Great Canadian real estate crash of 2013

The housing bubble has burst, and few will emerge unscathed

Photo Illustration by Stephen Gregory

Keith Roy began warning his clients about a faltering Vancouver housing market in early 2012. The realtor says he was tipped off not by industry statistics, but by chatter across backyard fences. “When you hear about a homeowner who thinks his neighbour got too much money when he sold his house, you know there’s something going on,” says Roy. “That was the first clue.”

The next shoe to drop was a handful of homes in desirable west side neighbourhoods that took a few extra days to sell. Sensing a shift in the market, Roy put his own house up for sale in June and penned a blog posting the following month that advised people to “cash out.” Though he was criticized by fellow agents for breaking rank, Roy says he now feels vindicated after watching Vancouver home sales crumble to their lowest point in more than decade, with prices falling 3.5 per cent since hitting a high last May. The lesson? Recognizing a looming real estate downturn is more art than science; once it shows up in the numbers, it’s too late to do much about it. “One day the phone just stops ringing,” Roy says. “Then you’re in it.”

It’s not just Vancouver where realtors’ BlackBerrys no longer buzz. In Toronto, the city’s once insatiable demand for living in 650 sq.-ft. glass boxes has evaporated overnight. Condo sales are down by 30 per cent, while prices have fallen by 4.5 per cent. Some proposed projects have been put on hold, while some angry investors—like those who bought luxury suites at the Trump International hotel—are desperate to get their money out, and have turned to the courts. Even the Bank of Canada, which has helped inflate the bubble by tempting Canadians with years of rock-bottom interest rates, has issued a rare warning about the risks posed to the broader housing market of too many condo developers in cities like Toronto and Vancouver chasing too few buyers.

A housing correction—or, possibly, a crash—is no longer coming. It’s here. And you don’t have to own a tiny $500,000 condo in downtown Toronto or a $1.3-million bungalow in Vancouver to get hurt. With few exceptions, the impact will be indiscriminate as the euphoria of rising house prices is replaced by fear. The only question now is how bad things will get. If the decline picks up speed, as many believe it will, there could be a nasty snowball effect. Construction jobs will be lost. Homeowners will end up underwater. Consumers may stop spending. “I’m getting very nervous,” says David Madani, an economist at Capital Economics, who has been predicting a drop in housing prices of up to 25 per cent in Canada. “I know I’m a bear, but the housing market itself has the potential to put us in a recession, let alone what’s happening in Europe and the U.S.”

Canada could be setting itself up for a devastating one-two punch: a painful domestic housing slump just as Canada’s export and resource-driven economy is hit with falling global demand. The most acute threat is the U.S. debt crisis, which, if handled poorly, could tip the world’s largest economy back into recession, taking Canada along with it. Meanwhile, Europe remains mired in a recession and concerns about China’s growth persist. “I feel like Canada is in the path of a perfect storm here,” Madani says. Other than housing, “the key pillar of strength is our booming resource sector,” says Madani. “If you take that away, it’s just going to knock the lights out.”

The sudden cooling in Canada’s housing sector seemingly struck without warning. As recently as last spring, bidding wars were common in many Canadian cities as were the “over asking!” stickers agents slapped on “for sale” signs. The peak may have been reached in March when one Toronto bungalow made headlines after selling for $1.1 million, more than $420,000 above the list price.

Eight months later, the story has been reversed. And not just in Toronto and Vancouver. In Victoria, existing home sales were down by 22 per cent in November from a year earlier. In Montreal, sales were down 19 per cent last month. Ottawa’s sales were down nine per cent and Edmonton’s were down six per cent. With all those houses lingering on the market, prices dipped in 10 of 11 big cities across the country between October and November, according to the Teranet-National Bank index. It was the first such drop since 2009.

The weakness is also evident in new home construction. The Canada Mortgage and Housing Corporation reported a third straight month of falling housing starts in November. The trend is expected to continue next year.

With mortgages as cheap as they’ve ever been (five-year rates can be had for as little as 2.84 per cent) and no spikes in unemployment, there can only be one explanation: Canadians bid home prices up so high, and piled on so much debt, they’ve essentially spooked themselves. In Vancouver, for example, the cost of owning a home eats up more than 80 per cent of an average household’s income, according to the Royal Bank’s affordability index. In Toronto, it’s over 50 per cent. Overall, affordability remains below historical averages across the country, RBC says, with two-storey homes in particular causing “affordability-related stress.”

Some argue this is exactly what the much hoped-for “soft landing” should look like. Earlier this year, Sherry Cooper, the soon-to-be-retired chief economist at Bank of Montreal, likened the Canadian housing market to a balloon—not a bubble—that will deflate slowly and naturally in the absence of a “pin.” But such semantic distinctions gloss over a key feature of bubbles: psychology. “Bubbles inherently contain the seeds of their own undoing,” warns Madani. “They’re driven by overconfidence and expectations that house prices will keep going up. But at some point it just pops.” And that creates the spectre of a pendulum that swings the other way.

Nowhere is this mood shift more apparent than in downtown Toronto, where a decade-long condo boom has reshaped the skyline and created a potential glut of tiny, glass-walled suites. There are currently 147 high-rises under construction in Canada’s largest city, according to research firm Emporis. That’s the most of anywhere in North America, including New York. When completed, an additional 56,336 new living spaces will be added to the city’s housing inventory. Most of the projects are conceived and marketed based on a cookie-cutter formula: minimalist decor; “lifestyle” amenities ranging from yoga studios to juice bars; and attention-grabbing flourishes, as with one midtown Toronto project called E Condos that promises two towers with “cantilevered,” glass-walled swimming pools overhanging the streets below. The building boom has even drawn in world-renowned architect Frank Gehry. He was hired by theatre magnate David Mirvish to build three downtown residential towers that will rise as high as 85 floors.

The concern is that the market is being driven by speculators, not families. Many condo purchasers buy off a floor plan—often borrowing against an existing property—and then sell or rent their unit once it’s completed several years later (units can also be sold, or “assigned,” to another buyer while a tower is under construction). “So far, the demand for units and supply has not been too far out of balance,” says Ohad Lederer, an analyst at Veritas Investment Research, citing estimates that investors comprise half of the Toronto condo market. “And that’s reflected by a relatively robust rental market. But I’m definitely concerned that, over the next couple of years, an imbalance will emerge.” It’s happened before. In Miami, a pre-2008 condo boom left 7,000 new units unoccupied after the crash. The upside? College students could suddenly afford to rent swanky suites with granite countertops and ocean views.

Lederer recently sent secret shoppers to several condo sales presentation offices. They made some disturbing discoveries: sales staff who didn’t ask for mortgage pre-approvals and who grossly misrepresented the demographic trends—namely the number of expected new immigrants to Toronto—that are supposed to keep units in high demand. But Lederer says he is most disturbed by the sector’s “shoddy mathematics.” By his calculations, many condo owners who rent their properties are realizing returns of less than four per cent. If rental rates fall as more units come on the market—Lederer estimates there are at least 5,000 too many condo units being built in downtown Toronto—those same investors will soon be losing money, prompting them to sell. “Being a landlord is already a negative cash proposition at today’s prices,” he says, adding that a bust in the condo sector will likely have a “trickle up” effect by reducing demand for starter homes.

John Andrew, a professor who studies real estate at Queen’s University, says Canada’s condo boom has put cities like Toronto in uncharted territory. Will all of the tiny suites still be in demand once the novelty of “plunge pools” and “sky bars” wears thin? “There really isn’t a precedent,” says Andrew. “When we’ve seen market crashes before in Toronto and Vancouver, condos really weren’t as prevalent as they are now.”

Finance Minister Jim Flaherty decided he had seen enough last July. He dialled back mortgage-amortization periods for government-insured mortgages (required for anyone buying a home with less than a 20 per cent down payment) to 25 years from 30 years, the fourth time he tightened standards in as many years. Observers were quick to note mortgage rules are effectively now back to where they were before the Conservatives took office. A national experiment in lenient lending has finally come to a close.

