The Elusive Canadian Housing Bubble

[GRG55]

Re: who to hire

Not for nothing, GRG55, but we're running into similar, if smaller scale problems in my little coastal community on the other coast south of the hat. My town is 24% vacant with rents increasing an average of 18% y/y. My neighboring towns are each over 30% vacant. Vacant is defined as not rented out or occupied for at least half the year, fwiw. These are literally towns of 15, 20, 30, 40,000 people where over 30% of the housing just sits empty, used as somebody else's investment.

Anyways, up the way 2 towns, they instituted a new rule at town meeting: Double the mil rate on property tax for anyone owning a place that wasn't at least rented out for half the year. It wasn't a panacea. But their vacancy rate went from 28% to 14% in one year, their homeless numbers dropped from marginal to zero, the town budget sured up substantially, and rents stopped increasing for the first time in a decade, although they didn't decrease. We'll see what happens next year. We're pushing the same policy here now.

Long story short, I don't think it's a bad idea to tax vacant residential property. It's supposed to be used for housing. Not as a store of value like gold in fort knox. Our whole commercial downtown was dying because even though more housing units were being built, fewer year round residents were living here every year as wealthy foreigners and more often New Yorkers just bought up homes speculating on appreciation and used them only for one week vacations, not even bothering to do the work to rent them out for rental income, despite the demand.

Especially here, we're a very old town. The buildings in the center are from the 1700s. Most in town are from the 1800s. There's not a whole lot of empty space to expand into. The town will literally die if every home is purchased just to be vacant but pretty as a New England post card. There has to be some way to fight back and incentivize people who actually intend to live in these places to own them. Otherwise, every small business around dies and my town becomes a periodically occupied museum rather than a place where real people live, work, grow up, and die.

Given the macro factors in play, town councils are trying to stick a finger in the dike.

No disagreement that it takes permanent residents for a community to thrive. But the situation you describe didn't happen by accident - it's the confluence of a lot of separate, presumably well intentioned, policy actions.

Vancouver, which started out life as a mill town and continental railway terminus, and was still largely a working class economy when I was growing up there, has graduated into a bifurcated economy composed of high paid software writers and MBA-carrying consultants layered on top of a vast and growing minimum wage service sector of baristas and oyster bar waitresses that serve them. The mills, refineries, railway yards and virtually all of the industry associated with them are mostly gone. Did the Chinese steal all this. Hardly. Today even the Port of Vancouver is under intense protest over its efforts to expand.

The cost and time to permit anything is incredibly expensive, and other than housing development the chances of success are abysmal. The city politicians have been seized with the idea that a zero-carbon economy is a necessary condition for the future and the regulatory blanket reflects that. Even the home building industry is going to have to accomodate this, and I don't see that doing anything to help make housing more affordable.

The wealthy, and those that have the power to write their own ticket (our elected officials), can absorb these costs. Private entrepreneurs and salaried residents are having a really difficult time, and it'll get worse.

Empty houses and property bubbles are a sign there is a dearth of productive investment opportunity to attract that capital. Central bank provided cheap and abundant credit, combined with taxpayer sponsored mortgage insurance for high leveraged loans (in our case CMHC) just makes a stupidly bad situation worse.

[dcarrigg]

Re: who to hire

Given the macro factors in play, town councils are trying to stick a finger in the dike.

No disagreement that it takes permanent residents for a community to thrive. But the situation you describe didn't happen by accident - it's the confluence of a lot of separate, presumably well intentioned, policy actions.

Vancouver, which started out life as a mill town and continental railway terminus, and was still largely a working class economy when I was growing up there, has graduated into a bifurcated economy composed of high paid software writers and MBA-carrying consultants layered on top of a vast and growing minimum wage service sector of baristas and oyster bar waitresses that serve them. The mills, refineries, railway yards and virtually all of the industry associated with them are mostly gone. Did the Chinese steal all this. Hardly. Today even the Port of Vancouver is under intense protest over its efforts to expand.

The cost and time to permit anything is incredibly expensive, and other than housing development the chances of success are abysmal. The city politicians have been seized with the idea that a zero-carbon economy is a necessary condition for the future and the regulatory blanket reflects that. Even the home building industry is going to have to accomodate this, and I don't see that doing anything to help make housing more affordable.

