The Elusive Canadian Housing Bubble

[touchring]

Re: Vancouver goin'?

LOL. Bowen Island is a ferry ride from West Vancouver, one of the most expensive districts in the Vancouver region. Bowen is mostly weekend and retirement "cottages" (at $750k I'm not sure cottage is the right way to describe them). No student in her right mind attending UBC (my alma mater, the University of British Columbia, which is located on Point Grey) is going to try to do that living on Bowen - between the ferry, the Upper Levels highway, the Lions Gate Bridge, driving through downtown Van and then one of the two bridges over False Creek it would be the commute from hell every day.

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[COLOR=rgba(0, 0, 0, 0.870588)]1 h 18 min[/COLOR]
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1 h 20 min without traffic

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1 h 18 min [COLOR=rgba(0, 0, 0, 0.541176)](39.1 km)

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[COLOR=rgba(0, 0, 0, 0.541176)]via Trans-Canada Hwy/BC-1 E

1 h 20 min without traffic

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  This route includes a ferry.
  
  

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[ProdigyofZen]

Re: June 2016 Canada 6-City Chart

The "Chinese Billionaire increasing Vancouver housing" meme has hit the front page of Bloomberg. It could be all downhill from here.

http://www.bloomberg.com/features/20...estate-market/

The Canadian Housing Boom Fueled by China’s


Bllionaires

Five scenes from Vancouver as it transforms into a playground for the rich.
By Katia Dmitrieva and Natalie Obiko Pearson | August 2, 2016


The walls of Clarence Debelle’s Vancouver office on Canada’s west coast are lined with gifts from his real estate clients: jade and turtle dragon figurines; bottles of baijiu, a traditional Chinese alcohol; and enough special-edition Veuve Clicquot to fuel several high-end cocktail parties.
They are the product of Vancouver’s decade-long real estate frenzy. The city, with its stunning views of the mountains and yacht-dotted harbor, has long been one of the world’s most expensive places to live but price gains have reached a whole new level of intensity this year. Low interest rates, rising immigration, and a surge of foreign money—particularly from China—have all driven the increases.

Clarence Debelle in his office in West Vancouver.

Photographer: Ben Nelms/Bloomberg

Consider the latest milestones:
• The cost of a single-family home surged a record 39 percent to C$1.6 million ($1.2 million) in June from a year earlier.
• More than 90 percent of those homes are now worth more than C$1 million, up from 65 percent a year earlier, according to city assessment figures.
• Vancouver is now outpacing price gains in New York, San Francisco and London over the past decade.
• Foreigners pumped C$1 billion into the province’s real estate in a five-week period this summer, or about 8 percent of the province’s sales.

After copious warnings over the last six months, including from the Bank of Canada, that price gains are unsustainable, the provincial government of British Columbia moved last week. Foreign investors will have to pay an additional 15 percent in property-transfer tax as of Aug. 2 and city of Vancouver was given the authority to impose a new tax on empty homes.
As Canada waits to see what effect, if any, the moves may have, here are the stories from the city’s wild ride.

The Luxury Broker
Debelle, the broker with a large Chinese clientele, specializes in luxury homes above C$2 million, located in such neighborhoods as Point Grey, where Lululemon Athletica Inc. founder Chip Wilson has a C$64 million house, the most expensive in the city, according to appraisals.
Most of the 59-year-old’s clients are Chinese and multi-billionaires. His website attests to that, featuring links to doctors who practice traditional Chinese medicine, lawyers, language classes and maintenance providers. He advertises on WeChat, China’s most popular app, and in local Chinese newspapers.
“I show homes every day to Chinese families from Shanghai, Beijing, cities I’ve never heard of, and sometimes it’s just the mother and kids because the father is working,” Debelle said, referring to so-called astronaut families with the father working in China and mother and children staying in Vancouver. “It’s typical of any wealthy person to move money abroad to preserve their wealth. They’re concerned about the market there and they want hard assets to preserve and protect their capital.”
Debelle, whose Mandarin-speaking sales associate drives a white Bentley, sells at least 25 homes a year, earning a commission of about 3 percent. He’s so busy that he’s taken only one vacation in the last eight years, working weekends and evenings with buyers on the phone in Hong Kong and mainland China.