Even with the market slowing, many experts believe Canada is unlikely to experience a “U.S.-style” housing crash. The riskiest mortgages are guaranteed by taxpayers through the CMHC, thereby insulating the financial sector from the sort of meltdown endured by Wall Street in 2008.

But a mere collapse in home sales—and prices—would be bad enough. Ben Rabidoux, an analyst at M Hanson Advisers, estimates that 1.3 million people, or seven per cent of Canadian workers, are employed in the construction industry, with housing being the main driver. He argued in a recent report that a U.S.-sized housing slowdown could result in the loss of 370,000 jobs and push the unemployment rate well over nine per cent, compared to 7.2 per cent now. And that doesn’t include job losses in related industries.

Equally important is the psychological effect that even a moderate slump in home prices will have on consumers. As people watch their net worth crumble—at least on paper—they are less likely to spend money on everything from new dishwashers to automobiles. “We talk about having a strong housing market because we have a strong economy,” Rabidoux says. “But it’s also true that our economy is strong because we have a strong housing sector.” He estimates that as much as 27 per cent of GDP can be linked to Canada’s housing market, a disproportionately large number compared to other countries, including the U.S. at its peak. “Take it away and that alone puts us into a recession, given where we are,” Rabidoux says.

In such a scenario, the homeowners most at risk are those who are overextended. Of the $570 billion in mortgages that the CMHC insures, about half are borrowers with less than 20 per cent equity in their homes. “If housing lands hard and affects the broader economy, many people will find themselves effectively underwater at a time when they would most need mobility to pursue employment,” Rabidoux says. “In this scenario, a house becomes a prison.” And it’s not necessarily condo buyers or those who paid over a million to live in a hot downtown neighbourhood who are most at risk. Rabidoux says people who shelled out for sprawling “McMansions” in the suburbs could be in particular trouble, as the demand for oversized homes is expected to fall out of favour when baby boomers retire and seek out smaller living spaces closer to the city. Indeed, that’s precisely what happened in the U.S., where some estimates peg the number of unwanted “large-lot” homes at about 40 million across the country. As for smaller houses, Andrew says there remains a shortage of single-family homes in cities like Toronto and Vancouver, which should keep demand relatively high. “If you are buying a three- or four-bedroom house right now, then I think you’re going to be okay,” he says.

Flaherty is still going to have a dilemma on his hands. Falling house prices don’t win votes. And there are already calls from the real estate industry to roll back the most recent mortgage rule changes. But most economists agree a correction is both necessary and long overdue. The average debt-to-income ratio of a Canadian household is now 164 per cent, higher than the pre-crash levels in the U.S. A recent survey by BMO found that one-third of Canadians have cut back on spending to make their mortgage payments. Seventeen per cent dipped into savings.

None of it bodes well for the country’s ability to absorb another economic shock. When the financial crisis hit, Ottawa responded by buying up $69-billion worth of bank-owned mortgages, encouraging financial institutions to keep lending. After a brief dip, the housing sector bounced back and carried the economy on its shoulders. But today consumers are tapped out just as a new round of macro-threats has emerged. It’s widely believed that the U.S.—and, hence, Canada—could face another recession unless Republicans and Democrats in Washington are able to agree on a comprehensive deficit-fighting plan. Even if the so-called fiscal cliff (a combination of tax increases and planned spending cuts) is avoided, the U.S. government’s longer-term debt troubles could stalk the economy for years to come. At the same time, the European debt crisis and China’s faltering growth have created a gloomy global outlook, threatening Canada’s large, export-oriented resource sector. With demand for oil falling and increased output from the Bakken shale formation in North Dakota depressing prices, some Canadian energy companies have already cut back on spending, threatening another key economic driver. Suncor, for one, recently said it would review expansion of three major oil sands projects. Talisman Energy is also forecasting spending cuts of as much as 25 per cent next year. The drag is being reflected in GDP. Reduced global demand for oil and gas and manufacturing dragged down the third quarter’s anemic 0.6 per cent growth, as did reduced business investment and a drop in exports, according to Statistics Canada.

Bay Street is getting nervous. Avery Shenfeld, chief economist at the Canadian Imperial Bank of Commerce, recently warned Ottawa to “be careful what you wish for” when it comes to winding down the housing market. He argued in a report that “a five per cent per year drop in housing prices, for example, would shed roughly a half-point off GDP growth through its wealth effect on consumer spending.” He added: “That makes it even more urgent that the global economy is healthier come 2014, when the full bite of a housing slump on domestic activity will be felt.”

It all amounts to a dramatic reversal of fortune for Canadians, albeit one we brought on ourselves. Back in 2009, our hot housing market acted as a life preserver in a sea of economic uncertainty. Now it feels more like a cinder block tied around our necks.

Great Canadian real estate crash of 2013

  1. Macleans has been banging the drum about this forever, and has little credibility on the issue. It isn’t clear that there is a bubble, and if there is it isn’t bursting yet. Sales have definately slowed in major markets, but prices are largely stable. It is fair to say that the wildly increasing prices are over for now, but it appears to be a period of stabilization, not serious decline. In most markets average prices are still significantly higher today than they were one, two or three years ago.

    • Sales drop before price declines. That prices haven’t dropped yet due to recent sales declines is not evidence that they won’t.

      2013 will probably be the pivotal year. Soft landings are rare, but not impossible. We can be reasonably confident that absent regulatory changes, prices will not continue to outpace inflation and incomes.

    • The market can stay irrational for long periods. Collective psychology makes it that as prices distance themselves from fundamentals people get into a “new paradigm” mindset. But the truth is that the further you get from fundamentals, the worse the consequences will be.

  2. Oh come on there should be decline. You know that because these prices are not nottt realllllll.

    • this is true

  3. So prices have CRUMBLED in Vancouver to their lowest point in a decade, 3.5% BELOW THEIR HIGH LAST MAY- a housing crisis indeed! Boy has the bottom ever dropped out of the market, quick, panic, panic, panic. An excellent piece of yellow journalism – keep up the good work Macleans.

    • Read again. SALES crumbled, not prices.

      • The way the sentence is written is to imply that sales crumbling is equivalent to prices falling rapidly-hence the headline-there is no other reason to structure that passage in that manner. A balanced approach would have clearly indicated that while sales volumes are lower, prices have remained relatively stable.

        • I agree with Bob

          • Some good points. I always think it’s funny how everyone is so quick to comment but so slow to invest in these areas…hmmm…and the obvious answer will always be “well I don’t live there, why would I invest there”

      • Learn to read between the lines… when sales crumble, prices will follow. duh.

        • I can read just fine. I was correcting someone who didn’t.

        • ur wrong – prices follow a decline in sales only if the decline in sales is not accompanied by a decline in inventory. u have a ceteris paribus mentality, andrew.

          • ***…ceteris paribus mentality, lol.

      • first volume than prices to follow, that’s how it works

    • Poor old Bob, stuck in an overpriced house when the collapse hit. Now he’s panicking and it shows.

      • bob is obviously able to see something the rest of u cant. have look at the stats for the GTA – there is no question that the long-term trend is getting out of hand, prices have next to no correction since 1970. But the current situation is completely seasonally regular – look at the data here: http://www.guava.ca

        when an article about real estate and economics appears in a mediocre general-circulation publication such as macleans preaching a bearish sentiment… its time to think about buying real-estate, not buy into the fear mongering.

      • poor kelly – renting since 1990 while all her friends have banked on tax free capital gains.

        • Really? No property or school taxes? No interest charges? No upkeep? Where is that, I want to move there.

    • The average price is down 14%. The 3.5% number is the fudged fake number the RE board concocts.

      • Very true – the Home Price Index was invented by the realtors to paint a rosy picture. Always look at median and average prices.

        • Well, median and average prices are too influenced by what is selling, whereas indexes are good to know what the same property would have changed. If only rich people are buying the median and average prices will be high but that doesn’t mean much for first time buyers.