The wealthy, and those that have the power to write their own ticket (our elected officials), can absorb these costs. Private entrepreneurs and salaried residents are having a really difficult time, and it'll get worse.

Empty houses and property bubbles are a sign there is a dearth of productive investment opportunity to attract that capital. Central bank provided cheap and abundant credit, combined with taxpayer sponsored mortgage insurance for high leveraged loans (in our case CMHC) just makes a stupidly bad situation worse.

We've actually been adding manufacturing again around these parts for the last couple of years now, albeit it slowly.

Besides the occasional hyper-rich 0.1% celebrity or hedge fund guy or captain of industry, of whom there are too few to really mess things up around here, It seems to me there are four places the absentee homeowners are coming from around these parts.

1. "Branded professionals" - the 0.8-0.5%. Mostly they work regular upper-middle-class professional jobs, but they 'broke out' somehow and made a name for themselves: Started a lucky franchise, wrote a book that hit, got on TV, did something. They have a couple million tucked away maybe, don't have to work to live middle class, but do the Boston-Washington circuit. In some cases, our infrastructure is just too good. So these folks easily get around between commuter rail and amtrak and small, med, and large airports. And they keep a house or an apartment all up and down the line. Week in Cambridge, followed by a month in DC, followed by a week in Manhattan, followed by a week at the shore, then back to Cambridge or Boston, maybe Philly or Baltimore or New Haven or Providence or Newark for some-odd-reason on occasion. These folks just buy a place in every spot. That's mostly who occupies the new luxury condos they build, and that's why they're mostly unoccupied. They don't really live anywhere. They are just macbook/amtrak nomads waiting for the next auditorium or mid-day talk news interview.

2. "The NYC/Fairfield Finance Elite" - the 0.5%-0.2%. These guys just bid up even crappy coastal property to infinity and don't care. They don't want it rented because they don't want any plebeians in their place. They may even bring in outside maintenance people from far away. They have no interest in the luxury condos. They want either mansions in the woods or right up on the beach. They also have no compunction about tearing down all the old stuff and building something new and gaudy. This is a good place to keep and use your yacht. But they work too much to use it much. So they take up all the moorings and all the coastal land and just do nothing with them except for their one week off. A lot of these guys think they'll retire around here. Some do. Most don't. Some are silly with their money and lose it before then. Best thing a swamper can do is charge them $10 for a $1 beer and $5 a $0.50 oyster.

3. "The Ivy/Little Ivy League Foreign Kids" - who knows how much wealth they have? But it's especially popular for the Middle Eastern and South Asian students to just have mommy or daddy buy up a whole house or luxury condo with the intention on flipping it when school's over. These kids are transient. Around but not around. Gone all summer and winter, maybe for a travel semester, they leave things unoccupied most of the time. But they have the money to do it. So this bids everything up and takes housing off the market too. And it's not at all rare for them to have a 2,000 sqft 4 bedroom palace to themselves. They tend not to drive, so they are easy to spot. They're a huge chunk of the college population.

4. Arbitrary foreign investors - this is new. But maybe the success of the Ivy kid house flip schemes spreads the word back home, so they get into it again. Foreigners buy things site unseen, and probably never intend to visit. Just park your money here.

None of this is to say you're at all wrong about the macro view of things.

But the way I see it, there's only one weapon we have left with which to fight the market, and that's democracy.

We may not be able to win in the end, but if we can soak some tax revenue out of them and local kids get better schools and the local hardware store stays in business because we wring a few million out of people with no better idea on how to use their capital than keeping our local homes empty, so be it.

If you ask me, I could easily come up with millions more in local infrastructure projects we could use. I know there are still old lead lines in places, and lead connections into houses in the water system. There are lots of roads that could use resurfacing. The storm drain systems are 150 years old and desperately in need of replacing. Bridges are 50 or 60 years old and need work. Pensions are always underfunded. Beaches used to be manned and open through October, could extend those hours again. Old folks' home and transportation are ancient and were poorly built to begin with. They could use replacing. Hell, there used to be an old trolly line we could even get up and operational again. Most people around here use diesel or propane to heat, we could run natural gas lines for the first time and give them that option too. It's at least always better than propane, which is expensive as hell and deregulated so shady and full of 'lock in' two year contracts with scams and tricky introductory rates and nonsense. We don't have town trash pickup either. We could easily get that going with the funds, and save everyone a trip to the dump or $30 a month to a private hauler. There's a lot of good we could do with extra revenue. Hell, even just directly taxing people who park homes like that and giving the money directly to manufacturers to move into town and get started up would be a better use than keeping their taxes low and the homes empty. And if the taxes get so high they sell, then rents come down, people occupy the housing and live in it year round, they consume locally, and we're all better off for it anyways.

