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Old Posted Apr 9, 2012, 5:05 AM
ssiguy ssiguy is offline
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Join Date: Mar 2006
Location: White Rock BC
Posts: 5,944
The issue with real estate and any impeding crash for Canada is disingenous.
Talking about a crash for Canada is like asking what the weather is going to be for Canada's too big and diverse for that kind of general question.
Real estate, like the weather, is a very local affair. Some parts of Canada have a good equalibrium, some under valued, and some over valued.
Toronto will definately have a correction of possibly 10% to 15% but ground zero will be Vancouver, Victoria, and most of BC.
The "average" price of home in Greater Vancouver {not just the city itself} is now a jaw dropping $1,150,000........a whopping 69% increase in the last 39 months. There is now not one single house for sale in the city of Vancouver for under $600k............not one.
This in a low income city and a low income province with Western Canada's highest unemployment rate. Also, unlike Toronto ands Alberta, Vancouver's population growth has plunged as it is down 50% in the last 3 years and BC now has a population growth rate slightly less than the national average. In everyone of the last 4 quarters BC has had a negative interprovincial migration figure. BC also is now getting fewer international immigrants than was the norm. This made worse by the fact that the people leaving are mostly the young and educated who know that BC and especially Vancouver is no longer a financial option for them.
Figures this year are ominous.......there are now 16,500 homes for sale in Greater Vancouver, a record high and that does not include homes in Surrey/Fraser Valley. Sales are down 30% from last year and the sales/listings inventory is it's worse in this millenium including 2008.
BC residents are awash in mortage debt as well as having the highest general personal debt levels in the country and the most expensive cost of living even when excluding real estate. BC is ther only province with a negative savings rate and has had a negative savings rate every single year this decade...........BCers are broke and getting broker.
I definately could see not a correction but a complete collapse of the market as the , mostly Chinese, investors begin to realize that the market is falling and will put their homes on the market on mass.
BC are not only the most mortgage ladden but also where more likely to take out the Zero down /40 year amortization mortgages of a few years ago. Those who have been paying for the last 5 or even 10 years have little equity and when house prices fall dramatically they will find themselves in a massive negative equity situation.
If the average Montreal house of $270,000 drops in value by 20% then thats about $55k. A loss no one likes but most would stay and live with it. In Vancouver however, if the average house drops by 20% that's a loss of $ one will tolerate that especially because far more Vancouverites took out the longest possible mortgage and used the banksters 5% cash back......they have no equity in their home yet will owe $230k more on their home than it's worth. People will begin to simply walk away and houses will flood the market.
Many markets are based on need, demand, income, and population growth but none of those things have any significance in Vancouver. Vancouver's housing market is based on pure speculation and no longer has any correlation with the local economy or demographics.
When a housing market is based on speculation like the stock market and not sound fundamentals then it can boom but can bust even faster.
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