Some wag wagered in a post on Monday my next piece would be on affordability, now that Canada has been judged to have the most unaffordable real estate in the world.
Damn straight.
If you’ve heard me speak, read one of my books or stumbled on this site, you know my conviction that Canadians are property fools. Yesterday I demonstrated how we roll over and pay almost twice the price Americans do for shelter. Now comes fresh, steaming evidence we lead the planet in delusionary behaviour. Especially in BC and the GTA.
In case you missed it, the latest Demogaphia survey – a research document comparing houses in Canada, the US, the UK, Australia and elsewhere – has pegged Vancouver, Kelowna, Abbotsford, Victoria and Toronto among the global elite when it comes to house values. Trust me, this is a list you do not want to be on.
The media (as usual) missed the point of this document. It’s not that homes in these places, led by Vancouver, are the most expensive in the world. They aren’t. Rather that they’re the least affordable. The difference is huge. Expensive houses in expensive cities like Hong Kong and London are affordable to the wealthy residents who live there. That’s why they cost a lot – since those are global centres of economic activity.
Vancouver, in contrast, ain’t. A regional city in a mildly interesting but second-tier country.
So why are Vancouver and Toronto two of the most unaffordable cities in the world? Because the cost of houses is totally out of whack with what people in those communities earn. In other words, high prices without economic justification – which means they’re unsustainable.
Demoghaphia considers a city affordable if the average house costs three times the average income. If it exceeds four times, it’s moderately unaffordable. Past five times, seriously unaffordable. Beyond that it’s comedic. So, Victoria at about eight times and Vancouver at over 9 times income are off the scale. This doesn’t mean the housing in those cities is world class, internationally desirable, glam, or destined to keep rising. Instead, it probably means the locals are nuts.
The more interesting question, then, is how this happened.
And it’s one we’ve already answered.
The current housing bubble has been caused by emergency interest rates engineered by the central bank. It’s the result of government-backed mortgage insurance which lets people without money buy houses. It has been pumped, promoted and pimped by the mainstream media, populated by home-owning producers and editors and run by advertising-starved, indebted corporations. It’s been desperately promoted by the feds through tax incentives and blanket approvals by the minister of finance. And it’s been fueled by self-dealing lenders, realtors, developers, real estate boards and huzzah-huzzah marketers who have told people, buy now or buy never.
In contrast, it has not been the result of an increase in disposable incomes, an influx of new investment and jobs or economic growth. And that’s why the thing cannot last.
At 9.3, Vancouver’s officially ready for the big one.
167 comments ↓
Garth, then what about the GTA 15-20% correction?
Shane
“A regional city in a mildly interesting but second-tier country.” Man the truth hurts.
Just received Money Road today Garth…looking forward to it!
“At 9.3, Vancouver’s officially ready for the big one.”
On the Richter Scale yes, that IS the big one but now that almost everything else worldwide is falling to pieces, the scale doesn’t matter.
——
BTW, did anyone notice (or read) that China is recovering from its worst sea ice in 40 years? That’s climate change — never makes it’s mind up!
Heads Up Canuckleheads (false flag)!
And who just happened to buy Kinder Morgan? That’s right! GS! I understand that dubya (not sure) has links with The Carlyle Group.
Banks are beginning to fall like branches in a hurricane, and January still has a week to go! The second wave of foreclosures hasn’t begun yet, and commerciall RE has yet to wake up to being broke as well. Also here.
Two down, plenty to go. Good for them, and speaking of fakes . . . Vaccinations for profit?!
Layoff apocalypse. / New Outsourcing “When the rich wage war, it’s the poor who die.” — Jean-Paul Sartre (Of course, the rich wage war just for the fun of it.)
Pakistan and We are free to be economic slaves (sheeple).
Garth,
I think that low rates can only explain so much of the phenomenon, and on a related note, in your latest book you talk about the difference b/t tax avoidence and evasion. I would propose that tax evasion is the main driver of under-reporting of income in the stats quoted.
Is it sustainable? I dunno. I do know that my wife and I who avg $150k, can’t afford houses that our hair-dresser making “half as much” can.
The underground economy works both ways I guess…
And to think that my wife and I were worried when we bought our first home in Port Hope ON in 1973. It was a semi because we didn’t want to get ourselves deeper in debt by buying a fully detached place.
Our affordabilty ratio? 1.3. Boggles the mind.
“So why are Vancouver and Toronto two of the most unaffordable cities in the world? Because the cost of houses is totally out of whack with what people in those communities earn. In other words, high prices without economic justification – which means they’re unsustainable.”
That’s an understatement. What Industry is there in Vancouver? Tourism with its low paying jobs, a dying forest industry, a shrinking government-due to incompetence of our lying Premier, a film industry that only became the size it is because of the previous huge differential wrt Can and US dollar. Approximately one in 5 people in BC are self employed. Can anyone name six large companies that are located in Vancouver? Hell, if you take away the condo flippers and the construction workers, then probably half the people here couldn’t earn a living- legally.
This explains very well how most mortgages originate with CMHC now. Here is an article form The Globe and Mail.
Bankers get the bonus, and government takes the risk
http://www.theglobeandmail.com/globe-investor/investment-ideas/bankers-get-the-bonus-and-government-takes-the-risk/article1442688/
It is interesting to also see the opposite end of that affordability chart. Canada has 5 cities leaving the remaining 90 most affordable cities in the world all in the USA.
[i]If it exceeds four times, it’s moderately unaffordable. Past five times, seriously unaffordable. [/i]
Actually, according to their report, if it exceeds three times it’s moderately unaffordable… exceeds four = seriously… exceeds five = severely
I am being purposefully understated. — Garth
What I notice is that most of these places are in Australia, United Kingdom, USA.
One thing in common – the British Common Law – the universally accepted use of the English language, the right to own land in fee simple and the fair Justice System. Foreigners, such as affluent Asians, Indians etc, feel safe in this kind of environment which is seen as safe for investments and racially tolerable.
The climate and incomes do not matter since they earn their money elsewhere. Interest rates for the local first time buyers and the influx of immigrant money – the combination – is relentless and is not likely to stop any time soon – at least not in the Lower Mainland which is so close to the Asian coast and is fairly populated with Asians already – so, for new comers it is already proven ground for success and they are just pouring in.
For young people born and raised in the Lower Mainland that spells trouble in the years to come, because according to their incomes they will be renters forever – unless the parents chip in for the large down payment – and I mean large; how much can you afford on $9.00/hr Job?
vancoucer is beating the housing market–new rental building in the downtown eastside—270 sq.ft. $675. per month—still doesn’t help anyone presently living down there
Excuse me but ‘Straya has 7 of the top ten unaffordable cities in the world. But perhaps not for much longer… http://www.dailytelegraph.com.au/news/sunday-telegraph/tighter-credit-rules-to-halve-home-loans/story-e6frewt0-1225822838856
Of course the housing market in Canada is delusional, but herding instinct is not logic.
90% of people do not think independent but walk with the herd. It is the “safety” of the herd that gives them comfort.
It is just a matter of how far is going the government with the MBS ponzi scheme…
But most people don’t understand this. Too complicated ….
Alberta’s being taken apart at the knees pages and pages of layoffs on google and then came the feds
the housing bubble will hurt us all
I look forward to a new demographia study every year.
However, they don’t seem to support the notion that this unaffordability was caused by low interest rates. If it was, wouldnt the “affordable” markets of Dallas, Atlanta and Detroit (OK not Detroit) have experienced a huge
resurgence?
I encourage everybody to read the study. It has some
thought-provoking ideas. And please, it only covers the english-speaking world. Does anybody have some info on world RE markets?
As a Vancouver dweller who SOLD out and is renting – I can’t convince anyone here that there is anything mildly wrong with the affordability factor in this City.
Vancouver ranks 57th in Canada (*stats Can 2008) in median after tax income….right there tied with Goose Bay Labrador.
In Goose Bay – how much is a two bedroom with a view of the rock, eh?
People in Vancouver are snobs…and won’t be happy when you tell them the truth.
A mid tier City in a backwater; always was and always will be.
Delusions of grandeur – and an Olympic sized headache to come.
World Class?
Right.
…..but the BoC says there is no bubble!
Garth, you are ignoring the reality. There must be a reason or more for this reality. Kanata is twice as expensive – as the States maybe because it’s proportion of population in millions living in big urbae vs rural (incl small towns) is probably way more. I’ll let you do the math. Also, is less competitive due to historical controlled prices (e.g.Hudson Bay era)
You can’t compare apples to pears – so prices will never drop to States level – Looks like the Urbans are in certain ways much more mentally lazier than reality-stricken small town folks – so the Urbans like to pay the price, as part of the fame. They also enjoymaking it unaffordable for others, believe it or not. Matter closed. No severe price drop on no-real competition ethnic enclavized post-collonial Kanata.
Just wait until unemployment hits 20% nation wide–
Then we can light up the names of more city’s–
Kind of like a growing industry–in reverse–
If you read some of background, you found out it wasn’t ONLY cost that made the housing affordable or unaffordable. A big part of the costs include land management and environmental planning programs implemented by municipalities. No wonder BC has the highest rate.
Did you happen to see where the best places for affordability were … Detroit ranked first with Windsor not far behind. Is THAT your vision of affordability Garth??
Ever been to Windsor? I doubt it. — Garth
Garth.. Slightly better pic of the chart.
http://i45.tinypic.com/296em8m.jpg
Just watch tomorrow… The RE cabal in Vancouver will make a strong counter-offensive to keep the buyer-lemmings jumping off the Cliffs of Debt. They will question the methodology, question the underlying motives and trot out the holy triumvirate of the cult of Vancouver RE… Rich Asians, Olympics and Running out of Land.
#14–Does anybody have some info on world RE markets?
http://1.bp.blogspot.com/_Et4TQ-a0gGU/Sg7WE-vBCII/AAAAAAAACEM/FQKqA_G5XOY/s1600-h/housing_bubbles_chart.png
Garth
Listings are surging in Vancouver (see http://www.agentwill.com – weekly stats). Sales suddenly sluggish.
Is this it – has the peak passed? Could there be a sharp initial decline?
Australia Bubble??
Looking at this study it would appear Australia has a housing bubble also. Their prime rate is 3.75% which is substantially higher than Canada’s 0.25%. Why hasn’t Australia seen a correction even though the consensus is that higher interest rates will start a housing decline in Canada?
Why is Australia different?
Something tells me that I would never live in Vancouver.
“… I want it, and I want it now….”
This mentality will change. Eventually.
