Shots fired! While our media has been pointing out how Chinese buyers are driving up real estate prices, the Chinese media has been dissecting our economy, government, and warning Chinese buyers of the dangers of owning Canadian real estate.
We’re always curious to know how other countries interpret our statistics, political climate and what outside media is reporting about Canada’s economy. Since China has been a hot button subject in Canadian news recently, we thought it was high time we took a look at how Canada is portrayed in China’s State regulated media. While the Chinese media does acknowledge that Chinese buyers are a contributing factor to our prices – and admit they have been capitalizing on it – they also point out some interesting observations that our media has failed to cover. Here are the most interesting points we found from three major Chinese publications.
Worse Than The 2008 US Crash
Hexun, China’s largest finance portal, recently published an article pointing to Canada’s debt fueled economy. They noted that Canadians have the largest debt-to-income ratio of any G7 country, with the average spending 165% of their salary. To contrast, at the height of the US housing crisis in 2008, Americans carried what was then considered an outlandish 147% debt-to-income ratio – 17 points lower than where we currently sit. Canada’s total household debt reached $1.892 trillion dollars, with $1.234 trillion dollars of that as mortgage debt – roughly 65% more than we make per year. To put that 1.82 trillion dollars into perspective, we could have run the US government for 8 months with that amount of money.
“This is a very big bubble. And it’s going to end in tears.”
CN Gold, another one of China’s large financial sites, ran an article quoting Toronto-based economist Paul Ashworth who told them “This is a very big bubble. And it’s going to end in tears.” They then went on to say that once this bubble bursts, real estate will likely be a major “blow to the Canadian economy”.
Real Estate As An Economy Booster
Sina.com’s real estate partner, and NYSE listed Leju was quick to point out that while the average home price in Vancouver is up more than 30%, the province is in a state of “stagflation.” Stagflation is a fancy word that describes when the cost of living increases but there is stagnant demand in the economy. They go on to say BC has one of the lowest median incomes in the country, and the BC government is hoping rising home prices will “render some good”.
While they didn’t put statistics to those statements, we recently published an article that showed Vancouver’s home prices have risen 172% in the last 15 years, while income has only moved up 10%. The struggle in VanCity is real.
BC Government Saved This For The Election
Most interesting, Chinese media outlets are questioning the timing of all of this. Afterall, Vancouver’s real estate has been growing at an unsustainable rate for years (more like decades), while incomes have stagnated. An author from Leju wrote that the Asian investment conversation is being brought on as platforms for the Vancouver municipal and BC provincial elections.
Leju also explained that other cities like Toronto, that have substantially more international buyers, are not having discussions about “vacancy taxes” and “restrictions”. They further allege that the government in Vancouver and BC are looking to distract constituents with “other factors” to explain why income in the province is one of the lowest in Canada.
“this crisis threatens the stability of [the Canadian] financial system.”
Hexun was a little more blunt, stating the Government of Canada “must introduce policies to cool the property market, or face collapse”. Further adding that “this crisis threatens the stability of [the Canadian] financial system.”
While you should approach all media with a grain of salt, they bring interesting points to the table that should be part of the discussion. In Vancouver’s market where mayor Gregor Robertson made almost four times his annual salary selling a home he lived in for only 2 years, and BC Finance Minister Mike de Jong has a stake in 7 homes (only 5 mortgages though), are Chinese speculators the problem or are all speculators contributing to the problem? Also, as Canadians we tend to not discuss things like declining income, which is unfortunate because it’s a big part of our housing story.
Let’s Have An Honest Discussion About Real Estate
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Haha, that turd has 5 mortgages? I need to get into politics.
Thats what I call a conflict of interest.
He sold way too early though. Elliott wave charts point that we have just begun the rally on the vancouver home prices. When a correction takes place, it will be at such a higher price point that the pullback may not even touch the prices that it is today. Now is your chance to buy in. The Brexit and other global instability will only keep interest rates low, driving up the home prices. Even foreign ownership restrictions will not do much as the Chinese buyers will only seek naturalization delaying the time to sell the property increasing the prices. When mainland Chinese become Canadian citizens, they lose the citizenship of their homeland so they will not be taking the money out of Canada back to China thus keeping the real estate prices high. The early 2000’s with the Hong Kong Chinese returning to China does not serve as a precedent because Hong Kong allows dual citizenship so Hong Kong Chinese were able to return. Mainland Chinese people will only be able to return as tourists like any other non ethnic Chinese Canadian wanting to go visit China will have nowhere else to park their money but in their new home. So I urge you all to get together with others and buy some land while you can, if you can.
“Now or never” is hallmark of historical bubbles. Patience is difficult, and rewarding.
You’re an idiot. Sales have already begun to flatline, as China cracks down on cash leaving the country. And after the BC Liberals get the boot in May 2017, the new government’s going to be bringing in a boatload of new legislation to crack down on foreign buyers – maybe even an outright ban. The smart money is getting out now.
I guess you’re trying to persuade a few more suckers to buy the real estate you’re holding on to. Mr. Tan.
It’s the conservatives that started this mess, why would they “crack down”? NOT!
Happy to see someone to agree with what is going to happen from a few years ago.I tried to warn many Asian friends because of my learning about real estate through the three recessions and developing my taste buds to pick up the flavour of impending doom in the business.
