Canada's housing market overvalued by as much as 30%: BoC

The Bank of Canada has acknowledged that the country’s housing market may be overvalued by as much as 30 per cent as a long-awaited soft landing remains elusive.

The bank said Canadian house prices have been overvalued by at least 10 per cent since 2007, and may now have overshot by anywhere from 10 to 30 per cent.

The range is significantly higher than estimates by the International Monetary Fund (10 per cent) and Canada Mortgage and Housing Corp., which judges there is a “moderate degree of overvaluation.”

Bank Governor Stephen Poloz acknowledged Wednesday that “some financial vulnerabilities appear to be edging higher.”

These include a growing appetite in Canada for subprime mortgages and risky auto loans, triggered by sustained low interest rates.

About 35 per cent of new, uninsured mortgages by smaller federally regulated banks since the end of 2012 could be considered non-prime, according to the report.

“Slim pickings for China’s immigration industry in Canada’s new investor migration scheme”

“Slim pickings for China’s immigration industry in Canada’s new investor migration scheme”

“For years, Canada’s immigrant investor programme was the Chinese immigration industry’s cash cow. A money tree. A goose that popped out golden eggs like a tennis ball machine.

Big commissions (more on this below) and a seemingly endless supply of mainland millionaires covetous of Canadian passports made the scheme the Chinese consultants’ favourite. So when it was axed this year, all eyes were on the promised replacement – would it offer similarly rewarding opportunities?

The new scheme has not been formally unveiled yet – expect that in coming weeks – but sources familiar with the government’s plans are now giving a good idea of what to expect. And it’s fair to say that immigration minister Chris Alexander is being crossed off a lot of Christmas card lists in China.”

“Separately, the Wall Street Journal reported last week that the government was targeting total investments of C$120 million (HK$820 million) under the scheme, with each applicant contributing C$1 million to C$2 million. That implies an intake of 60 to 120.

Fifty, 60 or 120 – it matters not at all, compared to the vast scale of the old IIP, which brought about 37,000 rich immigrants to BC from 2005 to 2012. When it was formally scrapped in June, 60,000 would-be millionaire migrants in the years-long queue had their applications dumped too; about 40,000 of those were likely bound for Vancouver.

The new venture capital scheme looks like being so minuscule as to serve little more purpose than allowing the government to keep its promise to replace the IIP. It certainly won’t provide viable access to Canada for the bulk of the dumped IIP applicants.”

West Vancouver may soon curb “monster homes” via zoning and building bylaw changes

West Vancouver may soon curb “monster homes” via zoning and building bylaw changes 

Consultation at city hall Sept 15 at 7pm.

This news was widely discussed in local Chinese forums. Some speculate that the new rules will drive down property/lot values in West Van.
Though some also speculate this rule change will drive up existing monster homes’ values.

CMHC could force banks to pay deductibles on mortgage insurance

http://business.financialpost.com/2014/09/08/cmhc-could-force-banks-to-pay-deductibles-on-mortgage-insurance/

The Canada Mortgage and Housing Corp. is looking at a new formula to push some of its losses on to financial institutions, essentially forcing them to pay a deductible on mortgages insured with the Crown corporation before claims are paid, according to sources.
The Financial Post has learned the Office of the Superintendent of Financial Institutions is involved in discussions with CMHC, which it oversees, while the Canadian Bankers Association is said to be against the measure.

Investors in Brampton house development hit with $30K bill

Via City News

09/05/2014
"Investors in a Brampton house development are suffering from a severe case of “sticker shock” after they found out the homes they purchased — originally scheduled to be completed in 2012 — will cost them an extra $30,000 in closing costs now that they are finally done.

Fernbrook Homes is telling the investors in the Castlemore development that if they want the keys to their new homes, they’ll need to pay up.

The buyers are upset since Fernbrook did not apply for a building permit until March of 2013 – one full year after the project was to be finished – and now they have to foot the very large, and unexpected, bill."

Caveat Emptor

Is Vancouver West High-end Demand Really Weaning?

It's been a while since I posted due to life events, travel, and busy work schedule.
Good to be back!  I did continue to post daily stats and noteworthy news on my twitter account (@greaterfoolvan) however!

Globe & Mail today had this piece

"Is the dip in high-end house sales in Vancouver just a summer blip?"

"He says listings are up in certain segments while sales are looking stagnant. The figures for single detached homes on Vancouver’s west side in the $3-million to $3.5-million price bracket – which is certainly high-end but not quite “luxury” – show 106 active listings and just nine sales, compared with 73 listed homes and 7 sales during July, 2013.“Right now, these numbers are showing blood in the water – and the sharks haven’t sniffed yet,” Mr. Kurland said."

I got my hands on the sales-by-price-range charts of Van West and Burnaby for 2012-2014, figure I'll do some quick math. Here goes:

Jan-July 31 Sales
Vancouver West

>3M

2012: 175

2013: 214

2014: 321

Jan-July 31 Sales
Burnaby

>2M

2012: 13

2013: 13

2014: 19

We can see thus far in 2014, cumulative from Jan-July there has been more high-end sales than previous 2 years in Van West and Burnaby.

However from some other data sources, there are some indications that the high-end sales are softening in the last 2 months (especially in Burnaby).  Based on the asking vs sold price differential, there seem to be increased bargaining room in the higher end (1.5M+).

China's CCTV reports on Canada's high priced housing market, June 2014

Youtube: China's CCTV on Canada's RE

Also, Remember the announcement of IIP cancellation? It’s finally in effect:

Terminated programs: Federal Immigrant Investor and Entrepreneurs
On June 19 2014, Bill C-31 became law, and applications still in the backlog of the federal Immigrant Investor Program and Entrepreneur Program were terminated.