Canada Housing/Debt: Trust me, I'm a landlord.

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namaste friends: Sep 18, 2004; by Smythe

Update for 2015-2022:

Housing is really expensive in Canada. How expensive?

From the Atlantic via the Economist

The housing market in Canada isn't monolithic and currently some markets are seeing declines. Here's a chart showing changes in the Teranet HPI:

In particular, Vancouver's market is on the cusp of something:

Larger here.

Yes, Vancouver's house prices are declining almost as fast as Miami's back in 2007.

So what do the experts say?

quote:

"It's a mild market correction," said Central 1 Credit Union economist Helmut Pastrick.

http://www.mapleridgenews.com/news/185715211.html

BMO Chief Economist Sherry Cooper

quote:

"In our view, the national housing market is more like a balloon than a bubble," the bank said. "While bubbles always burst, a balloon often deflates slowly in the absence of a pin."

http://www.cbc.ca/news/business/story/2012/01/30/bmo-housing-real-estate.html

Benjamin Tal, CIBC

quote:

�The Canada of today is very different than a pre-recession U.S., namely as far as borrower profiles are concerned . . . Therefore, when it comes to jitters regarding a U.S.-type meltdown here at home, the only thing we have to fear is fear itself.�

http://business.time.com/2012/11/30/oh-no-canada-as-household-debt-skyrockets-will-canadians-face-a-2007-style-crisis/

Brad J. Lamb has a nice handy infographic telling us all that facts don't matter:
http://new.bradjlamb.ca/2013/01/23/the-myth-of-the-toronto-condo-bubble/

BONUS: Vancouver real estate astro turfing.
http://vreaa.wordpress.com/2013/02/13/ctv-tv-news-featured-condo-buyer-actually-a-marketer-of-very-same-condos/

So what does a million bucks get you in Vancouver?

Crack Shack or Mansion: http://www.crackshackormansion.com/

Twitter feeds:
Ben Rabidoux - Probably the best source of Canadian RE information. - Bear
https://twitter.com/BenRabidoux

YVR Housing Analyst - Anonymous dude who analyzes RE with a strong emphasis on math. - Bear
https://twitter.com/YVRHousing

Garry Marr - National Post finance writer. - Bearish
https://twitter.com/DustyWallet

Tara Perkins - Globe and Mail RE writer. I like her a lot as she attempts to provide an unbiased point of view. - Appears Bullish but I think she's just trying to be unbiased.
https://twitter.com/taraperkins

Nicholas D. Chan - MAC real estate agent. This guy is an idiot but I love following his Instagram/Twitter to reinforce my own bias that Vancouverites are loving dumb as poo poo. - Bull
https://twitter.com/nicholasdchan

Bing Thom Architects - Great analysis and figures on housing policy and zoning. - Bearish
https://twitter.com/BTArchitects

TorontoBubble - I just started following this guy. - Bear
https://twitter.com/TorontoBubble

Blogs to follow:

Vancouver Price Drop - This guy has a realtor's license and scrapes MLS data to provide historical data on sales. Typically posts top 10 drops in different regions in Vancouver.
http://vancouverpricedrop.wordpress.com/

Vancouver Condo Info - Probably the most active Vancouver centric blog on RE. This blog is a shitshow and is what happens when baby boomers post like FYAD.
http://vancouvercondo.info/

Whispers from the edge of the Rainforest - This guy 'broke' the story on the MAC agents posing as hot asian money on the CBC. Beware, he's a bitcoin idiot and gold bug.
http://whispersfromtheedgeoftherainforest.blogspot.ca/

Great post from Etalian.

etalian posted:

Due to easy credit and unaffordable housing cost Canadians exceeded the worst of the US bubble in terms of debt loading

Also by multiple metrics such as price to income ratio and also simple media value the real estate market has multiple bubble characteristics:

etalian posted:

On a side note this is a pretty good book on macro bubble behavior by Robert Shiller:
http://www.amazon.com/Irrational-Exuberance-Robert-J-Shiller/dp/0767923634

He also considers housing to be a dubious investment:

quote:

Trish Regan: "Then why buy a home? People trap their savings in a home. They're running an opportunity cost of not having that money liquid to earn a better return in the market. Why do it?"

Robert Shiller: "Absolutely! Housing traditionally is not viewed as a great investment. It takes maintenance, it depreciates, it goes out of style. All of those are problems. And there's technical progress in housing. So, new ones are better...

"So, why was it considered an investment? That was a fad. That was an idea that took hold in the early 2000's. And I don't expect it to come back. Not with the same force. So people might just decide, "Yeah, I'll diversify my portfolio. I'll live in a rental." That is a very sensible thing for many people to do.

"If you think investing in housing is such a great idea, why not invest in cars? Buy a car, mothball it, and sell it in 20 years. Obviously not a good idea because people won't want our cars. It's the same with our houses. So, they're not really an investment vehicle."

Kalenn Istarion sums up how mortgages are securitized in Canada.

Kalenn Istarion posted:

I feel like we rotate around to the same discussion every week or so.

A) Canadian banks are required to apply prudent lending standards to originated mortgages or risk having their insurance cut off. Repeated excess insured losses risk having insurance cut off entirely. This is a big deal, because it is significantly more difficult, if not impossible, to securitize mortgages that aren't insured.
B) tax payers are currently net positive 26bn in value from CMHC (which is being prettied up for a sale by the way); for us to be 'on he hook' would require significant insurance losses, the likelihood of which is relatively low. CMHC also does it's own review of credit quality based on a proprietary system. See my post here for more:
http://forums.somethingawful.com/showthread.php?threadid=3533827&perpage=40&pagenumber=3#post430206168
C) banks have lots of exposure to uninsured mortgages, but part of why they can continue lending is because they securitize them and sell then to investors, including pension funds, insurance companies and the like who are looking for certain yield structures. While securitized mortgages are off the books, the bank may retain marginal exposure to them depending on the structure of the security

Somebody fucked around with this message at 04:38 on Oct 3, 2022

# ¿ Feb 14, 2013 16:43

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# ¿ Apr 28, 2024 07:47

namaste friends: Sep 18, 2004; by Smythe

I spend a lot of time reading the following blogs:
Vancouver-centric, lots of graphs and numbers: http://housing-analysis.blogspot.ca/
Vancouver-centric, all anecdotal, lots of schadenfreude: http://vreaa.wordpress.com/
Great analysis: http://theeconomicanalyst.com/

# ¿ Feb 14, 2013 16:46

namaste friends: Sep 18, 2004; by Smythe

jet sanchEz posted:

The banks don't want people to panic like they did in 2008 in the U.S. so, yeah, that is all that any of them will ever say, that this is a correction. I don't think it will be as bad as it was in the US but it is definitely going to be bad. Toronto's condo market will probably be a little worse than bad but that is because of speculators doing what they do best, speculating.

