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Granted, one cost of owning is simply being tied down to one location which has an impact on job and career opportunities and/or simple mental well being. Anyway, the Canadian real estate market is interesting because it is such an obvious bubble. I mean there is obvious the issue of China, not only of potential property investors but also the fact that the Chinese economy keeps demand (and thus speculation on) raw materials. If the banking system and local government debt blows up in the PRC, it is going to effect Hong Kong and it will probably effect Canada and especially Vancouver/BC. In addition, if the commodities market also collapses at the same time, it will be even more serious. In addition, there is the danger this will cause a slowdown in the US, sapping Canada of more potential exports and Europe, especially if it pushes another sovereign debt crisis (which honestly didn't really go away). It seems like quite a tightrope walking act, especially since unemployment is rising and things really haven't even kicked off yet. Ardennes fucked around with this message at 18:11 on Jan 10, 2014 |
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Jan 10, 2014 17:31
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What is the exposure of the Canadian government at this point to a housing crisis?
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Jan 17, 2014 21:18
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ocrumsprug posted:There are deflationary issues that stemmed from the 90's affecting it, but it is probably not the big point. It won't provide in the immediate manner it will take though, long-term Canada will recover but it is going to take a while. I am kind of surprised there isn't the broader dimension to be discussed, how does Canada recover from the crisis or will the crisis actually make things even worse. Let's say for the sake of enlargement, that a crisis happens...not only will there be foreclosures but the Canadian government is most likely going to take a big hit on insurance. In the case of that, I could easily see Cameron relying on austerity which will hit consumer demand even further. In addition, Canada is reliant on resource exports, and could very well see a double crunch of domestic demand being hit by a collapse of its housing market and foreign demand decreases from the possible 2014 emerging market crisis.
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Feb 2, 2014 06:42
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Helsing posted:Its Harper, not Cameron, and unlike the real David Cameron our Stephen Harper has been more than willing to use economic stimulus when things go south. However you're completely correct that our economy is entirely reliant on a mixture of debt financed consumer spending that is being powered by the housing bubble and China's insatiable hunger for our raw resources. If we have a housing crash (or even a "soft landing") and a slowdown in China happening simultaneously things will get very nasty for us. Yes sorry that was a mistake, but I am not sure Harper is going to be willing to institute the type of fiscal stimulus needed in such an event even if he is a bit softer historically on the austerity line. The issue is whether he as a fundamentally center-right politician be willing to put needed stimulus in the economy when the Canadian government may be hit by a wave of claims? Would a liberal or NDP government? coalition be willing to? Canada controls its currency and its debt levels are relatively stable, but looking at the amount of household debt Canada has and the possibility of being hit by a loss of exports there is the very real possibility of deflation. Even if you are talking about only 11% of exports that is still considerable especially if US demand remains tepid and Canada products may face reduced demand beyond US/China. Ardennes fucked around with this message at 08:13 on Feb 2, 2014 |
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Feb 2, 2014 08:05
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Helsing posted:Make no mistake, there's nothing centre right about Harper. He used to be in charge of the National Citizens Coalition, which is basically the Canadian equivalent of the Heritage Foundation. He's a hardcore right winger who just happens to understand that his long term plans for transforming the Canadian federal government require a lot of gradualism and tactical finesse. He is right-wing for Canada, but if anything the world has moved with his views. The question is if he (Harper) is going to be willing to make any real impact in stimulus, or would trade any stimulus for "targeted cuts." He wants to stay in power, but looking at every other country in the world which has face similar, especially with the right-wing in power, they all have eventually succumbed to austerity and "labor reforms." In addition, real question of how much of a hit he will accept to the Canadian dollar which already is dropping along with the emerging markets. Obviously one plan is just to go back to the 1990s and use a weak Canadian dollar to attract American importing. However, there is the obvious issues of lower global and American demand. There is ultimately a narrow channel of possibilities since all three parties are more or less openly neo-liberal at this point including the NDP and will likely follow a fairly safe road versus the Washington consensus, looking at the EU including France and the rest of the developed world, it isn't looking too bright. Ardennes fucked around with this message at 09:10 on Feb 2, 2014 |
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Feb 2, 2014 09:03
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Real estate does have some value as an investment, but it is very circumstantial. Ultimately, even cheap condos in Vancouver might appreciate on their own, but it would likely have been very modest over a long period of time. One issue is that in general the middle class in many developed and even developing countries are looking for a place to put their wealth (such as it is). Equities were once a more common place to put then 2008 happened, and bonds can be tricky and lower yield than many can accept. Then you have the gold and other commodity speculation which is also risky. You can carry cash but risk losing from monetary and price inflation, so the middle class gets diverted into real estate which as has shown been very risky on its own.
