Dr.HousingBubble, one of the well-known US RE Bubble blogs, has highlighted Canada and, in particular, Vancouver in a recent article: ‘The other CA bubble – Canadian housing bubble ripe for popping. Vancouver real estate increased by 142 percent from 2002 to 2011. Average detached home in Vancouver costs roughly $1 million while the median household makes $67,000 per year’, 15 Jan 2012 [hat-tip Makaya; chart originally from AGSage's worldhousingbubble site (see sidebar blogroll)]
Excerpts:
“Let us first get one thing out of the way; the Canadian housing bubble will burst. Just like real estate bubbles in Ireland, Spain, England, and the United States real estate bubbles do burst. Timing is always hard to predict but undoubtedly these bubbles pop because they are fueled by easy and hot money. Even at the apex here in California arguments were bandied around regarding foreign money, low interest rates, and other nonsense trying to support a ludicrous bubble.” …
“The U.S. housing market peaked in 2006 and it looks like Canada is five-years behind the curve. The rise in Canadian real estate is simply unjustified. Household incomes in Canada have not come close to keeping pace with real estate values in each respective market. … Real estate values in Vancouver have shot up by 142 percent since 2002. There is absolutely no justifiable reason for this except for massive speculation.” …
“The median household income in Vancouver is $67,550 yet the average detached home price is above $1 million. That is simply madness and even makes the California housing bubble look modest in comparison.” …
“By the way, I think Vancouver is a great place but it is in a major bubble. A lot of hot money from outside has inflated values. … Patterns like this are short-term just like Japanese buying in California during a previous bubble. These bubbles will burst because any housing market is going to be supported over the long-term by local households and what they can afford. These short-term speculative bubbles simply become landing grounds for hot money. The home price-to-rent ratio is already absurd in Canada.” …
“While many in Canada and places like Vancouver would like to deny a real estate bubble it is rather obvious to most outsiders. The bubble will burst and is looking very close to reaching a peak already. All the arguments and justifications were played out here in California as well. This is something that is very familiar especially now that we enter year five of the housing market crashing here in California. And just like the U.S. fringe markets pop first.”
…
Note how absurd the Vancouver market looks from a distance, or to anyone who sees it for what it is, “a ludicrous bubble”.
- vreaa
kind of a privilege to live right here, right now.
I guess dr housing bubble doesn’t read the venerable Vancouver Sun.
“Metro Vancouver is expected to see its average house price climb 2.3 per cent to $802,000 in 2012, while Toronto is expected to see a 2.6-per-cent jump. ‘Widespread calls for a major real estate correction in 2012 simply can’t be justified,’ Royal LePage CEO Phil Soper said in a statement. ‘The industry has significant momentum entering the year, and buoyed by the stimulative effect of very low interest rates, we expect the market to continue to expand — albeit at a slower pace.’”
http://www.vancouversun.com/business/Canadian+home+prices+gain+2012/5985432/story.html
All good. Nothing to see here. Carry on.
I love it how Phil Soper says a correction in 2012 “simply” can’t be justified… “Simply” conveys impossibility…
Europe is going down the crapper…
USA has had it’s third consecutive 1.3 Trillion dollar deficit…
Wages have been stagant in Canada for 20 years…
But, no, no, any correction in Canadian real estate “simply can’t happen…
I should update that chart . . .
When I get a chance, I’ll do that.
Post edited to reflect chart source.
And your site in the blogroll, AGSage.
chart has been updated
It’s a photoshop job, I’ll confess. I ‘shopped it ’til it confessed.
“While many in Canada and places like Vancouver would like to deny a real estate bubble it is rather obvious to most outsiders. ”
Absolutely. Coming from Aussie, im sickened by the intergration of the media and real estate industry. Its almost like there is no room for a sceptical opinion. And its like the place is full of “house” zombies.
And it is a massive bubble and there is no way around it. Looks like the bubble has now started to pop. Massive numbers of people will be hurt.
If your smart and place yourself on the correct side of not only the Canadian implosion of the housing bubble, but the euro collapse, and the rest of 2012 then you will probably make a lot of money while everybody else is crying.
BTW we will have a 2013, but the sooner we get to the bottom the sooner we can start looking positively at the future.
