Guest Post: Primer #5: The Role Of Demographics In Canada’s Coming Housing Bust

Tyler Durden's picture

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williambanzai7's picture

Do Canadians still think real estate prices can only go up?

Double down's picture

Yes, this is just a dip.  It will be back next year because we are responsible Canadians not mired in debt like those Americans.

And, yes we are retarded.

Mad Max's picture

Don't forget your took, eh!

svendthrift's picture

Look Yankee, it is spelled toque.

Double down's picture

Yes, this is just a dip.  It will be back next year because we are responsible Canadians not mired in debt like those Americans.

And, yes we are retarded.

Spitzer's picture

I agree.

These clowns had their warning in 2008. Rather then take it as a warning, it convinced them even more that housing only went up because it did bounce back.

The idea that these people cant make the correlation between falling interest rates and rising home prices is beyond me. I was renting but I knew the landlord was so far into debt and so brain dead that I wanted to get the hell out before this thing blows. My x landlord will go bankrupt, I know it. He will probably try and raise the rent to cover his ass, thats how dumb he is.

I just bought a little small house in northern Alberta to live in for now. It only cost me $38,000 because I found out that the banks will not finance it because it is too old. Imagine that, look what happens to prices when you have to pay cash, haha. I can still rent out this house for $700 a month. That is around a 20% yield.

dogbreath's picture

I just made an offer in small town alberta.  Sombody actually outbid me.  Told the realtor that I would not counter offer but they probably told the other party that I would because they upped their offer.

Spoke with a realtor yesterday.  She was remarkably on the ball because most can only sing the company song.  She said wait till spring as prices will be down by 50K.

Jessica6's picture

I know someone who bought a fixer-upper a few years ago in southern Saskatchewan for $10K and the municipality sold her the lot next door for one dollar.

Not sure how much it's gone up but it's where the 'smart money' headed before Calgary and Edmonton started to decline.

svendthrift's picture

Hubris is strong there. They watched the US housing market implode and theirs not and found an almost moral justification for it. It validated their feelings of "we're different" which heavily informs the "this time it is different" sentiment in Van/CGY/Toronto. Canadians, particularly in Van and Toronto, will drone on about how their city is world class this and that. They really don't know.

So the answer is yes. Yes, they do believe that their houses will appreciate for ever.

RockyRacoon's picture

Do we need to start building a fence at the Northern border as well?

dogbreath's picture

You don't.  I think we need to build a fence at our southern one.  

oddjob's picture

I'm sure you can print the money for that as well.

Diogenes's picture

Do Canadians still think real estate prices can only go up?"


Not me. I've been investing in real estate since 1972 and have seen the ups and downs.

In 2008 I sold most of my rental properties in fear that Canadian real estate was about to follow the US down the drain.

Since then those properties have appreciated 20%.

I've been looking for something to buy all summer but prices are too high for me and still rising.



ACjourneyman's picture

I agree bubble, there was just a report that said 60+% of people in Canada have no savings and will be in trouble if one pay cheque is delayed one week. To add to that, a house 1 1/2 hours drive to Vancouver is 500K and the ave wage is less than 50K a year. I try to get my friends to open their eyes to this but I get the deer in the headlights look.

Sudden Debt's picture

Immigrants will buy up all those houses so there's no problem.


billwilson's picture

Yes but ... the big driver on home purchases has been immigration. When 200-300,000 new folks come each year (almost 1% of the population) that provides a cushion under prices.

web bot's picture

This is the smartest and best comments made on this blog. The author misses this fact... and sounds like one of those RRSP salesmen parroting other people's ideas.

In Toronto alone, over 100,000 immigrants go through each year... and where are they going to? suburbs... Population growth is driving the housing market in Canada, not an academic bubble.

Now in the US... well that's another story.


BenRabidoux's picture

Actually I didn't miss that point at all.  Immigration into Toronto is projected to be 65K for the next several years, not 100K.


Regardless, housing starts in Canada have been running at ~175K, well exceeding net household formation, including immigration and organic household formation.

