Actually, given that the Liberals' program has been explicitly targeting infrastructure spending and higher economic growth, Trudeau appears to be a lot more like Trump, than Obama.
Canada's Housing Bubble Explodes As Its Biggest Mortgage Lender Crashes Most In History
- Thread starter Zr1Trader
- Start date
Canada has both an immigration and debt problem.
Race problem - not so much.
Life After Oil Makes Real Estate Canada's New Economic Crutch
https://www.bloomberg.com/news/arti...makes-real-estate-new-crutch-canada-eco-watch
https://www.bloomberg.com/news/arti...makes-real-estate-new-crutch-canada-eco-watch
Interesting article/summary about the Home Capitol fiasco.
https://www.bloomberg.com/news/arti...-canada-s-frothy-housing-market-quicktake-q-a
What I found most interesting is how they say that they serviced mortgages for those people who couldn't get a mortgage from the big 5 banks, like immigrants. When you consider that much of all the new sales go to immigrants (perhaps, or speculators, who really knows), perhaps much of these recent price spikes are a result of these alternative mortgages.
The tricky thing in my opinion is that all of these figures about price spikes are based on several thousand deals. You take a few months of sales that are 30% above last year, and all of a sudden conclude that the entire RE market is 30% higher, but this is bullshit because its not like even 10% of all homes could be sold for this if they all had to be sold at once. Its just like in the markets. They may move up during the overnight session on very little volume, but once the open hits, the huge amount of volume can very well completely reverse the move very quickly.
If much of these huge rallies in RE are a result of people almost being forced to enter the market via bidding wars, and then having to get alternate mortgages, then much of this rise in RE prices is in a way, inauthentic. And if this is a case, then what really is the true value? And what is the true value if you take away access to really cheap money that may very well run out, as in the crush of these alternative lenders?
Edit: Of course all mortgages are cheap money now, so maybe I should say easy money, not cheap money, since these alternative lenders are helping those who would have trouble getting a loan at a big bank.
https://www.bloomberg.com/news/arti...-canada-s-frothy-housing-market-quicktake-q-a
What I found most interesting is how they say that they serviced mortgages for those people who couldn't get a mortgage from the big 5 banks, like immigrants. When you consider that much of all the new sales go to immigrants (perhaps, or speculators, who really knows), perhaps much of these recent price spikes are a result of these alternative mortgages.
The tricky thing in my opinion is that all of these figures about price spikes are based on several thousand deals. You take a few months of sales that are 30% above last year, and all of a sudden conclude that the entire RE market is 30% higher, but this is bullshit because its not like even 10% of all homes could be sold for this if they all had to be sold at once. Its just like in the markets. They may move up during the overnight session on very little volume, but once the open hits, the huge amount of volume can very well completely reverse the move very quickly.
If much of these huge rallies in RE are a result of people almost being forced to enter the market via bidding wars, and then having to get alternate mortgages, then much of this rise in RE prices is in a way, inauthentic. And if this is a case, then what really is the true value? And what is the true value if you take away access to really cheap money that may very well run out, as in the crush of these alternative lenders?
Edit: Of course all mortgages are cheap money now, so maybe I should say easy money, not cheap money, since these alternative lenders are helping those who would have trouble getting a loan at a big bank.
Home Capital says account balance halves, suspends dividends
* Suspends quarterly dividend
* Says HISA balance to slump 50 pct
* Hires 3 new directors
May 8 (Reuters) - Canada'sHome Capital Group Inc <HCG.TO> estimated on Monday that the balance in its high-interest savings accounts (HISA) halved in the past week and said it had suspended its dividend and tapped its C$2 billion ($1.5 billion) credit line for the second time. Canada's biggest non-bank lender also said it hired three new directors to its board and a named a new chairwoman as it continues its management overhaul in an effort to win back investor confidence. [nCNWksRrSa] Home Capital has become a rare Canadian financial institution to face a run on its deposits and its troubles come at a time when the Canada's biggest province Ontario has taken a series of measures to cool its red-hot housing market. The fear of contagion has hit Canadian bank stocks and rival subprime lender Equitable Group <EQB.TO> has lined up C$2 billion credit facility.
More at
http://www.nasdaq.com/article/home-...ance-halves-suspends-dividends-20170508-00672
* Suspends quarterly dividend
* Says HISA balance to slump 50 pct
* Hires 3 new directors
May 8 (Reuters) - Canada'sHome Capital Group Inc <HCG.TO> estimated on Monday that the balance in its high-interest savings accounts (HISA) halved in the past week and said it had suspended its dividend and tapped its C$2 billion ($1.5 billion) credit line for the second time. Canada's biggest non-bank lender also said it hired three new directors to its board and a named a new chairwoman as it continues its management overhaul in an effort to win back investor confidence. [nCNWksRrSa] Home Capital has become a rare Canadian financial institution to face a run on its deposits and its troubles come at a time when the Canada's biggest province Ontario has taken a series of measures to cool its red-hot housing market. The fear of contagion has hit Canadian bank stocks and rival subprime lender Equitable Group <EQB.TO> has lined up C$2 billion credit facility.
More at
http://www.nasdaq.com/article/home-...ance-halves-suspends-dividends-20170508-00672
Here's an example of Toronto real estate. It's a joke, mimico is Toronto west suburb. They won't dare display a photo of the exterior. A similar townhouse in Fort Lauderdale will go for around 160k with upside potential, maybe less.
https://toronto.craigslist.org/tor/reb/d/etobicoke-stunning-2-story-condo/6875846845.html
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I met someone who helps create MBS for one of the large banks in Toronto. He said an outrageous number(if I recall it was something like 25%) of residential units are being bought by investors and rented out as Air BnB. If you can get 4k a month renting a 500 sqft apartment out on AirBnB why wouldn't you pay 500k for it?
Toronto's tourism has been increasing every year. And they just set another record in 2018. I think if you see tourism slow down, that might be a good predictor of future head winds.
Itll be interresting to see how it plays out!
This is a very interesting point and may very well explain the continued appreciation in values. But it only takes one law from the city to turn the tide. Just like in Vancouver where the city made AirBnB illegal, Toronto could do the same. In fact, it should do the same. When your local citizens who work in the city don't have a place to live, its a problem that politicians will need to solve.
I'm personally not comfortable with this whole AirBnB model and how it skirts the rules established for the hotel industry. Are these AirBnB hosts paying the hotel tax? Are they even paying their taxes to begin with? Once you equalize all this, maybe running your AirBnB isn't as lucrative, and worse, it might be illegal one day.
You are making the assumption the unit is rented out majority of the time, with minimal vacancy. Condo associations will crackdown on short term rentals like other cities. Wait until mortgage interest rates hit 8-9% or higher. Eventually the chinese will return home. They will become tired of paying investor property tax higher than locals. Good luck with rental model in an inflated market. There's nowhere else to go but down. They say 50% downside is conservative.
I highly doubt interest rates will go much higher from here. They simply can't or else the entire system will crash, especially for the highly indebted Canadians.
On the flip side, the high rate of immigration keeps stuffing more and more people into cities like Toronto and Vancouver. So although the fundamentals don't support these prices, everyone will need somewhere to live, and officials will try every trick in the book to support people being able to live somewhere.
Its too easy to say that prices will drop 50%. Before that happens, everything else will have to be tried first. I can't even imagine what all of this is, but I doubt it will be as easy as a fire sale pricing.