Canadian Real Estate - Is it a bubble?

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[quote=“bing”"]

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Bing,
I’m actually curious about another subject in Canada… with a run of the mill single family home in Vancouver,BC selling for $1.5 million (on the low side)… do you think the housing market in Canada is in a huge bubble? I’m talking, worse than the US market in 2008… I was reading somewhere that in 2008, Americans debt to income ratio was $1.32:$1… in Canada, it’s currently $1.68:$1

I’m certain than in the next 5 years the Canadian housing market will implode, worse so than 2008. Your thoughts?

ps.
For people who aren’t familiar with the insanity in BC right now:

https://www.point2homes.com/CA/Home-For-Sale/BC/Vancouver/Kitsilano/3070-West-12th-Avenue/44484977.html

home built in 1927, 2100 sq ft… 1/10th acre… asking $2.49 million.

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@snowracer101, I’ve been thinking the same thing lately. Had no idea the debt ratio was that high, though. :eek3:

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I would love to start a thread on that… how about you gents do the honours.

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My concern is that the area of the home is still calculated in square feet and no cubic decimeters of maple syrup.

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so yeah, split this into a new thread.

this is a very complicated issue and like the US presidency is subject to a lot of media and gov’t sponsored manipulation in the news and in the form of policy.

in BC (Vancouver) they enacted a foreign buyers tax to try and slow the market. it worked for a few months but prices continue to rise. the same thing is likely to happen in Toronto. However, there are some caveats to that… i googled but couldnt find a good link… there are a dozen or so exemptions for foreign buyers to get around the tax that are coded into the policy. moreover, in my opinion, many of these buyers are not buying and holding real estate in thier own names anyways… holdco’s or REITs are likely not subject to the tax.

further, there is a CDN visa program where if you invest $500k or so you can get CDN citizenship…

I believe that foreign buying activity is not going to be significantly impacted by the tax. The CDN currency is trading at a serious discount to the USD. also, Toronto and Vancouver are top 10 cities to live in globally. If you are rich and international this is a good place to park $1m for your family.

another point, Vancouver and the Toronto core are fully developed. There is extremely limited supply of good family homes and there are tens of thousands of young people who need to get out of renting or condos and into family homes. On top of that you have the foreign buyer demand and the rich canadian demand… then you have demand from the universal trend of people leaving rural areas and moving to cities… in Canada anyone from Saskatchewan, Manitoba or Atlantic Canada wants to leave there, sell their family assets and move to Toronto or Van…

for those reasons there will continue to be demand.

I can see there being a slow down and perhaps even a slight correction but i could only support the bubble theory in the event of something significant like a major interest rate hike, economic event or act of terror.

the price of real estate outside of the Toronto area and Vancouver is not increasing. In fact, the prairie provinces and atlantic canada and rural parts of BC, Ontario and Quebec are seeing declining prices as rural demand decreases. i often work rurally and people in these commonuties cannot keep educated young people and cannot sell their businesses so that they can retire.

We have had several people who live and operate business in rural areas try to get us to buy their business. I have people actively trying to sell to me right now. there is no demand for any businesses or real estate in rural areas at all.

a lot to digest here…

yes i hear you on the debt levels… but people these days dont work off of those numbers, they work off of what they can afford on a monthly payment… when they have to pull back they let the cars go, then the other stuff, but the home is always last.

you’ll see other shit hit the fan before people are panicked into selling their homes at a loss; precipitating the burst

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You’re forgetting that the vast majority of people aren’t car people. They’re driving around in used Hondas and Toyotas and their home, especially in these inflated price bubble markets, represents the vast majority of their debt. Scaling back on your $200-300/month car payment doesn’t do much to help you pay your $1mil mortgage.

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that’s fine, however, the data is not accurate or representative enough. I would only be interested in a data set that only includes owners and potential buyers of Toronto area real estate.

National numbers include people who are not in the market and exclude foreign, corporate or institutional buyers.

moreover, my T4 (annual tax filing) gives no indication of my actual purchasing power. People in the market for $1M+ homes would be in the same boat with a multiple streams of income and semi-complicated income structuring.

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[FONT=verdana]

[FONT=Times New Roman][COLOR=#000000]numbers from theToronto Real Estate Board (TREB) offer an early glimpse at the impact of theprovince’s big move to keep the housing market under control.
Home sales in the GTA plummeted 37 per cent in June compared to the samemonth last year. There were 7,974 sales reported through TREB’s MLS system thisJune, compared to 12,794 in June 2016.
The numbers are only the second set of monthly TREB data released since theprovince announced its Fair Housing Plan.
Prices didn’t see the same dramatic dip. The average price for all hometypes across the GTA in June was $793,915, up 6.3 per cent from June 2016,though it was still far less than the year-over-year increases for April (up24.5 per cent to $920,791) and May (up 14.9 per cent to $863,910).
The number of new residential listings entered into TREB’s system — 19,614— was also up, 15.9 per cent compared to last June.
“We are in a period of flux that often followsmajor government policy announcements pointed at the housing market," saidTREB president Tim Syrianos in a press release.
“On one hand, consumer survey results tell us many households are veryinterested in purchasing a home in the near future, but some of these would-bebuyers seem to be temporarily on the sidelines waiting to see the real impactof the Ontario Fair Housing Plan,” he explained.
“On the other hand, we have existing home owners who are listing theirhome because they feel price growth may have peaked. The end result has been abetter supplied market and a moderating annual pace of price growth.”
The TREB report adjusted its forecast for sales in 2017 downward to between89,000 and 100,000, below the record level in 2016.
Ontario’s plan included a 15 per cent tax on non-resident buyers as well asexpanded rent control. The provincial government released its own numbers onforeign buyers Tuesday, indicating that they made up only about five per centof sellers in the Toronto and Golden Horsehoe Area in the month after the taxwas implemented.
The Fair Housing Plan also made it possible for Toronto to introduce a taxon people who own homes and let them sit empty — something council will discussat this week’s meeting.
http://www.metronews.ca/news/toronto/2017/07/06/home-sales-down-37-per-cent-across-gta-report.html[/FONT][/COLOR][/FONT]

