Author Topic: Garth Turner - Real Estate in Canada  (Read 513025 times)

wisdom

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Re: Garth Turner - Real Estate in Canada
« Reply #650 on: March 08, 2016, 08:17:09 AM »
2 possible outcomes going forward:
1) inflation - Canadian debt levels are the highest on record. 100% of GDP - what would the impact be.
2) deflation - asset prices and jobs decrease.

Out of the 3 possible outcomes that I think of you lose in 2 outcomes. The only outcome where you don't lose is if status quo is maintained and people continue to pay up $1 million for houses in suburbs an hour away from downtown in the belief that foreigners will come buy their houses for a higher price.


JBTC

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Re: Garth Turner - Real Estate in Canada
« Reply #651 on: March 08, 2016, 06:22:21 PM »
What currency are they using for that study? With US dollars, the major cities of Canada are relatively cheaper.

These are just multiples to median income, so currency is not a factor.

Chicago is an interesting case. One obvious difference is that chicago population has actually shrunk over the past couple decades. The us median multiple is really helped by rust belt cities like Detroit.

http://www.demographia.com/dhi.pdf

This goes to show that income is really just one factor, and far away from being able to explain housing prices.

Much of the discussion has been focused on the demand side of the equation, especially related to immigration and population increase.

The Chicago example is interesting. While there's plenty of similarity between Toronto and Chicago in terms of climate and geography, the glaring difference is Toronto is adding people while Chicago is likely losing.

This is due to both the difference in immigration policy between the US and Canada and the difference in the relative competitive position of these two cities in each country. Toronto remains competitive in Canada, whereas Chicago faces numerous other cities that offer good job opportunities and lifestyle choices.

What has been mostly missing from this discussion so far is the supply. Is Canada building enough houses to the meet the rising demand? If not, then prices can surely rise.

This is just a question and I haven't looked up the answer. Anyone who has the answer please contribute.

Liberty

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Re: Garth Turner - Real Estate in Canada
« Reply #652 on: March 08, 2016, 06:29:00 PM »
If this was a simple shift in the supply-demand equilibrium because of growing population, wouldn't rents be up with the prices of housing? As things are, as far as I know, the ratio of owning to renting is out of whack with historical normals and with the averages in other countries.

As for supply, I've seen the statistic a few times in recent years that Toronto had more condos under constructions than all of the other cities in North-America.

http://www.cbc.ca/news/business/130-highrise-building-projects-in-toronto-lead-north-america-1.2504776

Most people I know have these beliefs about canadian RE:

1) It can't go down.

2) It'll keep rising at rates similar to the past decade.

3) FOMO, buy now or be forever priced out.

4) HELOCs are free money.
« Last Edit: March 08, 2016, 06:31:49 PM by Liberty »
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JBTC

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Re: Garth Turner - Real Estate in Canada
« Reply #653 on: March 08, 2016, 06:50:36 PM »
I guess another question is: at what prices would make you believe that a bubble has formed? Would it considered a bubble if median prices were $3 million, $5 million, $10 million or is there no limit?

Are there some similarities between what's happening in Toronto/Vancouver and Sydney/Auckland/Melbourne. (Would they be considered global cities too?) It seems like Australian prices were fuelled by a combination of foreign demand and lax lending. Thoughts?
http://www.bloomberg.com/news/articles/2016-02-22/one-sign-australia-s-housing-market-is-due-for-a-2008-moment

What about major cities like Chicago, Houston, why aren't they experiencing such elevated home prices.

Apparently, prices in Milton, Ontario(?) Increased by 42% yoy.. Is that even part of the GTA? http://www.theglobeandmail.com/report-on-business/economy/housing/the-real-estate-beat/torontos-hot-housing-market-drives-big-bidding-wars-in-suburbs/article29053048/&ved=0ahUKEwihx4K8s7HLAhWHhywKHTKZA-oQqQIIGigAMAA&usg=AFQjCNHWv6ncMw0Mqn5oVkISEeBae2NXuQ&sig2=ajPFoh6gjTEmrtEBapiJpQ

There is a huge similarity between Canada, Australia, and New Zealand. They offer the most mature and systematic schemes for foreigners to move into their country.

They are English speaking, so attract people from every country (Unlike Spain is attractive only to South Americans).

All three countries offer both good job/business opportunities and social welfare.

And luckily for the immigrants all three countries have cities that are highly livable by global standards.

On this issue the US is very different. The US mostly takes in people with family ties. So while you can pretty much fill out a few forms (after meeting certain standards) and then wait for your turn to get into Canada, you can't do that to get into the US.

Now as I said repeatedly, many demand/supply factors influence housing prices. The US is a particularly curious case. Despite having one of the highest incomes in the world, the US homes to my knowledge are probably the cheapest on an absolutely basis when adjusted for quality and certainly the cheapest relative to income globally.

There is not enough space and time to get into why that is the case. But this means if Canada is merely more expensive than the US, Canada is not expensive at all. Every country is more expensive than the US. The Yanks are quite lucky.

Uccmal

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Re: Garth Turner - Real Estate in Canada
« Reply #654 on: March 08, 2016, 07:07:56 PM »
I guess another question is: at what prices would make you believe that a bubble has formed? Would it considered a bubble if median prices were $3 million, $5 million, $10 million or is there no limit?

Are there some similarities between what's happening in Toronto/Vancouver and Sydney/Auckland/Melbourne. (Would they be considered global cities too?) It seems like Australian prices were fuelled by a combination of foreign demand and lax lending. Thoughts?
http://www.bloomberg.com/news/articles/2016-02-22/one-sign-australia-s-housing-market-is-due-for-a-2008-moment

What about major cities like Chicago, Houston, why aren't they experiencing such elevated home prices.

