Author Topic: Garth Turner - Real Estate in Canada  (Read 507056 times)

Liberty

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Re: Garth Turner - Real Estate in Canada
« Reply #270 on: February 05, 2015, 09:10:18 AM »
http://m.theglobeandmail.com/report-on-business/economy/new-alarm-bells-ringing-over-household-debt/article22797037/?service=mobile

Quote
“Canada had the second-biggest jump in household debt-to-income ratios of any country other than Greece between 2007 and the second quarter of 2014 […] Canada and Australia along with a number of countries in northern Europe “now have larger household debt burdens than existed in the U.S. or the U.K. at the peak of the credit bubble””
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LongHaul

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Re: Garth Turner - Real Estate in Canada
« Reply #271 on: February 11, 2015, 01:32:01 PM »
Anyone know why Canada's home price bubble did not bust when the US went into the Great Recession? 
Seems like Canadian home prices dipped a little then came roaring back.

augustabound

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Re: Garth Turner - Real Estate in Canada
« Reply #272 on: February 11, 2015, 02:17:00 PM »
Anyone know why Canada's home price bubble did not bust when the US went into the Great Recession? 
Seems like Canadian home prices dipped a little then came roaring back.

Wasn't the U.S.'s main problem sub-prime lending? We didn't have that here, or at least to the extreme as the U.S.
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A_Hamilton

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Re: Garth Turner - Real Estate in Canada
« Reply #273 on: February 11, 2015, 03:11:47 PM »
Anyone know why Canada's home price bubble did not bust when the US went into the Great Recession? 
Seems like Canadian home prices dipped a little then came roaring back.

Wasn't the U.S.'s main problem sub-prime lending? We didn't have that here, or at least to the extreme as the U.S.

The only major  economies on the globe that didn't collapse in 2008 were commodity driven (Canada and Australia) riding the China/ high oil price bubble or had a command economy (China). Canada was starting to collapse and then oil prices reversed course in a hurry.

I'm not sure there is much Canada can do to avoid it from a policy perspective (in the near term, over 20 years maybe continued diversification away from commodities and banking), but I think if commodity weakness really takes hold the country is going to have a very nasty recession. 



 

wisdom

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Re: Garth Turner - Real Estate in Canada
« Reply #274 on: February 11, 2015, 03:24:47 PM »
I concur with A_ Hamilton.

The stimulus in China saved the day for Australia, Brazil and Canada. As China moves away from investment led growth it will be tough for these countries because all of them have real estate bubbles backed by higher personal debt levels than the US or UK back in 2007. The oil rigs had jobs that paid $120,000 to $300,000 for high school graduates. It is tough to earn those incomes in other industries and support the debt/lifestyle individuals may have taken on.

For perspective - China was buying 50% of global production of several commodities at it's peak. It's tough for any other country to replace that kind of demand.
« Last Edit: February 11, 2015, 03:47:51 PM by wisdom »

Liberty

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Re: Garth Turner - Real Estate in Canada
« Reply #275 on: February 11, 2015, 03:27:54 PM »
I think that's likely correct. Canada benefited from the commodities boom while pretending that what made it get through the crisis was actually prudent citizens and institutions. It's quite clear that debt levels higher than the U.S. at its peak and houses that cost almost 2x what they cost in the US aren't exactly a prudent state to be in...
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wisdom

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Re: Garth Turner - Real Estate in Canada
« Reply #276 on: February 11, 2015, 04:03:33 PM »
It will get nasty if this impacts the housing industry in Canada (which I expect it to).

Housing and related industries are around 25% of GDP and investment in housing is over 7%. The commodity crash may lead to people losing houses when their debt levels are at their highest levels in history. At 70% home ownership it could get interesting as future demand is going to be limited when an average house costs 5.5 times the median household income. In some cities, it is at 10x.

Canada does not need sub-prime lending - there are enough investors who have pooled funds and lend money privately at 12-14% on 2nd/3rd mortgages. These funds are usually borrowed at 3.35% from FI's using individuals equity in their own residence. The boom has gone on for so long a lot of home owners have made this is a source of income for themselves. Most of these guys have no past experince of downturns and have no idea what they are getting into. On $500,000 HELOC at 10% spread they could be earning $50,000, and, as far as they understand with no risk.
« Last Edit: February 11, 2015, 04:05:15 PM by wisdom »

augustabound

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Re: Garth Turner - Real Estate in Canada
« Reply #277 on: February 11, 2015, 04:05:06 PM »
Canada benefited from the commodities boom while pretending that what made it get through the crisis was actually prudent citizens and institutions.

Don't forget our Conservative government. They've been given credit also, worthy or not.
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wisdom

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Re: Garth Turner - Real Estate in Canada
« Reply #278 on: February 11, 2015, 04:07:26 PM »
I am sure the increase in amortization to 40 years with 0% down helped along with other steps taken to help Canadians buy houses. That was the governments contribution.

Liberty

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Re: Garth Turner - Real Estate in Canada
« Reply #279 on: February 11, 2015, 04:14:54 PM »
The chest-puffing and self-back-patting by Canada about all this reminds me of Europe right after the subprime crisis started in the US. I remember reading Economist articles quoting European politicians gloating and saying that American capitalism was dead, the European model had triumphed, and Americans should come over to Europe to see how it's done, etc.

How did that turn out?
"Most haystacks don't even have a needle." |  I'm on Twitter  | This podcast episode is a must-listen