Real Estate

Vancouver housing bubble?

  • Last Updated:
  • Nov 14th, 2020 2:09 am
Tags:
None
Deal Addict
Mar 10, 2010
1787 posts
471 upvotes
Mark77 wrote: Yeah then you have to add the construction sector, and the sectors that supply it extensively. But the precise number doesn't matter -- I think we can agree that it is a substantial part of the Canadian economy.

A quick Google indicates that the source of the number was from the Conference Board:

http://murraydobbin.ca/2013/03/11/1209/



(and the question asked by the blogger is very pertinent as well -- just where will the demand come from when this sector falls apart? I agree with the premise of the question -- the BoC has a very serious problem on its hands and probably is in significant danger of finding itself behind the curve in terms of policy rate cuts and stimulus of the non-housing sector).

I know quoting a blog is just repeating hearsay, but certainly the 27% figure has appeared a number of times. In short, in much of Canada, housing is pretty big business.
Well looking at US numbers since they're easier to find, they estimate housing as % of GDP as currently only 2.3% and peaking at around 6% during the US Housing Boom. This encorporates all supply and support jobs for the Housing sector like Electricians, Construction Workers, Real Estate Agents etc.

http://bipartisanpolicy.org/projects/ho ... ic-economy


"The construction of new housing is an integral component of the economy. From 1980 to 2007, residential fixed investment, the Bureau of Economic Analysis’ measure of the economic value of new home construction and remodeling, contributed on average 4.5 percent to the U.S. GDP. During the boom years from 2004 to 2006, it constituted an even greater amount, peaking at 6.3 percent of GDP in the last quarter of 2005. However, when the housing bubble began to burst in 2007, new home construction’s share of GDP plummeted. As of the third quarter of 2011, residential fixed investment was only contributing 2.2 percent to GDP, 2.3 percentage points below its historical average. This suggests that the economy is, in effect, missing 2.3 percent of GDP because of the distress in the housing industry."

So since our economy and real estate sector is probably close to the US at the peak, lets take that number from 27% down to a modest 7%, which is even higher than has ever been registered in the US. It's still a substantial number, but still a small percentage of the entire economy. Would their be a hit to GDP in the effect of a 20% drop in housing, of course, but it would still only impact GDP by around 1%, hardly crippling the economy and driving the crash to 50% or more.
Banned
User avatar
Feb 15, 2008
26318 posts
3218 upvotes
Calgary
Vitalogy80 wrote: Well looking at US numbers since they're easier to find, they estimate housing as % of GDP as currently only 2.3% and peaking at around 6% during the US Housing Boom. This encorporates all supply and support jobs for the Housing sector like Electricians, Construction Workers, Real Estate Agents etc.
I find that pretty hard to believe, that it was only 6% at the peak... But yeah, just like anything, if you want to compare the US and Canada, you need very rigorous definitions of what defines 'housing' activity and what's not.

2.3% of GDP is basically a rounding error. I can assure you, what's happening in the United States with their economy is far more than a mere rounding error
So since our economy and real estate sector is probably close to the US at the peak, lets take that number from 27% down to a modest 7%, which is even higher than has ever been registered in the US. It's still a substantial number, but still a small percentage of the entire economy. Would their be a hit to GDP in the effect of a 20% drop in housing, of course, but it would still only impact GDP by around 1%, hardly crippling the economy and driving the crash to 50% or more.
Only 1% doesn't even pass a basic smell test. A non-event. But again, the problem probably lies in using consistent definitions. Much like the "prime vs. subprime' debate", where the people who argue that CMHC isn't subprime, want to define subprime to mean something other than non-prime, rather than its literal definition.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
Deal Addict
Dec 27, 2006
1968 posts
946 upvotes
British Columbians flee rising housing costs
www.vancouversun.com/business/bc2035/Br ... story.html

"My colleague Tracy Sherlock has reported that calls to the local offices of the Credit Counselling Society increased 23 per cent in the first five months of 2013, compared to 2012."