Well the government bean counters all over the country are busy crunching the numbers for the April 1st budgets. Going to be lots of hair pulling and groaning going on as they try and figure out how they are going to provide services with the allotments they have been given and still maintain current levels of staff. Sooooo, will they decide to hang onto the deadwood and cut services or layoff the deadwood and still provide a reasonable level of services? Of course laying off the deadwood woulld increase the unemployment rate considerably and that wouldn’t look good politically would it? Decisions, decisons. Will be interesting to see what happens here in the next few weeks. Already we are hearing of layoffs here and there but nothing compared to the 13,000 or so that had to be reduced in the recession of the early 80′s and that was just BC.
http://ca.news.yahoo.com/s/capress/100125/national/affordable_housing
#5 Jim
“…then probably half the people here (Vancouver)couldn’t earn a living- legally”
It’s a safe bet half the people in BC aren’t earning a living legally. Between a $8B/yr pot industry, home owners not claiming $15K+ a year renting out their basements, and the service industry not claiming tips, it’s not the Joe Average jacking the prices in Van. It’s the criminals getting rich and the rich getting richer.
There is a reason BC Real Estate has gotten so out of hand. Part of it is due to the ‘Greater Fool’ idiocy GT lays out. The rest has to do with how the money ,that is used to buy the homes, is being generated in the first place.
Toronto needs to step it up!
I can’t believe we’re behind wonderfully-named places like Toowoomba and Northamptonshire.
Come on Toronto – let’s get this bubble moving! We need to at least crack the top 20 before we’re considered “world-class” and can try again for the Olympics (the ultimate bubble prize).
Disaster delayed ……..
Today’s headline … “Canadians running out of E.I.: report … 500,000 Canadians who initiated E.I. claims in 2009 could exhaust their benefits before finding a new job”
The perfect storm is upon us …. Rising interest rates … Scores of E.I. recipients running out of benefits…. and a still sputtering US economy.
Ladies and gentlemen, please fasten your seat belts and make certain your set backs and seat tables are locked in the upright position …. we’re about to begin our decent into much lower RE prices. In case of an emergency decent, don’t panic … unless of course you purchased an overinflated house in the last five years. In that case there’s an airsick bag in the seat in front of you. You’ll need it …. It’s going to be a very bumpy ride down.
Great post Garth, thanks! Looking forward to grabbing your book at Chapters next week.
Your argument is compelling. These cogent and logical posts are gradually dismantling the wall of blinding denial and my emotionally-driven delusion that it is still “worth it” to own & live here in Van. Your advice will help our family down the road, I’m sure. Cheers!
How much would you say that Van RE prices have to fall in order to be realistic / in line with the actual (vs perceived) qualities of the city / global affordability standards?
Thanks #9 RAIN – good post also.
Garth, what do you think of the Demographia report’s assumption that overpriced markets are not (at least entirely) the result of cheap money, but that they are the result of “devastating impact of more prescriptive land use regulation”. The report emphasizes the lack of such regulation in affordable markets such as Dallas-Fort Worth and Atlanta. Montreal was cited as a city where land regulation has driven price increases:
“Housing affordability continues to deteriorate in Montreal (Median Multiple of 4.9), where an agricultural urban growth boundary has seriously constrained development on the urban fringe”
Are there any growing Canadian cities with a minimal land regulation and unaffordable prices that could counter this claim? All of the affordable Canadian markets that were listed are cities with stable or declining population (Windsor, Thunder Bay, etc)
Isn’t this report just amazing. It shows how Vancouver is “THE” most unaffordable market in the World. Not in North America, “IN THE WORLD”!!! It says Toronto is in the severely unaffordable category and Montreal, Calgary and Edmonton are rated as seriously unaffordable.
Does the Canadian media pick up on this article?? I can’t find it in any of the Canadian mainstream news sources, I’m not saying the article is not there, I just can’t seem to find it. But, boy oh boy, all I have heard from the mainstream media over the last year is how “affordable Real Estate is in Canada”, the steady stream of Realtor crap is guaranteed to be front page headlines every day of the week, even though it is a bold faced lie.
Why has Real Estate become so unaffordable in this country? Because of the non stop propaganda for the Real Estate association that we are force fed on a continuous basis driving the hysteria and because of Mark Carney, Jim Flaherty and Stephen Harper. The CMHC has become one of the largest subprime lenders on this planet and the Conservatives led by Stephen Harper and Jim Flaherty are the criminals behind this mess. All to generate themselves some votes.
Am I an angry Liberal? No, I am an angry Conservative!!!
http://www.rabble.ca/news/2009/10/canadas-sub-prime-mortgage-time-bomb
BTW, if Vancouver is currently rated as the most Unaffordable city in the world with Toronto rated as severely unaffordable while Montreal, Calgary and Edmonton are rated as seriously unaffordable, what the #@^% is going to happen to these ratings once interest rates head higher? We are going to see a market meltdown while the Canadian tax payers will be on the hook for upwards of half a Trillion dollars of CMHC guaranteed loans thanks to Jim Flaherty and Stephen Harper.
http://www.rabble.ca/news/2009/10/canadas-sub-prime-mortgage-time-bomb
Oliver, is a true believer in the “its’ different here” idea. He must be a Realtor or at the least a Greaterfool.
So why won’t all the rest fall too? The small ones like Darwin and Wollongong or the big ones like NYC or Melbroune? All four of those are way worst than Toronto. Should they all be expecting a colapse too?
Why are Vancouver, GTA, Sydney at the top?
Because:
1. Highest per capita immigration into these cities! Do the research!!! Nationally, Canada has the highest intake of permanent residents while Australia has the highest intake of temporaries, especially Sydney.
2. Restrictive land use policies that stakeholders will ensure remain in place for decades to come. Too much money to be made by putting others in debt.
Would be sweet to live in Dallas, Atlanta, or Houston…very enticing!!
Bottom in house prices decade away!
Headline at zerohedge a U.S. blog talking about the U.S. market. Mish has been talking about the cost of houses needing to come down to match incomes for months now but wages keep falling so the bottom never gets reached.
I forget where I read it but the most interesting thought in a while is just how long any country making less than 75% of its basic consumable products can survive or if one has ever survived. The point used was footwear. Canadians will buy an average of 1 pair in the next year so what if we had 100 companies making 300,000 pairs each which would require 100 or so employees each. 30,000 pairs of high end or specialty pairs would be imported. Lets see what that adds up to, 100,000 jobs along with taxes and 100 businesses paying taxes which would put a dent in the government deficet.
Multiply this among every basic product and our economy works again.
Oh yah that CHEAP is better thing. I guess we have to get over that nonsense first.
Glad to pass the trophy over.
Housing is showing signs of a correction on parts of the Coast.
People are still buying like crazy, but a lot of contracts are falling through, the auction clearance rate has dropped and agents are starting to push vendors to meet the market. Seeing a lot more rentals as well.
Garth, you know I was just being cheeky. I’m fighting the good fight with you.
Post Script: where do I pick up my prize? Mark and Jim?
Used house prices in Calgary right now are (at least on an ask basis) running north of $250 per square foot for a 30 year old structure plus lot. Which is wierd because the builders are pumping out new ones with modern insulation and all that for $200 plus lot. Ya sure the basement isn’t finished, but the deck isn’t falling over either. Something’s gonna give.
Sooner or later someone is going to figure out that a 30 year old house is half way to the wrecking ball. You’re buying a lot and a severely depreciated structure.
Got your signed copy of Money Road Garth!
Its nice to have a refreshing and really current perspective of what the future holds.
We love you Garth!!!
Garth is on financial post:
http://www.financialpost.com/personal-finance/mortgage-centre/story.html?id=2432195
RAIN #9
You are bang on!
The demographics of the city permit “foreign” money to enter without it ever being recorded. After all, Landcor data notes that “officially” only 4% of Vancouver real estate purchases come from “foreigners.” But anyone that lives here knows that our high RE prices are
There has been no correlation to local incomes since 1988, as even back then price to income ratios started to hit 1:5, well beyond the 1:3 before Expo 86. The Hong Kong influx change the local real estate game forever.
Here we are 22 years later, and those price to income ratios are 1:9 (supposedly). In effect, for 22 years, house prices have been out of whack with “local incomes.”
Maybe local incomes don’t matter…they have not mattered for over two decades…probably won’t in another two decades…
I’ve seen bubbles first hand.
I saw the gold bubble when I was a paperboy in the ’80s.
When I worked in a hotel I saw the dotcom bubble.
I watched as we booked larger and larger all day seminars for investment firms.
Originally they were staid affairs of twenty to thirty people getting together for the quarterly sales rah rah.
And then as the bubble grew these meetings morphed into multi level marketing schemes.
Every tupperware housewife and frustrated secretary was being pitched to leave the security of their jobs to come work for the juggernaut.
We now had a couple of hundred people being breakfasted and lunched through all day dream weavers.
They only had to milk every one of their friends and family for their every cent and they could reap fabulous commissions.
What could go wrong?
These meetings were a pain in the ass.
One was the ‘guy in the back’ who was a ghost who delegated everything to subordinates.
He was only there to watch.
But you knew if you were approached by some smiley face when something went wrong it was from him.
The pitchman on the other hand was something else.
He didn’t know anything about what he was doing.
‘My own computer won’t connect to my own projector.’
And I thought, ‘So what the f*** do you want me to do about it? I’m only here to feed your sheep.’
He was only there to spin his tale and sign them up.
When the Nortel shock hit and these meetings abruptly disappeared, I never saw that pitchman again.
And there was a short lull where the hotel sales department wondered about revenue.
Until the real estate meetings began to accrue an ever larger following.
Same pattern.
I guess they had spotted what I had.
Back in 2003 it was cheaper to buy a house than to rent, even in Winnipeg with rent control, if you had the money.
Not a great house, but something better than an apartment where the landlord told you that you had to sell your barbecue after 9/11. (Because the reinsurance chickens were coming home to roost.)
House prices started to climb.
The real estate board building on the main drag soon had a refit and a shiny new lcd sign.
And people started losing their minds bidding for houses.
Then all over the place, crazy big houses with crazy big price tags started sprouting up.
And people were buying them. (Still.)
I’d gone back to school.
The hotel business was dying in the sense that ever more players were chasing fewer customers who were increasingly ‘educated’ by the lifestyle networks on TV.
And then I landed in Saskatoon where the median price had gone from $100K to $250K in two years.
—————
I watched the real estate unfold in the States.
Because it was crazy here and there.
