Comments on: This Week’s Top Stories: Global Capital Flows, Vancouver Buyers, and Toronto’s Soaring Prices

By: Jon

Jon — Tue, 11 Apr 2017 13:55:26 +0000

Credit fuelled markets like Canada work well on the way up. However on the way down, the question becomes, can the latest buyers afford the losses?

Looking at US comparable cities, I’d say detached homes in Toronto should average around $700K. Since the average is about $1.4 million, can the home owners who borrowed afford to lose $700K? That is, will they decide that bankruptcy is a much better alternative than paying off some massive mortgage like a loser. Once people start going bankrupt, then prices fall below that $700K. A huge group of people now bankrupting, and forces the market lower.

Also note that people reference the US that they have foreclosures you can walk away . That argument works when losses are around $100K. In the US, sure walk away. In Canada, just wait it out. However when losses are $700K it makes total sense to go bankrupt, which means you lose everything and can’t get a new mortgage for a decade. Foreclosures work fast to correct the market and get people back in, hence the quick US recovery. In Canada we could be talking about decades of pain as people will not be able to rebuild credit or keep their assets like in the US.

People walk away. It happened in 1990. With the growth of CMHC it definitely means less skin in the game and for sure, if the market were to correct 50% in Toronto / Vancouver, most recent buyers would be smart to let taxpayers pay off their mortgage.

By: Emily

Emily — Mon, 10 Apr 2017 14:25:54 +0000

In reply to Mr obvious. That's very obvious of you, Mr. Obvious. :D

By: Mr obvious

Mr obvious — Sun, 09 Apr 2017 22:32:30 +0000

Canada =real estate bubble.
Vancouver market is purely speculative. I’ve observed several of the same houses in my neighbourhood bought and sold two or three times in the last two years. Everyone is marking up and out to make more $$$ along the way. That is speculative buying/selling. The provincial government doesn’t care. Every time the same properties are sold the property transfer tax is revenue that keeps on giving. I’ve also been told my realtors and bankers that despite the supposed credit scrutiny, banks are still very lenient with mortgage lending, and most people are getting approved for high $ mortgages despite questionable profiles. Speaks a similar story to the U.S.

Keep buying propert people. The market is low and it’s going to go higher and higher! Really, it will. Next time your realtor tells you that it’s okay to spend 1.3 million on a house that sold the previous year for 850k and is assessed at 700k make sure you tell your realtor that you are willing to spend $1.5 mil to secure the house and outbid any other offers. You will come out on top! 🙂
Remember we are Canadian, and we will never have the same issues that are neighbours to the south who have a profoundly larger economic foundation than us.