Tuesday, 24 June 2014

No Housing Bubble in Canada?

"The advice we have received is that we are not in a bubble," told the Finance Minister to reporters

I wonder whose advice that was? Was it from the real estate cartel (CREA), was it from the banks or was it from the CMHC? What was that advice based on? The fact that Joe Oliver did not say anything else beyond 'receiving the advice' tells me that he is hiding something. 

Remember that just a year ago Ex-Finance Minister Jim Flaherty said the following

“I’m pleased in particular that the condo market in big cities has fallen back. I’m also pleased with some other moderation in new house construction and in demand for mortgages. I think these are healthy developments because I think we were beginning to see some indications of the beginning of a bubble.”

So a year ago Flaherty saw early indications of a bubble and he was glad that things were slowing down.

But wait a second, things didn't fall back.

Since that comment was made condo prices went up by 7.6% in the City of Toronto while detached dwellings went up by 9.2%. Overall in Canada the average home price rose by over 7%. That's right, there is no housing bubble in Canada - keep calm and carry on.

canada housing bubble,

Sunday, 22 June 2014

Who Are The Real Estate Doomers?

canada housing bubble, canada housing doom
A typical doomer is in his 30's, has a household income of $150,800 on average, is likely to be a renter and expects home prices to drop north of 20% down the road.

Not what you expected? Then keep reading.

A few days back Garth Turner asked few questions in his Who Are You post: "(a) rent or own, (b) family income, (c) age and (d) your outlook for real estate over the next one or two years."

Since Mr. Turner made it clear that he won't be producing any graphs based on the generated data I decided to do it myself. Below is what I got.

Wednesday, 11 June 2014

Canadian Housing Market is Out of Whack - IMF

Canadian real estate is the most expensive in the OECD when compared to rents and the second most expensive when compared to household incomes.

But how come?

Are we running out of land? Hmm, Canada is the second largest country in the world and is one of the least densely populated. The scarcity of land argument just makes no sense. Even in Toronto we still have tons of land to build condos and the green belt policy had no significant effect on the real estate market.

But hey, it's cold in Canada. Our homes cost more to build! Yeah, right...

If you look at the charts below you can see that in other countries (Iceland, Finland, Norway) - which have the same freezing cold climate - real estate prices cost significantly less as compared to incomes and rents.

So what's going on? How come Canadian real estate is so expensive when compared to other countries in the OECD? Simply put, housing prices in Canada are out of whack with reality - hence the bubble.

Tuesday, 27 May 2014

GTA Pre-Construction Condo Sales Declined 19%

Pre-construction condo sales in the City of Toronto were down 5% in April 2014 versus a year earlier (down 47% compared to April 2012). In the GTA new condo sales were down 19% versus a year earlier and 51% versus two years ago.

What is especially interesting is that lately the pre-construction condo market has become quite volatile. While in March 2014 new condo sales were up 150% compared to a year earlier, in April sales declined. See chart below:

new condo sales market toronto 2014

What hasn't become volatile is the price. In fact, new condo prices have remained remarkably flat since dropping slightly in 2011. See chart below:

Monday, 19 May 2014

Canada's Housing Boom is Risky - IMF

What is behind the Canadian housing boom? Rising wages? Rich immigrants? The government?

Indeed it was the government relaxing mortgage rules in the mid -2000's which led to home prices doubling and even tripling in some places. As home prices rose, so did the debt. Household debt increased from 110% in 2000 to 165% in 2013.

After numerous property busts around the world in 2008, the Canadian government quickly reversed its housing policy by tightening mortgage rules, eliminating 40, 35 and 30 year mortgage terms.

While the Canadian housing bubble is yet to pop, the risk is still out there. In fact the IMF believe that the housing boom is the most important risk to our economy.

You can read the original paper below:



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