The Housing Bubble

A report from Vice Magazine on Canada. “Canada’s real estate market is bound to take a hit this year thanks to the government’s new mortgage rules that took effect on January 1st. Buyers who are making down payments of more than 20 percent on a home, do not need mortgage insurance — they will now have their incomes ’stress-tested’ on a mortgage rate two percentage points higher than whatever rate they originally qualified for. Average home prices in Toronto have declined by almost 10 percent since May 2017, with single-detached homes bearing the brunt of that decrease.”

“Some critics of government intervention in the housing market argue that the mortgage rules were badly timed, given that Canada’s hottest real estate markets like Toronto were already cooling. ‘These rules were necessary, but to what extent was there a need to do it at this particular time?’ asked CIBC’s Deputy Chief Economist Benjamin Tal.”

From the St Catherines Standard in Canada. “The Niagara real estate market has levelled out in recent months after prices increased on average 30 per cent from January to May 2017, says Brad Johnstone, broker of record for Royal LePage Niagara. Randy Mulder, president of the Niagara Association of Realtors, says many of the buyers have been coming from the Greater Toronto and Hamilton areas. While Mulder says buyers are no longer ‘flooding the market,’ he says activity should remain steady.”

“‘People realized there’s quality real estate to be had here for a reasonable price, comparatively speaking,’ he says. ‘I don’t think we’re going to see a heavy erosion of the pricing because a lot of that was a makeup.’”

“According to Boldt, Niagara properties are half to one-third of the price of housing in Toronto. He says Torontonians began selling their homes and buying similar properties in Niagara. Boldt says foreign buyers, especially from China, contributed to rising prices and volume before the province introduced a speculation tax in April. ‘As much as people complain, I think these are actually good things. We’re trying to prevent what happened in the States,’ he says, referring to the U.S. housing crash of 2008.”

“Mulder says it’s unfair to compare sales figures now to those experienced at the height of the boom. ‘We’re comparing sales now to one of the hottest markets I’ve seen in my 55 years on this planet.’”

The Vancouver Sun in Canada. “To understand Metro Vancouver’s housing market in 2017, and how B.C.’s politicians could ease the affordability crisis in the future, it’s necessary to look offshore — to China, Australia and New Zealand. A clutch of real-estate industry and government officials in Canada still want the public to believe foreign capital and immigration policy have little to do with the sky-high housing markets in Vancouver and Toronto. But the evidence is pushing their vested voices to the fringe of the affordability debate.”

“UBC geographer David Ley, author of Millionaire Migrants, joins SFU’s Qiyan Wu in maintaining Chinese investment has become ‘a fundamental’ of Metro Vancouver’s real estate market, up there with interest rates. National Bank of Canada economists estimate ‘almost $13 billion was spent by Chinese investors in Vancouver’ in one year alone.”

“Indeed, this year’s move by China’s authoritarian leaders to severely restrict how much money they will allow to leave their populous country appears to be a key reason prices on high-end detached houses in Metro have this fall been dropping by 15 to 20 per cent, even if most of the public hasn’t noticed.”

From News.com.au in Australia. “New data reveals that there are just over 23,000 Sydney properties on the market at the moment, a massive rise from last year. The CoreLogic data also reveals Sydney’s median home price has inched down in recent months to just over $895,000. However, that’s still more than $300,000 higher than it was in 2012. The average amount of time it takes to sell homes is already rising in some suburbs as buyers realise they have more choices and more bargaining power.”

“Yet auctioneer Rocky Bartolotto of Auction Services said many inner-city vendors were still not pricing their properties competitively because they were expecting to get more money than neighbours who sold six months or a year ago. ‘Sellers need to be realistic with their pricing. We’re not in the boom anymore,’ Mr Bartolotto told The Daily Telegraph.”

“CoreLogic head of research Tim Lawless said investors would struggle to enter the market. ‘Prospective borrowers, particularly investors, may find securing a mortgage won’t get any easier in 2018,’ Mr Lawless said.”

From The Daily Telegraph in Australia. “Some of Sydney’s wealthiest suburbs have been hit hard by the city’s plunging house prices, with formerly immune property havens such as Darling Point and exclusive Point Piper dropping by as much as 17 per cent in the past year. The dramatic fall follows a Sydney-wide downward trend in which timid buyers have slammed the brakes on the once-booming housing market.”

“‘It’s more than brakes, the market has slipped into reverse for four months now,’ said CoreLogic head of research Tim Lawless.’The question is how far is it going to go? We think there will be a correction of 5 per cent to 10 per cent in property values.’”

From the Brisbane Times in Australia. “Blacktown train guard John Okroglic, 40, is one Sydney property investor who believes he sold his investment property at the right time, as house prices in the city fall. Mr Okroglic sold his apartment on Elouera Road in Cronulla in November for $720,000, a property he bought for $345,000 just 15 years ago. ‘I think we hit the peak, simple as that,’ he said. ‘You sell at a high and buy at a low, you’re not going to hold something that’s not making you money.’”

“Just one month since the sale, Mr Okroglic thinks if he waited any longer, he would have received $50,000 less. ‘There’s one place in Cronulla it went for $640,000 two, three weeks ago … my agent saw it and he said, ‘How did he only get that much when yours was not nearly as good?’ ‘So I’m very lucky.’”

“Mr Okroglic said he always felt the Sydney housing bubble would not last. ‘Wages haven’t kept up with this nonsense, as I call it. Something is going to give eventually, and I’m sorry to say this, but I think there’s going to be a lot of carnage later on,’ he said.”