JamesM

This article hits some salient points. Generally I think the National Post is garbage but their business and economics articles and opinions can be interesting:

​​​​​​https://nationalpost.com/opinion/sab...jfc1ZC1phXiLrc

dbd33

Canada not special shocker:

https://www.theguardian.com/business...ket-has-become

JamesM

The nice thing here is the wonderful comments below the article.

dbd33

The Daily Mail is the most reliable source for BTL lunacy. Some of these comments make actual sense e.g.


"I read the other day that only 10% of the general population own more than one property but around 50% of politicians own more than one property with one in particular being the owner of eleven properties. ..."

spouse of scouse

I watch the real estate market closely in Oz, particularly Western Australia, and I've never seen property values increase so quickly as they have over the past 12 months.

When we moved back to Perth from the UK at the end of 2018 we bought a newly built villa for $475,000. The same builder has just finished 3 more identical villas 2 streets away from us, all advertised at $660,000. Two were sold on the first day of marketing, the other on the second.

dbd33

I suppose if there's a big crash the people who will get hurt will be the ones who've bought in Canada or Australia in the past three years or so. Those who didn't have the money to buy in that period will then be able to. We peasant farm folk are lucky in being underleveraged. Boom or bust, we still live in a field with chickens, the price of the field is neither here nor there.

scrubbedexpat091

I was bored today so looked at rents in Perth and Sydney, seems Australian"s get more bang for their rent vs BC.

Sydney seemed rent wise just as bad as Vancouver but I did notice wages on job postings being higher.

Moses2013

The next question: Wages in Canada/Australia sustainable?

https://betterdwelling.com/canadas-p...ke-19-years/#_
Canadian real estate prices are now beyond frothy, and the government says that’s fine. They believe they can prevent home prices from falling, and let incomes catch up. If you’re in government or banking, you may have already seen me explain how impossible this is. If you haven’t, this is known as the “soft landing” scenario, and it has never happened.

About The Calculations

Before we get to the numbers, there are a few ways of measuring incomes “catching up.” Today we’re looking at how long it would take incomes to rise enough to carry payments on a typical home. There are other barriers such as saving a down payment, but we’ll assume you can find it on a park bench or something. That means today’s numbers will be more ideal than the reality would be, but you know, we’re optimistic for you.

For the incomes, we will use the median income of a household between 25 and 34 years old. Income growth is about 2 points, around the inflation target. It may seem reasonable today, but in the past wages have failed to keep up with inflation. This is especially true in Toronto, where the wage has actually fallen a few times. That also makes this a little more optimistic than reality.


Mortgage payments will be on a 5-year fixed rate, with a 25-year amortization. We will assume the rate is 2% this whole period, but that would require perpetual recession for Canada. Low-interest rates are typical of a weak economy, while high rates are typical of a booming economy. In other words, this will be unrealistically low, just like politicians assume.

For home prices, we will be using the Canadian Real Estate Association (CREA) benchmark. Using the aggregate benchmark reported in February 2021, more specifically. A typical home is not a detached one, so if you’re hoping for that, add a few extra years. In this estimate, home prices do not rise. If home prices increased at the rate of inflation, the same as wages, the gap would persist forever. Nice thought if you’re a homeowner, but makes less and less sense if no one can ever buy your home. Got it? Great, on to the calculations.

Greater Vancouver Real Estate Needs To Stall For 19 Years

Greater Vancouver real estate prices need to stall for a long time for this to make sense. The median household needs 19 years of wage growth outpacing home prices, to carry a mortgage. It would mean 25 to 34-year-old households would be around 44 to 54 years old when they can carry payments on home prices. That’s a very long time to move out of that one-bedroom rental. It’s also for the Greater Vancouver region, not the city — which is more expensive.

Fraser Valley real estate isn’t far behind, even though it used to be considered a suburb of Vancouver. Incomes would have to grow for 17 years to catch up to home prices, to pay the mortgage. If you’re a household between 25 and 34 years old, you would be between 42 and 52 years old. Just in time to hear previous generations talk about retiring at 55.

