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I’ve never been able to figure out how the Canadian economy works. Higher wages but much higher taxes and costof living and no deduction for home mortgage interest. Cory or any other Canuck…..kindly enlighten.
Simple Dai…..five dominant banks that span the entire country coast to coast and coordinate policy amongst themselves in cooperation with the Minister of Finance and the Office of the Superintendent of Financial Operations. They are separate but work together in each others interests and the interests of the public and public policy (as unbelievable as that may sound). The system works and is self policing to some extent. Service is good and risk is limited. The public has a high level of confidence in the financial sector and that is absolutely key. Size matters. Those banks have stability, reach and depth. Profits are quite respectable on an ongoing basis and risks are low as the government has seen fit to backstop potential losses through the auspices of the Home Buyers Program which is heavily rule bound and regulated. Our past Minister of Finance, Mr Flaherty, did an outstanding job in ensuring that the system was both flexible and prudently managed. Canada has thus enjoyed strong growth in real estate prices despite heavy debt loads and employment levels have been strong throughout a period of instability in the rest of the globe. The record is enviable. There are going to be rough patches ahead but a meltdown of US proportions is highly unlikely. This is especially so as Canada never had subprime lending nor was credit granted to those who might otherwise be called poor risks in other countries. As long as the collateral (homes) is not unreasonably impaired then there is no significant reason home prices will suffer as they did in the US following the housing crisis of 2006. Most will however agree that bubbles exist in both Vancouver and Toronto however these are primarily confined to a few postal codes and those are dominated by offshore buyers and owners. Thus…..real risk is not as high as some might presume.
Thanks Bird for your thoughtful analysis although I guess that I can’t entirely agree as I believe it may be counterintuitive to supply and demand fundamentals. Should all the economies in the world end up badly, Canada may be in better shape to withstand the mess but I can’t see how it will be unaffected.
Truth in that Dai. We are truly all connected.
Birdman I must disagree completely regarding Flathead as he and Harpo opened ghe floodgates allowing CMHC to more than double the mortgage pool that and 40 year mortgages with No money down….infact BMO was lending 110% as if one had the income you could borrow 100% then be instantly approved for a 10% line of credit of the total mortgage amount….Flatheads legacy will be rewritten will rates rise…..a very Big real estate Debt bubble once again created by government action……#@Ã—!!$#!
What year are you referring too when Mr Flaherty made borrowing easier? You will surely get this point. Every major Western Government and Central Bank undertook extraordinary measures immediately following the Global Financial Crisis (GFC). Canada included. That did not materially impair housing prospects nor housing prices in Canada though and most will agree that supports were necessary at that time. Despite a crash in the US housing market it is well known that in Canada we saw a swift price recovery and employment remained stable. That is not even a debate as the facts stand on their own. So it is a testament to the actions of the Minister of Finance and Head of the Bank of Canada that price stability remained intact despite the headwinds and that public policy was effective. It should also be noted that because of that success, Mark Carney, Head of the Bank of Canada and one of the people who was instrumental in influencing public opinion was later promoted to lead the Bank of England. An exceptional appointment and one that was quite unheard of in the history of that long lived institution.
Im not going to pat the backs of those you mention as its there easy lending policy that has created insane debt levels that Cdn are now holding….these clowns did not save the day but created a debt bubble especially in real estate looking for a pin.
As for M Clowney I have 0 respect as I delt personally with the BOC for years….they are egotisic morons in $5g suits….when Clowney is done in the UK they will toss him out!!
I feel sorry for The English, they got hood winked when Carney was appointed the head of The Bank Of England, he has the same mindset that Bernanke had otherwise he wouldn’t have gotten that job. If it wasn’t for Flaherty who was bringing down our debt we would be in a bigger mess. Check out Australia they will be debt free in 3 years and now money is flowing to their country.
