Okay… it’s merely close to the worst in the world, but maybe not the absolute worst. My bad.
Link
Link
Nope.
Did you even read your own links?
Nowhere in those two articles does it say “Ontario real estate is probably the most overvalued and absurdly expensive in the world”.
But LC Strawhouse, even if your links do support that, what do you expect a provincial government to do about it? That was **RickJay’s **, which you’ve not answered.
Heh, is it that time of year again, for a Canadian real estate bubble scare? The same one I’ve been hearing about for pretty well my entire working life? 
Huh? I never said I was making a direct quote. The articles actually say “Canada is right near the top of the list of countries the IMF says has a dangerously overvalued housing market.” and “Canadian homes among most overvalued”, so what’s my transgression?
I don’t know, I’m not an economist. But this is precisely the type of thing that a provincial government needs to answer for. It’s their job. They have tools, resources and experts at their disposal (incentives, tax breaks, whatever.) They can put pressure on the Federal government to do things. If not them, then who will?
I’m talking about prices, not a bubble scare. There is NO reason why some nondescript house in Cow S**t, Ontario needs to cost twice as much as the same thing in the U.S. It also contributes to a society that favors already-wealthy families, people are packed into smaller lots, families have less disposable income (remember Rush’s “Subdivisions”)? and young people (who aren’t rich) can’t wait to bolt for other countries when they get a chance.
I wish there was a bubble - so that it would go ahead and burst.
Fair enough. When I was looking to buy, I longed for a bursting bubble, too. My cynicsm on the question comes from the fact that this was over a decade ago and economists keep telling me that one is just around the corner …
The reason Canada’s real estate is considered “overpriced” is, in part, the disparity between what it costs to rent, and what it costs to own. This is found in your link:
For less-wealthy families, this means that the financially prudent thing is to rent, rather than own. It does not necesarily mean radically increasing density, or being forced out of the country. There is nothing inherently wrong with renting.
The Rush song “Subdivisions” is really about the sort of sterile communities created by urban sprawl - that is, by the desire to own a house in relatively low-density ‘subdivisions’ located outside major cities, new builds that have effectively nowhere for kids to go and nothing for them to do. A rising house price-to-rents ratio actually discourages that sort of thing.
Cheap rents / high housing prices is great if you’re trying to attract students, temporary workers, serfs, etc. It’s not conducive to building healthy family units, especially families coming up from modest beginnings. Families want a place of their own. It makes me wonder if Canada is more influenced by UK-style feudalism than we like to think?
Huh? I rented for a decade before I bought a place, didn’t do me any harm.
Both renting and buying have their advantages and I do personally prefer the latter to the former … but I certainly did not feel like a “serf” because I was renting a place.
It’s such a ridiculous over-generalization.
It’s Economics 101, the law of supply and demand, as long as people are willing and keep buying houses at their current price levels they are not overpriced.
Absurdly expensive?! That’s irrelevant since it is a subjective term. People with different debt to income ratios have a vastly different idea as to what they would consider expensive.
Furthermore, the first cite is basically an opinion piece with very limited information about Canadian real estate cherry-picked, out of context, from the IMF report and the director’s presentation speech.
The second is from June 5, 2013 reporting a reading that the OECD (Organization for Economic Co-operation and Development) have come up with to guesstimate whether residential real estate is overvalued.
Apparently, they only took two readings into consideration
Yeah, OK…
I’ve never understood why so many people have the attitude ‘rent housing from landlord’ = bad, and ‘rent money from bank’ = good. Either way you’re beholden to someone else for your shelter.
And if one does have the cash to purchase expensive (compared to rent) housing, I don’t see a reason to automatically prefer buying the housing vs buying investments that produce income that covers the rent instead.
Nah, I’ll choose to believe my own lying eyes. I lived through it and those articles are pretty much spot-on. But by all means, enjoy a society where middle class people live on tiny plots with no disposable income while their kids dream of bolting somewhere else to start a family, to be replaced by already-wealthy outsiders. (The U.S. is even more free-market than Canada, but somehow they’re doing it better.)
Sorry, but I don’t even know where to begin with this. First of all, you own the property after you’re done “renting it from the bank”. Second, property is used for more than just basic shelter. Third, are you saying that Canadians shouldn’t really aspire to owning land like everyone else in the world? Why should there be a feudal class of landowners?
Has the “landlord and tenant” model EVER been a positive thing to aspire to? Places like the UK and Ireland have been cursed by it and it’s created no end of problems to this day (e.g., mass emigration, what a surprise)
The US real estate market had a complete and devastating economic collapse and you think they’re “doing it better”!?
I think you’re lying eyes may be blind.
The U.S. market paid for the housing bubble and prices corrected themselves - as they should have. Contrasted with Canada, where the prices are still absurdly high.
Well, no, they really don’t. If this is so important to you, why have you not put some thought into WHAT the provincial government could do about it?