I mean, if the people at the top can't think of anything better to do with capital than buy up houses to keep them empty, create property bubbles, drive up everyone's rent, and bring communities under, I can come up with a laundry list of ways that capital might be better employed were it taxed away and put to use by the public sector.

Of course, that's just the way I see things...

[GRG55]

Re: June 2016 Canada 6-City Chart

Does this sound like the sort of action needed to deal with those dastardly Chinese cash buyers? Even the financial regulators in this country understand this is Canadians doing it to themselves by borrowing heavily at cheap rates in the hopes of instant riches. But I couldn't help but notice this BNN article just had to mention those Chinese buyers, without any hint of the contradiction with the headline in its own article.

Canada's financial watchdog tells banks to stress test for 50% plunge in Vancouver home prices

July 26, 2016

Canada's banking regulator said on Tuesday it will require the country's banks to test how they would withstand a 50 per cent drop in property prices in Vancouver and a 40 per cent decline in Toronto.

The move, which builds on an existing requirement that banks test their resilience to a 30 per cent decline in home prices across all regions, is the latest in a series of measures by Canadian authorities to counter a risk posed by soaring house prices in the two Canadian cities.

The Office of the Superintendent of Financial Institutions (OSFI) said earlier this month it was tightening oversight of mortgage lending, citing concerns about record household debt and a sharp jump in prices...

...OSFI said that, previously, only the impact on banks' core capital ratios was assessed in the test but, this year, the impact on banks' leverage ratios, which do not take into account risk weightings used by banks, will also be tested.

Canadian Finance Minister Bill Morneau announced in June that the Liberal government would set up a working group of federal, provincial and municipal officials to recommend policy changes aimed at preventing a housing bubble. [ "preventing a housing bubble." ]

British Columbia introduced a new 15 per cent property transfer tax on foreign real estate buyers in Vancouver on Monday.

[lektrode]

Re: who to hire

....
We may not be able to win in the end, but if we can soak some tax revenue out of them and local kids get better schools and the local hardware store stays in business because we wring a few million out of people with no better idea on how to use their capital than keeping our local homes empty, so be it.....
.....

+1
and i'll use for example - that place i'm OH so familiar with - WHY this makes sense and is QUITE FAIR.

have just about had it with the gazillionaire flipper-class - they buy prime beachfront properties, put a few bux into em and then a couple years - if not months - later, they've got a write-up in the WSJ about why they are selling - at some ridiculous markup - if not multiple - of what they've put into the joint - with excuses such as: "... we're simply not spending as much time at the place as we thot... the kids have flown the coop... its too far away..."

as justification for selling for 5or10 MILLION more than they have into it!?

tell ya what i'd do (and i lean more in trump's direction than bernie's):
esp considering that it sure as hell isnt the seller's home design/decorating skills that result in their over-inflated sell prices = absolute BS.

its the location on some of the most expensive dirt (and/or lava...) in the world and what they've done to it is typically gutted by the buyers anyway - if not the entire structure torn down - and why i say that on sales above a certain threshold - like, say...oh i dunno - maybe 100% over the mean sales price in that county - and then slap a 50% tax on ANY GAIN.

this now routine profiteering on beachfront palaces that make ones in newport RI look like a shanty town has gone on for far too long already!

and same goes for the rockies and the sierra too! (even lake winnipesaukee...)

I mean, if the people at the top can't think of anything better to do with capital than buy up houses to keep them empty, create property bubbles, drive up everyone's rent, and bring communities under, I can come up with a laundry list of ways that capital might be better employed were it taxed away and put to use by the public sector.
.

EXACTLY!