When it comes to buying a house, the bank is gonna get you for a certain amount.
The equation is interest times price equals gain.
The bank is gonna get their gain.
Low interest times high price = High interest times low price = Gain.
But how many people want to be on the bad side of their bet?
Low interest times high price becomes high interest times high price = Greater Gain.
Banks have nothing to lose.
They just take the property back and start again.
Why do people keep making that bad bet?
I’d buy a house at 20% interest because I ‘know’ how unlikely it is that rates would go higher.
And prices couldn’t get much lower.
But to buy a house now with interest rates so low.
Houses can only get cheaper when interest rates go up.
It’s just the way it is.
I think the funniest statistic from the whole survey is Abbotsford ranking 25th IN THE WORLD!! That’s right, Abbotsford, that centre of world trade and finance.
The CDN gov’t needs to step in and if they can’t raise interest rates just because of the housing bubble, they can raise the minimum downpayment on a home to 13% from 5% like Australia has just done.
Mike
Hi Garth,
I must say you have really kicked it up a notch lately. I always new you were better than just awesome. Also my girl and I can’t believe the work load you take on everyday. Your like Oprah.
I love this post but what would you say would be the most fundamentally sound country in the world? Based on the country’s balance sheet and also personal balance sheets. Overall. Hopefully warm too.
Thanks.
So right now, the wife and I have been renting and waiting here in the GTA.
My father’s in his 80′s and lives two hours away in a Condo. He approached me the other day with this:
He’s getting to the point where he would feel better living with us – wife and I are in agreement. He says if we’ll buy a large house here in the GTA soon (by April) – a mcmansion for all of us, he’ll pitch in for a down, give us some entitlement cheque he says he doesn’t need that’s $400/month, and we can rent out his condo and keep any profit after property tax and condo fees (will be about $600/month profit). For himself, he has a very secure retirement income in addition to his CPP and OAS. In addition, he wants us to make sure we buy a house with an already rented basement that gives us at least another $800/month.
He says he’s getting too old and asked us to do this quick. Don’t want to let him down, so, I’m in the buying game now at the worst possible time. Inventory I think is at its lowest in 5 years for a January, and sales are at the highest for a January (according to the charts on guava.ca).
My fear is the carrying costs of periods when the basement apartment and/or condo aren’t rented out. Tons of ads in Craigslist & Kijiji for basements for rent. On the plus side, I know landlord tenant laws and gov’t procedures inside out from my last job, so I think I can manage the tenants – IF I have tenants.
I did not want to be buying at this time. Now the wife is frantically searching for builders’ inventory homes, as none of the used homes meet her criteria, I’m spending endless amounts of time on MLS foraging for the ‘right criteria’…..This is maddening, but necessary in the end.
#14, To answer your question:
I have been living in the Gulf for almost a decade now. Dubai, Kuwait, Saudi Arabia… Property prices have tripled here as well since 2001.
Except for Dubai and Bahrain, foreigners cannot buy real estate. Go figure, locals are paying $500,000 to a million for a piece of desert. Of course, leveraged. But houses are big. Average size: 4,000 – 5,000 sq. ft. Some are as large as a small airport.
If you are fatigued from paying taxes, why not join other Canadians here. You will still have to work but this time tax-free.
http://www.gulfspecific.com/Start-Winning-Get-a-Lucrative-Tax-Free-Job-in-the-Gulf-03.htm
rumoured to have been heard emanating from the Vancouver Real Estate Board ……..
” WE’RE NUMBER ONE …. WE’RE NUMBER ONE ” !!!!
Garth, I enjoy reading your blog and generally agree with what you write. However, this time around, I have to give you the bad news that you’ve been had, just like the newspapers. The Demographia survey is seriously flawed. I went to their website, and it claims that Vancouver has the most unaffordable housing “in the world.”
I have a serious problem with their definition of “the world”. It consists of SIX countries: Ireland, Australia, NZ, Canada, the UK and Australia. Last time I checked, the world also included Asia, Middle East, Continental Europe, Africa, Latin America, and the North and South Poles.
This is a seriously bad piece of research. I’m familiar with the markets in Asia. The survey said the Vancouver median housing price is just over C$504,000. In Hong Kong, you probably get a toilet for this price. In Singapore, an average condo sells for $1,000 to $2,000 psf. Salaries in Singapore are about 70% Canada’s levels. HK probably has the same average salary as Canada’s. Pls treat the Demographia survey as rubbish.
The other cities that I know that are far more expensive than Vancouver would include Mumbai, Tokyo, Seoul, Doha and Paris. Also, I find it hard to accept that Vancouver housing is more costly than London.
Thank you.
Top 10 most expensive real estate markets in the world:
http://english.people.com.cn/90001/90783/91325/6877975.html
Not one Canadian city made it to this list.
Monte Carlo, Moscow, London, NY, Hong Kong, Paris, Tokyo, Hong Kong, Singapore, Rome, Mumbai.
As I said, expensive and affordable are two different things. — Garth
Immigration policy has had a hand in BC’s inflated housing costs. Canada lets in only rich foreigners now, and the super-rich get fast-tracked. They like to live in BC because of the weather. Gone are the days when Canada imports people who’d choose to live in Windsor.
I am enchanted by the companion list of affordable cities. Myself, I would call all of them depressed cities. Some even crumbling cities. “Affordable” used in that context is just a little bit weird. It’s the kind of affordability most people can’t afford.
World Citizen said: “Also, I find it hard to accept that Vancouver housing is more costly than London.”
No one said Vancouver is more expensive than London, the assertion is that Vancouver is less affordable (based on median data) than London.
World Citizen, could you please point out where Demographia claims this is a ‘world’ survey, I don’t think they said that. I’ve noticed in the past that the use of word ‘world’ has been the fault of journalists who mistakenly write that. The demographia website clearly mentions the countries involved and in there survey pdf, there is this:
“This is the 6th Annual Demographia International Housing Affordability Survey. The Survey covers urban housing markets in Australia, Canada, Ireland, New Zealand, the United Kingdom and the United States. This edition is expanded from 265 to 272 metropolitan markets.”
I couldn’t agree more that affordability has reached the point of complete insanity but I don’t agree that Vancouver is the worst ‘in the world’. Those 5 countries listed aren’t the whole world.
I am in Shanghai now. Real estate is in the news paper every day, the average new build works out to almost $350/ft2. Not quite as high as TO or Vancouver but the average annual income is $6000 US!!!! And the high end real estate here makes Vancouver look almost free.
At first it looks like the price to income is 5x more than Vancouver but its too hard to compare Shanghai to Canada or to the other 5 countries. Too many differences like economic growth, debt free people that actually have savings, no property tax….. Also the high end to low end and the new build to old house price gaps really skew things. On the low end here, you don’t have 2 average earners in a 5 bedroom.
Anyways, the point of all this is that peak insanity is hard to predict.
Why Hongcouver prices will continue rising.
Thank you #53 World Citizen
Hongcouver is not in top 10 of World most expensive cities…but is rated #1 or #2 for overall lifestyle values.
Also,
1/
**Hongcouver have less than 900K citizens.**
Sydney, 4.5 million citizens
London, 8 million citizens
New York, 16 million citizens
Hong Kong, 6 million citizens
Mumbai, 16 million citizens
Tokyo, 28 million citizens
Moscow, 9 million citizens
Paris, 9.5 million citizens
Toronto, 4.5 million citizens
2/
Hongcouver has key living necessities in “abundance”
….fresh water, electricity, food and mild climate…
How many of above cities have similar necessities in abundance?
3/
North Shore, (only 175K citizens) North & West Vancouver, has everything plus 12 month leisure lifestyle.
4/
Crazy, crazy Bubble is in GOLD, DIAMONDS, FINE ART, and Auto industry & Manufacturing Industry in southern Ontario.
Nostradamus jr.
@ #24 Kevin in Winnipeg: Australia only raised its rates a couple of months ago, and their banks are just starting to change the leverage (down payment) rules.
Have patience.
I wonder what would happen to real estate values in Vancouver if that pear shaped Godzilla sprung forth from the sea and started smashing, eating and smoking everything in site?
Hi Garth – Received your book yesterday (in my hubby’s name as he has a Paypal acct.) and looking forward to finding some ‘investment’ tips. I hope he’ll read it too, but not holding my breath.
#21 Peter Pan,
You got that right. I mentioned this report to a young couple I know that are anxious to get into the market. I told them they should re-consider as they were likely buying at the top of the market. They spoke to their realtor who told them this was further proof in the value of Vancouver Real Estate.
#23 Taco,
I believe we have peaked in Vancouver. It may be too early as the evidence is really only a few weeks old but I think many people are listing because they see it as the peak. My best guess is that we hit our peak late last year and the gradual unwind has started.
#44 Vancouver Rocks,
Oh, good grief. Not this crappy argument again.
#51 Robert 1,
Exactly. See – we told you it was different here. The spin is already there. Just wait for another round of incomprehensible cobbly-gook from the RE industry spinning this in favour of committing more financial suicide.
“If we’re talking about a 200-300-point increase, clearly there will be some impact. It will lead to stagnation in the housing market and when I say stagnation, I mean a leveling off, not a crash,” says Tal. “If interest rates go to 10, 12, 13%, it won’t be pretty. Then housing prices will fall.”
http://bit.ly/5pbpsz
*****************************************
WOW! Tal thinks no drop in RE prices unless we hit the 10% – 13% range in IRates.
Then I’m the greater fool.
I don’t see rates going that high … and I’ve been sitting for 5 years waiting for a RE correction.
I believe there are two important reasons that Vancouver has shot to the top of the list and why it has begun its inevitable fall.
The first is widely discussed on this Blog and it is the general euphoric attitude and nature of the RE business in Vancouver. No other city in Canada is so stoked or vested in the notion that values always increase. Enough about that for now.
The second reason that is not being discussed is the Olympic Stimulus that Vancouver is currently being treated to courtesy of the rest of the country and the next generation of British Columbian tax payers. This is not a pro or anti Olympic rant. I, for one, will embrace the games now that they are here.
My point is simply that Billions of dollars have been pumped into the B.C. (primarily Vancouver) economy over the past 5 years in preparation for the Games. Looks at the venues, the new transit line to the airport, the highway to Whistler, the convention centre, the villages and other infrasture not even to mention the thousands of people hired to work on these preparations. Looks at the civic projects pushed forward including the 5 new hotels, Woodwards, Granville Street, the Carrall Street Greenway and many others. We are talking many billions of dollars spent in preparation for the games.
