Chinese Homebuyers Spreading Wealth Make Vancouver Pricier Than Manhattan

Broseph Monday 24 Feb 2014

HAM (hot asian money) is always cited as a culprit in the excesses of the market here. The problem is, it doesn't explain how we've had the Canadian home ownership rate jump to 70% of the country's population (the highest in the developed world) alongside a construction boom which has exploded supply with prices that are through the roof. Rich Chinese can be part of the demand, but there's only so many rich Chinese. They don't make up 50% of the population.

SweetLeftFoot Monday 24 Feb 2014

Is the tar sands boom part of this? I know in Australia you have the same effect - Chinese buying up but also guys making $300k p/a in the mines over leveraging into "investment" properties on the back of the steady cash from the pits?

Would seem a plausible option, though I think our mining boom is different from yours. Yours seems more Wild West - Fort McMurry at least.

Broseph Monday 24 Feb 2014

It only provides money to Alberta more than anywhere else and northern Alberta, at that.

Mortgage rates have been 3% for the past 7 years. For about a year, the gov't allowed 0% down, 40 year mortgages to be covered by the government against default. (shift risk from banks to government)

Everyone has their story about what's causing the boom thinking "My country/province/state/city has X going for it". You won't find a place that's doesn't have a very specialized/specific reason as to why it has a booming real estate market.

Vancouver and Toronto have HAM. Calgary and Edmonton have Oil money. Montreal has culture and a good night life. Hamilton is near Toronto so commuters live there. Sydney, NS is very beautiful. St. John's is safe and family-friendly. Winnipeg is very stable and is in the middle of the country. Etc...

It's a little suspicious that Canada's housing boom has been largely uniform across the whole country while all these different reasons exist to rationalize the boom. Hmmmm....

SweetLeftFoot Tuesday 25 Feb 2014

Broseph said: ↑

It only provides money to Alberta more than anywhere else and northern Alberta, at that.

Mortgage rates have been 3% for the past 7 years. For about a year, the gov't allowed 0% down, 40 year mortgages to be covered by the government against default. (shift risk from banks to government)

Everyone has their story about what's causing the boom thinking "My country/province/state/city has X going for it". You won't find a place that's doesn't have a very specialized/specific reason as to why it has a booming real estate market.

Vancouver and Toronto have HAM. Calgary and Edmonton have Oil money. Montreal has culture and a good night life. Hamilton is near Toronto so commuters live there. Sydney, NS is very beautiful. St. John's is safe and family-friendly. Winnipeg is very stable and is in the middle of the country. Etc...

It's a little suspicious that Canada's housing boom has been largely uniform across the whole country while all these different reasons exist to rationalize the boom. Hmmmm....

I didn't realise the housing boom was nationwide, I thought it was just Toronto and Vancouver.

Calgary and Edmonton, given their resource base, probably don't count as much as their markets would boom irrespective of conditions elsewhere in the country.

I see Nouriel Roubini today said the Canadian housing market is in for a major correction, though he said it wouldn't be a crash.

O'Zebedee Tuesday 25 Feb 2014

The Winnipeg and Saskatoon/Regina boom was simply because it was incredibly cheap to buy houses there for so long - I had friends with service industry jobs snapping up cool old houses. Prices have gone up there, but nowhere near Alberta.

Broseph Tuesday 25 Feb 2014

Calgary, Manitoba, parts of Quebec and Atlantic Canada haven't seen the increases that have been experienced in the rest of the country. BC, SK, ON and parts of NS have seen the largest increases in price. It makes absolutely no sense for Ontario as it has some of the highest taxes and unemployment in the nation.

O'Zebedee Tuesday 25 Feb 2014

I recall an oil boom in Saskatchewan a few years back, or at least an initial discovery of possible oil. Haven't kept up. Calgary has been expensive for so long that it would be impossible to go any higher - anyways, people with serious cash move out to Bragg Creek just an hour away.

Niccolo and Donkey Sunday 27 Apr 2014

Broseph SweetLeftFoot O'Zebedee

The Canadian Housing Bubble Puts Even The US To Shame

Since the bursting of the first US housing bubble in 2007, one of the primary explicit goals of the Fed has been to reflate the very same housing bubble (whose pop, together with the credit bubble, nearly wiped out the western financial system) as housing, far more than stocks, is instrumental to the "wealth effect" of the broader population (as opposed to just the 1%).

Sadly for the Fed, instead of recovering previous highs, median housing prices (not to be confused with the ultraluxury high end where prices have never been higher) have stagnated and are now in the downward phase of the fourth consecutive dead cat bounce, curiously matching a like amount of Fed monetary injection episodes.

But while the Fed has clearly had a problem with reflating the broader housing bubble, one which would impact the middle class instead of just those who are already wealthier than ever before thanks to the Russel 200,000, one place which not only never suffered a housing bubble pop in the 2006-2008 years, but never looked back as it continued its diagonal ' bottom left to top right' trajectory is Canada. As the chart below shows, the Canadian housing bubble has put all attempts at listening to Krugman and reflating yet another bubble to shame.

Here is the Globe and Mail's take :

The gap between the average price of a home in Canada and the United States widened to a record level in the first quarter of this year, contrary to what economists would have expected, according to Bank of Montreal’s chief economist Doug Porter.

Average Canadian home prices were 66 per cent above average U.S. prices during the first three months of this year, he says. (Note: these are prices for existing houses and condos, not those that are newly constructed).

“The main takeaway is that, contrary to all expectations, the Canadian housing market has just kept on rolling in 2014 even as the U.S. housing market has paused for breath (after a steep climb out of the dungeon),” he writes in a research note. “Put it this way, how many pundits a year ago were calling for Canadian home prices to rise faster than their U.S. counterparts in any single measure?”

It's worth noting that there are many problems with comparing average Canadian home prices to average U.S. home prices, not the least of which is that average prices themselves can be highly misleading. Mr. Porter is aware that it’s not an apples-to-apples comparison.

“Some may quibble that this doesn’t take the exchange rate into account, but even adjusting for the Canadian dollar leaves a 50 per cent price gap,” he writes.

So if indeed the Fed is intent on reflating the housing bubble for all, not just for some, perhaps it is time to take a look at what the northern neighbor is doing and do the same. Of course, the question remains how much more "up and to the right" movement is left in Canadian home prices, where the Chinese and Russian oligarch bid is, according to some, an even greater factor in setting marginal prices than in the US and Hong Kong.

Broseph Sunday 29 Jun 2014

Some more from Garth. Oliver is the new finance minister of Canada who is also the boss of the Canadian bank regulator. "F" is the old finance minister Jim Flahrety, RIP in peace.

http://www.greaterfool.ca/2014/06/11/cranky-town/

Note for our non-Canadians: VRMs have always been the norm in Canada and usually have 5 year terms over the life of the mortgage.

Slavoj Zizek Monday 14 Jul 2014

Who said it: Canada-U.S. housing bubble edition

There are a lot of reasons given for why Canadians shouldn't be concerned about a housing bubble. Almost all of them echo things people said about America's overheated housing market before the bubble burst in 2006.

Try to figure out who the speaker was for the following housing quotes. The quotes have been mildly edited to remove words that would identify the country.

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Chinese Homebuyers Spreading Wealth Make Vancouver Pricier Than Manhattan

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