Lacking much detail about the flywheel ponzi-nomics that enabled the entire bubble.
Canada's RE bubble, like all RE bubbles before it, isn't special.
Lots of clowns still claim insufficient supply. Yet, there's never been more vacant dwellings than recent times.
There were two distinct mania phases: 2014-2016; 2020-2022.
Picotop = Q1/Q2 '22, varying per locale.
Imagine the USA bubble then add:
-Generally less intelligent pop'n with less investing savvy/options
-Tax system incentivizing RE speculation (cap-gains free on "primary")
-Absurd level of fraud (easily preventable!) to acquire mortgages (banks happy to oblige)
-Three distinct group of greater fools: "old-stock" cucknadians whom haven't seen downturn 25+ yrs; Chinese immigrants whom never exp'd RE downturn, Largest bagholder demographic Indian immigrants whom again never experienced RE downturn
-Social Media! USA got a RE bubble pre-social media. Imagine what trouble one would get up to if that occurred during the era of social media? Taking investment advice from TikTok, etc. is common: ppl think land-lording is passive income.
1. Only 2-3 major cities for people to move to without feeling like they went backwards. Even Vancouver feels like a small town on international standards. Has 3 metro lines...
2. Zoning laws that literally hadn’t changed in 100 years. 80% of Vancouver was SFH only until just last week multiplexes allowed
3. ~30% in taxes and fees to build new property
4. Property tax deferment at only 1% interest. Subsidizes retirees staying in large homes
5. Delusional city policies of putting homeless shelters/injection sites in good neighbourhoods or next to schools, reducing supply of desirable housing
6. “Woke” but meek population will vote poorly then suffer in silence. They laugh at the French riots but pay 70% of income to rent a shithole
7. Taking immigrants who were rejects from USA, and no demographic limits. Something like 90% were from India, and a declining amount with skills like trades.
I lived in Vancouver from mid 70s to 2000. Since then I go back multiple times a year. The Vancouver housing bubble was incredible to watch inflate. Now it’s led to a massive stratification of the haves and have nots. Long term it’s disastrous for the future of a city.
Thankful that Daniel brought up the impact of foreign money and money laundering and also referenced Sam Cooper. In my opinion this is the biggest impact to the Vancouver side of real estate. This is not talked about enough because of so called racist undertones. I don't agree with these insane levels of immigration, if this was to be an impact on housing then it should have been obvious form a policy perspective that it would cause pain to the housing sector. It was either already anticipated and deliberate or I'm not sure what else policy makers could have thought would happen.
Similar story to Sydney and Melbourne in Australia. Worth having a look at these two.
With the dynamics described above. Would you expect housing prices to continue to raise? Where’s the limit when buyers are already stretching themselves so much (world’s highest household debt to GDP)?
Perhaps there will be a big boom in the resource sector once housing depletes? Government can easily restrict limitations and let companies go buck-wild for natural resources to drive a recovery. People often forget how much oil, uranium, gold, silver, and lumber Canada has. Will they have a workforce that they can tap into though? Most Canadians want to be desk-jockeys.
Excellent article - very Canadian stance though - that is no clear stance almost academic :( - a short direction from each author would help - ex. given that housing is not affordable @ current prices w/ increasing rates and goods inflation - expect a 20% drop in the next 2 yrs (even if gov offers 90 year mortgages) - Danile, Darren - would you kindly share your thoughts? - as much as we value PropTech and Social "construct" ideas - we would very much value a "bold" take from each one of you on where would you put your money in the next 2 years?
"asset class....being destroyed in real time by the bank of Canada’s rate hiking schedule."
Question for Daniel -> Do you believe that Bank of Canada will back off the rate hikes compared to the US Fed?
It seems like BoC has been raising in-line with the Federal Reserve. Obviously if BoC does back off the rate hikes to save Canadian RE, the Canadian Dollar would go to shit, won't it? - especially if Powell continues to raise rates a bit more.
Seems like BoC / govt have to choose between keeping RE prices high or destroying the CAD?
Canada RE - Warning Extremely Detailed (Darren Cabral and Daniel Foch)
Lacking much detail about the flywheel ponzi-nomics that enabled the entire bubble.
Canada's RE bubble, like all RE bubbles before it, isn't special.
Lots of clowns still claim insufficient supply. Yet, there's never been more vacant dwellings than recent times.
There were two distinct mania phases: 2014-2016; 2020-2022.
Picotop = Q1/Q2 '22, varying per locale.