My view is that this Olympic Stimulus has allowed Vancouver to maintain this lack of affordability beyond a normal economic curve. Over the next few months the spending will stop and the Olympic employees will have to return to the permanent workforce.
We have already seen some signs of the correction. By Spring it will have become a reality. By the fall we will have a better idea of how big a correction it is going to be. Will values drop 10%? 15%? At least. I have said I think they will drop by 30% by next January, 2011. I hold to that prediction.
Over the next 60 dy
Come on Garth! Lighten up.
Pop on over to my place some night:
http://www.nationalpost.com/news/story.html?id=2483680
I’ll stand, and you can sit on the milk crate. There’s one stop shopping for dope out front, too. (Not that that’s your thing!)
CBC Radio 99.1 in Toronto just covered this story.
Is their source the same as yours, or is this blog their source!?
Vancouver Real Estate – Rich Asian Immigrant Factor
Asian posters who emphasize this factor are hurting their community as not all immigrants of this descent are rich; hence the stereotype will make it tougher for poor/middle income members of this group to get govt. assistance.
If Asian money is the only reason why Vancouver real estate is grossly unaffordable, then why did RE prices in this region decline in late 2008 like the rest of Canada? Isn’t Asian $ a “teflon” factor?
Why are some older apartments/condos in the Lower Mainland (including Richmond) still under $200,000? If rich Asians were the main catalyst, this real estate, by now, would be out of reach to middle income people too.
Obscenely low interest rates (a single person making $45,000 can now afford a $380,000 Yaletown condo based on a 5/35 mortgage) have pumped much more air into the bubble than Asian $. Maybe this assumption is stretched too as Vancouver jobs that pay $45,000 are much tougher to find nowadays.
Asians to Vancouver – reality check
An Asian influx will not save Vancouver from a correction. There are rich Asians that buy here but the proportion is so small compared to local buyers it will make no difference.
But more importantly if your from Hong Kong and looking to park a few million in real estate why would you ever buy in frothy Vancouver when you can get better property in LA, San Diego. or SanFran for much less.
OH yes, the Vancouver is so much better to live in than SO CAL argument – sure if you like taxes and cold rain!
I wonder why we Canadians don’t head a warning from what happened to our South. What is it that makes us think that things here are so different? Argue all you want about the differences in banking and sub-primes but the fundamentals are not a lot different.
The average U.S. home dropped in price more than 30% from the peak of the bubble to the bottom – if prices have indeed reached bottom. This article discusses a report that says it will take a decade for prices to return to the peak of the bubble. Yes, prices always go up – in the long term. And in the long term we are all dead.
http://www.latimes.com/classified/realestate/news/la-fi-lew24-2010jan24,0,5502825.story?source=patrick.net
#67 OMG,
Thank you for repeating this. I have a lawyer friend who works with the Chinese community. He was born in Hong Kong and has family there. He confirms what you just said – they are not coming to Vancouver when better deals can be had elsewhere. Certainly not in any number that is going to bail out this market.
Simply put, and who will suffer because to Harper/Flaherty/Carney …… “Every” single taxpayer and their children and grandchildren alike and it matters not if you get down on your hands and knees and kiss CON butts. Because they will be all long gone with bags full of money to live the good life …. and that you can take to bank. Think not? then go to your bank and buy one of those $250,000 homes for $1 million or more and wait for it to sell for $2 million!
Garth- Listening to MSM ( CP 24 ) while I read todays blog post and it looks like they have picked up on this report as well. Probably preparing the young 5/35 ers for the eventual “told you so”. Still think that the only ones at risk right now are the fools who are buying into the market right now for the “first time” or retire’s who have a short time horizon left that don’t get out in time. I personaly feel comfortable and realize that a 10%-20% drop could/will happen hear in the GTA. Our second and final home was purchased at the low of Fall 2008 and has increased approximately $100 000- $150 000 during the last year and few months( depends on the greater fool I could sell to). Even if this bubble pops by 20% all I lose out on is this fake paper equity and I will still have 20 years a head of us while I raise my family. The best part is that out of the approximate $24 000 paid in mortgage payments last year $20 000 of it went to reducing the principal and the original 20 year amortization is already down to 13 years. Gotta love prime minus rates being given out in Fall of 2008, it has helped us reach 50 % equity in record time.
We’ll see what the federal budget brings. The wind has gone out of the fiscal stimulus phase in North America and now the focus will be on deficit containment. Everything will now be about hiring/spending freezes, tax increases, interest rate increases, have/have not pension wars, TTC fare increases, the realignment of service delivery (i.e. less service for more money) – and people won’t feel as flush.
Garth,
I think World Citizen may be on to something. I mean, how could cities like Hong Kong and Tokyo not be more un-affordable? Isn’t it common for people there to enter into inter-generational mortgages to acquire property?
A very good Tuesday morning to everyone!
#49 BigAl (original)
I can really relate to your problem and the circumstances that your Dad is in. However, it would be to your advantage to not panic. If Dad needs to be with you immediately, could he move into the rental house with you, temporarily, until a more opportune time to buy a large home. That would provide a better understanding of what you actually need in the way of housing for an expanded family situation. Also it would give you more time to find just the right place.
Good luck…
elle
#49 BigAL (Original) Your off your rocker even considering buying a place depite your old mans desire to live with you. Go rent a bigger place if you have too but don’t buy. Your Dad is letting his emotions lead you both on the road to financial disaster. With all due respect he may not be around in 10 yrs and what will you do with the McMansion then.
SO SO SO right again Garth… Canadians still have this delusion of world superiority but really we are but a pimple on the ass of some big players. So calling us second tier is just being kind indeed…. Prices in Toronto are really driven by the frenzy created by the evil MLS system where the agents are always pushing for higher prices ie higher commish. Its like I have said hundreds of times… why would anyone spend 1 million on a house in a town like this unless it is attached to a beach or water or something extraordinary. Ain’t much extraordinary about T.O. except for the massive number of condos and starbucks. Thankfully someone outside of this country has finally given a kick in the pants hopefully to wake us up about how insane the prices are.. AMEN
when i read comments like ‘obscenely low interest rates’
i see that the writer has been completely brainwashed. that expression is is like an ode to the virtues of usury.
what is a reasonable amount of usury?
you decide
22 jr -thanks but those are price-rent ratios. Not the same metric.
33/34/35 Get real. The study is only for english speaking countries. Comprendez?
14 KJ Thanks for the invite. At the moment I am still happy with where I am, but you never know.
#68 some kind of Druid Dude
what is a reasonable amount of usury?
_________________________________________
5 Years: 7% to 8%:
http://www.myvirtualmortgagebroker.com/5-Year-Mortgage-Rates-Historical.html
Vancouverites earning less than $50,000 must be feasting on this one:
http://www.cibc.com/ca/mortgages/variable-flex-mortg.html
inflate “The big one” away
“Ever been to Windsor? I doubt it. — Garth”
Ouch! Hey, Windsor’s not the end of the world…but you can see it from here.
Seriously, Windsor is NOT Detroit. If you have work it is a pretty decent place to live. You can get a modest home cheap or a monster house on the waterfront for the price of a “knock-down” in T.O or Van. If you want to start a business, we’ve got storefronts, offices and shops and factories that you can get a good deal on and a workforce ready to go.
I’m not a shill, just a guy that wants his city to bounce back a little.
By the way, Garth, when will you bring yourself to this town? We could use a little pep talk.
ShangHai and BeiJing should be No.1 and No.2
The biggest bubble in real estate is in China.
It would appear from this study that easy credit, off-loading of risk from loan originators and real estate mania have nothing to do with affordabiity.
According to the author, we just don’t have enough sprawl to keep housing prices affordable. Let’s just build some more highways and suburbs.
This doesn’t seem to have worked here on the prairies. We have plenty of available low density residential development, and affordability has plummeted.
#50 KJ
Good to see that it is working out for you
But unfortunately, for every this, there is a [That|http://www.independent.co.uk/opinion/commentators/johann-hari/the-dark-side-of-dubai-1664368.html]
Cheers
2010: YEAR OF THE RENTER (at least in NYC)
http://www.nytimes.com/2010/01/24/realestate/24cov.html?hpw
Sorry
Above link
http://www.independent.co.uk/opinion/commentators/johann-hari/the-dark-side-of-dubai-1664368.html
If politicians, bankers and industrialists were wise, they would agree to do whatever is necessary to keep a new bubble away. Most economists agree on what needs to be done. Over the next few years, the supply of bubble-fuelling debt should be cut back. That means tougher financial regulation, more balanced global trade and a return to balanced government budgets.
But even if everyone agreed on that agenda, it will take several years to make the necessary changes. The one move that can be made right away is to bring the era of near-zero policy rates to an end.
http://www.financialpost.com/opinion/breaking-views/story.html?id=2484206
#49 BigAl (original),
I really feel for your Dad, poor man, finally understands that best time to give to kids is when they are in need, not when you are died.
For you, think about it, visiting and living together are two totally different worlds. Be honest, would your wife still be ok to live with your Dad if he has no money to give or need money from you? Only if the answer is yes, then you three may live together happily ever after. Otherwise there might be problem down the road long term, regardless if you buy a house or rent a big place.
You could probably try it for a few months or half year to live together, to see if you, your wife, AND your Dad are happy, before proceed any further. What would happen if, say your Dad couldn’t stand certain smell and want to live by himself again or move to a retirement home. With his money gone, can you then still afford the house?
Next, if your Dad come and live with you and happy to stay, it may be wise to sell his condo rather than renting it out. You have to pay income tax on the $500/m, plus the capital gain tax on the condo when he dies, for the years it is rented out.
All the above can be done if you just rent a big place with the extra $400/m from your father, and things doesn’t work out and he leaves, you can rent a small place again.
I don’t know you and your family, just a FYI.
“For Las Vegas, in particular, prices have declined for 39 consecutive months, with a peak-to-trough reading of -55.6%. It is now just 4% above its January 2000 level. This compares to its peak in August 2006, when the average home price was 135% above that same level.” Case-Shiller Report
This is what happens to a real estate market when it gets overbuilt, over priced, reaches a blow-off top, then collapses. Classic pattern seen in all boom/busts.
Look at a long-term chart of Vancouver or Toronto real estate prices. Tell me again how “it can’t happen here” when in fact it already has several times previously. Then go join the Flat Earth Society where you’ll fit in nicely.
Our declines should not be as bad as Las Vegas, but we will see a serious correction in real estate prices I have no doubt at all. It is inevitable.