Apparently, prices in Milton, Ontario(?) Increased by 42% yoy.. Is that even part of the GTA? http://www.theglobeandmail.com/report-on-business/economy/housing/the-real-estate-beat/torontos-hot-housing-market-drives-big-bidding-wars-in-suburbs/article29053048/&ved=0ahUKEwihx4K8s7HLAhWHhywKHTKZA-oQqQIIGigAMAA&usg=AFQjCNHWv6ncMw0Mqn5oVkISEeBae2NXuQ&sig2=ajPFoh6gjTEmrtEBapiJpQ

There is a huge similarity between Canada, Australia, and New Zealand. They offer the most mature and systematic schemes for foreigners to move into their country.

They are English speaking, so attract people from every country (Unlike Spain is attractive only to South Americans).

All three countries offer both good job/business opportunities and social welfare.

And luckily for the immigrants all three countries have cities that are highly livable by global standards.

On this issue the US is very different. The US mostly takes in people with family ties. So while you can pretty much fill out a few forms (after meeting certain standards) and then wait for your turn to get into Canada, you can't do that to get into the US.

Now as I said repeatedly, many demand/supply factors influence housing prices. The US is a particularly curious case. Despite having one of the highest incomes in the world, the US homes to my knowledge are probably the cheapest on an absolutely basis when adjusted for quality and certainly the cheapest relative to income globally.

There is not enough space and time to get into why that is the case. But this means if Canada is merely more expensive than the US, Canada is not expensive at all. Every country is more expensive than the US. The Yanks are quite lucky.


I think concentration plays a role as well.  For higher end employment in Canada you need to be in one of the big cities... Toronto, Van. Calgary, and Montreal perhaps.  The advent of telecommuting was supposed to work opposite and allow people to work from anywhere.  In reality work has become more concentrated in the biggest cities.  New Zealand has the one city, and Australia has Sydney, Melbourne, and  perhaps Perth. The Us has dozens of big cities, which may be dispersing the population a little better. 

Or Toronto is in a horrible bubble of epic proportions. 
GARP tending toward value

JBTC

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Re: Garth Turner - Real Estate in Canada
« Reply #655 on: March 08, 2016, 07:18:27 PM »
If this was a simple shift in the supply-demand equilibrium because of growing population, wouldn't rents be up with the prices of housing? As things are, as far as I know, the ratio of owning to renting is out of whack with historical normals and with the averages in other countries.

As for supply, I've seen the statistic a few times in recent years that Toronto had more condos under constructions than all of the other cities in North-America.

http://www.cbc.ca/news/business/130-highrise-building-projects-in-toronto-lead-north-america-1.2504776

Most people I know have these beliefs about canadian RE:

1) It can't go down.

2) It'll keep rising at rates similar to the past decade.

3) FOMO, buy now or be forever priced out.

4) HELOCs are free money.

These beliefs are coincident indicators. It seems the market is strong for now.

There is probably stock broker research that analyzes the supply/demand picture. One of the key factors to future pricing in my view is if the current housing construction will continue to grow and at some point exceed demand (as the property developers too extrapolate the past trend).

A bad downturn would require a few things to take place, ideally simultaneously - weak economy and job losses, inflation failing to fall and hence limiting rate cuts, new supply coming on stream and exceeding demand, China going through a huge slowdown and wealth being destructed, Canada deciding to tighten immigration rules, banks tightening lending due to regulators' concerns, etc.

A proper bear case needs to examine all these factors and weigh the negatives and positives.

JBTC

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Re: Garth Turner - Real Estate in Canada
« Reply #656 on: March 08, 2016, 07:43:03 PM »
Oh, there is no bear case yet on the immigration front -

Canada’s Liberal Party, headed by Prime Minister Justin Trudeau, promised to create a more welcoming immigration program and to “fix the problems” created by his predecessor, Stephen Harper. Last week, they made good on that promise, introducing amendments to Canada’s Citizenship Act.

“The main point I think is that I want to do more to help international students become permanent residents because Canada needs immigrants,” Canada’s immigration minister, John McCallum, said at a news conference today. “We are an aging society. We need more immigrants for sure. I think international students are arguably the most fertile ground, the best place to find new immigrants because they know about Canada.”

http://www.barrons.com/articles/canada-fast-tracks-asian-students-for-residency-1457491661?mod=BOL_hp_highlight_5


wisdom

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Re: Garth Turner - Real Estate in Canada
« Reply #658 on: March 09, 2016, 07:19:29 AM »
http://www.theglobeandmail.com/report-on-business/top-business-stories/bc-ontario-2-frothy-housing-markets-3-stats/article29070884/

I wonder how much of it is because of speculating and builders building inventory financed by credit. Credit continues to grow faster than GDP even though private debt is now = 100% of GDP for the first time.

JBTC

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Re: Garth Turner - Real Estate in Canada
« Reply #659 on: March 09, 2016, 08:05:56 AM »
http://www.financialpost.com/m/wp/news/blog.html?b=business.financialpost.com/personal-finance/mortgages-real-estate/more-than-one-in-10-vancouver-condos-sit-empty-in-city-desperate-for-affordable-housing&pubdate=2016-03-09

Another study saying foreign ownership is not a factor

The article doesn't say that at all.

It says vacancy rates are low for detached homes, and are high for condos.

It seems the overall vacancy rates are relatively low in Canada. I recall seeing data suggesting 10% of all homes in Australia are vacant.

All else being equal, low vacancy rates indicate fewer speculative activity.