BTW similiar story to the 50K. Had a life long friend approach me before xmas wanting to borrow 50k-60k. He is a commision based stock broker. Major Aussie Bank. Since 2007 crash his income has dropped dramatically. He too thinks its just a short term issue. I gave him 10k as a gift. I said you want more – you need to sit down with my accountant and myself and we will look at your income and expenses. (Amazingly he rents – but has also been through 3 marriages).
if you are so smart, why arent you running the show? instead, being a dry waller and pretent a big developer. by the way are you gonna show your diploma to this blog as well?
Idiot – why do you have to be a big developer? In the next few years the only important thing is to survive in the development business and be profitable. And that is going to be very tough. Developers kicking over the carcasses of failed projects are brutal.
Across Canada and Australia the ranks of developers will be decimated with bankruptcy. The name of the game is to be smart enough to survive not become massively big and then collapse just like your bubble!
And your not smart enough fred – because you still believe that its different this time. Weve obviously clashed before and youve learnt nothing apart from how to be emotionally caught up in a bubble. Good luck with that Fred!
Hey Fred, go play in traffic. That’s a good boy.
I was talking to a senior VP at a French credit union last year about credit markets. He was of the opinion that the US was the next domino to fall. I said, tu pense que oui? This was July.
France lost its AAA status, the US lending rate dropped.
Just saying, not all bankers are good at macro.
My own view for this year 2012 – 2015.
Euro will break apart – who is left in 12 months time – anybodies guess. German is printingb deutschmarks
S&P down to 650-750 where it will find a bottom and wont bounce, but grind slowly and steadily up for a decade or more. Again based on income and dividends, not speculative gains.
All remaining asset bubbles around the world will pop.
QE3 will be put through.
On euro collapse world equity —> flood to USD. A$ and Cad$ will drop to 65c and 75c respectively against US$
2013-2014 Yuan will eventually be wrenched from being pegged to US$. At that time all the inflation that has been exported will flood back into the US, reinflating assets and resolving many of the debt issues for banks. Interest rates will rise suddenly but if your in assets inflation youll be fine. Most will be screwed.
But because of the massive printing of money, the UD$ will rise from that position until it is $1.25 to the CAD$ and A$. (Making it very competitive world wide.)
Ive come to the conclusion that much of this has been planned by somebody in the US as a form of economic war and the only way to make the US financially competitive again.
Ive had long discussions with senior bankers in Aussie and guys with economic quals. Discussing it back and forth for an hour or more often one can only come to one conclusion – the guys running the show are either extremely dumb or very smart – and im betting on the second. Oh and you can be sure they wouldnt be telling anybody about it.
lol. don’t know chief, he’s either very smart or very dumb. he’s gone under the boat – he’s a big smart fish – he’s gone under the boat
Gonna need a biggerboat.
Where is the growth in the US going to come from? Funny money is about the only industry they appear to be exporting.
In Europe there are problems but not anywhere near the scale of the US.
It is time for Canadians not to swallow the hype about Europe – they will get it sorted by kicking the PIGS out no probelmo if they need to.
Who can the US kick out?
Taipan: This mirrors my thoughts somewhat on the situation as well. Are you familiar with Kondratieff’s supercyles by chance? If not look him up, I’m thinking deflation, a stock market dive, DOW down to 2000ish and then unload hard assets back into stocks for the big leg up (probably 10 year time frame like you say). It’s all part of what Kondratieff called “debt purging” which is exactly what most economies will have to go through if you look at deficits.
yes. but i don’t think kondratieff imagined the world would adopt irredeemable usd as the ww reserve currency. debt purge in real terms (i.e a sound currency) but not necessarily in nominal terms.
you know what i find perverse? the tax regime in vcr is more repressive than CA. by that i mean fully-allocated fed, province, gas, sales, etc. but, RE activities can be fully-sheltered or subject to cap gains rates. also, the economy is far less diversified – i.e. fewer alternatives. i think this has the effect of funneling people into RE speculation to a greater extent than CA. so despite being less able to support higher debt/income loads, the local set-up appears to drive exactly that. i wonder if there have been similar observations elsewhere – eg. europe.
Vreaa, did you catch the “live” censorship story of the day?