Misappropriated funds whether it be foreign or Canadians using cheap loans for the wrong reason as mortgages instead of developing growing businesses are an obvious indication that we have become arrogant and lazy.
Glad I only see real estate as somewhere to live.
So true. Get a mortgage while interest rate is low and buy a property!
Vancouver housing is still very cheap compare to Hong Kong.
Vancouver offers real land.
Also the next wave of rich immigrantsvwill be from India, the next superpower.
Or,,,live in a tent tear the system down
It must stop.either through direct citize action or ..the government is obviously against the people….Canadians are a polite people ando there are those who take this for granted…this is coming to an end and will make your financial projections irrelevant…
still think he sold to early?
Guess you were right. What’s your thoughts on aftermaths of COVID-19 on real Estate
Why not propose to end dual citizenship in Canada? If those Chinese want to come to our country, so be it. Let them become Canadian and buy a home here. But then they should also give up their citizenship with their home country. Until 1977, Canada also did not allow dual citizenship. Citizenship of convenience was not an issue. We have become a country where foreigners come here buy land and cash out without paying much income tax at the expense of citizens that truly live here in Vancouver. Many of us are being squeezed out of buying a home so that foreigners can speculate on real estate, and cash out to make a quick buck. We should continue to be a country that accepts people from all ethnicities but dual citizenship has proven to become unsuccessful. We need to end dual citizenship for those who choose to become a citizen of our country. Those who are born into dual citizenship should have until they have reached the age of majority when they could make a declaration of choice of which nationality they should choose. If they choose Canada, they should be submitting a copy of a certificate of renounciation from their home government as well as Canada notifying the country of their other citizenship of the fact that they have chosen Canada and has intended to renounce the other country of citizenship. Canadians should like Americans be required to enter and exit the country on a Canadian passport. (I realize that this is an issue for some countries because they also require their citizens to enter and exit their country on their passport for example, the USA. But then they need to choose. In addition to this, we should tax Canadians by citizenship, not by residency in a very US like fashion. We have much to learn from our southern brother. We need to stop being walked all over as citizens so that foreigners get to make money at our expense. Should we be paying for all these Chinese when they fly back to Canada one day after spending years inhaling the pollution of China? I think we are going to have a crisis. I am sure that many Chinese will choose to give up a Chinese passport for ours, and that is totally cool. But they should still pay Canadian income tax each year regardless of where they live from then on. Americans were wise to not get walked all over by immigrants. You join you join. We need allow everyone a chance at becoming a Canadian, but they also need to be fully Canadian. Not some hypenated Canadian that is actually 90 percent citizen of the other country, and 10% Canadian. We need to a country with a one citizenship policy. Those who already have dual citizenship should be given 2 years to decide.
I’m sorry but your whole point is wrong. China doesn’t allow dual-citizenship, just like MANY other more conservative countries. DID YOU KNOW THAT? so that means citizens of China needs to give up their citizenship when they become a citizen in Canada.
It took us a while to get to a more liberal and global minded place. The estate situation is far more complicated than just that. Chinese are the easier scapegoat to pin point in this larger issue.
Everyone please look deeper, have more insights, try not to fall into the conservative thinking and stereotyping groups which leads to discrimination and nationalism.
‘ conservative ‘ thinking is bad? Now who is the prejudice d one!
“…which leads to nationalism” …?
You’re kidding, right? This is a SOVEREIGN nation, so you BET we respect nationalism. You goddamned bleeding-heart free-trade foreigners can take your invasion force and get the hell outta my country!
Donald Trump is that you?????????????????
I agree hundred persent.
I think you mean Gregwhore Robertson.
“But… but… but this market is different! There is no bubble, it will never crash!” — Every bubble denier ever.
Our CEO is always saying a fundamental requirement of a bubble is that people do not believe it can happen. Denying almost always demonstrates a lack of preparation.
@Tiffany no offense, but your statement above sounds just like an Amway guy trying to promote people to join Amway, by saying: first, you need to believe.
Not sure what your point is, but what Tiffany said was the opposite: People have to DENY, not believe. And there is massive denial of this bubble, just as there was in the U.S. before that bubble crashed.
Thanks for clarifying;)
In Australia even after stamp duty was implemented on foreign buyers purchasing properties there, prices actually continue to increased this year – so we need to see how Vancouver’s homes prices fare in the next 6 months – and not to speculate yet.
China’s population is huge and many are going to continue buying homes and investments in Vancouver. I don’t believe a 15% additional tax money on the purchase price would deter them. Please remember that many of the purchasers willingly ( happily ) put in additional $500,000 or even $1M over the asking price just to own the bragging right that they got it ( palm slap with realtors ) — leaving behind may be 25 other competing offers biting their lips and begging to buy similar homes in our most popular Vancouver Westside neighborhood!
Here are the 7 biggest cities & their population in China: Shanghai ( 24M ), Beijing (19M), Tianjin (11M), Guangzhou (11M) , Shenzhen (10M), Chengdu (7M) & Hangzhou (7M).
Our safe & pretty city of Vancouver has just over 600,000 people.
I believe many Chinese buyers will still buy in Vancouver, Richmond and vicinity.
There is a big difference between selling a home you live in for a profit, buying a house in a foreign country as an investment (not a home), and owning 7 houses as an investment. The first might raise prices marginally, the second starts the bubble expanding, and the third will eventually result in the Big Burst.
I agree with you.
The unknown factor is when?
