's easy to mistake the real estate division for the HR division, and in some companies the two are joined. So while a company may be able to save a few bucks by locating in an area where office space is cheaper, they instead go to the talent as that's clearly a more important deciding factor for them. Further to this they actually spend more on real estate in their build-out by creating beautiful work spaces all in an attempt to persuade the best and brightest to work for them rather than a competitor.

The proof is really in the pudding. If it were BS companies like Amazon would be setting up shop in Detriot and Calgary, not NYC and DC.

Oh, I don't doubt that is currently the case, I'm just arguing there isn't a real rationale for it. Especially in Canada where a lot of tech talent is brought in on visas - they'd go where they're told for the job. But Microsoft , Amazon and others who use the visa program instead drink the Vancouver Kool-Aid. Maybe this will change as the tech workforce ages and want to start families. who knows.

[240glt]

Originally Posted by whatnext

Oh, I don't doubt that is currently the case, I'm just arguing there isn't a real rationale for it. Especially in Canada where a lot of tech talent is brought in on visas - they'd go where they're told for the job. But Microsoft , Amazon and others who use the visa program instead drink the Vancouver Kool-Aid. Maybe this will change as the tech workforce ages and want to start families. who knows.

Interesting to note, based on conversations with my colleagues who manage facilities for the largest tech companies in North America that the turnover rate at these companies is exceptionally high. From what I understand it is fairly customary for these employees to bounce between firms, collect their retention bonuses and then look somewhere else. So maybe the type of individual who works in that industry is used to being more transient, and therefore less likely to settle down.

[240glt]

Well the stats paint a gloomy picture for Edmonton & area real estate but I just sold my house in the central core neighbourhood of Alberta Avenue in 17 days on the market. It was an older house on a nice street, priced it aggressively and it got lots of interest with multiple offers. Really didn’t want to have to look after the place all winter so I’m happy. Our other property for sale has seen some interest as well but not nearly as much. Lower priced properties seem to be moving quickly while higher priced properties seeem to be languishing on the market

[whatnext]

Originally Posted by 240glt

Well the stats paint a gloomy picture for Edmonton & area real estate but I just sold my house in the central core neighbourhood of Alberta Avenue in 17 days on the market. It was an older house on a nice street, priced it aggressively and it got lots of interest with multiple offers. Really didn’t want to have to look after the place all winter so I’m happy. Our other property for sale has seen some interest as well but not nearly as much. Lower priced properties seem to be moving quickly while higher priced properties seeem to be languishing on the market

That sounds pretty good. Houses in Metro Vancouver are generally sitting on the market much longer than 17 days. Maybe the owners are greedier!