And yes, we are in a bubble.


If you'd like to debate the content of this post using widely accepted measures of fundamental value, I'd love to hear it.  Otherwise your weak anecdotes expose you for the fool you are.

web bot's picture

Go back to selling used shoes.

BenRabidoux's picture

That's about the level of intelligence I expected in your rebuttal.  You prove my point.


web bot's picture

So typical of an insecure person... the moment your post is up on Zerohedge and you are on here like some little man trying to smother everyone with your insecure comments.

You've got a way to go little man.


BenRabidoux's picture

Yeah....the guy posting using his own name rather than a pseudonym is the insecure one.  My analysis is there for you to refute.  Give 'er!

dogbreath's picture

regardless of the actual number coming in the number that is important is the number that are staying.   I see alot of new latinos and chinese in my area and they seem to be happy.  Most probably never had it so good but they are surely aware of the huge difference in the value of the goods they buy here and what they would have to pay back home.  I think many are immigrants of conveience.  Got the passport and the healthcare card.  Mom and dad work illegally.  Relative showed up and dropped a kid so it will have citizenship and the money is getting saved to be taken back or sent home where a person is comparatively rich on what is modest wealth here.  I have chinese friends who have a canadian passport and they are doing well back home.

Vampyroteuthis infernalis's picture

web bot, denial is hard to accept.

UrbanAnalyst's picture

The CMHC report linked by the author forecasts 2009 net migration to Toronto of 64,500, I believe the commentors were discussing future immigration. Supporting statistics would indeed lend credibility, perhaps also on a national basis as the nature of your content seems to not be CMA specific.

taraxias's picture

You mean those rufugees entering Canada at an alarming rate because Canadian immigration laws are too lax are the ones responsible for holding up Toronto RE prices at 10/1 earnings to price ratio and Vancouver's at 16/1?

Who would have thunk?

BenRabidoux's picture

Yes, because we only accept uber wealthy refugees.  It's a good thing those refugees are coming carrying bags of cash to purchase the average Vancouver home for a cool mil or a home in T.O for half a mil. 

taraxias's picture


Now that made me laugh.

Nice piece BTW.

svendthrift's picture

Sounds like Miami.. What with all those rich South Americans and all.

It's worth noting that there really was a flood of wealthy South Americans into Miami. They really did buy lots of high end property. They're all underwater now, but that's not all that relevant.

Suisse's picture

On the bright side you can pick up a waterfront condo on the cheap now.

Jessica6's picture

I always use Miami when trying to talk sense into people about Vancouver. There aren't that many 'rich Chinese' and the really rich ones started coming over in the late 1980s. The ugly truth is that most of the Vancouver bubble is being fuelled by locals on the scaling up treadmill all counting on that greater fool to offload their first property onto. I do think that million-dollar crackshack blog represented a tipping point though.

On top of that, underwater immigrants can bugger off back to their home countries, only losing what they put down. The Canadians with nowhere else to go will soon learn what 'full recourse' really means.

At least Miami has nice weather and gorgeous beaches.  Vancouver is only pleasant if you're moving from either the North Pole or Seattle.

Sudden Debt's picture

I reminds me of a job offer I got a few years back to go work in Norway. As a gift, they would GIVE ME a FREE 5 SLEEPING ROOM HOUSE with 90 acres of ground as a incentive!

They don't have enough young people in Norway anymore and they need people to do the work. The -500000 degree temperatures could be a reason but WHAT IF that will be the future for all western country once the old people start kicking the can? 

FranSix's picture

What's even more disturbing about the coming housing collapse in Canada is that long term mortgages are being allowed with very little or no money down, and the pension plans are all positioned to 'insure' these mortgages with what's called covered bonds.

Canada was one of the first countries to experience a melt-down with Asset-Backed Commercial Paper based on credit card debt and mortgages, but here we have the government propping up with taxpayer dollars the exact same corporate bond bubble.

And the people who are on the hook are working age couples, two-income homes with families in over their heads.  Its unreal how everyone expects that this will all work out for the better.