# 24 Kevin.
There is something missing when we analyze the Autralian RE market. Yes the market seems not going to burst, why??.
I have a frien in Sidney, Australia, he said, most of the people who bought a house is pay only interest every month, which is less cost than rental a house/apt, so when renewal come, they do switch thebank and again pay only the interest, they hope whithin 10-20 year the house price will go up and become their capital gain….
I think this sceanrio could happen in canada if goverment will adopt Australia strategy.
Just listening to the news out of Vancouver. Local real estate org. predicating real estate prices to increase this year because of the Olympics.
Then someone else was quoted as saying that if prices continue upwards real estate will become less unaffordable.
Further proof they are from another planet.
those of you that are suggesting 20% as what you expect Toronto prices to drop are way off. We’re at least 30% over valued
Garth,
When are you releasing details on the Jan 30 seminar in Vancouver?
That was last year’s sked. They have now banned me. — Garth
It seems to me that listings are exploding in the GTA.
Spring market starting early?
Current inventory could double within weeks. Sales are weak so far in January (higher then last year but that was extreme), arround 2001/2002 levels:
Year January
1995 1791
1996 2222
1997 4080
1998 3006
1999 2449
2000 2694
2001 3103
2002 4869
2003 4403
2004 4256
2005 4153
2006 4587
2007 5173
2008 5075
2009 2670
2010 3500 (est)
Anyone else notice this?
#24 Funny I thought the same thing so did a quick search and lo and behold an actual article in the wiki listed as Australia property bubble. Short but interesting read since there appears to be some parallel events with Canada.
#67 ++ agree especially considering what options you have with that amount of cash if available.
The general sentiment I’m hearing who still own in Vancouver among friends and family I have that live or own there, seems to be of active discussion of ‘locking in their gains’ and so far know 3 families confirmed who have. Most of them are fairly conservative by nature and find now is a good time to divest and take their substantial gains happily and don’t want to ride the greed train in case it crashes since their potential gain vs present potential risk doesn’t make much sense. RE sounds a lot like the stock market these days doesn’t it? With everyone speculating how much further it can go before it tips so they can do the equivalent of timing the market for max profit. ie. Gambling.
I think a significant note that I don’t notice being commented on is the exponential factor of losses. If you take a 10% hit on a 300k home being down, 30k is a lot less hurtful kick in the nads then say 10% on a 1 million dollar+ home. Vancouver/GTA with their already inflated prices seems like average joe will take a larger kick then any other city joe with any upcoming type of correction whether it be large or small. And a kick is coming for sure whether you see the signs or choose to ignore them.
The “Big One”?
Very topical, but I wouldn’t tempt fate, Garth!
Just saying …
Munch
From CBC News
Vancouver has world’s least affordable housing: report
Last Updated: Tuesday, January 26, 2010 | 12:03 PM ET Comments 8 Recommend 8
So by this most people just do not care. And for those who understand just what a devastating effect a housing crash can have it would appear best to just protect yourself and family and forget it.
Great articles the last two days! I just read a great article on US real estate, and although it deals a lot with commercial real estate, it has many references to residential real estate and the future. Just think “CMHC” buying loans here vs Fannie and Freddie in the US. Could soon be us. Here is the link, it is part of the Barry Ritholtz think tank section. http://www.ritholtz.com/blog/2010/01/an-insiders-view-of-the-real-estate-train-wreck/#more-50123
I traveled all over North America and the one thing I have noticed about Windsor (and the rest of SW Ontario) is how “American looking” it is. I couldn’t put my finger on it but then I realized, Windsor sprawls like a US Midwest city. Never mind that Windsor housing quality is vastly greater than what you would find in Western Canada to a general degree (brick is used extensively in Windsor). The city doesn’t end at an arbitrary land planning line such as Calgary or Vancouver/Richmond (farmland next to condo towers), Windsor just peters out… Land density gets less and less until you leave exurban areas for rural areas. Yes it doesn’t look “planned and pretty” but it keeps housing affordable. Even Kitchener/Waterloo is much more affordable than Edmonton even though it has just as strong an economy.
The question we must ask is, “why such strict planning?” Why ration out plentiful land? Read a book now free on Google Books called “The Developers”. It’s from 1978 so a little old but its about the Canadian Land Development industry and the names are familiar. Shows how land monopoly and legislated land quotas reduce supply so prices go up. Think of it as an agricultural marketing board for building land.
Windsor seems to lack these tight controls so Windsor has always been relatively cheap compared to the rest of urban Canada.
http://books.google.ca/books?id=bWjkRi4p87sC&printsec=frontcover&dq=The+Developers&source=bl&ots=Y8CBSaz957&sig=gtZXdCO0vqOsTHZ6XBeJAq9IcP8&hl=en&ei=5CpfS9G6J4OmsgOP19DGCw&sa=X&oi=book_result&ct=result&resnum=4&ved=0CBcQ6AEwAw#v=onepage&q=&f=false
Vancouver most unaffordable market in the world!
http://ca.news.finance.yahoo.com/s/25012010/2/biz-finance-new-report-says-urban-land-policies-rules-making.html
Australia is still in inflation,because China is–or has been inflating like crazy–
China’s economy is starting to overheat–
When China’s economy goes pop–
OZ–will go boom–
Their household debt–is higher then anyone’s–
#91 Ralph,
You will be able to time the response from the RE biz in Vancouver with an egg-timer. The arguments will spin through the usual – “Olympics” – “No Land” – “Most Beautiful Place on Earth” – “Different Here” – “Rich Asians” – “All Markets are only Local” – “Prices always go Up.” Until the market crashes.
I can hear a hissing sound right now…….
#92 Dave,
30% may not be far off. I am very comfortable with that number for the City of Vancouver. I would think the outlying regions and in particular the North Shore and West Van would drop less.
One thing that really stands out for me are the gains from the initial drops in 2008. GTA is up nearly 20% since that time and Vancouver even more. What makes us believe that at minimum those gains need to be erased just to bring us back to market value? Wages are flat, unemployment is up and all things being equal people are worse off since 2008.
Still waiting for one of the Bulls to address this.
#50 KJ:Jobs in the middle east is a pay site flogging jobs, not sure if this is the place for that. Perhaps the Slap chop guy – Vince Shlommey has a blog for that link.
Stockwell Day did a lengthy interview with CBC’s The House program this weekend and assured PSAC drones that they are dedicated hard workers who will not be chopped. With the pending retirements there will be a shortage of fed workers. Funny though he didn’t address the pension elephant in the room. I can see them changing from a defined benefit plan for new hires at minimum.
The main sticking point on the brutal Vale-Inco strike in Sudbury is also their defined benefit pension. Xstrata mining is rumoured to be seeking the same pension changes in their upcoming bargaining(strike).
Oh man. This is the kind of hysterical over-reaction that gives bubble-blowers a bad name.
1) The report is not for the whole world. It is a survey of 6 countries! Garth’s opening statement (is not only hyperbole — it is inaccurate.
2) Do you note any geographic factors that unite the top 10? Hmmm, do you think those might be important? Cities with restrictive land-use regulations and/or oceans, deserts, mountains, or borders further restricting growth. The report itself says that cheap money is not the problem. Garth: care to comment why you don’t believe that part of their analysis?
http://globaleconomicanalysis.blogspot.com/2010/01/housing-bubble-comparison-us-uk-canada.html
How many oceans/deserts/mountains or borders are there in Kelowna, Toronto or Abbotsford? — Garth
#44 Vancouver Rocks,
“Maybe local incomes don’t matter.” Love that one. One of the true Vancouver classics. Probably not on Fantasy Island but in the real world they do.
No question that people are prepared to pay a premium to live in Vancouver but affordability remains the #1 priority.
Stay tuned.
Wait until interest rates start rising…people will get crushed. Housing will fall…massive pop of the bubble…if you believe otherwise, you have been manipulated by the MSM… a sheeple as they say…NOT! Oh yeah, wait until CMHC imposes 10/30…then the sky will fall…NOT!
Well FYI, Sydney, Australia, has interest rates that rose over 300% over the past year(to 3.75% bank rate) and banks require 10-13% down payment minimum. Guess What?? No correction in housing prices! Quit waiting because you’re going to be perplexed in the future!
Too many people analyze housing prices in too much detail. It is a simple concept. Supply and Demand. Demand will be there as someone who is breathing will need a place to live be it a homeowner or renter. That’s where immigration is factor. Supply will be restricted by gov’t policies (ALR in Vancouver) (2,000 sfd lots max in Sydney per year even though many more poeple moving in). etc., etc.,etc.
I recomend that everyone read that Demographia (or whatever it is called) report. Most of the answers are there. Only missing the immigration bit…and I’m not talking about wealthy immigrants. I’m of a south asian bbackground. When I say Immigrants buy houses it is because the extended family pools together to buy a house…so you have 6 wage earnering adults on title.
Money Road!
k I got caught reading Money Road in an abondoned office with the door shut during work hours.
Good use of my time I figure. lol
#102
…30% may not be far off. I am very comfortable with that number for the City of Vancouver. I would think the outlying regions and in particular the North Shore and West Van would drop less.
One thing that really stands out for me are the gains from the initial drops in 2008. GTA is up nearly 20% since that time and Vancouver even more. What makes us believe that at minimum those gains need to be erased just to bring us back to market value? Wages are flat, unemployment is up and all things being equal people are worse off since 2008.
**************
Why would North Vancouver and West Vancouver drop less than the City of Vancouver? Because you live there? If you do, then I see how your maintain a classic bull lense amidst your bearish statements (it will crash, but not in my neighbourhood).
During the minor pullback in 2008, West Vancouver led the declines, contrary to the opinion of a lot of bulls who thought it was untouchable because of all the supposed “old” money. Perhaps it had something to do with all the junior mining stock brokers and CEOs losing their jobs and their pump and dump companies. Admittedly, though, their loses were erased by the 2009 increases.
And where did you get Vancouver increased more than 20% from? Certainly not from the REBGV. We are simply a smidgen above peak pricing now, with the 14% 2008 declines erased.
95MC
here’s one of those 1m+ houses
mLS# V799920 only 6700sq.ft. (suitable for a family of 20)–westwood plateau– coquitlam
asking 1,88900.00 in july 09
dropped to 1,788000.00 in dec.09
dropped again to1,500000.00 jan 2010–a little overpriced to begin with–20% off already
there are approx. 55 houses priced over 1m in this area when prices fall these houses will be interesting to watch as they drop their prics like 2008
Bob Rennie was on CBC Radio (Vancouver) this morning… Much as I predicted in #21, Rennie was stating Vancouver RE prices were going to continue rising after the Owelympics… He called them a “6 Billion Dollar” marketing promotion…
Is that the value of the media exposure Vancouver will receive or is it the debt BC will incur as a result?
