# some thoughts on when Toronto and Vancouver RE bubble will burst



## Pluto (Sep 12, 2013)

According to this guy, if it is money from Asia, mostly China, that is sustaining the price rises, then the bubble will burst when money from China stops. 

http://macro-man.blogspot.ca/2017/06/economist-riff-of-week-canada.html


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## Mortgage u/w (Feb 6, 2014)

but its not money from Asia that is fueling the price hike - its plain old supply and demand.

the bubble will burst when unemployment rises. Good luck predicting that one.


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## DollaWine (Aug 4, 2015)

Mortgage u/w said:


> but its not money from Asia that is fueling the price hike - its plain old supply and demand.
> 
> the bubble will burst when unemployment rises. Good luck predicting that one.


Agreed that Asian money probably isn't making a BIG impact, but it's more than just supply and demand... a lot of it is speculation, investors, people taking on massive debts because interest rates are low.. etc


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## sags (May 15, 2010)

Some news reports have been that banks have told appraisers to lower the appraisal values, which is forcing some people to borrow the shortfall money from alternative lenders. Lawyers are getting phone calls from frantic buyers to get them out of contracts.

Listings are up. Sales are down. Prices are falling.

The housing industry is looking very wobbly. I would rather be a seller than a buyer in this market.


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## mark0f0 (Oct 1, 2016)

Bubble plateaued in 2013 coincident with Minister Flaherty (RIP)'s crackdown on CMHC subprime mortgage insurance issuance.. Price "increases" since haven't been applicable to individual, identical, unimproved properties, but have been the artifact of drastic changes to the sales mix. Which was inevitable given the onslaught of brand new, un-depreciated supply that has come to market in both cities after the new-build order frenzy in 2011-2013.

Another factor, particularly in Vancouver, but also to a lesser extent in Toronto, has been the "landlord families" engaging in "assignment flipping" scams amongst themselves, to provide misleading and higher 'reference valuations' for their financers. In a nutshell, a whole bunch of related party transactions are conducted, on paper, but not actually registered down at Land Titles/Teranet, and reported to the MLS. Exxagerating price changes in some neighbourhoods dominanted by "landlord family" ownership.

Now that the sales mix adjustments have run their course, down RE goes.

"Asian" money is practically non-existent (not literally zero, but so close to it so as to basically be a rounding error!). Too many Canadians unfortunately are caught up in a rather racist meme concocted by various participants, to realize that the culprit behind Canada's RE bubble has been domestic speculation.


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## tavogl (Oct 1, 2014)

sags said:


> Some news reports have been that banks have told appraisers to lower the appraisal values, which is forcing some people to borrow the shortfall money from alternative lenders. Lawyers are getting phone calls from frantic buyers to get them out of contracts.
> 
> Listings are up. Sales are down. Prices are falling.
> 
> The housing industry is looking very wobbly. I would rather be a seller than a buyer in this market.


Prices are not falling in the Vancouver area, they are actually going up again. Maybe they are going down everywhere else in Canada.


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## OnlyMyOpinion (Sep 1, 2013)

mark0f0 said:


> Bubble plateaued in 2013...


All based on data you can't reveal as I recall.


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## bgc_fan (Apr 5, 2009)

sags said:


> Some news reports have been that banks have told appraisers to lower the appraisal values, which is forcing some people to borrow the shortfall money from alternative lenders. Lawyers are getting phone calls from frantic buyers to get them out of contracts.
> 
> Listings are up. Sales are down. Prices are falling.
> 
> The housing industry is looking very wobbly. I would rather be a seller than a buyer in this market.


The problem is that each market is different. Having moved around over the past 10 years, I thought I would take a look how I would have fared in two specific areas, Quebec City area and Barrie. Around Québec city, I had sold a place around 7 years ago for $260k or so. Today, in that area, a larger model sells for about $360k. I sold a place near Barrie 5 years ago for $220k or so. Now, the same model with some minor upgrades is listed for $445k. So which example is a true reflection of the housing market? 

Of side interest, the high end houses near Barrie did not increase the same percentage, meaning that there is a ceiling for expensive homes in certain areas. For example, I believe the most expensive houses in that area were roughly $500k or so. Right now, they are about $750k.


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## james4beach (Nov 15, 2012)

I had to go back 10 pages in the Real Estate section to find any thread with 'bubble' in the title. This is the first one I found, and it's from 2017. That seems like a pretty good indication of complacency and lack of concern!

I think we _are_ in a housing bubble, and I think this virus event will finally burst it. This crisis is a big enough shock to the system to burst a bubble. It was just a matter of time before some kind of shock happened.

The RE market, which is already illiquid, seems to have totally frozen up and RBC forecasts the first nationwide drop in prices since 2009: Bloomberg article

Personally I don't think housing will simply bounce back to normal after this. There is far too much loss of employment and a big hit to personal finances coming. We're already seeing signs of credit tightening broadly in the country... traditionally, these are bad for housing markets.

Worse yet, even at the start of this crisis (today) the central bank has already lowered rates to about zero. So home prices cannot simply be pumped back up by dropping rates again. A friend texted me yesterday that his mortgage rate is now 1.7%. The central bank has exhausted what it can do with low rates.

I think the bubble has burst. I don't think Canadian housing will be the same after this.