First, along with the housing collapse you'll get a corporate bond market collapse.  Then pensions, who are insuring it all as counterparties to the risk, can no longer guarantee any payment because its all tied up in credit default swaps.

All this is happening with a backdrop of historically low interest rates in long dated bonds.  Unreal.

Major deflation risk here.

DosZap's picture

Hate to say I TOLE YA SO........Canuckians.Saw this biatch coming over a year ago.Their fissin to get a dose of what we have.

Poor Shmucks.

FranSix's picture

What's even uglier is that retirees are fixing to profit from the onset of the collapse in housing, figuring they will yoke the young into lifelong debt servitude, but instead the entire complex will become illiquid.  Its patently insane.

CPL's picture

Yes they are...

It reminds me of given dining rooms sets. When my wife and I got married we found a modest dining room set someone as giving away a la curbside. I sanded it, polished it down , repaired it, found boston bolt sets to replaced the busted ones and refinished all the chairs. It was (is) a nice Ash set and the price was exactly where we needed it to be. Free.

4 years after being married my mum in law gave us her dining room set because she didn't like it anymore. So we took it graciously, table, chairs, hutch and buffet. We put the one I restored away in the garage to give to another couple if they needed one.

5 years later after the fact, my parents gave us their dining room set. we thanked them as the dining room set we had lived through three kids up until that point, basically it had the shit beaten out of it. So I put that set next to the old set I intended to give to someone else. So two sets in stow, one in use. Fast forward to the progressive retirement of my wife and I's parents.

So both parents retired in the span of four years between one another and when moving from a 2300 sqft two story home to a single level 850 sqft bungalow. They didn't have any problems in 2003-2006 dumping their places, it was the fact they had all this crap. Tonnes of it. Including dining room sets, dining room sets, beds, bikes, couches, tonnes of prints, boxes of knick knack crap women buy...aka shit.

I attempted to unload what I had and just had been given in the garage through craigslist and kijiji. For Free, even offered to use the truck to drop it off to any one starting out. Took forever to organize and take pictures of, meanwhile the parents are busy in Florida.

I get a couple of calls, manage to help out a couple of kids starting out (not one of them owned a car btw, these are 25 year olds, not even sure they had a license which wouldn't be that irregular). Dropped stuff off. Managed to get my own son outfitted with any stick of furiture he would even need so he doesn't move back home to live in the fridge.

To be blunt, I hardly put a dent in the mess in the garage. So two summers ago I had a 100 thousand dollar bonfire and BBQ. Just the estimates on the 80 large boxes of books, had to be a conservative estimate of around 15k. The beds I salvaged the wood and burned the rest. The Four given dining room sets went into the pyre, ash/oak/teak. Burned the prints, which are posters anyways. All oils and originals stay hanging on the walls. The shoes, suits dating back to the 70's (why do people collect/keep clothes); some was salvaged for the quilters around the area, 95% was burned.

It took two days to safely burn it all.

Now both sets of parents have rentals and a primary residence. All of the siblings have their own places and rental properties. When even both sets of parents on both sides are dead, there will be 5 properties plus the left over crap we dind't burn or give away.

I have already explained to both sets of rents that I do not want the property because managing it is a pain in the ass. So we've made arrangements for the local diocese to take them.

So to quickly summarize, see all that crap you have and the houses you own, they were only valuable to one person.

Vampyroteuthis infernalis's picture

CPL, why did you not have the Salvation Army come pick up the items and drag them away for free?

CPL's picture

I did. Salvation army is swamped with crap from a huge glut of junk from people "downsizing". They seriously don't want anything, people assume the Sally Ann is synomous with "dump".

Otherwise In the country, it just gets burned regardless at the pyre at the dump or I setup a controled burn on my property.

I obtained a license and paid some of the off duty guys firefighters to hang around and eat hot dogs/drink beer while it all burned.