It was over at VCI. Here are the messages in chronological order…
Message1:
southseacompany Says:
January 16th, 2012 at 7:47 am
CTV: Latest read on housing sales expected to be modest.
“white-hot Vancouver market is now cooling with sharply lower sales and with prices coming off their highs”
http://www.ctv.ca/CTVNews/Canada/20120116/canada-housing-sales-report-120116/
Message2:
asalvari1 Says:
January 16th, 2012 at 9:14 am
@southseacompany:
Your use of quotation marks make your entry looks like you are citing something from the article.
Sadly, there is no such text in the article.
Message3:
southseacompany Says:
January 16th, 2012 at 10:06 am
@ asalvari1
Re: Your comment on missing text in the CTV article I linked to. That is very interesting. Not only is the text not there, the link is to a different article now, with a totally different headline. Now instead of saying “sales expected to be modest”, it now says”Housing Sales Edge up in Dec”
If you google the original headline “Latest read on housing sales expected to be modest” you can see that the article did exist. Strange that it disappeared and was replaced.
http://www.google.ca/#sclient=…..mp;bih=872
Message4:
southseacompany Says:
January 16th, 2012 at 10:23 am
Re; Revised CTV link.
I found a link which includes the original CTV article text with the quote on Vancouver’s ‘white hot’ market cooling.
http://money.ca.msn.com/savings-debt/yourmoney/no-housing-slowdown-in-2011-data-shows-1
Have a look before it disappears.
Message5:
YLTNboomerang Says:
January 16th, 2012 at 10:35 am
@southseacompany: Too late, it is now “No housing slowdown in 2011, data shows”
I’m not one for conspiracy crap but seriously, what’s with the changing of headlines to sound positive???
Message6:[finally the original article!]
southseacompany Says:
January 16th, 2012 at 7:21 pm
@#22 Boombust & #20 YLTNboomerang
Re; article disappearing. Yes, very Wintson Smithish.
Every single link I found on Google to the article that had the quote on Van’s “white hot market cooling” (from CTV to CNBC Canada) had been changed to the no drops in 2011 article. Found one that the Ministry of Truth didn’t get:
http://justvancouver.com/2012/01/16/housing-sales-data-expected-for-december/
The quote was by an economist named Robert Kavcic from BMO Capital Markets. This article was posted this morning on many sites. Then ….. poof.
[Isn't that crazy?]
Thanks, will headline.
The ‘live censorship’ phenomenon is interesting; like catching a kid with hand in cookie jar… you know they know they’re doing wrong.
I used to blog, and this was very common. Several bloggers would criticize the same article, and suddenly the article is revised and the headline and overall tone of the article is changed to deliver an entirely different message. Very often the precise quotes that had been quoted on blogs would be removed. And suddenly it is the blogger who looks disingenuous for making up quotes!! The more ethical ones will note that there were revisions (G & M usually does this). CTV almost never does. Interesting as they are both owned by Bell. Different editorial standards I guess.
There are quite a few people in Vancouver who used private lenders. That’s the sub-sub-prime and those mortgages are NOT insured by CMHC. Once we are in full crash mode, these homes will lead the price declines.
C-A-P-I-T-A-L D-I-R-E-C-T DOT C-A!
MSM in full propaganda mode!
Buy now to get an unheard-of rate for a 10-year mortgage
“There’s a brilliant reason to get into our expensive and quite possibly weakening housing market right now.
A 10-year mortgage is now available for under 4 per cent. You can thank the banks for this unheard-of rate. In the past week or so, competition between them on mortgage rates has gone nuclear.
Have you caught all the warnings about how the house that you can afford now because mortgage rates are so low will crush you when borrowing costs rise? With a 10-year mortgage, you’ve got long-term cost certainty. “This is a fantastic opportunity for somebody to lock in and have peace of mind for 10 years without worrying about a renewal,” said veteran mortgage broker Vince Gaetano of MonsterMortgage.ca.”
(…)
http://www.theglobeandmail.com/globe-investor/personal-finance/rob-carrick/buy-now-to-get-an-unheard-of-rate-for-a-10-year-mortgage/article2304460/
I think the graphs need to be aligned based on troughs, that would pull Vancouver down a tad. Still overvalued but not as insane as depicted.
i believe the timescales are correct. however, can/vcr data is not case-schiller equivalent – it’s just indexed to nominal 1999. if the can/van data were c-s like, it stretches up – though perhaps not uniformly along the timeline. the valuation relative to longer term historical is probably worse than usa.
