Loading ...Follow up to Sir Farmer’s post on the Exter pyramid and Canadian real estate
It didn’t happen overnight … the boom in Canadian real estate. The article is over 7 and a quarter years old.
https://macleans.ca/economy/economicanalysis/chinese-real-estate-investors-are-reshaping-the-market/
Why/how do I relate to this personally?
Being a resident of one of the best suburbs of the famed Silicon Valley, I got priced out of an upgrade during this same time period. I always heard the Chinese were buying with boatloads of cash.
GL
Yes it’s a Bubble
I thought 10 years ago it was a bubble and passed up many real estate “deals” ..prices have gone up exponentially since then
and every time there is a small down draft…everyone yells…the Chinamen are selling…then back up it goes
betting against RE in Canada is a a death wish
You are correct FGC. It is, like general stock market indicies, a manifestation of the debased currency. Same in the US as well. Unlike Bitcoin or other things that no one needs. Housing in one form or another is needed by all. The continuous rising prices, despite the occassional corrections, are just reflecting declinning fiat value.
Its a permanently high plateau!
We have heard that before (1920’s).
Famous last words Nightingale. The guy who uttered them was humiliated shortly after. Much to his shock I’m sure. But who knows. Maybe there is a big plan in the works to seize all homes and use them to back the currency like Germany did once. Canada won’t have a commodity currency much longer if they keep closing mines and oil sites. Houses and land are the natural alternative. Will you give them yours to help the cause!!
‘betting against RE in Canada is a a death wish’ …
But what happens once the ‘side effects’ (finally) kicks-inn and ‘suddenly’ demand diminishes as RE getting sold-off due to inheritance and to sell to who? Then Canuckoes & Down-under’ RE might be first to go steep south.
If someone who cannot ever aford a house inherits a house…they will likely not sell it .
If one is Mortgage Free then I see NO Risk in Holding Your Home through whatever comes.
It is after REAL Estate
Mortgaged second and third properties are another story…but so far still doing well IF you locked in zero
What about the poor saps who inherit homes that are underwater on the mortgage? Want to bet they take a pass and refuse to be part of the estate. That’s coming I suspect. Yes, Canada’s R/E has seemed unstoppable. But no it will not last forever because nothing ever lasts forever. EVERY trend will eventually reverse. We all know that even if we cnnot time it easily. Hope I am around to see it pop. Its been bugging me for years.
Party pooper
🙂
My Great Grandmothers house on the Alberta prairies went to zero during the depression. It still stands empty to this day like a dessicated old wooden hulk on the farm and no obvious path to the front door anymore. It hardly rotted at all because the air is so dry. Its a real dustbowl story. The farm just blew away until the wooden fence posts vanished under the accumulated blowing soil. And the family moved to Calgary for the relief being offered by the city plus free lodgings and meals.
What a crazy time that must have been if you can imagine. Worse than what we are seeing today in some ways. Nobody ever returned to the farm either. Eventually they started plowing circles around the house and its sat there ever since with all the paint having long since been blown off by the winds. Great roadside photo though. My point is obvious enough. They had the roaring 20’s and a massive speculative boom in everything just prior to the crash and depression. The people thought the good times would never end. But when it did…..nothing was ever the same again. Hardly anyone had saved a cent for the bad days that came next. The family were turned near to destitution.
Then we had a war!
Farmer, in your old hometown, prices have stalled, new developments are offering incentives and more places are finally coming on the mkt. In my neighbourhood there, foreign buyers constitute 20-30% of the SFH. It’s even worse, no one lives in those houses full time and maybe never. If we get to 8% mortgage rates from the 2% before the rise, renewals gotta hurt. I imagine that those buyers paid cash but if the Chinese RE mkt crashes more, they may need to repatriate some cash in the form of Canadian housing just like the Americans did in 2008-9 in resort towns in BC. It took prices down up to 50% until the inventory cleared.
Back up on the mountain in the BC Interior we are already down 10-20% from the Feb 2022 highs depending upon the price and location. A plateau has formed and depends upon the direction of the rates since foreign buyers are excluded from the mkt for the next two years.
Let me tell you something crazy…..what is happening in Canada right now is similar to what crashed the Japanese economy back in 1990. The Bank of Japan raised interest rates rapidly from a low of 2.5% to 6% and that was all she wrote as the bubble finally could take no more pressure and she burst.
What led the decline was commercial real estate which had become massively inflated relative to other assets. Residential was also a bubble. They thought it would never end. Thirty Four years later and they are still recovering if you can imagine. It was the crash to end all crashes and the rest is history. So watch those rates rising and see how long before the CRE bubble pops because what comes next is the whole house of cards will collapse. Its all part of the plan I suspect.
And it could get very ugly.
In the period before WW2 in Vermont, the hill farms that we’re basically only accessible via Class 4 dirt roads were abandoned as they were subsistence farms at best. Once dairy and sheep farming in the flatland with fertile soil offered cheaper costs, the farmers walked away. The State took them over and created the State Forests and the old Class 4 roads became great hiking trails along the spine of the Green Mountains. All those old roads followed the stream beds.
After the war, there was massive advertising in the Long Island Sound area and CT to bring families to Vermont with the promise of cheap land and buildings if you were handy. That was the beginning of the Vermont Life magazine to market the state.
As an aside, this was the start of the Liberalization of VT and accelerated when the Interstate System was completed in the 70’s allowing easy access. We call it rats coming up the sewer pipe. Many old time Yankees left for the West. Most of the multi-generational families were good Centre folk and now still lean Red although that has changed over the years.