      • Trusting a realtor about investment value of real estate is like getting medical advice from a coke dealer ….

    • what’s 3.5% of the average price in vancouver, and also don’t forget whatever the realtors are charging – how many x 10Ks is that that’s no longer in homeowners’ pockets if they choose to sell? Id feel like prices have crumbled if I were selling in Van right now.

    • Prices are a trailing indicator – the point of the article is that economic data is usually 6 months to 1 year behind the changes in the market housing prices themselves ten to trail by 60 – 90 days, and since it is not a uniform good (average house price does not measure the average house, but the average house sold, so 10 20 million dollar house out of 5000 400k houses skew the number, so median would be a better measure to begin with ….)

  4. I find it odd that some are now claiming that the housing market cannot
    survive under the same conditions that were considered normal back in
    2006.

    Too bad that It looks like we are damned either way. We have rising interest rates on one side. This will eventually lead to higher payments. Obviously the highly leveraged will be hurt the most.

    But if the economy goes the other way, we have rising unemployment, and loss of income that will squeeze people. Just when people need to unload their houses and move to find employment, the over leveraged will find themselves trapped, upside down on their mortgages.

    Regardless of the source of the initial prick, the entire economy will be knee capped once the direct and indirect GDP growth that is derived from inflated housing prices, is removed.

    Why aren’t Canadians calling out Harper Inc. on there failed policy of 0/40 CHMC insured mortgages?

    • Someone please explain how investing in a $280,000 brand new 400 square foot bachelor apartment is wise in downtown toronto??? Whether your plan is sell to a greater fool in a couple years when the project is complete thinking the price will go higher still ~ is total insanity…or rent out to some future student that is willing and able to pay $1500 a month to live in a claustrophobic hole in the sky. At best this is a $75,000 shoebox at true value…Smart investors have already sold out…there is no place to go but down… The 1989 GTA housing crash is going to look like a picnic…This is going to get ugly fast people!!!

      • Have u ever traveled around the world ? Toronto Prices condo prices are still low.

        • My advice to people like you ~ keep investing in GTA real estate…if that’s what you call it ~ see how fast you’re underwater…running for the exits with your hair on fire!!!

        • Really, how so

        • Yeah. Can find a lot cheaper in nicer areas with better weather.

        • No they are not. What country are you comparing and I hope you are not using exchange rates to inflate their real estate costs. Real estate is valued domestically – not internationally. You earn money in pounds, you price houses in pounds. It’s not fair to compare. And Canada is not a tiny country like England. Toronto’s footprint is gargantuan.

      • Go to mls.ca and and kijiji.ca look at the rentals downtown and I think you will take back your comments. location is key anywhere in the world and downtown Toronto $1,500/m for a bachelor (without parking and locker) is consistent.
        Toronto is still cheap for a major city

        • Mainly because rents are a function of prices – if your mortgage + tax + maintenance is 2000 per month are you going to sell it or lose 1000 per month renting – the bigger problem is when prices drop and there are no more tennants with jobs to pay 1500 per month – then what -

        • Yes but there is $300+ a month in condo fees, $300 in property taxes and a ton of extras on top of that, to come up to $1500. You aren’t making money on the rent, rather it helps paying your holding cost while you speculate. If interest rates go up, property prices fall, you are going to have tens of thousands of those units go up for sale.

      • Burn baby burn.

        • Real estate works in cycles. This bull cycle is possibly the longest bull cycle ever in Canada. What follows is the bear part of the equation. If you see the length of the bull, the amount of debt that has been put into it this time, it’s a never before seen bear cycle. I can’t say it will be worse, but it remains to be seen how bad it could get when Canadians switch from thinking that real estate is a good investment, to real estate is an expense and a bad investment. The thinking is what changes. Where does that put real estate prices, given that noone can borrow anymore and we have to pay back about 170 percent of our income to household debt. Another note, our provinces are broke. There is no bailout coming. Austerity and a bear real estate cycle and broke consumers. Ouch. As a result, and further worsening it, a bad recession.

      • When you invest in a $280,000 brand new condo in Toronto and you sell it for $100K more than what you bought it for, that might be considered a good investment.

        • Explain to me how buying a 400 square foot bachelor apartment with no bedroom for $280,000 is investing and not speculating…it’s a 400 square foot claustrophobic box…it’s true value is $75,000 at best.
          That’s the issue here ~ there are too many unsophisticated speculators that know nothing about investing. Anyone paying today’s prices is no different than gambling. This is gambling on a large scale ~ one wrong move can put you in bankruptcy quickly.
          Prices have gone too far too fast…fueled by speculators thinking they are investors because it has continued to go up…wait when it turns the other way. ‘Greed’ fueled the run up…’Fear’ will power it all the way down.

          • Rob. This kind of news post is place for intelligence sharing, not rants. Valuation is about worth and can be absolute or relative. Putting an absolute price of 75000 in one of the major cities in the world is amateur. And people would have an even stronger case for relative valuation considering real estates of say New York, Taipei, London and Shanghai. Why are prices a far cry from where we are and still remain sustainable?
            plus. demand/supply never had a history on how knowledgeable the “investors” need to be

        • hindsight is 20 20 – I should have bought apple stock for $15 per share 9 years ago ….. makes your condo look like a bad investment at $446 a share now …. History is just that – do you think there is another 100k in that condo

        • Are you Paul Constable, the realtor? If so, it explains many of you posts.

          I believe much of this problem was created by greedy realtors, spewing their misinformation in order to keep the insanely high commissions coming in.

          • Realtor or not, it’s the people making the investments who are liable for their decisions. You can’t fault the industry or its professionals for what supply and demand has guided. If people weren’t paying it, then the prices wouldn’t go up. But real estate is always a good investment and people know that. But even with corrections in the market, we’re simply seeing the down side of the natural cycle, which will inevitably come back around.

          • Don’t forget – Japan 22 years of price decline and counting> I know inevitably LOL

        • this is true

      • Bang on! it will get painful and will not end well

      • Toronto is the third largest metropoliton in North America now. Try buying similar property in downtown New York.

    • The fundamental problem with ÈinvestingÈ in real estate is that people do not understand how prices for the commodity (housing) are determined. Realtors babble about location and supply, but as we can see from the divergence between the Canadian and US markets, that is nonsense.

      Prices in real estate are set by municipal development costs (ie. taxes) which are passed on to new home & condo buyers, and thus influence existing sale prices, mortgage underwriting (interest rates + GDR & TDR limits + credit) and employment.

      Canada now has very very high development costs (taxes) on new development, veryt very very leniant underwriting practices mainly due to horrendous risk management by the CHMC, and so far stead employment.

      Now, prices relative to other countries, cities, etc are irrelevent – yes a condo in new york, london or Hong kong costs more, byt these are all constrained by geography and much much larger and more affluent cities than Toronto. Vancouver has the physical restrains of geography (and bad planning) and toronto has the population, but Calgary has the highest median income ….

      Clearly Canada has an issue that housing prices are too high compared to our direct competitors for labor and economic output (ie. compare Vancouver to Seattle and Portland, not London and NYC), Toronto to other rust belt cities – because in the longer term, supply and demand for cheaper labor and lower taxes will move the non bank & construction jobs to those other places.

      This is why Calgary had a major housing correction in 2008 – 2013 as jobs moved to Texas, Oklahoma, Lousiana, etc … because people can work for 35k per year in those place and own a home! Why would anyone operate a car plan or manufacturing facility in toronto or Vancouver where peopel need 60k per year to give 80% of their pay to housing payments …. Move to Ohio, Michigan, NC, Penn ….

      • Spoken like a genius as I have been to both Chicago and Houston and I can say if you are making 35k you can afford to buy a home..not so much here in Canada

  5. It’s interesting that there are still those trying to position this as a bubble to be burst. It’s not. It’s a few markets of large cities that have been over-inflated and must correct in order to meet demand. It’s the real estate cycle. There are plenty of areas, especially in Calgary and others out west, where the markets are performing extremely well for real estate investors. Look at Alberta.