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I find that a year ago so many people where “oh I can get 2mil yea i’ll sell my house and move somewhere cheaper” was happenening. and that wave has passed. prices are still up just the number of sales is down.

im about an hour north of toronto in an area that is in a CRAZY housing boom of people retiring off their 2 mil house in toronto and spending 600k for a decent place 5 mins from a ski hill and a few blocks from waterfront. 1/4 of the houses being built are for foreigners looking to just drop coin on Canadian real estate. and left behind is the people like me who are being priced out of ownership.

most 23-25 year olds in the area are spending stupid amounts on rent and not saving up a penny. or living at home so they can hope to buy around age 28.

builders have put their prices up on an average subdivision home from 170ish/sqft to 250+/sqft in 2 years

i’m about to build a house and hoping that material cost doesnt skyrocket just because people are willing to pay it. the market is like nothing ive seen, and for the sake of myself being able to build I hope it just keeps going up but at a more sustainable rate. I think we’re kind of peaked and will stay steady for the next 5 years

within about 2 hours of toronto, and any cottage country within 5hrs has gone up. as bing said its not really a canadian housing boom its just 2 cities being looked at as world class locations combined with a cheap loonie. the results of that are trickling to the area around them but not affecting the whole country at the same rate

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i read that earlier today, it has been posted many times to my FB feed.

the same stall period happened to Vancouver when they enacted similar, but probably more strict and more targets to foreign buyers. Since that time the Vancouver market has continued its prior pattern albeit at a slower pace. The same is likely to happen in toronto.

The next front of this phenomenon is Montreal. It has already started though it is probably 10-12 years behind Toronto and there is no guarantee it would keep pace if Toronto and Vancouver were to become more affordable. There is a lot of beautiful real estate in the Montreal core that is considerably undervalued relative to Toronto and Vancouver. Montreal isnt quite as great a city as the others but it is better than may international cities and easy for most Canadians to live there if you want the big city experience.

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used Hondas and Toyotas… have you driven around Vancouver at all? Everyone is driving new vehicles, pricey ones too. I know Canadians make a bit more than Americans… but they need to because literally EVERYTHING in Canada is more expensive when compared to the states.

I had the opportunity, through my employer, to spend a month speaking with Canadians crossing into the US. I would notice many new pickup trucks coming through, and these weren’t your XLT or LS models, they were Lariats, Denali, LTZ etc. I know for a fact these vehicles sell for at least $10,000 more in Canada vs. the US. So, I decided that I’d start asking people how much they paid for their trucks. 9 out of 10 responses went like this:
“Ah, I’m not too sure, I don’t really care about the price, I just care about the monthly payment, which is $8xx/mo for 84 months”

I can't think of a worse financial mentality than that ^^^

Also, according to the Canadian friends I have in BC (not sure if this is country wide), their banks do NOT offer fixed 30 year mortgages, only ARM at like 7-15 years.

Even someone earning $150k/year in Vancouver… in my head, cannot even come close to affording a mortgage on a $1.5million dollar home

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I love watching the property brothers show, renovating a house 30 minutes outside of Toronto:

This lovely home comes with 1 bedroom, an outhouse, and an outlet for one kitchen appliance - 4.5 billionnnnnnnnnnnnnnn dollars.

The housing market will implode, not just in Canada but eventually everywhere. My best friend lives in the bay, where he rents a 3 bedroom apartment for 3500 A MONTH BAHHHHHHHHHHHH. He makes roughly 160K a year and after bills and whatever else gay guys spend their money on (giant dildos and poppers I presume) he has a couple hundred bucks to himself at the end of the month.

When shit his the fan whether in Toronto, NYC, the Bay etc. I’m jumping in when all these geniuses are upside down on their mortgages.

LoL enjoy the big city life you fucking dickasses! (I tell him this all the time)

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Yeah, that doesn’t seem sustainable at all. If it’s as common as you say prepare for a bubble pop that will put the US one to shame.

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When I think of Vancouver I don’t think of Canadians at all, I think of Chinese.

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My syrup thing went off. Crash already, I’m liquid and awaiting blood in the streets. It may not be soon, but it will happen and I will pounce yet again.

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although toronto home sales fell condo sales still rising:

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i wish you well. if only i could afford to have done the same in FL or AZ in 2008-2009.

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X2 Florida swings where huge

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I think/hope many of us will be in a better position to profit this go round. I made small moves last time, sadly I was tending to several major life events at the same time as the recession.

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A good buddy/co-worker of mine purchased a home in New Mexico in 2007 for $260k. In 2009, he took a transfer to another state… at that time he looked into selling his current house… his realtor showed him comps and suggested he list for $110k. Instead of taking the enormous loss, he held on to the house…but refused to rent it out as he didn’t want some POS destroying the place, so it sat vacant for years (he’s not the more financially smart person). About two years ago, he finally decided to sell the house, for ~$130k. He took out a 401k loan to pay off the remainder of the mortgage.

I just couldn’t imagine going through financial devastation like many Americans did during that time… talk about setting your retirement age back about 20 years.