The Elusive Canadian Housing Bubble

[GRG55]

Re: The Elusive Canadian Housing Bubble

Article from Steve Keen: http://www.businessspectator.com.au/...bble-it-bursts

"The only clear conclusion from here is one that surprised me. On this data, Canada does not have and has not had a housing bubble. Its price index is exactly where it was thirty years ago. I’ve just spent some weeks in Toronto, and its horizon-to-horizon condominiums and cranes seemed to reek of a bubble – but apparently not."

Would be interesting to know why the real house price index in Canada has not gone up. Inflation has pushed everything up at the same rate?

From the Keen article:

"...My unpopular alternate refrain is that house price (and share price) bubbles are always and everywhere a phenomenon of rising bank leverage, and anywhere that has high and rising levels of household debt (relative to GDP) is a candidate for being a bubble economy..."



And lo and behold what is the household debt relative to GDP trend in Canada you ask? Take a look. Note the government sponsored post-financial crisis vertical ramp in residential mortgage credit issuance. And note dominance of residential mortgage credit in the overall trend.

Keen visits Toronto, sees "horizon-to-horizon condominiums and cranes", and declares that apparently Canada is not in a property bubble after all.

[nedtheguy]

Re: The Elusive Canadian Housing Bubble

redacted

[GRG55]

Re: The Elusive Canadian Housing Bubble

A chart of relative values of Canadian housing vs USA housing from a recent BoM report. No prizes for figuring out which line is which



Oh, and by the way, if anybody wants a few minutes of amusement about the idiotic real estate market in one of the last holdouts in the Great Global Property Bubble, take 3 minutes to cruise through this link:
http://vancouverpricedrop.wordpress....april-16-2013/

Time to check in with vancouverpricedrop for an update:

Number 29 is in a chi-chi equestrian themed development in South Surrey (east of Vancouver near the US border) modestly called "High Point Estates". I made a point of touring through there this past summer when I was in Vancouver. Place is a collection of look-alike overstated starter castles, about 150 of them when built out...the Canadian equivalent of the McMansion...filled with all the absolute necessities of life, including the obligatory built-in cappuccino machines, subterranean media rooms and outdoor pizza ovens. One of the more creative realtors selling in this horsey development uses the byline "Time to make a stable investment".

At the other end of the scale, Number 10 seems so typically west coast..."unremediated grow-op"...that's realtorspeak for "knockdown".

Number 13 also caught my attention...looking at the rents apparently the dock is more valuable than either of the residences...

The Weekly Drop – September 30, 2013

Here are the top 30 properties that changed their price or were relisted under a new MLS number the previous 2 weeks AND have dropped the largest percentage overall from their original asking price

Maple Ridge dominates with 8 properties on the list, Abbotsford 4, Coquitlam 3 and West Vancouver and Langley with 2 each

Take a look at #25 in a prime area of Burnaby which, if sold for asking, would lose the current owners over $550K and 25% in a little over a year. ”Feng Shui is #1 here”

[lakedaemonian]

Re: The Elusive Canadian Housing Bubble

In my opinion, the Middle East has seen it's worst. Syria is a disaster to now where, will be the last. Even the Egyptians know the perils of revolution gone haywire and backed the military government. No one wants a Syria.

The next hotspot will be somewhere in Asia or Central or South America.

Central America has some horrendous levels of violence(Honduras's second most populous city for example).

And Mexico's narco civil war is not likely to end anytime soon with ramifications that stretch both North and South.

And there's the future economic implosions of Venezuela and Argentina.

But to me it just doesn't "feel" like it's going to blow too big or bad...Mexico's narco civil war notwithstanding.

I'm still with GRG55 on Egypt.

On top of all the issues GRG55 has brought up with Egypt, add the issue of water that I've mentioned before in posts.

I think the Nile river systems and the countries the water systems pass through are worth keeping a very close eye on. It may not be tomorrow, but there will be conflict over the Nile resources.

Just look at Syria.....what is one of the least covered aspects of the Civil War there? Water.

Syria and upstream had a bad drought a few years ago, pushing folks urban, water restrictions were common, protests started in some of the drought affected and water restricted urban areas.

[Milton Kuo]

Re: The Elusive Canadian Housing Bubble

When they're throwing in "freebies" so they don't have to lower the price of the house ("nobody" want's that; uh, except for buyers ) it's a sure sign of trouble in the market. But I'm sure the denial is thick.

Offering a "free" car with the purchase of a house was commonplace during the latter stages of the US housing bubble.

[GRG55]

Re: The Elusive Canadian Housing Bubble

When they're throwing in "freebies" so they don't have to lower the price of the house ("nobody" want's that; uh, except for buyers ) it's a sure sign of trouble in the market. But I'm sure the denial is thick.

Denial ain't just a river in Egypt.
--Mark Twain--

The property market in Canada is grinding lower, and the overpriced, overbuilt condo markets in Toronto and Vancouver are leading the way. The developers and realtors are doing everything they can to fudge the stats and convince the property virgins that "now is a great time to buy a home".