    • Calargy and Regina are the exceptions, not the rule. Vancouver, Toronto, Montreal and Ottawa are in some trouble, and together they form a majority of the national market.

      • Single family home sales in Regina are down 27% according to the graphic in the article.

        • Don’t know what is being shown in the chart – is it all home sales or resale of existing homes? Because new homes are selling like hotcakes and there are hardly any resales listed

    • Calgary took a big dump in 2007, average 20% drop. Due to government stimulus in China and U.S, which buoyed oil prices, housing prices are steadily climbed back to 2007 levels.

      The caveat is that Calgary and Alberta in general is almost completely dependent on the fairly high oil & natural gas prices. Natural gas prices are quite low and forecast to remain low for the foreseeable future. As you are aware Alberta oil is currently facing considerable head winds, due to sharp production growth in the U.S and declining spare pipeline capacity, needed to get the crude to world markets.

      If Calgary is the foundation your building your “no bubble here” argument, then your argument is build on a pretty shaky foundation. A sustained $20-30 drop in the price of oil would result in rising unemployment and likely set the Calgary market tumbling again.

      Regina is too small a market to factor into the Canadian bubble discussion. Whether it rises, falls or stays the same is immaterial.

      • I would think that you can find a lot cheaper homes in nicer regions with better weather and economic climates.

  6. The crash in Florida saw one in three properties for sale in less populous cities (such as Cocoa Beach). I drove through the east coast of Florida in the height of their bust, before the housing bubble actually spilled over into the financial crisis (before the knowledge of toxic assets and outright fraud at AIG and other firms really became news). One in three houses had for sale signs up, and a majority of homes had a “new reduced price” sticker slapped on it. It was striking, and quite easy to see that something was going wrong.

    Is this the picture in Vancouver and Toronto? Is there a feeling of dread like what was experienced in Florida in the years leading up to the bubble (and the American economy) bursting? Will it affect markets outside of Toronto and Vancouver?

    • Yes – Florida, Arizona, Nevada, and California definitely experienced the worst of the housing collapse in the US. I’m not certain whether they’re apt comparisons either. Giant housing developments built in the middle of swampland or desert aren’t quite the same conditions as Vancouver. Canadian lending requirements have also been tighter to discourage speculators. Prices will fall if people are forced to sell because they can no longer afford their homes, otherwise I’m guessing most will tend to sit tight because they’ve got to live somewhere.

      • There are plenty of condo speculators. They bought condos, often preconstruction, on the premise that prices would continue to rise by 10% per year. If prices don’t rise, they may take possession, and face the unpleasant prospect of renting out the unit at market rents, which are so low the unit will be cashflow negative even at current low interest rates. Without the prospect of rising prices or rents, how long would said investor be content to hold onto a property that costs cash flow to maintain?

  7. Many of you people sound like those talking up housing in ’07 and stocks in ’01.

    Look around people. Europe is in a recession with no end in sight. Japan is a mess with a stagnant stock market and gigantic national debt. China’s situation is uncertain at best. And American government officials (gov’t/Fed) are pouring about $2 trillion per year into the economy and still it barely stays afloat.
    Some emerging market countries are doing well – but they can hardly raise up the rest.

    The West’s (including Japan) addiction to private/public debt is slowly starting to strangle it’s economies.

    Anyone that thinks this is just a speed bump is (imo) naive in the extremis and not looking at the facts clearly.

    • Very well said. There is simply too much debt in the world. Debt that will never (can never) be paid off. The Government strategy of moving this bad debt from those responsible to taxpayers will have disastrous consequences.

      • That’s why we need a whole new world order instead of the big companies dictating to us to be robots we need to share in everything that the earth provides without a high dollar value slapped on it. Basic human rights should not have a price, and it’s always the white and blue collar that get hit the hardest. Here is Vancouver, we now have tolls, carbon taxes, and next will be higher property taxes to pay for infrastructure just so these game players can say they have GDP. China may fare well now that Canada is selling them our oil, they can continue to build their ghost cities so that their illusional GDP can fool the rest of the world while their people suffer and can’t afford anything they build, which in turn they will become the superpower. Why the heck does Harper not see this was a bad deal, everyone is going under and we still had our resources to extract and use to create jobs and still have some export. But no, he wants it all before he leaves office so bring on the big equipment and forget about the little guys who will need these jobs and resources to survive in the future. We can’t drink bitumen Harper, extract the proper way, but I guess the time it takes to use manpower instead of big equipment is way too slow for him. I sure hope China has promised him a mayoral position in one of their ghost cities because once he is out of office and held his word “that we would not recognize canada when he is done”, some of us are not going to enjoy the new Canada.

      • Every single cent of debt has its counterpart somewhere.

        • On a ledger in a bank’s book…

        • “Every single cent of debt has its counterpart somewhere.” — you do not know how reserve ratio banking works. For every cent the bank has it can lend out 10, and it continues exponential..who and how are we supposed to pay for this made up money that is in the trillions now?

          • You missed the real key – the banks create completely interest free the 10 cents they lend out, and then charge us interest on it (hence banking is nothing more than a taxation scheme by which shareholders of banks charge us to use government backed money). Earlier, banks had to assume the risk that when they lent out too much, the people would not pay it back and the bank would go sideways (banker would be lynched and the world would reset). Today, the banks have the taxpayers (for whom the moneys is issued to begin with, who pay all the interest to the banks for basically doing nothing, and then tell us about debt and investment) insure or guarantee all the debts – so on top of charging trillions in interest for actually putting up nothing of value, they no longer take any risks. This is why capitalism will fail within 50 years ….

          • Very true. Most people don’t understand where money comes from. Only a small percentage is printed by a government treasury. When someone takes out a mortgage, the bank doesn’t use actual cash reserves to lend. Someone at the bank simply hits the “enter” key on a computer and creates the mortgage balance that will have to be paid back to the bank. A Bank Charter is a license to print money. The world changed in 2008. The politically connected scam artists’ on Wall St., Bay Street, etc. made some calls and now all taxpayers are on the hook for trillions of bad debt. Nobody went to jail. No punishment whatsoever. Now that the banks are backstopped by every living, breathing taxpayer, and there is no consequence for their behavior – there is no incentive for bankers to do anything but double down on their risky behavior. I think we will be very lucky if the present system makes it another 50 years.

          • Everybody is an expert. You guys have no idea what you are talking about, keep watching YouTube.

          • This comment is spot on, except for the last sentence, which should read, “this is why our version of socialism will fail within 10 years”. It is the government that enables the banks to rip us off. If we let the market work, which is true capitalism, we would not be debt slaves like we are today.

    • Debt and deficits aren’t as huge a problem as individuals such as yourself are making it out to be. If you were “looking at the facts clearly” you would understand that the majority of the U.S deficit is a result of the gap in current GDP to potential GDP and the result of increased spending for social programs. These trends are all reversing in a positive direction and the “deficit” may not exist in a few years time. Overall, a debt ratio of 75% percent debt:GDP is actually manageable.

      Please read Paul Krugman’s blog with the NYT. He is a noble prize winning economist who bases his arguments on the “facts”(i.e official numbers/graphs/data) as opposed to widespread “economic stereotypes” regarding debt/austerity/spending.

      • Keep drinking the cool-aid buddy! Obviously you need a lesson in math if you think QE4ver with ZIRP is going to lead to anything good. Perhaps you haven’t heard of the LIBOR scandal, HSBC laundering Mexican drug cartel money, MF Global where 1.2 billion ‘vaporized’. Lol. How does 1.2 Billion vanish anyway when I can get nailed for missing $150 on my annual income taxes? Oh my goodness, you really need to get informed and fast!