The author needs to take into strong consideration that he is reporting off of Chinese state media, notoriously unconstrained by the truth, and they have very little concern for the actual Chinese citizens who have invested in the Canadian market and will lose out in a crash. What the truly care about is stemming the amount of financial flows exiting their country because their citizens do not trust the Chinese economy to safeguard their money (or it is dirty money in the first place.)
These reports, while containing some truths, are only meant to scare their own citizens from investing. Which I guess i am okay with…
Thanks for commenting!
Regardless of the reason why they’re saying it, they do make valid points. This might be shocking to some, but our media is also bias on the issue. The easy answer is China is ruining Canadian lives. The question our governments are failing to ask is why don’t we have investment vehicles other than homes that Canadians can have their money work in? When the best job in Canada is owning a home, the economy is screwed.
FYI, If China wanted to stop their capital outflows, they could. The SPP has the world’s most sophisticated financial crimes tracking software – they know where every yuan ends up.
Thank you Tiffany for this!
The thing that most people seem to forget is that speculating in any market be it real estate or stock, is more or less gambling with your money. It might or might not be an educated gambling, but it’s not a hot market, or people buying homes to live in that’s the problem. It’s people buying real estate with the purpose of making relatively “quick” return on their money.
Because eventually a few “investors” get spooked and pull out of the market, and it dips, just a bit. But then a few more start to panic, and before you know it… it’s a run to the bottom and people that bought in late for way too much or are over extended get wiped out. That’s the nature of any investment bubble and it’s exactly what’s in the process of happening to the Canadian real estate market on the west coast in general, and the greater Vancouver area in particular. I should know because I saw the same thing happen in Fort St. John in the 70’s and early 80’s.
And the fallout is going to be severe because our economy isn’t the most stable as it is, just as the Chinese were suggesting, it’s growth is due more to higher levels of consumer debt than anything else. That’s not good because when, and it’s a when not an if, some people start to default on those debts……
I absolutely agree with Paul. The level of distrust between the Chinese people and their own government has helped create this mess that many Canadians find themselves in. Chinese foreign investors are extremely sophisticated and rich – they have had many ways of hiding money and getting it out of there country. Why do you think the government created the SSP in the first place? I am not bullish and I am not bearish but I do hope for all our sakes there is a soft landing and relative stabilization of a new normal. Finally, I would add (my size sample is small) that I don’t know anybody spending 165% of their income per year. Is it possible sure, but throwing out stupid statistics like that without framing those numbers is crazy. Does it take into account the largest inheritance passed between generations? Does it take into account the sale of homes and downsizing leading to cash positions? And so on and so on. I just get really skeptical about the numbers without frames of reference.
You mean biased.
Like any journalists with conscience, you are peeling off layers of distraction and reminding people what the real issues are, although you are too nice to bite into bones. Even my mediocre mind does not fail to recognize these obvious causes that genuinely lead us where we are, despite people are still too lazy to turn their focus around.
1. Decades of incompetence of provincial governments in economy stimulation and usage of non-sustainable drive, in this case “real estate”, to fake the image of economic growth. The direct result is the huge gap between locals’ income and housing expense. Now we are forced to bet on the continuous price increase as we have taken on too much mortgage and our houses are now our retirement fund.
2. Entanglement between the personal interests and the righteous duties of the policy makers/government officials. For those who have 5 mortgaged houses for investment, it would be really hard to figure out why they don’t want to truly face the issue. Gregor Robertson only publicly “warned” about the housing market AFTER selling his house. The result? No effective or meaningful action has even been discussed to intervene.
3. Redirect the spotlight from the domestic issues to the foreign investors, this round, the mainland Chinese(previously Italians, Japanese , people from HK/Taiwan etc.). Please don’t insult us with superficial and hypocritical “vacancy tax” or blame game on outsiders. The issue is here. The money always finds wherever it feels safe or can quickly re-generate. Foreign capital is a vital part of a healthy economy and I’m very proud Canada is the preferred destination, but it would be UP TO US to direct the money to the industries where investment needed the most and safeguard our own economic stability by using policies and laws. If there is virtually non regulatory policies to highly inflated housing market, I’m going to blame someone, but not the foreigners. Those who I elected need to take a good and hard look on implementing sound policies before it’s too late(call me an optimist). “Vacancy tax”? What a joke! You wouldn’t replace your tires if you have an engine failure, would you?
Not only could they, they are. Like I said before, sales have dropped in the last month or so – a lot.
Ruining Canadian Lives? Talk about being overly dramatic. If anything it is making your fellow Canadians that sell a home very very wealthy.
What are high priced Real Estate in highly desirable cities as in Toronto and Vancouver actually doing to the standard of living for Canadians?
They cannot afford a SFH with white picket fence with a large back yard in the heart of the city? The horror, how can life be unfair to those Canadians. All I see is how entitled Canadians feel about their SDH.
C’mon now, it’s not like the average Canadian cannot afford to live in Toronto or Vancouver. The rest of the country and outskirts are very affordable. There are other alternatives but those that complain about high RE are those not willing to make sacrifices to keep living in the city.
What do you think of the average earners living in New York, Paris, Tokyo, Sydney, London, etc are doing? They either bought further away, or moved away or bought smaller (condo) or are renting. There are always alternatives.
