The "Forever" Canadian Housing Bubble

[GRG55]

Seems like it has been going on forever.
Vancouver seems invincible, no matter how many new taxes the governments throw at it. The foreign buyers tax (otherwise known as the Chinese Dudes Tax) has been raised from 15% to 20%. We will see if that proves more effective.
Toronto had the froth lightly skimmed off, and that's about it so far.
Calgary is maintaining a half-decade flat line despite the devastation since 2014 in high paying energy sector jobs and outright hostility from governments across the land towards the domestic Canadian hydrocarbon industry.
And the condo markets in all three cities are on fire (black dotted line) - its the only thing anybody can actually afford apparently.
Mortgage rates up again this past week.

[dcarrigg]

Re: The "Forever" Canadian Housing Bubble

Seems like it has been going on forever.
Vancouver seems invincible, no matter how many new taxes the governments throw at it. The foreign buyers tax (otherwise known as the Chinese Dudes Tax) has been raised from 15% to 20%. We will see if that proves more effective.
Toronto had the froth lightly skimmed off, and that's about it so far.
Calgary is maintaining a half-decade flat line despite the devastation since 2014 in high paying energy sector jobs and outright hostility from governments across the land towards the domestic Canadian hydrocarbon industry.
And the condo markets in all three cities are on fire (black dotted line) - its the only thing anybody can actually afford apparently.
Mortgage rates up again this past week.

Coming from Boston, it still blows my mind how affordable Montreal is even after it has heated up these past couple years. I know they have their own program and there are a few drawbacks to living there as an anglophone, I'm sure. But actual downtown brownstones are still in middle class stretch-reach, never mind single family homes that are nice and affordable everywhere. And it's a city with all the public transit and culture and amenities you could want with a reasonably large corporate presence for jobs as well. I mean, if you sold my small, ancient house down here and drove five hours north you could be living pretty damned well in a decent city. And you could live pretty much like a king if you're willing to commute onto and off of the island. Meanwhile, in Vancouver, if you don't inherit a home you pretty much have to be homeless to be middle class. Such a huge disparity between places...

[GRG55]

Re: The "Forever" Canadian Housing Bubble

That chart reminds me of "New Economy" vs "Old Economy" stock charts circa 4rth Q 1999.

[Mega]

Re: The "Forever" Canadian Housing Bubble

Good Eveing Gents
I threw the towel in last year, not sure why we seen no crack up boom...........no mega inflation.
I feel so very, very depressed (hence my lack of posts)..........i feel like am trapped in the Mad house, the event horzison of a CB Black hole.............

[GRG55]

Re: The "Forever" Canadian Housing Bubble

Don't feel too bad Mike. I thought the Vancouver housing market was crazy stupid back in 2010. It is my home town after all, even though I have not been resident there since 1979. In the years since it has only gotten crazier and stupider from my perspective. And then Toronto followed along a similar, albeit lower amplitude, path. But a LOT of property millionaires have doubtless been minted over that time, so what do I know.

[touchring]

Re: The "Forever" Canadian Housing Bubble

Don't feel too bad Mike. I thought the Vancouver housing market was crazy stupid back in 2010. It is my home town after all, even though I have not been resident there since 1979. In the years since it has only gotten crazier and stupider from my perspective. And then Toronto followed along a similar, albeit lower amplitude, path. But a LOT of property millionaires have doubtless been minted over that time, so what do I know.

The Vancouver property market is basically the Asian/China property market.

Here's how I see it, correct me if I'm wrong.

A change in trend maybe coming soon. Unless Donald Trump is impeached and a Democrat comes in to reverse all his "For America" policies, Canadian real estate is going to be deep shit soon.

Trump's trade and domestic policies (tariffs + lowered taxes + soon to be launched rebuild America infrastructure) will create a lot of jobs in the US, and with the already tight US labor market, this could only mean wage inflation.

