Global price-to-rent ratio

Update: Japan sinks into recession

Citibank slashing more than 50,000 jobs

85,000 homes were lost in October

Click above for details


Email of the Day:

Fort McMurray is ridiculous……even now.  Renting a 2 bedroom condo is $2500 or more a month and renting a house is $3500 plus. Of course, after listening to you we cancelled our condo purchase and real estate sales here are slowing and prices a bit lower but not much. A 2 bedroom condo is still $500,000.
I think this bubble will be the last to burst.
Crabby in Fort McMurray

(Thanks to Al Vucic) Original source, Traders Narrative

The data is normalized with 100 being the long term average. Here are some quick take aways:

  • Japan’s real estate continues to slide into an abyss
  • US housing market doesn’t seem so bad now, does it?
  • not surprised to see Spain at the top but am surprised at Canada being second
  • data hides a lot of regional disparities – for example, within the US, Florida and California would trump Spain
  • Ireland is ahead of other markets in correcting – but it also started earlier
  • Mr. Greenspan, what happened around 2000? seems to have been an inflection point there


#1 chris on 11.16.08 at 11:58 am

Canada is clearly next, but don’t tell fellow Canadians, as they will be in denial.

Read your book, Greater Fool. Good work. Pessimistic but well-argued. It’s important to read a counter argument against every day advertising in real estate.

#2 dd on 11.16.08 at 12:07 pm

Some data points:

#3 SmallHouse on 11.16.08 at 12:27 pm

Just to clarify, the price-to-rent ratio is the number of years of rent it would take to purchase a property. The chart calculates price-to-rent ratio as number of _MONTHS_ of rent it would take to purchase a property.

What is not clear from the chart is what number was used to determine the purchase price, nor the annual rental income. Is this the average Canadian house price ($289,916 as of September ’08, from the CREA Web site)? Average _monthly_ gross rental income would be…$1,500 or $18,000 per year?

So it takes over 16 years or over 190 months of rent to purchase the average Canadian house. A ratio of 110 would mean that the average Canadian house price should be $188,000, or about 34% lower, given a more realistic year-over-year rise in house prices than the bubble we’ve seen growing since 2001.

Since I’m in a small (1,100-sq-ft) house that I purchased at considerably below the national average price, I think my hit would be relatively minor compared to those with large homes.

Nice try. But a market decline hits eveybody. Your best defence is no debt. — Garth

#4 Jeannette on 11.16.08 at 12:34 pm

I cannot see house prices falling as being the huge calamity the media makes it out to be. Most of our friends either have their houses paid for or very close to doing so.

I would like to know if their is any data on the percentage of houses that actually have a mortgage. I doubt if it would be more than 15%.

If their is a reccession I hope people wake up and realize what a scam the Central Banks and fractional reserve lending is. Every fiat currency system in the world has ultimately collapsed…..there has been no exception.

The latest number I have seen is that 52% of homes in Canada have mortgages. In the US, it is almost 60% of 80 million houses. More worrisome is that mortgage debt in total has hit an historic high, meaning the average indebtedness has exploded. How many friends do you have? — Garth

#5 David on 11.16.08 at 1:04 pm

Quite the interesting graph lines. The lines say a great deal, but yet there is more is more information that needs to be teased out of them.
Ireland had an unprecedented boom over the last 10 years as the Celtic Tiger roared. Due to labour shortages thousands of Ukrainians, Russians and Poles migrated to Ireland. Now that the roar has turned to a purr many migrants are returning home.
The Japanese real estate bubble has been deflating for almost two decades. There is the story about the Imperial Palace in Tokyo at one point having a fair market value exceeding the total value of all the real estate in Florida.
Part of the Spanish real estate bubble was driven by northern Europeans buying second properties. Sunshine is priceless.
The Swedish bubble is difficult to assess given the small sampling size.
The UK, US and Canadian Bubbles were aggressive debt fueled bubbles pure and simple. None of these bubbles was driven by anything closely related to fundamentals. Everything was driven by excessive leverage and a vague belief system that housing is a fool proof investment. The deleveraging and deflationary process is now starting to run its brutal course.

#6 squidly77 on 11.16.08 at 1:16 pm

please people no pasting of articles

it ruins the flow of the blog.. i read here to hear peoples opinions and thoughts and sometimes leave a short comment of my own

pasting entire articles is a trick and is used by people that dislike this blog and is meant to discourage readership

links are great though

beware of the wolf dressed up as a sheep

#7 Observer on 11.16.08 at 2:05 pm

This is fantastic. Here in Vancouver people still (yes even now) are convinced that the prices here are justified. Their reason? Because “everyone wants to live here) I’ve maintained for some time that if this were true, the rent would be in line with the purchase price. Now factor in that Garth’s graph is an average and not specific for the greater inflated Vancouver area. Love to see that chart.

#8 California Pompiers/Sapeurs on 11.16.08 at 2:39 pm

Tragic what’s happening in California in and around Yorba Linda with the brush fires. Wonder how the Nixon Library & Birthplace is doing? The library doesn’t receive federal funding like the others owing to the resignation.

Maybe a real mixed bag of feelings amongst those that lose their homes to nature.. some losing everything, some getting out of a mortgage others seeing a recently foreclosed gone for good.

What’s scary is a local firefighter official who said in recent years he’s lost count of the number of these fire occurrences. It used to be a once in a career thing.. now he says it’s yearly.