Did you hear that we're talking ourselves into a housing crisis?

loving globe and mail

quote:

Little was heard of housing bubbles in Canada up to about a year ago. Now, predictions of crashes are on the front cover of Maclean�s and other publications. One might wonder if we are talking ourselves into a housing miasma, even though the fundamentals don�t point to one.

Yeah, fundamentals like decade high inventories and decade low sales figures, nominal housing cost increases that outstrip inflation by a couple standard deviations. Who needs facts?

# ¿ Feb 14, 2013 17:05

namaste friends: Sep 18, 2004; by Smythe

SpaceMost posted:

I'd love to move to Fredericton. Got lots of extended family there.
Too bad there are no jobs.

There aren't any jobs in Vancouver either.

I know 4 lawyers or so making over 200k/year. Everyone else, not so much. Amongst my friends I would guess that the median household income is about 80k/year.

Anecdotally, what's the worst income to house price ratio you guys have heard of for anyone buying a real estate?

# ¿ Feb 14, 2013 19:35

namaste friends: Sep 18, 2004; by Smythe

Baronjutter posted:

There's no jobs but all your friends are rich and employed???
Or like no jobs for regular folk?

The majority of my friends are what I'd describe as underemployed. The 'household' income I'm talking about generally accounts for two income earners.

# ¿ Feb 14, 2013 19:43

namaste friends: Sep 18, 2004; by Smythe

Oh dear. This MAC marketing astroturf is blowing up. http://www.theprovince.com/business/Vancouver+real+estate+firm+admits+faking+investor+news/7965588/story.html

# ¿ Feb 14, 2013 21:44

namaste friends: Sep 18, 2004; by Smythe

Baronjutter posted:

Man if a household making 80k a year is underemployment I want to be that underemployed. Lucky if my household breaks 60k a year with both of us working full time. I guess we're insane to think of buying here?

I don't think buying on a 60k household income is insane. How much of a mortgage were you considering?

What's really worrying is that the globe and mail is trying to redefine affordability as the amount of debt service rather than the total purchase value of a property.

http://www.theglobeandmail.com/glob...?service=mobile

This is reprehensibly stupid advice from an economist.

quote:

RBC�s measures at the national, provincial, and city levels show the proportion of median household income required for mortgage payments, property taxes and utilities on various types of houses at going market prices. By including mortgage rates (and other costs), they offer �a much more realistic measure of the ability of households to afford housing than the crude price-to-income ratio �.,� says Wikipedia.

# ¿ Feb 14, 2013 23:12

namaste friends: Sep 18, 2004; by Smythe

Baronjutter posted:

Our credit union told us we could go as high as 300k, on paper, but told us 200-250 is way more reasonable. Which isn't too bad because there's a lot of semi-decent condo's in that range. I work in architecture/construction related stuff and my wife does insurance, specially a lot of condo insurance, so we're both pretty aware of what to look for and avoid when buying. Plus we know a few great extremely critical inspectors. Not house inspectors, actual condo-specialized inspectors that know more about commercial level construction like concrete and parkade issues a basic house inspector might not specialize in.

It's still a VERY scary thing to even think about. And we know even in the worst crash we'll never be able to afford a house unless one of us wins the lottery or there's some capitalist-smashing revolution.

There's been chatter on the vancouver re blogosphere that credit unions have been soliciting zero down mortgages, contrary to OSFI changes. Apparently this is permitted because credit unions don't have to follow these rules like traditional banks.

When I bought my first house in 2003, I was making 60k/year and I had a 240k mortgage. I was finding it very difficult to save money, after paying for incidentals like insurance and upkeep. I sold my house in 2005 because I didn't think it was worth having skin in the Vancouver re game because it made absolutely no sense. The lesson I learned was that extraneous housing related costs can eat away at your income and the next time I decided to buy a home, I would be sure to perform a much more comprehensive personal financial analysis.

From what I understand, the Victoria market is in full retreat so just sit tight for a couple more years.

# ¿ Feb 14, 2013 23:37

namaste friends: Sep 18, 2004; by Smythe

ocrumsprug posted:

Hard to say what it will do for rents. Vancouver was already jammed packed full of amateur landlords that don't have the first clue regarding the Residential Tenancy Act. In the short term I expect that the delusion of 1.2 million dollar ~~crackshacks~~houses will translate into unreasonable expectations for rent. However, since rents are 100% tied to actual income they will remain stable.

Unless of course the wheels come of the economy when it unravels.

the wheels are totally going to come off

An ex-coworker of my wife who was 45 years old and making ~45K at the time, bought a 650K house on a 40 year amortization. Hopefully she outlives the mortgage.

ok, rough back of the napkin calculation; ~500 for each 100k borrowed, 25 year amortization, 5% interest payments. That means she would have had a monthly payment of $3250. Of course, she probably got a sweet deal and is paying $2600 or so on a 40 year amortization 3% interest mortgage? At 45k/year, that's more than 50% of her monthly take home income. How the gently caress do you live on that?