Mansion in West Vancouver.

Photographer: Ben Nelms/Bloomberg

One of his listed homes is opulent, even for Vancouver. It’s a seven-bedroom custom-built mansion with ocean views that sits on 2.3 acres (0.4 hectares), the biggest plot of residential land for sale in the city, and backs onto a park. It has a wine cellar for 2,500 bottles, several crystal chandeliers, cabinetry and paintings completed by artists who flew in from Los Angeles and Italy, and a wall-to-ceiling violet marble bathroom. It’s listed for C$24 million and Debelle has shown it to about one client a week.
“The wealth here pales in comparison to the wealth in China,” he said from behind the wheel of his silver Mercedes-Benz on Marine Drive, the waterfront road that winds through West Vancouver, passing luxury listings, quiet restaurants and cafes, and parks. “The number of people I deal with who have at least C$2 billion, it’s amazing. I had a client who had C$2 billion, was 43, and thought it was a good start.”

Clarence Debelle.

Photographer: Ben Nelms/Bloomberg

Everyone benefits from the real estate investment boom, Debelle said. “It’s not just the agents. It’s the guy at the dock unloading a Sub-Zero fridge or custom sink off the boat for the house. It’s the decorators and landscapers. Chinese investment has spurred an entire economy.”
The Car Dealer
One of those benefiting is a luxury car dealership run by Caleb Kwok, 37, general sales manager at Vancouver’s MCL Motor Cars. It’s selling Bentleys, Jaguars, Aston Martins and Range Rovers so fast that it has had to extend its hours and boosted staff by nearly a third.
“For not being a real big-time city, there sure are a lot of luxury cars in Vancouver,” Kwok says as he walks around the downtown showroom where a special edition, C$250,000 Range Rover SVAutobiography with two-tone paint, reclining rear seats, and tray tables for drinks is about to be driven off by a customer.

Caleb Kwok.

Photographer: Ben Nelms/Bloomberg

Demand for luxury cars has risen alongside housing prices in Vancouver, with 1,100 high-end vehicles on the streets of Vancouver as of Dec. 31, 2015, almost double the 2009 count, according to the Insurance Corporation of British Columbia.
Customers have to be ready to part with anywhere from C$49,000 for a basic Land Rover to more than C$500,000 for a Bentley Mulsanne luxury sedan. Those who do so usually make the decision in less than two hours, Kwok said.
Kwok has hired three new Mandarin speakers to help serve the 5 percent to 10 percent of clients who don’t speak English. What buyers have in common is that they’re wealthy and often in a hurry. Kwok describes the most outrageous request he’s ever gotten involving a Bentley Bentayga SUV.

Jaguars and other luxury vehicles at Vancouver’s MCL Motor Cars.

Photographer: Ben Nelms/Bloomberg

“‘I want the vehicle, I want it right now,’” his customer said, according to Kwok. “The car wasn’t built, not even announced. It was four years away. They saw it on some website. He asked, ‘How much do I need to pay to get that car right now?’”

The Desperate Buyer
Stephanie Goudriaan isn’t having nearly as good a time amid the boom. She wants to have children, but the housing market is derailing her plans.
The 31-year-old paralegal and her husband, an apprentice plumber, live in a two-bedroom, 1,200-square-foot (111-square-meter) apartment built more than 20 years ago in Surrey, a neighborhood about an hour’s drive from the downtown core where they work. Goudriaan, who has a large Italian family in Vancouver, wants to start a family of her own in a bigger home and with a bit of green space. She can’t afford it.

Stephanie Goudriaan (left) and her husband, Corey, outside their apartment building.