Free car with your condo? How Toronto-area realtors are catching your attention

TORONTO – Kylemore Communities’ Patrick O’Hanlon says his company is offering a $35,000 voucher towards a BMW with the purchase of a condominium in his Markham community.

“We wanted to bring people in and show them that this is different than a regular condominium,” said O’Hanlon...

...“You don’t need an upgrade here, so what else would you need? Something to park on the P1 level that you can take out and say, ‘I live at the Sixth,’” he explained.

Another eye-catching realtor ad offers a free 2013 Honda Civic when you buy or sell a home for $2 million or more, a free 2013 Nissan Versa if you’re in the $1.2 to 1.99 million range, a $7,000 Yorkdale Mall shopping spree from $600,000 to $1.19 million or a $3,000 Apple Store gift card for those from $300,000 to $599,000.

Real estate marketing expert Ingrid Menninga believes these incentives are effective as attention-grabbers and differentiators.

“Typically what happens is when people buy real estate, there are many other purchases that go along with that in the tens of thousands of dollars,” she said. “So it’s a smart move for the developer to think ahead of time what people are doing and offer that as an incentive.”...

...While the condo market cooled in September with prices slipping 3.7 per cent in downtown Toronto and 1.8 per cent in the suburbs, market analyst Jason Mercer said when you look at the same type and quality of condominium apartment from one month to the next, it’s a different story.

“If you look at our benchmark price…you actually see pricing up by about 2 per cent,” said Mercer, Senior Manager of Market Analysis at the Toronto Real Estate Board...

...Mercer said overall, condo pricing has held up “quite well” given the added supply, and he’s seen an acceleration of condo apartment sales growth moving from summer into fall.

“There’s still quite a lot of households who are looking to get into that ownership market and are looking at that condominium apartment segment.”

[don]

Re: The Elusive Canadian Housing Bubble

aka a phatt margin . . . no

[Onlooker]

Re: The Elusive Canadian Housing Bubble

But in Ottawa, the developers of 211A Melrose Ave. thought buyers needed a little more enticement, so they're throwing in a Jaguar F-Type for free to whoever buys the place

When they're throwing in "freebies" so they don't have to lower the price of the house ("nobody" want's that; uh, except for buyers ) it's a sure sign of trouble in the market. But I'm sure the denial is thick.

[GRG55]

Re: The Elusive Canadian Housing Bubble

Photos: $1.1M Ottawa home comes with free Jaguar

In Vancouver, a brand new, three-bedroom, three-bathroom modern home would be a steal at $1.099 million. But in Ottawa, the developers of 211A Melrose Ave. thought buyers needed a little more enticement, so they're throwing in a Jaguar F-Type for free to whoever buys the place




http://surfacedevelopments.com/211melrose/

[GRG55]

Re: The Elusive Canadian Housing Bubble

Pitter patter...

They expected hundreds. They got dozens. Could this turn out to be the landmark building that’ll never be built? Or is there enough condomania left in the nation’s biggest market to fill a staggering 56 stories with hot young hipsters at the corner of Young & Eligible?

Days ago Tower Hill Development blew its food budget at a “Preview Opening” event for 2221 Yonge, a massive slab which will soar over one of the busiest intersections in Toronto. Imagine living in a frenetic beehive of 600 concrete boxes thrust into the skies, all linked underground to a subway station big enough (when a new line’s completed and hooked in) to handle 400,000 bodies a day.

The boxes start at $200,000 for a closet of 390 square feet, with parking spaces available at $65,000 (if you qualify). Occupancy is slated for August 31, 2017. Or maybe never. It’s a bit early to tell, but a few long faces at the gala event suggest the latter.



As you know, many eyes are on the most insane condo market in North America, where 150 towers are currently being built at the same time new projects are scuttled at a record pace. Already 21,000 virginal units sit unsold, while projects like 2221 Yonge gush out more.

Even before the first canapé was nibbled at the corner of Yonge and Eglinton, ravenous realtors were using Kijiji (cuz it’s free) to reflog inventories that were foolishly bulk-bought on spec. Suddenly that parking spot fell to ‘only’ $50,000, the downpayment dipped 5% and the buyer receives a no-fee assignment clause, letting them flip the box to a greater fool during the l-o-n-g four years until closing day.

But likely gone are the days when you could buy a pre-build condo and expect profits by the time the last exploding glass balcony panel was installed. The speckers and flippers have learned that lesson, often the hard way. It’s why only a third (at best) of new units are now being bought by speculators, as opposed to 70% a year ago. And in this may be the true death knell of one of the world’s most overbuilt markets.

It’s interesting that the price gap between new houses (real ones, with actual dirt) and new condos has soared to an unprecedented level. A decade ago someone graduating from a condo needed only about $75,000 more to move up to a small SFH or a townhouse. The spread is now $220,000 in the GTA – with low-rises houses averaging $658,938 and condos checking in at $436,789.