#9 midas on 11.16.08 at 3:07 pm

“What we learn from history is that we learn nothing from history.” George Bernard Shaw

What the past economic crisises have taught us is that they are always followed by warfare. Almost all modern wars have their genesis in economic turmoil. I fear this crisis will soon be forgotten as an Economic Crisis and fast become a political crisis. Economic crisises reveal the robber-baron evil nature of the ruling elite and the best way for them to deflect the spotlight from themselves is by blowing things up on a massive scale. The ruling elite are Robin Hoods in reverse. They steal from the poor and the middle class and give to the wealthy. This is why the rich keep getting richer and the poor and MC keeps getting screwed. Is this by accident or design?

Since the firepower of mankind has increased exponentially since the last big one I am afraid that the whole Earth may soon light like a Christmas tree as did the jungles of Vietnam where more bombs were dropped than in all of WWII. Besides man has never invented any weapon that he has not later deployed and there are some doozies waiting in the wings to be deployed with trigger happy generals all too anxious to see what kind of damage their toys are capable of inflicting.

Garth why do you not address the issue of criminality on the part of bankers to fleece the public aided and abetted by their ‘elected’ representatives? Sad as it is the tone of this blog will surely change in the coming year as the prices of houses will be the least of the worries on the radar screen of the average person. And since trouble seems to come in bundles it would not surprise me if there are other nasty surprises hiding in the shadows! Anyone still remember bird flu?

#10 midas on 11.16.08 at 3:49 pm

Quotable Quote

‘I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.’

Thomas Jefferson 1802

#11 Charles on 11.16.08 at 3:49 pm

The following link will take you to an article written by Martin D. Weiss. The article is titled “Why Washington Cannot Prevent Depression”, and was written on Nov. 10, 2008.

Why Washington Cannot Prevent Depression

#12 Sean on 11.16.08 at 4:49 pm

These numbers omit A LOT of factors, the most important being interest rates. Other articles in this blog seems to conveniently ignore interest rates. It seems like comparisons are made to historical averages with the assumption that interest rates have been constant historically. Just a few examples, 5-year mortgage rates in Q3 1981 were 20.55%, in Q2 1990 they were 13.97%.

If price to rent ratios are used to VALUE HOMES AS AN INVESTMENT, then homes should be ANALYZED AS AN INVESTMENT. What type of investor looks at revenue and purchase price only while completely ignoring earnings? It is like valuing a business by first ignoring monthly profit, then looking at monthly revenue, then ignoring monthly expenses, then looking at the book value of the major asset.

From this chart and a more complete analysis you could say that the price to rent ratio should be higher in 2007 than in 1990 because the major expense (interest) is 1/2 what it was. Of course this analysis is incomplete and ignores current personal debt, lack of savings etc. That would be drawing conclusions from a very incomplete dataset and be misleading.

I think this blog is full of great info and analysis and has been accurate with predictions. I just think it isn’t necessary to manipulate data like price to rent and price to income and omit crucial variables in order to draw the conclusion you want. It is talking down the market with the same tactics the realtors use to talk it up. There is more than enough data to show the problems in the housing market without resorting to that.

As the link shows you, this is a chart from Trader’s Narrative. Go complain there. — Garth

#13 Bobby in Victoria on 11.16.08 at 5:12 pm

The graph is a clear indicator why there is little to rent here in Victoria. Yes, there are lots of empty condos for sale but they are not selling and the rent will not come even close to covering the costs.

When the real estate pundits point to the low vacancy rate, they fail to state that those statistics are derived from properties built specifically for rental.

A good rental investment should should command a rent of 1% of the purchase price. One realtor showed me a condo for 300k saying it was a great deal as I supposedly could get $1200 a month. Wow, a fraction of where the rent should be for the price.

The VREB put out a full page ad yesterday trying to explain the virtues of the Victoria market. They say there are no problems, but by placing the ad clearly shows there are!!!

Just wait till Novembers sales come in.

#14 Ydgrunite on 11.16.08 at 5:49 pm

SmallHouse said:

“The chart calculates price-to-rent ratio as number of _MONTHS_ of rent it would take to purchase a property.”

That is not true.

It says clearly under the chart: “The data is normalized with 100 being the long term average.”

It is impossible to tell from this chart how many months or years of rent it takes to match the house price. The chart shows only that the price-to-rent ratio in these seven nations were close to long-term averages around the year 2000 and they are higher now with the exception of Japan.

I say that it shows “only” this, but I believe that it is a significant fact.

#15 teepee on 11.16.08 at 6:20 pm

For Bobby in Victoria. I used to rent out houses in Victoria. At that time, no need for damage deposits. Renters respected the properties and I expected normal wear and tear. All of a sudden the authorities threw in a bunch of new rules one of which is that if someone grows a bit of pot on my property, I’m responsible and the property can be condemned. I sold ’em all.

#16 kc on 11.16.08 at 7:06 pm

And another condo bites the bullet in (Vancondolandouver)

Bank pulls funding on luxury condo project
$180-million downtown Vancouver tower featured conveyor belt to park resident’s vehicles

Hey garth, at this rate I bet TO and Van are neck and neck in “vacant holes in the ground”


#17 dd on 11.16.08 at 7:28 pm

#12 Sean,

No matter what valuations you look at, housing is still overpriced. Global price-to-rent ratio is just one method to prove the point.

Slap up 12 more ratios and the majority will prove that the there is better value in other asset classes.

#18 Calgary rip off on 11.16.08 at 7:28 pm

Yes, yet again revealing that renting is more logical than owning. Especially in Calgary, home of the rip off.

#19 Sean on 11.16.08 at 7:57 pm

#17 dd

I fully agree with you, the majority of housing is overpriced using most measures.

I just think that price/rent and price/income are pretty irrelevent incomplete statistics if interest is ignored.