      • Paul Krugman? are you kidding me? biggest socialist spend spend spend_ Yeah “potential” noble prize winner so was Obama after 2 months in office for peace- what a crock of s–t

        • Go to school, try and have an open mind, and learn something. You shout your ignorance. Fool

  8. Yeah yeah we know. The housing bubble “burst” in 2006. And 2007. And 2008. 2010 11 and 12. BUT THIS WILL BE THE YEAR FOR REAL

    • What’s it like being one of the stupidest people on the internet?

  9. oddly enough, since the giant crash years ago when interest rates skyrocketed, and values dropped, they have not only recovered but doubled or more. gee, 5% less for a year ? big deal

  10. People have been predicting this for a decade or more. I guess if you keep predicting it you will eventually be right ;-)

    • Calgary real estate market is wayyy toooo hott!! Prices have to come down–Here come the listings!! Timberrrrrrrrrrrrrrr!!!
      Montgomery triangle is awesome!!

      • Here’s hoping, burn, baby, burn. I want to see a nationwide collapses but none more than here in cowtown. Van and T dot make sense to be this expensive, there’s actually people, jobs, activities to do and culture in their cities.

        Calgary is just a wasteland of greed and ignorance. I’m here until jobs open up elsewhere, it’d be nice to buy a condo rather than rent but even with a combined household income of $100,000+ and no kids we still can’t afford anything that isn’t way out in hell (the suburbs)

    • Yes because fundamentals have long been out of line. The crash will be even more severe now.

  11. As long as people can borrow money, this housing bubble will keep on going. From experience in the industry, this new generation of first time home buyers will literally borrow as much as the bank will lend. I’m seeing people living on credit cards with no hope of getting out of debt. This entire ‘recovery’ is being fuelled by debt.

    I’m not seeing factories opening with mass hiring, or industry labour shortages. We are seeing thousands lining up for a job at Costco.

    So housing values are rocketing up, my house has gone up $100,000 in 3 years, according to MPAC. No one can find good jobs, lots out of work. Everyone is deep in debt. This doesn’t add up, the fundamentals are not right for a real estate boom. This has to be a debt fuelled bubble. When those interest rates stop being manipulated down by the central banks, look out.

    • There is some truth to that statement. As individuals we are suckers for people who will lend us money or allows us to buy things we may not be able to afford. But hey who am I say no to money…haha

    • What you are referring to is inelastic demand for credit. Marx (you know the commie guy) identified this in the 19th century, that credit and fractional reserve so distorted the basic premise of capitalism (supply and demand determining price and allocation of resources) that it was just another form of feudalism. People will borrow money until they cant anymore (ie they get cut off) Currently Canadians are addicted to debt, and housing debt is a serious problem …. The solution to this is a crash and resetting of prices of course.

  12. This article is almost pure crap, it’s this kind of stuff that creates fear in everyone. Listen if I constantly predicted a crash, a crash, a crash eventually it’s gonna happen, what goes up must come down. Every 6 months print another article saying the sky is falling, and the one time that’s true you can puff out your chest and say “see I told you so” but forget about all those other times you predicited a crash and it never happened. Over construction in Toronto is very obvious, and prices in Vancouver are unaffordable for the majority of average working Canadians, even with two good household incomes. But the country does not exisit solely on Vancouver and Toronto, in fact in almost every other city across the country (London/Sudbury/ Regina/ Edmonton etc) prices are still steady and sales are still strong.
    The biggest reason we are seeing a slump in the Canadian Real Estate market is because of changes made this past summer to mortgage rules, changing the max amortization period from 30 years to 25 years, had a huge impact on consumers so did requiring a min of 25% down for any home over 1 million dollars, it’s had a huge impact almost the same as an interest rate increase of 2%, at first I thought this change won’t effect the majority of people, because how many people are buying a 1 million dollar home, but it’s a domino effect. The person selling their home for a million can’t sell, therefor the person wanting to buy and in turn sell their home at $750k can’t, and so on and so on. Also if you were paying let’s say $1500 per month before in mortgage payments because your mortgage was amortized over 30 years and now you want to buy a new house, even if you have a 15% down payment your going to have to use CMHC or Gemworth etc. to insure your mortgage and you may end up with $1800 per month mortgage payments because you’ll only have 25 years to pay off your mortgage, that’s a big enough deterant for many people to stay put or not even enter the housing market all togther.
    And seriously your first indication of a crash was your neighbour commenting that someone got too much for their house, most people think their neighbours get way to much for their homes, that’s nothing to base an argument for a housing crash. I’m glad this article was free and I didn’t actually pay for this crap, save my pennies for the mortgage payment I’m apparently not going to be able to meet.

    • You probably don’t get it..another fool who believes a roof over our heads should COST MORE. Thats like saying I want my gas to go up..or my food or my refrigerator. Im so excited to see my cost of living SKYROCKET! YIPEE! Most people don’t understand how bubbles work. EVERYTHING is a bubble! Your life, a tree, the stockmarket, currencies, TV prices, ipads, ipods, computer prices, tulips, Iranian carpets, your JOB..the list is endless. LEARN how the world works before you post GARBAGE.

      • Oh god, don’t tell me you are a fan of that idiot Garth. Seriously, if you buy in a good location the price will always, always go up. Think about it why should I pay less to live closer to work or amenities or have a great view. As more people want to live there more demand is created, therefore prices go up.
        Simple.

        • Over the long run maybe.

          But in the short to mid-term prices can fall in any market. No big deal, just wait it out. Well what if you can’t wait it out. What if you lose your job and need to re-locate, you die (and leave a family behind), you become disabled or get divorced?

          Owning a home can be the right option for some people, some times. But ownership is not for everyone, all the time. It is usually a losing proposition from an investment point of view. The studies that I have read come to the conclusion that buying a house most often doesn’t offer a return that is higher than inflation, over the long term.

          There are high transaction costs, high carrying costs, the investment is usually highly leveraged, very concentrated (as opposed to diversified) and usually illiquid. In any other context, anyone with even a fundamental understanding of effective investing, wouldn’t buy in.

          • The key number is the price of a house to median incomes – rising from 3 times in the 50s to 10 – 20 times now. Housing is a commodity – you dont really own the land, and the house depreciates like a car. It should be priced accordingly …. Its a place to live, and if you think that you own something you should understand the concept of a constitutional monarchy before you buy your will and kate shirts…. No one thinks of their car as an investment, its a consumable

        • This may be true but what is the cost of waiting for these values to increase in these areas.

        • lol

        • You sound like me a few years ago. I believed that rising home prices was perpetual and inevitable. Looking back, I was pretty stupid a few years ago.

          • I admit that there are exceptions (Detroit). However in the long run, especially if you are using it as a home, you should come out on top.

      • Downtown toronto condo prices are way too low in fact similar size units in comparable cities around the world will cost 2 to 3 times more in average.. Some times way more for good locations,

        Sydney = 1800 sq/feet
        London = 3000 sq/feet
        Hon kong= 2000 sq/feet
        Tokio= 2400 sq/feet
        New York = 2000- 4000 sq/feet

        Toronto = A Joke 500-600 sq/feed average

        We are in a Global economy… a lot of changes happening in Toronto that numbers can’t explain… have you notice many luxury cars on the recent days around the city.

        Do you realize that there are over 21 trillion dollars in fiscal paradises in de Caribbean. Do u know that 250,000 people come to canada to live permanently every year (Permanent resident card issued). 150,000 of them economic class .

    • i have seen this before, it is coming, winnipeg prices are thru the roof cannot get more middle Canada than that, it is a wave and it is crashing when i do not no, but gravity is setting in

    • also, most people have neighbours who take economic advice from a journalist.

    • Even a broken watch is correct twice a day

      • The clock doesn’t have to be right twice, just once. The wealth destruction of a housing meltdown will not be fun for most.

  13. Fear mongering. Real estate goes thru normal cycles. Pay attention to them or pay the consequences. Can’t your “journalist” give some perspective over time and not use normal downward swing in prices for his article? Lazy. Using realtor’s quotes as the basis for news is like using oil companies quotes as basis for news on BC’s economic health. Of course, that would never sell, gotta keep the customers entertained

    • watching this crazy housing bubble crash surely will be very entertaining

      • Yes, watching young families lose their shirts and homes just because they wanted to ownmin their own part of the world is surely “entertaining”. Meanspirited watwaffle.