If I rented a skid, hauled the skid, brought it to the dump and paid the dump levy it would have cost me $3500. For a license, beer for around 40 people and hot dogs. It cost $750. My place or the dump burns it regardless, just cost less to DIY

Rogerwilco's picture


LOL -- sounds like your garage has much in common with mine. They say when Ghandi died, he had a rice bowl, his spectacles, and a pair of sandals.

CPL's picture

The mind blowing thing is my sister is "downsizing" as well as her brats are out and gone. Since her kids rent, don't own, she's been trying to foist all her junk on to them. Since they don't want it, she's been noticing all the room in my garage. :(

It's endless.

I hope I only die with my glasses, an empty beer mug, a half finished book and a bar tab. Wife has other plans though.

VWbug's picture

i am renting in one of the most in demand areas of toronto and have owned rental properties here.

last week i was jogging and i saw something i have never seen in over 20 years here: for rent signs. Lots of them. I have never seen more than 1 for rent sign on any given street, and now i am seeing 5 or 6 on every street.

Might be a strange coincidence...but something is going on.

I never had to place an ad to rent my places here, i just tacked up a sign and then waited for the hordes to start calling and banging on my door.

Something is different now.

I also looked at some open houses for fun. One was a horrible DIY reno on a bad house on a bad street. Sloping floors, crooked windows, obvious foundation problems. About 1500 sq ft. Price? $785,000   what a joke, lol.

Don't think prices have dipped yet...but looks like they will...

gmak's picture

Why there are so many rentals now is that the condo market is soaking up young people who traditionally rented. Others are moving to owning on the rationale that it makes more sense to own than to rent at current rates. (At current rates? Are they in for a surprise in 5 years at renewal time. I also get tired of hearing that paying rent is throwing money away. So what is interest, then? :-)

It's simply supply and demand. Artificially low mortgage rates, long amortization terms, and the herd mentality are removing the demand side from the rental equation. Supply remains fixed. Look to Atlanta in 2003 - 2007 for a similar example. A traditional "full up" market, by 2003, even the best rental properties were offering major discounts and freebies to get warm bodies in vacant units.

taraxias's picture

Nice try!

The reason there are more "for rent" signs up is because people who lose their job in the "city" can no longer afford to live there due to the high cost of living. So they are abandoning ship and moving back to smaller centers where they originally came from.

And the unemployment wave is just beginning.........

gmak's picture

Could you back up your contention with data? Or is this an assumption on your part?

It appears that you are saying that those losing their jobs had moved from other cities and were renting. If people can't afford rent, then they certainly can't afford mortgages and we would probably see an increase in the foreclosure-sale market, no?

Further, according to Bloomberg, Canadian unemployment peaked  in mid-2009 and has been declining since then. I would think that these rental signs would have been popping up in 2009 (since the rise in unemployment began in early 2008).

gmak's picture

Nice chart. But what does it have to do with rental availability in Toronto, or with your contention that it is out-of-work intra-country migrants who rent that are leaving to move back home?



taraxias's picture

My "contention" is based on real life observations, not any "cut & paste" chart. 

And it's getting worse out there by the day.

In my estimation by about this time next year we'll really get to find out that a lot of Canadians been swimming naked.

gmak's picture

In essence, you are saying that you know some people who moved to TO from elsewhere, lost their jobs and had to move back.  Somehow, that can be extrapolated to include the area of TO referred to in the original post?

I guess we're done here.

VWbug's picture

gmak i think you are right.

Young people that used to rent 2 bdrm places here for $1200 to $1500 a month plus utilities are now buying 500 and 600 sq ft condos downtown, they are building them at an astonishing pace.

Also makes sense because i don't see an unusual number of for sale signs, just for rent.

I also noticed the HUGE empty lands from the distillery to the DVP (I heard it was the biggest piece of undeveloped land in any major NA city) has finally started to be developed. Foundations for condos being poured right now.

I figure they can put, i dunno, 50,000 units in there? Maybe more?

The TO downtown skyline is dramatically different than it was even 5 years ago.

Be interesting to see where it is in another 5...