# ¿ Feb 15, 2013 15:42

namaste friends: Sep 18, 2004; by Smythe

Whoa I can't believe the Sun wrote this.

http://www.vancouversun.com/business/What+type+home+afford/7969716/story.html

quote:

Headlines regularly tell people that Vancouver is among the least-affordable cities in the world. But often they don't tell the full story - that while the city of Vancouver is a pricey place to be a homeowner, the suburbs still have home prices that are affordable to most families.

Today, The Vancouver Sun introduces the UDI/FortisBC Housing Affordability Index, a new way to look at housing prices that provides a clearer picture of affordability across Metro Vancouver.

The index was developed by a partnership of The Sun, the Urban Development Institute and Urban Analytics Inc. over the past three months.

Anne McMullin, president and CEO of the Urban Development Institute, said she thinks it may dispel some of the "myths and hysteria" about housing.

"It gives us a different read and drills down a bit more to have a better understanding of what affordability is really like in the region," said McMullin. "There's no doubt that there are issues of affordability in certain areas. But I think, as a region, the numbers aren't bad."

The UDI/FortisBC Housing Affordability Index will be reported by The Vancouver Sun every quarter.

"This is the first one. It will be interesting to see how it goes every quarter and to compare on an annual basis," said McMullin, whose non-profit institute represents B.C. residential, commercial, industrial and institutional developers.

The UDI/FortisBC Housing Affordability Index breaks Metro Vancouver into three areas: the city of Vancouver, Inner Metro (West Vancouver, North Vancouver, Burnaby, New Westminster, Richmond, South Delta, Coquitlam, Port Moody, Port Coquitlam) and Outer Metro (Surrey, Langley, North Delta, White Rock, Pitt Meadows and Maple Ridge).

Urban Analytics calculated their numbers using average prices for new homes and median prices for resale homes.

"I often think when we talk about affordability, we say Vancouver meaning the whole region. But there are differences within the region. We tend to lump it all into one," McMullin said.

"This takes out the really high-end, which is really just a small number of people on the west side of Vancouver or on the West Vancouver waterfront, and looks more at the median prices rather than averaging the high, high prices with the relatively low prices.

"This study, unlike others, brings in not just income and house prices, but also factors in interest rates and amortization and looks at how that affects affordability," McMullin said. "I think this gives a more accurate gauge of affordability in the region."

The index shows that the majority of households in outer Metro can afford the payments on all types of homes, both new and resale. It found that as many as 82.9 per cent of households in outer Metro could make the payments on a re-sale wood-frame condo, while 80.4 per cent could afford a re-sale concrete condo.

For inner Metro, the index found that while 64.5 per cent of working households can afford a re-sale wood-frame condo, just 51.7 per cent of working households can afford a new concrete condo.

For single-family homes in inner Metro, less than 40.9 per cent of households could afford to make the mortgage payments. In Vancouver proper, housing is affordable for a far smaller percentage of the population. The UDI/FortisBC Housing Affordability Index shows that fewer than 32 per cent of households can afford payments on a single-family home, a new or resale townhouse or a new concrete condominium.

The numbers are a bit more encouraging for other types of housing: 34.7 per cent of households earn the $66,017 required to make the payments on a new wood-frame condominium, 35.4 per cent of households make the $65,129 needed for a resale concrete condo, and 49 per cent make the $48,455 required for a $356,000 resale wood-frame condo.

The index defines "affordable" as the percentage of households living in a region who would qualify for the mortgage required to own the property. Typically, a bank wants to see no more than 32 per cent of income going to housing before it provides a person with a mortgage.

Certified financial planner Michael Thorne said the 32 per cent debt-service ratio is a good guideline.

"In most circumstances, about 30 per cent is what I recommend a family target to spend on housing," Thorne said. "When you start getting up to 40 or 50 per cent of your income, that's when there are problems."

Adrian Mastracci, portfolio manager at KCM Wealth Management, said 32 per cent is a reasonable amount for a family to spend on housing, but that it would be tough to do that in Vancouver, with its lofty prices.

Mastracci said most people have to start with a small condo and whittle down their mortgage to build up equity. "Plow any extra money you have against your mortgage and really go to town," Mastracci suggested. "That is a risk-free investment you can make."

The UDI/FortisBC Housing Affordability Index treats first-time buyers differently, as most have less money for a down payment and thus need an insured mortgage.

For such buyers, the index assumed a 10-per-cent down payment (the lowest allowed to get an insured mortgage) and a 25-year mortgage amortization (the maximum allowed for an insured mortgage).

Using those assumptions, the index shows that 63.3 per cent of working households in outer Metro earn the $46,384 annual salary required to buy the average new wood-frame, 836-square-foot condominium, while 48.8 per cent are above the required income of $59,760 to buy a similar condo in inner Metro, and less than 32 per cent earn the required $82,649 to afford a similar type of condominium in Vancouver proper. For resales, the percentages were higher: 76.9 in outer Metro, 54 in inner Metro and 37.9 in Vancouver proper.

OUTER METRO: RESALE WOOD FRAME CONDOS

83%

INNER METRO: NEW TOWNHOMES

50%

VANCOUVER: RESALE WOOD FRAME CONDOS

38%

INNER METRO: NEW CONCRETE CONDOS

52%

VANCOUVER: SINGLE-FAMILY HOMES, LESS THAN

32%

# ¿ Feb 15, 2013 18:15

namaste friends: Sep 18, 2004; by Smythe

From Ben Rabidoux's twitter:

This is the second lowest sales to list ratio for all of Canada in 15 years.

# ¿ Feb 16, 2013 00:53

namaste friends: Sep 18, 2004; by Smythe

Oh dear. Today isn't such a good day for real estate 'marketers'. It turns out the shitheads who are trying to sell The Village in the olympic village have been paying off the dumbass who runs vancouverisawesome.com

http://www.biv.com/article/20130214/BIV0121/130219967/real-estate-media-manipulation-trend-emerges

quote:

Such tactics seem to be part of a trend of real-estate marketers manipulating media perception to sell condos.

