News   Jul 12, 2024
199 Church Showcases Heritage Facade and Artwork at Street Level
 1K     0 
News   Jul 12, 2024
Six Points Plaza Redevelopment Advances With 36-Storey First Phase
 896     0 
News   Jul 12, 2024
Trading Spaces: Can Real Estate Conversion Help Boost Housing Supply?
 355     0 

Baby, we got a bubble!?

AKS said:
If Toronto were to drop by to 3.5 (which is doubtful), Vancouver would have to drop 60% of RE to get to 3.5 (which is also doubtful). The charts didn't rate the higher ratios from other countries either. Beijing in 2006 supposedly at 9:1? Some report Beijing is at 27:1 now. 5x the international average. HK hit 11:1 before their bubble burst.

Anyhow Global Bank seems to consider 5:1 as affordable. While the UN thinks it should be 3:1. I think the Global Bank might be more on track than what the UN wishes the numbers to be. If people want affordable, they would have to move to smaller cities. Or earn money from higher paying cities, and save to live or send money back home to cheaper cities. I can't see all the high ratio RE markets ever reaching 3.5-4x again, especially when they're above 11 and expecting them to free fall to 4.
http://english.people.com.cn/200612/22/eng20061222_335044.html

Rather than comparing at other countries figures which are even more skewed then we are, we should probably just look locally at Canada's history and on average what is globally affordable. Looking from the ratio and historical prices, we will undoubtedly face a correction, but a US style meltdown is unlikely since we never bubbled as high as they did and if the Bank of Canada doesn't put a full break on RE. The bigger the bubble, the bigger the burst. I do wonder about Vancouver though...
Click to expand...

The report I posted clearly stated that it covers only Australia, Canada, Ireland, New Zealand, the UK, and the US

What is your source for "some report Beijing is at 27 to 1" and "Hong Kong is at 11 to 1"? I can't really respond to unsubstantiated numbers.

Canada's historical price to income ratio is 3-3.5 to 1.

Actually, we have "bubbled" higher than than the US. They hit a max of 4.8 x income nationally, and are now in the range of 3.5 to 1. http://paul.kedrosky.com/WindowsLiv...stoIncome19892009_145D7/price-to-income_2.png
 
Canadian retail sales down .1%, ex auto down .4%, the street was calling for up .6%, wrong again, this is why I dont make investment decisions on what the experts say or print, I know of a housing expert that has been wrong for 10 yrs a bear on housing, Carney looks real good here for sure. Gold rallying Dec spot near $1300 an ounce. www.kitco.com
 
Primer #5: The role of demographics in Canada�s coming housing bust

Primer #5: The role of demographics in Canada’s coming housing bust
Posted on September 21, 2010 by financialinsights

Hello again

I’d like to reiterate that the point of these primers is to explain the big-picture factors that have shaped my opinion on the direction of the economy in general, and housing in particular. So far we have seen that deflation and not inflation will be the dominant force over the next several years as we have reached a point of peak credit and peak consumption in the Western world. Beyond that is anyone’s guess, and the inflationists and hyperinflationists may yet be proven right. But it won’t be in the next few years, at least not in Canada. We’ve seen that real estate in Canada absolutely is in bubble territory when the data is considered rationally and compared to widely accepted measures of fundamental value. We’ve seen that the two big drivers of this bubble growth have been mass psychology (how many times have you heard, “real estate only goes up,†despite all the contrary evidence just south of our border) and also by the erroneous and self-defeating policies of CMHC.

2) A price floor under smaller residences, particularly small bungalows (2 bedrooms) with smaller yards. In markets where condo speculation and overbuilding are not rampant (ahem….Toronto!), this may also put a floor under condo prices.
Click to expand...

Ottawa condos anyone?

(there's much more, click the link)

http://financialinsights.wordpress....-demographics-in-canadas-coming-housing-bust/
 
Last edited:
CN Tower said:
Primer #5: The role of demographics in Canada’s coming housing bust
Posted on September 21, 2010 by financialinsights

Hello again

I’d like to reiterate that the point of these primers is to explain the big-picture factors that have shaped my opinion on the direction of the economy in general, and housing in particular. So far we have seen that deflation and not inflation will be the dominant force over the next several years as we have reached a point of peak credit and peak consumption in the Western world.



Ottawa condos anyone?