#20 wealthy renter on 11.16.08 at 8:22 pm

“The latest number I have seen is that 52% of homes in Canada have mortgages. ”

Garth, statscan pegs the number somewhere around 60% of homes have mortgages:

Given the numbers are from 2006, and the 0 down, 40 year amortization home-buying orgy since then, I would bet the number has inched up a wee bit.

#21 buy gold on 11.16.08 at 8:29 pm

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0 Oct 2008 9,336.9 0 0
1 Nov 2008 8,020 635 1,049
2 Dec 2008 9,570 781 1,291
3 Jan 2009 10,320 882 1,458
4 Feb 2009 10,160 962 1,589
5 Mar 2009 9,600 1,028 1,699
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8 Jun 2009 10,460 1,184 1,957
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#22 thriller on 11.16.08 at 9:52 pm

Some kind of people feel good, when they see other feeling bad…

#23 CZ on 11.16.08 at 10:23 pm

I do feel good when I see:

Rapists get sentenced,
Terrorists get caught,
Illegal/immoral operation gets banned,
Greedy fat cats get punished,
Elites on the top the pyramid get stuck because their ignorance, careless and glutness.

The word is called justice in a society, and karma in a moral domain.

#24 Noz on 11.16.08 at 10:27 pm


Don’t speak too soon…from that graph it looks like Japan is lower now but is bottoming out..while the US and IRELAND (HOLY SHIT!) are on their way down.

The headline above the chart is a link to a news story of today’s date saying Japan is in a new recession. Click on the headline for a link to the story. — Garth

#25 POL-CAN on 11.16.08 at 10:30 pm

Well I almost became a GREATER FOOL today :)

Put in an offer 15 % below asking for a house in W2.
It has been on the market for 40 days now and has had two price drops in that time frame.

Listed ~ 750 K
Reduced ~ 649 K
Current ~ 639 K

Zero offers until today.

We put our offer in at 550 K (14 % below asking) at 4 PM and magically there is a second offer “significantly” higher then ours.

Did we get a counter offer? Nope…. But we did get the “opportunity” to draw up another one if we really wanted the house :)

We said no thanks but passed along that if the other one falls through (wink, wink, wink), we would still be interested…. And the asking price will be below the 550 K we went in with today.

There is so much choice out there that one would be an idiot to get into a bidding war in a falling market…. To bad the sellers and their agents still do not get it….

By the way…. The house is perect and easily would have scored the 750 K in 2007.

#26 Bobby in Victoria on 11.16.08 at 11:20 pm

For #25 Pol-Can. Looks like amateur hour in the real estate industry. Go in again with less than 550K and hold your ground. I’ll bet the seller was told by the agent that you would initially pay more. If the agent refuses to present your new lower offer, go to another agent. They are obligated by law to present your offer to the seller.

Too many of the newer agents took their training at the same academy as used car salesman. And look what is happening to the car industry.

#27 Rick on 11.16.08 at 11:37 pm

#25 POL-CAN on 11.16.08 at 10:30 pm
Zero offers until today.

We put our offer in at 550 K (14 % below asking) at 4 PM and magically there is a second offer “significantly” higher then ours.
Sounds like a case of “Realturditis.” Ethics would dictate the seller, via their agent, simply say to you that your “bid is too low, try again.” Instead they choose to use tactics that verge on criminality. It won’t change until the entire industry is cleaned up, purged of the vermin and run like any other business.

#28 Future Expatriate on 11.17.08 at 12:25 am

#25… it’s HIGHLY illegal for realtors and sellers to lie about phony offers, but it’s done every day as a matter of course “because everyone else is doing it and we have to do it too to compete”. Some crooks go so far as to have relatives and cronies actually put in “real” offers.. offers that never materialize and are, strangely enough, never prosecuted when they pull out for no valid legal reason (like eBay shill bidders.)

Everyone; stick to your guns on your lowball offers. Realtors and sellers lie through their teeth, and the more desperate the times, the more desperate the lies.

#29 MBS-guru on 11.17.08 at 1:24 am

#25 – Pol-Can: Funny story. I remember a few months ago in June when i was looking at this small condo in Oakville. It was listed at $210,000 for 2 weeks when i looked at it. Before i left, she advised that she’s expecting an offer that night and suggested i put in an offer as well if i really wanted the suite. I said no because it didn’t come with a parking space. Weeks go by and i was browsing MLS and what do i see?….. the same condo still listed at a slightly lower price now. I remember seeing it months after that as well ….. Moral is, don’t be an idiot by falling for the ‘another offer is coming in’ trick it’s one of the oldest and sleaziest tricks in the book.

#30 POL-CAN on 11.17.08 at 1:28 am

#26 Bobby

Thanks for your take on it but this one is a bit different.

I trust our agent 100 %. The offer was presented.
He knows my strategy is to go after the speculators sitting on empty renos with low ball offers.

From what I understand, the second offer was rushed probably with the usual “you better go in with your best” bs…. Whatever… I do not care as in another few months these tricks will no longer work on the sheep.

We are in a unique situation. We are looking for a multi-family house. There are 3 of us and we have a very high income and a good downpayment. We also have discipline and refuse to get into a situation where the total costs of ownership (including utilities) are higher then 40 % of our take home.

This house was perfect but not in the greatest part of W2. Hence the hard stop. If it was in a better location we would have gone up a bit…. Maybe lol

We currently rent a house in the area and hence no hurry to buy although it would be nice to have a place of our own again.

There are hudreds of houses and prices are FALLING. Only a matter of time :)

#31 kitchener1 on 11.17.08 at 1:55 am

For #25 POL-CAN I would wait it out until next summer if you can. Can’t believe that RE agents are still trying this trick, especially in today’s market.