The primary driving force right now behind rising housing costs is that mortgage rates are very low; it is cheap to borrow money to buy a house, so more people are doing it, which in turn drives up the prices of the houses. You can pay more principal and less interest. That’s just Econ 101 stuff, and the government of Ontario has no control over interest rates.
No they absolutely cannot. First of all, interest rates are controlled by the Bank of Canada, a distinct entity from the federal government. Secondly, Ontario absolutely would never do this because low interest rates are a Godsend to the provincial government. Ontario’s debt, and ongoing accumulation of it, is so massive that an increase in interest rates would eventually wipe out its budget. Thirdly, even if Ontario WOULD do this, it won’t. Why would the Bank of Canada alter monetary strategy to makes housing prices lower in Ontario?
Well, there is the fact that Ontario is a much nicer place to live than most parts of the United States.
I’m not picky - doing anything at all would be good. At least acknowledging that a problem exists would be a good start. I don’t claim to be an expert in the field but I know a problem when I see one.
Fine, so let’s throw up our hands and do nothing. The fact remains that there are social and personal costs of too-high property values, especially on ordinary people and families, which really should be part of the decision making process. At least there was public dialogue and soul-searching about it in the U.S. during their housing bubble. But in Canada, who cares, as long as there are lots of gullible wealthy foreigners to keep prices on track. I won’t even get started on the fact that 90% or so of Canada is Crown land. Why should Canadians have it tougher than everyone else in the world?
Yes, of course, I would definitely pay double for the privilege of living in places like Hamilton or Newmarket (cough).
You’re completely ignoring the fact that the federal government has been doing its level best to depress real estate prices for some time now. They’ve tightened CMHC rules multiple times, and gone so far as to admonish banks for offering mortgage rates that were “too low,” in spite of being high enough to be profitable to the banks. This latter rather pissed me off as I was at that moment starting to look to buy, and sure enough rates crept up before I secured a mortgage.
There’s plenty of “soul-searching” about real estate prices in Canada. It seems the Globe & Mail has a story every other day about whether the real estate market is a bubble about to pop or is rather destined for a soft landing.
And 90% of Canada is uninhabited tundra and boreal forest. Is it really a problem that all the lakefront property on Lathkyed Lake (google map it) is owned by the crown?
Well, you and RickJay seem to be saying that you can have either low interest rates or low prices, pick your poison. Well, the market in the U.S. (and presumably most other western countries) is magically offering low prices AND low interest rates. Why not Canada?
Possibly not, but who can say what kind of cities and towns might have spring up on their own? If (for example) over 50% of the land in N.B. and over 90% of the land in B.C. is crown land, leaving everyone else to compete among themselves in narrow corridors, that does sound a little feudal to me.
Well, no, we’re not saying that exactly. We’re saying that low interest rates put upward pressure on housing prices. This is Econ 101 stuff - lower interest makes for a lower payment on the same principle. These lower payments drive higher demand and increase housing prices.
But that’s not the only thing that drives real estate prices. If banks are in the midst of a horrible liquidity crisis and won’t lend money to anyone without a perfect credit record, and there’s a huge glut of overbuilt housing on the market owned by speculators desperate to get rid of it, those downward pressures are likely going to outweigh low interest rates.
It’s the overbuilt market with excess capacity held mostly by speculators that’s almost essential for a bubble to exist. If prices are high but are driven by genuine high demand & low supply, that’s not a bubble no matter how high the prices. It’s not a bubble because it can’t burst - those prices can ease, slowly, as the inevitable construction boom entailed by that scenario slowly shifts the imbalance between supply and demand, but it can’t pop. Bubbles pop when markets suddenly realize that supply is actually greatly exceeding real demand and that the only thing holding prices up was the “demand” by speculators who didn’t want the property per se but were essentially placing wagers that prices would climb faster than inflation + interest.
Now, the housing market might be overbuilt in Toronto or Vancouver, I really couldn’t say, but in my own market where housing prices have more than doubled over the last decade supply is genuinely scarce in the face of increasing demand. That sucks for consumers of housing, but it doesn’t make real estate overvalued.
No. That’s what the banks are saying.
At today’s housing prices the banks are willing to offer lower competitive interest rates because of the higher principals and the demand for such mortages.
Why do you keep generalizing the US real estate market and comparing it to your limited scope of real estate in Ontario?
The US is a massive federal republic with 50 states and 14 territories (5 populated), ~320 million people and a GDP of $~17 trillion?
Canada, and its province of Ontario, is …well…not.
But where is that Crown land located? It’s not prime real estate in downtown Vancouver or waterfront in Toronto. By and large, Crown land is in the hinterland, not where people want to live in large concentrations.
BC is a good example: it’s a sea of mountains, with in your own phrase, narrow corridors of land where you can build towns and cities. The Crown land is the mountains and the interior.