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Canadian Real Estate


benhacker
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Yep, there is most likely a bubble. Here are some quotes from people around me in Montreal.

 

Sister: "My coworker has been searching for a house since a year, the prices of the same Condo's is 50k more today then 6 months ago. They finally decided to buy because they did not want to wait more and see the prices inflate even more."

 

Coworker 1: "Real estate prices only go up, surely you should know that BeerBaron"

 

Coworker 2 (knowledgeable) seeking for additional rental properties: "It's crazy all I can find is properties with a Price/Earning above 16... why should I want a spread so thin?"

 

Coworker 3 (single mother earning about 40k) : "Yeah I just bough a Condo, I didn't had enough cash down but the bank let me put the difference on my credit card."

 

Real estate agent ad in my mail: "How much longer prices will stay at those levels? You should think about selling now."

 

I had an interest in CWA.UN, which is a Wholeseller of home appliances that sells mainly to contractor. I sold it all because I figured this could be a 0 if the bubble goes out. Too bad, because at the prices it is currently trading it would have been a great 15% return stock.

 

BeerBaron

 

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I am in the process of wading back into the Greater Vancouver real estate bubble. fortunately, I will be looking to buy in Langley where prices are a little cheaper...

 

Currently, in Canada one can get a 5 year fixed mortgage for 3.79%. Let's say a house costs $700,000 and a family has a $100,000 down payment. Amortized over 30 years and your monthly payment is $2,782 = $33,384/year (interest is about $22,740/year).

 

This is not onerous. This is extermely cheap. And this is clearly what is feeding the bubble in Canada. Until 2 to 5 year rates increase significantly (to 5 to 7 %) the market in Canada will likely continue on its merry way.

 

Further, holding debt as a part of your assets (say 30%) is not a bad decision if one is looking for an inflation hedge. 5 years at 3.79%?

 

My belief is that housing prices in Greater Vancouver are in bubble territory. I also think the most likely outcome is they will stay high the next few years as interest rates stay low... One can be right on a trade. Getting the timing right is the hard part... 

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Guest kawikaho

There's a chart I've seen (can't find it anymore) that shows a pretty good inverse correlation between interest rates and house prices.  You guys are betting rates are going lower?  Good luck with that.

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There's a chart I've seen (can't find it anymore) that shows a pretty good inverse correlation between interest rates and house prices.  You guys are betting rates are going lower?  Good luck with that.

 

Pretty much all asset values are inversly correlated to interests rate...

 

It seems to me like a run-off on the CHMC by the banks, Canadian taxpayers avoided it in 2009 but they will get their bailout in 201x.

 

BeerBaron

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There's a chart I've seen (can't find it anymore) that shows a pretty good inverse correlation between interest rates and house prices.  You guys are betting rates are going lower?  Good luck with that.

 

I don't understand. I don't see anyone in this thread betting or suggesting that rates are going lower.  Can you clarify what you are referring to?

 

 

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Guest kawikaho

Sorry about that.  I wasn't addressing you guys in particular.  Bad writing on my part.  Apologize for the confusion.

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