# Canadian RE Bubble?



## Cal (Jun 17, 2009)

Just wondering what some of you out there are wondering in regards to our RE market.

Personally...I think at best we can hope for a plateau in valuations....but probably a 'correction' is in the future.

Gov't is in a rough spot...I think they want to raise rates a bit to slow the RE market (definitely don't want a crash like the states), but increasing rates will slow the economic recovery...

Opinions?...


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## msimms (Apr 17, 2009)

Cal said:


> Just wondering what some of you out there are wondering in regards to our RE market.
> 
> Personally...I think at best we can hope for a plateau in valuations....but probably a 'correction' is in the future.
> 
> ...


I don't think Bank of canada will raise Rates with R/E in mind, I believe their #1 priority is inflation. And if inflation stokes because of the money supply increasing due to stimulus or debt reduction efforts then Boc will rate rates and that will definitely affect real estate prices.


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## CanadianCapitalist (Mar 31, 2009)

Cal said:


> Just wondering what some of you out there are wondering in regards to our RE market.
> 
> Personally...I think at best we can hope for a plateau in valuations....but probably a 'correction' is in the future.
> 
> ...


Real estate is very local. I live in Ottawa and I wouldn't even venture to guess which way prices will go. Prices dropped a bit late last year and early this year but reports indicate they are up again. Who knows what the future will bring? Your guess is as good as mine.


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## Rickson9 (Apr 9, 2009)

Cal said:


> Just wondering what some of you out there are wondering in regards to our RE market.
> 
> Personally...I think at best we can hope for a plateau in valuations....but probably a 'correction' is in the future.
> 
> ...


I have no opinion on this since I'm an utter failure at predicting the future.

However, having said that, I don't see anything reasonable in the Toronto RE market at the moment. So far my wife and I haven't found anything interesting.

We don't base decisions on our opinion of the future or other predictions. Actually we consider thinking about what may or may not happen to be a waste of time - time better spent looking for deals.

In general my wife and I look around to see if there is a deal in the asset class we're interested in. If there is a deal, we buy. If there is no deal, we just sit around and watch DVDs.


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## FinancialJungle (Apr 22, 2009)

There's nothing reasonable in Coal Habour as well. 

Red Robinson recently sold his North Vancouver home, and started renting in Coal Habour for $4000 per month:

http://www.vancouversun.com/Home+With+legendary+Robinson/1936523/story.html

Smart move if you ask me. The condo is probably going for $2,200,000. In other words, the condo yields only a measly 2.2% before any expenses (tax, condo fee, etc). Even if the market plateaus, Red is better off renting rather than owning his home.

Really depends on where you live though.


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## Rickson9 (Apr 9, 2009)

FinancialJungle said:


> http://www.vancouversun.com/Home+With+legendary+Robinson/1936523/story.html


Cool story. Thanks for the link!


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## Cal (Jun 17, 2009)

I hope I haven't misled people on my interest rate comment.

I am more interested in peoples RE thoughts. I have my own opinions, as stated. And have no interest in purchasing anything at current prices.

It just seems to be such an emotional thing for some people, I thought it would be a interesting to hear other viewpoints.


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## canadianbanks (Jun 5, 2009)

Our Canadian RE bubble is the "last man standing" in the Western World. When it crashes, it will be fast and furious (15-20% per year for 3 years or so in my humble opinion). As a result of the crash there will be a immense banking crisis in Canada, which will bring the economy on its knees. Say what you want, but we are no different than the rest of the developed world (compared to US we are actually much worse).


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## NorthernAlex (Jul 26, 2009)

Where (countries), but in the US, did we have a bursting RE bubble, please?

Just in cities, because the LOCAL market was overheated, but not in countries.

London had its bubble- NOT Britain. 

Barcelona, Madrid or new established summer cities like Benidom- but not Spain in general.

The ripple effect maybe reached each country in whole because of the news, but not because of the market in general.

Canadianbanks, do you mind of showing me examples others than Vancouver (overheated because of Olympia 2010), Edmonton (because of its oil) or Toronto and their Condo bubble, which will burst first? 

I am from Europe and had there a RE history and have a track record here, too.

NOWHERE in Europe nor on the American continent is it so save (and lucrative) to invest like in Canada if you do your due diligence, follow investment rules and know the market where you invest.

The Tiger Woods years are gone, where every hit was an eagle, so to speak. Now you have to aim!


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## FeeOnly.ca (Jun 4, 2009)

An eye-opening look at US Real Estate prices over time.

Those that think Real Estate prices only go up should think again. There have been long periods of sideways, down as well as up.