(there's much more, click the link)

http://financialinsights.wordpress....-demographics-in-canadas-coming-housing-bust/
Click to expand...

Very thoughtful comments CN Tower.

Sustained deflation, in effect, means downward spiral in real estate prices. This, in turn, will gain its own momentum. In this scenario, a lot -- and not some or few -- of individuals will be hurt financially or ruined. There will be a free fall in real estate prices. That, in turn, will hurt other segments of economy -- furniture, appliances and individual consumption items. A full blown depression down the road? Do I see flood of assignment and other listings in the coming period?

A person who has paid off the mortgage and has some money in the bank should be able to survive with dwindling interest income, CPP, OAS and, perhaps, GIS. I shudder at the thought of what others might have to face.

When will all this end? Is Canda Greece of tomorrow?
 
JayBee said:
Like I said, 60% drop. It's coming.
Click to expand...

hehehe ... i hope you're being facetious ... where did u get that figure from?

from the various metrics, i've calculated TO RE is 25-30% over-priced and should be around $350-375 for the typical dt locales.

of course a premium for true EXCLUSIVE luxury buildings, PRIME PRIME PRIME location(s), etc, of which there aren't that many IMO that can be classified as such, although many developers and RE agents market them that way
 
cdr108 said:
hehehe ... i hope you're being facetious ... where did u get that figure from?

from the various metrics, i've calculated TO RE is 25-30% over-priced and should be around $350-375 for the typical dt locales.

of course a premium for true EXCLUSIVE luxury buildings, PRIME PRIME PRIME location(s), etc, of which there aren't that many IMO that can be classified as such, although many developers and RE agents market them that way
Click to expand...

I am... I am...

Thing is...I think prices will drop. But I don't think they will drop across the board. Some areas will be unaffected, while some will drop quite a bit...and others may even increase. What people seem to forget is, there are some areas in the States during their meltdown that came out unscathed. I travel to the US quite often, so I saw a lot of this with my own eyes.

Just hope that you don't own property in the areas/buildings that plummet that had purchase prices of $600,$700/ft. If prices drop to $350/ft for say....a building like 10 Morrison or 550 Wellington, Five, Berkzy, etc... I'll be first in line ready to buy. I know i won't be alone either lol.

Funny you mention that agents/developers milk the whole "prime location" thing. If I read/hear "steps to yorkville" one more time, I'm going to lose my mind LOL
 
From the Globe and Mail

"Revisiting trends of the slump
Canadian house prices and consumer credit are "revisiting recessionary trends," which will dampen consumer spending that is so key to the economic recovery, CIBC World Markets warns in a new report. "It's no secret that house prices have been falling recently, but less noted is that the performance of the housing market is already approaching levels seen during the recession," economists Benjamin Tal and Krishen Rangasamy said. "... Even a modest 5-per-cent additional drop in average price in 2011, on top of the 6 per cent it already shed from its peak, will lead to a negative wealth effect of $10-billion, stripping growth in consumer spending by more than a full percentage point."

housing_895401a.jpg

Their outlook is equally bleak for consumer credit, which has driven spending and is also "mimicking recessionary trends" on a month-to-month basis. Growth in consumer credit will dip to 3.5 per in the next 12 months, on an annualized basis, compared to 6 per cent, also annualized, in the first half of the year.
"Not surprisingly, the Canadian recovery didn't play out as advertised," they wrote. "While we did see a spike late last year and early 2010, the momentum has faded lated, largely as a result of a strong [Canadian dollar] and a softening U.S. economy."
CIBC World Markets economists believe that fears of a double-dip recession "look overdone." But in an overall global forecast, Avery Shenfeld noted that "the Great Recession that shattered global growth in 2008-09 is now water under the bridge, but the Great Disappointment of a subpar global recovery will be with us for a good while longer." Among other highlights of the report:

  • Global GDP growth will run "well below" the 5-per-cent pace of the prior expansion.
  • Emerging Asian economies still have room to grow but will feel some of the chill.
  • Canada's trade sector will underpeform the domestic economy this year and next.
  • The recent improvement in business investment in Canada won't last."