Anything with a score of 3.0 is considered unaffordable, over 5.1, severely unaffordable.

Vancouver, with a median house price of $621,300 and household incomes of $65,200, has a score of 9.5.

The global financial capital of London — boasting endless cultural and consumer offerings — is at 7.8.

The cost of housing could be one reason why many are leaving — more Canadians have been leaving than moving to B.C. since 2011.

On a net basis, reports BC Stats, the province lost 2,234 residents in the last three months of 2012 alone.
Banned
User avatar
Mar 31, 2010
1948 posts
441 upvotes
Motoss wrote: British Columbians flee rising housing costs
www.vancouversun.com/business/bc2035/Br ... story.html

"My colleague Tracy Sherlock has reported that calls to the local offices of the Credit Counselling Society increased 23 per cent in the first five months of 2013, compared to 2012."

Anything with a score of 3.0 is considered unaffordable, over 5.1, severely unaffordable.

Vancouver, with a median house price of $621,300 and household incomes of $65,200, has a score of 9.5.

The global financial capital of London — boasting endless cultural and consumer offerings — is at 7.8.

The cost of housing could be one reason why many are leaving — more Canadians have been leaving than moving to B.C. since 2011.

On a net basis, reports BC Stats, the province lost 2,234 residents in the last three months of 2012 alone.

Same goes for Toronto
I am not sure if we have to trust the last data from TREB (personally I don't trust it) but if the prices continue to go up I will consider going back to Europe
Any european city has to offer more than any major canadian city in this respect.

Although I could afford buying I do not find any sense in these two things:
-putting most of my savings in an inflated asset
-spending so much for a house in a place that has less and less to offer

Between Toronto and Vancouver I believe that for me Vancouver has more to offer, to bad the economy is not strong enough to support life there :-)
On the other side Toronto can sustain life but has little to offer from my point of view.

I will probably have to consider London too.

I am quite sure that Flaherty will have to step in.
Rising prices should somehow reflect in growing debt (I do not believe in HAM, that is *****)
RE Market melting down: YtoD GTA $volumes -4%, YtoD Toronto $volumes -7%. Read more here. Admins please read this before you consider further requests to ban me. If you are on this list do not expect replies.
Deal Addict
Mar 10, 2010
1787 posts
471 upvotes
Mark77 wrote: I find that pretty hard to believe, that it was only 6% at the peak... But yeah, just like anything, if you want to compare the US and Canada, you need very rigorous definitions of what defines 'housing' activity and what's not.

2.3% of GDP is basically a rounding error. I can assure you, what's happening in the United States with their economy is far more than a mere rounding error



Only 1% doesn't even pass a basic smell test. A non-event. But again, the problem probably lies in using consistent definitions. Much like the "prime vs. subprime' debate", where the people who argue that CMHC isn't subprime, want to define subprime to mean something other than non-prime, rather than its literal definition.
Well my numbers come from the Bureau of Economic Analysis under the US Department of Commerce. I put a lot more faith in their numbers than I do with the numbers you're quoting as fact because you read it on a blog somewhere. I would assume that the Bureau of Economic Analysis has hundreds or thousands of Economists that have a greater idea how to measure housing to GDP than you or I do.

If you've got some actual proof or even any idea where 27% came from, then please let us know and continue to use it, but I"m going to guess around 6 to 7% as a more reasonable number based on the US Governments Data. I doubt their housing at its peak varied much from ours right now...certainly ours isn't contributing 4 times what theirs did to GDP.
Banned
User avatar
Feb 15, 2008
26318 posts
3218 upvotes
Calgary
Vitalogy80 wrote: If you've got some actual proof or even any idea where 27% came from, then please let us know and continue to use it, but I"m going to guess around 6 to 7% as a more reasonable number based on the US Governments Data. I doubt their housing at its peak varied much from ours right now...certainly ours isn't contributing 4 times what theirs did to GDP.
The source was given by the blogger, the Conference Board of Canada. They're certainly not my numbers, and hence, I am unable to support or defend the statistical methodology, or, as discussed previously, the 'definition' used to derive such.