Vancouver data is CS-like, it’s Teranet. The point is, I argue, that we should y-shift the graphs to align the troughs and not look at timeline. The US was about 3-4 years ahead of Canada in terms of a house price bubble.
From what I saw parts of the US were more zany than Vancouver ever got, at least so far. That does not absolve Vancouver of being in a bubble, its modes to sustain high prices are slightly different. Vancouver is different, after all
@jesse. guess i’m scanning stuff to fast. my thinking – working thesis is this is credit bubble. so, the normalization should be from a time period when conditions were more ‘normal’, when deficits mattered.
Yes, it would be better to go back to 1995 before the U.S. repealed Glass-Steagall, but housepriceindex doesn’t have data back that far. By eyeballing I equalized the scales of the two graphs at the earliest point I had access too. (Then erred on the side of making the teranet graph on the small side, just in case)
Even within the two data sources (teranet and C-S), already the starting index points aren’t equal in price anyway. Vancouver at the starting point was not the same price point as the Canadian 6 city nor the same as the 11 city index. All of the graphs on there are relative to each other, not absolute, whether they come from the same source or not.
I’d have to look it up to be sure, but the average price of a Vancouver house at that 1999 starting point is at least 200k higher than that of the u.s. 20 city index. So, the doubling on the graph is actually misleadingly tame in absolute terms.
“and buoyed by the stimulative effect of very low interest rates, we expect the market to continue to expand”
Sadly I agree with this statement. As of this week we are now at all-time historical record lows in major bank mortgage rates in Canada, 2.99% from the Bank of Montreal. I keep hearing from this person and that how they can afford their payments “easily” as long as interest rates are so low. These are happy homeowners who are living in their homes and have no intention of selling as long as they can make the payments. The people I talked to are not owners of 5 properties, just one high priced home.
I know there are differing opinions and I would love to be wrong on this, I pray I am wrong, but all I see is a flattening or maybe brief 15% off sale at some point in the next few years after another 25% gain, I just don’t see a massive collapse of housing aka much more than 50% (which we need) until the Bank of Canada gets off its ass and raises interest rates significantly higher than the current target 1.00%. But they just won’t do it. They are a puppet that follows the US Federal Reserve and the latter has promised low interest rates essentially forever. I know housing in the US tanked but that was after a short but sharp spike in rates. I think we NEED that here, people we need to call for an end to this free money, WE NEED A NEW BANK OF CANADA. It should cost something to borrow, and a savings account should pay something. The BOC complains that we borrow too much and save too little, yet at the same time they leave interest rates at all time lows indefinitely!? That is senseless. Raise rates and we will start to save more, pay off some debt, maybe not even be able to pay a million and a half for that East Van dump, take away the free heroine and maybe we’ll get clean. But with free money, why should we bother?
free heroines! expect more of the same policies that got us here – still won’t work. more dope just means bigger bust later. japan, usa, eu – all zirped and still busted. don’t use up life waiting for it … market can remain irrational longer than you can remain X.
Very true!
Banks have become little more than needle exchange kiosks for credit junkies. Free heroin from the BoC, clean needles from the banks, and a safe place to shoot up complements of the CMHC.
Now that’s a metaphor that only works for Vancouver.
“safe place to shoot up” – isn’t that the reason for stanley park?
Brilliant metaphor, totally works for Vancouver!
Bubbles burst when people can no longer afford housing. Vancouver’s real estate prices are being inflated by foreign investment. Vancouver real estate prices will fall when China and India disappear. It is really funny how nobody understands this or doesn’t want to admit it because it isn’t politically correct. Many counties have created laws making property ownership something only citizens can enjoy. They do this because foreigners inflate real estate prices. It is simple. Too bad this will never happen because any citizen that already owns a home would be insane to support this legislation since it will affect their property value as well. Catch 22. The funny thing is, that they are experiencing the same thing in China. The new wealthy class are buying up dozens of properties and they don’t even rent them out because they don’t care. I wouldn’t even hope that the renters will somehow keep property prices down. If you can’t afford to rent, too bad, those properties will just sit vacant.