Canadian House Prices Overvalued
 

This should come as no surprise.

B.C. leads the nation with Alberta a close second in overvalued house prices.

Re: Canadian House Prices Overvalued
 

In other news...

S**t in woods traced back to bears.

Pope in shock Catholicism announcement.

Rooney did pay hooker.


BC and Albertan is crazy overpriced. I'm a bit surprised the national average is 11.8% over 'fair value' though, and BC is only 16%.

Re: Canadian House Prices Overvalued
 

Hey that s**t could just as easily have been traced back to moose, deer, elk, coyote etc. ;)

Somebody had to do the research. :):p

Re: Canadian House Prices Overvalued
 

If CIBC are willing to admit to that extent of overvaluation what are the real values?

Re: Canadian House Prices Overvalued
 

Yes, the report doesn't make any sense unless it defines what "fair value" is.

Edited to add: Fair value is usually taken to mean the price agreed between a willing purchaser and willing seller, who both have knowledge of the market and no external pressures to buy or sell.

This is going to be 90% + of the sales in Vancouver and Calgary, which means the price is the fair value +- nothing.

Re: Canadian House Prices Overvalued
 

True. The 'fair value' is only of any significance, if it is directly tied to the affordability of the housing compared to the salarys in the city. They are better talking about (un)affordability, and avoiding the comfusion.

Plus, no one has their hand held behind their back and forced to buy a house at an unfair price. The fair price is whatever the buyer is willing to pay for it. The 'affordability' price will be seen in a couple of years when we know what the locaized job markets are looking like!

Re: Canadian House Prices Overvalued
 

fair value means no state propping up of the market

Re: Canadian House Prices Overvalued
 

I just had a quick look for the report on the CIBC website but couldn't find it.

Happened to notice this page on renting v buying

https://www.cibc.com/ca/mortgages/bu...nt-vs-own.html

The first thing is they are using information 5 years old, but at least that perhaps gives an indication of the situation before the last couple of years of inflating the bubble.

Taking an example, the rent of $2100pm. Supposedly a house at that rent could be bought for $250k (maybe so in 2005?). The reality is a house being rented for $2100 or so in Calgary now is going to be priced at least at $500k. My suspicion would be that houses are significantly overvalued, to a greater extent than the values in the report suggest.

Re: Canadian House Prices Overvalued
 

There was a time in the UK when landlords wouldn't accept anything less than 7 or 8% yield. i.e. they'd value a house at 12-15 times it's yearly income. Since 2005 people haven't been doing that, in fact many even accept negative yields in the hope of capital gain. This speculative investment is extremely bad for the economy as it not only produces nothing it takes capital away from otherwise productive things.

This is the effect of low interest rates and free money, things the state controls. And it's still going on.

Re: Canadian House Prices Overvalued
 

Interest rates are set by the Bank of Canada to maintain a predictable inflation rate. (Not that I am trying to suggest there is never any political interference.) I think that setting interest rates to manipulate the housing market would severely screw the rest of the economy.

Re: Canadian House Prices Overvalued
 

That actually made me laugh out loud;)

Keeping inflation in check is secondary to keeping economic 'stability'. The government interprets this to mean keeping the banks solvent, which means keeping people paying their mortgages, which means keeping interest rates low. Whilst this is simplistic, it is, in my view, the entire reason for the price increases in Canada over the last 12 months. The problem with this policy of course is that it's a trap - once you have low interest rates like this, it is very very difficult to raise them effectively. The Bank of Canada (to their credit) has tried - they look like they've hit a wall, but I still hope they can do it.

Re: Canadian House Prices Overvalued
 

That, imo, is the problem with this federation when it comes to economic policy.

Australia & NZ have had similarly overheated housing markets, perhaps Oz even more than NZ. Like BC they are both pacific rim economies with high amounts of asian immigration. In both countries, interest rates were raised by the reserve banks to cool the housing market off - far more than has been done here. I see more similarities between Vancouver and Sydney, Auckland etc. than I do to other Canadian cities.

Unfortunately, the battering central canada & manufacturing has taken, and US economic policy of keeping interest rates ridic. low means the canadian central bank doesn't have much choice but to follow suit, even though it's the wrong choice vis a vis Western Canada.

Re: Canadian House Prices Overvalued
 

This is basically the reply I would have given to Alan's post if you hadn't answered first. Given the problems of the manufacturing industry in ON
and QC I don't think the possibility of an overheated housing market in Vancouver even registers on the radar of a notoriously eastern centric federal government.

They are absolutely right to concentrate on getting the rest of the economy moving.

Re: Canadian House Prices Overvalued
 

Eh? Have you noticed who is the federal government right now?

Re: Canadian House Prices Overvalued
 

Just the same that doesn't change the fact that their focus is on Ontario and Quebec, simply because that's where the votes are. :sneaky: