Baby, we got a bubble!?

[interested]

In fairness to Mr. Flaherty, the government can't set mortgage rate policy for the whole country based on 1 market; Vancouver.

The rest while worrisome is not nearly so "out of whack" as Vancouver.

Besides, Flaherty has just made 2 major mortgage rule moves in the past year. He has to see the effect. I would suggest if the effect would have been to trigger a major correction everyone would be yelling and putting blame on the Conservatives for "wrecking the housing market". Therefore, I expected his moves would be designed to cause somber second thought and not outright correction. I believe the aim all along was to slow or stall growth in prices, not cause a decline but this is a tough thing to get right.

As for Mr. Carney; his mandate is not to set mortgage rates but to control inflation. While the inflation is tepid at present (if you buy statscan's numbers) all he can do is encourage Canadians not to overextend themselves. He can't prevent them from placing themselves in precarious positions. All he can do is try and warn them, which he has been doing for over a year.

The fact that the party will keep going on for a while longer doesn't mean that most of those who are "sober" have either gone home or are in the process of sobering up before going home, and not continuing to party (i.e. buying). Again, I am talking about investment purchases for capital appreciation alone and not personal usage property.

I again emphasize that I do not have a crystal ball. I just feel the downside risk outweighs the upside potential in my view.

 

[interested]

http://www.financialpost.com/news/Should+house+before+late/4984409/story.html

From the financial post today.

 

[js97]

Party will keep on going for a while. Join in or miss the fun. Bubble, if there is any, is somewhere over the rainbow -- not as yet visible on the horizon.

In all fairness,

the impact of the u.s. subprime financial crisis was not predicted and visible 'in the horizon'. July 2007 was the first sign...

Not exactly the most prudent advice when your approach is as arbitrary as playing 'hot potato' with the biggest investment an individual will make.

 

[TrickyRicky]

"Mr. Flaherty suggested that he is now more comfortable with the health of Canadian housing"

Ergo run as fast as you can away from the Canadian housing market. Next think you know Flaherty is going to call the Canadian housing market strong as the Canadian Shield.

Speaking of Canadian Shield, commodity stocks are in a malaise and signs point increasingly to overheated asset bubbles in China. I'm sure both of these events are neither related nor will they impact our domestic housing market

 

[anddan]

Just wondering... does the strength of CAD have any effect on the property market?

 

[interested]

Just wondering... does the strength of CAD have any effect on the property market?

Interesting hypothetical question. I would think the answer is yes.

If foreigners expect price appreciation and the dollar is getting stronger, that makes Canadian real estate as well as other assets more attractive.

On the other hand, if prices drop significantly or the CAnadian Dollar drops, it makes our real estate less expensive but as a long term trend, this would be harmful for those investing foreign currencies.

Looking at the US experience, Canadians with a stronger dollar are buying US property because it is more affordable with the advantageous exchange and also the decrease prices in USD are making it attractive.

 

[KA1]

Average debt is meaningless. Read it here.



http://www.theglobeandmail.com/repo...-debt-a-meaningless-statistic/article2070505/

 

[cdr108]

"Mr. Flaherty suggested that he is now more comfortable with the health of Canadian housing"

Ergo run as fast as you can away from the Canadian housing market. Next think you know Flaherty is going to call the Canadian housing market strong as the Canadian Shield.

Speaking of Canadian Shield, commodity stocks are in a malaise and signs point increasingly to overheated asset bubbles in China. I'm sure both of these events are neither related nor will they impact our domestic housing market

but of course not.

you see, Canada doesn't have a R/E bubble ...
we just happen to LIVE in a R/E bubble that excludes all negative exterior forces but are the recipients of any / all by positive factors.

such is the Toronto / Vancouver / Canadian R/E markets and don't you forget it !

 

[cdr108]

any implications for Canadian (TO / YYZ) R/E markets?
will the China Chinese money continue to flow here?

http://www.marketwatch.com/story/china-data-show-almost-flat-growth-hsbc-2011-06-22


China data show almost flat growth: HSBC
Bank’s advance PMI hits lowest in 11 months

HONG KONG (MarketWatch) — China’s manufacturing activity eased in June to its slowest rate of expansion in 11 months, barely above the level indicating no growth at all, according to preliminary results from a key survey published Thursday.

The HSBC flash Purchasing Managers’ Index (PMI) eased to 50.1 in June, down from 51.6 in May.

The new export orders component indicated contraction at an accelerating rate, while new orders remained expansionary, although at a slower rate.

Meanwhile the employment subindex showed conditions were now contracting, reversing from an expansion.

HSBC economist Hongbin Qu said the result shows “demand is cooling, thanks to the effect of tightening measures and the slackness in external markets. This, plus the ongoing inventory destocking, has led to a slowdown in output growth.â€

However, he added that so far there was no sign China was headed for a hard landing, as the data suggested activity consistent with a 13% annual growth in industrial production.

“The good news is that inflationary pressures started to ease meaningfully in June amid slowing demand,†Qu said.

China stocks traded mixed following the data release, with the Shanghai Composite Index CN:000001 +0.24% inching up 0.2%, while Hong Kong’s Hang Seng Index HK:HSI -0.79% eased 0.8%.

The flash PMI is compiled using 85% to 90% of total PMI responses and is intended to give an early reading of the final survey sample.

The softening in activity as indicated in the PMI could bolster the view that China may switch to a neutral or even an easing monetary-policy stance against a global backdrop of weakening demand.

Ahead of the PMI release, analysts at Samsung Securities Asia said consumer inflation would peak out in the 5%-6% range, as Beijing’s relative tightening begins to show results in taking the steam out of prices.

“China has done enough tightening and needs to decide whether global deflationary pressures over the next several months will be strong enough for it to reverse the course and start again stimulating the economy,†wrote Samsung Securities head of research and strategy, Viktor Shvets.

Shvets said it was “more likely†easing momentum in the global economy would result in China opting for further monetary stimulus.

 

[Glen]

China is not going to have a soft landing. When consumption is less than 40% of GDP. It requires far to much capital now to create a single point of GDP.
In other news have a look at this...
http://macrobusiness.com.au/2011/06/how-germany-achieved-stable-affordable-housing/
London looks an awful lot like Toronto.

 

[daveto]

Glenn,

Thank you for the macrobusiness link. A very interesting article about the effect of land regulations.

I also saw the following spirited discussion on that site in response to their essay on the Demographia housing study. Many good points arguing in favour of the validity of the demographia affordability study, but also those who argue that the median income to housing affordability target of 3-4 is irrlevant (as a bear, I of course think the demographia study and the 3-4x income target are valid)
http://macrobusiness.com.au/2011/01...011-demographia-housing-affordability-survey/

 

[KA1]

http://www.theglobeandmail.com/repo...riving-vancouver-house-prices/article2072241/

 

[js97]

Just wondering... does the strength of CAD have any effect on the property market?

Yes, and yes.

Our strong dollar has managed to keep inflation relatively at check. If our dollar where to drop quickly to 85 cents, you would see an increase in the cost of foods and any/all other imports. The direct impact to inflation would force a move by the BoC to increase interest rates, and impact affordability.
This is of course, not addressing the implications of a lower dollar for our economy.

I would think our high dollar is one of the reasons why our interest rates/inflation has been so low - a result of having the most stable banking systems (so far).

 

[cdr108]

Yes, and yes.

Our strong dollar has managed to keep inflation relatively at check. If our dollar where to drop quickly to 85 cents, you would see an increase in the cost of foods and any/all other imports. The direct impact to inflation would force a move by the BoC to increase interest rates, and impact affordability.
This is of course, not addressing the implications of a lower dollar for our economy.

I would think our high dollar is one of the reasons why our interest rates/inflation has been so low - a result of having the most stable banking systems (so far).

if you believe the MSM inflation data, then yes it's 'in check' but considering necessities such as food and fuel have gone up at least 25-50% in the past 2 years i don't believe it.

but a high dollar has kept the prices from going up more.

i would also say our high dollar isn't the result of our banking system ...
it's just that our economy isn't in the complete tanks like other countries especially the USA,
and we've been able to fool ourselves to thinking we're better as the discretionary income draining housing market continues to escalate .... so it's all relative.

 

[myfive]

if you believe the MSM inflation data, then yes it's 'in check' but considering necessities such as food and fuel have gone up at least 25-50% in the past 2 years i don't believe it.

but a high dollar has kept the prices from going up more.

i would also say our high dollar isn't the result of our banking system ...
it's just that our economy isn't in the complete tanks like other countries especially the USA,
and we've been able to fool ourselves to thinking we're better as the discretionary income draining housing market continues to escalate .... so it's all relative.

We are seen as a resource based economy which has been strengthening our dollar for the last few years, similar to Australia. Expectation is for the price of commodities to continue to go up this decade, which is good for our economy, and hence our dollar.

For international investors that want a place to park money out of their country, one of their best options is to invest in hard assets in countries with strenthening currencies. So Canadian real estate is in particular favour right now. The expected increasing volatility of some of the key currencies going forward, such as the Euro and the US dollar makes cdn dollar denominated assets all the more appealing. And in fact, the Chinese Yuan is tied to the US dollar, so it is very smart for Chinese to invest money over here IMO.

In fact, those Chinese (for example) that have waited are finding prices a lot more expensive now, as prices have gone up, AND, the purchasing power of the Yuan compared to the Cdn dollar has gone down, so the procrastinators have been hit twice. Conversely, those Chinese that bought here a few years ago have been very happy with their returns.