Dave Rosenberg Worried About Vancouver Real Estate

Gluskin Sheff Chief Economist David Rosenberg puts out a daily summary called “Breakfast with Dave” in which he outlines his concerns and observations that day. This morning (Nov 29, 2010) he expressed concern about the housing market in Canada and specifically mentioned Vancouver.

My long-time readers will likely remember that I visited Vancouver in the Fall of 2009.

VERY Large Sashimi!

First Visit

It was my first visit to that great city (ashamedly) and I thoroughly enjoyed it. Natural beauty surrounds the city, as similar to Seattle, Vancouver sits between mountains and hills on the Pacific. The Asian food is excellent (including “Japadog” – Japanese influenced hot dogs. Yes they have veggie dogs) and most of their sushi restaurants seem to feature very large pieces of sashimi.

Anyway, back to Dave and his concerns: “We remain concerned that Canada experienced some sort of housing bubble in 2009 and into 2010. We are worried about looming default risks but have been pleasantly surprised by the fact that the real estate market has eased, rather than busted.” He goes on to say that the current level of real estate leverage mirrors that of the US at its peak:

debt ratios are as high as they were in the U.S.A. at the peak in relation to income (the debt/asset ratio for now looks better here). This is a longer-term concern, especially if interest rates were to be raised further in the future. I see this is a very big intermediate-term concern for the consumer spending outlook.”

In discussing Vancouver specifically, Rosenberg comments:

Property prices are being driven up by very wealthy Chinese, who are flocking to Vancouver, under the government’s “Business Immigration Program”, which requires an up-front investment of $400,000. Average home prices are about $1.4 million and in some sought-after neighbourhoods average three bedroom homes can go for $2 million. In some cases, expensive homes are rebuilt at $200 a square foot.”

When in Rome...

He says that based on income, San Francisco is cheaper than Vancouver – that is saying a lot. It wouldn’t surprise me to think that many Chinese are diversifying their political risk by investing in and buying Canada, and especially Vancouver – a beautiful city. Also hidden in the quote above is the interesting “Business Immigration program” and its features. Canada does some interesting things to encourage certain immigration and investment – a discussion for another time.

We’ll have to see what happens in Canada going forward but in the meantime, if you want to follow Dave Rosenberg, go HERE to subscribe to his daily musing, Breakfast with Dave.

See one of my photos featured in Schmap’s Guide to Vancouver

For more on Chris Grande: About Chris

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