The General Canadian Real estate market has been going strong for 20 + years without any major pullbacks. I am curious to find out when does the BP community think the prices will start to go decrease in Canada ?
Call me an amateur, but unless you're investing in a single Canada-wide REIT, there is no such thing as "The Canadian Market". This street is up, that street is down, the other street has been stagnant, the east end of this town is booming, the west end of that town is shutting down.
Is beef farming land in Alberta 500km from the nearest oil well going down this month? Toronto is exploding, but Peterborough is under your wing before you even reach altitude on a flight to Montreal and it isn't doing anything crazy. Cross the river from Vancouver and prices look like any other town.
Maybe cliches are for the uninitiated, but "All Real Estate is Local".
Hi @Paul Gill
Wow what an excellent question.
I want to make it clear, I don't speak for BP, but I have been studying world markets and I'll answer your question with a few questions. If you or other still don't understand my drift and people want me to clarify then ask me.
1. Avg home prices in Canada are roughly +$1M, but local incomes don't support such pricing. So is it locals buying up and driving up prices?
2. Who makes up majority of foreign investment? What country? And is that country experiencing some tightening policy around currency movements?
3. Use pure logic, +20 years without major pull back (I would double check this). but even with that, just x years consistently doesn't mean it will continue that way. Look at the economic factors that drive this and see if its external fabrication. Or in other words as this 'external' influence been there???
I can get into more details if folks want but want other BP folks to chime in on this. Its a GREAT topic!
Hi @Paul Gill
Wow what an excellent question.
I want to make it clear, I don't speak for BP, but I have been studying world markets and I'll answer your question with a few questions. If you or other still don't understand my drift and people want me to clarify then ask me.
1. Avg home prices in Canada are roughly +$1M, but local incomes don't support such pricing. So is it locals buying up and driving up prices?
Michael: Average home prices in Canada are less than half that amount ~470K ... and that is inclusive of the distorting effects of Vancouver and Toronto. If you remove Vancouver and Toronto from the picture, the average for the remainder falls significantly (~40%).
In the over-heated Vancouver and Toronto housing markets, the largest portion of recent foreign investment has been coming from Asia. However, if you were to look at foreign ownership across all real estate classes, I suspect the U.S.A. would still hold the top spot {I'll have to dig a little to verify if this is still true}.
Pardeep is correct that the housing market has seen rising prices for almost a generation without any meaningful correction. It has gotten to the point where many homeowners and investors/speculators are too young to remember falling real estate prices and believe valuations only travel in one direction. Across most of the country and specifically in Vancouver and Toronto, the divergence between housing prices and household income has been widening. Vancouver has been ranked as the second or third least affordable city in the world for half-a-decade or more.
Just a quick comment: the Vancouver and Toronto markets often get lumped together, but they are very, very different.
Just a quick comment: the Vancouver and Toronto markets often get lumped together, but they are very, very different.
Claude:
Apologies to my friends in the Big Smoke ;-)
I was not trying to imply Vancouver and Toronto are the same, just that they are both outliers in comparison to most other markets in the country.
Besides, Vancouver has a much nicer climate :-P
Agreed, and I wasn't offended, just wanted to point out that they need to be evaluated separately. :-)
Another very important factor to consider is that Canada's economy is highly dependant on oil. Far more dependant than the average Canadian realises. That along with the fact we rely heavily on export of raw materials and we now have a tax and spend government in place we could see a negative economic shift on the horizon.
Home prices will fall at some point, impossible to predict when. As investors holding to a buy and hold mentality with positive cash flow should still remain a solid business plan. Just hope you are in the market to buy not sell when the bottom drops out.
Hi @Paul Gill
Wow what an excellent question.
I want to make it clear, I don't speak for BP, but I have been studying world markets and I'll answer your question with a few questions. If you or other still don't understand my drift and people want me to clarify then ask me.
1. Avg home prices in Canada are roughly +$1M, but local incomes don't support such pricing. So is it locals buying up and driving up prices?