Business in Vancouver has learned that VancouverIsAwesome.com editor Bob Kronbauer is being paid by the in-receivership Village on False Creek, formerly the Olympic Village, to promote life in the village � even though nowhere on his website does it make it clear that he is being paid to do so.

http://www.biv.com/article/20130214/BIV0121/130219966/life-in-the-village-pays-off-for-local-webzine-editor

quote:

Marketers of the in-receivership Olympic Village are paying the editor of well-known local culture webzine VancouverIsAwesome.com to blog about the joys of life in the village � but it does not say on the website that he is being paid to do so.

Rennie Marketing Systems awarded the deal after receiving a single pitch from VancouverIsAwesome.com editor Bob Kronbauer, who says feels like he won a contest to be paid to flog the Village in False Creek � much like the public contests held by Vancouver International Airport and Tourism Richmond to find paid bloggers to promote them.

namaste friends fucked around with this message at 01:19 on Feb 16, 2013

# ¿ Feb 16, 2013 01:00

namaste friends: Sep 18, 2004; by Smythe

312 posted:

What the hell causes the massive drop every year from Dec -> Jan ? Fire sale at the end of the year for tax reasons?

But the lowest start (2009) still recovered and basically performed as well as the boom years through the second half, so it's hard to say what a low start means.

To prevent Canada's economy from going the way of the rest of the world(remember we were in the throes of the financial crisis) the bank of Canada reduced interest rates. Additionally, lending standards were loosened by Flaherty and thus people who could nominally, not afford to buy a house, suddenly could.

# ¿ Feb 16, 2013 17:03

namaste friends: Sep 18, 2004; by Smythe

Antioch posted:

We just bought a place in Edmonton - half duplex, 2009 construction, 3bdrm/2.5bath, unfinished basement - total price was $320k with CMHC and associated costs, with about 6% down. Our household income is just over $100k. The wife is thinking we can turn around and sell for $350k+ in 3-5 years and I'm not sure how to break it to her that's probably not going to happen.
On the plus side now I get to figure out how to finish a basement! So that should be fun.

Factor in realtor costs, property tax, insurance and all the money you're gonna spend renovating and you will probably lose money if you sell at 350k. Why sell it? Just enjoy your home.

# ¿ Feb 16, 2013 17:07

namaste friends: Sep 18, 2004; by Smythe

312 posted:

Oh boy you guys are going to blow up. That staves off disaster for a couple years but makes it ohhh so much worse. But I was referring to the cyclical nature, it bounces from high to low every year in that graph, and it's not seasonal.

There were always plenty of other ways to do 100% through subprime. gently caress I saw 100% day out of bankruptcy financing even at the end on rate sheets. You're correct that brokers liked FHA loans (you got super paid) so if it was possible to go FHA (they actually were much stricter about income/jobs than subprime) those programs were utilized- you're not wrong at all about that.

Story for the huge quote; I'm typing this from a nexus. What is a 100% day out of bankruptcy?

# ¿ Feb 16, 2013 21:39

namaste friends: Sep 18, 2004; by Smythe

Excelsiortothemax posted:

I'm just tired of hearing about house flipping. Many people are telling me to buy a crap shack, fix it up, then sell for profit! Heck, I just heard on the radio of a free seminar from a host of "Flip that House" that is trying to encourage more people to do that.

Ill laugh when they sink all their money into a poo poo hole that no-one will ever buy once the market crashes.

Just slowly socking my money away......$50,000 you need to materialize quicker.

Where do you live and who is telling you to do this? Its really hard to talk with bullish family members.

# ¿ Feb 16, 2013 21:40

namaste friends: Sep 18, 2004; by Smythe

Excelsiortothemax posted:

Lethbridge, and it's not just family members. It's my customers, a few friends and people I just talk to when I'm the customer. I them as I wouldn't want to touch a house flipping project in a million years

Jesus a housing boom in Lethbridge? What is going on there economically?

# ¿ Feb 16, 2013 22:18

namaste friends: Sep 18, 2004; by Smythe

zapplez posted:

Uhh what? Mortgage rules just got much more stringent over the past few years. Amortization was reduced to 25 years over the past 3ish years. Thats huge. You can't blame the federal CPC for housing at all.

Edit: Very significantly. Like a huge reduction.
http://www.cbc.ca/news/business/story/2012/06/21/flaherty-mortgage-cmhc.html

You should Google when those revisions came into effect.

# ¿ Feb 20, 2013 06:02

namaste friends: Sep 18, 2004; by Smythe

moron posted:

Speaking as someone who's moving immigrating to Vancouver from London (UK) this summer, this thread has provided interesting reading.

It was obvious that the current market was a bubble, but I didn't realise quite how bad it is. It probably doesn't help that living in London has pre-conditioned me to think that spending $500-600k on a two bedroom apartment is perfectly acceptable and normal.

We'll be renting for at least the worst year, so hopefully the market takes a nosedive during that time. We're ultimately hoping to buy a place in Kits, but expecting the prices to bottom out there is probably too good to be true.

What's your occupation? Did you take a pay cut?

# ¿ Feb 24, 2013 06:26

namaste friends: Sep 18, 2004; by Smythe

moron posted:

I work in IT, in support/sysadmin roles. I currently have a fairly decent job in London and 10+ years of experience, but I'm aware that I'll almost certainly be taking a pay cut, and it'll be harder to find a job than it is over here. Luckily, between myself and my wife, we have enough savings to cover us entirely for a year whilst we get settled in. Also, if/when the Vancouver housing market shits itself, we'll have around $200k set aside (from selling our apartment here) for a deposit on a place.

Whoa whoa whoa, you're moving here without a job? Why on earth? Have you checked out what jobs here actually pay? You're probably looking at a 30% decline in income. I went through this experience myself 2 years ago. I also worked in IT in London and I would consider myself very lucky to have moved home (to Vancouver) in an internal transfer. There is no loving way I would have considered a move home without an internal transfer.

# ¿ Feb 24, 2013 17:43

namaste friends: Sep 18, 2004; by Smythe

Soooo...Vancouver is at an all-time high for unsold inventory.