Bet the sellers are going to lose some sleep over that tactic.

#32 squidly77 on 11.17.08 at 2:11 am

a short pasting from the guy that requested no pasting
go figure..

You received 100% financing because your credit credentials were excellent. Should you decide to hand in the keys, the mortgage company will obtain legal rights to sell your house, list your house with a real estate company, sell it for whatever they can get, pay the real estate commission, pay the lawyers who obtained permission to sell it, settle their mortgage debt, then go after you for the balance. Because house prices may have gone down, and because the house was sold for less than current market values (because the lender was selling it instead of you), this difference could be in the tens of thousands of dollars. The lending company will then obtain a court judgement for that amount of money and lodge the debt against what used to be your “good” name. Your credit rating will now tank! Anytime in the next five years, your lending company can go after your bank account, your paycheques, an inheritance, etc. and in return, you cannot borrow any money without your mortgage company attaching those funds. After five years, the mortgage company can renew their judgement against you for another five years. You won’t be able to buy another home for a long time.

the dark side of the moon

#33 Marcus Aurelius on 11.17.08 at 2:27 am

Pol-Can #25 raises an issue that we all should take seriously. There’s a simple expedient to immediately reduce the fraudulent msrepresentation that happens when the realtors ‘create’ a false counteroffer to try to jack up what is often a sole Offer. Our provincial consumer laws and REBBA should be amended to require the disclosure of all Offers, and criminal penalties should be enforced against those who create fake offers (usually, in Toronto, the feckless group of felons know as licensed broker and agents do this by creating a fake fax offer, in the name of someone verifiable but linked to the agent/broker. When Maureen O’Neil was elected to head the quasi-criminal real estate lobby, she won her current reputation as a comedian by flatly denying that this goes on, in the face of accepted knowledge that it does. Instead, she and her followers spend time trying to fight City Hall on land transfer taxes (a commission threat) instead. But making Offers disclosable under law would go a long way to introducing transparency into the marketplace for residential real estate. Pol Can did the only thing a citizen faced with a feckless, do-nothing, bought-and-paid-for Provincial Government can do – he refused to bite. If the law required agents to show all Offers, that may not stop the truly devious and criminal, but it would take this stunt from being ‘commonplace’ to infrequent. And if there were criminal records and Consumer and Commerical Relations investigations behind this accepted way Toronto agents do business’ they may hesitate the next time a convenient fax from their brother-in-law is slipped into their files to try to rob an interested buyer.

#34 dd on 11.17.08 at 2:29 am

It is interesting to note Japan:

1) Real estate and stock bubble in late 80’s
2) Banks took years to write off bad debts (US is doing it quick it seems.)
3) Interest rates took 5 years to come down (again US is doing it quick).

So yes, Japan real estate is still dropping after all these years, however, if the system was “flushed” early on they might have been in a better position.

Just some observations.

#35 renting in W2 on 11.17.08 at 3:03 am

For #25 Pol-Can,

Just very curious why you’d consider buying now?

The general consensus everywhere seems to be that the real estate market will continue to tank for a good long while.

I guess your bet is that around 15% drop is about the max depreciation you’ll see?

Don’t know what your circumstance is, but seems to me it’s a bit of a gamble.

In any case, best of luck.

#36 dd on 11.17.08 at 3:26 am

Leaders must be worried about a major recession:

#37 Derrin on 11.17.08 at 3:42 am

Here is a link to an article that just surfaced after my post on November 13th. For anybody in Vancouver that owns a condo. This is worth a look. Leaky condo part 2 the nightmare continues:

#38 Kash is King on 11.17.08 at 8:10 am

#25 POL-CAN “We said no thanks but passed along that if the other one falls through (wink, wink, wink), we would still be interested…. ”

Umm, is there any way to determine if there REALLY is another legit offer?

If there isn’t and it’s just a ploy to milk more money out of you, it sounds like fraud… and maybe the police should be involved?

#39 OntarioHouse on 11.17.08 at 9:55 am

I enjoyed your story. A while back I spoke with a real estate agent who was just finishing up having an open house. The house was nice but it was way over priced. I asked the agent how it went. He told me that he had gotten several offers on it that day. Yes, several. He told me I could put mine in as well.
Well guess what, that property never sold! What ever happened to all those “multiple offers”? LOL. I guess somebody was lying.

#40 Downsized and Delighted on 11.17.08 at 10:45 am

Before you call the police maybe you should acquaint yourself with the term “buyer beware”. That agent works for the vendor. The vendor pays his salary. He can’t lie about the property, but saying that he “expects” another offer on the property is not lying, it’s just good salesmanship. If you want to challenge him, just ask if an offer has been “registered” with his office. Then you’ll get the truth, but if you don’t then you have grounds to complain to the real estate board (not the police).

I’m not sure what you guys expect from the listing agent. Do you want him to say “we haven’t had any interest in this dog so try your luck”?

Is this the property?

Note: Property details removed as they contained listing agent’s information. If you want to slag the guy, it hardly seems fair to do it this way. — Garth

#41 Hazzard on 11.17.08 at 11:08 am

I wish these charts broke down Canadian and US numbers regionally. These two countries, from a purely geographical sense, are so much larger than Japan or the European countries it seems almost pointless comparing national numbers. As mentioned in the original post, Florida and California would surpass Spain. Since the entire USA number is much lower than Spain’s that would suggest that there are many regions of the US that are much lower than Florida/California and thus Spain. I suspect a similar phenomena would be shown in the Canadian data if Calgary/Vancouver or Alberta/BC were shown separately. Such a breakdown of the data would be far more valuable to current and potential homebuyers in this country. As a Calgarian it would help explain just how out of wack this real estate market has gotten. And conversely it would possibly comfort folks living in many other areas of Canada to know their local market is far more sound.

