Canada's 'housing bubble' deemed close to bursting

[swimmer_spe]

Originally Posted by Coldrsx

Curious to see how bank valuations and revaluations will impact them, their lenders and home owners.

I am hearing that some are not permitting HELOCs or drastically reducing what % they will allow to protect their exposure.

I am beginning to think that we might have a sick canary.

What do you mean by sick canary. I know the idiom, but not what you mean by it.

[Coldrsx]

Impending doom or yet another financial collapse, but it's not dead yet.

[swimmer_spe]

Originally Posted by Coldrsx

Impending doom or yet another financial collapse, but it's not dead yet.

Ah. I thought that is what you meant, but thought there was something more nuanced.

[whatnext]

End of a cycle.

RBC’s quarterly profit misses forecasts, CEO warns ‘end of an economic cycle’ near
JAMES BRADSHAW BANKING REPORTER
PUBLISHED 7 HOURS AGO

Royal Bank of Canada’s third-quarter profit fell 17 per cent as the bank started rebuilding reserves against possible loan defaults, with CEO Dave McKay warning North America’s economy is getting closer to “the end of an economic cycle.”

Rising loan loss provisions and unusually weak results from capital markets dampened RBC’s earnings, despite encouraging signs of demand for loans and expanding profit margins on lending in personal and commercial banking...
https://www.theglobeandmail.com/business/article-rbc-q3-earnings-august-2022/

[ssiguy]

So far there have been, according to Bill Ferguson who reports on daily Vancouver housing sales, 2350 asking price declines and 290 increases in the entire GVRD so far this month.

What's more the average listing price is down a whopping 6.4%. When you consider that includes the 290 who increased their prices wildly hoping for some rebound, the average listing price has probably dropped by over 8%.

[kwoldtimer]

Originally Posted by ssiguy

So far there have been, according to Bill Ferguson who reports on daily Vancouver housing sales, 2350 asking price declines and 290 increases in the entire GVRD so far this month.

What's more the average listing price is down a whopping 6.4%. When you consider that includes the 290 who increased their prices wildly hoping for some rebound, the average listing price has probably dropped by over 8%.

You mean August '22 compared to July '22?

[ssiguy]

Originally Posted by kwoldtimer

You mean August '22 compared to July '22?

No.

This is simply a tally of the number of asking prices that have been reduced or increased. Some may have decreased their asking price 10 times in the last month or first time in a year and vice-versa for those who increased their asking price.

Just as last year when listing price increases out numbered price declines leading to soaring prices as sellers knew they would get the asking price and probably more, this in turn is a reflection of how sellers can't sell and a lowering their expectation causing a race to the bottom.

[yaletown_fella]

Originally Posted by rbt

Neither of those people would get hit by the proposed wealth tax which has been proposed to begin at $10M of net-worth.

The problem is there are so few people with $10M or more in net worth, that the revenue generated would be insignificant.

In reality, seemingly innocent wealth tax legislation ends up being a trojan horse for various governments tax agencies to chase and shakedown the middle class. In the case of the CRA, they will hire more agents to specifically target self employed people earning less than $100,000. The reason being:

1) There are exponentially more middle class than the ultra rich , and therefore more potential untapped revenue to shakedown.

2) People earning less than $100,000 (many of whom are self employed) cannot afford to take time off work plus pay for the cost of a tax lawyer to fight the CRA, so it's cheaper to just give into their demands regardless of the fairness or legitimacy of these demands regarding complexities and ambiguity in the tax code. It's especially impossible to take the time off to open a dispute with the CRA , when you are facing rising costs of living and paying double CPP.

[WarrenC12]

Love it when the plebs come in to defend the uber-rich. It never gets old.

[swimmer_spe]

Originally Posted by WarrenC12

Love it when the plebs come in to defend the uber-rich. It never gets old.

They do it because they think they either are one, or that they will become one and don't want a consequence for hording.

[yaletown_fella]

I think you are missing the point of my post. Im explaining why its not feasible for the CRA to go after high net worth individuals.

Im one of the few critics and opponents of the TE on primary residence capital gains, which is a huge tax avoidance scheme for the wealthy. Im also a proponent of raising overall property taxes as an alternative to development charges on new condos and secondary units.

If I was defending the wealthy id support TE on primary residence

[WarrenC12]

Originally Posted by yaletown_fella

I think you are missing the point of my post. Im explaining why its not feasible for the CRA to go after high net worth individuals.

Im one of the few critics and opponents of the TE on primary residence capital gains, which is a huge tax avoidance scheme for the wealthy. Im also a proponent of raising overall property taxes as an alternative to development charges on new condos and secondary units.

If I was defending the wealthy id support TE on primary residence

Your post says the $10M+ crowd isn't big enough to worry about taxing, and it will be an excuse to increase taxes on those making $100k and below.

Sure I agree PR should be subject to some form of CG tax, or the exemption should have a lifetime limit, etc.

