“Vancouver Scarily Overpriced!” (Yawn…We’re Used To Ignoring Alarm Bells..)

“Observers outside Canada are ringing (loud) alarm bells (again) over inflated house prices.
Both Moody’s Analytics and The Economist issued fresh warnings within days of each other, each citing swollen household debt.
Moody’s Analytics, the rating agency’s sister group, pointed fingers specifically at Vancouver and Toronto, which have long been the focus of angst.
“The risks are less around the rapid house price appreciation per se than the fact that, relative to incomes, homes in Toronto and Vancouver are increasingly becoming unaffordable either to own or to rent,” Moody’s economist Paul Matsiras said in his report.
“Canadian household debt has risen faster than disposable income since 2011, greatly increasing the debt burden for consumers and the risks of a pullback in spending as interest rates rise.”
He warned of difficulties as the key measure of household debt to disposable income rises, now standing at almost 165 per cent.”

– from ‘Scarily overpriced’: Outsiders fear for Canada’s housing markets, Michael Babad, G&M, 19 Oct 2015

22 responses to ““Vancouver Scarily Overpriced!” (Yawn…We’re Used To Ignoring Alarm Bells..)

  1. Oh, these fools at Moody’s, The Economist, Morningstar, and elsewhere. They just don’t get it. Fundamental metrics don’t matter in Canada. All that matters is “wealth migration” from China. Chinese people will pay ever-rising prices and make us all rich!

    • Is it coming to Hongcouver soon?.
      HK 2nd richest property tycoon advised the HK people not to speculate in real estate in the coming two years as the market will tumble 5% x 2 years. Not sure how his HendersonLand is connected to Vancouver’s Henderson. You know how some rich boy will drop name, and his papa can easily get a cash injection of funds any time during tight liquidity. I don’t believe that the Kongers are curry-eaters.

  2. Hey, good to see ya back. Where have you been. Btw, what did these analysts think of Monaco? I would venture to guess they say it is an exception case. So the rich europeans could have their playground and the rich asians can’t? Sure. I would also venture to guess that the number of single family homes in Vancouver is probably similar to how many total supply of condos in Monaco.

    • So, Vancouver is the new Monaco? That’s rich. Next thing you know, you’ll be comparison Robson Street to the Champs Elysee.

      Btw, according to Forbes, Monaco RE prices fell 54% in 2009. These sorts of declines can and do happen, no matter the location.

      • That’s rich until it does happen. What, you are well versed with the way that rich Chinese people think? We have a long way to go to achieve those price to income ratios. Imagine we had those here, what, we would have had a revolt by now. I am sure Monaco’s properties are all supported by local incomes.

  3. Housing prices in a lot of retirement destination countries like Caribbean countries, and southeast Asia don’t make sense either when looked at from a local income perspective. Yes, housing isn’t crashing in those countries either. How do you explain that?

  4. The average monthly mortgage payments in both absolute $ terms (inflation adjusted) and % of income hasn’t actually changed much compared to the 80s with the super high interest rates. Given interest rates are unlikely to jump by huge amount in a short amount of time, there is argument that the problem is not as bad as it looks on surface.

    • You are incredibly wrong. Affordability has never been this bad. Ever.

      • Still don’t get this, why are we looking at affordability based on bungalows???? Bungalows make up a minority of properties in the Vancouver housing market. Vancouver city proper only has 47000 detached homes and only some of it is bungalows. So why are we measuring affordability using bungalows. The condo affordability has not seen this sharp of a decline.

      • A. That is metro affordability, not city.
        B. Condo affordability is also near record lows.

      • See below.


        Using an apple to apple comparison against every other city in the world in terms of price to income ratios, tell me how do we stand out exactly?

      • See my reply to your post at the end with a housing valuation report from RBC.

      • Brian: Quoting an obscure Serbian website as more authoritative than Moody’s and The Economist? Thanks for the laugh.

        And btw, your site contemplates apartment prices only. Nice try, though.

      • Are the stats wrong? What you have better numbers to share? Btw, did you forgot to read or did you just not notice when I said “apples to apples”. So in your world, we really should compare apartments to estates, yeah very valid comparison.

  5. Lets just accept that at least in Vancouver and Toronto, things really are different and get on with it. Something about those two markets make them behave very strangely. As for the rest of Canada, let’s see how things pan out in Alberta. A crappy economy may in fact lead to lower house prices as expected.

  6. Punch in Vancouver Realtor Deals With First Time Home Buyers on YouTube. It’s hilarious.

  7. This is put out by RBC a while ago titled Canadian Housing in 6 Questions:

    Click to access rbc-gam-economic-compass-cdn-housing-201411.pdf

    Exhibit 6 shows that the average mortgage payment have rise by ~ 1% compared to the 1980s. This is a more comprehensive study and I trust that more than a simplistic measure you posted.

  8. btw, if you got to Asia or even much of Europe, you will find that using average local income, majority of housing prices DO NOT make sense as often posted on this blog and VCI. However, by and large housing prices have not yet crashed despite decades of being too expensive.

    That Demography report’s definition of the world probably only covers about 10% of the world populations and less than 10% of the world’s countries.

    Once people in China planning to come to Vancouver actually look at the Vancouver price, they laugh at how damn cheap it is, especially considering that you actually own the land, and the mansion is less than 30 mins away from city center, without even going on the highway. Try getting the same thing in Beijing/Shanghai? Good luck…..

  9. Btw, I have a question for all, with Trudeau winning, anyone think that the IIP might be returning? The liberals were the only ones who criticized the closure of the IIP.

    • They have committed to evaluating root causes of high housing prices in Toronto and Vancouver (where they have key support and elected MPs). Look for them to start turning the screws, voters will want to see something. I doubt iip is that screw.

    • They should up the IIP price, just like Australia, maybe a straight $1M donation to the Fed gov’t at least.

      There is already a business investor program where you buy a business and operate it for 2 years and ensure that you employ at least 2 full time people – aka – boomer marginal small biz bailout program. I think Vancouver itself is like at least $250K+ purchase price, while GVRD ex Vancouver is like maybe $150K+ purchase price.

  10. This comment from another site says it all:

    I live in Vancouver and work in finance. Its a shit storm. Many brokers out of work, many companies cant raise financings, many people from finance out of work.

    As for housing, local realtors and real estate developers wont touch Vancouver West side, West Vancouver and Edgemont Village (in North Vancouver) because the Chinese had been propping up prices but now they cant get their money out and closings are failing.

    No, Canada is definitely in recession.

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