#42 Downsized and Delighted on 11.17.08 at 11:22 am

I had to look up “slag” in a web dictionary of slang to find out that it meant to put someone down. Now I’m not sure if you mean the buyer or the agent. But I AM sure that I have seen listings posted here before to illustrate what “overpriced rip-offs” they are, so pardon my mistake. It won’t happen again.

#43 The First Rick on 11.17.08 at 11:25 am

#40 Downsized and Delighted on 11.17.08 at 10:45 am
I’m not sure what you guys expect from the listing agent. Do you want him to say “we haven’t had any interest in this dog so try your luck”?
What we/I want him/her to say is “the vendor isn’t interested selling at that price, you are welcome to try another offer.”
THAT would be eithical, instead of using manipulative techniques that create a false sense of urgency, demand and contributed to the real estate mess we are currently in.

#44 Just a Girl on 11.17.08 at 11:33 am

#41 Hazzard wrote: “I wish these charts broke down Canadian and US numbers regionally. These two countries, from a purely geographical sense, are so much larger than Japan or the European countries it seems almost pointless comparing national numbers.”

I agree. Charts like this can be very misleading, and only drive me to ask more questions. To paraphrase Mark Twain, there are lies, damned lies, and then there are statistics ;)

#45 Larry on 11.17.08 at 11:43 am

Rent is still increasing in Calgary despite a glut of houses for sale. In Ireland rents have dropped along with house prices ???

#46 lgre on 11.17.08 at 11:51 am

Never tell your agent what the max is you are willing to pay for a house, the minute you do that they are on the phone with the seller’s agent trying to come up with a plan to pursuade the situation. Behind your back of course.

#47 lgre on 11.17.08 at 12:03 pm

‘I trust our agent 100 %. The offer was presented.
He knows my strategy is to go after the speculators sitting on empty renos with low ball offers’

trusting any agent/salesperson/mechanic 100% is your mistake, even if he is your brother..I learned long time ago that the people who you think will not rip you off will actually do it the most, because you trust them 100% and they know that.. I have no brother by the way.

#48 Downsized and Delighted on 11.17.08 at 12:14 pm

” What we/I want him/her to say is “the vendor isn’t interested selling at that price, you are welcome to try another offer.”

First Rick – When a vendor sends back your offer with no counter offer, that’s exactly what he is saying.

But I agree with you that if there is not another offer on the table it is unethical for the agent to say that there is one. But I don’t think he can tell you any details about the offer, otherwise that would be unethical also.
But in the world of multiple offers, it has become common for the agents to “hint” that they will be working with the “other” offer unless you come in higher. To assume that this “hint” is a lie, is misreading why the agent is “hinting”. They are bordering on being unethical by giving you too much information. But if I were Pol Can, I’d want to have the option of putting in the higher offer, and if I were the vendor, I’d want all the prospective purchasers to have that knowledge. So that’s why all the “hinting” is going on.

But Pol Can knows what he’s doing. He’s testing the market and he’ll take his time to find the right deal.

#49 dd on 11.17.08 at 12:42 pm

#45 Larry,

I am finding that rents are decreasing. More rentals = less costs and more selection.

#50 kc on 11.17.08 at 12:44 pm

Hey Garth,

I see you are going to be in Victoria and Nanaimo, any chance of you stopping into the Vancouver area anywhere on your west coast tour?

(a) Plan an event. (b) Invite me. — Garth

#51 POL-CAN on 11.17.08 at 12:55 pm

All… Thanks for all your input.

Hope I answered all questions/concerns below.

#27 Rick

Agreed. I hope that over time the industry cleans up.

#28 Future

In this market no one should pay full asking price.

#29 MBS-guru

As recently as 3 weeks ago we were at an open house on a Sunday and the agent said right up front that no offers will be looked at until Wednesday the following week. Trying for multiple offers in this market lol. The house is still on the market.

#31 kitchener 1

The plan has always been to wait until spring unless we found a property that was perfect, that all 3 of us agreed on as “the one”, and if we could get it at the price we were willing to pay.
We found it and decided to try. Oh well. There will be another one.

#33 Marcus Aurelius

In this case we will know if the second offer is real in a matter of days. If it is then the house will sell and the property will be taken off the market. Someone will have a very nice house. Hopefully they can affort it and all is well. If the agent comes calling again saying the other one fell through, we probably will go for it again but at less then the 550 K we offered yesterday.

#35 renting in W2

I expect the market to be down 25 % from peak in the spring.

The plan is to wait. However this property was perfect for our needs in every way. Legal 2 family home on 4 levels. 5 bedrooms, 4 bathrooms, 3 kitchens, all apliences included. 3700 square feet, so plenty of room for parents down the road. In tough times we could cramp together and rent half. Could easily put up a couple of walls in the basement in order to rent it out, etc. The house was built like a bunker (overbuilt), and can be added on if required. 2 car garage that my rather big truck would easily fit in along with my vast collection of tools. At $180.00 per square foot with almost no reno required we though the place was worth it. It will probably be very difficult to find something comparable.

However, like most on this blog I belive that houses are too expensive and that they will be falling over time. Thus I have to draw the line somewhere in order to minimize the damage from catching that falling knife.

