51 Comments

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.

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Yup..most people dont realize but in 2015 Canada only had 35 Million people. So to your point about the mania phases, population wise we are a very small country. Almost overnight (relatively speaking) we had two countries with over a billion people fighting for our real estate, no wonder it went parabolic.

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The mania's were just cucknadians re-hypothecating the asset class to re-invest in same asset class. Sounds risky.

Mainland might have even worse RE bubble than canada

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Agree with a lot of your points.

But inefficient supply economics are still a problem aren't they esp. considering the recent increase in Canada's population and the lack of housing to keep pace with the new demand for housing?

Also, is the increase in Vacant Dwellings due to the tax on foreign buyers in BC and ON?

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The primary reason why shelters remained vacant was that they were appreciating > cost of carrying. This type of scenario is to be a short-lived, "transitory" if you will, historical anomaly.

Almost all of the government measures, such as vacancy tax or regulation of STRs are not enforced. Hence not effective (intentionally).

There are sufficient shelters for the fast-growing pop'n. There are unique, localized exception: abuse of "student visa" to game immigration system. Naturally Canada shouldn't be issuing more student visa's than USA; yet province of ON is issuing more visa's than all of USA. This has caused pressure on lower-cost rentals in certain locales. Again, temporary, as the "student visa" is unsustainable scam.

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Cabral's opinion sounds like the PoV of someone who got some heavy Canada RE bags.

Foch's take is closer to the mark.

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founding

Agree. The first one also reads off like it was written by ChatGPT (???).

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I was going to say... quality of writing + analysis in the first half was quite poor compared to what I'm used to seeing here. Unnecessary flowery language, cliches, vague statements without support, almost no real insight. I was a bit disappointed until I read the second one, because I'd gotten excited when I saw this post, and the first part was a huge let-down.

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author
Sep 18, 2023·edited Sep 18, 2023Author

As usual we have no idea hence why we got two people.

Also lol at complaining for 2 people taking their time to do this for free

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Apologies for complaining. Second guy was great; he carried it by himself. I've been wanting to see this covered for a while as it's hard to find serious commentary on Canadian topics. Thanks for the post!

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The dude is advertising pre-con's on his site... great way to lose it all in one trade.

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Spot on ChatGPT or an academic research article - avoiding bold take on where one would put his money - 2 years 20% down... or 5 years with 15% drop due to gov. intervention to prevent big drop - then gradual decline to 40% from the top.

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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.

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founding
Sep 18, 2023·edited Sep 18, 2023

IMO, the govt is making use of the newer immigrants, they are being used as a crutch for the economy/real estate, aka basically used as cash cows. The tell is that they suddenly increased immigration levels to unprecedented highs after COVID.

They pay 2-3x in tuition fees if they are registered to any of the diploma mill colleges (who are raking in cash) and also provide influx of labour (cheaper wages). Not to mention the demand generated by +1 mil people/year, when you think back to it Canada only had a population of ~30mil or such just 5-10 years ago.

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founding

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.

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author

No problem, shouldn't have been free but they wanted to do it for free which means they deserve the full audience.

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"...the deserve the full audience."

Lol, you are the best Bull, you are the best.

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Absoultley been waiting for this. Would like more articles around a Canadian perspective.

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Would love to see an Australia RE post if there is demand

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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.

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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.

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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?

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Ditto this question

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founding

I'll venture an answer; GTFO out of the country to anywhere else that makes sense for you -> US/Mexico/South-East Asia. Wait out the shitshow of higher rates / potential recession and possible collapse in RE values for 2-5 years. Come back after (if you even want to) and buy.

The problem with this is that it assumes you can cut / move from any family ties. Also can't predict how far the government would go to protect the high RE prices here.

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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)?

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Glad this is getting attention.

Interested in Bull's take on the next few years in Canada, or how US might affect Canada.

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author

Honestly no idea, this is why we avoid stuff we don't deal with. Had no idea it was such a mess.

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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.

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founding
Sep 18, 2023·edited Sep 18, 2023

The current government is determined to continue knee-capping the oil/gas & natural resource companies here. Perhaps not that much dis-similar to the Biden admin, similar anti-energy agenda, although I believe in the States, individual states have much more power and say in developing their resource industries.

Also, the problem is that Alberta is landlocked and the retards in British Columbia (sometimes I wonder if they're funded by OPEC/Saudi Arabia) don't want them to build a pipeline/refineries to and on the coast to get the oil exported. In theory, Canada should be making money hand over fist right now selling oil to Europe who have cut themselves off from Russian gas, but it isn't the case.

There's a lot of workforce that used to work in the O&G industry that shifted elsewhere after the many shitty years for the industry in the past decade, I believe they could come back if the govt is changed and investment into the industry starts flowing in again, big IF.

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founding

Cabral was filled with fluff

Foch good

As usual, thanks Bull

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founding

Super interesting, thanks!

Could you guys do the UK next?

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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?

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founding
Sep 18, 2023·edited Sep 18, 2023

"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?

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founding

Personally, I think answer has to inevitably be a painful one that Canadian RE has to crash and come down to Earth, there has to be a few years of pain, preferably to the boomers & others that bought between 1990-2007; 2010-2015. The country needs to learn a hard lesson that it should have continued developing O&G assets as well. Otherwise it will be a crappy future for the younger people in the country. Realization of the WEF "you will own nothing and be happy" agenda.

However, I won't doubt the lengths that (any) govt would go to in order to protect the boomer class and the golden tax goose that is Canadian RE. I can only hope that Powell hikes harder and faster and it all comes crashing down.

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Very curious about this too. Keeping current RE holders (aka voters) happy must be high on the gov's priorities. Therefore CAD continues to go to dogshit. Would love a more nuanced take though.

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founding
Sep 18, 2023·edited Sep 18, 2023

I’m more so worried that CAD hasn’t reached anywhere near the worst of what we will see.

The dilemma here is if rising oil prices will help balance it out the devaluing CAD or not. We haven’t yet seen BoC go out of line with US fed (yet) but if there’s another pause while at the same time Powell hikes, then I think we will easily see CAD hit 1.40+ per USD.

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This article could provide an answer as to what the Canadian govt would do:

https://www.palladiummag.com/2019/09/19/how-not-to-build-a-country-canadas-late-soviet-pessimism/

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This was a fantastic read. The pessimism described here is actually palpable in Vancouver. The comparison to Brezhnevites is an eye-opener...

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Thanks for this. Lots more to add but this is a great picture albeit an unfortunate situation

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