Canada's 'housing bubble' deemed close to bursting

[Architype]

Originally Posted by hipster duck

It's definitely true that the ability to make the move from a condo to a home gets tougher and tougher every year.

However, there is a bit of a paradox at work because, as we increase the supply of multifamily condos as infill, we necessarily have to shrink the supply of single family homes within the same central area. ...

The cost of any upgrading, even from a one to two bedroom, etc. suffers the same increases to a lesser degree.

However, regarding your paradox, the loss of a few SFH is replaced by perhaps ten times, or more, the number of condo units, so the effect is mitigated.

[whatnext]

If you're one of the thousands who don't visit the Toronto forum you might have missed this. Come to think of it, I don't think it was mentioned in that incredibly vibrant fora

Like so many other Toronto neighbourhoods, the Junction Triangle is growing and changing – which, while exciting, makes it prone to some growing pains.

Castlepoint Numa just announced the cancellation of its Museum Flats condo development at 158 Sterling Road, part of the much-hyped "Lower JCT" project.

Local design lovers are disappointed that the sweet-looking building, designed by architectsAlliance, won't come to fruition. Early buyers, on the other hand, are livid after sinking so much money – and time – into the project pre-construction...
http://www.blogto.com/city/2017/11/m...elled-toronto/

It certainly seems like the same case as Vancouver's Langara West, where the developer is suspected of cancelling in order to flip or build later for more money. Totally a sign of a condo bubble.

[lio45]

I always keep an eye on what comes up for sale around here and while I find this a bit overpriced, it's very cheap by Vancouver standards so not out of reach of a significant number of Canadians willing to take on a 7-figure mortgage. Houses that old don't come up for sale that often and I'd love to justify owning one someday. (If I had a Vancouver bungalow, I'd trade for it.) Built under King Louis XIV; the supply of those is limited (on this side of the pond).

http://www.epeladeau.com/fr/nouveaut..._ch_royal.html

[whatnext]

Money Magazine's take on the least affordable city in North America: Vancouver.

...The International Housing Affordability Survey, a new study conducted by real estate website Point2Homes, says that Vancouver is the least affordable housing market among the 50 most populous cities in North America. According to the study, the median home sale price in the Canadian city exceeds $1.1 million, while the median family income is just under $64,000, creating an unbalanced financial situation for many residents.

While San Francisco and Manhattan’s real estate prices top Vancouver’s — with a median selling price of $1,275,000 and $1,207,500 respectively — people who live there also tend to make more money. Manhattan’s median family income is $77,559, and residents of San Francisco on average earn the most in the U.S. with a median income of just over $94,000...

...A key reason for Vancouver’s disparity is thought to be foreign investors, who have fueled the city’s house prices, according to a New York Times article cited by the study....

http://time.com/money/5017121/least-.../?iid=sr-link1

[lio45]

CBC analysis fresh from this morning that doesn't tell us much we don't already know:

http://www.cbc.ca/news/business/real...uses-1.4400092

[geotag277]

I'm starting to feel these real estate articles are being churned out by artificial intelligence bots. They all seem to be a subtle rearranging of words over and over and over and over again. Future of news?

[osmo]

Originally Posted by whatnext

If you're one of the thousands who don't visit the Toronto forum you might have missed this. Come to think of it, I don't think it was mentioned in that incredibly vibrant fora

Like so many other Toronto neighbourhoods, the Junction Triangle is growing and changing – which, while exciting, makes it prone to some growing pains.

Castlepoint Numa just announced the cancellation of its Museum Flats condo development at 158 Sterling Road, part of the much-hyped "Lower JCT" project.

Local design lovers are disappointed that the sweet-looking building, designed by architectsAlliance, won't come to fruition. Early buyers, on the other hand, are livid after sinking so much money – and time – into the project pre-construction...
http://www.blogto.com/city/2017/11/m...elled-toronto/

It certainly seems like the same case as Vancouver's Langara West, where the developer is suspected of cancelling in order to flip or build later for more money. Totally a sign of a condo bubble.

People are saying this was intentional to try and rebound and get better returns with higher prices.

I am not sure as Castlepoint looks to have bitten off more than it can chew rolling the dice on these Sterling lands and the Film Studio lands. Both of the mentioned sites where employment lands and they had to sit like ducks for years with trying to convert them. I also wonder if L Tower ever made them take a hit on their chin. I always heard a story that the crane bungle was held up for a long time as the Condo Corp was making the Developer pay for its removal.

[whatnext]

CMHC is going to be looking in to shadow lenders. This could be huge as its becoming clear many people have turned to non-traditional lending as CMHC then OFSI have tightened their rules:

Canada’s housing agency is seeking more data on home loans from shadow lenders, amid concern rising levels of debt aren’t being adequately tracked and may increase the risk of financial instability.

Canada Mortgage & Housing Corp. will seek data from participants in the securitization program on their uninsured conventional mortgage lending, said Evan Siddall, chief executive officer at the Ottawa-based agency. CMHC needs to “know what risk we are exposed to,” so will use the reported information to decide if changes are needed to their rules, he said....
http://business.financialpost.com/re...ured-mortgages

[Pinion]

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[lio45]

Originally Posted by Pinion

My realtor sent me this chart. All I can do is laugh

"Laugh all the way to the bank", as they say

[Pinion]

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[whatnext]

From today's Globe & Mail:

Can the government save the middle-class wannabe homeowner in Toronto and Vancouver?

With a new federal housing strategy coming imminently, let's catch up on what the recent ups and downs in Canada's most expensive real estate markets mean for affordability.

Remember the Paul Simon song Slip Slidin' Away? That's your life if you're not a high earner and trying to afford a home. Toronto and Vancouver are markedly less affordable than they were two years ago, and Victoria and Hamilton are similar. Elsewhere, the news is quite a bit better.

Using an old-fashioned affordability measure that says a home should cost no more than three times your household gross income, housing markets in St. John's, Halifax, Saint John, N.B., Quebec City, Ottawa, Winnipeg, Regina, Saskatoon and Edmonton look manageable. Calgary's only a little on the expensive side, as is Montreal...

https://www.theglobeandmail.com/glob...ticle37037091/

We still don't seem to be getting a concerted Federal effort to look into how and why Vancouver and the GTA prices are so out of whack with local incomes. We've had action on mortgage stress testing but that really just takes local buyers out and does nothing about foreign purchases.

[someone123]

Here's a YouTube video about the changing mortgage rules in 2018 that captures in a nutshell how a lot of people seem to think about the housing market:

• Video Link

Summary:
- You will need to qualify for a mortgage 2% higher than the rate you actually get (so there's a lower risk you'll have a hard time paying if and when rates go up again).
- You can "afford" a $700,000 mortgage this year if you make $100,000 a year and can put 20% down. "Affording" $X is synonymous with somebody being willing to give you $X in credit.
- You will be able to "afford" $150,000 less next year! Look at that house shrinking! Buy now!

But is it really a good idea to borrow $550,000 on $100,000 of income? And what's going to happen to the price of that home you were going to buy for $700,000? Most other people will have to qualify for the stress test too and so fewer people will qualify for $700,000 mortgages.

[someone123]

Originally Posted by whatnext

We still don't seem to be getting a concerted Federal effort to look into how and why Vancouver and the GTA prices are so out of whack with local incomes. We've had action on mortgage stress testing but that really just takes local buyers out and does nothing about foreign purchases.

It's interesting because on the one hand there's a somewhat inelastic supply of detached housing in Toronto and Vancouver, so it makes sense that they should go up over time. But maybe if you take speculation out of the picture this means $800,000 houses instead of $1.8M houses. When bubbles are possible and there has been massive appreciation it's hard to know what the floor is. Somewhere north of housing prices in other less land-constrained cities I guess, but that's a tiny fraction of current prices in Vancouver. Unless something horrible happens I don't think we will ever see bargains in Point Grey but I am skeptical that $900,000 3 bedroom bungalows in Port Coquitlam can go nowhere but up.