You think politicians and the banks put a gun to the heads of most Canadians and made them sign on the dotted line to go into so much debt? Ha Ha Ha!!!! Good one JJ. Nobody is responsible anymore let alone one of the most diverse, healthy, wealthy and best educated populations on the planet. They are just innocent victims of policy. Whatever you are smoking in Toronto must be laced with pretty bad stuff because it has impaired your thinking such that the public are innocent pawns and the government is a crafty puppet master bent on evil to make housing bubbles and one day destroy the economy! Those bastards!! Ha Ha Ha!!!!!
come on birdman your joking right!?!? The sheeple are far too busy trying to survive at their own livelihoods the banks allowed by governments make eebt far too easy…no of course they are signing without a gun to their heads BUT the whole real estate debt situation was taken to the next level by nothing down…and 40!!! year mortgages and dam near 0 interest rates….Cdn givrrnment learned nothing from the US mortgage debt issue.
Think the banksters dont run Ottawa…haha…why is Canada still at emergancy interest rate levels yet the banks are allowed by BOC to still charge 19% on credit card debt……100% Scum!!!!!
Dai – you mean lower wages. Canadian average wage is less than American. Americans can also write off mortgage interest, Canada cannot. Currently a completely irrational and un-sustainable percentage of Provincial and National GDP is real estate related. When it goes, Canada is in for a world of hurt for a long time. There has been rampant speculation for far too long fueled by cheap credit, ridiculously lax lending standards and overly aggressive immigration. Its a disaster waiting to happen. The average family income in Vancouver is around $70K, The average detached house is close to 1 million. It doesn’t take a genius to figure out the income of this story. It will be far worse than the US when it happens.
Sorry Duke, those numbers for Vancouver are totally distorted by Point Grey, Kits, West Side, Kerrisdale, West Vancouver, Coal Harbour and a few other key areas. The typical home is nowhere near so badly priced as first impressions would imply especially when you strip away the extremes seen in just a handful of postal codes dominated by Asian and other offshore buyers.
So what can a person get for $350k?
Calgary also in a bubble
Calgary homes cost a mere 3.5 to 4.0 times the average family income. Not even close to a bubble by world standards. Mostly it is just locals crying about price without good factual analysis or comparative evidence. Sorry Dai. I know they seem high but then Calgary incomes are much higher than in other cities on average too.
The curious case of Calgaryâ€™s residential real estate market – Venture — December 2013
A quick check returned 307 properties between 250k and 350k. Don’t you have more money than that?
Vancouver MLS Listings 250k to 350k
Way out in eastern Surrey?
Over here on the dry side of the State, a new townhouse, condo or bungalow (3 bedroom, 2 bath, double garage in a nice neighborhood: (3 golf courses) can be purchased for around 175K if one can find one. Many oldsters(our age) are significantly downsizing.
BTW: There is an excellent new, large, free of charge, full colored glossy publication with names and addresses of 600+ Washington wineries in the state complete with maps, addresses, tasting room hours and other details. It is published by the Washington State Wine Commission. Available at wine shops and even grocery stores gratis. In 2000, there were 150 wineries; today there are about 750 statewide.
And, in our opinion Dai they are some of the best in the world!
In Calgary not much, maybe a starter home. Paid 52k for the house im living in. Of course I live in the boonies. Me and the wife have just ordered a new house, going to put it on the farm. All said and done should come in a little under 300k.
Thanks, and another great guest. The air will be coming out of the Canadian housing balloon next year as the next Bear Market for stocks gets going. A world wide slow down is knocking at the door, and most still can’t hear it. Knock -Knock-Knock, it’s already started, but don’t expect to hear it on CNBC anytime soon. That’s why I come here to listen to your guests.
Surely you meant CBC or CTV, roboman!
Birdman – first of all you just listed 2/3rds of Vancouver, second all of your examples are one and two bedroom condos. Not too many families living in those. Average EAST side rat hole detached house is pushing $850K. Burnaby $840K, West Van $950K. Compare family incomes to detached. Condos are irrelevant.
Here is a great comparison:
Also Google: Ben Rabidoux – excellent balanced stats and info.
Lots of cheap housing in the boonies–northern Ontario, rural Manitoba and rural Saskatchewan for example. Big cities like Vancouver and Toronto are dear.