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Canadian Housing Prices


jjsto
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Anyone have any thoughts on this?

 

Reading Krugman destroys brain cells  ;)

 

Canadian housing prices have been bubbly for years now.  The devil is ready to take the hindmost, and most everyone else, in Vancouver in particular.

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I'm actually betting that the Canadian RE bubble will burst (or at least significantly deflate) in the next few years by staying a renter instead of buying.

Id never thought id say this but that thought has crossed my mind.

A listing of a home near by here is going for some insane amt (relatively speaking) and Im thinking, man, i could use that $ to increase my float and then most likely buy back a few years down the road.

Still is speculative considering not knowing how long this bubble can stay afloat.

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I'm quite certain that Vancouver real estate, and to some extent other overextended areas of Canada, will have a real estate correction when China's own bubbles correct.  When that is?  I haven't the foggiest, but it will happen.  The average home price in the suburb of Richmond, which is predominantly Asian, hit $1.1M this week...up from $880K in September 2010!  The culprits behind the rise...wealthy mainland Chinese buyers. 

 

This is no different than when the Japanese were buying up everything in the late 70's and 80's, or the Hong Kong/Taiwan exodus that was buying up everything in the 90's.  Correct me if I'm wrong, but wealthy American's were buying a few years ago and pushing up Vancouver and Whistler prices.  They are all gone now and it is the mainland Chinese buyers left.  Guess what?  They won't be buying by the end of this decade either! 

 

Maybe the eventual wealthy Indian middle-class will be coming, and Vancouver prices will remain inflated for another decade!  ;D  Cheers!

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Here's something worth reading regarding what Sanjeev said about the Chinese influx:

 

http://www.vancouversun.com/business/real-estate/Chinese+investment+surge+hits+Metro+Vancouver+housing+market/4352746/story.html

 

Couple that with what Prem said about the bubble in Chinese real estate...

 

And for your amusement let's bring back the classics...  Always good for a few minutes of play time..

 

 

http://www.crackshackormansion.com/

http://www.crackshackormansion.com/part2.html

 

 

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  • 1 month later...

Here are some more comments on Canadian house prices.

 

http://www.theglobeandmail.com/globe-investor/investment-ideas/experts-podium/signs-point-to-a-severe-housing-correction-in-canada/article1979229/

 

The current consensus is that Canada’s real estate market has achieved a “soft” landing and that prices will flat line but not decline substantially over the next several years. I disagree. The housing market in Canada is already in bubble territory. Average house prices have doubled in the last 10 years, while rents have risen by only about 30 per cent. The ratio of house prices to rent is now higher in Canada than in any other developed country.

 

An even more powerful indicator also points to a severe housing correction in Canada. Residential housing investment as a percentage of GDP was 6.48 per cent in 2009, down slightly from 6.76 per cent in 2008, after peaking at 7.13 per cent in 2007. The previous peaks were at 7.26 per cent in 1976 and 7.18 per cent in 1989 – and we know what happened to the housing market in Canada in the early 1980s and early 1990s. After residential housing investment as a percentage of GDP peaked in the previous two cycles, the housing market crashed within a few years.

 

I believe we are running out of time. By way of a comparison, this ratio peaked at about 6.1 per cent in the U.S. in the mid-2000s at the height of its housing bubble, and toward the end of the 1980s in Japan, when that country was nearing the end of its own property boom. Both countries experienced sharp declines in housing prices soon afterward. (I should mention that the ratio stands at 6.0 per cent in China at the end of 2010 – no wonder there is talk of a bubble in the Chinese housing market.)

 

Canada is past the point of no return. What has propped up the housing market in Canada and delayed the correction is artificial demand from Asian investors. While it is not clear when this demand will dry up, it eventually will. Once it does, watch out.

 

 

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These are comments from several miles away, looking for a reaction from the people on the ground. My opinion is that when bubbles are not propelled by leverage, the dumb money may suffer but the effect on the general economy and the stock market should be minor and sector specific (aka Internet bubble). My question to the Canadian friends is how involved are the banks and the shadow banks in this bubble. My understanding is that they are very conservative and LTVs very low.

 

Also my understanding is that most of this price increase has been in urban centers (mainly Vancouver, but also Toronto) so it is not like there is suburban oversupply that will not be sold for years to come. There is a real trend to rent in cities that only will be more pronounced with higher oil prices and increase in the number creative economy jobs. Prices will come down but without big real effects in the general economy (New York, Los Angeles are doing just fine, Seattle not so much but it was not a disaster)

 

 

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There is a real trend to rent in cities that only will be more pronounced with higher oil prices and increase in the number creative economy jobs. Prices will come down but without big real effects in the general economy (New York, Los Angeles are doing just fine, Seattle not so much but it was not a disaster)

 

Los Angeles has an 11.3% unemployment rate from 6.9% in '08, not seasonally adjusted. It's amazing to see some areas where restaurants can still charge $18 for a deep fried egg with some fish eggs, closely bordering run-down neighborhoods with blocks of commercial vacancies. 

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Interesting thing we are seeing around here. With today’s communications and convenient air travel, people are to realize that they no longer have to live in the large centres. For example, on  Prince Edward Island we see more and more people moving here to avoid those insane housing prices, high crime rates, and long commute times. I live three minutes from work, the  city centre, two golf courses, two marinas and a beautiful beach are all just five minutes away. Yes, we have a murder every year or so - usually a domestic situation. But for the price of a forty year old bungalow in Vancouver you can own a luxury waterfront home.

 

Recently we had a tech firm move here and re-locate all their entire staff. Companies like Investco-Trimark, CGI, and Ceridian have all set up major centres here recently. With New York, Boston, Detroit, Montreal and Toronto just a couple of hours away by air and fibre optic internet service cable becoming widely available, more people are finding they can work and run businesses from here just as efficiently and much more inexpensively than they can in the large centres.

 

The bottom line is that there comes a point where some areas will simply price themselves out of the market. When you have a huge disparity in housing prices between different areas of the same country things are going to tend to level off because eventually people will realize that many businesses no longer have to be tied to large, overpriced centres.

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For example, on  Prince Edward Island we see more and more people moving here to

I really do want to get to visit your province one of these days. My sister in laws family is from there - I hear nothing but marvelous things of there and NL.

 

Hope to see you Soon ;D

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http://www.financialpost.com/personal-finance/mortgages/Pricey+property+surge+drives+average/4621592/story.html

 

Strong sales in Canada's most expensive market helped push the average price of a home across the country up 8.9% last month from a year earlier, the Canadian Real Estate Association said.

 

The Ottawa-based group, which represents about 100 boards across the country, said the average sale price of a home was $371,286 in March.

 

But CREA cautioned that Vancouver was driving the numbers because of strong activity "in a few pricey areas.

 

“A record number of multi-million dollar property sales in Richmond and Vancouver West are pushing up average prices for Greater Vancouver, British Columbia and nationally,” said Gregory Klump, chief economist at CREA.

 

"If Vancouver is excluded from the equation, the national average price increase is cut by more than half to 4.3%."

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Smazz, --  Thanks for the kind words & everyone is welcome come to PEI. We were very lucky to have escaped the recession almost completely on PEI with the main exception being the fishing industry. But there's a plus side to that... Last spring you could buy 3, one pound cooked lobsters for $13.99 and I expect much the same this year. So you might want to come sooner than later!

 

Re: Housing. In December 2010 CREA forecast sales on PEI to be down in 2011 by 11%. If that is true, no one seems to have told the construction industry. We are involved and are seeing our usual steady increases. Every year we wonder where all the people come from, but the houses seem to keep selling.

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