# ¿ Feb 24, 2013 18:57

namaste friends: Sep 18, 2004; by Smythe

Oops, I thought you meant London UK.

# ¿ Feb 24, 2013 21:17

namaste friends: Sep 18, 2004; by Smythe

http://extranet.centris.ca/FCIQ/Upload/collaboration_201302_an.pdf

Apparently realtors aren't allowed to disclose that properties for sale by the CMHC are in foreclosure.

Oh well.

edit: I mean repossession, not foreclosure.

# ¿ Feb 25, 2013 22:06

namaste friends: Sep 18, 2004; by Smythe

Not really new news but a poignant data point:
http://www.bloomberg.com/news/2013-02-27/canada-losing-debt-halo-as-bull-market-housing-peaks-with-carney.html

quote:

Herbert Crockett called Cairo, Geneva and New Delhi home in his four decades as a human resources executive with the World Health Organization. The Prince Edward Island native invested closer to his roots in 2005.

With Toronto on the verge of what turned into a colossal building spree, the 75-year-old retiree bought a C$904,000 ($878,000) one-bedroom suite in the Trump International Hotel & Tower. Eight years later, the 65-story skyscraper is complete, exuding Manhattan-style glamour.

For Crockett, fellow investors and Canadians alike, the glow is fading as home sales tumble, Bloomberg Markets magazine will report in its April issue. They say they�re worried that Canada�s debt-fueled expansion will stall before a global recovery can revive exports -- a slowdown that would blemish Bank of Canada Governor Mark Carney�s record just as he begins his new job as head of the Bank of England on July 1.

More from the April 2013 issue of Bloomberg Markets:

BANK OF AMERICA: The Education of Brian Moynihan
�If the city is any indication of what�s going on in the country, it�s over-reliant on its housing sector,� Crockett says, pointing out a window of a downtown coffee shop to dozens of cranes swinging across the skyline. �I�m afraid of a condo crash, and then what will happen to all the investments?�

Toronto is awash in real estate. There were 144 skyscrapers under construction in late February, more than in any other city in the world, according to SkyscraperPage.com. Proposals for new condos reached 253,768 units at the end of the fourth quarter, up 10 percent from a year earlier, Toronto-based research firm Urbanation Inc. says. Four luxury hotels, each featuring condos, have opened in the past two years.

Gehry Towers

The projects keep coming. Frank Gehry, architect of the landmark Guggenheim Museum Bilbao in Spain, plans three towers. The highest, at 85 floors, would be North America�s tallest residential building.

Crockett, who lives in Crozet, France, says he�s losing C$7,000 a month amid the glut. He says his Trump suite, which guests rent through the hotel reservation system, is occupied about a quarter of the time. He�s suing Donald Trump and the developers for C$2.9 million for misrepresenting investment returns. About two dozen other buyers have brought similar cases.

Crockett says in his lawsuit that a presentation by developer Talon International Development Inc., referred to in court documents, put returns as high as 27 percent a year and that the company wasn�t transparent about room fees and mortgage financing. Crockett adds that after he bought the suite, Talon declined to answer questions about his investment.

Economy Stalling

Val Levitan, chief executive officer of closely held Talon, denies the allegations, dismissing them as buyer�s remorse. He says sales documents outline risks to investing in a hotel suite. Alan Garten, personal legal counsel for New York-based Trump Organization Inc., says Donald Trump wasn�t involved in selling the properties, calling the allegations �completely without merit.�

The weakening property market is just one sign that Canada�s economy, which everyone from International Monetary Fund Managing Director Christine Lagarde to Carney himself has touted as a model of stability, is stalling.

As recently as September, the World Economic Forum ranked Canada�s banking system the world�s soundest for the fifth straight year. Canada�s bank stocks never fell as far as their U.S. counterparts during the financial crisis, with the Standard & Poor�s/TSX Composite Commercial Banks Industry Index (STCBNK) first surpassing its 2007 high in early 2011 and setting a record on Feb. 20 this year.

�The Best�

Such performances likely helped Carney, 47, land his new post. British Chancellor of the Exchequer George Osborne called him �quite simply the best, most-experienced and most-qualified person in the world to do the job� in the surprise Nov. 26 announcement.

Now, as the former Goldman Sachs Group Inc. banker prepares to cross the Atlantic, Canada�s households are burdened with record debt, and third-quarter growth, at 0.6 percent, was the lowest in a year. Canada is scheduled to report fourth-quarter gross domestic product on Friday, with economists surveyed by Bloomberg News forecasting no change in growth. Moody�s Investors Service weighed in on Jan. 28. It downgraded six banks the WEF had lauded, saying debt and soaring home prices have left Canadians vulnerable to more bad news.

While Canada may get stellar marks for navigating the global credit crisis, it did so with a borrowing binge, says Benjamin Tal, deputy chief economist at the investment-banking unit of Canadian Imperial Bank of Commerce.

�Payback Time�

�We basically borrowed our way out of this recession,� Tal says. �Now, it�s payback time. We will be in for a period of long, slow growth.�

Canada�s property blitz is winding down just as U.S. housing perks up. Construction of new Canadian homes plunged 19 percent in January from December to the lowest number since the end of 2009; sales of existing homes fell 8.8 percent from a year earlier. Toronto suffered a 36 percent decline in new condo sales in 2012 from 2011; resales dropped 10 percent, the first annual decline since 2008, Urbanation says.

Home prices are for the most part still rising on average in big cities -- except in Vancouver, where they fell 8 percent from their peak in May 2011 through January. In contrast, sales of new and previously owned U.S. properties rose 9.9 percent last year, the biggest annual gain since 1998.

Mortgage Changes

Hoda Seraji is experiencing Vancouver�s housing slowdown firsthand. A real estate agent, she took her own family�s two- story house in Canada�s third-largest city off the market after failing to get a single bite for the C$2.39 million home overlooking the Pacific. Cutting the price for the five-bedroom, four-bathroom residence didn�t help.

�Buyers are very skeptical, very hesitant because they think prices may go down,� she says.