Photographer: Darryl Dyck/Bloomberg

“Kids are becoming a luxury item that only the rich can have in Vancouver,” she said during a break at work. “We’re not living this extravagant lifestyle, and we’re still stuck. We can’t move up. It’s crazy.”
Detached homes are out of reach for the couple and they’re also steadily being priced out of townhomes and even another condo. The couple qualifies for a mortgage on a house worth C$450,000, according to a broker they spoke with this year, and she searched online for properties with a maximum price of C$500,000. She was stunned.

The Goudriaans look over real estate listings in Surrey.

Photographer: Darryl Dyck/Bloomberg

“There was barely anything for us,” she said. “Old townhouses for half a million that we’d need to renovate. Large condos that were basically the same as our current apartment, but more expensive.”
She’s not alone in being priced out. It would take a record 120 percent of the average Vancouver household’s median income to purchase a detached home in the city, according to Royal Bank. The affordability measure is based on average household income of C$64,000 and a 25-year mortgage with a 25 percent downpayment.
“Do we stay and raise our child here,” Goudriaan said, “or leave Vancouver, leave the province?”

The ‘Halfer’
Linda Todrick, 68, lived in a subdivision 45 minutes south of the city for 26 years, until her partner began thinking of retirement and a broker friend told her how much the house was worth. At the end of 2015, her detached home was appraised at just shy of C$1 million. A month later it had shot up to C$1.3 million.
She listed it in April for C$1.288 million, appealing to local Chinese buyers with the lucky number eight. Within 24 hours, four bids came in. They sold within just a few days to a young family for C$1.5 million, no conditions.

Qualicum Beach, British Columbia.

Photographer: wwing/Getty Images/iStockphoto

“It was surreal,” the retired Air Canada flight attendant said from a boat near her new home in Qualicum Beach, a town of 10,000 people on Vancouver Island a 1-1/2 hour-ferry ride from the city. “It happened so fast. You can’t believe how many people have done the same—moved to Qualicum and the islands. People are flooding in from the mainland with cash in their pocket.”

Linda Todrick stands in front of her old home, with her new home on the right.

Source: Linda Todrick

She bought her new house for less than half of what she got for her old one, part of the flow of “halfers” from Vancouver, as brokers call them. The new property is double the size at 4,000 square feet and has five bedrooms, a view of the water, and half an acre of garden.
Todrick said one factor driving her to sell quickly was the risk of the market cooling. “It’s not going to get more silly,” she said.
The Tear-Down Specialist
Real estate broker Lorne Goldman walks around a 100-year-old, 2,000 square foot detached home with aquamarine siding and burgundy trim in East Vancouver. The front steps are broken and creaking, the mudroom is draped with cobwebs and the walls contain asbestos, a health hazard when airborne. The home is listed for C$1.4 million and “priced to move quickly,” according to the newspaper ad.

Home listed for C$1.4 million in East Vancouver.

Photographer: Darryl Dyck/Bloomberg

“This is a perfect starter home for a young family,” Goldman, 61, says.
Goldman approves of government moves to stop shadow flipping, where brokers help a buyer sell a sales contract, often multiple times, before a deal closes at a higher price, then split the profit. But he says critics should also direct their anger to those who set the rules.
“We’re doing everything by the book,” Goldman said. Meanwhile, the city allows perfectly livable homes to be demolished and there isn’t enough supply.

Lorne Goldman sits on stairs in the backyard of a house listed for sale in East Vancouver.

Photographer: Darryl Dyck/Bloomberg

In the one-hour tour of the East Vancouver home, his phone rang a dozen times before he finally muted it. The message: the insanity isn’t ending.
“Would this house have been the same price a few years ago?” Goldman says. “No chance. Five years ago this would have been $700,000. It’s gone up, up, up. It keeps going up. And at some point it’ll slow down, maybe 20 years from now. But not anytime soon.”

[GRG55]

July 2016 Canada 6-City Chart

Is that in inflection at the top of the Vancouver curve? Nah, couldn't be...after all housing only goes up.

