“Canada has a new worthwhile initiative. After years of booming prices, that bastion of politeness north of the border is looking to avoid a catastrophic housing bust for something more, well, boring. Initiatives don’t get more worthwhile, and perhaps not more difficult considering Canada just might have the biggest housing bubble in the world right now.
Not exactly boring, eh?
The distinction between higher prices and bubbly prices isn’t as subjective as it might sound. Like any other financial asset, there should be a fairly steady relationship between the price of housing and the stream of income — rent — it produces. Should be. The chart above, from The Economist, looks at the price-to-rent ratios across different countries, and measures how under-or-overvalued housing is, with negative numbers corresponding to the former and positive ones to the latter.”
“..by keeping rates where they are and slowly tightening mortgage requirements, Canada hopes to engineer a more gradual price decline that won’t set off a vicious circle. In the best case, prices wouldn’t fall, except below the rate of inflation, so that real prices decline without hitting household net worths. This strategy is hardly unique — China has done the same the past few years — but it has the very Canadian name of “macroprudential regulation”.
– from ‘The Biggest Housing Bubble in the World Is in … Canada?’, The Atlantic, 25 Jan 2013
Yes, we have a big RE bubble.
Noteworthy, again, for the mention in the international press.
It is our considered opinion that a soft landing, particularly in markets such as Vancouver’s, is an impossibility.
Our market has been completely dependent on rising prices to draw in buyers.
Stagnant or falling prices will beget falling prices. Yes, that’s a circular, self-reinforcing effect, and that is why the downdraft, once established, will be so powerful.