2. Home prices in Toronto and Vancouver are well into bubble territory and well out of reach of most residents, as typified by this home which is being listed for $1.6 million CAD:
3. Most of this bubble has been caused by foreign speculators. In an attempt to "cool down" the market in Ontario, their government has passed measure which tax the hell out of people buying homes:
5. Meanwhile, Home Capital Group (the Countrywide of Canada) is in full collapse. 75% of depositors have pulled out their money, they have started an emergency line of credit, and they are looking for someone to buy out the company:
6. Just like when the collapse was first beginning in the US, those with a lot to lose are screaming the loudest that there is no problem. For example, this guy who is blaming regulators for outing HCG for their irregularities:
I'm sure there are a handful of other companies who stand to lose when their economy collapses. It might be an idea to look at how the American economy reacted in 08.
Bentley Williams
The Canadian housing market still has momentum. The rising us stock market and housing market for the next 1-2 years will keep it inflated before spectacularly crashing
Benjamin Adams
That is the toughest part... knowing WHEN it is going to collapse.
I'm glad you at least agree it's GOING to collapse. It seems so obvious to me that I can't understand how everyone doesn't see it.
Related photo... in the burbs of Toronto, who WOULDN'T jump at the opportunity to spend close to $1 million CAD for a 70 year old home?
Brandon Evans
Get your bug out bags, time to go innawoods Leafs.
Carter Hall
As I linked in my OP, they've passed new rules to "cool down" the market.
The measures include...
... a 15% tax on all foreign buyers.
... a tax on homes that are empty
Instead of cooling it's freezing out the market
Ethan Rivera
Since Canadians are mostly poor and indebted, I think the Chinese foreign investor meme is real. Around north Toronto there are tons of empty houses, and who knows how many empty condos. And the real estate agent advertisements on busses and stuff have bigger text in Chinese than English, so it's definitely more than the 5% the news tells us about.
When something happens in the China Making all of these "investors" liquidate their foreign homes, that's a surefire catalyst for 70%+ corrections.
Aaron Parker
In the rest of the country there will be more like a price adjustment, think of a 15-20% depreciation but for TO and Vancouver, oh boy... it will be beautiful to watch the idiots who paid CAD 1.3 million for a beatdown townhouse see their "investment" depreciate 75-80%.
I know a guy from GTA who sold a house via Skype to a chinese investor last month, I shit you not.
I think it will take 2 more years for all of that to happen though
Samuel Bennett
I live and work in the Greater Toronto Area serving in the building materials supply chain.
We noticed a pretty drastic tapering of clients recently, whereas normally this is our busiest time of the year. The market was hit with like 6,000 listings in the past 3 weeks, and people seem a little uncertain.
These are the first sines. HCG is a drop in the mortgage market, but it's the sentiment that counts.
The frenzy is over. I'm hoping for a 50% correction.
If you won RE NOW is the time to cash out. You've been granted a million dollar lottery ticket, CASH IT IN, it won't ever happen in your lifetime again.
Julian Cook
I think it will do more than that. If it follows the US model, here's how it will happen...
1. Home appraisals are based more on what other homes in the neighborhood have sold for as opposed to an objective standard.
2. Once the first home misses it's price target, that will force down the price of every home for sale after that.
3. When the collapse happens, people will discover that their homes are now only worth 50% of what they owe on them, so they will have incentive to default or just walk away.
4. Meanwhile, the loan companies will start to fail; which will cause the stock prices of the banks to go down.
5. Other banks and companies, which use stock in the banks as collateral for their own loans, will start to get calls to put up more money since their collateral is no longer worth what it was worth before.
6. As a result, banks will stop loaning to each other, which will freeze the credit markets.
7. The frozen credit markets will hit most of the large companies that rely on easy credit to support their day to day operations.
8. With the collapse in full swing, the national government will need go generate massive debt and bailouts to keep the whole house of cards from falling.
