Well, well, well. After years of hearing how different it is north of the border, it looks like the Vancouver housing market is finally starting to crack.
[T]he latest home-sales figures point to a slowdown. The number sold dropped 21 per cent in July from June, and prices edged 0.1 per cent lower to $630,251 for a typical detached house, according to the Real Estate Board of Greater Vancouver. Listings of properties for sale in the city are increasing, while bidding wars are becoming less common.
The slowing real estate scene in Vancouver is adding to concerns that the rest of the country’s housing market will cool off as well against a backdrop of global economic uncertainty and gyrating financial markets.
The claim has been that Canada’s more sensible lending laws have protected them from U.S. style nonsense. Better lending or no, housing cannot rise indefinitely out of proportion to wages– and Vancouver’s home prices are seriously out of line with income.
The average house now costs 11 times average household income, double that of anywhere else in Canada.
When Bank of Canada’s Governor Mark Carney spoke about the Canadian housing market in March, the Globe and Mail pointed out that he didn’t use the word bubble. I couldn’t help but be reminded of Greenspan’s comment about some markets being “frothy” when I read Carney’s comment:
Some excesses may exist in certain areas and market segments.
Carney also said:
[H]eavy investor demand (much of it foreign) reinforces the possibility of an overshoot in the condo market in some major cities.
So Carney didn’t say “bubble”, but “overshoot” and “excess”. He also described the market as “unusual” and “financially vulnerable” in his speech. It almost sounds like a Jeopardy question, doesn’t it? “What are four terms that describe a financial bubble?”