2. Who makes up majority of foreign investment? What country? And is that country experiencing some tightening policy around currency movements?
3. Use pure logic, +20 years without major pull back (I would double check this). but even with that, just x years consistently doesn't mean it will continue that way. Look at the economic factors that drive this and see if its external fabrication. Or in other words as this 'external' influence been there???
I can get into more details if folks want but want other BP folks to chime in on this. Its a GREAT topic!
Where did you get these stats?
I believe there will be some stagnation in the the bigger markets such as Toronto, Mississauga, Brampton here in Ontario as prices have been crazy last year or two. But I see the markets around those area keeping steady as we play catch-up. Right now Ontario and BC look to be the future supporting economies which does not inspire much confidence. I'am seeing lots of job creation in my area due to all the tech start-ups and constructionmbut province wide we don't look to be growing as fast as we should to support any other province when the time comes, since we can no longer ride the Alberta oil cash cow.
Alberta is really going down! with no immediate signs of recovery.
I don't know much About @Roy N. stomping grounds out east, but I have heard they expect over 50& of the workforce to retire in the next 10 years. That true?
I think we will have to wait and see what Justin trudeau
Toronto is a world class city and it still consider undervalued compared to other major cities like NY, London Tokyo and Beijing. We still have lots of growth coming our way. However as an educated investor you have to make sure the numbers works and you can ride any economic waives that may occur.
Toronto is a world class city and it still consider undervalued compared to other major cities like NY, London Tokyo and Beijing. We still have lots of growth coming our way. However as an educated investor you have to make sure the numbers works and you can ride any economic waives that may occur.
Arthur:
Actually, not so undervalued depending upon the study you read.
@Samuel Sedore
While NB, NS and NF lead the country in aging populations (mostly as a result of migration), 50% workforce retirement in the next 10-years would be on the alarmist end of predictions.
Here my two cents.....
All investments have cycles and Real Estate l is no different. What goes up eventually comes down.
I agree with Roy. The Canadian RE market has not seen a major pull back in the last 20+ years. The price increases have been the greatest in Toronto, Vancouver & surrounding areas and more reasonable in rest of the country.
What goes up, must come down so the real estate prices will come down at some point in the future. The downturn will be dependent on having a recession, high employment rate and high mortgage rates. The banks and the Canadian government has been preparing for this down turn since 2008 US recession by making it increasingly harder to qualify for mortgage financing and increasing down payments requirements.
I also believe in Greg’s view point that one should have sound business plan that can whether storms. I try invest in positive cash flow properties and I have the mental mindset to handle 25% decreases. Infact, I am looking forward to it as that is when you will get the best possible deals.
I remember a quote from Warren Buffett “ Be fearful when others are greedy and be greedy when others are fearful”
I sold real estate in Toronto from 1987 to the 90s. There was in fact a significant slow down in the market in the early nineties, and I recall some real estate lawyers and mortgage brokers going out of business at that time. I now sell real estate in Florida and a major difference in both markets, are the regulations that are imposed by the government in Canada and its real estate agencies. Particularly in the area of financing. The market crash that occurred here in the US would not happen in Canada, mainly because of the strict rules imposed on lenders when qualifying potential buyers.
Toronto is a world class city and it still consider undervalued compared to other major cities like NY, London Tokyo and Beijing. We still have lots of growth coming our way. However as an educated investor you have to make sure the numbers works and you can ride any economic waives that may occur.
Arthur:
Actually, not so undervalued depending upon the study you read.
@Samuel Sedore
While NB, NS and NF lead the country in aging populations (mostly as a result of migration), 50% workforce retirement in the next 10-years would be on the alarmist end of predictions.
that would make sense I heard it through an interview I forget the gentleman's name he was a politician from NB on CBC radio. basically predicted negative growth due to extreme rises in health care costs and lack of incoming tax money
it was wrapped up with his grand scheme on how he can fix it :-p
Call me an amateur, but unless you're investing in a single Canada-wide REIT, there is no such thing as "The Canadian Market". This street is up, that street is down, the other street has been stagnant, the east end of this town is booming, the west end of that town is shutting down.
