Author Topic: Garth Turner - Real Estate in Canada  (Read 495150 times)

Viking

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Re: Garth Turner - Real Estate in Canada
« Reply #1820 on: December 19, 2018, 09:31:08 AM »
Yes, thanks for posting. In terms of what is a Canadian to do i liked his idea of holding US$ as this has been my hedge should we get a housing correction or bust.

Bottom line is i expect the US economy to perform better than the Canadian economy moving forward. If housing in Canada gets ugly i expect this outperformance to widen.


Viking

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Re: Garth Turner - Real Estate in Canada
« Reply #1821 on: February 07, 2019, 10:52:02 AM »
Real estate stats for Greater Vancouver for January are out and they are ugly. If supply continues to build in the coming months and pricing continues to soften we could be seeing the end of the great housing bubble in Canada (Vancouver anyways). Year over year, inventory up 56% and prices (for detached houses) down 9%. The threat of missing out (as prices go continually higher) may be shifting to fear of trying to catch a falling knife (as prices go lower) which may slow sales even more.

Real Estate Board of GV: https://www.rebgv.org/market-watch/monthly-market-report/january-2019.html

And we have a Federal election this fall. What is a politician to do? Loosten mortgage rules (allow 30 year amortizations for first time buyers so young people can ‘afford’ that + $1 million home by taking on an obsene amount of debt).

https://www.theglobeandmail.com/politics/article-morneau-taking-close-look-at-return-to-30-year-insured-mortgages/

Some highlights:
Supply is continuing to build - The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 10,808, a 55.6 per cent increase compared to January 2018 (6,947)

Prices are starting to fall - Sales of detached homes in January 2019 reached 339, a 30.4 per cent decrease from the 487 detached sales recorded in January 2018. The benchmark price for detached homes is $1,453,400. This represents a 9.1 per cent decrease from January 2018, and an 8.3 per cent decrease over the past six months.

Australia also seems to be having its own housing correction...
« Last Edit: February 07, 2019, 10:58:40 AM by Viking »

Rod

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Re: Garth Turner - Real Estate in Canada
« Reply #1822 on: February 07, 2019, 11:50:38 AM »
Real estate stats for Greater Vancouver for January are out and they are ugly. If supply continues to build in the coming months and pricing continues to soften we could be seeing the end of the great housing bubble in Canada (Vancouver anyways). Year over year, inventory up 56% and prices (for detached houses) down 9%. The threat of missing out (as prices go continually higher) may be shifting to fear of trying to catch a falling knife (as prices go lower) which may slow sales even more.

Real Estate Board of GV: https://www.rebgv.org/market-watch/monthly-market-report/january-2019.html

And we have a Federal election this fall. What is a politician to do? Loosten mortgage rules (allow 30 year amortizations for first time buyers so young people can ‘afford’ that + $1 million home by taking on an obsene amount of debt).

https://www.theglobeandmail.com/politics/article-morneau-taking-close-look-at-return-to-30-year-insured-mortgages/

Some highlights:
Supply is continuing to build - The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 10,808, a 55.6 per cent increase compared to January 2018 (6,947)

Prices are starting to fall - Sales of detached homes in January 2019 reached 339, a 30.4 per cent decrease from the 487 detached sales recorded in January 2018. The benchmark price for detached homes is $1,453,400. This represents a 9.1 per cent decrease from January 2018, and an 8.3 per cent decrease over the past six months.

Australia also seems to be having its own housing correction...

It seems the BC and Federal gov'ts have done what needs to be done to end this bubble. I hope they have the guts to let it die. I expect the boomers will be agitating soon...

Viking

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Re: Garth Turner - Real Estate in Canada
« Reply #1823 on: February 07, 2019, 12:29:54 PM »
Real estate stats for Greater Vancouver for January are out and they are ugly. If supply continues to build in the coming months and pricing continues to soften we could be seeing the end of the great housing bubble in Canada (Vancouver anyways). Year over year, inventory up 56% and prices (for detached houses) down 9%. The threat of missing out (as prices go continually higher) may be shifting to fear of trying to catch a falling knife (as prices go lower) which may slow sales even more.