Imagine the USA bubble then add:
-Generally less intelligent pop'n with less investing savvy/options
-Tax system incentivizing RE speculation (cap-gains free on "primary")
-Absurd level of fraud (easily preventable!) to acquire mortgages (banks happy to oblige)
-Three distinct group of greater fools: "old-stock" cucknadians whom haven't seen downturn 25+ yrs; Chinese immigrants whom never exp'd RE downturn, Largest bagholder demographic Indian immigrants whom again never experienced RE downturn
-Social Media! USA got a RE bubble pre-social media. Imagine what trouble one would get up to if that occurred during the era of social media? Taking investment advice from TikTok, etc. is common: ppl think land-lording is passive income.
CA RE bubble should be 4-10x worse than USA.
Cabral's opinion sounds like the PoV of someone who got some heavy Canada RE bags.
Foch's take is closer to the mark.
I would add a few more:
1. Only 2-3 major cities for people to move to without feeling like they went backwards. Even Vancouver feels like a small town on international standards. Has 3 metro lines...
2. Zoning laws that literally hadn’t changed in 100 years. 80% of Vancouver was SFH only until just last week multiplexes allowed
3. ~30% in taxes and fees to build new property
4. Property tax deferment at only 1% interest. Subsidizes retirees staying in large homes
5. Delusional city policies of putting homeless shelters/injection sites in good neighbourhoods or next to schools, reducing supply of desirable housing
6. “Woke” but meek population will vote poorly then suffer in silence. They laugh at the French riots but pay 70% of income to rent a shithole
7. Taking immigrants who were rejects from USA, and no demographic limits. Something like 90% were from India, and a declining amount with skills like trades.
Been waiting for this post for a long time, surprised it’s even a free post, thanks for finding people who were credible enough to write about it BTB.
Would love to see an Australia RE post if there is demand
I lived in Vancouver from mid 70s to 2000. Since then I go back multiple times a year. The Vancouver housing bubble was incredible to watch inflate. Now it’s led to a massive stratification of the haves and have nots. Long term it’s disastrous for the future of a city.
Thankful that Daniel brought up the impact of foreign money and money laundering and also referenced Sam Cooper. In my opinion this is the biggest impact to the Vancouver side of real estate. This is not talked about enough because of so called racist undertones. I don't agree with these insane levels of immigration, if this was to be an impact on housing then it should have been obvious form a policy perspective that it would cause pain to the housing sector. It was either already anticipated and deliberate or I'm not sure what else policy makers could have thought would happen.
Canadian here, home and business owner (100% remote). In a city that isn't Toronto or Vancouver.
Would you be considering any changes or steps to mitigate the dynamics outlined in the article?
Similar story to Sydney and Melbourne in Australia. Worth having a look at these two.
With the dynamics described above. Would you expect housing prices to continue to raise? Where’s the limit when buyers are already stretching themselves so much (world’s highest household debt to GDP)?
Glad this is getting attention.
Interested in Bull's take on the next few years in Canada, or how US might affect Canada.
So, basically, Canada is a scam?
Perhaps there will be a big boom in the resource sector once housing depletes? Government can easily restrict limitations and let companies go buck-wild for natural resources to drive a recovery. People often forget how much oil, uranium, gold, silver, and lumber Canada has. Will they have a workforce that they can tap into though? Most Canadians want to be desk-jockeys.
Cabral was filled with fluff
Foch good
As usual, thanks Bull
Super interesting, thanks!
Could you guys do the UK next?
Excellent article - very Canadian stance though - that is no clear stance almost academic :( - a short direction from each author would help - ex. given that housing is not affordable @ current prices w/ increasing rates and goods inflation - expect a 20% drop in the next 2 yrs (even if gov offers 90 year mortgages) - Danile, Darren - would you kindly share your thoughts? - as much as we value PropTech and Social "construct" ideas - we would very much value a "bold" take from each one of you on where would you put your money in the next 2 years?
"asset class....being destroyed in real time by the bank of Canada’s rate hiking schedule."
Question for Daniel -> Do you believe that Bank of Canada will back off the rate hikes compared to the US Fed?
It seems like BoC has been raising in-line with the Federal Reserve. Obviously if BoC does back off the rate hikes to save Canadian RE, the Canadian Dollar would go to shit, won't it? - especially if Powell continues to raise rates a bit more.
Seems like BoC / govt have to choose between keeping RE prices high or destroying the CAD?
Thanks for this. Lots more to add but this is a great picture albeit an unfortunate situation