See for your self:

http://www.yourwealthadvisor.ca/apps/videos/videos/view/3926498-real-estate-roller-coaster


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## Berubeland (Sep 6, 2009)

*Yes its a bubble !!!*

Housing prices are created by supply and demand. Before September of 2008 if you had good credit you could buy a house with 0% down. When this new condition was introduced sales sagged. Now you need 5% down to buy a house. The Toronto market had a mini adjustment between August 2008 to Spring 2009. 

At the current house prices the average being say $382,000 less 5% down of $19000 gives me a mortgage of $2122.06 with no property taxes included. 

A couple would have to make about $80,000 a year to qualify add another $10,000 in income to qualify for the property tax portion @ $300 per month 

The average family income is $71,000 in Toronto. There is an affordability gap of about $20,000. 

My old dad says if two people working full time cannot afford a house the prices must come down.


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## NorthernAlex (Jul 26, 2009)

*No, it is not a bubble.*

I bought my first 1 BR apartment when I was 19 or so. Not fancy at all, but mine and cheap. I payed it off as soon and fast as possible. Met my wife, moved to a better 1BR. Got a baby, upgraded couple years later to a 2 BR... aso. 

Call me old fashioned, but if I can't pay down 20% (min) I am not purchasing- not my rental, nor my private family home or whatever. I will have to wait longer to get there or I have to get something different/smaller.

Berubeland : Maybe it is not a bubble, but the inflated demand of the individual. See MDJ a couple weeks ago. http://www.milliondollarjourney.com/lifestyle-inflation.htm

In which major city in this world can a family live in a house, if they earn average income. It might sound harsh, but it is reality. 

They would have to
a) save more to have bigger down payment
b) earn more
c) move out of town
to get a house.


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## Smac20 (Sep 7, 2009)

*Real Estate Bubble*

I didn't think there was a real estate bubble, but am now getting suspicious.

I wrote a paper about real estate prices in Canada a year ago by adapting the Case Sheller index formula for the Canadian market and only came up with Calagary as a potential bubble location.

However, it seems too good to be true that prices are still at historically unaffoardable levels in much of Canada. I live in Vancouver and with a two income professional household income my GF and I are unable to affoard anything more than a 1 bedroom apartment. That is a joke considering we have a combined income over 100k.

------------------------------------------------------------------------
Investing In Canada


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## sprocket1200 (Aug 21, 2009)

the only problem is that in many cities there can be more than one family living in the same house, or they have suites rented out.

why anyone would ever want to have others living in their house is beyond me. my house, get out!

then again, maybe it was just my upbringing...


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## SimonSays (Apr 10, 2009)

Smac20 said:


> I didn't think there was a real estate bubble, but am now getting suspicious.
> 
> I wrote a paper about real estate prices in Canada a year ago by adapting the Case Sheller index formula for the Canadian market and only came up with Calagary as a potential bubble location.
> 
> ...


I too am looking for a place in Vancouver area and my wife and I also have a combined income over $100K although this will change next year when we have our first kid.

Even with a large downpayment (20%) on $300K I am very uncomfortable purchasing in this environment because interest rates WILL increase. Artificially low interest rates are keeping prices propped up when I was expecting a much larger drop in pricing.

Still looking for a good deal but who knows what will happen here.


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## CanadianCapitalist (Mar 31, 2009)

SimonSays said:


> I too am looking for a place in Vancouver area and my wife and I also have a combined income over $100K although this will change next year when we have our first kid.
> 
> Even with a large downpayment (20%) on $300K I am very uncomfortable purchasing in this environment because interest rates WILL increase. Artificially low interest rates are keeping prices propped up when I was expecting a much larger drop in pricing.
> 
> Still looking for a good deal but who knows what will happen here.


It is hard to predict what RE markets will do. Prices can stay insane for a long time. Or prices may remain fairly stable allowing inflation to catch up. Or there could be sharp correction. It is hard to tell but by all accounts Vancouver has the priciest markets in Canada.


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## NorthernAlex (Jul 26, 2009)

Smac20 said:


> I didn't think there was a real estate bubble, but am now getting suspicious.
> 
> I wrote a paper about real estate prices in Canada a year ago by adapting the Case Sheller index formula for the Canadian market and only came up with Calagary as a potential bubble location.
> 
> ...


If someone would have asked me 16 months ago where we have a bubble in Canada I would have said Vancouver and the oil cities. Now I would say only Vancouver and this bubble will burst, fmpov, after the 2010 Olympics. 

There are local bubbles (like Toronto has its condo bubble), but general Canada does not have one!


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