Seraji blames fading interest from foreign investors, especially in China. Changes to Canada�s mortgage rules designed to cool the market have accelerated the sales drop, she says.

Finance Minister Jim Flaherty announced new regulations on home loans for the fourth time in four years in June, reducing the maximum amortization period on mortgages the government insures to 25 years from 30 years. It had been as high as 40 years in 2008.

Both Flaherty and Carney have campaigned against the perils of household debt, with Carney warning in June 2011 that valuations in some markets were reaching �severely unaffordable� levels.

Taxpayer Liability

Until the government�s latest tightening, however, Canadians weren�t listening. Carney slashed benchmark interest rates more than four percentage points to 0.25 percent during the recession, pushing five-year mortgage rates to less than 3 percent. That helped Canadians enjoy the lowest borrowing costs in the Group of 20 nations outside Europe, Japan and the U.S. Flaherty increased the stimulus with guarantees and tax credits for homeowners.

Encouraged by cheap money, Canadians couldn�t resist the housing market. The average price of homes sold jumped 82 percent during the 10 years through January, rising more than 30 percent from January 2009 alone, according to the Canadian Real Estate Association.

The value of mortgages insured by the government�s housing agency swelled 98 percent to $575.8 billion at the end of September from the end of 2006, foisting a growing liability onto taxpayers. Meantime, Canadians became more indebted than Americans in 2011. The ratio of household debt to disposable income has continued to rise, hitting a record 165 percent in the third quarter of 2012, according to Statistics Canada.

Official Hectoring

The mixed message of borrow but save isn�t lost on economists.

�It did seem a little unusual to have every policy maker in Ottawa hectoring Canadians about their excessive debt levels and yet the economic incentive for the average Canadian was completely slanted to taking on debt and not saving,� says Douglas Porter, chief economist at Bank of Montreal.

�The realist in me would admit it was the only tool the Bank of Canada had. The reality was, they really could not lift interest rates.�

With global rates so low, any independent increase would set off a surge in the Canadian dollar. Carney dampened expectations for higher borrowing costs at the end of January, saying rate increases were �less imminent� because of weaker- than-anticipated business investment and exports. He�ll be more than 18 months into his new job before his successor, who has yet to be named, raises borrowing costs again, some economists predict.

Exports Struggle

There�s little evidence exports will help Canada offset any drag from its housing-sparked debt addiction. In the third quarter, outbound shipments, including oil, plunged 7.8 percent from the second quarter and had dropped 8 percentage points to 30 percent of GDP since 2000.

Meantime, the share of GDP linked to housing, including construction and renovation, soared to more than 20 percent. A similar U.S. measure peaked at 18 percent in 2005. Canada�s share of construction jobs in total employment was 7.3 percent in January, above the 4.3 percent in the U.S.

�This heavy reliance is not healthy,� CIBC�s Tal says. �I expect to see some softening.�

Many of Canada�s construction workers have been toiling on Toronto�s condos. Lou Rivera wonders who will live in them. Rivera, 55, found out in November that property owner Mondelez Canada Inc., a unit of Mondelez International Inc. (MDLZ) will close this year the Mr. Christie�s bakery where he has worked as a production mechanic for 14 years and sell the land. The factory, which employs 550 people to pump out animal crackers and other snacks, may be replaced with 27 condo towers, documents filed with the city�s planning board say.

�Big Correction�

�What will happen, 550 people will be jobless,� Rivera says in the plant�s snow-covered parking lot, which already is hemmed in by new condo developments named Eau du Soleil and Ocean Club. �Will they work at the condos? No. Will they live in them? No.�

Steve Hennessey, a sales representative for Right at Home Realty Inc., Canada�s largest independent real estate brokerage, predicts Toronto home prices will tumble 20 percent during the next two years.

�We�re due for a big correction,� he says.

David Rosenberg, chief economist and strategist at Gluskin Sheff & Associates Inc. in Toronto, wonders what would trigger a slump. He expects rates to stay low.

Missing Ingredients

�I don�t think the Bank of Canada is going to have a smoking gun to raise interest rates,� says Rosenberg, who, as chief economist for North America at Merrill Lynch & Co. in New York from 2002 to 2009, was among the first economists to predict a U.S. housing collapse.

Canada is also missing ingredients that made the U.S. market so toxic -- subprime borrowers and banks that lent with little diligence. With about 62 percent of mortgages issued by Canadian banks insured by the federal government, the nation�s six big banks are more sheltered from delinquencies than American counterparts.

What may push Canadian housing over the edge, however, is another slowdown in the global economy. This could further weigh on exports and jobs, prompting the country�s maxed-out consumers to cool their love affair with real estate.

�As an economist working for a Canadian bank, I can�t go into a client meeting and have someone not ask me about housing in Canada,� says Tom Porcelli, chief U.S. economist at RBC Capital Markets LLC, Royal Bank of Canada�s investment-banking unit, in New York. �For U.S. investors, they are still a little gun-shy about what happened in the U.S., and I think they worry the same fate will happen to Canada.�

Timely Escape

While Crockett�s case against the Trump hotel�s developers winds through the courts and the once-hot housing market sputters, Carney will be facing new hurdles at the Bank of England. Jens Larsen, chief European economist at RBC Capital Markets in London, says Carney is likely to come up short.

�He had tremendous press, and it was a huge coup for the chancellor to be able to land him,� Larsen says. �You look at the expectations, and you look at the challenge he has in front of him, and some disappointment is likely.�

There are already signs of how difficult Carney�s job may be. Because Britain�s economy shrank in the fourth quarter, he could find himself struggling with fallout from an unprecedented triple-dip recession. Yet, if Canada�s home sales keep sliding and household debt keeps rising, the banker who helped orchestrate his nation�s vaunted growth and stability may consider his trans-Atlantic move a timely escape.

# ¿ Feb 27, 2013 17:41

namaste friends: Sep 18, 2004; by Smythe

Baronjutter posted:

Other than this thread everyone is telling me the price-dip is over (in Victoria) and NOW is the time to buy because the economy is heating up and everything is going to start going up soon. This is the low! Buy NOW!!