Home ownership in the city is becoming a luxury and are for those that have the means to do it. I’m all for globalisation and being on countless of the world’s best cities list but it comes at a cost. It means foriegners want to live here which in turn drives up RE prithere
Ruining lives? Not so much.
You are a smart man Henry.
The internet is a very democratic place, but it isn’t necessarily informed or rational.
If you are do not have a basic understanding of the following, you are simply sharing your bias online
– Economics 101,
– Monetary Policy, Fiscal Policy (and the difference between the two)
– Corporate Finance 101 (I know it doesn’t usually have 101, only 201 or the such)
The following reasons are not informed:
– I can’t afford housing! Make housing cheaper!
– My kids / families kids can’t afford housing! Make housing cheaper!
– I don’t want to move out of Toronto / Vancouver! Make housing cheaper!
– I don’t have a lot of equity, and I’m jealous of my neighbours and friends are making!
The main reason clearly and simply is that interest rates are at almost nothing, and are not projected to rise for an extended period.
If you want to put the brakes on this market, then interest rates need to be much higher. But then, you have to deal with the consequences of higher interest rates on other parts of the economy. Hard choice right? Yes, it is. That’s why life is not as simple as yelling stop housing prices from increasing!
Foreign buyers, bubbles, hard landings, they are all “effects” that can take place, but they aren’t the heart of the problem.
Try to understand that as money gets “cheaper”, everything else must get more expensive. Why does it only feel like it’s housing? Because housing can act as a store of value (where say a loaf of bread or a hair cut can not), and it is conveniently a large value product.
Isn’t it all just speculation? You need to be careful in dissecting “price action” to see if it’s speculation or a normal market. If the “volume” of available loans has doubled (example only), then you would expect mathematically that the price of goods would increase by something slightly less than double. But what if loan volume is a much, much higher number (closer to infinity, what happens when you divide by 0), then you would expect the price of goods to increase at an extreme rate.
In an example where interest rates are more normal, you would be logical in saying there is a bubble. But in an example where interest rates are close to 0, the increase in a market is simply a correction to the value of the real property in dollar terms.
None of what I said may outshine something like “I dun care, I want low housing prices. I don’t remember econ, that’s for egg heads, shud up.”
If you look at the real estate bubble in Canada in economic terms only then I agree with you. Unfortunately, Economics will never teach you the political and social implications of what is happening here.
Land is a finite resource. If foreign nationals are allowed to invest in Canada without Government regulations, you are essentially losing land that could be used by Canadian citizens to either build a home or to earn from. Instead, if enough foreign investors buy land in Canada, we can potentially become tenants to landlords from other Countries. The biggest implication is that the money that could potentially be earned here in Canada will no longer be available.
China invests in Canada because they know the Government will never illegally expropriate properties here. That’s the biggest fear of Chinese investors. They look for safe countries to hide their money away from the Chinese Government. That’s their incentive in investing here in Canada.
Again Shannon, that’s what the government wants you to believe, but the actual situation is the opposite. The sales drop or even future price drop does not have slightest correlation to any of the recent policy announcements, should it be “Vacancy Tax” or the freshly born “15% property transfer tax on foreign buyers”. Last time I checked this market is still a non-regulated wild west. Those half-hearted superficial policies are meant to scoop your vote for the coming provincial election year. If you want to minimize effect foreign buyers on the market(if foreign buy/sales are truly the problem), you do what Australians did, you don’t allow foreigners to buy properties/land that was previously developed, they can buy vacant land and develop new projects in suburban areas. The real change would be regulations/laws(criminal prosecution) on realtors’ shadow flipping, restriction on government personnel who have conflict interest to own more than 2 properties and process to investigate those who put property titles under their families and relatives, and interest rate hike(but this bazooka shouldn’t be used just because couple of provinces having housing issue . We can only wish for dozen other economy indicators allow this to happen)
Wow I never thought of that! Thanks!
See if you can buy a house in their country as a Canadian. We are allowing them to buy in Canada, but will they reciprocate by allowing us to buy in China? Phillipines, Thailand or India? The last time I checked foreigners were not allowed to truly own property in many parts of Asia.
Canada is a massive land mass with more real estate then almost all other countries in the world. We have plenty of land and very little demand. Only two places exist in Canada with above average real estate (Toronto) and (Vancouver market) this are only two cities in our entire massively HUGE country. In my Province Housing market starts in the $130-$200 range last I looked that is not expensive compared to other countries….towns …. and cities through out the world.
Hey Mark, thanks for commenting!
It’s true, Toronto, and Vancouver are the markets propping up Canada’s real estate market. The disturbing thing is, if it’s only two cities, why is it such a large percentage of our GDP growth?
Because in the case of Toronto, much like London before it, has reached the point of being a city of sufficient size and has become sufficiently cosmopolitan that its price levels are jumping.
It isn’t reflected in all parts of the market the same way. A lot of wealth would have to be wiped out to materially effect the value of single family detached homes in the GTA. Condos, and to a lesser extent; townhouses, price levels reflect a still healthy multiple of their rental rates (far below the ratio of places like London, NYC, or even Chicago) combined with the spillover demand from those that can no longer afford single family detached dwellings.
In Vancouver its a whole other story, an already fast rate of property value increase has been fueled by the demand by foreign nationals. Part of that increase was fueled by commodity prices that have been significantly erroded. Combine that with the new restrictions on foreign national absentee ownership and you have a bubble in the making. I know it sucks to watch your buying power evaporate over night but the potential owners in Van that are pushing so hard for new rules to restrict foreign demand could very well end up backfiring.