In normal times (e.g. 2006), a rising interest rates will be sufficient to subdue the stock market, and stop rate hikes but with Trump's policies, the stock market may not even crash, so we'll have a combo of rising interest rates + rising stock market.

Monetary policy might lose effect in face of Trump's inflationary fiscal and government policies.

[GRG55]

Re: The "Forever" Canadian Housing Bubble

The Vancouver property market is basically the Asian/China property market.

Here's how I see it, correct me if I'm wrong.

A change in trend maybe coming soon. Unless Donald Trump is impeached and a Democrat comes in to reverse all his "For America" policies, Canadian real estate is going to be deep shit soon.

Trump's trade and domestic policies (tariffs + lowered taxes + soon to be launched rebuild America infrastructure) will create a lot of jobs in the US, and with the already tight US labor market, this could only mean wage inflation.

In normal times (e.g. 2006), a rising interest rates will be sufficient to subdue the stock market, and stop rate hikes but with Trump's policies, the stock market may not even crash, so we'll have a combo of rising interest rates + rising stock market.

Monetary policy might lose effect in face of Trump's inflationary fiscal and government policies.

Pardon me, but I found your post incoherent - I don't follow the connection from an "Asian/China property market" (which by the way the Government of British Columbia's own data has now conclusively refuted) to "deep $#!£" to Donald Trump & wage inflation.

[touchring]

Re: The "Forever" Canadian Housing Bubble

Pardon me, but I found your post incoherent - I don't follow the connection from an "Asian/China property market" (which by the way the Government of British Columbia's own data has now conclusively refuted) to "deep $#!£" to Donald Trump & wage inflation.

No government will admit this, just think of the amount of taxes and stamp duties earned each time a property is flipped in Vancouver. It's as lucrative as operating a casino and unlike a casino, there are no operating costs or staff to maintain.

As for the "Trump connection", I'd wait till the end of the year before commenting further.

[Adeptus]

Re: The "Forever" Canadian Housing Bubble

I will admit, the Vancouver housing prices are ridiculous, and I thought for sure, we'd have a crash as far back as 2009. I occasionally travel to Vancouver and know dozens of people who work and live there. A lunch with friends or business people doesn't go by without a hearty discussion on how real estate is such a great investment. I've been having these types of lunches for almost a decade now... the insanity seems endless, but I know it will end, and will end in tears.

What's changed is of course the left leaning NDP government that point blank admitted they have the intention to lower housing prices, and if there's one thing I've learned from Itulip is don't fight the (fed and by extension the...)government. It may not look like it yet, but I think they will eventually win this price reduction battle. I now see too many significant things going against continuous rising house prices:


1. Actual rising interest rates affecting mortage rates. We've had I think 3 hikes so far with at least 3 more on the horizon. History seems to suggest a high correlation with the US hike trends
2. OSFI Mortgage qualification stress tests now require buyers to qualify for 2% higher than the actual rate the banks give them. Some studies suggest this can reduce a buyer's mortgage loan from 15-20%.
3. Empty house tax (1% per year, affecting aprox 2000 properties - this is not going to have much impact, but it's something)
4. Foreigner Buyer/Property transfer tax - upwards of 20% more for non-nationals (up from 15% last year)
5. Pre-sale loopholes to be closed - There were some crazy virtual real estate flipping loopholes (aka. 'Shadow Flipping')allowing people to buy/sell the same property many times before it was actually constructed, all avoiding various taxes whilst increasing real estate prices significantly with each property transfer
7. Laws changing to prevent realtors from representing both buyer & seller (which usually results in higher house prices, so realtor gets bigger comission)
8. As far back as 2016, self-regulation ended for BC real estate industry.
9. Speculation tax - People with 2nd, 3rd etc houses are going to start paying more taxes

Other potentially impacting items:
10. Trump NAFTA complications w/Canada affecting BC
11. BC declining (so far) the KinderMorgan pipeline = less jobs and profit.