Evan Reyes
>8. With the collapse in full swing, the national government will need go generate massive debt and bailouts to keep the whole house of cards from falling.
> implying Sunny Ways' already not doing it
Justin Bailey
That's the scary part, how in liberal shithole Canada, real estate is its biggest export, and related jobs are the biggest chunk of gdp. Once this housing meme collapses, Canada will fall back to what it was before the 2000s, a lame, poor and miserable country. Check out Garth turner's blog for your daily dose of housing collapse confirmation bias.
David Garcia
Garth has been preaching his doom for so long, he was bound to be right, since real estate follows a 15 year cycle.
Only decent advice he gave was buying preferred shares.
Jason Lewis
Very intriguing thread, similar housing bubble in Auckland, New Zealand, also significantly driven by overseas investors. I'm not sure how I could profit off it, There's a huge construction drive going on, and land being freed up for construction. I don't believe prices will fall drastically in a short amount of time, but as supply increases over the years, there will surely be a price decrease.
Nathaniel Clark
meant to say *I'm not sure how I could profit off it decreasing
Alexander Hughes
It depends on how much danger you like.
If you're balls out, you could short the banks that supply the riskiest of loans.
If you want the potential of a limited loss, you could buy put options in these same companies.
Or... you could simply set aside cash. When the crash happens, the price of everything goes time and it's a great buying opportunity for those who have cash.
Austin Sanchez
If you currently own a house turn it into a rental. There's going to be a lot of homeless Canadians in the near future.
Nolan Thomas
Not necessarily a bubble. You guys are just soaking up all the new Chink millionaires who got rich when the Jews decided to transfer the wealth of the West to China.
Ryder Smith
This.
Same thing is going to happen in Australia, Sydney, Melbourne and soon even Brisbane will reach stupid levels.
Nathaniel Thompson
This topic hits home for me as i own a fairly large property i rent out (commercial, not residential). Brain is telling me to sell but my hearts telling me to hold and keep the money comming in.
Nolan Gomez
I heard that it was also happening in Australia
Robert Sanders
This is the part that I'm undecided on. The Chinese investment isn't a real investment with normal expected returns. They aren't thoroughly invested for a profit.
They're sinking their money somewhere safe. Canadians are profiting off Chinese people that want to keep their fortune relatively safe.
It's true but Australia is still a beautiful place to live with beautiful property with an extremely limited supply. When people say "most Canadian real estate isn't habitable" they're exaggerating. There's still an absolutely tremendous amount of land that can be developed around the American border. Southern Ontario alone is barely inhabited. Canada is also cold as shit with limited upside.
Plus Canada is much larger economically so it can support more expensive properties. (100k more millionaires, 10 more billionaires etc)
It's hard to say. Depends how Trump treats Canada going forward. Banking will stay strong. Resources will pick up one day. The real debate will be around software tech
Charles Green
Or you could sell on a land contract.
If they have the money, take the money. If they default, keep the money and take the building back.
Or... sell now, wait for the crash, buy the same building back on a discount.
What's the Australian version of "granite counter tops"?
Carson Hill
Last option would be nice but i operate my own business in the building.
One option im considering which i think will work well in my city in the event of a crash is selling now, wait for the crash and buy a dirt cheap property that i can transform into office space.
Blake Jackson
>3. When the collapse happens, people will discover that their homes are now only worth 50% of what they owe on them, so they will have incentive to default or just walk away. >or just walk away. >walk away Does Canada has the concept of nonrecourse debt like US or is it more like in Europe where you are personally liable with all of your assets and can't possibly "walk away"?
Jaxson Ross
Which is a very good idea.
When the crash happened here in the US, it was really a buyers market....
1. Banks that foreclosed wanted them off the books in a hurry, and would sell for whatever was left on the mortgage just to get rid of them, and for even less if they couldn't find buyers.
2. People who owned multiple properties and were hit hard would sell at major discounts.
Anyone with cash was king.
I remember a 1 acre piece of property that was sold for $15k during the crash and $150k a few years later.
Justin Parker
I'm not sure (I'm in the US). But when it comes down to people going broke who just can't afford the payments anymore, there's not a lot they can do about it.
What I want to know is this.... does canada have variable rate mortgages? That's a real time bomb.
Alexander Cook
is there a chance for a tsx wide correction?
thinking I might sell some of my weed stocks
David Reed
>But when it comes down to people going broke who just can't afford the payments anymore, there's not a lot they can do about it. In the US people who had stocks, cars or other assets where able to "walk away" without having to declare personal bankruptcy, because the laws in most states are in a way that the house alone covers the credit. In Europe on the other hand this concept is unknown and people have to use all their assets to cover the debt in case the home gets foreclosed or under water. This makes Europe way more risky. Just wanted to know what the situation is in Canada.
Nathaniel Reed
in alberta if you make a big enough down payment you have the ability to walk away from a mortgage but it's rare
rest of the country is europe style
thing is, if there's a bit of a crash, the government will just open up the gates more, double the amount of investor visas to bring in asians and their money
Wyatt Nguyen
There is no ultra profitable way to profit from a housing collapse as a retail investor. Outright shorting bank equity forces you to compensate the person you're borrowing the shares from to short the dividend that they are owed. This could be around 4.5% a year to maintain the position. Buying options is a moronic tactic unless you have a definitive time team on when the bank equity would collapse. Otherwise you're pissing capital out the window on rolling the premiums.
Ryan Morris
*time frame, sorry. Typing on my phone
Jacob Myers
I agree that shorting is not a real option, because you also face the risk of unlimited risk.
Options CAN be a workable plan, depending on how far out they are.
So far, the ones I've seen related to this conversation have expiration's no later than Dec 2017; but if you can find options that expire in Dec 2018 , that would certainly be in the ballpark.
Matthew Foster
Good luck. This market is a piece of shit but I can't think of the trigger event that will cause its collapse. Ultimately we need strict control on capital inflows, but the provincial government is too busy lapping up those juiced up land transfer taxes.
Isaac Hernandez
Variable rate mortgages are enough of a trigger, in my opinion.
If the rates go up, it pushes people out of their homes, which start the cascade failure.
According to a few articles, they are a booming business in Canada:
In the US, variable rate mortgages is what set the whole system crashing. So many of them that when they started going upside down it flooded the market with empty homes.
Jacob Allen
Here are a few more links....
How lenders are bundling loans to bypass regulations:
Sure a few super rich will still find ways to get their money out.
But for your basic millionaire....you will not be able to take out hundreds of thousands of dollars from China like you did even a year ago.
The capital flow will cease. Canada is fucked.
Connor Perry
Same with Stockholm.
Ryan Gonzalez
What's the big deal? Surely most Canadians live outside of Toronto and Vancouver. Oh wait...
Blake Rodriguez
Jesus in Detroit that house would be $500
Jack Myers
noob question but, how will it affect things like tsfa's and mortgages? I have most of my cash in tsfa just to beat inflation, will i be fucked? wont it recover within 10 years regardless?
Ryder Jones
Well the "something" that happened is Chinese regulation passed early this year that makes it harder for Chinese to invest in foreign assets.
Now if there is something that actually makes Chinese liquidate their current assets, rather than just not be able to buy new assets, shit is gonna crumble faster than it should
but the new regulation alone I think provides tons of opportunity.
Jackson Myers
>What's the Australian version of "granite counter tops"?
Granite counter tops
Jaxon Sanders
Think anyone is going to do a Paulson style grand slam out of this?
Brayden Cruz
I feel like ive seen this before....
William Cooper
Neat piece i found...