Has anyone research what realestate is doing in the rest of western world …open your eyes before you start analizing the market in canada.duh
What? Do you mean how are global socio-economic factors are affecting Canadian Real Estate or Real Estate generally? Or how Real Estate investments are performing world wide? Or….?
The Toronto housing market is not rising in price. It’s all skewed by tear downs and rebuilds and total renovations. If you factor out all of these the Toronto real estate market is flat to down and has been for years. That’s how the CRA spews all their baloney but never comes out and tells you the truth.
I’d say because Toronto and Vancouver (when including surrounding areas) make up a huge percentage of our Canada’s population.
vancouver and toronto re market are propping up real estate on all vancouver island, and i suspect plenty of re all over canada.. it is the re lottery at this point and if you were a lucky recipient who bought in anywhere beforehand – you win the lotto! bubbles can last a lot longer then people think, especially when central bankers are gunning the system to ensure short term stability and long term destruction – which doesn’t get talked about..
We are long overdue for interest hikes but because of short term inflation stability a small bubble never burst.
Which leaves us with a bigger one that will not burst in the upcoming year as of the Canadian governments announcement last week to keep interest low.
Both Canada and America will probably see negative interest rates as early as 2017. More than likely it will be made common knowledge after the U.S. election that America was in recession for most of 2016. Hint don’t own bank stock or insurance company stock.
Canada does indeed have a large amount of land at its disposal, but a lot of that land is in the northwest territories, and thus quite cold. The livable land of Canada is primarily the greater Vancouver area where the winters don’t go below -17 (with windchill). Toronto is in a huge bubble, much bigger than Vancouver. I’m actually surprised that the people of Toronto actually thought that real estate there was worth something. That’s delusion for ya. They’re always comparing themselves to more livable places, often forgetting that their winters go well below livable conditions. Look for prices there to fall at least 50%.
The real estate bubble in BC Canada has being quoted for decades. It will never happen, we have the BC Liberals saying its all good here and foreign investment into home purchases are less than 5% June report 2016. We are all living the dream…
Hmm no links to the source material; I’m almost 100% certain that the two quotes this article was based off of came from non-Chinese sources and therefore the basis of the article is misleading. This is a fluff piece.
“Canadians have the largest debt-to-income ratio of any G7 country, with the average spending 165% of their salary. To contrast, at the height of the US housing crisis in 2008, Americans carried what was then considered an outlandish 147% debt-to-income ratio – 17 points lower than where we currently sit. Canada’s total household debt reached $1.892 trillion dollars, with $1.234 trillion dollars of that as mortgage debt – roughly 65% more than we make per year. ”
“Vancouver’s home prices have risen 172% in the last 15 years, while income has only moved up 10%.”
So do you believe that the above figures from the article are false?
Fortune Cookie say; ” no bubble just special plice yu pay cass.”
So lets just say the bubble bursts… Then hundreds and hundreds of Locals home owners are forced to sell for half, they all loose their minds… Then prices drop.. Doesnt that just mean more Asian buyers come to snatch up whats left?
They’ll lose a lot more than half. Chinese buyers never buy into a falling market, they only buy outlandishly high and eventually lose most of their money. Some of the smart Chinese bought physical gold and physical silver but very few per capita. Canadians especially the Millennials will learn a valuable lesson the hard way. The Canadian taxpayers will live the endless nightmare because of all the “monkey see, money do”.
When residential property prices drop because of a rise in interest rates forcing sales by mortgagees who can’t afford paying, foreigners will buy the devalued properties because they will be a bargain compared to their previous cost which will lessen the impact of forced sales and will keep prices from significantly declining or may keep prices up. The increased mortgage interest payment problem will only affect Canadians because there is a huge foreign investment capacity available.
As well, the relative value of the Canadian dollar is a big factor. The lower the relative value of the Canadian dollar the more affordable and price attractive the real estate becomes to foreign buyers. If the Canadian dollar rises in value, the less attractive our real estate becomes to foreigners except that if the dollar value trend continues upward foreign buyers will continue to buy because the increasing relative currency exchange value will make the already invested properties increase in relative value in the foreign currency exchange when the property is eventally sold. Canadian real estate is now an international commodity like any other one that is freely traded and has become a market like the stock or commodities market.
The only way to affect real estate prices directly and effectively is with foreign ownership controls such as significant additional taxes and/or restrictions which prefer citizens, especially non multiple citezenship citizens who have only Canadian citizenship which would virtually gaurantee affordability for Canadians. Canada has to stop being the investment whore of the world selling itself to any foreign John rich enough to outbid a single citizenship Canadian.
Everyone seems to miss the point or has a lack of the basic understanding of economics. I have to capitalize this so everyone will see it. WHEN THE YUAN FALLS TO A CERTAIN POINT VIS-A-VIS THE U.S. DOLLAR ALL OF THE SMART MONEY WILL HAVE ALREADY LEFT CHINA. AS THE YUAN FALLS IN VALUE THE CHINESE BACK IN CHINA BECOME POORER IN AMERICAN DOLLARS. THEY HAVE LESS AND LESS MONEY TO BUY PROPERTY OVERSEAS AS THE YUAN CONTINUES TO FALL. THE CANADIAN DOLLAR HAS BEEN FLAT TO RISING AGAIN THE U.S. DOLLAR. Anyone looking for the peak in Vancouver prices has only to look at the value of the yuan. It is really that simple and after the bust you’ll see my point. The yuan is trading at about a 6 year low to the U.S. dollar.