[GRG55]

Re: Cracks Becoming Clearly Visible Now

The trickle of inevitable mortgage fraud in Canada is increasing. It is impossible to avoid fraud in a market so consistently frothy for such a long period of time. This is at least the 5th announcement of a mortgage creditor going bad I can recall in the past year or so:

July 21, 2016
Saskatoon, Saskatchewan
FOR IMMEDIATE RELEASE

PrimeWest Mortgage Investment Corporation announces the suspension of redemption of Class “A” shares to October 31, 2016.

Saskatoon, July 21, 2016/CNW/ – PrimeWest Mortgage Investment Corporation ("PrimeWest" or the "Corporation") PrimeWest announced today that following the annual general meeting and the release of the Chief Executive Officer, the Board of Directors installed new interim Co-Presidents and Co-CEO’s to manage the corporation.

A review of corporate action was conducted, and when unrealized redundant assets were identified the new management, together with the Audit Committee and the Credit Committee began a review of the Corporation’s mortgage portfolio.

In light of these actions and potential concerns, and the need for the Board to complete its review of the loan portfolio, the Board of Director’s has announced today that redemption of Class “A” shares scheduled to occur on July 31, 2016 will be suspended until October 31, 2016.

The Board of Directors is undertaking recruitment of a new Chief Executive Officer. Further the Credit Committee is assessing lending policies and procedures in relation to the performance of the portfolio during the immediate past. If necessary, steps will be taken to correct past actions and to ensure the financial integrity of the Corporation...

[dcarrigg]

Re: Cracks Becoming Clearly Visible Now

The trickle of inevitable mortgage fraud in Canada is increasing. It is impossible to avoid fraud in a market so consistently frothy for such a long period of time. This is at least the 5th announcement of a mortgage creditor going bad I can recall in the past year or so:

July 21, 2016
Saskatoon, Saskatchewan
FOR IMMEDIATE RELEASE

PrimeWest Mortgage Investment Corporation announces the suspension of redemption of Class “A” shares to October 31, 2016.

Saskatoon, July 21, 2016/CNW/ – PrimeWest Mortgage Investment Corporation ("PrimeWest" or the "Corporation") PrimeWest announced today that following the annual general meeting and the release of the Chief Executive Officer, the Board of Directors installed new interim Co-Presidents and Co-CEO’s to manage the corporation.

A review of corporate action was conducted, and when unrealized redundant assets were identified the new management, together with the Audit Committee and the Credit Committee began a review of the Corporation’s mortgage portfolio.

In light of these actions and potential concerns, and the need for the Board to complete its review of the loan portfolio, the Board of Director’s has announced today that redemption of Class “A” shares scheduled to occur on July 31, 2016 will be suspended until October 31, 2016.

The Board of Directors is undertaking recruitment of a new Chief Executive Officer. Further the Credit Committee is assessing lending policies and procedures in relation to the performance of the portfolio during the immediate past. If necessary, steps will be taken to correct past actions and to ensure the financial integrity of the Corporation...

GRG55, Do you know much about how much provinces have power over Canadian mortgage markets? It has always seemed to me that you're absolutely right, and the macro data shows Canada has been stepping up for a big fall for some time now. And it's clearly the case in Vancouver. But to a Bostonian's eye, especially this day-in-age, the East Coast straight through all of Quebec just look plain cheap.

If I think about Montreal as analagous to Boston and Sherbrooke as analogous to one of the 100k+ satellite cities, things look super affordable now, especially given the exchange rate. I mean, a nice 1,200sqft 3bd house in really good shape, I couldn't touch anywhere (outside of the middle of nowhere in northern Maine) in New England for less than $300k USD, you can pick up on a hill overlooking Sherbrooke for $150k USD. There's some beautiful stuff in Kirkland, still on the Island of Montreal, for $400k that would never go for less than a million anywhere within a 3 hour drive of Boston.

Halifax doesn't look quite as cheap, but still cheaper for safer neighborhoods and better schools than the equivalent down this way. And yeah, New Brunsiwick is sort of dead like chunks of Maine, although Moncton's growing a bit.

I'm just wondering how 'lumpy' the burst is going to be. Seems to me it's primarily aimed Alberta westward and around Toronto, but the rest of the country may get out without too much pain, especially Quebec.