To the motivated economists at BMO (where they apparently sell mortgages), this is good news: “Going forward, the large premium on detached homes should push more buyers into the condo market, where sales are down 18 per cent from a year ago, thereby stemming the upward pressure on detached home prices.” Sure. In your dreams.

The condo market is croaking because of saturation, higher mortgage rates, tighter lending restrictions and a growing shortage of juicy virgins. After all, if 2221 Yonge ever gets built, you can rest assured renters will live there for half the cost of owners.

[touchring]

Re: The Elusive Canadian Housing Bubble

And with the "Arab Spring", Syria and who knows what next, some in the Middle East are also hedging their bets:

In my opinion, the Middle East has seen it's worst. Syria is a disaster to now where, will be the last. Even the Egyptians know the perils of revolution gone haywire and backed the military government. No one wants a Syria.

The next hotspot will be somewhere in Asia or Central or South America.

[GRG55]

Re: The Elusive Canadian Housing Bubble

And with the "Arab Spring", Syria and who knows what next, some in the Middle East are also hedging their bets:

Middle East buyer went on $40-million Vancouver property spending spree

Penthouse and lower unit at the Fairmont Pacific Rim is fit for a royal

Vancouver Sun September 21, 2013

VANCOUVER — It sounded like an astonishing purchase when reported in June — $25 million for a deluxe penthouse in the Fairmont Pacific Rim building at Coal Harbour — but it turns out that was just part of the story.

The price for the penthouse was a record for a Vancouver condo, but the buyer, identified only as a Middle Eastern royal by the realtor who made the deal, also picked up a unit on the floor below for $15 million, bringing the total to $40 million worth of real estate.

Realtor Malcolm Hasman, quoted in a story by Bloomberg News, characterized the combined purchase as the most expensive condominium purchase in Canada, and indicative of the foreign interest in Vancouver real estate.

“Vancouver has been fuelled tremendously in the last couple of years by high-end wealthy Chinese and Hong Kong buyers,” Hasman said...

...“There’s more money around today than there’s ever been in the high-end market. And where’s it coming in from? The Middle East, China, Asia.”

Hasman declined to disclose his buyer’s identity, and transaction records at the B.C. Land Title Office only identify the purchaser as Leemar Investments FZE, a company registered in Dubai’s Jebel Ali Free Zone Authority.

Land title documents show that Leemar bought the PH01 unit on June 7 for $25 million. The property last sold for $17.6 million in April 2010.

Just 10 days later, land title documents show that Leemar bought apartment 4601 for $15 million. That property last sold for $5.5 million in February, 2010...

[seobook]

Re: The Elusive Canadian Housing Bubble

the avalanche of money flowing out of China

Macau has many gold stores & 30+ casinos where the casinos make up most the local economy & something like 1/2 of the floor space is VIP only: "Macau posted casino revenue of $3.69 billion for July, outstripping Las Vegas’s by more than six times, Bloomberg Industries data show."

[GRG55]

Re: The Elusive Canadian Housing Bubble

I don't believe there's a place where there is less "any fear of losses" than the Chinese. I do know from a relative real estate broker that many Chinese speculators willing to pay the 18% tax on property purchases in Singapore.

Hong Kong is the conduit to move money into and out of mainland China. The wealthy mainland Chinese have always hedged their bets by getting money out of there, even when net flows were inward due to foreign direct investment. That's the main reason Hong Kong real estate went nuts last decade. Now you can buy a Frank Gehry designed apartment at the Opus in Hong Kong.

Mid-Levels Gehry flat sets record of HK$68,000 a sq ft

Luxury Opus Hong Kong apartment goes for HK$455 million, or HK$68,000 a square foot

A buyer has paid HK$68,083 per square foot for a luxury flat at Opus Hong Kong, the new Frank Gehry-designed residential building in Mid-Levels East, a record for an apartment in Hong Kong and Asia in terms of price per square foot...

Now the avalanche of money flowing out of China through Hong Kong seems to be going into anything, anywhere that the mainland Chinese feel their government cannot easily get their hands on. Even the frenzy of gold bullion buying in mainland China is indicative of a desire to get out of yuan and maybe out of the country.

18% is cheap compared to the potential loss of keeping it in China...

[touchring]

Re: The Elusive Canadian Housing Bubble

When I lived part time in London, UK in the middle of the last decade I thought the prices there were completely insane and the bubble would have to burst any minute. When the financial crisis hit I was certain that London, being a preeminent FIRE centre, would get hit pretty hard. Today? More insane than ever.

I keep thinking Vancouver and Toronto property just has to end badly. There just isn't any fear of losses out there any more.
Friend of mine dropped by this evening. He just sold his house in Calgary to a retired couple from B.C. They plan to rent it out because it's an "investment". They think Calgary housing is "cheap". I think they are completely nuts. But then what do I know...

I don't believe there's a place where there is less "any fear of losses" than the Chinese. I do know from a relative real estate broker that many Chinese speculators willing to pay the 18% tax on property purchases in Singapore.