        • It’s true a lot of innocent victims will be hurt. When everyone from your inlaws to your parents to your banker to your friends to the experts on TV tells you you should buy a house, it’s gonna affect people’s decisions. And some compassion for those who will be destroyed by that advice is in order. However, some scorn for those who bought “the most house you can afford” and who recklessly sacrificed their financial health by taking out HELOCs and using their home equity as an ATM is also on order. Such people (and I know plenty) deserve to be spanked.

  14. I am wondering why Saskatoon was left off the chart. According to Benjamin Tai of CIBC’s economic activity index ,Saskatoon, in percentage points ,led the pack of 25 Canadian cities in MLS sales.Also, was number one in non-residential permits. The city also lead in population growth and second in employment growth. Curious that the largest city in Saskatchewan was ignored.

    • Right. I don’t see anyone mentioned Saskatoon. I moved here for 5 years, and I see the housing price keeps going up even the new policy was placed last July. The home prices are ridiculous high. A single home with 3br (1300sq ft) sell for 480k! My friend bought a house for 325k in 2006 and sold it for 590k last year!

      • And the price still goes up by now!

  15. Is the world economy in trouble, sure but the key word is WORLD, at the end of the day, we are a military family and need a place to live, so just because Japan is in trouble, I should put off buying a home in Ottawa? Give me a break, at the end of the day, we need a place to live, and option B is to rent a home at 1800-2000/month, we are no better off. There are some good post on here and perhaps we are missing the bigger picture but all this doom and gloom. So let’s say we buy a home for 300K market drops 10%, we “lose” 30K in value, option B I rent at 2000K/month and at the end of the year, I am out 24K. You see where I am going with this…I get it, Vancouver & Toronto went up on pure speculation which always corrects itself , so investors will try and time the market to buy which is fine. But for the average family that needs a place to live, should not let MACRO economics scare them, their will always be economies in a downturn. Just wanted to give a different perpective, it seems like it’s either agents or people that hate agents posting here. :)

    • JR. I get your argument, however you need to factor in the full cost of owning versus renting. You put down 5%, 10%, 20% on $300k and then use a mortgage calculator to break out interest versus principle (the amount of equity you gain per month). Add in property tax which you don’t pay as a renter, plus maintenance and insurance. Now drop the house value by 10% so you lose $30k [if you put 10% down you are now without any equity and if you had to sell are also out the realtor fees and any land transfer tax if this exsits in Manitoba] and add in all of the money you pay monthly on the mortgage that goes to interest plus property tax. Compare this to paying $24k for rent (no property tax, no maintenace, minor if any insurance cost and no loss of equity). Then add in a mortgage rate increase of say 1 or 2% upon renewal as the bond market is driving rates in this direction. You are now screwed. if the market slums 15 or 20%, which could easily happen and you are potentially ruined. What if the military wants you to move? Will you sell at a huge loss? Rent. Invest your spare cash in equities held in a TFSA and watch the carnage.

      • Thanks Longterm, appreciate the feedback, I always viewed renting as throwing your money away but you make good points, but calling for 15-20% drop in Ottawa is a stretch in my opinion, and remember you only “lose” if you sell. The 90′s were basically sideways to slightly up, time will tell. Good luck

    • JR, I live in Ottawa and pay less than $700 for a 2 bedroom with 2 kids. I pay no hydro, no water and no heating, no taxes on the place either. You can rent and you can RENT. Priorities. Instead of paying 24K for rent, pay 8 or 9K and save up the remaining 15-16K. :)

  16. You’ll know the ones who are caught in the bubble by their delusional comments on this forum telling us everything is fine and will continue to go up.

    • It wont be fine. The world is completely screwed economically and Calgary is this huge rock star??!!? Come on, get real. Flaherty did a great job with his new mtg rules: he really slowed down Toronto and Vancouver mkts.–We will slow too. Just watch. Probably a bunch of scumbag realtors posting how great our market will continue to be. Best deals are in Montgomery.
      Montgomery is awesome!

  17. To those who suggest that falling sales doesn’t lead to falling prices, well, history proves you wrong again and again.
    Also, what about the thousands who can’t sell their house? I guess we’ll just count those as a sale right?
    This will snowball, as 2008 already drove us to our knees. Now comes the knockout punch when we can least resist it due to debt and a weak economy.

  18. the scary part is, it is coming, went to winnipeg for holidays there real estate is out of control

  19. People keep referring to 2008, you are absolutely correct, congrats you know how to read a chart, the market “crashed”, only to rebound the next year….Look back at a historical chart like 100 years of housing market, the trend is up with corrections, and the last time I checked a house was NOT meant as a short term investment.

    • and the problem is that the rental market is just as crazy so if you need a place to stay…what do you do? what do you do?

      • The post 2008 ‘recovery’ of the past 5 years was only because of the lowest interest rates in history coupled with the longest mortage terms in history, backed by the taxpayer via CMHC. The subsequent bust now that the props [long mortgage terms and low interst rates] are starting to be removed by the government [after they created them] and the bond markets will be all the worse as the past 5 years has been akin to Ireland’s ‘Celtic Dragon’ decade. A sham fuelled by cheap money. All of the graphs in Ireland now – housing, incomes, GDP look a lot like the country is where it would have been had all of the indicators just trickled along at 2% pa from the late 1999s and ignored the massive spike and drop in the 2000s, save one thing: the MASSIVE public and private debt that accrued during the boom years. The boom vanished and Ireland reverted to less than it’s former trickle along growth but the debt remains and acts as an anchor. 18,000 extra euros of public debt per person to bail the banks and enormous amounts on mortgages on half million euro flats in Dublin that have dropped by 40%. Canada’s housing long term charts are going to look similar to how they did in all major Canadian markets after the busts on the early 80s and early 90s – a decade of slow drop and stagnation while inflation means they are losing value. If you bought in Canada in the past 2-3 years, maybe the last 5, and put less than 20% down you are in danger, indeed, quite possibly screwed. In the long term 100 year charts this of course will look like a minor correction, however we don’t live in 100 year cycles and for those caught in the downdraft this will be little consolation. And what happens when the largest, per capita, population of baby boomers in the world [Canada's] start to ‘downsize’ to cash out some of that equity from the longest [40 years] sustained bull market in property in Canadian history? A double whammy of epic proportions. You can’t fight the bond market on interest rates and you can’t fight demographics so you better prepare.

        • 100% correct. Don’t expect anyone to listen until it’s too late. And it already is.

  20. Think segmentation people, the bubble is in the condo market and overheated asian demand based on the wet coast. The rest of the market is fairly normal although cooling a bit.

  21. It is certainly interesting to see Brisbane as #4.
    I really think that it will be different here, as they are not creating any more land.
    What exists here is going to be more and more valuable.
    Suck it up, doomers!

  22. Sydney = 1800 sq/feet
    London = 3000 sq/feet
    Hon kong= 2000 sq/feet
    Tokio= 2400 sq/feet
    New York = 2000- 4000 sq/feet

    Toronto = A Joke 500-600 sq/feed average

    We are in a Global economy… a lot of changes happening in Toronto that numbers can’t explain… have you notice many luxury cars on the recent days around the city.

    .

    Do you realize that there are over 21 trillion dollars in fiscal paradises in de Caribbean. Do u know that 250,000 people come to canada to live permanently every year (Permanent resident card issued). 150,000 of them economic class .

  23. This comment was deleted.

    • Meh, Maclean’s has been banging this drum for quite a while now.

      Personally, I think it’s because Ken Whyte shorted some property management firms and is upset it hasn’t paid off yet.