#38 Kash is King

Should know the status of the other offer within a day or 2. Depending on conditions (sale of house, financing, etc.), it migh fall through and maybe we will get an invite for another offer. Either way we are ok with not getting it, are willing to wait until spring/summer, and will continue to look at other properties. There are hundreds out there.

#39 OntarioHouse

That happens all the time…. We refuse to bite :)

#40 Downsized

Agreed…. And Garth is also right :)

#43 The First Rick

They gave us an “oppertunity” to put in a second offer closer to the asking price as the first one exprired without a counter, since we were first in with an offer. We immediatly said no thanks.

#52 POL-CAN on 11.17.08 at 1:10 pm

# 47 Igre

Funny you mention that….

The next property I purchase will be my 3rd. Nothing but good experiences with both buying and selling agents the first 2 times. However, the first two times were not in Toronto so your thoughts probably apply.

The funny thing is that of all the people that could have screwed me over the years, only the ex-wife did.

#53 kc on 11.17.08 at 1:37 pm

This is getting more stupid as the days pass …

Bad investments hurt condo owners
Strata councils fall prey to promises of high returns on risky deals

#54 Panic Profit on 11.17.08 at 1:44 pm

#25 POL-CAN – You would definitely have been a GREATER FOOL.

1) Don’t use the 2007 hyperinflated price as a value comparison ie “This house is so cheap compared to the $700k last year.”

You don’t want to be the sucker everyone compares the new lower prices to in 2009, do you?

2) In Vancouver what few houses are selling are going for 20-30% below asking. When you put your next offer in – keep that in mind.

3) Brilliant move walking away from the ‘phantom’ competing bid (Realtors are such douche bags, aren’t that?)

#55 POL-CAN on 11.17.08 at 2:15 pm

#53 KC

This should not be a surprise….

We have been conditioned to chase bigger and bigger returns for decades due to the interest rates on savings being negative after inflation. Higher yield means higher risk and here we are….

Look at what is happening in the USA…. CALPERS is a perfect excample….

Here in Canada I am waiting to see how much our own supper investor (the ontario teachers pension fund) has lost so far…. Does anyone know?

IMO pension funds and the like should be forbiden from gambling with our safty nets. Same for our RRSPs. Only safe investments should be part of their portfolio….

#56 JM Vancouver Island on 11.17.08 at 2:18 pm

I am currently renting a home that was on the real estate market for some time. When it didn’t sell for a reduced price of $519,000 the owners decided to rent it out. We are paying $1800 /month for the house. If I understand the ratio correctly that means the price to rent ratio for us is a whopping 288! This means if you purchased the house at $519000 and paid CASH (because interest is not factored in here) it would take 24 years of rental income just to pay the principal. This also does not include any repairs or significant property taxes (currently about $5000/year).
I would say we have a pretty good deal here.

#57 POL-CAN on 11.17.08 at 2:27 pm

#54 Panic Profit

I hear you. All my calculations are based on worse case scenarios. What would we do if 2 out of 3 loose their job? In this case we can still carry the place on one income and rent out in order to supplement.

Also, the thought is that my parents will eventually sell their house in Markham and would move in with us as they are out of the country half the year (retired). All 3 of us were born in Europe where it is a norm to live with the extended family. We are trying to plan for this while maintaining our own privacy.

By the way…. Depending on what the November numbers tell us in a couple of weeks…. The offers might fall even further then the 20 – 30 % below asking. If all people looking to buy did this, the prices would correct further and faster. The other way is to simply stop buying. A few days/weeks with no sales would send a message no?

#58 midas on 11.17.08 at 2:28 pm

#49 dd / rents decreasing

I agree. Been looking to rent in a ‘trendy’ North of Toronto Golf Course Community. Up until summer even town homes were renting for $2200 to $2500 PM since there will almost no rentals in this hood. Now the floodgates have opened and rents are coming down considerably. A 3500 SF detached house that was originally being offered at $3700 PM is now asking $3200 and will settle for $2800 according to the listing agent. Another detached 2800 SF house was offered at $3000 and then $2800 and is now being offered for $2500. The # of properties for rent all around this area have sky rocketed.

#59 lgre on 11.17.08 at 2:35 pm

Forclosure alley? this is looking like Vancouvers and Calgarys faith in the near future.

#60 bcgirl on 11.17.08 at 2:37 pm

Garth, could you post when you plan to be in Victoria?

Check out the ad on the home page. — Garth

#61 bcgirl on 11.17.08 at 2:38 pm

Ummm, I just saw the dates on the site…thanks.

#62 Popping Bubbles on 11.17.08 at 3:26 pm

Just a Girl: “Charts like this can be very misleading, and only drive me to ask more questions. To paraphrase Mark Twain, there are lies, damned lies, and then there are statistics “

Agree that statistics can be dangerous; however, the source of this data is from the OECD (Organization for Economic Cooperation and Development), which in my opinion is fair more credible than most sources as they aren’t biased in the same way CMHC, Realtors, or the Bands are.

Also, presumably the data is calculated in the same way over time and across all markets. So even if the analysis isn’t perfect, the trend over time and relative movements of one market relative to another are still very informative.

This isn’t new analysis (it is continually refreshed by the OECD, and its quality is further substantiated by what we now know to be true, namely that

(1) countries around the world have experienced a global credit bubble in real estate (to name one asset class), driving up prices beyond any reasonable measure of what can historically be considered normal.

(2) real estate in Canada and most other countries have a long way to drop before getting back to “normal” levels. This crisis still has a long way run.