Big Al….move away from the computer and take a deep breathe.
You already know everything you need to know to solve this problem.
Sell your place, sell dad’s place and go and rent some other fool’s place.
This leaves you in the best position for whatever the future brings.
After all, isn’t this what this blog is all about?
You’ll sleep much better with all that money invested.
While I think Vancouver is ready for a correction, local incomes are only part of the equation. Attend an open house on the west side, where prices are highest, and you will see the vast majority of those attending are from Mainland China. With over a billion people in China there are countless numbers of wealthy individuals who can afford Vancouver’s prices. This is driving a lot of the market in Vancouver at the moment and it only takes a few sales to rise prices in the area. Low rates are also a part of the equation, but remember these low rates are available in many regions around the globe and those areas are not seeing the same price increases. Vancouver is still overpriced.
“What Industry is there in Vancouver?”
Oh by the way, the industry that employs the highest number of people within Greater Vancouver is … prostitution.
My spouse and i are renting a shoe box next BC Place and there is a busy brother right next door.
Distorting of Decision-Making
Statement of Sheila C. Bair, Chairman, Federal Deposit Insurance Corporation on the Causes and Current State of the Financial Crisis before the Financial Crisis Inquiry
Commission; Room 1100, Longworth House Office Building
January 14, 2010
http://www.fdic.gov/news/news/speeches/chairman/spjan1410.html
conclusion:
“In my testimony today, I have discussed some of the financial sector developments that fueled a speculative boom in housing that ended badly—for consumers, savers, financial institutions, and our entire economy. As the committee examines the causes of the financial crisis, it should also consider long-standing features of the broader economy that may have contributed to the excesses that led to the crisis.
This crisis represents the culmination of a decades-long process by which our national policies have distorted economic activity away from savings and toward consumption, away from investment in our industrial base and public infrastructure and toward housing, away from the real sectors of our economy and toward the financial sector. No single policy is responsible for these distortions, and no one reform can restore balance to our economy. We need to examine national policies from a long-term view and ask whether they will create the incentives that will lead to improved and sustainable standards of living for our citizens over time.
For example, federal tax policy has long favored investment in owner-occupied housing and the consumption of housing services. The government-sponsored housing enterprises have also used the implicit backing of the government to lower the cost of mortgage credit and stimulate demand for housing and housing-linked debt. In political terms, these policies have proven to be highly popular. Who will stand up to say they are against homeownership? Yet, we have failed to recognize that there are both opportunity costs and downside risks associated with these policies. Policies that channel capital towards housing necessarily divert capital from other investments, such as plant and equipment, technology, and education—investments that are also necessary for long-term economic growth and improved standards of living.
As the housing boom gathered steam in this decade, there is little doubt that large-scale government housing subsidies only encouraged more residential investment. These policies amplified the boom as well as the resulting bust. In the end, government housing policy failed to deliver on its promise to promote homeownership and long-term prosperity. Where homeownership was once regarded as a tool for building household wealth, it has instead consumed the wealth of many households. At present, foreclosures are nearing 3 million per year and the rise of housing-linked debt has resulted in more than 15 million households owing more than their home is worth. ……
our financial sector has grown disproportionately in relation to the rest of our economy over time. Whereas the financial sector claimed less than 15 percent of total U.S. corporate profits in the 1950s and 1960s, its share grew to 25 percent in the 1990s and 34 percent in the most recent decade through 2008. The financial services industry produces intermediate products that are not directly consumed—transactions services and products that channel savings into investment capital. While these services are essential to our modern economy, the excesses of the last decade represented a costly diversion of resources from other sectors of the economy. We must avoid policies that encourage such distortions in economic activity. Fixing regulation will only accomplish so much. Longer term, we must develop a more strategic approach that utilizes all available policy tools—fiscal, monetary, and regulatory—to lead us toward a longer-term, more stable, and more widely-shared prosperity.
===========
But, there is no mention of the
400k fund raising dinners (back in 1992) which certainly buys a lot of access to the system.
In my postings of 52 and 53, I should have emphasized “unaffordability”. Demographia’s survey is rubbish, as Vancouver does NOT have the world’s most unaffordable housing. Have you heard of 100-year mortgages spread out over three generations? Yes, it’s there in Tokyo. In Singapore, it’s common for people with a family income of $10,000 a month to buy a $1.5 m condo. Salaries are lower than Canada on average. Demographia’s survey was based on SIX countries, and they have the cheek to call it “world”.
Vancouver 24 Hours adviced us today “if you want affordable housing it’s best to grab your things and go”
http://canadabubble.com/bubble-watch/392-vancitys-blood-too-rich.html
Welcome to the la-la-land
http://www.cbc.ca/consumer/story/2010/01/26/consumer-home-affordability.html
Paul Krugman, Nobel prize economist on his NY times column today:
‘We have avoided a second Great Depression, but we are facing mass unemployment — unemployment that will blight the lives of millions of Americans — for years to come. ‘
http://krugman.blogs.nytimes.com/2010/01/26/obama-liquidates-himself/
Aren’t those millions of Americans our prime “reason for living”?
cmhc is a proxy printing press for the government, it’s out of control and should be dissolved. Harper, Carney, and Flaherty are just ‘bubble deniers’. They are Faustian puppets saying what they are told to say
corporate walk aways / strategic defaults…. paid 5.4b /06 now worth 1/3 -1.8b
A group led by Tishman Speyer Properties has decided to give up the sprawling Peter Cooper Village and Stuyvesant Town apartment complex in Manhattan to its creditors in the collapse of one of the most high-profile deals of the real-estate boom.
The decision comes after the venture between Tishman and BlackRock Inc. defaulted on the $4.4 billion debt used to help finance the deal. The venture acquired the 56-building, 11,000-unit property for $5.4 billion in 2006—the most ever paid for a single residential property in the U.S. The venture had been struggling for months to restructure the debt but capitulated facing a massive debt load and a weak New York City economy that has undercut rents and demand for high-priced apartments.”
=================
http://www.nytimes.com/2010/01/24/business/economy/24view.html
…”California or Arizona, where mortgages are so-called nonrecourse loans. That means the mortgage is secured by the home itself; in a default, the lender has no claim on a borrower’s other possessions. Nonrecourse mortgages may be viewed as financial transactions in which the borrower has the explicit option of giving the lender the keys to the house and walking away. Under these circumstances, deciding whether to default might be no more controversial than deciding whether to claim insurance after your house burns down.
In fact, borrowers in nonrecourse states pay extra for the right to default without recourse. In a report prepared for the Department of Housing and Urban Development, Susan Woodward, an economist, estimated that home buyers in such states paid an extra $800 in closing costs for each $100,000 they borrowed. These fees are not made explicit to the borrower, but if they were, more people might be willing to default, figuring that they had paid for the right to do so.”
#109 Vancouver Rocks,
I actually live in Vancouver near where I thinkin it will hurt the most. I think the West side and Downtown will be the worst hit. I am close to but not in the epicenter. Believe me, I lose too if I am right. However not as much as I will have lost in the long term had I moved up market last fall (IMO).
I have friends in RE who told me otherwise regarding the North Shore. They advised me that prices didn’t move as much in 2008. However you could be right.
Time will tell.
Totally OT but just had to share this YouTube with you. So funny. A girlfriend sent me this. The one in the middle of the video is her Mom – my 2nd Mom – when I was a teenager. She’s 90 YO. She lived through the war in Germany and still puts in a veggie garden each summer. Quite something.
http://www.youtube.com/watch?v=dIsLsDXXJUE
Garth
Could you elaborate on the ban from the Vancouver seminar?
Thanks
Banned from the city. I must now go disguised as Ozzie Jurrock. — Garth
The Calgary Herald refutes latest reports:
Calgary home ownership becoming more affordable
Calgary housing became slightly more affordable in 2009, but it’s still just the 23rd most affordable place to own a home from a list of 28 Canadian cities, according to the Winnipeg-based Frontier Centre for Public Policy.
http://www.calgaryherald.com/business/real-estate/Calgary+home+ownership+becoming+more+affordable/2484798/story.html
POL Can 94… Have not noticed a weak market… The house across the street from ours sold well below asking but his house was a POS. Unfinished basement and partially finished rest of house but someone still bought it with no conditions….the highest priced one in the hood so far…I have noticed some listings near by that have been sitting around but I can honestly say the weather might be a factor… stuff is still selling but I do think the whole market… stock and realty… will be in a shit kicking this year… You just can’t go straight up in value in 1 year or less and not see a correction. RE has been puffed for years now so that is well overdue.. at least here in Toronto the mediocre.
Stimulus funds help the hungry -food stamps,build america and unemployment adds 75b.
Unemployment compensation: In CBO’s(Congressional Budget Office ) initial estimate for the Recovery Act, the unemployment rate was expected to cap at 9%, but the rate rose above 9% in May and soared above 10% in October.
As a result, the CBO said unemployment compensation in 2009 and 2010 will cost $58 billion. That’s $21 billion more than initially expected.
Build America Bonds: The rest of the $75 billion comes from the Build America Bonds initiative. The popular stimulus program allocates federal money to pay state and local governments for 35% of their interest costs on taxable government bonds issued in 2009 and 2010 to finance capital spending.
CBO said that more than $60 billion in new bonds have been issued since the program began in April, which is “significantly higher” than original estimates. As a result, CBO added $26 billion to its projection for the cost of the program, which grew to a total of $30 billion. That’s more than seven times higher than the initial estimate.
Lower projections: The CBO report also included several lower projections from its original forecast.
The largest decrease in cost was for the Medicaid match program, in which the government helps states pay for Medicaid expenses. The CBO now estimates that the program will cost $3 billion less than originally thought
Last February, CBO had a much higher inflation projection than it does now. It believed that inflation would catch up with the $668 benefit by 2013. “But CBO now believes inflation won’t catch up with the benefit until 2019, which means the Recovery Act’s food stamp benefit increases will add $34 billion more to the deficit than initially anticipated.
cnn
general comment to Garth and blog
All of the issues that Garth raises are valid and I agree with him that the bubble has to pop. What worries me is the effect of continuing high unemployment and the subsequent abundance of labour which will pressure real earnings of individuals. Add to that the rising tax burden that is required to offset the lessened level of economic activity and if we don’t watch it we will be in a ‘death spiral’ with no pent-up demand because its already been sated and /or houses becoming totally unafffordable or unwanted.