Is beef farming land in Alberta 500km from the nearest oil well going down this month? Toronto is exploding, but Peterborough is under your wing before you even reach altitude on a flight to Montreal and it isn't doing anything crazy. Cross the river from Vancouver and prices look like any other town.
Maybe cliches are for the uninitiated, but "All Real Estate is Local".
@Jett Rao thanks for that input, I've been wondering. It sounds like Trudeau is betting hard on oil coming back in the next couple years. I say that because his budget has poured a LOT of money into making it easier for out-of-work oil workers to stay afloat on the government's dime. That move will likely keep prices firm while oil is low - at least until the bottom falls out.
Just a quick analysis of what I have seen in the past 6-7 months. Monumental price increases driven by multiple offer situations. I am seeing 10-15% during this span for single family and not just by a handful of houses but across the board on average. Biggest increases are the homes between $500-800k which are the more "affordable" homes in the GTA. It is absolutely ridiculous and I cannot for see something like this again. I have seen prices gradually increase since 2009 and thought it would slow down at some point but it never did. Lots of foreign money coming in and staying. Demand will always be here.
Interest rates haven't budged in a long time. I don't see this lasting forever.. This will be a game changer for a correction. I watched the "Big Short" a few days ago and was a phenomenal movie. No way the Canadian government will allow a crash like that to happen.
Much smarter folks than me think that Canada is in a pretty rough spot - maybe worse than the US was before the 08 disaster.
I'm not a Canadian, but I spend a fair amount of time there for business in the Toronto, Brampton, Mississauga areas. The constant new construction (that often seems to go unfilled) would worry me if I lived in the area: it reminds me too much of Long Island in the years leading up to the crash when I lived there.
For the sake of all the businesses I work with there, I hope I'm wrong - but something about that market just feels very off to me. But like I said: all smarter folks than me.
This reminds me of a similar BP post for vancouver specifically.
https://www.biggerpockets.com/forums/48/topics/287...
There I gave my 2c:
"Vancouver wont crash!
Being born and raised in Sydney Australia I have seen real estate rise, rise and rise some more. Even when people thought it couldn't get more expensive it went up another 20% in Sydney last year.
Vancouver and Sydney are very similar in that they are the most desirable places to live in their countries and until recently Sydney was also in the top 5 in the world but now only Vancouver remains there. both cities are land locked, and they are also both beautiful harbor cities. Australia sells non-renewable resources as its main export to China and Canada doesn't sell much to china instead more Chinese/Asia invest in property in Vancouver, also in LNG companies and resource companies in BC etc. Canada sells more to the USA (~87% of exports).
Even when china slowed down some years ago and stopped buying from Australia, Sydney house prices did nothing but stay stable. At the same time and to this day Chinese folks with money continue to get their money they make out of china and hence invest in real estate in Vancouver mainly due to instability in their own country and most don't care if their investment appreciates as long as its holds it values.
Long story short even if china crashes prices will do nothing in Vancouver but remain stable or maybe fluctuate no more than 5% even if their is more inventory than buyers.
Vancouver is an amazing place to live and the more the world knows this the more the prices will rise.
This is why our investors and I continue to make great residual income through buy, renovate or build new and sell in Vancouver and will continue to do so for some time."
Interest rate will rise in a few years and when it does the market will slow down and I wont be offering $100K over asking - but it would take a world economic crash for it to really crash here in Vancouver.
Just a quick analysis of what I have seen in the past 6-7 months. Monumental price increases driven by multiple offer situations. I am seeing 10-15% during this span for single family and not just by a handful of houses but across the board on average. Biggest increases are the homes between $500-800k which are the more "affordable" homes in the GTA. It is absolutely ridiculous and I cannot for see something like this again. I have seen prices gradually increase since 2009 and thought it would slow down at some point but it never did. Lots of foreign money coming in and staying. Demand will always be here.