The condo situation is even less stable because if development rules change the price of condos could converge toward their construction cost, which is only a couple hundred thousand per unit. And theoretically the construction cost should fall over time as construction technology improves. Maybe we will have the equivalent of $50 per square foot condos in 2050. That outcome would be great for residents but would make condos a really crappy long-term investment. A lot of people own investment condos and they only make sense when their market value goes up quickly. This is far from guaranteed since condos generally become less desirable as they age.

[travis3000]

Originally Posted by someone123

Here's a YouTube video about the changing mortgage rules in 2018 that captures in a nutshell how a lot of people seem to think about the housing market:

• Video Link

Summary:
- You will need to qualify for a mortgage 2% higher than the rate you actually get (so there's a lower risk you'll have a hard time paying if and when rates go up again).
- You can "afford" a $700,000 mortgage this year if you make $100,000 a year and can put 20% down. "Affording" $X is synonymous with somebody being willing to give you $X in credit.
- You will be able to "afford" $150,000 less next year! Look at that house shrinking! Buy now!

But is it really a good idea to borrow $550,000 on $100,000 of income? And what's going to happen to the price of that home you were going to buy for $700,000? Most other people will have to qualify for the stress test too and so fewer people will qualify for $700,000 mortgages.

Exactly, which is why prices will fall next year across Canada that's my prediction. Expect another 5-10% decline especially in the $500k-1m price range.

[240glt]

Originally Posted by Pinion

My realtor sent me this chart. All I can do is laugh

A good friend of mine who manages an office building for CF in Vancouver bought her little bungalow just up from the seabus back in 2001 for something like $250k. At the time it seemed like a steep price. I can only imagine what it's worth now

[ssiguy]

That little 3 bedroom bungalow in PoCo can continue to go up because the Chinese buyer will purchase and quickly pull it down. This is the norm in Vancouver not the exception.

There is lots of blame to go around for Vancouver's housing but most of it can still be laid at the feet of our local politicians. If Greater Vancouver had simply stated years ago that no home can be destroyed unless it was replaced by a higher density development {duplex, townhomes, condos} then it wouldn't have commodified the city. Now the house itself means little.

Vancouver is also quite different from Toronto in the how Vancouver's housing supply is warped. Recently SFH sales declined in Toronto and the result was a major hit to prices. In Vancouver however we have seen a major decline in SFH homes but prices continue to rise. Over the last 25 years there has been so much money laundering and housing speculation that you have far fewer sellers than houses...........people own many houses and due to being bought with dirty cash simply takes them off the market so the supply & demand economics are warped. Last year there were 5 homes for sale in NW all right beside each other, all listed at the same time, all small post-war, and all listed for the same price of $1.2 million. In other words 5 houses one buyer and they, miraculously, all came off the market at the same time meaning they were bought enmass to a developer or simply all taken off the market at once by the individual owner.

[Pinion]

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[dreambrother808]

New study from Sydney, Australia challenging the supply myth:

Claims that simply increasing the number of homes in Sydney will fix the housing affordability crisis have been challenged by new modelling that shows boosting supply alone is unlikely to deliver affordable housing.

Analysis by Australian National University academics Ben Phillips and Cukkoo Joseph has identified a long-term oversupply of housing in many inner Sydney suburbs. Despite the surplus, property prices have surged in that region over the past five years.

The findings cast doubt on assertions made by many political leaders, including Premier Gladys Berejiklian, that adding new housing supply is the best way to improve affordability.

http://www.smh.com.au/business/the-e...19-gzobxa.html

Due to vested financial interests, there will continue to be a lot of intentional clouding of these underlying issues, akin to the oil industry and climate change, or the NRA and gun control. The BC economy is held hostage to the real estate industry at the expense of middle and lower class citizens. Supply will not fix this problem, especially when it often comes at the expense of affordable rentals.

[csbvan]

Canadians are the most indebted in the world, OECD says as it warns on rising debt risk

http://business.financialpost.com/pe...sing-debt-risk

We do all know how this ends right? It won't be pretty.