The only part I don't agree with, "Barring a major asset-market crash in Emerging Markets or a policy change, foreign investors will continue to add demand to housing markets."
In fact, when there is a crash or when volatility in EM is high, there will be more demand for safe assets, to hedge against home country volatility. From the interest of Canadian homebuyers, you would want EM to be stable and boring, so that EM investors have less need to send their money to Canada, overheating the market.
Yes so many of these real estate articles are written to sell papers with sky is falling headlines and numbers. Real estate fundamentals are not covered. Lots of people can afford to buy still. Products will sell fine when demand is there.
“These people work long hours and are perfectly happy to spend a big share of their big incomes on housing.“ this is so wrong. No one is happy to be overworked and pay out “big shares” of their income.
- Demand is measured by how much a buyer is willing to pay for a house, not how many buyers there are or how desperately they feel like they want a house. So it's unclear which of falling rates or population growth are bigger drivers of demand.
- If you do a little forecasting of shelter inflation, which is a big part of the CPI bucket, the Bank of Canada's claim that inflation will come down on its own starts to sound a bit optimistic. In a rising rate environment, shelter costs (as measured by the CPI) increase, even if housing prices start to decrease.
The only part I don't agree with, "Barring a major asset-market crash in Emerging Markets or a policy change, foreign investors will continue to add demand to housing markets."
In fact, when there is a crash or when volatility in EM is high, there will be more demand for safe assets, to hedge against home country volatility. From the interest of Canadian homebuyers, you would want EM to be stable and boring, so that EM investors have less need to send their money to Canada, overheating the market.
Great to see unbiased work and footnotes in an article!
Yes so many of these real estate articles are written to sell papers with sky is falling headlines and numbers. Real estate fundamentals are not covered. Lots of people can afford to buy still. Products will sell fine when demand is there.
“These people work long hours and are perfectly happy to spend a big share of their big incomes on housing.“ this is so wrong. No one is happy to be overworked and pay out “big shares” of their income.
Some good points. I'd add:
- Demand is measured by how much a buyer is willing to pay for a house, not how many buyers there are or how desperately they feel like they want a house. So it's unclear which of falling rates or population growth are bigger drivers of demand.
- If you do a little forecasting of shelter inflation, which is a big part of the CPI bucket, the Bank of Canada's claim that inflation will come down on its own starts to sound a bit optimistic. In a rising rate environment, shelter costs (as measured by the CPI) increase, even if housing prices start to decrease.
Surprised to know that foreigners own so little houses in Canada. May be they are getting permanent residency along with the home purchase.