Canada's 'housing bubble' deemed close to bursting

[milomilo]

If the BoC is reducing rates, it's because of weak growth and weak inflation. I'm not sure that is the market conditions where a housing boom would occur.

[misher]

Originally Posted by milomilo

If the BoC is reducing rates, it's because of weak growth and weak inflation. I'm not sure that is the market conditions where a housing boom would occur.

We've already seen a strong correlation between low rates and high prices. As long as employment stays steady I would say prepare for a boom. In the end as much as we accuss the rich of being the ones buying our real estate, its the average joe's buying power that dictates the market. So as long as people remain employed with the same wages you can expect a boom. Bond yields are heading lower with interest rates anticipated to drop. It will be 2015-2017 again.

I still find it hilarious how somehow the Federal Liberals have not taken any blame for our housing prices, that drop in rates in 2015 combined with their immigration boom was a huge reason why prices increased.

[whatnext]

Originally Posted by milomilo

If the BoC is reducing rates, it's because of weak growth and weak inflation. I'm not sure that is the market conditions where a housing boom would occur.

Covid-19 will kill any China or HK-fuelled housing rally that some are apaprently hoping for.

[Truenorth00]

Originally Posted by whatnext

Covid-19 will kill any China or HK-fuelled housing rally that some are apaprently hoping for.

Beer flu will replace that epic housing rallies thanks to QE and rate cuts. The stock market is tanking. Government isn't going to kill the Boomers' other retirement asset at the same time.

[lio45]

Originally Posted by vid

I'm not looking for a portfolio.

But if you did build one, I'm sure you wouldn't regret it later.

(Though I wouldn't recommend it to someone who's not handy nor willing to learn to become handy. Even when you aren't doing anything yourself anymore, it's an important skill to have in this business.)

[misher]

Originally Posted by lio45

But if you did build one, I'm sure you wouldn't regret it later.

(Though I wouldn't recommend it to someone who's not handy nor willing to learn to become handy. Even when you aren't doing anything yourself anymore, it's an important skill to have in this business.)

I do YouTube and do most of my own maintenance and repair. It’s a welcome
break from my day job and I much rather do it myself then pay someone and work more. Highly recommend that everyone learn to do the bare minimum like flip a breaker, replace a flush valve, or caulk a joint.

In other news, Vancouver real estate sales are up 30-40% from last month and around 40-50% from feb 2019. Developments are way down so inventory is getting very tight.

With rates to drop in March and possibly again by April and the stress test to be reduced by approx 40-50 points in April were looking at a massive housing price and sale across the nation. Stocks are down but housing can lag stocks up to 6 months (and sometimes doesn’t even follow them).

[misher]

An interesting article on how Chinese have been scapegoated by politicians in Vancouver's real estate crisis:

In his July 3 commentary in The Tyee, freelance writer Mitchell Anderson summarizes the popular opinions that collectively blame China, Chinese immigrants, and their money for the high price of Vancouver real estate. His summary is noteworthy for not mentioning the domestic factors that have contributed to the region’s housing boom or crisis. This would include a decade of prolonged low interest rates, the surge in bank lending for home buying, the rise of alternative mortgage lenders, the region’s strong economy and job market, restrictive anti-supply policies and practices by the various levels of governments, the shortage of rental-only developments, the intergenerational transfer of wealth, population growth, and record tourism arrivals.

According to Anderson’s one-dimensional explanation, China’s wealthy, together with its criminal elements and corrupt officials have spirited a huge amount of money out of their country into Canada’s housing market. He cites a Bloomberg story about US$800 billion leaving China since 2014 without asking if a large part of that is foreign direct investment (FDI) projects undertaken by the country’s many large companies in various parts of the world. His suggestion that the bulk of that US$800 billion has gone into buying Metro Vancouver’s C$50 billion (US$38 billion)-a-year housing market is absurd: imagine a garter snake trying to swallow a horse.

Anderson also repeats a widely circulated story that wealthy Chinese migrants evaded paying taxes after arriving in planeloads through Canada’s Business Immigration Program, which ran from 1980 to 2014. The “satellite family” phenomenon is often portrayed as widespread among Chinese immigrants, where the man returns to China to work and pays no taxes to Canada while his wife and children live off welfare in their new homeland. The Canadian media’s obsession with Chinese satellite families pales in comparison with its surprising lack of interest in the far bigger tax evasion problems posed by the country’s corporations and powerful elite.

The China-blamers have won
Instead of inviting skepticism and derision from the public, the media’s lack of objectivity and impartiality has become the new norm in the housing debate, endowing the anti-Chinese narrative of Vancouver’s housing crisis with a kind of “common sense” feel that makes anti-racist interventions more difficult, and all the more necessary

This strikes at the core of Wu’s lament that while “my family and I haven’t contributed to the skyrocketing prices…we’ve been lumped together with all Asian-looking people.”

The harsh reality is the Canadian public is already convinced that foreign capital, especially Chinese, is the source of Metro Vancouver’s housing crisis. The public is not interested to continue with the discussion. The Chinese blamers have won.

Over the past year, this guilt-by-association trend for “Asian-looking people” has extended to their alleged involvement in widespread tax evasion by satellite families, casino money-laundering, and the opioids crisis.

http://thevolcano.org/2019/10/15/sinopho...ing-crisis-with-chinese-characteristics/

[Xelebes]

Where is this article from?

[misher]

Originally Posted by Xelebes

Where is this article from?

Dope my bad
http://thevolcano.org/2019/10/15/sinopho...ing-crisis-with-chinese-characteristics/

Btw another quote thats great to add:

While acknowledging the impact of foreign capital, Mr. Pavlov is also worried about the public’s growing tendency and seemingly implacable anger to blame the bulk of the region’s housing problems on foreign buyers.

“Foreign buying has had an impact, but I don’t know if it’s the biggest,” he said in an interview.



“There are clearly a number of forces that work together. It’s very difficult to establish which forces are more powerful.”

He criticized the ‘Dirty Money’ report for being “ridiculous” in exaggerating the impact of laundered casino money.

“It’s such a small amount. This (has) nothing to do with the housing crisis.”

He described Mr. Eby’s attempts to sell a link between Metro Vancouver’s housing problems and Chinese criminal activities as a “politically easy” move that “resonates with voters.”

“You’re not offending anyone who’s involved (in the housing market). You’re only offending people who don’t vote,” he said.



If the trend of blaming foreign demand persists – and if governments keep trying to tax the problem away – Mr. Pavlov foresees negative consequences.

First, he thinks it’ll distract the various levels of government from the urgent task of boosting supply. Critics, including developers, have long maintained they are hobbled by restrictive and onerous government regulations and red tape.

Mr. Pavlov said population growth has outpaced home completions for over 10 years, creating a long-term housing deficit

https://www.onepacificnews.com/2018/10/07/metro-vancouvers-housing-blame-game-part-two/

[Xelebes]

Please refrain from posting too much of articles. It is a pattern I am seeing and it needs to stop. What you are doing is copyright infringement and can land this site in trouble.

[casper]

Originally Posted by whatnext

Covid-19 will kill any China or HK-fuelled housing rally that some are apaprently hoping for.

I think will cause the opposite. Those who can leave China or HK for Canada may be more motivated now than before.

Thankfully the influx of money from China into the Canadian economy is a positive.

[misher]

Originally Posted by casper

I think will cause the opposite. Those who can leave China or HK for Canada may be more motivated now than before.

Thankfully the influx of money from China into the Canadian economy is a positive.

You do see a large rise in chinese students seeking international studies after SARS which may or may not be related.. Not sure how it will play out here. The real estate market in China is tanking and we talk about how chinese restaurants are down here but they are still getting customers if noticeably less.

I do find it funny that back in 2002 people were complaining about how home prices were too low and the real estate market crashed so that most people who were owners lost a lot of money or went bankrupt and unemployment was high. In 2008 prices crashed in the US which led to the mortgage crisis as people walked away because the price was less than the mortgage. Fast forward to 2018 and suddenly high prices and buyers are bad and we want things to crash.

Now if the economy slows and we enter a recession it’s going to be like 2002 again.

In the end money is good if used well and this whole “anti real estate” crowd are short term anti-capitalist thinkers who don’t understand how much good money in our real estate has done. I point to all the modular housing we built quickly that’s now slowed down because real estate taxes/fees declined.

Plus if people wanted to buy they would have bought when it was cheaper back in 2012 or earlier. The current crazies wouldn’t buy if real estate was half the price. They just want to see it burn like those stupid protestors trying to sabotage trains and bridges.

PS: will cut down on the size of my quotes thanks.

[misher]

Presenting the 1.99% mortgage. And thats just the start of the race to the bottom in the lead up to the hot April sales market.

The spring mortgage market just got another boost. HSBC has unveiled a brand new 1.99% 3-year fixed that is now the lowest mortgage rate in Canada.

It’s for default-insured (“high-ratio”) mortgages only, but it’s spectacular nonetheless. The last time the bank had a rate this low was July 2017 on a 5-year variable.

https://www.ratespy.com/1-99-hsbc-mortgage-special-030212008

[misher]

US fed just cut rates 0.5

Canada anticipated to make a 0.25-0.5 cut Wednesday.

A confluence of factors is priming the pump for a brisk buying season. Lower bond yields amid the virus have allowed Canadian banks to unveil mortgage specials and the government has tweaked its mortgage qualification rules. Meanwhile, markets have begun to price in an interest rate cut from the Bank of Canada to cushion the economic of virus as soon as Wednesday -- maybe even 50 basis points.
“All of this is great news for housing and the mortgage market -- until and unless we see a huge spike in coronavirus cases in Canada and/or a big jump in unemployment,” Robert McLister, founder of mortgage comparison website RateSpy.com, said in an interview. “Lower rates are stimulative to housing.”

