I spend a good deal of time reading Garth Turner's Greater Fool
blog where he has been sounding the alarm about Canada's unsustainable real
estate market. Recently, he compared what you could snap up for $600,000 in
Edmonton versus San Francisco and like all the stats surrounding Canadian real
estate, it makes you shake your head:
In Edmonton, six hundred buys a 1950s house that four years ago sold for less than $400,000. It’s a 1,400-square foot bung with all the curb appeal of a utility substation, a cheap suite downstairs and a jet tub imported from a garage sale.
In San Francisco, six hundred buys a house that was worth $866,000 at the end of 2007. It’s about the same size, and is now priced $25,000 less than it sold for in 2004. Built in 1928, it is a classic west coast villa, walking distance from Golden Gate Park. Kitchen to die for.
So, one home has risen in value by half, the other dropped by a third. One’s in a regional market dependent on volatile resource prices. The other’s in a hive tied to intellectual entrepreneurship. But in Edmonton you get a pine tree. Americans are total idiots without a clue how to value property and opportunity. After all, it couldn’t be us.
blog where he has been sounding the alarm about Canada's unsustainable real
estate market. Recently, he compared what you could snap up for $600,000 in
Edmonton versus San Francisco and like all the stats surrounding Canadian real
estate, it makes you shake your head:
In Edmonton, six hundred buys a 1950s house that four years ago sold for less than $400,000. It’s a 1,400-square foot bung with all the curb appeal of a utility substation, a cheap suite downstairs and a jet tub imported from a garage sale.
In San Francisco, six hundred buys a house that was worth $866,000 at the end of 2007. It’s about the same size, and is now priced $25,000 less than it sold for in 2004. Built in 1928, it is a classic west coast villa, walking distance from Golden Gate Park. Kitchen to die for.So, one home has risen in value by half, the other dropped by a third. One’s in a regional market dependent on volatile resource prices. The other’s in a hive tied to intellectual entrepreneurship. But in Edmonton you get a pine tree. Americans are total idiots without a clue how to value property and opportunity. After all, it couldn’t be us.
2 comments:
Ironically, it's the greater affordability of housing that has driven up the prices. The driver of house price appreciation in Canada over the past decade has been primarily the result of the unprecedented expansion in debt caused by the loosening of CMHC mortgage insurance requirements and the removal of the maximum insurable mortgage ceiling....facilitated by a falling interest rate environment, a new mass perception of the 'investment worthiness' of real estate as an asset class, and the emergence of housing as a form of conspicuous consumption.
But if we boiled them all down into one word, it would be this: DEBT!
And the pace of debt accumulation is not sustainable... ergo, the pace of house price appreciation is not sustainable. We see that debt drag to the housing prices in many American states. Canada is always the States' slower little brother.
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