People in Canada have been paying the highest prices in history by any metric at a time when the economy of the world, not just Canada, is positioned at is lowest potential growth for at least 5 to 10 years. Anyone buying VIRTUALLY ANY real estate in this country will rue the day they purchased at some not too distant point in time.
Hi Mike B… Good to see that you still post….
I don’t think the market is softening yet.
My comments were based on what I perceive to be an increase in listings and ~ 1700 sales in the first half of the month in the GTA. If we double the 1700 then we still have a very weak month in terms of sales. Maybe we are finally running out of the cheap credit drunk greater fools?
Thetruth#107
You are a RE agent who will soon lose your income to the RE market crash. With loss of income you will need to find a real job or face losing your own home. The RE market is starting to crash as this year will be the year RE agents lose everything. RE agent IMO should be locked up in jail for their financial crimes against humanity as well as the BoC and all the CONservatives who inflated this bubble.
Thetruth#107
Once the governemnt stop backstopping the worthless mortgages from those who should not get a mortgage the game will be over. Why did home prices start to crash in 2008? Because the BANKS would not lend to those deadbeats who have NO MONEY but since the taxpayer is on the hook the banks are giving tens of thousand of people who would NEVER qualify for a mortgage a mortgage. JUST like in the US freddie and fanny the money will run out and BOOOOOOOOOM the RE houses of cards will come crashing down along with your income. You will need a new job you criminal.
Western Canada is in a class of it’s own.
Total population of the four Provinces is less than……
….. Ten Million people….yet with so much of world’s natural resources and abundances….
“”Oh give me a home, where the buffalo roam
and the deer and the antelope play.
Where seldom is heard, a discouraging word,
and the skies are not cloudy all day.”"
Nostradamus jr.
From today’s Victoria Times Colonist:
“The “median multiple” for Canada came in at 3.7, up from 3.5 the previous year. A ranking of 3.0 or less is deemed to be affordable. Overall, Canada falls within the “moderately unaffordable” group of 3.1 to 4.0. ”
And from “The Big One”: “The current housing bubble has been caused by emergency interest rates engineered by the central bank. It’s the result of government-backed mortgage insurance which lets people without money buy houses. It has been pumped, promoted and pimped by the mainstream media, populated by home-owning producers and editors and run by advertising-starved, indebted corporations. It’s been desperately promoted by the feds through tax incentives and blanket approvals by the minister of finance. And it’s been fueled by self-dealing lenders, realtors, developers, real estate boards and huzzah-huzzah marketers who have told people, buy now or buy never.”
Yes, Vancouver, Victoria and Toronto are out of whack, but the average affordability value (3.7) for the country doesn’t seem that bad, despite the pressures you list in the above para. I would have expected the Canadian “median multiple” to be higher.
re # 130 and # 131 Dan
Couldn’t agree more.
If you or I told someone something was a “good investment” without being a licensed IA (Investment Advisor) we could be charged and sued. Real Estae agents, who carry no such licensing commit that crime every day in this country.
The suckers buying into this BS deserve every single dollar lost and I hope EVERYONE OF THEM loses their respective shirts. That goes double for RE agents.
#128 Peter Wiener on 01.26.10 at 4:55 pm
general comment to Garth and blog
*********************************************
Totally agree with you–
Unemployment will continue to climb–
Governments cannot look ahead and ask–
Where are all these predicted computer modeled-
future revenues,going to come from?
Tax and spend–only half assed works–during inflation–
In deflation with high unemployment and falling business revenues= lower wages = diminishing tax revenues–
CDS rates will continue to climb, as our risk of default increases–
Buying high priced debt insurance,will further crimp governments ability to sell debt–ie-”print”
Cash and no debt–at this point–
I prefer a mix–USD/CAD/Gold–
The CAD i really don’t like–but what else can you do–
We are heading into a debt wall-or some kind of currency upheaval-or both–imo
#119…..the USA is IN the greatest depression in history…and we are about to follow them into the abyss.
True unemployment is between 22-27 % (shadowstats.com) and a massive hyperinflationary event is about to begin. Canada will really start to get hit as the oil prices decline below $70.00 per barrel later this year as demand destruction rips the guts out of world trade. As the americans begin to see the effects of QE released into the marketplace…and they will …we will see a bizaare combination of rapid rises in commodities (fuel, food) and deflations in plasma screens and ipods. Unemployment beyond 30% with prices of the necessities heading out of reach…..
we should be collectively peeing in our shorts.
In the end most people will have wet nether regions as they begin to realize that what they “thought” had value (paper assets and urban/suburban real estate) is essentially worthless…and the important stuff..like food…is getting hard to come by….
Jeesh…I increasingly feel like the weirdo on the corner with a cardboard sign……but unfortunately in this case “the end” actually is near.
#28 Garth Vader
Ironic you mention that as I have a niece that owns her own home, she rents the two extra rooms out to a couple friends which brings in an extra G a month. She’s a waitress and makes triple the amount in tips as she does in hourly wage. Oh ya, just bought a new car too!
Go Dan Go!
The only way out of this mess is the continued printing of money. Inflate! This is what’s missing in all the bubble popping theories on this blog. This is what all the govy’s are doing. It will take many more dollars to buy the same piece of real estate in the future -not less. The middle class will shrink and the poverty stricken will increase. (that’s most of the commenters of this board) That’s the headlight that’s coming at you fast and furious.
You all just don’t get it
#130 … Dan.
“………..Yeeeeessssss …!!!!!!
Agreed 101%
#132 Nostradamus Jr.,
Once again, the Local markets only argument. It is a Vancouver fav of the Bull crowd.
All markets in the global economy have an international, national and local dynamic. It is increasingly impossible to seperate each of them from the other as global finance and trade continue to integrate and overlap. In a relatively open market like Canadian Re you cannot insulate yourself for long from global dynamics. In the case of Vancouver you can’t insulate yourself from regional and national influence either.
Head offices have moved from Vancouver due to better tax environments and costs in Calgary or other cities. Immigrants have chosen Toronto or Montreal instead because of the prices, etc. No city lives in a vacuum.
The closest we had on the planet was Dubai and look what happened to it.
#136 Knucklewalker,
I agree with you. I got a note from my business bank today talking all about how the recession is over and recovery is on the way. All is rosy for the Spring so better start spending money!
When are people going to realize that this is the worst recession of our lives? It is going to be a long, hard road back.
#128 PW, that sums it up. For those of us who have been coming to Garth’s blog for years to see the fresh bloggers try and justify why “we are different” is now changing to the negative.
30 YEARS OF CREDIT EXPANSION!!!!!
It will all come down to both unemployement and partially employed and salary haircuts that will provide no bottom to RE. As this occurs the affordability gap will remain the same so likely 10 years to the bottom.
Canada prices to retrace to approx. 2003 levels so about 30% national avg. and over 50% in VAN and TO.
2010 is the year it turns sour for everything. RE Stock Market GOLD…USD safe haven on deck. Repeat of fall 2008 but different as Commercial RE kicks in, shadow Res RE recogized, interest rates hike and let’s not forget the Boomers to set things off.
US RE market is an absolute disaster. Another 10%+ downward easy to 40% avg.
You have to understand that unemployment is being estimated in the US at greater than 10% for a decade. This is a BS statement based on the calculation method for U3, U6 shows over 17% but still the method going forward will not account for all calcs in partially employed and salary haircuts so you could see a REAL UNEMPLOYMENT factor of 25% moving forward.
JOBS LOST WILL NOT BE REPLACED. BOOMERS RETIRING WILL LEAVE RETIRED JOBS BEHIND THEM. FORCED RETIREMENT DURING TOUGH TIMES IS PERFECTLY ACCEPTABLE.
China correction to hit AUS right between the eyes. AUS and CANADA to suffer a major blow. It will get very ugly and very quickly as an overinflated bubble deflates at break neck speed.
There is absolutely NO agruement to support anything positive moving forward except the “GREAT GLOBAL RESET” will hopefully knock some sense into us.
“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” Ludwig von Mises
Alan#139
Yet another criminal RE agent spreading ignorant propaganda. The US is printing dollars like crazy and yet US home prices CONTINUE TO CRASH. You will lose your job , home and easy life Alan as the housing bubble blows up in your face. Tic toc Alan……you will need a job.
Get Real,
the report is NOT for the world. it is for english speaking countries.
people, please read first and after that expose your ideas. do ypu know anything about paris, venice, rome or any important cities in other countries than english speaking ?
Re #130, 131, 134, #140
How dare you call me a real estate agent…lol. FYI, Im NOT A REAL ESTATE AGENT. Let me add further that I’m not a MORTGAGE CONSULTANT, BANK/FINANCIAL EMPLOYEE, CARNEY/Flaherty sidekick, ELECTED POLITICIAN, HOMEBUILDER, AN EMPLOYEE WHO DIRECTLY DEPENDS ON HOUSING, etc.etc.etc.
WOW! Can’t stand an alternative view, eh Dan?
I live in Vancouver and am basing my opinions on watching the market for 24 years. My predictions are coming true as i started posting almost 6 months ago. Check the ones i posted 6 months ago. And also check what happens in the next year. Sorry, but that’s TheTruth.
Predictions:
1. Interest rates will remain at low levels until 2011. US won’t raise theirs and why would Canada start?? So Carney could raise the dollar? Right! Low interest rates over the long term will push the Candian dollar down to help the unemployed get exporting jobs. You know, we just had a jobless recovery!
2. Even if Interest rates rise, no major correction. Look at what happened to Sydney over the past year.
3. If CMHC raises policy to 10/30, then (look at above point).
4. Immigration will increase. Demand! How else are we going to afford the retired boomers. They will demand free healthcare…either you pay much higher taxes or we get more workers and grow the economy that way. We can reduce immigration…but that would lead to a user pay healthcare system. Connect the dots!
5. Urban sprawl will be contained in the name of protecting the environment. Less and less detached homes. Supply restricted. Single family homes on lots will become pricier and pricier! Families will raise kids in high density areas like condos. Schools will be opened in these areas…u just watch!
5. 15 and/or 30 year mortgage terms will be coming to Canada.
6. Candian dollar will be lower by this time next year (80-84 cent range). Long term trend will be lower.
And also, the biggest condo project in Surrey has just been restarted after a year and a half. Now those developers just put up hundreds of millions of dollars are betting in a robust real estate sector in the future. Of course, their bet is a very thought out one. Why else would they restart the project?????? Oh, I forgot, they are sheeple…sheeple with $400,000,000 to throw around betting!