Must be a screw up in the data in Toronto, no other way to explain that negative slope - such things being impossible in the Canadian real estate market.

Calgary downtrend now firmly established, and I think it will accelerate this fall and winter. There are now between 15 and 20 new listings for homes for sale over $850,000 every day. The Calgary condo market is toast. There is so much product under construction still to come on the market, so much existing product that was sold to "investors" as units to rent - rents are falling as demand collapses with the massive job losses and the still contracting economy.

Chart from Brian Ripley's "Plunge-O-Meter" site:

[santafe2]

Re: The Elusive Canadian Housing Bubble

July sales down 30%, first two weeks of August down 66%.


From the Motley Fool:

A few weeks ago the provincial government in British Columbia made headlines by instituting a 15% extra land transfer tax on any real estate transactions from foreign buyers in an attempt to cool Vancouver’s red-hot real estate market.Reaction to the new law was strong on both sides of the issue.

Realtors, mortgage brokers, and bullish investors decried the move, calling it unfair and racist. This group not only thought the law itself was unfair, but the decision to implement the new tax immediately drew extra ire. Imagine entering the biggest decision of your financial life and then having to pay 15% extra on a contract you already signed in good faith.

On the other side of the coin, folks who think the Vancouver property bubble is out of control applauded the new law. According to them, Canada has become nothing more than a vessel for laundering money out of China, which has made buying property unaffordable for struggling Canadian families. This is a welcome move to even up the playing field.

This is likely a bill that will be debated and questioned for years. Instead, let’s look at the immediate consequences of it.

We don’t have much data yet, but thus far it looks like the new tax is having a big effect on the market. Sales of single family homes in the Greater Vancouver Area fell 66% in the first two weeks of August compared with the same period last year. That’s after July was slow as well; sales were down 30% compared with last year.

Sales of condos and apartments were also weak, although this wasn’t as bad as the detached market. Additionally, communities that have previously been popular with foreign buyers, like Richmond, have seen particular weakness.
Sellers are reacting to this much like one would expect, causing listings to surge in recent weeks. New listings of detached houses in the area are nearly double compared to a year ago, indicating many owners want to sell now and ask questions later.

Declining sales and increasing listings isn’t usually a combination homeowners want to see. Although prices haven’t really fallen in Vancouver yet, it may only be a matter of time if the current conditions persist.
There's more here:
http://www.fool.ca/2016/08/29/has-va...e-just-popped/

[GRG55]

Re: The Elusive Canadian Housing Bubble

We've only just begun...

The sharp drop in the SFD chart below is more likely due to an absence of transactions at the extreme upper end of the price spectrum (the stuff the Chinese are buying) as opposed to an actual drop in the prices of comparable sales. It takes time for property prices to respond to the drying up of transaction volume. Distressed sellers, which is what usually starts the downward price cascade, don't appear suddenly overnight. And the remarkable tendency of sellers to refuse to sell their home for less than the neighbour across the street received (who sold 4 or 5 months ago) tends to compound the decline in sales volumes from an emerging buyer's strike - some sellers will pull their home off the market "because this is just a short term pause, and I won't sell for a loss" (a loss? really }. They will be among the many that follow the market down, always just behind the curve. FOMO is alive and well and living in the GVRD.

[GRG55]

August 2016 Canada 6-City Chart

August

[GRG55]

Re: Cracks Becoming Clearly Visible Now

Having created this monster, the government is now trying to tame it by tinkering, without being eaten alive:

Ottawa tightens mortgage requirements and targets foreign money

Finance Minister Bill Morneau announces new rules today in Toronto

Last Updated: Oct 03, 2016 1:35 PM ET

Ottawa has announced new rules aimed at limiting foreign money into Canadian real estate and ensuring that borrowers take on mortgages they can afford.

"Overall, I believe the housing market is sound...", Finance Minister Bill Morneau said in making the announcement Monday in Toronto...