[GRG55]

Re: Cracks Becoming Clearly Visible Now

GRG55, Do you know much about how much provinces have power over Canadian mortgage markets? It has always seemed to me that you're absolutely right, and the macro data shows Canada has been stepping up for a big fall for some time now. And it's clearly the case in Vancouver. But to a Bostonian's eye, especially this day-in-age, the East Coast straight through all of Quebec just look plain cheap.

If I think about Montreal as analagous to Boston and Sherbrooke as analogous to one of the 100k+ satellite cities, things look super affordable now, especially given the exchange rate. I mean, a nice 1,200sqft 3bd house in really good shape, I couldn't touch anywhere (outside of the middle of nowhere in northern Maine) in New England for less than $300k USD, you can pick up on a hill overlooking Sherbrooke for $150k USD. There's some beautiful stuff in Kirkland, still on the Island of Montreal, for $400k that would never go for less than a million anywhere within a 3 hour drive of Boston.

Halifax doesn't look quite as cheap, but still cheaper for safer neighborhoods and better schools than the equivalent down this way. And yeah, New Brunsiwick is sort of dead like chunks of Maine, although Moncton's growing a bit.

I'm just wondering how 'lumpy' the burst is going to be. Seems to me it's primarily aimed Alberta westward and around Toronto, but the rest of the country may get out without too much pain, especially Quebec.

Montreal is incredibly cheap. The chart on this page below shows how cheap - the average condo in Van, Calgary or TO is more expensive than a single family detached dwelling in Montreal.

http://www.itulip.com/forums/showthr...830#post304830

The primary regional difference is the western part of Canada, which is heavily resource economy dependent, saw a lot of in-migration during the commodity up cycle and that started the inflation in everything, including housing. High pay jobs, lots of expensive support services (lawyers, accountants, IT, etc) and even a fair amount of retired people moving to the west, because that's where the kids and grandkids were. I don't see that sort of in-migration for work in most of the Maritimes or in Quebec, and that lack of increasing population demand for housing is probably the reason prices are pretty stable.

I made a post a while back on this thread suggesting a pied-a-terre in Montreal would be pretty attractive for anyone wishing to enjoy that wonderfully cosmopolitan and most European of Canadian cities.

Whatever bust happens will be regionally 'lumpy' as you say. But who really knows how these things actually play out, what governs when it peaks, and how far it will actually fall in each city or region. So far the resilience of the Calgary market has impressed me. However, I don't think the worst of the consequences has arrived yet. I heard a report earlier this week that there are 15 to 20 new listings for sale at or above $850,000 every day in Calgary now.

[GRG55]

Re: who to hire

The market is already showing early signs of a developing 'buyer's strike', the first indicator that it is going to roll over. Trust government to arrive late, and meddle in a completely ineffective way.

B.C. slaps 15% additional tax on foreign nationals buying property in Metro Vancouver

July 25, 2016 5:52 PM ET

Foreign buyers will pay an extra 15 per cent in property tax fees on residential real estate in Metro Vancouver, a move British Columbia announced Monday to cool the country’s hottest market...

There are no limits to human ingenuity...

Vancouver realtor probed for 'how-to' email on avoiding new property transfer tax


'Realtors should not be doing that,' Premier Christy Clark says

Jul 28, 2016 6:32 AM PT

...And then of course there's those that get caught in the government's hasty, hamhanded, purely politically motivated, poorly thought through, knee-jerk legislation. Quelle surprise. There's a growing opinion that this idiotic legislation will be the catalyst that finally crashes the Vancouver real estate market. If that turns out to be the case Premier Clark will be running for cover as all the existing "homeowners" blame her for their falling "wealth".

New real estate tax harming foreigners working in B.C., says American buyer


American Mac Kerman will be on the hook for $90,000 if he can't close his pending purchase by Friday

Jul 28, 2016 6:30 AM PT

Mac Kerman picked the wrong month to buy a condo.

An animator by trade, Kerman has been living and working in Vancouver for two years. He's one of thousands of foreigners living in Vancouver — including professors, hockey players, and experts needed by local companies.

Earlier this month, Kerman signed the paperwork for the purchase of a two-bedroom condo in Mount Pleasant and put down a down payment...