That doesn't mean we can't tax the assets of those with over $10M, or $100M, or whatever.

[whatnext]

It wonder if the contagion in China's property market will drag prices lower in Vancouver and Toronto lower as PRC residents seek to liquidate assets here to cover losses.

Point of no return: crunch time as China tries to fend off property crash
Martin Farrer
Mon 29 Aug 2022 01.31 BST

China has reached a point of no return in its battle to contain what could be the biggest property crash the world has ever seen, experts believe, creating a perilous moment for the country’s Communist leadership and the global economy.

As western countries stand on the edge of a potentially ruinous recession in the coming year, China is also facing a slump thanks to “total collapse” of confidence among ordinary people in the once-buoyant housing market, the continued ravages of Beijing’s draconian zero-Covid strategy and an extreme heatwave that is affecting the supply of power and food...

....But just as it has become impossible for President Xi Jinping to U-turn on the mass lockdowns that have stunted economic activity, it also appears increasingly unlikely that he and his politburo will reverse the crackdown on reckless lending in the property market that has led to a 40% fall in the sale of homes this year.

The Chinese housing market has driven growth for the past two decades and now represents the biggest asset class in the world, with a notional value of between $55tn (£47tn) and $60tn, which is bigger than the total capitalisation of the US stock market. Now developers are going bust after being deprived of easy credit, prices are falling, homeowners are refusing to pay mortgages on unfinished homes and the slump in properties being sold and construction is crippling local governments that rely on land sales for income....

https://www.theguardian.com/business/202...o-fend-off-property-crash-global-economy

[Truenorth00]

They could also decide to double down on hiding assets overseas since they can't trust their home market.

[lio45]

Originally Posted by Truenorth00

They could also decide to double down on hiding assets overseas since they can't trust their home market.

Applies to wealth tax in Canada as well.

Half my wealth is in the US (perfectly legal, of course) but if a wealth tax had been on the horizon, it would be more like 99%.

[Truenorth00]

Originally Posted by lio45

Applies to wealth tax in Canada as well.

Half my wealth is in the US (perfectly legal, of course) but if a wealth tax had been on the horizon, it would be more like 99%.

Losing half to tax is preferable to losing all to fraud or confiscation.

[lio45]

Originally Posted by Truenorth00

Losing half to tax is preferable to losing all to fraud or confiscation.

Of course, but that only matters if all the developed countries unanimously agree to stick together on a given level of wealth tax (and even then - there are things like bitcoin), so that there are only two types or countries on this planet: the ones that’ll tax half your assets, and the ones that might nationalize all of them any day.

Then, yes, totally agree.

Keep in mind that it’d be very advantageous to be among the few rogue countries on wealth tax (say, Switzerland), so the measures would have to be punishing for it to work.

[ssiguy]

TD' newest home price forecast came out today and now they are expecting a 25% decline in prices nationwide by 2023.

Of course this is much worse than they forecast 6 months ago at about 12% and RBC 15% just 2 months ago. This is a national report so obviously some areas will be hit much more than others like BC & Ontario.

One thing to also remember that a 25% price decline MORE than makes up for 25% increase during the COVID boom. In such scenarios, the real estate cartels will say that you have simply broken even but of course that is a pathological lie.

If a house goes up in value by that 25% then if only requires a 17% in the price to get you back to even or 40% increase requires just a 29% price decline etc. This is why many are going to find themselves way under water but for those who bought for a quick flip and not to actually live in, they get absolutely no empathy from me.

[someone123]

I'm not sure that chasing money out of real estate speculation in Canada would be a bad thing on balance, nor does it seem like we got much out of the speculators who pay very low taxes. If housing dropped around here my wealth would go down but I'd potentially end up in a nicer property.

Overall our economy seems pretty sick where there are a lot of paper gains that don't translate into a good living standard and a few people who do really well and pay low taxes while middle class wage earners pay high rate on everything.

[lio45]

Originally Posted by someone123

I'm not sure that chasing money out of real estate speculation in Canada would be a bad thing on balance, nor does it seem like we got much out of the speculators who pay very low taxes. If housing dropped around here my wealth would go down but I'd potentially end up in a nicer property.

Overall our economy seems pretty sick where there are a lot of paper gains that don't translate into a good living standard and a few people who do really well and pay low taxes while middle class wage earners pay more.

The macro effect of this conveyor belt of foreign cash into Canada is still positive for the country, I’d say. (And definitely bad for the countries that are getting drained.)

(Even though it has perverse effects too.)

When someone sells a modest bungalow for several million dollars to a BCML, that person has several million to play with now, most of which will likely get spent in Canada. Even if they pay no tax on that windfall, it’s still better than not having the windfall at all.

Kinda like a province with lots of oil and a reeeeeally low royalty rate on it (leaving money on the table; letting itself get screwed by rich oil companies) vs a province with no oil who therefore leaves no potential royalty money on the table; given a choice between those two, who wouldn’t prefer to be the former?