HK also have same problem but they are having a super soft landing !!! So if indeed we have a bubble, Can we also land softly ?
Prices in HK are down close to 40%, far from a soft landing.
You say the yuan is at a 6 year low to the US dollar. Wouldn’t that make their interest in CANADIAN housing increase? Last I checked we’re 77cents on the dollar.
And look at any CAD to CNY chart. The value of the yuan is greater now in CAD than in years and years!
Now, please, Tony, stop with your single line rotten argument. You are wrong.
The Canadian government is broke. Their idiotic policies and excessive taxation has crushed the real economy. Put interest rates back to historically normal levels (5%-8%) and you’d see the entire country crumble.
There scheme to prop up the economy, is to slash interest rates to nothing, loan money to foreigners (30% down, don’t need to be a resident of Canada for a mortgage), and large volumes of sketchy economic immigrants from the third world. Economic immigrants in Canada typically settle in the big cities, so you have massive housing bubbles forming in economic immigrant hubs like Vancouver and Toronto.
When the housing bubble pops, and it will, I suspect Canada will be hit with a boomerang effect. First, housing will crash and fall off a cliff, then the boomerang effect will be immigrants leaving Canada to look for work elsewhere, which will further compound the housing crash.
Canada has set itself up for a real nightmare, sky high taxes, sky high real estate, propped up by highly mobile economic immigrants looking for a quick buck.
I cannot stress enough, that when the bubble pops, you will see an exodus of economic immigrants. Baba Jeet and Mr. Wang will bail on Canada, leaving a horridly overbuilt housing/condo market that will deflate for decades to come.
You making it sound like disaster of mega proportions 🙀
And hete i am thinking i am reading the Australian Housing market
All valid points but we have been saying this for some time . Is it possible this is the new normal
Ppl have been saying new normal for over 10 years so I think the new normal maybe rise and rise until it cannot sustain, I have always thought whatever goes up must come back down ! Can we agree anymore? 😁
Why banks are declining mortgages for good rated credit scores saying you cannot own more than 5 houses. They are worried
Im living in Toronto suburb and bought my 2700 sq ft home 6 years ago for $ 570 000. Now its priced north of 1 million . I really wont to sell and lock in profit but rent is much higher than mortgage. Also I went to few Open Houses event and did not see any Chinese buyers but it was a line to get in . Probably they looking for a condos or high end homes . Whats driving market in Toronto now is a listing shortage. People willing rather to renovate than move .
Canada is in the same situation like Australia ( commodity driven economy ) and Sidney has the most property millionaires in the world and bauble doesnt burst for years .
So real question is should I sell for $500000 -$ 600 000 profit and miss another possible 20 % =$200 000 run next year ?????
Please dont sell. If you bought it for more than $500000 6 years ago, it must be a realy nice place. It will only go up for another 3 years. It wont crash. However it will float at flat level after which will still be higher and with shortage of detached houses, you could be looking at close 2 million in another 5 years time.
LOL, you’re in Toronto, a shit place to begin with. Be smart, sell it. Invest in a warmer place. The housing market of Toronto is more inflated than a goodyear blimp. The place is horrible, winters are extremely cold. What dreamland are these stupid owners in to inflate the prices so much. Seriously? Seems like they were jealous that everywhere else prices went up, so why not Shitville Toronto? Because it is a shit place to live.
Try living in Winnipeg.
With so many millions of new people expected in Vancouver over the next 10 years, the demand is gonna be there. That will make it harder to crash when people still need to buy cause there’s no where to rent.
Buy with what money? If the market continues to rise, the vast majority will be priced completely out.
There are more millionaires and billionaires in China then the whole population of Canada and India is not far behind and this is the country they are choosing to move to and the majority of them have not even have a taste of Canada Canadian Living which is almost a hundred times better then what they deal with in China don’t get me wrong there are nice places in China and India but nothing like Canada so if they’re choosing Toronto and Vancouver to buy a home whether its investment or for generations to come there is no crash coming this is only the tip of the iceberg and when word spread across China and India on this air and water and the quality of life is 100% better than theirs in their country where do you think they’re going to move, 2 billion people Plus, they’re going to go somewhere and they’ve already started
Punctuation exists for a reason.
^ Agreed lol
[…] of the border is far worse than that in the United States. The Chinese finance portal Hexun is predicting that Canada will soon experience a financial meltdown worse than the 2008 crash in the United […]
This article simply fails to point out that 900,000 people are immigrating to Canada in 3years
The city of Vancouver has only 44,000 detached houses. (Not including North Van or West Van etc)
So you geniuses do the math. I just don’t believe all these millionaires will move to places like Sask or Manitoba because 6months a year the weather is ridiculous
I heard this bubble crap for 20years.
Minimum wage will rise to $15 soon (already announced by NDP)
All wages will go up. Therefore housing will stay high.
Yes, because $15/hour is going to allow people to suddenly afford Vancouver prices? Btw, you believe what the NDP says? Good for you mate! Next you’ll say what comes out of Trudeau’s mouth is the truth. If those 900000 people are coming from China, then sure, I’d suspect many of them could afford Vancouver prices.