  24. The people it’s going to hurt are the ones who over exteneded themselves. I’m just sitting here like a vulture waiting for it to crash more. It’s like investing in anything else, get in low get out high. My hope is it’s a lead balloon, sorry, someones loss is someones gain.

  25. The housing market is a scam. First, wealthy Hong Kong buyers offered crazy prices for anything on sale in Vancouver. Those moved to Ontario started the condo craze . Most Canadians living in overpriced Toronto highrises have no chance to buy a property, for the rich foreigners running the show.

    • Wrong. The majority of buyers were Canadians who took advantage of low interest rates and generous mortgage rules. With cheap money they bid home prices up. That’s why there’s now a slump in sales since the govt changed the rules. Rich foreigners are not affected by such rules. If they were running the show, why are sales and prices falling?

  26. 6 Years ago I bought a house in South Vancouver for 250 k I thought It was over priced than. On this years assesment they say its worth 990 k. Ridiculous. Governments jack up the value so they can charge more tax.

  27. Media hype using statistics that have no reflection on reality. Sales are down from last year – big deal, last year was a record year and so was the year before. If you are doing 140KM on the highway and slow to 120KM, you are still speeding!
    Yes, real estate buyers are being less aggressive but I don’t think you have any single-family homeowner in downtown Toronto who would accept 5% less for what their house was worth because the market is “slowing”.
    Nice example of the Trump Tower – this was a bad idea to begin with and it was in trouble a few years ago. Condo sales are also tied to new supply – if no new projects are starting, then there’s nothing to sell and thus the stats drop off.
    The sign of a housing crash is a rise in mortgage delinquency, property tax delinquency, etc. Rental rates for condos aren’t plummeting, except for possibly weaker projects in the suburbs.
    Slowdown yes, crash no!

  28. This is a pretty irresponsible piece of journalism. Where is the balanced view that Macleans is known for?

  29. This person should note that Keith Roy, the realtor whom he referrences had he best and busiest year in 2012. Tell me they sky is falling and I will tell you that the media has been telling us since 2001 that the bubble is bursting.

  30. Chill out people. No crash has happened despite the ridiculous hyperbole in this article and many others like it in the media over the past several years. A slow-down is ineveitable (especially in winter) but so far this one is no big deal. Let’s be responsible, Macleans, and stop reporting events that haven’t actually happened yet.

  31. Its the middle of winter and prices will go down, nobody buys a house in the middle of winter.

  32. Most Canadians think they’re immune from a crash in their real estate market. This just cannot happen to a great Country like Canada. A lot of wealth has been created during the last 5 years when Canadians wrecked up their mortgage debt by 50%. Sure, their payments did not go up by much because the smart government cut the interest rate enough to make this incredible mountain of new debt possible, at least in the short run. Most Canadians tell me that they don’t have those crazy loans they did during the haydays in the US. Really? They do have exactly the same crap, and it’s even insured by the taxpayer. Proof: http://www.cmhc-schl.gc.ca/en/hoficlincl/moloin/hopr/upload/CMHC-Newcomer.pdf
    A freshly landed immigrant from India or Jamaica, as well as Canadian recent graduates and divorced people with no credit history can buy a home with only 5% down. No, wrong, I mean with ZERO DOWN, because the 5% down can come from any source, including borrowed funds. New immigrants with no Credit history can borrow 100%, no money down, all they need is a letter from their cousin who works at their bank in Jamaica or India who states that they are good paying people. That’s it! No Credit score, just landed and 100% financing. Fully insured by the poor taxpayer. Super high risk, but the banks giving out the money like there is no tomorrow because if anything goes wrong the taxpayer will take the hit. The banks can only win, not loose, a banker’s paradise like we just experienced in the USA. But what if you have no proof of income? No problem, you can buy a house under a Million Dollars today, they want to give you a loan when you claim to be self-employed, for 100% financing you just need a friend who is a CPA who can tell them that you earn enough money, or if you don’t have such friend then NO PROOF is needed with a mere 10% downpayment.
    Proof: http://www.cmhc-schl.gc.ca/en/hoficlincl/moloin/hopr/upload/CMHC-Self-Employed.pdf
    In short: If you have either NO CREDITSCORE, or NO MONEY DOWN, or NO INCOME you can buy a house today in the great land of Canada! And that’s why they’re coming by the hundreds of thousands from all over the world to get a free house! Yippiiii!!!! That’s just gotta be a super stable housing market, after all it’s all fully insured by the government so nothing can go wrong!

    • Mortgages are not insured by the government. The government forced taxpayers and children to insure them.

  33. Last time the real estate market crashed in Toronto (1989) was just because of increasing interest rates. Of course that cannot happen now with our low interest rates in the 2% range, right? Interest rates can only go down, not up.

  34. If Regina house sales went down last year the only reason would be there were not enough to sell. They are plagued with low inventory and not enough homes to sell. House prices are high but so are the wages in Sask. And unlike Toronto our market and buyers are majority end users.

  35. Location is still everything. A city like Vancouver will still be a desirable place to live 50 years from now. You mention Vancouver to any well travelled foreigner and you see their eyes glisten as they remark how spectacular of a place Vancouver is. Add to that the fact that the BC government is expecting the population of BC to grow to 6MM by 2036 – and most of that growth will be in the Lower Mainland. Also, the majority of the population growth will be driven by immigration. So you take location, population growth, international immigration, and you have strong demand for one of the most liveable cities in the world. So yeah, the market might take a 10% hit here or there, but in the long run demand will always outstrip supply for a fantastic city like Vancouver. The trick is not to panic and enjoy your home!

  36. House in Toronto just went $120K over asking. Listed at $299K, went for $420K.

  37. Many Canadians think that they are going to have a soft landing because they are different from the US. Yes, Canada is different. So were Ireland, Spain and Japan. After their Housing Bubbles collapsed, all of them had HARDER landings than the US:

    Search for and read:

    Housing, after the bubble bursts newworldparty

  38. The role of the central bank is to maintain price stability by fighting inflation. The single biggest purchase for most people is their home. In bubbles, home prices inflate astronomically thanks to zero interest rate policies. This is HUGE inflation for the young.

    This means that the head of most central banks should be fired for gross incompetence. Yet, Mark Carnage bolts the country before the devastation. It would be safe to assume that inflation matters only for the older, baby boomer homeowners.

    Search for and read:

    Housing, the most manipulated market in the world newworldparty

  39. “Ottawa responded by buying up $69-billion worth of bank-owned mortgages, encouraging financial institutions to keep lending.”

    Bubbles are extremely dangerous. The collapse of a bubble caused the Great Depression. The collapse of the Housing Bubbles in the US and Europe caused the Great Recession of 2008.

    Governments should do everything they can to prevent or suppress bubbles. Instead governments, especially the Canadian government, did everything they can to create and fuel the Housing Bubble, at the expense of taxpayers, first-time buyers and the young. It is a huge transfer of wealth from the young to the old. Every one of these politicians should be fired for gross incompetence or corruption.

    Search for and read:

    Housing, the most manipulated market in the world newworldparty

    (Canada’s manipulation is explained in bottom half)

  40. “They made some disturbing discoveries: sales staff who didn’t ask for mortgage pre-approvals and who grossly misrepresented the demographic trends—namely the number of expected new immigrants to Toronto—that are supposed to keep units in high demand.”

    If you are selling shares in your company to private investors, it is illegal to make false representations in your pitch. If you do so, you can be charged or sued.

    The real estate industry regularly makes false representations with impunity. It is one of the most dishonest and corrupt industries in the world.

  41. “The riskiest mortgages are guaranteed by taxpayers through the CMHC, thereby insulating the financial sector from the sort of meltdown endured by Wall Street in 2008.”

    CMHC is the Canadian equivalent of Fannie Mae and Freddie Mac, who insured and guaranteed half of the mortgages in the US.

    Fannie and Freddie did not stop the US Housing Bubble from collapsing. American taxpayers had to bail them out with $86 Billion in 2008, making the bail out of Citigroup and Bank of America look like chump change.