I tell them I want to wait at least a year, save up more, and hopefully get a lower price. They laugh at me and say things like "oh you must buy those doom and gloom cranks on the internet? They've been saying the bubble's going to burst for the last decade!" and tell me I'll be renting a tiny basement suite for the rest of my life if I'm waiting for a crash.

I get this all the time in Vancouver. People here can't seem to fathom that cities like Vancouver and Victoria are economic backwaters that have no business hovering at the cost of living levels that they do.

# ¿ Mar 11, 2013 14:00

namaste friends: Sep 18, 2004; by Smythe

quote:

The flicker of optimism that sparked in Canada�s housing market when January sales outpaced December�s has died out, erased by a notable drop in February.
Last month�s declines were significant enough to prompt the Canadian Real Estate Association (CREA) to cut its sales outlook for 2013 on Friday for the third time since last summer. �
�Vancouver remains the clear weak spot, with sales down a seasonally adjusted 9.8 per cent in February and 29.2 per cent in the past year,� Bank of Montreal economist Robert Kavcic wrote in a research note.But some feel that much of Vancouver�s weakness has played out.

http://www.theglobeandmail.com/report-on-business/economy/housing/crea-cuts-forecast-as-home-sales-plunge-in-february/article9812647/

I wonder how many of these bank economists are cutters.

# ¿ Mar 18, 2013 02:55

namaste friends: Sep 18, 2004; by Smythe

Rime posted:

The most overpriced/inflated real estate market on the planet is the achilles heel for the country? Color me shocked.

I can't wait for Vancouver to emulate the titanic and plow into the bottom of the market. The metro is absolutely absurd, but it's been effecting the province at large for years now. There's no sane reason for a crackshack in Bella Coola or Fort Nelson to sell for $400,000. If you browse MLS you can't find anything for sale other than a mobile home for less than $120K.

You piqued my interest and I just had to look this up. You did not disappoint. What. The. gently caress. Is. This. poo poo.

http://agents.royallepage.ca/fortnelson/502362?teamId=null&listingPageType=useOfficeListings&listingId=739843

# ¿ Mar 18, 2013 14:25

namaste friends: Sep 18, 2004; by Smythe

Baronjutter posted:

I'd love to rent but this isn't europe and renting is for lazy failed poors and students, who have to live in sub-standard old buildings with lovely shared-laundry and stinky elevators. I know buying is expensive but I don't look at it as an investment, it's a luxury, it's a thing to make one happy. I hate renting, I hate the uncertainty, the lack of any sense of ownership or control. You go into a condo building and no one vandalizes poo poo because it's their own building, people have a sense of ownership and it shows. Something breaks, you can fix it and fix it right. I looked at some not-shitbox apartments and town-houses for rent but the rents are insane, higher than mortage+strata+utilities. So it's either shared-laundry apartments where you have to do guard-duty or your clothes will all be stolen, or really high-end units marketed more towards rich professionals here for a season or two.

If I could find a 2 bedroom apartment with in-suite laundry, up to date fire safety equipment, decent sound-proofing, and a management company that doesn't take months to fix broken light switches and faucets (replacing them of course with the cheapest shittiest things they can) I'd probably jump on it. But there's like no middle-ground here. It's either 50 year old poo poo-boxes full of students and drug addicts, or super high-end luxury stuff.

That said, even adding the joy of owning your own home into the math, the prices for condos are still way too high. But people always post these purely beep-boop excel sheets that never factor quality of life into the mix. It's good to have perspective though, and you're an idiot if you think buying is a wise investment. But people shouldn't forget about the huge quality of life issues when weighing buying vs renting.

I'd be quite content to just hobbit-down and live in this very cheap basement suite for years more, savings up a massive 50% downpayment or something, it's the wife...

Want to live like a student the rest of your life? Here's a solution for you! http://www.vancouverobserver.com/real-estate/cohousing-vancouver-living-outside-box

# ¿ Mar 19, 2013 03:43

namaste friends: Sep 18, 2004; by Smythe

http://bucks.blogs.nytimes.com/2013/03/15/financial-tips-for-younger-people/

The best article about managing your money that I've read in a long time.

quote:

He also advises younger adults with higher incomes not to aim to buy a big, expensive house right away, because they are likely to move around before settling down. Ditto for fancy cars. But if they want the cars, he said, he urges them to buy �gap� insurance, which will cover the difference between what they owe on their car and what it�s worth, if the car should be totaled in accident.

Words everyone in the Best Place On Earth lives by right?

# ¿ Mar 19, 2013 03:48

namaste friends: Sep 18, 2004; by Smythe

JawKnee posted:

I don't think that's really fair, it's essentially your own apartment with an additional (much larger) shared kitchen, storage area, and guest bedroom thing. Also apparently the screening is fairly rigorous so I doubt you'd have to put up with student bullshit. From what I've heard the units would pretty much be around the same cost as comparable apartments, but that article seems to say that they'd go for 20% less than going cost?

Sounds pretty good to me actually.

Whatever floats your boat. A reasonably sized apartment sells for about 400k. 20% off is 320k. 25% downpayment is 80k. Roughly speaking, the cost of borrowing 240k is probably going to be around $1200/month. Maintenance is probably going to be about 100 bucks.

If you think $1300/month for one of these loving things is more palatable than your current rent, be my guest.

A shared kitchen? gently caress me. Never in a billion loving years.

# ¿ Mar 19, 2013 04:10

namaste friends: Sep 18, 2004; by Smythe

JawKnee posted:

How large are the individual unit's kitchens?

Dude, shared resources implied shared decision making. Have you ever attended a strata meeting? I have heard horror stories about stratas full of idiots who can barely afford their units who want to defer mandatory maintenance. gently caress. That. poo poo.

