Canadian housing market crash not in the cards 

Contradictory to what the central bank said that the Canadian housing market could be overvalued by as much as 10 to 30 percent, Governor Stephen Poloz said on Thursday that the Bank of Canada does not foresee any sharp rise of unemployment and mortgage rates that might trigger a major housing market correction.  Speaking in New York, Mr Poloz said that the probability of such a big drop in prices is low.  

" The risk comes when some catalyst sets off the vulnerability", he said.  " In this case it would be, let's say, a rise in unemployment, a significant rapid rise in mortgage rates, neither of which we're expecting"

He also told an Economic Club of New York business audience that he doesnt think of the Canadian housing in "Bubble" or in any "Bubbly-type" way.  He also said that a return to sustainable economic growth which Canada is estimated about two years away, would require continued financial innovation.  He pointed a need for expansion and innovation in terms of bond financing; securitization to create new high-quality, low-risk products; peer to peer lending; and public-private partnerships.

Stats Can reported on November 13, 2014, that new homes sales cost less in September of this year than a year ago in Vancouver.  There was no change in August but the New housing fell 1.2% compared with last year September 2013.  While across Canada, there was an increased of 1.6% year over year for new housing.

Calgary is the most increased in new home pricing compared to other areas in Canada, it jumped 4X more than the average in 12 months,  The cost of new apartments or condos are not included in this calculation, according to Stats Canada.

Metro Vancouver's high end housing market have surged 35% higher defying the predictions of a slowdown after Ottawa close down the immigrant investor program in February.  

572 Properties in Metro Vancouver with at least a price tag of $3M and more range  were sold in the first 8 months, this includes 135 homes in the $5 Million and more according to Macdonald Realty Group statistics, compare to 422 properties ($3M or higher range) in the first 8 months of 2013 and including 112 homes that were in the $5 Million range.

$3 MIllion is the new $1 Million now in the real estate cirlcles on the West Coast since 55% of detached homes are now in the $1 Million or greater based on their assessment by the city of Vancouver Andrew Yan.  About 37,800 properties made it to the Million-dollar club last year.

Transaction of at least $3 Million homes are headed towards a new annual high as per Dan Scarrow of Macdonald Realty, which contrary to expectations that some rich Chinese immigrants would avoid investing here due to scrapping of the federal immigrant investor program.  " There is confidence in the Vancouver real estate market.  Peole within the market itself are trading and there is also money flowing from the outside" Mr Scarrow said in the interview.  

Recently, I came across an article written by BIV .  Vancouver has consistently ranked as the most expensive city to live in Canada but surprising that only 20% of the top 25 wealthiest neighborhoods in the country can be found here in the Lower Mainland according to this report.

They ranked the average net worth of household, Shaughnessy area (Vancouver) comes number 4 on the top 25 list, Shaughnessy area is located along the neighborhood of Granville street area from West 29th avenue to West 39th avenue, houses in this neighborhood average over $3 million while the household average net worth is $12 million and the household average income is $777,184.  according to BIV.

The other Vancouver neighborhoods that made to the list were Kerrisdale,West Bay & Sandy Cove in West Vancouver and Shaughnessy Center.

May Home Sales jumped to 13.9% in B.C., it was the biggest increase in a number of months since the 2008 recession.  The B.C. Real Estate Board Association mentioned that there were 8,729 home sales last month which makes a total of $4.9 billion dollar which is said to be an increase of 20.6% compared to May of 2013.

It also mentioned that  there was an increase of 5.8% to the average price of home from last year, the new home average rose now to $565,233.  Sales in Greater Vancouver also were at par with the rest of the province, also rose to 13.4%.  More increase in sales percentage wise on Chiliwack and Fraser Valley which were 21.9% and 19.7% respectively. It was also the strongest home sales since 2007 where 8,700 homes were sold, although it is still fall short in comparison with 11,000 sales in May prior to recession times in 2006 and 2007.

The 2008 financal crisis brought deep impacts on the global housing market and B.C. Homes sales had fallen significantly during those times in May 2008.

On March 24,the Conference Board of Canada reported that China's increase in gross domestic product (GDP) caused a positive impact on the housing market in Vancouver.  The report also mentioned that the influence of China's economic state on our housing market should not be underestimated as it is the biggest drivers behind housing activity in the area.

The report also said that observers need to pay a close attention to China's economic health when doing the assessment of Vancouver's housing market, it also suggested that Vancouver market welcomes Chinese GDP growth more than the Canadian low interest rates and rise in local employment.  If  the Chinese economy is indeed improving, it might starts to rekindle both the new and resale demand in the Lower Mainland.

The report also looked back over the past couple of decades, where the trend of sales in Vancouver home sales can be correlated to the Chinese economy trends.

- 1990s, China's GDP growth was "sluggish" with annual growth rates around 3.8% - 7.8%, correspondingly, Vancouver housing market was relatively slow even though the local economy was good and the employment was at 2.3% increased annually and the population growth was at 2.5%

- 2000s, Chinese GDP grew by over 8% annually, effect - Vancouver housing market took a dramatic upswing!

The pattern seems repeating again today, wherein Vancouver's employment growth was 2.1% per year average from 2010 - 2012, while population also grew 1.6% with low mortgage rate which should lead to more active housing market but over the same period, China's GDP growth came to 12-year low and Vancouver's housing market resale volumes fell to 23% in 2012.