Skip to main content

Canadian House price continue to rise

Look at the dichotomy between Canada and the U.S.  Between 2007 and 2010, house price in the U.S. fell by, on average, 29%, in Canada they are up by 6%.  One massive difference is income, whereas average income has been stagnating (some would say even falling once you remove health care) it has been rising in Canada.



The impact of this on the economy is two fold:  First, Canadian banks – the primary lenders to the housing sector are seeing few problem mortgages, and even if there are problems sales prices are sufficiently high to minimize losses (moreover in Canada a loan is a personal liability, any shortfall from the disposal of the property remains as a liability of the mortgagee).  Secondly, is spurs the new home construction industry, since demand keep s on growing, a result of Canada’s different aging factors and the continued growth in household formation.  It is difficult to believe, but U.S. household formation has dropped, over the past 5 years, from 600,000 per annum to just slightly more than 200,000.  While in Canada (1/10 the size of the US) household formation has remained constant in the 175,000 to 210,000 range for the past 4 years.

One question is always, are house prices, on an income basis, higher in Canada than in the U.S., despite the recent 29% drop in the U.S. and the 6% rise in Canada, the reality is that if you look at house prices from 1987 to 2010, Canadian house price index is lower than in the U.S.  However, if you use average income, then Canadian house prices are  remaining reasonable.  Moreover the U.S. figure for household income doesn't take into consideration the annual increase in health care costs, which have been growing at a double digit rate.

Housing market is "fully priced" by all accounts.  There is no doubt that Canada could easily face a pricing correction, especially if the Canadian dollar continue on its current trend.  However, the level of over-valuation is hard to estimate, it could be in the range of 5% to 20% (the more gloomy forecasters)





Popular posts from this blog

Ok so I lied...a little (revised)

When we began looking at farming in 2013/14 as something we both wanted to do as a "second career" we invested time and money to understand what sector of farming was profitable.  A few things emerged, First, high-quality, source-proven, organic farm products consistently have much higher profit margins.  Secondly, transformation accounted for nearly 80% of total profits, and production and distribution accounted for 20% of profits: Farmers and retailers have low profit margins and the middle bits make all the money. A profitable farm operation needs to be involved in the transformation of its produce.  The low-hanging fruits: cheese and butter.  Milk, generates a profit margin of 5% to 8%, depending on milk quality.  Transformed into cheese and butter, and the profit margin rises to 40% (Taking into account all costs).  Second:  20% of a steer carcass is ground beef quality.  The price is low, because (a) a high percentage of the carcass, and (b) ground beef requires process
Post a Comment
Read more

21st century milk parlour

When we first looked at building our farm in 2018, we made a few money-saving decisions, the most important is that we purchased our milk herd from a retiring farmer and we also purchased his milking parlour equipment.  It was the right decision at the time.  The equipment dates from around 2004/05 and was perfectly serviceable, our installers replaced some tubing but otherwise, the milking parlour was in good shape.  It is a mature technology. Now, we are building a brand new milk parlour because our milking cows are moving from the old farm to the new farm.  So we are looking at brand new equipment this time because, after 20 years of daily service, the old cattle parlour's systems need to be replaced.  Fear not it will not be destroyed instead good chunks will end up on Facebook's marketplace and be sold to other farmers for spare parts or expansion of their current systems. All our cattle are chipped, nothing unusual there, we have sensors throughout the farm, and our milki
Post a Comment
Read more

So we sold surplus electricity one time last summer...(Update)

I guess that we will be buying an additional tank for our methane after all.   Over the past few months, we've had several electricity utilities/distributors which operate in our region come to the farm to "inspect our power plant facilities, to ensure they conform to their requirements".  This is entirely my fault.  Last summer we were accumulating too much methane for our tankage capacity, and so instead of selling the excess gas, that would have cost us some money, we (and I mean me) decided to produce excess electricity and sell it to the grid.  Because of all the rules and regulations, we had to specify our overall capacity and timing for the sale of electricity (our capacity is almost 200 Kw) which is a lot but more importantly, it's available 24/7, because it's gas powered.  It should be noted that the two generators are large because we burn methane and smaller generators are difficult to adapt to burn unconventional gas, plus they are advanced and can &qu
Post a Comment
Read more