Interest rates haven't budged in a long time. I don't see this lasting forever.. This will be a game changer for a correction. I watched the "Big Short" a few days ago and was a phenomenal movie. No way the Canadian government will allow a crash like that to happen.
The crazy part to me is that people are still able to afford real estate in Toronto. I know my market is starting to get stupid with multiples because of everyone getting pushed out the GTA into KWC and Hamilton. Saw a triplex go 84k over list a month ago......it was really undervalued to begin with.
Much smarter folks than me think that Canada is in a pretty rough spot - maybe worse than the US was before the 08 disaster.
I'm not a Canadian, but I spend a fair amount of time there for business in the Toronto, Brampton, Mississauga areas. The constant new construction (that often seems to go unfilled) would worry me if I lived in the area: it reminds me too much of Long Island in the years leading up to the crash when I lived there.
For the sake of all the businesses I work with there, I hope I'm wrong - but something about that market just feels very off to me. But like I said: all smarter folks than me.
Jason
In terms of new construction that is not filled. You must be talking about condos and houses in Mississauga Brampton and other parts of Peel Region because York Region all the way up to Sharon Ontario is mostly sold out on Single Family.. check the new construction websites yourself.
I just don't see it happening worst than in US 2008 when Canada seen it with their own eyes. Canadian economy as a whole is not doing well and that is where I will agree with those smarter people you know. It just will not be that bad.. It will take a big screw up with Canadian Government and jacking up the Bank of Canada rate overnight.
Canada never had subprime adjustable mortgages. Mortgages in Canada vs US are day and night. Canada is so strict and force people who cannot afford to go to B lenders are simple rent.
I think the best way for Canada to get out of this is to slowly increase the bank of Canada rate year by year to cool down the market. Its ridiculously low and has not changed in a while.
Having said all this I only have a primary residential in Canada where I live and all my investments are in the US. I don't invest in super hot markets and markets driven by appreciation and 0 cash flow.
Toronto market is sky high, but I believe people are still able to afford real estate in Toronto is because the majority of those SFH buyers are not new homeowners. They have benefited from the rising values of their own properties.
People talk a lot about foreign investment into the market, but I personally believe it has a lot more to do about perception then reality and its really the local speculators that are driving the market. Combine perception with cheap credit and low inventory and it feeds itself.
Some builders are feeding the speculation as I now see SFH/townhouses with assignment clauses.
It's funny I've signed up for builder release notices in York Region/Durhan Region. Multiple times I receive an email advising that registration is now open, only to receive an email stating registration is now closed within 1-2 hours. Quite often all units are sold out within the 1st day. (Markham / Richmond Hill)
Toronto is a world class city and it still consider undervalued compared to other major cities like NY, London Tokyo and Beijing. We still have lots of growth coming our way. However as an educated investor you have to make sure the numbers works and you can ride any economic waives that may occur.
Toronto is not in the same class or league as these cities. Don't get me wrong Toronto is a large international metropolis but not even close to these Megalopolis cities in terms of population, density, demographics, economics and geography.
The crazy part to me is that people are still able to afford real estate in Toronto. I know my market is starting to get stupid with multiples because of everyone getting pushed out the GTA into KWC and Hamilton. Saw a triplex go 84k over list a month ago......it was really undervalued to begin with.
Samuel:
Let's draw the distinction between "people still buying real estate" and "people are still able afford real estate". Household debt nationally is between 160 & 172% of household income (depending on the study you read). Mortgages are a large portion of that over-extension and Toronto and Vancouver are the big skew on the mortgage numbers.
Young, freshly minted homeowners - particularly those in TO or Vancouver - with no amount of equity paid down, could find themselves in precarious positions if a recession were to occur in concert with their {first} mortgage renewal.