Home prices in some of Canada’s largest cities have already been rebounding after the market slumped through 2018 and 2019. Shrinking supply in Toronto drove prices to their strongest gains in more than two years in January. Pasalis estimates that sales were more than 40 per cent higher in February from a year ago.
Yield Freefall
“We’re back to near all-time highs in some markets, and we’re seeing prices ramp up and bidding wars in hot markets,” McLister said. “Everyone knows exactly what happens in the near term if mortgage rates plunge -- that’s just more kerosene on the fire.”

https://www.bnnbloomberg.ca/virus-driven...ene-to-canada-s-housing-market-1.1399285

[whatnext]

Originally Posted by casper

I think will cause the opposite. Those who can leave China or HK for Canada may be more motivated now than before.

Thankfully the influx of money from China into the Canadian economy is a positive.

Not likely. Studies have shown Vancouver's real estate market is now unfortunately closely tied with China's economy. China's economy is now on track to actually contract for the first time since Mao was in power.

That leads to this:

Global property deals stall as coronavirus keeps China money at home
-Chinese buyers spent US$13.4 billion on US homes in 2019, the most from any foreign country even as purchases plunged amid trade war
-Property agents are facing the same problems from Singapore to Vancouver with hundreds of millions of Chinese effectively quarantined

Bloomberg
Published: 11:39am, 3 Mar, 2020

...Elsewhere, from Vancouver to Singapore, property agents are facing the same problems as their counterparts in US that rely on Chinese buyers: With hundreds of millions of Chinese effectively quarantined, it is hard to sell real estate.

“People were planning to do open houses in early February and obviously the turnout wasn’t as good,” said Jerry Huang, an agent in Vancouver. “Many investors aren’t planning to come at all, just to follow rules.”...

https://www.scmp.com/business/article/30...stall-coronavirus-keeps-china-money-home

This is good news for Canadians.

[misher]

Comparing median prices is a tad tricky because square footage of newer units has been getting smaller so the median price will look like its decreasing even if the $per/sqft price stays the same. Looking at the below and factoring in inflation it appears that average prices in Vancouver have not changed much. The sharp increase in 2016 is largely due to the flood of foreign buyers rushing to get in before the FBT came into effect.

[misher]

A 50 point cut is now a real possibility.

Pressure for the Bank of Canada to act is only increasing. As of 2:30 p.m. Toronto time, markets were pricing in a 66% chance for a 50-basis-point cut. That’s up substantially from the start of trading Tuesday, when markets expected just one full 25 basis point cut, and no more.

We’ve already seen what cheap debt has done to our economy. I think we all underestimate the impact even cheaper debt will have. I understand why we need to decrease rates but the weakness in our economy that’s led to this road is partially of our own creation. We’re looking at negative interest rates in the future unless we smarten up.

Meanwhile despite all the denials make no mistake, housing is going to go insane. It did back when rates dropped before and it will again now that both rates and the stress test are dropping. All funded by local debt, not foreigners. We can’t try to blame this on someone else this time.

[WarrenC12]

Originally Posted by misher

A 50 point cut is now a real possibility.

US Fed did it today and Dow is down 800 points. They blew their wad already.

[casper]

Originally Posted by whatnext

Not likely. Studies have shown Vancouver's real estate market is now unfortunately closely tied with China's economy. China's economy is now on track to actually contract for the first time since Mao was in power.

That leads to this:

Global property deals stall as coronavirus keeps China money at home
-Chinese buyers spent US$13.4 billion on US homes in 2019, the most from any foreign country even as purchases plunged amid trade war
-Property agents are facing the same problems from Singapore to Vancouver with hundreds of millions of Chinese effectively quarantined

Bloomberg
Published: 11:39am, 3 Mar, 2020

...Elsewhere, from Vancouver to Singapore, property agents are facing the same problems as their counterparts in US that rely on Chinese buyers: With hundreds of millions of Chinese effectively quarantined, it is hard to sell real estate.

“People were planning to do open houses in early February and obviously the turnout wasn’t as good,” said Jerry Huang, an agent in Vancouver. “Many investors aren’t planning to come at all, just to follow rules.”...

https://www.scmp.com/business/article/30...stall-coronavirus-keeps-china-money-home

This is good news for Canadians.

The Vancouver Sun article quotes indicates a correlation but not a causal relationship.

The Canadian Western Economy is still very much dependent on natural resources. For the last decade or so China has been a key driver in commodity prices.

[SpongeG]

Condo crisis? Analyst warns of massive Metro Vancouver presale drop-off

BY SIMON LITTLE AND AARON MCARTHUR GLOBAL NEWS
Posted February 28, 2020


A B.C. real estate market analyst is sounding the alarm about a steep drop-off in condo and townhouse presales.

“We knew there was something going on, but when we saw the final numbers we were pretty shocked,” said Michael Ferreira, managing principal with Urban Analytics.

The company recently crunched regional data for 2019 and found a 60-per cent drop in new condo and townhouse units coming to market.

Looking at highrise construction only, the dip was even steeper: 76 per cent.

While Metro Vancouver appears to be a forest of towers under construction to the eye, Ferreira said the impact of the presale slide is currently hidden.

That’s because presale units usually take about three years to reach completion — meaning a cut in new supply will be felt down the road.

...

https://globalnews.ca/news/6611441/metro-vancouver-presale-dropoff-condos-townhouses/