Timeline of a housing bubble: Smart money moves in and purchases property Credit gets cheaper due to low interest rates, inflationary monetary policy Speculators enter the market Putting money into real estate becomes a water cooler topic People start racking up debt You know of a few people purchasing multiple properties as investments Credit lending standards deteriorate People rack up even more debt Prices rise exponentially "Prices will never, ever go down! Immigrants! First-class cities! Lack of housing supply!" Governments intervene with "housing affordability programs"; inflate prices more Subprime lender crashes; bank runs Sales volume drops Smart money sells into euphoria of the market
James Perez
How does one short the Canadian housing market?
Jack Wright
Watch the big short
Lucas Lewis
Thanks for this thread OP it's quite refreshing to read about something else then crypto on this board
Blake Morales
Which Options should i look for?
Austin Phillips
Yes they have and people who took their mortgages in 2012 are about to get fckd
Brody Cruz
a thought I had
Is the crypto runup due to chinese investors not being able to do traditional outside investing due to the new regulations?
gov can stop investment in canadian homes, but its way tougher to stop crypto
David Torres
>It's hard to say. Depends how Trump treats Canada going forward
Considering in his first 100 days he has already restricted timber and agriculture imports from Canada, and NAFTA is getting renegotiated... It probably isnt going to go well for Canada over the next 4-8 years
Robert Bennett
The first person to put granite countertops in their kitchen had a good idea. But after you find them in the kitchen of every piece of shit house, it loses its value.
Well, those who don’t remember the past are condemned to repeat it. People have very poor memories.
You left out… wait 9 years and repeat
By either shorting or buying put options on the companies who stand to lose the most
Thanks
No, the crypto business is a small segment of people who like get rich quick schemes
Ian Williams
Good thread. Hope it happens in a few years when I have some capital available and can buy a house in Vancouver on the dip.
Joseph Bell
Home Capital Group dropped another 12.13% today.
Which means that since April 19th, 73.07% of their share price has evaporated.
Analysts are now looking at the bigger picture. While they are saying that they "don't think" it will turn into a contagion, they "can't rule it out"
I guess i should buy puts on the dec 17 option then
Isaiah Ortiz
I don't think there's anyone selling HCG options.
You could buy options on the big 5 banks, but December might not be long enough.
Thomas Perez
good luck with breaking even, premium will be fucking big
Daniel Peterson
Not necessarily. Based on prices today, here's the break even on December puts for the big 5 canadian banks.
Note:
1. The B/E includes commission in both direction (buy/sell).
2. This is a break even for only 1 option. If you were to buy more, the B/E goes up since your commission costs are diluted.
Liam Hughes
How does one short the Canadian housing market? >By shorting it. Thanks mane
Asher Phillips
I was thinking about FXC. Is there a CDS-Index like Itraxx for the canadian market and if so would it make sense? I'm really just learning the basics of this stuff
Jacob Robinson
OK, I'll try again.
You can either short a stock or buy put options. Both make you money if the price of the stock goes down, but shorting has an unlimited risk of loss where with a put option the most you can lose is all your money.
You can either short the toxic loan companies themselves, or you can go after other companies who will also suffer as a result of the collapse.
Matthew Young
If it's cash in a TFSA it's still cash regardless of what happens. If it's stocks or a mutual fund or an ETF in a TFSA then it rides the market and can be at risk.
Nathaniel Rivera
I bought a house last February and was smart enough to a) buy a house I could actually afford (225k vs 1mm they tried to sell me on) and b) got a fixed rate mortgage.
First thing I did was max out my payment periods and amount so $800 per month became $1000 every other Friday. After that I saved up and used my full 10% prepayment option (17.8k) that I get each year. As of Monday this year's will have processed, so that's 20% of pure principal outside of the regular payments.
29 year mortgage is already under 7 years.
Jaxson Johnson
thank you user!
Parker Martin
These aren't subprime though. I think Canadian regulations prevent the existence of subprime mortgages.
Levi Sanchez
They are bypassing those regulations, see and
Adrian Powell
Gold is falling and my country is in a bubble, how do I save my money and make some too?
Camden Morgan
take a credit in Canadian dollars, change it into something nice. Wait for the Canadian Dollar to collapse and pay back less.