Get rid of Nostratard PLEASE! And FOR GOOD!
#123Live Within Your Means
Great routine…..hard to believe that groovin momma is 90! lol
Thanks for the entertainment:)
elle
Hi Garth,again hats off to you again for telling it like it is!As I was born/raised in Vancouver I am dismayed at what people are paying for houses all over the Lower Mainland.All common sense has been thrown out the window.The idea of buy now or never is so far from the truth it’s laughable.I can recall in the mid 90′s I had a very hard time selling my house inspite of 3 price reductions.If you ask all the real estate agents,banks,mortgage brokers,etc if you should buy a house now the obvious answer is,hell ya it’s never been a better time,record low interest rates.Ask yoursef a question,who do these people really work for?It’s for themselves of course,firstly they are all in some form salespeople and their interests come before yours.When this RE market does come back to reality it is going to hurt alot of people for a very,very long time.Until then keep on buying,as there always is A Greater Fool.
38 BD on 01.26.10 at 12:27 am
“Oh yah that CHEAP is better thing. I guess we have to get over that nonsense first.”
Welcome to the China Price and the walmart world… easy way to combat this is to stop buying made in China (cheap shit) they sell in the stores today… go to flea markets to buy old made in USA tools, shop around on CL for good old free stuff that people are tossing out to buy “new” cheap stuff from ___ (pick your store) and all on credit or get today pay tomorrow plans.
46 Ulsterman on 01.26.10 at 3:01 am “I think the funniest statistic from the whole survey is Abbotsford ranking 25th IN THE WORLD!! That’s right, Abbotsford, that centre of world trade and finance.”
Come on now… every one here lives on TimH salaries (or seven oaks) and pays taxes from that job while their real income is in the basement …
116 World Citizen on 01.26.10 at 2:10 pm “In my postings of 52 and 53, I should have emphasized “unaffordability”. Demographia’s survey is rubbish, as Vancouver does NOT have the world’s most unaffordable housing. Have you heard of 100-year mortgages spread out over three generations? Yes, it’s there in Tokyo. In Singapore, it’s common for people with a family income of $10,000 a month to buy a $1.5 m condo. Salaries are lower than Canada on average. Demographia’s survey was based on SIX countries, and they have the cheek to call it “world”.”
Your arguement is 15-20 years TOOO late…. the Japanese bubble popped … get over it….
http://www.nytimes.com/2005/12/25/business/yourmoney/25japan.html?_r=2
Today on CKNW radio (bill goodes show) one of his guests was actualy stating that after the 5 ring circus, he sees property prices staying flat… or shall we say that all these suckers who feel they are going to be selling into this super market for 20% more are in for a RUDE awakening… he was saying that their is no way that this crazy city can sustain higher sales prices after the golden O’s. he was close to calling the top, however, he wouldn’t commit to Vancouver/lowermainland being in a bubble….
cheers
#139 Alan on 01.26.10 at 7:35 pm
The only way out of this mess is the continued printing of money. Inflate! This is what’s missing in all the bubble popping theories on this blog. This is what all the govy’s are doing. It will take many more dollars to buy the same piece of real estate in the future -not less
*********************************************
Printing isn’t the only way out–
Default is a way out and i expect,that’s what will happen–
Some sort of debt forgiveness–
When that happens,the actual shortage of money will be stunning–
Hyper-inflation is hard to do,with floating currency’s–
Hyper-inflate against what?
If everyone is engaging in coordinated currency devaluation-ie-”printing”
Then it’s more or less all relative–
In order to hyper-inflate–you would have to peg against another currency/USD and maintain your faster rate of printing–
Also–money/credit would have to circulate in the economy,to ramp up the velocity,necessary to spur Hyper-inflation–
With people not working–getting paid and spending,how will they get the money into their hands?
If they decide to just give it to us–then yeah
I really can’t imagine–for instance- the “Fed” allowing their control over the world–via the USD to be destroyed,by blowing up the dollar–
It doesn’t mean it couldn’t happen–but–
No dollar–No Fed–
Just received your book in the mail! I can’t wait to get into it and on with my life
#131 Dan
Careful Dan, “thetruth” is the self proclaimed, most highly educated person ever to bless this blog.
And my guess would be they are either a RE agent, or some kid just fresh out of university with a brand spanking new 35 year mortgage, “talking up” their financial savvy.
Now back to my GED.
In my net worth calculation, I use a net worth for my house, in Toronto, that is 20% below what places are selling for in my area. That’s not due to the state of the house, which is very good. It’s due to real estate commissions, legal and CORRECTION FACTOR expenses. I think I need to lower my estimate.
However, I did read, not sure where, that the average individual income in Toronto is $52k. If you double that $104. If the average home in the GTA is $400,000 (that’s a high guestimate) than that would mean about 4 times. Still highly over valued. Adding in the skew factor (the many bank execs etc.) the average numbers can contain serious flaws.
Currently, I’m in Vancouver on business. The group of workers I met with today have hourly wages that range from $13 to $16. Virtually no job security due to off shoring of jobs. Mostly new Canadians. Will they ever be in the position to own a home in Vancouver? Perhaps…if they can keep their jobs, improve their lot, after the crash.
Take a look at the world map, Canada has the 2nd largest land mass(after Russia) with only 33 million.
RE prices were kept artificially high by the strict zoning
regulation.
Again, take a look at HK and Singapore, they are nothing but tiny red dots with millions crapped in
close quarters.
It puzzled me why would anyone pay C$500,000
for a “plywood” house built during WWII (some WWI)
134 HJD – Havent seen the Times-communist lately so
not sure on the median multiples, but it doesn’t seem to jive with a bubble being caused by ultra-low mortgage rates does it? These rates were available all over Canada, but apparently had little effect on national house
prices. Lends credibility to the conclusions of the
demographia study.
Post #147 The Truth. Link to Surrey project, Link to 400 million investment. Please.
Congratulations to the study for relating median income and median home prices. Not earth shattering but glad to see Vancouver at the top of the heap. I think we all know it is a unique place. Gravity does not count here. Nor do statistics, reason, logic, or anything approaching unequivocal argument. This is Vancouver….it’s not different…..WE are different. Very.
I liked the base stats but the rest of that report was less useful than the 2-ply hanging on the roll in the next room over. Blaming land use planning as a primary driver of high real estate prices is moronic, and not surprising for someone who clearly has never set foot in North America. Looking at Calgary, Vancouver…..heck Missoula Montana, I can’t say that constrained growth is hurting house affordability. That would mean this is a supply vs demand issue. It’s not. North American developers have been given free reign to pave over some of the very best agricultural land on the continent since the second world war. Heck the GTA has hardly constrained development. Calgary? Yeah right.
The problem is not poor land use planning. In fact, I think stricter regimes are helpful with less spending on highways to force urbanization., less traffic, less pollution, less wasted space (hello quarter acre lot). The problem is a global fixation on the association of real estate and investment. And very, very short memories.
OK as far as the article goes.
In my area of South Surrey most of my neighbours are retired and many many have come from other countrys to retire here. They bring with them suitcases full of money and drive the prices up.
There is a shortage of land, too many dollars chasing too little land in the lower mainland.
The lower mainland is the place people from all over the world come to retire and many of those still working are ethnics and free enterprisers and do not report incomes and devulge nothing, but can and do buy multi million dollars homes.
Garth, have met you and talked many times but in this case more research is needed
Yes, it’s different there! Enjoy the next couple of years. — Garth
Curious Girl, Peter Wiener and others,
if you agree with Krugman about what Obama is going to do to try to save whatever he thinks he is trying to save, just wait until March 4th and Harper’s budget. We’ll be right behind the States – in lockstep.
What we are witnessing is the winding-down of the faux economy of the financial sector and its lucrative permutations (such as unreal RE). That was sustainable only as long as enough revenue to keep it going could be generated from the ultimate source, consumers and taxpayers (the real economy, in other words). That revenue stream is about to run dry, so it’s back to the real world, where products and services have real costs as well as actual values.
Consumers are being whip-lashed by higher costs and reduced earnings, including unemployment and amount and duration limits to EI (newspeak for UI, as has another commenter has pointed out). The federal government(s) not only have to turn off the impetus tap on account of lack of funds (not to mention lack of results), but reduce services – and personnel – to the essential because the non-consuming, non-selling, non-producing tax base will continue to shrink. Of course they will increase taxes wherever possible, but that will only be more painful, not more productive.
Regardless of definitions bandied about by practitioners of the dismal “science”, I would call that a depression. And printing more money can’t avert that.
159 ginner – I havent finished reading this years demographia, but so far it is similar to previous ones. The contrained development issue isnt necessarily blamed per se, but one theory was that the required timeline for development in these markets (several years) does not allow the market to work freely and meet increasing demand, increasing the magnitude of the real estate cycle.
IMO Calgary does not have overly constrained
development. They are just slightly into
the “unaffordable” at 4.8ish I think.
TheTruth – Please keep it down about Australia, you have absolutely NFI and you’re embarrassing yourself to any Australian reading this.
#162 taxpayer
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development timeframes may be long in vancouver but we hardly need a free for all here. There is hardly a lack of units in this city. Rather there is a speculative fervor. The vacancy rates for rentals are rising fast and many units which were bought purely on spec are not even in the rental market. There is no unit shortage here and certainly no need to loosen the reigns on development (taking up a bigger footprint on the edges) but simply a need to make better use of what has already been developed.
Vancouver is going to get killed. Garth may not like to make specific predictions, but I will. It’s going to be 50% here before all is said and done. Income levels indicate that. Rental prices indicate that. Interest rates, CMHC over-exposure and constrained lending will guarantee it.
This town is full of nutters. Pure and simple.
164 Ginner – thanks for your reply – ‘Tis good blog.
Perhaps the number of available units you now see is
simply the top of the cycle – the overshoot the study
claims is the result of the time lag to market. Speculation
would certainly play a role, but is it a cause, or an effect
(maybe both).
Now I did notice from older demogaphia studies the cycle usually tops at a factor of about 10, then has dropped to about 7 in places (so far). So I’ll call for a 5-10% increase then a 30% correction in Van.
Thank you Garth for doing what you do…I just received Money Road the other day and really enjoyed it. I’ll likely have to read parts of it over and over, but it’ll be a great reference. I’ve always been a contrarian too, in all aspects of life…but now on the financial side of things, someone out there (You) has given us this gift of knowledge. Thanks again!
noha began to build the ark before the rain not after it will be to late.