I think we will have a very very good idea of where this is going by the end of September and it will be confirmed with October numbers. My guess is that with mid-October numbers, we'll start seeing year over year price decreases in condos and by February we will be back at April 2009 pricing. By July it will be back to late 2007. Anyone who bought in, for eg. Freedville or at places like Maple Leaf Residence or Ice at more than $550/ft will be underwater. Our economic recovery was so heavily dependent upon the housing market that this will seriously erode our national growth next year. Already TD predicts only 1.9% growth and I expect that will be revisited and drawn down to an anemic 1%.
 
Last edited:
simuls said:
Our economic recovery was so heavily dependent upon the housing market that this will seriously erode our national growth next year. Already TD predicts only 1.9% growth and I expect that will be revisited and drawn down to an anemic 1%.
Click to expand...


our economic 'recovery' was predicated on the lowering of the BoC overnight rate from 4.50% in 3/2007 to 0.25% in 4/2009. ... http://www.bankofcanada.ca/cgi-bin/famecgi_fdps

i attribute the dramatic 50% RE price increases of the past several (4) years to the above (and subsequent lower LT bond rates)
 
doesn't surprise me that Canadians are over-extended ...
spending too much on housing even though rates are historic lows because of over-inflated evaluations.

the best scenario is south of the border with lower prices and low rates with the ability to LOCK in rates for 25/30/35/40 years, unlike Canada where we have to refinance every few years ... and rates have only one direction to go ... UP !


Canada consumer spending slips, recovery may stall
Wed Sep 22, 2:09 PM
By Louise Egan

OTTAWA (Reuters) - Canadian consumers are no longer pulling their weight in the country's economic recovery, reports showed on Wednesday, raising the possibility that the economy will shrink in July for the first time since August 2009.

Economists and policymakers have long anticipated a slowdown in consumer spending after it powered Canada's torrid growth rates in late 2009 and the start of this year. But so far there is little sign that other segments of the economy are compensating by picking up the slack.

After disappointing July numbers on exports, manufacturing, wholesale trade and housing, markets had pinned hopes on retail sales to nudge the economy into growth territory.

But the report showed retail sales for July unexpectedly slipped 0.1 percent from June as consumers shied away from home-related purchases such as furniture and electronics, offsetting a rise in car sales, Statistics Canada said.

It was the fourth straight month of flat or declining sales, disappointing forecasts for a 0.6 percent gain. Excluding autos, sales fell 0.4 percent and in volume terms, they were down 0.2 percent.

Canada's dollar dropped versus the U.S. currency after the release of the data.

Economists said the reluctance to spend may be temporary due to a new tax regime and other factors, but they were still hard-pressed to find any encouraging details in the report.

"The big picture is not a pleasant one to watch ... (the retail sales decline) together with earlier reported declines in real manufacturing and wholesaling, will weigh on July GDP," said Krishen Rangasamy of CIBC World Markets.

The news reinforces expectations the Bank of Canada will hold its key interest rate unchanged for the rest of the year after hiking it three times since June to 1 percent.

"It adds to the body of uncertainty over the strength and sustainability of the Canadian economic recovery as well as clouding the outlook on Bank of Canada policy," said Stewart Hall, economist at HSBC Canada.

Although the composite leading indicator exceeded expectations in August with a 0.5 percent increase, once again the gains rested entirely on a rebound in the hard-hit manufacturing sector, while the housing index tumbled.

The data on Wednesday prompted Canadian Imperial Bank of Commerce to cut its economic growth forecasts and predict the central bank won't hike rates until the second quarter of 2011.

Annualized economic growth was 2 percent in the second quarter, down from rates of 5.8 percent and 4.9 percent in the previous two quarters. CIBC sees another three quarters of growth below 2 percent, and a growth rate of 1.9 percent in 2011.

It cites the eventual loss of construction and public sector jobs when government stimulus spending fades, as well as a slowdown in housing and consumer credit as reasons consumer spending will remain tepid through next year.

"Not surprisingly, the Canadian recovery didn't play out as advertised," the report said.

"Growth in the second half of the year will be only a fraction of the Bank of Canada's July ... forecast."

Retailers reported lower sales in five of 11 sectors, Statscan said. Furniture and home furnishings stores saw the biggest decline, with sales tumbling 8.4 percent after climbing for the past 1-1/2 years.

The largest increase was in general merchandise stores, with a 2.4 percent gain. Sales of motor vehicles and parts rose 1 percent, led by new car dealers.

(Editing by Peter Galloway and Jeffrey Hodgson)
 
You must log in or register to post here.

Back
Top