However, since we know that 1/5th to 1/3rd of the income of Canadians (and Americans as well!) goes into housing, it shouldn't be too much of a stretch to understand that housing, housing-related finance, etc., as a percentage of GDP must be higher than a mere few percentage points. The difference in the numbers probably relates to differences in defining housing activity, with the US entity you quote probably using a very narrow definition of residential construction workers.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
Deal Addict
Mar 10, 2010
1787 posts
471 upvotes
Mark77 wrote: The source was given by the blogger, the Conference Board of Canada.
So do you believe the numbers given by the Conference Board of Canada (not even a Governmental Organization) over the US Department of Commerce and their hundreds (or thousands) of trained economists? Or do you believe that the Canadian Real Estate accounts for 4 times more to our GDP right now than the US even at their peak (or 10 times now).
Banned
User avatar
Feb 15, 2008
26318 posts
3218 upvotes
Calgary
Vitalogy80 wrote: So do you believe the numbers given by the Conference Board of Canada (not even a Governmental Organization) over the US Department of Commerce and their hundreds (or thousands) of trained economists? Or do you believe that the Canadian Real Estate accounts for 4 times more to our GDP right now than the US even at their peak (or 10 times now).
I believe that RE, construction, and all the related financing activity, manufacturing, distribution, transportation, etc. are a huge amount of the economy's direct and spin-off activity.

I believe that the US number you're quoting has an inconsistent definition compared to the Canadian number, hence, you're attempting to elicit a comparison based on apples and oranges.

Of course Canada isn't 10X the US activity at our peak versus their peak. That is an absurdity. However, the US number you quote, again, is likely referring to an extremely narrow definition, with the Conference Board's number being based on a broader definition of the impact of housing activity.

As for credibility, there's no contradiction between the numbers. The issue is clearly in the definition and the methodology.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
Deal Addict
Mar 10, 2010
1787 posts
471 upvotes
Mark77 wrote: I believe that RE, construction, and all the related financing activity, manufacturing, distribution, transportation, etc. are a huge amount of the economy's direct and spin-off activity.

I believe that the US number you're quoting has an inconsistent definition compared to the Canadian number, hence, you're attempting to elicit a comparison based on apples and oranges.

Of course Canada isn't 10X the US activity at our peak versus their peak. That is an absurdity. However, the US number you quote, again, is likely referring to an extremely narrow definition, with the Conference Board's number being based on a broader definition of the impact of housing activity.

As for credibility, there's no contradiction between the numbers. The issue is clearly in the definition and the methodology.
OK, so how does the Conference Board get at 27%? They include the entire Financial industry and the Insurance Industry and their contribution to GDP as well. Not what the banks do what is related to specifically housing or Insurance Companies contribution from insuring houses, but their entire profit including service fees, insuring vehicles etc.

Here's a Real Estate Bear like yourself who shows Real Estate % of GDP in Canada as reaching record highs of 7%....

http://theeconomicanalyst.com/content/b ... osting-gdp

[IMG]http://theeconomicanalyst.com/sites/def ... of_gdp.jpg[/IMG]

Or here's a line straight from the Bank of Canada...

"Residential investment has accounted for only 6 per cent of GDP on average over the past 30 years"

http://www.bankofcanada.ca/wp-content/u ... 150611.pdf
Banned
User avatar
Feb 15, 2008
26318 posts
3218 upvotes
Calgary
Vitalogy80 wrote: OK, so how does the Conference Board get at 27%? They include the entire Financial industry and the Insurance Industry and their contribution to GDP as well. Not what the banks do what is related to specifically housing or Insurance Companies contribution from insuring houses, but their entire profit including service fees, insuring vehicles etc.