Greater Toronto Real Estate Would Need To Stagnate For 19 Years

Greater Toronto real estate may be a little cheaper than Vancouver, but it needs just as long for incomes to catch up. Households need to see incomes rise and prices stall for 19 years. If you’re between the ages of 25 and 34, you would be between 44 and 54 years of age before you could carry the payments. Remember, this is just for Greater Toronto. In the City, you would need longer, especially if it’s for a detached home.

Just west of Toronto in Mississauga, things only get a little bit better for incomes. It would take 15 years of home prices stalling, for wage growth to make payments affordable. Households between the age of 25 and 34 would be between 40 and 50 years old. Not terribly old, but not exactly the kind of jump in affordability you would expect to commute an hour for.

Greater Hamilton real estate, where Toronto’s young adults moved until 2019, is more affordable. It’s just not much more affordable. Households need incomes to rise for 11 years, while home prices stall, to pay the mortgage. The typical household between 25 and 34 would be between 36 and 46 years of age at that point. It doesn’t seem bad in contrast to other regions, but remember — this is an unrealistic scenario. The IMF recently warned Hamilton is the most overvalued market in the country these days.

OrangeMango

The problem is ultimately that you will have a whole future generation which can't buy property or fulfill there dream of their life. I find that thought even more scary than climate change or global warming.

This is not only the case in Canada but also in the UK and other countries. Alt least Canada has still a lot of open space and doesn't only consist of Vancouver and Toronto or Montreal.

I am certainly not a socialist or on the extreme left, but I truly think that even a hard working brick layer or car mechanic should be able to afford a house of their own in their life time, even in cities like Vancouver or Toronto.


I am also guessing that Canada will raise interest rates slightly after the pandemic is over, really over, also in the minds of politicians and vaccine-effectiveness doubters. Then there would be a massive economic rebound and a strong possibility of overheating. And an overheating economy has always been slowed by higher interest rates.

dbd33

The idea that everyone should own a house isn't even vaguely socialist. Lives geared to the acquisition of a material good is core Thatcherism. There is another way, in Germany or Holland, for example, it's common for people to rent all their lives and to make nothing of that.

Global warming/climate change otoh will fry your bollocks, it's an existential crisis. It won't matter who owned the houses when they're at the bottom of the sea.

Shard

It almost seems as if Canada's main economic engine is immigration. Construction and retail and equity growth obscure (limited) productivity and innovation.

spouse of scouse

One of scouse's sons and his partner have been renting for some years. About 6 months ago his partner received an inheritance of around AU$100,000 from her aunt in Chicago and was pondering what to do with it. I suggested that using it for a deposit on their own place might be a good idea - they're both pushing 40, have good jobs and no kids (and are not planning to have any). Their jobs are not super high-paying ones but they're not minimum wage either, with that deposit that could pay off a modest home in a decent Perth suburb by the time they retire.

They went with having cosmetic dental treatment and a new car instead. Which is absolutely fine as it's their (her!) money to do as they like with, but I just hope they don't regret it when they're still paying rent from a much reduced income when they retire.

Shard

What a mistake. The new car will be an old car next year, and at forty it's late in the day for cosmetic dental treatment (if you can't easily afford it).

scrubbedexpat091

I would have went with trying to get a house. But then I am not into cosmetic dentistry, I am fine with what I was given and I don't care if my teeth are not perfect.


Old age concerns me. When renting for life there is no house to sell and downsize and help cover the costs of old age.

If I get to an old age and can't live on my own I'll be in whatever crappy govt run home they shove me into.

At this point for us a house will never happen. Too old and too low income and no way we can earn what is needed as wages in Canada suck.

Even if I manage to ever retrain for medical device reprocessing, the people who clean and steralize the tools used in surgeries at hospitals, the pay is only $25 per hour which is far below what is needed to own a house and that is BC wage, other provinces the wage can be lower.

Considering the cost of living is higher in BC overall vs California it's sad the min wage is so low in BC, BC will be at 15.20 CAD next month and California at $15 in January

OrangeMango

It seems like that sometimes. If Canadians, resident and working in Canada can't make enough to buy one of those houses in Vancouver and Toronto, the funds must come from overseas. If this is the case, than immigration is the only way. Immigration from booming Asian countries, where you have a high number of millionaires who want to seek a different life, with a bit more political freedom and less corruption. I hear that's hard to find these days in Hong Kong, and who knows what's going to happen to Taiwan?