..."This was me climbing the rung — the fabled millennial finally being able to grasp at home ownership," Kerman said "And I had it in my hands. I signed that paperwork. Who could've seen this coming?"

Kerman is just one of many people facing unintended consequences of the B.C. government's new 15 per cent tax on foreign homebuyers.

The tax is meant to discourage speculative overseas purchases of B.C. real estate and cool Vancouver's red hot housing market, but Kerman said it is adversely affective people like him who just want to live and work here...

...Patrick Weekes, a Vancouver realtor working with RE/MAX, said Kerman's situation is not an uncommon one..."This has really put the whole market in a bit of a tailspin and created a lot of unnecessary stress and anxiety," Weekes said.

Kerman put a $30,000 down payment on his prospective condo early in July. He doesn't have the additional $90,000 the new tax will cost him, so if he can't close the sale in time, he'll have to walk away from that down payment and wait until his permanent residency application goes through, which will likely not be until the winter...

[GRG55]

Re: Cracks Becoming Clearly Visible Now

Here is a perhaps more useful answer to your question:

CMHC warns housing prices overvalued in 9 Canadian markets, with Vancouver at high risk

Last Updated: Jul 28 9:42 AM ET

Canada Mortgage and Housing Corp. says prices are overvalued in 60 per cent of the top 15 centres it surveys across the country.

In what the Crown corporation calls its Housing Market Assessment Survey, released Wednesday, it said overall evidence of problematic conditions in the housing market for the country as a whole has been bumped up from weak to moderate — with Vancouver singled out for “high” evidence of problematic conditions in its market...

...The agency defines evidence of problematic conditions as imbalances in the housing market. CMHC says those imbalances can occur when overbuilding, overvaluation, overheating and price acceleration, or combinations of those factors, move away from historical averages.

In its report, CMHC says there has been sustained, high levels of sales with minimal increases in supply in Vancouver, now Canada’s most expensive city to purchase a home, with the average detached home selling for $1.56 million in the metro region last month...

...For Canada overall there is strong evidence of overvaluation, though CMHC emphasizes that real estate markets are inherently local. The Crown corporation does say price acceleration is spreading in the communities it analyzed that neighbour Toronto and Vancouver.

CMHC sees its HMA as an early warning system for Canadians and the real estate industry to address concerns about the market, which it says promotes stability.

While Vancouver has been added to cities with strong evidence of “problematic conditions,” CMHC says they still exist in Toronto, Calgary, Saskatoon and Regina.

“In Toronto and Vancouver, this is due to the combination of price acceleration and overvaluation. In Calgary, Saskatoon and Regina, this is due to the combination of overvaluation and overbuilding,” CMHC said.

CMHC also said it sees “moderate evidence” of problematic conditions in Edmonton, Winnipeg, Hamilton, Montreal and Quebec City.

One city getting a downgrade was Ottawa, where the Crown corporation says the evidence of problematic conditions dropped from moderate to weak.

[verdo]

Re: Cracks Becoming Clearly Visible Now

Governments never learn, do they...

You can't deflate an asset bubble...you can only pop it. Throwing on a 15% tax on foreign buyers is analogous to Ben Bernanke raising interest rates from 2006 - 2008 to "slow down" the overheated real estate market. Bad bad news

[GRG55]

Re: Cracks Becoming Clearly Visible Now

A chart to consider. Canada is hosed.


In addition, preliminary reports from Vancouver indicate July 2016 home sales volumes down 19% y-o-y, and down 30% y-o-y in single family category. Suggests the inevitable 'buyer's strike' started before the govt came out with it's voracious Foil Those Dastardly Foreigners tax.
These numbers are preliminary sales volumes report. No report yet on price changes, but who knows could be up another 30% or 40% in July, eh.

Finally, for those that may believe the B.C., Alberta and Canadian Federal Goverment's nonsense that Canada can wean itself from resources, particularly that dirty oil they make from oil sands up north, here's an indication of just how important hydrocarbons are to the Canadian economy. Nothing to worry about though - the Premiers and the Canadian Prime Minister are on record we can shut down the oil sands and make it up with windmills and solar panels. Sure...