Clearly, the provincial government has jumped to the other side of the fence to fix the rampant speculation that they along with the Federal government created as far back as 2007 with all kinds of incentives. If the above measures aren't enough, I could see them implementing more until the desired result is achieved... of course, who knows what the unintended consequences will be, but as it stands, a correction is long overdue IMHO.

A good site to follow this topic is: https://greaterfool.ca It's written by a humurous ex-MP (member of parliament), who is quite knowledgeable on the subject.
As for Canadian housing price chart tracking, this site is pretty good: http://www.chpc.biz/

[GRG55]

Re: The "Forever" Canadian Housing Bubble

IF the B.C. NDP survive the 3-cylinder Green Machine long enough to crash the housing market there is no chance they will survive the next election. I can't think of anything that will bring out the anger-vote more than Vic & Van homeowners watching their equity evaporate.

Over the decades we've seen some truly stupid government policies in Canada, but Horgan & Co. look like they are going to establish new all time records in that respect. Instead of thoughtful, considered policy they give all the appearance of flailing about, trying to make it up as they go. First they are against Site C, then they approve it. During the election campaign they are against LNG exports, now they want to subsidize them. The "speculators" tax, and all the backpedalling in the days immediately after, came across as something they made up during a drunken Cabinet meeting in Horgan's basement the night before the budget.

[touchring]

Re: The "Forever" Canadian Housing Bubble

4. Foreigner Buyer/Property transfer tax - upwards of 20% more for non-nationals (up from 15% last year)

20% is crazy, but HK had 30% foreign buyer tax (or rather China buyer tax) since 2016. So it's subjective if it will work.

But even a 30% tax won't be sufficient to stop laundered corruption money from China.

http://www.yazhouproperty.com/city-w...operty-buyers/

[GRG55]

Re: The "Forever" Canadian Housing Bubble

20% is crazy, but HK had 30% foreign buyer tax (or rather China buyer tax) since 2016. So it's subjective if it will work.

But even a 30% tax won't be sufficient to stop laundered corruption money from China.

http://www.yazhouproperty.com/city-w...operty-buyers/

If foreign buyers were really the problem afflicting the Vancouver, Canada property market then the government should simply ban foreign buyers outright. Voila, problem fixed. Non?

Unfortunately, that is far from the real sources of the problem. And the governments of BC and of Canada now have collected the data to prove that. So what does the idiot new government of BC do? Oh, let's pander to the worst form of xenophobia, keep blaming Chinese Dudes and raise the tax to 20%.

I was wondering if there was anything worse than the fast ferry debacle. Appears the answer is yes.

[touchring]

Re: The "Forever" Canadian Housing Bubble

If foreign buyers were really the problem afflicting the Vancouver, Canada property market then the government should simply ban foreign buyers outright. Voila, problem fixed. Non?

Actually, this really happened and crashed the local market. But ironically, it wasn't the foreign government that banned Chinese buyers but the Chinese government that banned Chinese citizens from buying.

No country will ban foreign buyers because property sales generate massive taxes. Higher property prices also means higher property tax.

http://www.scmp.com/news/china/polic...rned-nightmare

[GRG55]

Re: The "Forever" Canadian Housing Bubble

Actually, this really happened and crashed the local market. But ironically, it wasn't the foreign government that banned Chinese buyers but the Chinese government that banned Chinese citizens from buying.

No country will ban foreign buyers because property sales generate massive taxes. Higher property prices also means higher property tax.

http://www.scmp.com/news/china/polic...rned-nightmare

actually I think New Zealand recently banned all foreign buyers.

[jk]

Re: The "Forever" Canadian Housing Bubble

i just looked up the record of our old friend, vancouvergoinup. he joined itulip 8/2/07, and his last activity here was 12/22/10. we have been calling for a crash in vancouver real estate since BEFORE vancouvergoinup came around and was thoroughly ridiculed for his boosterism for vancouver real estate. yes, i too believe that eventually the bubble must pop, but we're winning no prizes for our ability to time anything.

and i'd like to think that vancouvergoinup is on his yacht somewhere