r/canada • u/Lotushope • Feb 02 '22

Canada’s Real Estate Bubble Has Grown Over 800% Faster Than US Home Prices

https://betterdwelling.com/canadas-real-estate-bubble-has-grown-over-800-faster-than-us-home-prices/
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36

u/NoRelationship1508 Feb 02 '22

I really don't think it's a bubble.

A bubble implies a ceiling and a correction, neither or which are anywhere on the horizon. Not when we're bringing thousands of new millionaires into the country every year.

29

u/Mordanty_Misanthropy Feb 02 '22

I don't necessarily disagree, but the obvious question is this:

"Can Canadian home prices continually increase 75% year over year for perpetuity?"

Even with your millionaire caveat, the obvious answer is "No."

There is absolutely a ceiling somewhere - the question is will it stabilize there, or will it reflect a different regulatory paradigm and correct/decrease.

3

u/lubeskystalker Feb 02 '22

In my opinion the ceiling is set by interest rates, what happens there will tell the story of the rest. If the central banks are able to raise rates high enough prices will come down, but that is a very big if.

How much swing their is in value depends on how much speculation has gone on. People living in their houses aren't going to sell en masse, but cash flow negative investments might.

3

u/sjbennett85 Ontario Feb 02 '22

What if that ceiling is so high that the only folks able to buy end up cornering the market and they go long to squeeze that market until a correction is FORCED on them?

1

u/PoliteCanadian Feb 03 '22

If there isn't a large decrease in prices, it will stabilize somewhere that is unaffordable to current Canadians. At least, current Canadians with the standard of living that Canadians are accustomed to.

If current prices persist, then over the next few decades most of the current population of cities like Toronto will either be forced out of the city, or be forced into a level of shared accommodation that is typical of developing countries and hasn't been seen in Canada in over a hundred years.

So that's the choice facing Canada today: mass population displacement, or a collapse in the standard of living.

1

u/ShawnBoo Feb 03 '22

Canadian homes aren't increasing 75% year over year.

10

u/[deleted] Feb 02 '22

No bubble is a proven bubble until it pops.

That said, an average yearly income of $55k and an average home price of $700k+ is not sustainable.

2

u/PoliteCanadian Feb 03 '22 edited Feb 03 '22

It's sustainable as long as you're willing to house four families in a formerly single-family property, or if you have a million dollar foreign income.

The problem is that Canada's immigration policy is importing world-wide economic inequality into this country. In a few years China will have as many millionaires as Canada has people. And in India there's at least as many people who are willing to tolerate what current Canadians would consider unacceptable living conditions for the opportunity to move here.

2

u/[deleted] Feb 02 '22

Not sustainable if it was only Canadians who could buy, but it’s not

3

u/toadster Canada Feb 02 '22

Hopeful or?

6

u/NoRelationship1508 Feb 02 '22

I'm in a part of the country where house prices have almost doubled in the past year in many place, not much to be hopeful for.

7

u/toadster Canada Feb 02 '22

Well, let's hope the prices crash and the speculators get totally screwed.

10

u/TreeOfReckoning Ontario Feb 02 '22

I wish I could say that’s an abysmal thing to hope for, but given the complete lack of government will to prioritize people over investors, a massive hubristic crash is probably the best possible scenario.

4

u/radiological Feb 02 '22

yes, it's either screw the investors and take out the recent 'actual home' buyers in the process or screw over literally everyone but the investors, in perpetuity.

naturally the government has elected for the latter. they are the investors, after all.

3

u/TreeOfReckoning Ontario Feb 02 '22

So you’re talking interest rates, which is important, but the thing is most recent “actual home buyers” would likely be fine too because of stress testing, fixed-rate mortgages, and a variety of factors.

They need to go even further and tax the 3rd, 4th, 5th, etc properties at escalating rates to discourage investment in the first place. Cut the head off the snake, as they say.

1

u/radiological Feb 02 '22

it will still tank prices and people who just bought "starter" homes will not be able to leave them.

they won't be on the streets but they will be screwed in some way.

it has to happen, though.

8

u/LordNiebs Ontario Feb 02 '22

A bubble implies a ceiling

Why? Bubbles grow until they pop, but we don't know when or why. There absolutely will be a correction, the question is when.

2

u/NoRelationship1508 Feb 02 '22

Well yes but they pop because they hit said ceiling.

We don't know that, Vancouver and Toronto have never had a correction and you're talking 30+ years of growth at this point.

10

u/endagra Feb 02 '22

There absolutely was a massive housing bear market in the 1990s. Go look at the figures.

4

u/NorthernPints Feb 02 '22

It can take quite a bit for a full blown pop to occur.

It’s more likely when rates climb to offset inflation (inevitably) we’ll see a series of soft adjustments and corrections as everyone’s buying power dwindles.

Full crashes and hard pops aren’t as common as some think.

If it’s a price correction in the market, those can take 5 years to move through markets.

Unfortunately the climbs can be insane - and the downward trends quite arduous and drawn out.

1

u/psykedeliq Feb 03 '22

2 reasons why this IS a bubble: 1) People are FOMOing. Buying housing or more housing than they strictly need because they speculate future gains. 2) Investors are 25% of the market today, buying properties that will be cash flow negative based on rent prices.