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Feb 2, 2014 23:59
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etalian posted:The whole get a investment mindset is amusing since for areas like Vancouver you are buying a property near the top of the bubble. Just to be clear I am not defending the bubble (or any bubble really), and people investing in Vancouver real estate are just making a clear bad bet. I wouldn't want to seem cruel and use the term "sucker" but you know what I mean. There is a calculus to real estate especially if you are in an area where housing prices and rent aren't that far apart. People have made money off of their houses over time, and it wasn't imaginary but that is in a more normal market, for example I don't think buying a house in Portland is that bad of an investment. That said, different countries and different circumstances. However, I think the larger point holds true that many middle class people are looking for a place to put money and it is becoming more difficult. (In addition, real estate traditionally is actually more safe than equities but it obviously comes at a price.)
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Feb 3, 2014 00:10
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Helsing posted:Canada has been getting pretty substantial austerity and some mild labour reforms for the last several years. Like I said, the question of whether the government would respond to a housing crash with stimulus spending or further austerity will heavily depend on the timing. It wouldn't really even need to do that, the type of household debt Canada (and potentially governmental debt) is facing and overall global circumstances could put under a considerable amount of pressure on the country even if there is technically stimulus. It is ultimately difficult to predict, but I think you need to be more open to the idea that the Canadian political system may not be able to readily address the situation Canada is in and that its response may be more in align with the rest of the developed world than you hope. Canada overall wasn't hit as hard as many other countries during the 08 crisis, the coming crisis if anything is going to be a real test of the Canadian political system. I remain pessimistic. As an outsider, I have seen Canada follow much of the same footsteps as the rest of the developed world before they fell into deeper crisis.
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Feb 3, 2014 01:28
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Helsing posted:Oh yeah we definitely aren't ready and our system certainly isn't equipped to deal with the fallout, I hope I'm not coming off as suggesting otherwise. I'm just saying that the response of the government is going to hinge quite a bit on electoral calculations (and therefore on the timing of the crash and the particular balance of forces in Ottawa when it happens). Even assuming we get some kind of stimulus its inconceivable that it will be large enough to actually replace the demand generating by the housing bubble, and even with that source of demand we already have an unemployment rate of 7.2%. In that sense I agree, stimulus is more likely before the election than after it. For the sake of argument, lets say it happens this year and Harper provides mild stimulus in order to keep Canada from free fall, but loses the election anyway. Would a liberal/ndp coalition government be at risk of being long on rhetoric and short on actual change? I could see them keeping Harper's stimulus but I think the case scenario is fairly limited intervention beyond monetary stimulus. Canada would be caught in likely a prolonged malaise, that may be worse than the 2008 recession was for the US. As you said, the US was actually unexpectedly aggressive at least in 2009/2010 so Harper would have to at least meet that with possibility more considerable headwinds.
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Feb 3, 2014 02:48
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Well the argument traditionally is that what you would spent on a rented home could be turned into equity. It doesn't make sense in the context of Canada at this point, but in other markets in other countries it still may. That said, taxes/maintenance/insurance/interest all cut into that bottom line. In the case of Vancouver the costs are now so ridiculous, there isn't any real way it could be done and you would be underwater even if prices slowly rose under inflation. Ardennes fucked around with this message at 07:00 on Feb 3, 2014 |
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Feb 3, 2014 06:58
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etalian posted:Even from a math perspective for a mortgage you aren't building equity for the first few years since it's mainly interest to the bank. The assumption is that it would be long hold, and start paying down the principal, also the down payment itself is an investment in the equity. Basically you would stay in one place and pay down the mortgage as the property slowly accrued value. Yeah, there are the agent fees too. It isn't impossible to make money out of your house, just very difficult outside of a bubble environment. However, there is another twist, you have to be confident you are going to stay in an area a while since selling a home can be quite risky in of itself and it isn't guaranteed there won't be a downturn. Anyway, most retirement planners will say you should only have a portion of your assets in real estate, usually just your primary resistance and the rest should be in a mix of equities and bonds.
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Feb 3, 2014 07:36
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Baronjutter posted:Like every extended family member or friend of the family that finds out we're "still" renting acts like someone died. They try to carefully ask if something happened to our finances, if someone lost a job or something. "Oh I thought you guys were saving up by living in the basement, your parents said you had about 60 grand saved up... what happened?" and we tell them yes, we still have that savings, but right now renting comes out ahead and the market is so unstable anyways we don't want to buy. Well look at this way, there might be some deals in the future but yeah thats basically what bubbles do. In their mind, it is going only up, so you missed the boat and all that cash thats going to rain down. Yeah, it is pretty sad if your own family/friends would try to knowingly engineer some schadenfreude your way.
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Feb 3, 2014 20:40
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Baronjutter posted:Vancouver, it's not a bubble, it's the weather! If the weather was so important, you probably would look for property outside of Canada rather than buy Vancouver real estate at ultra-inflated prices.
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Feb 3, 2014 22:53
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Cultural Imperial posted:lol wtf So how many billions in insurance money is the CMHC on the hook for?
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Feb 4, 2014 04:09
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etalian posted:Vancouver, the Cayman Islands for rich Chinese nationals? It seems like it, BC is just a provincial sized money laundering scheme.
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Feb 9, 2014 01:40
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