Has anyone considered that this article and others like it are simply designed to scare buyers out of the market and drive people to sell their inventory (before it’s too late) so that the same people with money can temporary flatten the market to pick up more lower-priced inventory (scare tactics)? Just a thought..
There is a huge shortage of detached houses in GTA. I bought my 2500 sqft in North Oshawa for $430000 2 years ago. I put in another $50000 in upgrdes to make it $480000. NOw the builder is selling the same house for $590000. For me its already a profit of $110000 just by the builders price. Its a corner lot and smaller houses right next door are going for the high 600s. Right opposite a chineese bought a smaller house for $660000. Its all good. There are lots of immigrants coming into Canada and they all need a house.
It’s a bit tiring to hear the word bubble it’s overused. Canada is different from the 2008 US crash we don’t give no equity loans, the price increase for homes have happened in large metropolitan cities in canada and when people tried to sell homes for investments in places like Peterborough or small towns it failed or prices didn’t increase that much . That tells me out economy is fine. Even if Chinese owners start selling off their houses they own them with cash so what makes you think they will just leave the keys and walk out where as US homeowners had no reason to keep their homes or save their mortgage as the debt owed was much greater than the value of their home
Is this to say a crash can’t happen??? Of course not but simple common sense based on ecominc trends in canada point to a stabilization or a soft landing similar to 2008 while the rest of the world collapsed
If anything we should be grateful we had finance ministers Jim Flaherty (rip) and Paul Martin who made responsible fiscal decisions for our country relative to the rest of the world
PS if you keep predicting the end of the world one day you will be right 😉
Yes, there ARE no-equity mortgages in Canada. They are called ‘second’ and ‘third’ mortgages. or loans from the Bank of Mom and Dad, based on a mortgage on THEIR house, towards the down payment. The piper has to be paid.
The only sure things are death and taxes.
Sorry but I am not remotely interested in Chinese Govt State Controlled media. How can you legitimately present this as news and not acknowledge the long history of media and information control by the central government? Meaningless garbage.
I’m curious when these articles in Chinese media as you claimed was posted. I read Chinese media online on a regular basis and hasn’t really seen the articles you’re referring to. A search on their websites haven’t resulted in anything. Could you post the links?
Funny the Chinese media should says that. You know they have a problem with capital outflows. It is their economy that is crashing and they have the worst debt problems of all. The population knows this so they are trying to get their money out as fast as they can.
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Do a story about domestic Intergenerational wealth transfer and its effects on real estate prices.
Toronto Housing Bubble in 1989
Between 1985 and 1989 the average price of a house in the GTA increased by 113% in real terms or by $240,992 in today’s dollars. Low unemployment of the late 1980s and large inflow of immigrants to the area helped to inflate the bubble. Some critics pointed to the fact that in the early 80s many women were still just entering the workforce and thus doubled the income of households by the mid 80s which further fueled the bubble.
However, one could argue that bubbled was fueled mostly by massive speculative investment. In late 80s everyone thought that the housing prices are going to rise indefinitely and that turned real estate into a compelling investment for everyday Joe. More people jumped into the market hoping to make a fortune causing an artificial increase in demand. Suddenly housing became scarce, which further increased the price. Developers decided to profit on this illusive scarcity by building condos left and right – many of them in downtown Toronto.
During the peak of the bubble the borrowing cost started increasing and the 5 year fixed mortgage reached 12.7%. Coupled with the early 90s recession, a spike in unemployment and a drop in the inflow of immigrants to the area, housing prices in the GTA collapsed. Between 1989 and 1996 average price of a house in GTA have declined by 40% adjusted for inflation or$182,625 in today’s money. Downtown of Toronto was hit the worst with over 50% decline in value of a home.
Unaccounted for inflation, it took 13 years for the average house price to recover in the GTA. In nominal terms, the average price breached the 1989 peak of $273,698 in 2002. However, viewing prices in nominal terms has an upward bias. For example, take a look at the GTA average house prices between 1980 and 1985 in the first graph below. As you can see there is a clear upward trend of price increases. Yet if you look at the second graph below, which is adjusted for inflation, you can see that between 1980 and 1985 housing prices were in fact declining.
Once adjusted for inflation you can see the real scope of the Toronto housing bubble of 1980s. Only in 2010, or 21 years later, real average housing prices reached the peak of 1989. In real terms, the fallout from the burst of the bubble looks much worse than when you look at nominal numbers. In nominal terms the average house prices between 1989 and 1996 fell by 23%, while in real terms it fell by whopping 40%.
At the bottom of the last housing crash the prices still settled by near 30% above what they were in the beginning of the 80s. Some attribute it to increased population, women joining the workforce in bigger numbers and income growth. Most likely all those factors played a role as well as debt growth. Between 1985 and 1996 the real annual price growth of house in GTA was 2.5% which is slightly above Canada’s average GDP growth of 2.2% in the same period. Since the financial crisis condo prices were rising above 6% a year while economy grew around 2%.
Currently the average house price in the GTA is 9% above the peak achieved in 1989. But real estate is local and there is huge differences between neighborhoods. If you bought a condo in downtown Toronto in 1989 and you were to sold it today, you would likely still end up selling your house at a lose and that’s not counting the closing costs of a sale.