Real Estate Board of GV: https://www.rebgv.org/market-watch/monthly-market-report/january-2019.html

And we have a Federal election this fall. What is a politician to do? Loosten mortgage rules (allow 30 year amortizations for first time buyers so young people can ‘afford’ that + $1 million home by taking on an obsene amount of debt).

https://www.theglobeandmail.com/politics/article-morneau-taking-close-look-at-return-to-30-year-insured-mortgages/

Some highlights:
Supply is continuing to build - The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 10,808, a 55.6 per cent increase compared to January 2018 (6,947)

Prices are starting to fall - Sales of detached homes in January 2019 reached 339, a 30.4 per cent decrease from the 487 detached sales recorded in January 2018. The benchmark price for detached homes is $1,453,400. This represents a 9.1 per cent decrease from January 2018, and an 8.3 per cent decrease over the past six months.

Australia also seems to be having its own housing correction...

It seems the BC and Federal gov'ts have done what needs to be done to end this bubble. I hope they have the guts to let it die. I expect the boomers will be agitating soon...

Right now all the policy dicussion is around how to make housing more affordable. The flip side of this is people who currently own homes do not want to see them go down in value (boomers) as they likely see their home equity as their retirement nest egg. Vancouver real estate is in a wickedly difficult situation and it is going to be very interesting to see how it plays out in 2019.

Interest rates look headed lower; my read is global deflationary forces are starting to overwhelm the strength of the US economy. Lower interest rates and a resumption of QE will likely allow governments to kick the can down the road a little longer. I am wondering if all the talk about much higher US rates last year (Gundlach and others) was just not a head fake and we have seen the peak in interest rates for this cycle. Not good if true.

Cigarbutt

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Re: Garth Turner - Real Estate in Canada
« Reply #1824 on: February 07, 2019, 05:02:16 PM »
Interesting developments in Australia. It seems like the authorities want to look under the hood of financial institutions and monetary authorities are espousing an easing mood.

Cyclical, secular or else?
All real estate cycles have their own stories and are not always globally correlated. Who knows what will happen but a common theme has been that busts tend to be correlated to booms (in intensity and duration).
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12162132

What may be a fascinating aspect is the Sweden curve that seems to be unremarkable and whose section in the 1990-period does not stand out, although the house price to disposable income did increase by about 30% then with some uncomfortable consequences.
http://archive.riksbank.se/Documents/Avdelningar/AFS/2015/Session%201%20-%20Englund.pdf

Conclusion: History does not repeat itself and nobody knows the future but crises don’t arise out of thin air.

cwericb

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Re: Garth Turner - Real Estate in Canada
« Reply #1825 on: February 08, 2019, 05:14:38 AM »
I recently posted this in another thread but since it directly relates to this thread I will put my two cents in here.

This thread started with Garth Turner’s statement ...  “The big real estate bubble about to burst in Canada”. Many board members agreed and believed the collapse was imminent.

However, that statement and this thread originated in February of 2012 - SEVEN years ago.

Certainly nothing has collapsed since then. At this point, even if it does collapse, will property prices drop to pre-2012 levels? I am glad I haven’t been sitting waiting for the collapse to purchase a new home.

Why hasn’t the Canadian market collapsed?

This might have something to do with it:

10 Most Liveable Cities in 2018
1. Vienna, Austria
2. Melbourne, Australia
3. Osaka, Japan
4. Calgary, Canada   (average home price $431,000 CAD - $328,000 U$)
5. Sydney, Australia
6. Vancouver, Canada   (average home price $1,092,000 - $832,000 U$)
7. Tokyo, Japan
8.  Toronto, Canada   (average home price $766,000 - $584,000 U$)
9. Copenhagen, Denmark
10. Adelaide, Australia

The first U.S. city on the list is Honolulu. But you won’t find it until  you get to number 26 with an average home price of $800,000 U$. And in Hawaii you don’t have the expense of building for well below zero temperatures, nor do you have to battle winter conditions during construction. In other words - it ain't cheap to build in Canada.