Alberta fires torch economy, biggest monthly GDP decline in more than 7 years


July 31, 2016

On Friday, Statistics Canada’slatest reading for real gross domestic product showed a contraction for the month of 0.6 per cent, a number that revealed the extent of the economic fallout caused by the blazes that roared through the heart of oilsands country.

The dip in the economy was a little deeper than expected. Economists had predicted real GDP to recoil 0.4 per cent, according to Thomson Reuters.

The number, Canada’s worst monthly figure since real GDP fell 0.8 per cent in March 2009, supported the already-dismal growth prospects for the second quarter...

...The decline in real GDP for May was largely due to a 22 per cent drop in non-conventional oil extraction, which Statistics Canada said was the sector’s lowest level of output since May 2011.

The agency said the disaster was the main contributor to the 6.4 per cent drop in the overall natural resources sector and the 2.8 per cent decline in the output of all goods-producing industries.

Manufacturing output was also hurt. The industry was knocked back 2.4 per cent in May in large part due to a 15 per cent drop in output at petroleum refineries, which was created by a shortage of crude oil.

Even without the negative consequences of the fires, the economy still had disappointing results in other sectors.

Excluding the decline in non-conventional oil extraction, real GDP moved backwards in May by 0.1 per cent, Statistics Canada said...

[santafe2]

Re: Cracks Becoming Clearly Visible Now

A chart to consider. Canada is hosed.

In addition, preliminary reports from Vancouver indicate July 2016 home sales volumes down 19% y-o-y, and down 30% y-o-y in single family category. Suggests the inevitable 'buyer's strike' started before the govt came out with it's voracious Foil Those Dastardly Foreigners tax.
These numbers are preliminary sales volumes report. No report yet on price changes, but who knows could be up another 30% or 40% in July, eh.

I don't have the July numbers for Vancouver but I've posted the 10 year average count of listings for greater Vancouver and in June of 2016 listings are down about 50% from the 10 year average. My expectation is that if listings are down 50%, sales will fall a similar amount. I don't have exact numbers but it appears listings are down about 35% yoy. If sales volume is down 19% yoy, that would indicate that the market may still be somewhat heated which could lead to higher prices.

If we look at 2016 months of inventory, (given the rate of sales, how many months would it take to move all the properties on the market), it is a staggering 2 months. Over the last 5 years this metric has fallen from 8 to 7 to 5 to 3 to under 2. That is not just unbelievable, it's unsustainable.

I would reframe this argument. It appears there are very few sellers in Vancouver. Sales prices are down marginally this spring but given the small number of homes on the market, it's impossible to know if this is driven by current inventory or the beginning of a downturn. Until the market stabilizes it will be difficult to understand market direction.

[GRG55]

Re: Cracks Becoming Clearly Visible Now

I don't have the July numbers for Vancouver but I've posted the 10 year average count of listings for greater Vancouver and in June of 2016 listings are down about 50% from the 10 year average. My expectation is that if listings are down 50%, sales will fall a similar amount. I don't have exact numbers but it appears listings are down about 35% yoy. If sales volume is down 19% yoy, that would indicate that the market may still be somewhat heated which could lead to higher prices.

If we look at 2016 months of inventory, (given the rate of sales, how many months would it take to move all the properties on the market), it is a staggering 2 months. Over the last 5 years this metric has fallen from 8 to 7 to 5 to 3 to under 2. That is not just unbelievable, it's unsustainable.

I would reframe this argument. It appears there are very few sellers in Vancouver. Sales prices are down marginally this spring but given the small number of homes on the market, it's impossible to know if this is driven by current inventory or the beginning of a downturn. Until the market stabilizes it will be difficult to understand market direction.

The first indications of a downturn are appearing. Listings in the GVRD are now increasing. If the 2016 version of the Chinese Head Tax + the Big 5 Banks cutting back on mortgage lending + the fundamentally unaffordable prices converge to produce an increase in volume of homes for sale, that'll be the start of the loooong overdue price correction. Vancouver may be the poster child for the Canadian bubble, but it's going to hit in quite a number of places.

"...A little while back we did a breakdown that indicated some banks were trimming exposure through a decrease in their mortgage businesses, and some were increasing the percentage of insured loans. The Bank of Nova Scotia (aka Scotiabank) seems to be the most cautious, having reduced their mortgage portfolio by a whopping 37.77% to $117 billion over the past year ending in second quarter of 2016. Additionally, they increased the percentage of mortgages that were insured by 23.2%. The strangely aggressive move seems to contradict what’s being widely reported about how our large banks feel about the housing market..."

Housing is being used by the nation as an economic growth sector of the economy, instead of it being shelter.

http://business.financialpost.com/news/economy/canadas-economy-is-growing-at-the-slowest-pace-in-60-years-and-the-only-thing-holding-us-up-is-housing

Canada is in the midst of one of its weakest expansions ever, and only the housing boom keeps it from getting worse.

That’s one of the key takeaways from Friday’s GDP report. Two years since oil prices started plunging, Canada’s economy is almost completely reliant for growth on bank lending and the hot Vancouver and Toronto housing markets generating fees for brokers.

Real estate and financial services now account for 20 per cent of the economy, levels not seen in the data since the early 1960s. That could be a problem, with household debt at a record and policy makers scrambling to slow price gains that are making homes unaffordable for all but the wealthiest buyers

That 20% figure above is up from 17% in the year 2000 (includes the property mortgage and financing sector). By comparison, the Canadian oil and gas industry, which almost single handedly brought the country into negative growth in May due to the production (and export) losses at the oil sands plants during the Fort McMurray fires, is only 6% of national GDP.

[santafe2]

Re: Vancouver goin'?

According to the article here: http://www.cbc.ca/news/canada/britis...yers-1.3703987, 3 to 4 thousand real estate deals in greater Vancouver just died. That's about a months worth of sales. The quotes by realtors are hilarious. I'll offer a few.

"It is unfortunate that, in the wake of the most complex and volatile market we've seen, our government has chosen a path that, at this time, will bring significant distress to consumers both local and abroad rather than nuanced solutions," said Charles Wiebe, president of the Fraser Valley Real Estate Board.

Really Chucky? This is how government works. They wait until it's about five years too late to manage the crisis and they bring the sledge hammer. Government in a democracy is generally asleep. You should have already made your money and get the hell out of Vancouver real estate.

Some say it violates the North American Free Trade Agreement (NAFTA) which prohibits governments from imposing policies that punish foreigners. Top lawyers say the tax is ripe for a constitutional challenge.

Really? Some say? I'm a bit offended. This is uniquely American. You tell a lie at 10AM and by 11 you quote yourself saying "some say". Of course we're happy to not be the only country sued for violating NAFTA.

On a half-million dollar deal the tax represents $80,000 to $90,000, said Jonathan Cooper, vice president at Macdonald Real Estate Group

Jonny, this is not a maths variable. It's $75k.

He described an immigrating family who recently bought a home on Bowen Island for $750,000 in time for their daughter to attend UBC, only to face an extra $100,000 to pay."It was a burden for them. This isn't the kind of family that has an extra $100 thousand dollars just lying around," he said.

OK Jonny, the family has almost a million but they're "not the kind of family that has an extra $100k..." Yup, this is some Bangladesh level hardship. How will this family get by?

The additional tax left their buyers scrambling to come up with $300,000 they did not have.

Let me try to get this straight. Some poor soul was able to scrape together $2MM and they were "scrambling" for an additional $300K. Government is truly evil.

[GRG55]

Re: Vancouver goin'?

According to the article here: http://www.cbc.ca/news/canada/britis...yers-1.3703987, 3 to 4 thousand real estate deals in greater Vancouver just died. That's about a months worth of sales. The quotes by realtors are hilarious. I'll offer a few.


OK Jonny, the family has almost a million but they're "not the kind of family that has an extra $100k..." Yup, this is some Bangladesh level hardship. How will this family get by?

...

LOL. Bowen Island is a ferry ride from West Vancouver, one of the most expensive districts in the Vancouver region. Bowen is mostly weekend and retirement "cottages" (at $750k I'm not sure cottage is the right way to describe them). No student in her right mind attending UBC (my alma mater, the University of British Columbia, which is located on Point Grey) is going to try to do that living on Bowen - between the ferry, the Upper Levels highway, the Lions Gate Bridge, driving through downtown Van and then one of the two bridges over False Creek it would be the commute from hell every day.