You'd have to ask the Conference Board specifically how they derived their number, but clearly there are a lot of people involved in activity relating to RE financing in the financial services industry and insurance. Careful with the term 'profit'.

Again, the problem is in definitions. Leverage/spin-offs are a big factor. It is noteworthy that Canada entered quite significant recessions in the early 1980s and in the 1990s coinciding with the drops in your chart. That's no coincidence.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
Deal Addict
Mar 10, 2010
1787 posts
471 upvotes
Mark77 wrote: You'd have to ask the Conference Board specifically how they derived their number, but clearly there are a lot of people involved in activity relating to RE financing in the financial services industry and insurance. Careful with the term 'profit'.

Again, the problem is in definitions. Leverage/spin-offs are a big factor. It is noteworthy that Canada entered quite significant recessions in the early 1980s and in the 1990s coinciding with the drops in your chart. That's no coincidence.
I'm not denying that if Real Estate falls, the economy will be hurt, I've just stated that you're way over-estimating the effect Real Estate has on the economy, it's certainly not close to 27%...and yes, I mis-used the term profit when it should have been those Industries entire contribution to GDP. As you've stated before, the Banks will be fine with a Housing Collapse, so you can't really count their sizable contribution to that 27%. Also, I'm sure the Insurance Industry will still be fine.

I've already shown you exactly how they get at 27%, whether you chose to believe stats provided by the Bank of Canada is your choice. The Bank of Canada itself shows Residential Investment as a % of GDP at 7%...pretty much exactly what I estimated it at yesterday.
Banned
User avatar
Mar 31, 2010
1948 posts
441 upvotes
bcbgboy13 wrote: Yes it does not fit with the RE bubble pooping deniers, RE agents, mortgage brokers and RE photographers but why we do not do a little bit of our own investigation as we are pass the February midpoint.

Unfortunately The Real Estate Board of Greater Vancouver (REBGV) does not provide mid-month snapshots in the way TREB does here (claiming that the sales are down 8.3% when they are down 11.95% when compared to the original NR from 2012) so I took the liberty to calculate the REBGV numbers from the daily sale stats provided by the popular Vancouver RE agent Rob Chipman

And this is how they look:
[IMG]http://img835.imageshack.us/img835/579/ ... eb2013.jpg[/IMG]

This is what the whole Feb.2012 REBGV looked like:

"The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Greater Vancouver reached 2,545 on the MLS® system in February 2012. This represents a 61.4 per cent increase compared to the 1,577 sales recorded in January 2012, a decline of 17.8 per cent compared to the 3,097 sales in February 2011 and a 2.9 per cent increase from the 2,473 home sales in February 2010.

February sales in Greater Vancouver were the third lowest February total in the region since 2002, though only 151 sales below the 10-year average."


Now I should stress that we cannot compare directly the first two weeks as the numbers for Feb.1, 2012 to Feb.3, 2012 include the sales from REBGV and the Fraser Valley RE board combined (which will decrease the number of sales and increase the av.price for the period) but unless the pace changes DRAMATICALLY it will be a big decline in the sales and perhaps in the average price too.

Stay tuned for the complete report (due March 1-4,2013)
Hi bcbgboy13

Any chance to have your mid-month stats for Vancouver?
I am really curious to see what is going on there

thanks
PF
RE Market melting down: YtoD GTA $volumes -4%, YtoD Toronto $volumes -7%. Read more here. Admins please read this before you consider further requests to ban me. If you are on this list do not expect replies.
Deal Addict
User avatar
Dec 10, 2008
4692 posts
1147 upvotes
Anyone have this afternoon's numbers for west side properties in Vancouver? Bonus points if you can give me hour by hour price changes.
Let's hug it out
Jr. Member
Oct 1, 2006
143 posts
18 upvotes
toronto
RCGA wrote: Anyone have this afternoon's numbers for west side properties in Vancouver? Bonus points if you can give me hour by hour price changes.
I do. Any particular street you are interested in?

Top