If you’re interested in seeing the actual data visit the housing price ratio tab of the following spreadsheet:

#63 Jelly on 11.17.08 at 4:22 pm

Kash is King re: #38

There is a way to find out if there is a legitimate competing offer. You simply ask the realtor who the
buyer is represented by (basically find out a name)
so that they would think twice before lying and you
can find out if it is a true second offer or a bald faced lie.
I recommend you try it out and see who stammers and
does not have a name for you, legally they must tell
you the info, not how much the offer was for but just
a name.

#64 Downsized and Delighted on 11.17.08 at 4:39 pm

#56 JM Vancouver Island: The rent depends on different things than the sale price. Maybe the land value is high (future potential), but that is of little interest to a renter.

Your rent is about a 4 percent gross return on the $519,000 assumed value. (would be a higher return if the value is lower, as has already been established since it didn’t sell). If the owner is holding this as a land investment, he would be VERY happy with that return. This sounds simplistic, but believe me there are many million dollar plus homes in Florida renting for $2500 a month because they are weighted in land value versus improvements.

The important thing is are you happy with the rental?

#65 David on 11.17.08 at 6:51 pm

Pol-Can $550K is a lot of money. That house will probably be relisted 8 times over the next two years with no potential qualified buyers and numerous price reductions and few showings.
When it comes to housing, it is very much like telling another man that he has an ugly wife. It is a good way to earn a black eye on your part and that is about all.

#66 My_view on 11.17.08 at 8:06 pm


I have been giving low offers too. What I think the property is worth, why not? The bubble has popped folks. If you want it and can carry it, do it. I never care what someone else pays for tomorrow; I care what I pay today. It’s not timing the market; it’s your time in the market.

A friend just closed on a semi in W12.

Listed June 08 for 320k, no sale.

Relisted Sept 08 for, 280K SOLD for 240K

Not bad for waiting 6 months……….

#67 timbo on 11.17.08 at 8:19 pm

I hope this is not the start of the drop

#68 timbo on 11.17.08 at 8:40 pm

is this the start of inflation or is china finally out of money to lend to the u.s.a.? from what I understand they have stopped the spending of the last 350b. was it a waste and they decided to stop throwing money or was the u.s.a. told no more credit? If GM goes now with no more bailout holy s&it! they now have to raise interest rates to get people to buy treasuries or there goes the dollar…

never thought I would see this…or am I missing something.

this is bigger then housing now. housing started this but a crash will hurt everyone.

#69 nonplused on 11.17.08 at 8:57 pm

Or 2 wives? I think it’s a bad idea to jointly hold property with only one other adult these days, but 2? Even if it’s a business it can only end in the courts.

#70 Mike B on 11.17.08 at 10:21 pm

POL CAN 25 Love that story indeed. Hope I find out where you eventually land because I would love to be your neighbour as our experiences and sentiment are very similar.
I have had several experiences with this, “all of a sudden an offer has come in”. One was on a commercial property I was looking at last December. It had been on the market for 6 months or more and this was the second listing, at a much lower price. Because we could not get into the back area each time we came to look it over we had to finally get the owner to let us in. What a piece of work he was. Rented out a building with leaky flat roof AND no furnace to welfare people. The money went right into his bank account he chirped with glee. A true slum lord. In spite of all the crap I wanted to do an inspection. Because of the tenants it took a few days to arrange accesss. Before the inspection another offer came in and during the day of the inspection another, supposedly. The inspector found over 90K worth of serious stuff needed to be done. I put in a low offer but I guess the other guy got suckered in and bought it for full asking price. I passed on it. Turns out the guy who got suckered spent over 120K which with closing costs made it more expensive than others that had parking and were in better area .
Moral…. don’t get pulled into something as there are always other options.
Christ even when we rented our current house, we experienced some sheister agent actions. We had seen a semi that was vacant for months and put in a low low offer as the house needed some TLC. Didn’t fly and they flatly wanted more cash even though we were supposed to get a signback. Weeks passed. We bumped up the offer 100 bucks a month, but this time my agent told me that another offer had come in. We walked and laughed . I told my agent that if this thing was sitting there for months the chances of another offer was slim. Sheepishly she agreed. We walked away and ended up with a better house around the corner for alot less. We drive by that semi ever once in a while. Still not rented. That was early August when we put in the first offer.
A third sheister agent story if I may, Saw a house listed in the Bayview Village area ,… agent was an elderly guy who sold a house I put an offer in on LAST October.
That house sold for 50K above asking , was fixed up a little and relisted months later for 875K , 125K above what he paid. It eventually resold this last October of 2008 for about the same as he paid. The flipper lost a ton of dough. SO when I saw this same agent I could not resist the opportunity to harass him. After much enjoyable insults were hurled and endured we finally discussed his latest effort . Listed at 799K, decorations circa 1978, lovely indeed, I remarked it would be lucky to get 700K. He said his clients knew it was over priced but would like to give it a whirl and will most likely relist in January at the realistic price. Talk about sheister.
Moral… as others have pointed out… a reduction in price from the already hyper inflated price of 2007 is no deal at all. POL CAN is right. Start at 15% and lower or else you are just the greatest of fools.

#71 patriotz on 11.17.08 at 10:41 pm

This sounds simplistic, but believe me there are many million dollar plus homes in Florida renting for $2500 a month

A house that someone paid $1 million for at some time is not a “million dollar house”, any more than a share of Nortel that someone paid $100 for at some time is a hundred dollar stock.

#72 David on 11.17.08 at 10:45 pm

There is a wonderful scene in the British movie the Magic Christian where there is a wild bidding war over a very philistine piece of art. With real estate it looks real life imitated art.

#73 Pension Guy on 11.17.08 at 11:02 pm


Pensions such as Ontario Teachers invest in risky assets for a reason – without the higher returns your pension would be completely unaffordable.

