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  #7741  
Old Posted Dec 7, 2017, 11:27 PM
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Originally Posted by TorontoDrew View Post
Still waiting for this 6 and a half year old bubble (age of thread) to burst so I can buy some cheap properties. Must be some sort if record for a bubble.
Not really. US/Irish/Japanese housing bubbles all lasted a decade or so.
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  #7742  
Old Posted Dec 8, 2017, 12:08 AM
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Part of what's happening is that the credit is coming from multiple sources, so the leverage may be higher than it seems. They talk about Kenny Gu for example who was borrowing money from his friends to take out mortgages (and this counted as his businesses for the purposes of qualifying as an investor-class immigrant to Canada).
Kenny Gu was also an isolated incident (unless there were other cases of this I missed?), which incidentally was more involved with tax evasion and gaming CRA (flipping 3 residences as primary residence for tax free gains) than it was with mortgage fraud and capital. "Friends and family" handshake loans are always adding to a baseline of credit in the market. It isn't a new development.

In any case, in this case we are talking about 3 houses.

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Originally Posted by someone123 View Post
These disparate policies and behaviours affect the housing market by adding more money to the system and further increasing prices. As a corollary to this we might also expect prices to be more volatile in the long run.
But again, you are talking about a fraction of a percentage in the case of Laurentian Bank, and with Kenny Gu you are literally talking about 3 houses.

You might as well add lottery winners, drug dealers, and newly minted Spotify millionaires as contributors to the run up on prices as well. A bunch of tiny effects that have always existed in the background, including in 1971 when Vancouver was smaller than Ottawa.

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I don't know why a > 35% drop in prices in Vancouver is seen as beyond the pale when all that amounts to is rolling prices back by a year or two. After the foreign buyer tax came in there was something like a 20% drop in sales prices of detached homes.
Average prices dropped, but what does it mean when median prices never dropped and kept increasing? It means the top end of the market stopped selling but it doesn't necessarily imply any house actually lost any value - which is what banks would care about.

Individuals in 5 million dollar mansions in West Van felt the brunt of the immediate aftermath, which actually simply meant their house took longer to sell (in this case, 6 months versus 48 hours).

Mortgages over 2 million also face much stricter requirements, as your "foreign buyer income exempt" article also detailed.
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  #7743  
Old Posted Dec 8, 2017, 12:11 AM
geotag277 geotag277 is offline
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Originally Posted by csbvan View Post
Not really. US/Irish/Japanese housing bubbles all lasted a decade or so.
Did USA prices reverse 10 years? Maybe in some markets (certainly Detroit along some time frame) but several areas have since totally recovered, including arguably Vancouver's most similar analogue - San Francisco.

Considering San Fran - in the period between 2008-2018, the 2008-2010 period looks most like an anomaly where houses temporarily went on sale. That doesn't seem like a bubble as much as a "reverse bubble" - investors irrationally panicking presenting shrewd investors with a buying opportunity for undervalued assets (houses).

Always a bit dangerous to paint a country as large as Canada and the United States with a broad brush.
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  #7744  
Old Posted Dec 8, 2017, 12:36 AM
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Originally Posted by geotag277 View Post
Kenny Gu was also an isolated incident (unless there were other cases of this I missed?), which incidentally was more involved with tax evasion and gaming CRA (flipping 3 residences as primary residence for tax free gains) than it was with mortgage fraud and capital. "Friends and family" handshake loans are always adding to a baseline of credit in the market. It isn't a new development.

In any case, in this case we are talking about 3 houses.
Given that the CRA set up a unit specifically to investigate this type of fraud, you can bet they know this is not just an "isolated incident".


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Originally Posted by geotag277 View Post
But again, you are talking about a fraction of a percentage in the case of Laurentian Bank, and with Kenny Gu you are literally talking about 3 houses.

You might as well add lottery winners, drug dealers, and newly minted Spotify millionaires as contributors to the run up on prices as well. A bunch of tiny effects that have always existed in the background, including in 1971 when Vancouver was smaller than Ottawa.

Average prices dropped, but what does it mean when median prices never dropped and kept increasing? It means the top end of the market stopped selling but it doesn't necessarily imply any house actually lost any value - which is what banks would care about.

Individuals in 5 million dollar mansions in West Van felt the brunt of the immediate aftermath, which actually simply meant their house took longer to sell (in this case, 6 months versus 48 hours).

Mortgages over 2 million also face much stricter requirements, as your "foreign buyer income exempt" article also detailed.
Isolated incidents my Aunt Fanny:

...Jin allegedly helped ultra-wealthy Mainland China “whale” gamblers, recruited in Macau, to gamble in B.C., the investigation documents allege.

The Macau whales were able to gamble with suspected drug cash supplied by Jin’s network, especially at River Rock Casino, the investigation documents allege. With those funds borrowed from Jin and “private lenders,” they were not only able to gamble, but to develop real estate in B.C....

http://vancouversun.com/news/nationa...s-in-drug-cash

..Stronger anti-money laundering rules could be particularly useful in a place like Greater Vancouver, where governments can’t identify the owners of almost half of the region’s 100 most valuable homes, according to a previous TI report.

The city has also been the focus of efforts by the Chinese government to recover the proceeds of corruption, a report by the Financial Action Task Force (FATF) said last year...

https://globalnews.ca/news/3350193/c...estate-report/

..Richmond real estate lawyer Hong Guo says Chinese police have charged two of her former employees in connection to the disappearance of about $7.5 million that Guo alleges was stolen from her firm’s trust account, laundered through B.C. Lottery Corp. casino accounts, and transferred to China in the form of casino chips...
http://vancouversun.com/news/local-n...ugh-b-c-casino

...A review of B.C. regulatory filings points to a growing number of mortgage fraud cases involving fake incomes, phoney offshore collateral, and false tax information in schemes allegedly connected to real estate professionals operating in B.C.’s growing shadow banking sector.

Postmedia reported Saturday that shadow lenders — non-banks that are not federally regulated — have rapidly increased their share of Canada’s mortgage market in recent years, as Ottawa has tightened lending standards for Canadian banks. Many of the big loans issued in Vancouver prior to 2017 won’t be insured again, a Bank of Canada risk report says. As a result, according to a number of experts, an increasing number of borrowers are turning to shadow banks for loans in Vancouver’s hot market, and the private lenders in this growing sector are more prone to fraud and careless lending.

Chris Carter, B.C. registrar of mortgage brokers at B.C.’s Financial Institutions Commission, or Ficom, said the agency is experiencing an increase in mortgage fraud complaints, and “recently recruited dedicated staff to implement a more ambitious program of risk-based examinations.”

Ficom’s stats show complaints roughly doubled from 109 in 2013 to about 200 in 2016, and about a third of complaints allege loan application fraud....

http://www.theprovince.com/news/loca...427/story.html

It is clear the rot in Canada's largest housing markets is deep and pervasive. Anyone who thinks Home Capital, Laurentian etc are just aberrations rather than the tip of an iceberg is deluding themselves.
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  #7745  
Old Posted Dec 8, 2017, 1:49 AM
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We are in for a soft landing in my opinion. Prices have already cooled 10-15% across the Greater Toronto Area from the record frenzy this spring. With the two interest rate hikes and now the stress test rules coming in January I think we will see prices continue to soften through 2018. As for how much that's anyones guess. Canada wide is probably in for a slight relaxation of under 5% but in the GTA where prices are still fairly pricey it wouldnt surprise me to see another 10% drop by the end of 2018. By then prices will be down well over 20% from the peak. This "bubble" is slowly deflating before our very eyes, its just not the big show some of you were hoping for.
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  #7746  
Old Posted Dec 8, 2017, 2:06 AM
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Originally Posted by mistercorporate View Post
lol, if that doesn't scream bubble I don't know what does.
Victoria has been consistently in the top 3 most expensive cities in Canada for decades, so I’d say it’s more of a long term problem with no easy solution in sight.
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  #7747  
Old Posted Dec 8, 2017, 8:25 PM
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  #7748  
Old Posted Dec 8, 2017, 10:35 PM
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I must be the real estate whisperer, all indications are we're in for a massive contraction by the end of next summer. I predicted it on these forums a couple years ago and it seems like it will come to fruition. Sadly, we may get a recession at the same time, I really hope that doesn't happen and we pull an Australia (20+ years without recession).
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  #7749  
Old Posted Dec 14, 2017, 4:48 PM
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I've always said 2020 will spook Chinese investors.
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  #7750  
Old Posted Dec 14, 2017, 6:33 PM
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I've always said 2020 will spook Chinese investors.
Why?

Meanwhile more signs of Canada's scary bubble built on massive debt:

...The central bank is particularly concerned about Canadians using home equity lines of credit (HELOCS) to dangerously stretch their borrowing. Mr. Poloz pointed out that 40 per cent of all housing-backed loans are now blended home equity lines of credit, on which borrowers can choose to pay only interest and no principle.

And he pointed out that 40 per cent of HELOC borrowers are not regularly paying down their principal, delaying debt repayment.

"Furthermore, some may be using their HELOC to speculate – for example, to fund a down payment on a second house with the intention of flipping it," he said...(bold mine)


https://www.theglobeandmail.com/repo...ticle37325511/
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  #7751  
Old Posted Dec 15, 2017, 4:05 PM
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The Fed gonna raise the interest rates 3 times in 2018, 1.2 total, 2 times in 2019 and 2 times in 2020. the CAD might be in trouble
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Last edited by GreaterMontréal; Dec 15, 2017 at 4:28 PM.
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  #7752  
Old Posted Dec 16, 2017, 7:29 AM
geotag277 geotag277 is offline
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Originally Posted by GreaterMontréal View Post
The Fed gonna raise the interest rates 3 times in 2018, 1.2 total, 2 times in 2019 and 2 times in 2020. the CAD might be in trouble
Canada is also losing a bit of the tax advantage, with the US cutting their corporate rate from 35% to 21%, still higher but not nearly as much.
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  #7753  
Old Posted Dec 16, 2017, 4:39 PM
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I wonder if a lot of speculative money has left/will leave housing to go to Bitcoin? If so, a bitcoin crash could be great for knocking out speculative money by giving them a severe haircut!
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  #7754  
Old Posted Dec 16, 2017, 6:54 PM
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That's very possible. Canada is particularly open to questionable money, which is why the market is more out of whack in the Canadian city on the side of China than in comparable cities in other countries, but the bitcoin actually checks the important boxes even better for someone who's first and foremost looking to take their money out of China.

Maybe bitcoin (and other such cryptocurrencies) is the next Vancouver real estate.
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  #7755  
Old Posted Dec 17, 2017, 7:59 PM
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And Interesting interview with Seth Daniels of JKD Capital, plus one scary graph:

...J: So I’m assuming that you’ve seen the other two bubble conditions in the Canadian housing market. Are there any other reasons why you’ve chosen the Canadian housing market in particular?

S: Those are the two primary reasons. The other factor in Canada is the inflow of foreign money that is itself driven by gigantic debt bubbles abroad. So for example, China I think is the biggest debt bubble that the world has ever seen, and that has added fuel to the fire of the Canadian bubble. The US bubble in the early 2000’s wasn’t as driven by the Chinese debt bubble back then as Canada is today. Canada today in some ways is probably more similar to the US housing bubble that was driven by hot Japanese money flows in the 1980s...

...J: Right. So you’re looking at the size of the amount of debt that has gone into buying and building houses…

S: Yeah, the details are complicated…. but for me, at the core, the main thing that credit bubbles share is the amount of debt that’s being taken on and how quickly it is growing. If you look at housing and financial insurance, real estate, construction, consumer spending, as a percentage of the economy, it’s bigger in Canada than it was in the US. Basically any metric that you look at, it’s a bigger bubble in Canada than it was in the US, at least the ones I used to analyze the US bubble at the time.

J: That’s scary. I mean it’s one thing to have 1 or 2 charts showing that the bubble’s big, but it’s another story altogether if multiple charts are showing the same thing.

S: I have a table - I haven’t updated it in a while - but it’s basically all the things I looked at in the States, so I’m not cherry picking to make Canada look bad, it’s what I actually looked at in the States and I’m comparing Canada to that and, Canada is worse on every metric....


[IMG]canada-vs-us-housing JKD Capital by whatnextyvr, on Flickr[/IMG]
Source: Seth Daniels via moneygeek.ca

https://www.moneygeek.ca/weblog/2017...s-jkd-capital/
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  #7756  
Old Posted Dec 18, 2017, 1:31 AM
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While the stats are grim for Canada, there really are only 2 markets in Canada...........BC and everywhere else.

Most cities in Canada are only slightly overvalued and many are still undervalued. Even the GTA has seen prices slump recently because it's housing sector is still effected by economics and Canadian government policy. Vancouver's is very much set by Chinese government policy namely the limits they put on taking money out of the country and how well they enforce them.

People often talk about high priced markets of Toronto & Vancouver together but in reality they are world's apart. An average SFH in Vancouver is 80% more expensive than the average SFH in Toronto.............they are not even in the same league. Even little Victoria is more expensive than Toronto. The ONLY reason why the feds are starting to reign in the CMHC and get back into the public housing arena is that it was becoming a Toronto issue.

