5 ms·

Isn’t a lot of that related to foreign investments? Or was that mostly limited to Vancouver?

adventured 6y ago
No, it wasn't mostly foreign investments, although that added fuel to the fire. You can see the Canada housing bubble represented in that Canadian households are among the most indebted on the planet (it's heavy with mortgage debt). Here's a chart showing the prominent split with the US, where they go different directions after 2007-2008 (Canada's bubble and debt accumulation kept going and the US began deleveraging and improving its household fiscal condition and debt to equity ratio in housing): https://i.imgur.com/gCAsd5Y.png https://i.imgur.com/gCAsd5Y.png
- doopy-loopy2 6y ago
  What are the implications (if any) of this?
- gentleman11 6y ago
  Canadians end up owning a decent amount of wealth by the time they retire compared to many nations. That debt isn’t like credit card debt. Median wealth per household is about 200k vs 77k in the USA. Edit: used per-household stats instead
- IkmoIkmo 6y ago
  Not sure if a disposable-income denominator is fair when there are such large discrepancies in taxation and public provision of big-ticket expenses. If you get taxed harder in Canada but then don't have to pay for healthcare or education privately than in the US, then it makes no sense to just say 'look disposable income in Canada is lower, thus debt:disposable income is higher, thus Canada is worse off'. You'd first have to correct for the fact disposable income is lower because taxes are higher, because healthcare and education are publicly financed and therefore individuals require less disposable income and could be just as well off. Second, just look at mortgage delinquency rates between the US and Canada for an impression on affordability.[0] Third, debt doesn't matter much, not all debt is made equal. A 15% creditcard loan for $10k is much worse than a $20k 3% loan, in terms of bankruptcy risk, even if the debt to income ratio is worse on the latter loan. You can't just look at debt to income, and again, especially not disposable income between countries which very different systems without correcting for it. Absolute debt doesn't say much, debt servicing does, and in particular servicing of interest rates. That's actually at historic lows for Canada [1], which is totally different from the US[2]. Canada's debt servicing ratios are much lower than in the US. And that's why, in part, the delinquency rates are much, much lower, and why it's not quite so simple to conclude that Canada is in a RE bubble compared to the US. [0] https://i.insider.com/596f5f88a47cb502028b4f17?width=750&format=jpeg&auto=webp https://i.insider.com/596f5f88a47cb502028b4f17?width=750&for... [1] https://www.macleans.ca/wp-content/uploads/2014/03/can_mort_debt_income_service_income-1024x453.png https://www.macleans.ca/wp-content/uploads/2014/03/can_mort_... [2] https://www.macleans.ca/wp-content/uploads/2014/03/us_mort_debt_income_service_income-1024x453.png https://www.macleans.ca/wp-content/uploads/2014/03/us_mort_d...
cmrdporcupine 6y ago
I have to say too that a large part of the reason greater Toronto area and Vancouver area real estate has climbed so high is that it started out relatively low after the early-90s crash and was undervalued for a long time. And those cities have grown like gangbusters and are now huge metropolitan mega-areas and so their economics start to look like other large North American metropolitcan areas. Toronto especially is now the 3rd or 4th largest city in the US/Canada combined, depending on how you count it, so it's not a surprise that its prices would start to reach up into NY/Chicago/LA type ranges. Canada is a politically stable economically stable and fairly wealthy place (in the major cities) with fairly high immigration rates, and the immigration is merit based and fairly prosperous. So growth has been steady. That growth kinda snuck up on us, though, even for those of us living here it seems crazy that these cities are "worth" so much now.

No, it wasn't mostly foreign investments, although that added fuel to the fire. You can see the Canada housing bubble represented in that Canadian households are among the most indebted on the planet (it's heavy with mortgage debt). Here's a chart showing the prominent split with the US, where they go different directions after 2007-2008 (Canada's bubble and debt accumulation kept going and the US began deleveraging and improving its household fiscal condition and debt to equity ratio in housing): https://i.imgur.com/gCAsd5Y.png https://i.imgur.com/gCAsd5Y.png

doopy-loopy2 6y ago
What are the implications (if any) of this?
gentleman11 6y ago
Canadians end up owning a decent amount of wealth by the time they retire compared to many nations. That debt isn’t like credit card debt. Median wealth per household is about 200k vs 77k in the USA. Edit: used per-household stats instead
IkmoIkmo 6y ago
Not sure if a disposable-income denominator is fair when there are such large discrepancies in taxation and public provision of big-ticket expenses. If you get taxed harder in Canada but then don't have to pay for healthcare or education privately than in the US, then it makes no sense to just say 'look disposable income in Canada is lower, thus debt:disposable income is higher, thus Canada is worse off'. You'd first have to correct for the fact disposable income is lower because taxes are higher, because healthcare and education are publicly financed and therefore individuals require less disposable income and could be just as well off. Second, just look at mortgage delinquency rates between the US and Canada for an impression on affordability.[0] Third, debt doesn't matter much, not all debt is made equal. A 15% creditcard loan for $10k is much worse than a $20k 3% loan, in terms of bankruptcy risk, even if the debt to income ratio is worse on the latter loan. You can't just look at debt to income, and again, especially not disposable income between countries which very different systems without correcting for it. Absolute debt doesn't say much, debt servicing does, and in particular servicing of interest rates. That's actually at historic lows for Canada [1], which is totally different from the US[2]. Canada's debt servicing ratios are much lower than in the US. And that's why, in part, the delinquency rates are much, much lower, and why it's not quite so simple to conclude that Canada is in a RE bubble compared to the US. [0] https://i.insider.com/596f5f88a47cb502028b4f17?width=750&format=jpeg&auto=webp https://i.insider.com/596f5f88a47cb502028b4f17?width=750&for... [1] https://www.macleans.ca/wp-content/uploads/2014/03/can_mort_debt_income_service_income-1024x453.png https://www.macleans.ca/wp-content/uploads/2014/03/can_mort_... [2] https://www.macleans.ca/wp-content/uploads/2014/03/us_mort_debt_income_service_income-1024x453.png https://www.macleans.ca/wp-content/uploads/2014/03/us_mort_d...

cmrdporcupine 6y ago

I have to say too that a large part of the reason greater Toronto area and Vancouver area real estate has climbed so high is that it started out relatively low after the early-90s crash and was undervalued for a long time. And those cities have grown like gangbusters and are now huge metropolitan mega-areas and so their economics start to look like other large North American metropolitcan areas. Toronto especially is now the 3rd or 4th largest city in the US/Canada combined, depending on how you count it, so it's not a surprise that its prices would start to reach up into NY/Chicago/LA type ranges. Canada is a politically stable economically stable and fairly wealthy place (in the major cities) with fairly high immigration rates, and the immigration is merit based and fairly prosperous. So growth has been steady. That growth kinda snuck up on us, though, even for those of us living here it seems crazy that these cities are "worth" so much now.