# ¿ Mar 19, 2013 04:13

namaste friends: Sep 18, 2004; by Smythe

Dr. Witherbone posted:

Let's not devolve into regionalist BS as is so easy for a Canadian thread. Vancouver has all of the benefits of a highly dense and centralized city: a wide variety of businesses, restaurants, and entertainment, as well as awesome public transportation with the ever-expanding Skytrain network and busses that, though Vancouverites grumble over them, are really quite awesome.

On the nature front, there's the beautiful sea wall that provides an excellent 10k+ walk, the beaches that line it (which are as good as they get for Canada), Stanley Park, and the mountains in North Van for skiing and snowshoeing.

As far as variety for the design of the city itself goes, there's the fairly pretty and large Chinatown, as well as historical Gastown, with it's awesome steam clock and brick roads.

There's a lot to love about Vancouver

If only we had a real economy that created real jobs.

Something that drives me crazy about this place is the uncritical view Vancouverites take on the cost of living. People here don't think anything of paying $7.65 for a pint of beer or $150 for a dinner (with wine). My sense is that everyone here wants to live like a baller and they don't care if they have to get in debt to do it.

# ¿ Mar 19, 2013 19:09

namaste friends: Sep 18, 2004; by Smythe

Rime posted:

Vancouver is a sleepy resource backwater that up and decided that it was going to put on a show of trying to be LA or New York, in a fashion not entirely dissimilar to Dubai. The inhabitants of Vancouver are like any other city that finds itself suddenly booming: live like a king and gently caress the consequences. When the hangover finally comes and we go back to being like Prince Rupert in a decade or so, I will very much enjoy it.

Assuming D-Wave or General Fusion doesn't turn Burnaby into a crater, of course.

Are we even sure D-Wave isn't some kind of scam? That's so loving typical of Vancouver.

edit: oh dear god. General Fusion is trying to commercialize fusion reactors....loving lolling out loud

Rime, why don't you and me buy some space in Burnaby and set up a hyperspace engine manufacturing business? Or maybe a time machine factory?

namaste friends fucked around with this message at 20:35 on Mar 19, 2013

# ¿ Mar 19, 2013 20:27

namaste friends: Sep 18, 2004; by Smythe

Fine-able Offense posted:

A funny anecdote: when I was at the Vancouver real estate board, they did this thing where they would fundraise for the office Christmas party throughout the year, usually by selling bingo and 50/50 cards and the like, with the proceeds going into the party fund.

However, they would always have to time the games to happen on the day after payday, because otherwise nobody would have $2 to spare on a raffle due to being broke.

So in terms of that whole "spend every dime you have every month and never save any of it and max out your allowable mortgage SPEND SPEND SPEND!" mentality, the real estate board staff certainly practiced what they preach...

Did you ever meet a talking head like Cam Muir or Tsur Sommerville? And what was your impression of them?

# ¿ Mar 20, 2013 01:08

namaste friends: Sep 18, 2004; by Smythe

Mr. Wynand posted:

Of course there's a limit to this, of course people should eventually move out of completely unproductive localities, of course it is possible to re-form that network given time and of course young unattached people especially can/should do this most often. But allowing people to live where they've always lived (assuming they were happy there to begin with) is something absolutely worth supporting, especially when it's only being threatened by something as arbitrary as speculative investors (even when most of those investors are locals themselves).

I work in a large systems integrator with several contracts to outsource it from businesses around the vancouver area. There are a large number of employees in this company who come from brazil, china, india, south africa, australia and the uk. These people are not yospos gamer admins, they have highly specialized skills. On average, these people are in their mid to late 30s. On the other hand, every single life long vancouver resident working in this company is a baby boomer.

If you want to develop your skills and move up in your career, the clear choice to me is to leave and then come back. Don't fool yourself into thinking your 'support' network is going to help you get ahead if everyone is bush league.

# ¿ Mar 20, 2013 01:44

namaste friends: Sep 18, 2004; by Smythe

Paper Mac posted:

This is a profoundly sick way to understand the value of community.

Oh please, spare me your sanctimonious bullshit about 'community'. Vancouverites are humungous assholes who don't give a poo poo about anything other than themselves.

# ¿ Mar 20, 2013 06:20

namaste friends: Sep 18, 2004; by Smythe

Mr. Wynand posted:

Well like I said, your 20s are the time to do that. But really, this neither here nor there. The kind of uprooting stress inflicted on working professionals by awsome job offers abroad is not exactly the social problem I have in mind.

Having jobs available in a wide variety of fields is, but having to leave town because the top of your field is centered elsewhere is more of a "lategame" type of urban social issue.

Having worked with a shitload of antipodeans in europe, I'm really distressed to learn that Canadians are such weak hearted pansies that they could never ever consider leaving home for better opportunities abroad. We should all just give up now and fold this country so we won't have to put up a fight when the russians and americans come for our natural resources.

We'll still have our precious communities.

# ¿ Mar 20, 2013 06:30

namaste friends: Sep 18, 2004; by Smythe

Does anyone know how a house price index is actually calculated?

# ¿ Mar 20, 2013 06:33

namaste friends: Sep 18, 2004; by Smythe

ocrumsprug posted:

How the HPI is determined.

Thanks!

This is kinda cool.

quote:

The MLS� HPI model is used to calculate Benchmark Prices. A �Benchmark home� is one whose
attributes are typical of homes traded in the area where it is located, one being generated for each
supported sub-area. Benchmark property descriptions are based on median values for quantitative
property attributes (e.g. above ground living area in square feet), and the most commonly occurring
value (i.e. modal value) for qualitative attributes (e.g. basement is not finished).

Imagine how messed up this benchmark could get with houses in areas where it is known that illegal and therefore undocumented secondary suites are rife.

# ¿ Mar 20, 2013 06:55

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# ¿ Apr 28, 2024 07:47

namaste friends: Sep 18, 2004; by Smythe

Have you heard that everyone wants to move to Vancouver?

Well not really. http://housing-analysis.blogspot.ca/2013/03/bc-population-growth-to-q4-2012.html

# ¿ Mar 20, 2013 22:01

The Something Awful Forums > Discussion > Debate & Discussion > Canada Housing/Debt: Trust me, I'm a landlord.

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