If you want to get a picture of how different the market is and what real people are up against then here is an example: The city of Toronto with 2.9 million is roughly equivalent to {inner Metro} Van/Burn/N&W Van/Richmond of 1.4 million in how & when they were urbanised where the bulk of land was already built up by about 1980. In Toronto there are currently about 1,000 SFH for sale under $1 million while in the same area of inner Vancouver Metro has a grand total of just 3 individual homes under $1 million..............................enough said.
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  #7757  
Old Posted Dec 19, 2017, 2:39 PM
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All this panic for not even 5% of the local housing market?!

So looks like foreign buyers aren’t the big problem in Canada's housing market

Quote:
OTTAWA — Foreign ownership of housing in Canada’s two largest markets, Toronto and Vancouver, is below 5 per cent, Statistics Canada said on Tuesday in a report that suggests foreign investors are not the biggest factor driving up home prices in Canada.

The new data, promised for months, showed non-residents owned 3.4 per cent of all residential properties in Toronto, while the value of the properties was 3.0 per cent of housing stock. In Vancouver, non-residents owned 4.8 per cent of residential properties, accounting for 5.1 per cent of total housing value, Statscan said.
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  #7758  
Old Posted Dec 19, 2017, 2:49 PM
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Originally Posted by esquire View Post
All this panic for not even 5% of the local housing market?!

So looks like foreign buyers aren’t the big problem in Canada's housing market
On University Avenue in Downtown Toronto, where condos often go for $1 million+, the average declared income is less than $30,000, significantly less than other parts of the city. This would qualify many there for welfare. Statscan is looking superficially at declared data (probably some moron in Ottawa, far away from the action who doesn't know where to look for the real skeletons). So much for that deep-dive. These starving Chinese students and Dubai welfare moms in million dollar properties need to get locked up, instant real estate correction, no need to waste money on public housing.

We're a colony, Canadians are too weak and stupid to be free.
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Last edited by mistercorporate; Dec 19, 2017 at 2:59 PM.
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  #7759  
Old Posted Dec 19, 2017, 5:17 PM
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Originally Posted by mistercorporate View Post
On University Avenue in Downtown Toronto, where condos often go for $1 million+, the average declared income is less than $30,000, significantly less than other parts of the city. This would qualify many there for welfare. Statscan is looking superficially at declared data (probably some moron in Ottawa, far away from the action who doesn't know where to look for the real skeletons). So much for that deep-dive. These starving Chinese students and Dubai welfare moms in million dollar properties need to get locked up, instant real estate correction, no need to waste money on public housing.
Nothing to see here folks! One of the "poverty capitals" of BC, afflicted by unusually low incomes (but blessed by low taxes), is a part of Richmond where homes are up in the $2M+ range.

I wonder how they resolved the issue of proxy buyers and holding companies? I would guess that a domestic company with real estate holdings and foreign buyers counts as domestic.

In the Vancouver case the number amounted to around 6-7% of the value of properties in the city, which is significant. But this does not include people with permanent residency like the tens of thousands of investor-class immigrants who were able to buy passports over the past few years (and pay, on average, lower effective tax rates than refugees).

It was a similar story with universities in the Lower Mainland. UBC for years talked about how there was only a small percentage of foreign students who pay higher tuition and subsidize everybody else. But in the 2011 survey, 49% of domestic students indicated that they were ESL. This has some implications for post-secondary accessibility for native-born British Columbians, who are almost never ESL.
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  #7760  
Old Posted Dec 19, 2017, 5:20 PM
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Nothing to see here folks!

I wonder how they resolved the issue of proxy buyers and holding companies? I would guess that a domestic company with real estate holdings and foreign buyers counts as domestic.

In the Vancouver case the number amounted to around 6-7% of the value of properties in the city. But this does not include people with permanent residency like the tens of thousands of investor-class immigrants who were able to buy passports over the past few years (and pay, on average, lower effective tax rates than refugees).

It was a similar story with universities in the Lower Mainland. UBC for years talked about how there was only a small percentage of foreign students who pay higher tuition and subsidize everybody else. But in the 2011 survey, 49% of domestic students indicated that they were ESL. This has some implications for post-secondary accessibility for native-born British Columbians, who are almost never ESL.
The ESL thing is different though. There are many people who have immigrated here and aren't rich but are ESL. Maybe not 49%, but it wouldn't surprise me if a large chunk of domestic students were ESL, like if you come to Canada when you're 5 or 10 or whatever.
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