Real estate insanity in Canada and India, too

Home > Economics

Real estate insanity in Canada and India, too

Tuesday, November 10th, 2009 | Economics |

America Canada - Deflation or Inflation. What’s in the Cards for Canada?:

Canada’s home prices have skyrocketed in this recession. When the dollar was at 97 cents US a couple weeks ago, average Canadian home prices hit roughly $320,000 US – an all-time high. Residential mortgage debt has over doubled since 2002. We will surpass the US in per capita residential debt within the next year. In 2009 alone, we will add 100 billion in fresh residential mortgage credit (equivalent of about 1 trillion in the US on a per capita basis).

The average price of a detached Toronto home has approached $600,000. I have attached a home listed at $559,000. The home is about a 15 minute drive from downtown in an average location. It is clearly overvalued. Yet it’s more than likely that the property will receive 20-30 bids and finally sell at over $600,000.

iTulip - Houses in Canada 2 to 3 times as expensive as U.S.:

I hope readers took note of that 1500 square foot old shack on the 30 front-foot lot in Vancouver: $989,000.

From some people with experience in Canada:

Based on my weekly research, in the GTA (accessible to the subway via a 10min. bus ride) a semidetached (3bdr/1.5bath) goes for around $450K, while a detached starts at around $600K/$650K. That is for a 1960/1970 built house in average area, with average repair to be done.

Another story:

I was in Vancouver visiting family in September and was *shocked* at the price of housing up there. As the article points out, prices are sky high and incomes are not nearly high enough to cover debt service. My cousins live in Burnaby, just 15 minutes east of downtown Vancouver. In addition to my cousin, his wife and two daughters, they have 4 other roommates to cover rent. I would guess the house is valued at close to $1,000,000 CAD although they are renters and do not own the home. I’m not sure if the roommate situation is the norm, but that seems about the only way to afford housing if you are a normal person. In any case, I definitely came away with the impression that there is a massive real estate bubble in greater Vancouver.

And in India:

Housing in India serves as a vehicle for the class that doesn’t pay tax (”Black Money”) to hoard its wealth. Ergo, due to massive income inequalities and rampant corruption/tax evasion, housing in India will always be much more expensive relative to income than in the West.

Bombay (Mumbai) is a good example of that. Prices there have been out of the reach of the vast majority of people for generations. And yet, despite massive corrections at various times, they continue to be at levels that even middle class people cannot afford (let alone the poor).

When I wanted to buy land in India, I was told that some 85 percent of the price had to be paid in hard cash (Black Money). This sum would not show up on any property deed and would not be the amount at which the transaction would be registered with the land registry for stamp duty purposes. I refused to do it. I managed to find a seller who agreed to accept the entire amount by bank draft. However, that was a rare exception.

Tags: mortgage mess