  42. “our economy is strong because we have a strong housing sector”

    Canada has a strong housing sector because of unprecedented borrowing and debt.

    Ontarian’s real income has been flat or dropped in the past decade.

    This means that BOTH the Canadian economy and housing sector are FAKE.

    As in any bubble, the wealth is temporary and fake.

    The only way to maintain the fake wealth is to continue borrowing.

  43. The interest rate are low, there are a lot of new jobs created. No need to worry. I encourage home owners to hold you price high. Vancouver will still go up and so will the rest of Canada

  44. You people are pathetic! You write articles like this based on conjecture in many cases and spook Canadians and possibly resulting in exactly what you predict! Why don’t you predict growth and for conjecture, include what expansive ideas are presently available and even developing in Canada!

    • This will happen whether someone predicts it or not.

    • I disagree, the house prices have been shooting sky high and they have been building at historical levels..I have the money to buy a new home but I am renting for now.

      I can even notice this happening, renting in upper neighborhoods is becoming harder to find, as potential home owners like me are waiting this madness out.

      $600k for a house that has a closet for a living room, a shoddy foundation…and built as fast as possible so they can move over to the next project before the bubble bursts..

      I rather rent for life than buy these quickly put together houses for sky high prices…keep holding to it, there is no bubble ..

  45. Here in florida it is typical to charge absolutely nothing for a house. My neighber sold his MH for zero dollar. I even paid someone $3000 to buy my new 4 bed 3 bath home on an exclusive golf course gated community. I paid $317,000 and had put in another $20,000 in it. At the high it went up to $550,000. The banks are not able to sell their inventory either. I hope and pray for our dear canadian neighbers!!!!!!!!!! Because i love them.
    I would say stop making payments and file bankruptcy. Which is what i did. You would not recover a dim from your property. Not even a dim. When people get scared they are not buying. You have not seen nothing yet. Move to fl. Live poor in a MH.

  46. Great article. I believe that it started.. will adjust at least 30% before July,

  47. I’m a wait to inherrit my parents house bought and paid for 30 years ago last bill paid, screw dealing with this BS market stuff and while I am at it ima make a small garden in the back yeard grow my food and watch what happens,

  48. If interests rates don’t rise, then there is no problem, why does everyone think that interest rates will rise.

  49. Canada is one of the best places to live and invest. The fact that Canadian market is cooling off is no exception to the economical principle of demand and supply. As long as there are new immigrants coming in to Canada to meet the supply, there are no reasons why the prices should come down. Besides, the housing market has gone up everywhere in the world. In some of the third world countries one can expect to pay over 500,000 US dollars for a decent piece of property. Us, Italy, Greece, due to other economical factors,
    are exceptions to this pattern.

  50. This is a tough one for the larger cities to avoid. I think it is incredible that housing prices have increased to what they are today. BC’s economy has really slowed down over the past few years although the housing prices have kept rising. It is more of a balancing act than a bubble because if wages don’t increase at the same rate as housing, something has to give sooner or later. In SK and AB we have our own bubble, which is unfortunate for us first time home buyers. Unemployment is extremely low, so are interest rates but our strong natural resource and agriculture economy will continue to increase wages and price of housing. Atleast there is a chance of getting a job that pays well enough to purchase a $300,000 60 year old shack..

  51. As someone who has been priced out of the market I hope the crash comes soon. Even though I make nearly 100,000 per year I can’t afford to pay $350,000 for a house. Once house price hit $250 I’ll look to buy. Sorry baby boomers, I’m not going to fund your retirement by paying triple what you did for your home 15 years ago. If I were in their shoes I’d be cashing out too, but you’ll have to find another sucker.

    • No crash happening. The thing is with your income you can afford a home. Great Price, Great Location, Great Home – choose two, you likely feel that you deserve all three,

  52. There is clearly an over valuation of home prices = housing bubble. Anyone who is intelligent will easily be able to identify this, this is why the majority will lose alot of wealth when this housing market comes back to ground level. All asset bubbles in human history have crashed, so anyone talking about deflating is not telling the truth. Its like saying that the government can control the speculators and over leveraged people to sell and exit the housing market in an orderly fashion. Its never happened in human history for 1000′s of years and it wont happen this time either. This will all be about when, not if a crash will happen and what will be the trigger for this crash. My guess is its closer than alot of people think as there are lots of economic headwinds and storms approaching in the near future. I am a happy renter and have cashed out of the real estate market as like any other asset class, there comes a time when the cycle ends and opportunities arise at a later time. The greater fool will always be the last one left holding the empty bag. But everyone should do their own research and make their own decisions on whats best for themselves and their families, but all I can say is this one will go down in the history books as the biggest crash in Canadian housing history. Of course this is an engineered crash by the global elites and we are their pawns in the bigger scheme of things.

  53. This whole boom and bust cycle came about by greedy people viewing property as an investment to make a quick buck rather than a place to live. Property prices need to be corrected to a level that an average working bloke can afford an average place to live. simple as that.

  54. July. 2013′s half over. Prices down about 5% in a year here in Van. Hardly affordable yet. Hope it continues but not much of a crash so far.

    Maybe Shiller was right…Canada seems like the US in slow motion.

  55. Selling a house can be a difficult
    and frustrating task. But many a times, due to unavoidable circumstances, there
    is no other option left for the homeowner then to sell the house. The reasons
    for this decision are many such as bankruptcy, divorce, foreclosures, or to get
    instant cash. It has been seen that selling a house is one of the easiest and
    quickest way to deal with financial crisis. Though, a first time homeowner may
    get exasperated with the daunting task because, at times, your home may sit for
    a long time in the market. It is possible that as a homeowner, you do not get a
    good price for your house and are forced to sell your house at a price lower
    than the market value of your home. So, what is your alternate course of action
    that allows you to get a decent price for your home?

  56. with increases in immigration and demand for housing increasing in urban areas prices should level out . we need to calm down on development and give the market a chance to catch up.We all need to keep our debt levels under control in the event of interest rate increases which are coming.

  57. Scaremongering.
    What is too often left out of the equation is the real cost of a house. House values are not just made-up numbers overheard across backyard fences, or plucked out of the air by baby boomers to fund their retirement.
    Housing prices are comparable to the cost of building a new house (land, labour, materials) and the cost of maintaining one (property taxes, insurance, utilities, maintenance). All these things are always keeping pace with inflation and for this reason housing prices always go up. Would you deny the trades their high wages? Would you like a home with cheap building materials? Prime locations become ever more scarce, so you bid against others for the best most convenient ones because guess what, you’re not the only one who wants to live there!!
    Unless something devastating happens to the neighborhood, real estate is always a good LONG TERM investment. It’s not about speculation, it’s REAL estate. If you don’t believe this, then try to buy a piece of land where you think you “deserve” to live, and
    Of course in the short term there will be downturns and upticks, but, as with the stock market, it’s not advisable to sell during a downturn unless you need the cash.

  58. What say you now Mr. Doom & Gloom Chris Sorensen?
    This is the same B… S… article Macleans publishes like the one where the City of Burnaby was declared as the “Best Run City in Canada”. Maybe nextime, Macleans should try interveiwing the regular staff and get the other side of the storey.

    http://www2.macleans.ca/2009/07/22/the-best-run-city-in-canada/

  59. No bubble, no crash, no story, I need real facts and this story does not prove anything… Real estate in Canada is stable, and the rules are tight, the banks do not give the money for nothing, you have to apply to borrow and the banks have tight rules, unlike the george bush days, where single mothers can borrow 300,000…Geesh!

  60. I remember when that happened here in USA… I have been a real estate broker for about 12 years… just to give you an idea my own home was value at $540,000 in 2006 and in 2008 the new appraisal was $230000,.. now the market has recover a bit and the current value is $325,000. Now is a good time to invest in properties in the USA as the values are going up, I have many investors from Canada. If you are looking to invest in real estate in USA – Florida, take a look on my website http://www.mchomesrealty.com I will be happy to help you.

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