...Effectively, that means borrowers will be tested against their ability to pay their mortgage if actual rates were as high as the big bank's five-year posted mortgage rates, which the Bank of Canada says currently average 4.64 per cent.

That requirement was already in place for many borrowers, including so-called "high-ratio" mortgages for people with small down payments, and borrowers who borrowed money on terms of less than five years.

But from now on, any insured mortgages will be tested against that higher bar. Anyone who already has a mortgage, or who has already applied for mortgage insurance, is exempt from the new rules, which will formally kick in on Oct. 17...

[jk]

Re: Cracks Becoming Clearly Visible Now

stage i:
Metro Vancouver real estate sales cool, but prices remain stable
In total, 2,253 homes were sold in September, a decrease of 9.5 per cent compared to August 2016, and a drop of 32.6 per cent compared to September 2015.
But the benchmark price for all residential properties in Metro Vancouver remained stable at $931,900 — a 0.1 per cent decline compared to August 2016, but a 28.9 per cent increase compared to September 2015.


stage ii - will have sales go from "cool" to frozen.
stage iii- low but rising volume of transactions at lower prices as more motivated sellers drop their prices.
stage iv- the deluge

[GRG55]

Re: Cracks Becoming Clearly Visible Now

From a txt I received from a friend on Sept 13 regarding the Vancouver property situation. The "buyer's strike" has started. Most sellers will cut prices too late, too little and make the classic mistake of following the market down.

"...It's really, really bad out there. 1 firm sale in West Van this month. Normal month is 70. His office does 5-7 deals per week. They havent done anything yet in Sept. Says the Chinese are 'just gone'. Says RE board is inflating sales stats because of the methodology...i.e. counting sales from previous months. Not doing it deliberately, it's just baked into their methodology. Says local realtors are getting frustrated because sellers arent seeing the urgency. They think the market is stronger than it is."

Single family detached has been the runaway category in Van as the charts show. From the linked article:

"...Sales of detached properties decreased 47.6 per cent last month from September 2015."

[GRG55]

Re: August 2016 Canada 6-City Chart

September:

[GRG55]

Re: Canadian and B.C. Government Sponsored 0% Down - Unbelievable

From "weak" (green) to "moderate" (yellow, in July) to "strong" (red) all in the space of 4 months. Must have been another one of those "unexpected" economic bubbles that cannot be foreseen

CMHC to issue first ‘red’ warning for Canada’s housing market

VANCOUVER — The Globe and Mail

Monday, Oct. 17, 2016 1:21PM EDT

Canada’s housing agency is raising the alarm over the country’s real estate sector, warning about a strong risk of problems on the horizon.

Canada Mortgage and Housing Corp. will increase the risk rating in its overall assessment of the country’s residential market to “strong” from “moderate” when it issues a new report on Oct. 26.

“CMHC has recently observed spillover effects from Vancouver and Toronto into nearby markets,” CMHC chief executive officer Evan Siddall said in an opinion column in The Globe and Mail. “These factors will be reflected in our forthcoming Housing Market Assessment on Oct. 26. They will cause us to issue our first ’red’ warning for the Canadian housing market as a whole.”

CMHC’s decision to issue the red alert has been months in the making. Under the agency’s analysis that looks for “evidence of problematic conditions,” it rates 15 metropolitan markets based on weak (green), moderate (yellow) or strong (red) risk signals...

...In July, CMHC increased its warning for Canada as a whole from weak to moderate. The Vancouver region has come under increased scrutiny this year...

[Thailandnotes]

Re: Cracks Becoming Clearly Visible Now

https://www.bloomberg.com/news/artic...ng-of-declines

[jk]

Re: Cracks Becoming Clearly Visible Now

https://www.bloomberg.com/news/artic...in-eight-years

[jk]

Re: Cracks Becoming Clearly Visible Now

it's official! the canadian housing bubble is over. it has VANISHED!!


Canada's housing bubble has vanished without a 'crash landing', say economists