As Canada is relatively welcoming to immigration, the laws of supply and demand kick in. Remember housing prices are only expensive in relation to one’s personal wealth. What may be expensive to me may well be cheap to an immigrant with a few hundred million in their back pocket.

I am involved in the construction industry and most people have no idea of the extent of the wealth some of these people immigrating into our country have. Most of the people I encounter are looking for real estate as a relatively safe haven for their money.

Had a older lady newly arrived from Iran come in recently doing some home renos. She asked if I knew of anyone who might have an apartment for sale.
“Are you thinking of selling your house and looking for an apartment?”, I asked.
“No, no I want to buy building.”
“Well, I know of an 18 unit starting shortly.”
“That’s exactly what I want. I want to buy a few of those.”
But that pales in comparison to some of the Asian money we see. And we are a relatively small place.

It also seems that many investors from outside Canada don’t understand that, unlike the US a decade ago, a lot of our mortgages are in effect government guaranteed through CMHC, others require a substantial down payment and in general our mortgages are not non-recourse loans. You can’t throw your keys on the banker’s desk and just walk away. So a correction in housing prices certainly would effect the economy, but not likely to the extent we saw in the U.S. meltdown of a decade ago.

While our economy certainly has its problems, this is still not a bad place to live - and you don’t have to look far to make a comparison.

We also have an upcoming election that may show an improved change in direction should a new government realize that there is more to Canada than the two central provinces.

Could housing prices collapse. Certainly anything can happen. But I would think twice about putting off buying a house for that reason because the bottom line is that unlike your stock portfolio, you can live in your house.

Just my humble opinion.
Politicians and diapers must be changed often, and for the same reason. - Mark Twain

clutch

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Re: Garth Turner - Real Estate in Canada
« Reply #1826 on: February 08, 2019, 05:53:16 AM »
Very well put cwerib,

I live in Toronto and can share some perspective as well. I'm in the boomimg tech industry here and there are many of my friends and colleagues who have high paying jobs and are waiting to enter the housing market. So in case there is a small "collapse" I am pretty sure there will be a strong support to hold the market. Remember these people are currently paying somewhat outrageous rent prices in Toronto (there are currently bidding wars in the rental market!!) and the price wouldnt have to drop that significantly to justify buying instead of renting.

Also, the stats like household income to housing price can be misleading. It is a definite sign of unaffordability but not as much a sign of bubble. Most of the expensive houses in Toronto are owned by retired (or close) boomers or immigrants -- with the former group having bought their houses 20-30 years ago. Although their house prices increased significantly compared to their income, it's really not like they have stretched their budget to buy and live in their current houses. They would not be in any trouble in the collapse scenario.

Of course, the debt to income rario is worrisome. I do think there are also a lot of middle class people who have stretched their budget to own a home and people who are levering up to buy more and more real estate. Those two people will get hurt. But for the former group, if they are forced to sell, im sure there will be a strong support -- from many affluent professionals who are waiting to enter the market -- considering the properties that will be sold are in the low-mid ends.

(The scenario im describing may be only specific to Toronto)
« Last Edit: February 08, 2019, 05:56:16 AM by clutch »

cwericb

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Re: Garth Turner - Real Estate in Canada
« Reply #1827 on: February 08, 2019, 06:18:49 AM »
Factor this in:

World population 1960:            3 billion
World population 2018:       7.7 billion

Canada population 1960:    18 million
Canada population 2018:     37 million

People have to live somewhere.
Politicians and diapers must be changed often, and for the same reason. - Mark Twain

Viking

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Re: Garth Turner - Real Estate in Canada
« Reply #1828 on: February 08, 2019, 08:35:46 AM »
Factor this in:

World population 1960:            3 billion
World population 2018:       7.7 billion

Canada population 1960:    18 million
Canada population 2018:     37 million

People have to live somewhere.

I am pretty sure that Canada’s population grow rate has actually been slowing every decade since confederation in 1867.

We have had a housing boom since 2000. Something has happened in the past +18 years to drive this. Has population growth spiked? No. What then?
1.) mortgage rates: went as high as 20% in the early 80’s and have fallen steadily to about 2.5% today. Inflation is running about 2%. When you have free money it normally results in asset bubbles (financial assets and housing).
2.) China factor: wealthy Chinese looking to get part of their net worth out of China (Huawei COO owns a house in Vancouver); given current chill in relations with China and Canada this may slow for a while.

Bottom line, housing is not affordable for average family in Vancouver or Toronto. And, yes, there is a chance that this is the new normal (permanently higher pricing). Time will tell.

lessthaniv

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Re: Garth Turner - Real Estate in Canada
« Reply #1829 on: February 08, 2019, 09:08:26 AM »
I recently posted this in another thread but since it directly relates to this thread I will put my two cents in here.

This thread started with Garth Turner’s statement ...  “The big real estate bubble about to burst in Canada”. Many board members agreed and believed the collapse was imminent.

However, that statement and this thread originated in February of 2012 - SEVEN years ago.

Certainly nothing has collapsed since then. At this point, even if it does collapse, will property prices drop to pre-2012 levels? I am glad I haven’t been sitting waiting for the collapse to purchase a new home.

Why hasn’t the Canadian market collapsed?

This might have something to do with it:

10 Most Liveable Cities in 2018
1. Vienna, Austria
2. Melbourne, Australia
3. Osaka, Japan
4. Calgary, Canada   (average home price $431,000 CAD - $328,000 U$)
5. Sydney, Australia
6. Vancouver, Canada   (average home price $1,092,000 - $832,000 U$)
7. Tokyo, Japan
8.  Toronto, Canada   (average home price $766,000 - $584,000 U$)
9. Copenhagen, Denmark
10. Adelaide, Australia

The first U.S. city on the list is Honolulu. But you won’t find it until  you get to number 26 with an average home price of $800,000 U$. And in Hawaii you don’t have the expense of building for well below zero temperatures, nor do you have to battle winter conditions during construction. In other words - it ain't cheap to build in Canada.

As Canada is relatively welcoming to immigration, the laws of supply and demand kick in. Remember housing prices are only expensive in relation to one’s personal wealth. What may be expensive to me may well be cheap to an immigrant with a few hundred million in their back pocket.

I am involved in the construction industry and most people have no idea of the extent of the wealth some of these people immigrating into our country have. Most of the people I encounter are looking for real estate as a relatively safe haven for their money.

Had a older lady newly arrived from Iran come in recently doing some home renos. She asked if I knew of anyone who might have an apartment for sale.
“Are you thinking of selling your house and looking for an apartment?”, I asked.
“No, no I want to buy building.”
“Well, I know of an 18 unit starting shortly.”
“That’s exactly what I want. I want to buy a few of those.”
But that pales in comparison to some of the Asian money we see. And we are a relatively small place.

It also seems that many investors from outside Canada don’t understand that, unlike the US a decade ago, a lot of our mortgages are in effect government guaranteed through CMHC, others require a substantial down payment and in general our mortgages are not non-recourse loans. You can’t throw your keys on the banker’s desk and just walk away. So a correction in housing prices certainly would effect the economy, but not likely to the extent we saw in the U.S. meltdown of a decade ago.

While our economy certainly has its problems, this is still not a bad place to live - and you don’t have to look far to make a comparison.

We also have an upcoming election that may show an improved change in direction should a new government realize that there is more to Canada than the two central provinces.

Could housing prices collapse. Certainly anything can happen. But I would think twice about putting off buying a house for that reason because the bottom line is that unlike your stock portfolio, you can live in your house.

Just my humble opinion.

The geographic footprint of the lower mainland in BC features an ocean to the West, a border to the South, and mountains in the North and East which all limit expansion. New construction features high rises these days in an effort to house more people on the same amount of land. It’s land values therefore that have become valuable.

And while there is lots of talk in the press about the new speculation tax there is less discussion on things like Strata legislation changes. Changes in strata legislation now means winding up a condo building no longer requires a 100 per cent vote from owners and the City of Vancouver has seen a flurry redevelopment applications.

High demand for the land and relatively fixed supply.
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