The typical Ontario teacher works 30-35 years and will be retired for 20-25 years. To give provide a good pension on that basis you can’t put money in risk-free investments (although one wonders if such a thing exists anymore anyway – i.e. ABCP). Investment returns make up 80% of a pension and contributions only 20%. So if you want low risk investment you’re going to have to accept a greatly reduced pension. This is not a tradeoff most employees are willing to accept.

The point is that OTPP is a very well run pension investment program that makes calculated, shrewd long-term risk and return decisions. Of course this is not going to pay off every year and there can even be a few really bad years – like they will probably go through now. But to compare it to gambling or speculation or carelessness isn’t accurate.

#74 Jonathan on 11.17.08 at 11:16 pm

Now is not the time to buy a home. Sales are still decreasing and inventory is still building.

Confidence won’t return to real estate any time soon. The US auto industry is about to collapse will have broad implications to our economy and real estate.

Of course I’m mixed on the auto aid package. They are delaying the inevitable by in essence, burning tax payer money. The big three haven’t invested in their own businesses because management knows that their business model has been ineffective since 1980. It would be better for the economy in the long run to let them go under.

Obama asked “What does a sustainable auto industry look like?” Well I have an opinion that easily answers that question. If we let the big three collapse, then there will be a massive opening in the marketplace. New businesses will finally get a chance to enter into what was previously a closed market. These entrants can compete on new business models and the winners will have models that are sustainable. Even if they reinvented the wheel, the current Detroit manufacturers wouldn’t be able to deliver any of its value to consumers.

Long term gain versus short term benefits means that Detroit will have to sell themselves well to get a package. If they don’t, then watch out, because real estate is going to take a massive hit.

#75 Bottoms_Up on 11.18.08 at 12:23 am

I have learned invaluable information from these posts:

1) ask if the 2nd offer is registered

2) ask for the agents name

Thank you!

ps. post-olympic real estate prices have exhibited price decreases in all hosting cities, check out the appropriate years for Calgary, Atlanta, Beijing etc. please do yourself a favour and don’t buy in Vancouver until after 2010!

#76 PKS on 11.18.08 at 5:07 am

To Jonathan #74:

“It would be better for the economy in the long run to let them go under. ”

Let’s try and remember that, in the long run, we’re all dead. The coverage I heard on CBC radio this morning had an economics professor suggesting that if the US were to let the big 3 go under, with economic spin-offs, that could total around a million job losses, conservatively, in the US.

I’m not sure how much that’s worth, but if they can spend 80 billion a day in Iraq, they can probably spare something to keep that from happening.

Of course, the moral hazard problem has to be kept front-and-center in everybody’s mind, if taxpayers are ponying up the cash to save the industry, well, the government gets a say in how they operate.

#77 Popping Bubbles on 11.18.08 at 11:01 am

To PKS #76

There is no way the U.S. government is spending $80B a day in Iraq. This would amount to $29 TRILLION per year, more 3-times the current U.S. debt level accumulated since the Declaration of Independecne.

As for bailing out the automakers, it is a poor investment. The Big 3 have been losing market share for decades because they make crappy, gas guzzling cars, are poorly organized, have unions which inject inefficiency into every part of the production process, overpay their staff, and have ridiculous legacy retirement benefits which they can’t hope to meet.

Bankruptcy potection would allow the firms to reorganize, address these issues and emergy as leaner and stronger competitors. It doesn’t mean they will disappear.

#78 Canoz on 11.19.08 at 7:56 pm

I read an article today from an Investment Advisor with lots of letters after their name who said that because of the current volatility, it might be “Prudent to invest in gold and real estate“. In the same batch of mail was a flyer from a large home builder advertising a “massive inventory clearout save up to $70,000“ off homes not far from my house.
I kept the Advisors article on file to be sure in the future I do not use their services.

#79 The Boss on 12.06.08 at 1:43 am

I love when a bunch of shmucks have such a gift of declaring the obvious. Wait..real estate is down…well real estate was up….way up….so I guess its a market! WOW! I had no idea….if you don’t even know that any commodity is subject to market volatility you’re a twit regardless of the commodity. So lets not give ourselves a medal because we all saw people leverage themselves into oblivion and pretend we’re geniuses when it catches up to them. BIG DEAL. 80% of the WORLD’s millionaires have made their money in real estate. I’m not a realtor or a optimist..but talk to me in 25 years and we’ll see where people made money regardless of short term market snapshots in time (highs or lows). One thing for sure it won’t be those who bought bonds, GIC’s, mutual funds, or stock pickers as typically they average less than double digits. Any near sighted investor can call the market as it is. That won’t make you anything even if you’re a self declared real estate prophet with a self appointed “I’m a genius” medal hanging around your neck. Do you think that Donald Trump and many others won’t make even MORE money in a down market??? This blog is an absolute joke if there’s no perspective of the inevitable upside to real estate over the LONG TERM.

#80 Dave on 04.07.09 at 10:36 am

The normalized values, with respect to the respective countries’ long-term averages, is interesting, but absolute values would be helpful as well.

One can make the argument that even with today’s low interest rates, a price-to-rent of, say, over 15 means that a house is not economical to buy versus GICs, i.e. if a house costs $300k and only commands $1666.67 per month in rent you’d be better off to rent and put the savings into GICs.

The relative numbers you give can indicate upward or downward pressure on the trends, but the absolute number can tell you if it makes economic sense to buy or rent.

#81 adam on 11.21.09 at 10:38 pm

would like to see a graph of the rental yields on tokyo property over the last 25 years.