Below is a chart which shows the inflation adjusted percentage change of house value from 1989 peak to 2012. Almost one third of Toronto – including downtown – is still below the peak of 1989. The areas of Toronto that crashed the most during last housing bubble are still below the last peak, while some other are 50% above it.
The chart below shows the percentage growth of Toronto’s average home price between 1996 and 2012 adjusted for inflation. The areas just east of downtown have recorded the largest growth. I wonder whether East York will see the biggest declines in prices this time the bubble bursts.
How do you interpret the charts above? What are the similarities and the differences between the Toronto housing bubble of 1980s and now? I will answer those questions in a later post, but before then help me by commenting below of what you think of the charts above. How would you interpret them? What areas do you think will crash the most and least?
“After the Liberals get the boot in May 2017.”
Ha, ha; that’s really funny.
If you believe that, you really must live in lala land.
Ha ha ha…welcome to La la land!
My thoughts on the housing bubble http://alexkhalil.com/10-reasons-real-estate-bubble-burst/
[…] Chinese media are warning investors of a Canadian housing crash. Major Chinese publications are raising concerns about Canada’s debt-to-income ratio, B.C. stagflation and whether the BC Liberals are distracting voters with “vacancy taxes” and “restrictions” to avoid explaining why provincial incomes are so low. (Better Dwelling) […]
In Toronto, People are buying houses like stock options as Liberal Govermen is creating a bubble of low or 0% interest rate.
Land is readily available in Canada, but all tied up in forest or crown portfolios. For example if you opened up 50,000 acres and sold of as fifth of an acre lots to our desperate young, prices would possibly reduce in the city by at least 25%, if not more. Why? Because landlords need tenants to pay their mortgages. London , HK , Singapore has NO land. 50,000 acres is 78 square miles or just under 9 miles (15km x 15km). Where is that. My fellow Vancouverites. Look all around you . One mountain area is greater than this amount. But maybe the rich don’t want you to have affordable homes with new schools, young families, hard working Canadians building for the next generation. Who stokes the eco warriors who won’t let you cut down that tree? Such a vision needs roads bridges railtracks , and fantastic employment opportunities would abound. Between deep cove north van and port moody is enough area to build this property price cooling project. I’m a landlord, but I worry for the next generation. I don’t need more wealth , I need a future.
Best post on this page. So rare to read something I’ve thought of for years. Thank you. Wake up people.
[…] https://betterdwelling.com/…/chinese-media-now-warning-can…/ […]
There is a very big difference between ‘investing’ your money and ‘parking’ your money.
The Chinese are not ‘investing’ in Vancouver real estate, they are ‘parking’ their money, waiting to see what happens with exchange rates. They will make much more money on the exchange rate than on whatever happens to Vancouver housing prices. That’s why the houses are sitting empty – so they can sell on a ‘dime’!
And remember, the 15% tax is money wasted. Money they can not get back. it does not increase the value of the home, only the cost to them. When they sell, they do not get this 15% back.
Justin, you are so right!
“If it is asserted that civilization is a real advance in the condition of man — and I think that it is, though only the wise improve their advantages — it must be shown that it has produced better dwellings without making them more costly; and the cost of a thing is the amount of what I will call life which is required to be exchanged for it, immediately or in the long run.”
― Henry David Thoreau, Walden
Thoreau is correct about exchange of life for everything. We waste so much of our indefinite length precious lives without thinkink about it. Spend it wisely.
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[…] Chinese Media Is Now Warning Canada’s Housing Crash Will … – Shots fired! While our media has been pointing out how Chinese buyers are driving up real estate prices, the Chinese media has been dissecting our economy, government … […]
[…] evidence for months of a housing correction. It’s real and it’s likely just beginning. Even foreign buyers from China have been warned. Although Vancouver prices will surely rebound again, i’m not so optimistic it will happen […]
[…] I know, bringing up Sidewinder brings up more issues than it clears. In fact, some of you might think this was a hate piece written to attack the Chinese and politicians. Completely not my intention. In fact, I receive at least a couple emails a day saying I’m too pro-China for some of my articles. […]
[…] Even Russia and China are talking about our epic consumer debt bubble, and it’s expected to get worse. Canadians had $585.8 billion in consumer (non-mortgage) debt at the end of the second quarter in 2016. Since the average Canadian household has $1.70 in debt obligations for every $1 they earn, the bulk of consumer spending this weekend is likely to be put on credit. This can increase that debt load by up to 3%. […]
You guys all forgot, the difference between toronto and vancouver is that toronto has a sustainable job market. All the major commerical, financial trades corporations are there. Vancouver on the other hand has limited job market to sustain what people can afford. These chinese investors who bought these houses are not going to be contributing at all to our job market and most of the time are not even contributing to taxes. Richmond has the lowest income in the entire canada, yet all the houses are ridiculous in price. If the house market continues in this state, our millenials and working class people will move out of the city and the whats left wil be foreign investors and foreign international students.
[…] https://betterdwelling.com/…/chinese-media-now-warning-can…/ […]
A parody of this situation, called “O Chinada”
[…] the previous article that talks about the 180 years Canada has avoided a financial crisis, with a BetterDwelling article referencing the view of Canada’s housing market from China. It pointed out that Canadians […]
[…] I know, bringing up Sidewinder brings up more issues than it clears. In fact, some of you might think this was a hate piece written to attack the Chinese and politicians. Completely not my intention. In fact, I receive at least a couple emails a day saying I’m too pro-China for some of my articles. […]