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## Money172375 (Jun 29, 2018)

james4beach said:


> I had to go back 10 pages in the Real Estate section to find any thread with 'bubble' in the title. This is the first one I found, and it's from 2017. That seems like a pretty good indication of complacency and lack of concern!
> 
> I think we _are_ in a housing bubble, and I think this virus event will finally burst it. This crisis is a big enough shock to the system to burst a bubble. It was just a matter of time before some kind of shock happened.
> 
> ...


is there a bubble? Probably. Assuming that covid is a short term event (less than 2 years)...I think the bubble growth and prices in real estate will rebound quickly. simple supply/demand. Limited supply coupled with increasing demand will move prices higher...hopefully slower this time. Immigration will continue, unless govt restrict it for fear of importing another virus. I always need to do a double take when I compare Canada’s population and density to most other developed countries. I live in rural Ontario and it feels sparse (formerly lived in gta). Besides pei and Nova Scotia, Ontario’s density is massively larger than the rest of the country.....it’s surprising, especially compared to BC and Quebec





__





Population and dwelling counts, for Canada, provinces and territories, 2011 and 2006 censuses







www12.statcan.gc.ca


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## STech (Jun 7, 2016)

sags said:


> Some news reports have been that banks have told appraisers to lower the appraisal values, which is forcing some people to borrow the shortfall money from alternative lenders. Lawyers are getting phone calls from frantic buyers to get them out of contracts.
> 
> Listings are up. Sales are down. Prices are falling.
> 
> The housing industry is looking very wobbly. I would rather be a seller than a buyer in this market.


Source?


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## Money172375 (Jun 29, 2018)

STech said:


> Source?


why are the appraisals happening so late? A bank appraisal should be a part of the mortgage pre-approval process. people shouldn’t be waiving their condition of financing until the appraisal is complete and a firm and final commitment is made by the bank.

as an aside....you‘ll sometimes see a bank representative on a new home builder site. In these cases, a blanket appraisal is usually done on the entire subdivision. The bank is then able to offer some piece of mind by guaranteeing the appraisal value for a period of time.... in say 2 years.......this offers amazing protection in what might be a declining value situation. It would be rare (and unknown to happen to most first time buyers), but a new house purchased today could be worth less in 2 years. Friend of mine purchased his new townhouse in 2016. Moved in 2018. Neighbours are selling at a loss now.


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## STech (Jun 7, 2016)

Money172375 said:


> why are the appraisals happening so late? A bank appraisal should be a part of the mortgage pre-approval process. people shouldn’t be waiving their condition of financing until the appraisal is complete and a firm and final commitment is made by the bank.


No. A source for the claim that banks are telling appraisers to lower values, and forcing people to borrow from alternative lenders. Clearly someone is just making crap up, and has no clue about the mortgage process and lending ratios.

And appraisals are a part of the pre-approval before you waive condition of financing.


A lot of rumors and misinformation gets spread at these times, but I honestly wonder why people don't pause and think for a second before they post garbage? Someone who just lost their job, just bought a house, or is panicking about finances and keeping a roof over their family's head, will have elevated anxiety and depression when they read more doomsday rumors. Why do that to anyone?

And no, this doesn't affect me personally at all. Paid off the house years ago, and even a 50% drop in value still puts me way ahead of what I paid 20 years ago, and I don't have to pay rent. This is a time to show leadership and help people out, calm their nerves, help with optimism. Posting rumors shows a genuine lack of character and integrity.


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## nathan79 (Feb 21, 2011)

The post you are referencing is from 2017. Hard to know where he got that info, but there has been a trend toward alternative lenders in markets like Vancouver... How private lending is distorting the Vancouver housing market

Hard to feel sorry for anyone who just bought a house and is worried about the value going down. The fact that we're in a housing bubble has been well documented, so they should have known what they were (potentially) signing up for. I blame FOMO and unethical realtors for not educating people on the potential risks of buying at such elevated prices.

The people who didn't over-leverage themselves and saved for a rainy day aren't going to lose their homes. That's what the 6-month mortgage deferral and unemployment benefits are for. Lower prices will be good for everyone in the long run.

Those who over-leveraged themselves, particularly into multiple non-cash-flowing investment properties, are in for a rough ride. This likely includes the majority of people who needed alternative lenders to finance their purchases. Such loans are usually at much higher interest rates, so the only reason people take them is because they can't qualify with a traditional lender. This part of the market is going to blow up, no question about it.

James, there's certainly been no complacency here in BC. Practically everyone I know has been talking about the bubble for the past three years and before. So many people are simply unable to enter the market, while many others are stuck in tiny condos and unable to move to a better place to start a family.


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## STech (Jun 7, 2016)

^ You're right about the post date, I didn't notice it first, but it's actually even more relevant now, than in 2017. The fact remains, no credible source will say that banks are telling appraisers to lie.

Some facts. Banks are a business, not a charity. As such, they're under no legal or moral obligation to give you a mortgage. If they think a loan is too risky, they'll simply tell you no. They will not tell appraisers to intentionally lie, because it'll A) open them up to law suits and loss of public confidence, and B) it'll un-intentionally lower values for other properties they hold a mortgage on.

On the issue of private lenders. I agree that it was starting to get out of hand, and I can see tightening coming after all of this. It'll be good for everyone.

And lastly, yeah, maybe the virus will finally pop the housing bubble. The insanity certainly wasn't contained to Toronto and Vancouver only.


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