Home prices may drop as much as 50%

Government of Canada is determined to pop the bubble for those suffering from “Forever Appreciating Property Syndrome (FAPS)”. They have announced various measures will be taken in an attempt to stop the insane real estate price increases (to the tune of up 36% in one year for Vancouver), particularly residential dwellings.

They have indicated pretty ambitious figures for price drop – upto 50%!

Sounds like Black Friday Sales, doesn’t it?

Image Source

The Office of Superintendent of Financial Institutions (OSFI) has an even grimmer assessment of the situation. It has imposed harsher criteria on stress tests for smaller lenders, forcing them to evaluate how their balance sheets would be affected by a decline of at least 50 per cent in house values for Greater Vancouver and at least 40 per cent for Greater Toronto.

You hear it – 50% for Vancouver, 40% for Toronto, 30% elsewhere. All must drop (and  a lot), or Liberals can kiss voters goodbye?

Are you kidding me?

Yes, I am kidding. It just seems unreal.

Why do you say that? Didn’t the government just implemented some really drastic actions (see below)?

Christy Clark’s Liberals have ended self-regulation of realtors and slap a 15 per cent property transfer tax on home buyers in greater Vancouver who are not Canadian citizens or permanent residents. Don’t forget, there is also Vacant Home tax.

Are these measures good enough? So,  why still want to curb the price increase? And what are they going to do … to the extend there can be a house prices drop of up to 50%?

Well, the existing measures meantioned above won’t have any effect on the prices. The same cash rich speculators will just look for loopholes, or come to the worse, move further east to find a new playground … Perhaps pump up Toronto or Montreal? By the way, they have been  in Toronto for a while.

Could it be the government will raise interest rate soon?

I don’t think so.

Stephen Poloz should know this is an instant suicide he will never dare even just mentioning. Interest rate increase will collapse Canada economically and instantly with no sight of recovery for at least one decade. The worse part is this will have zero impact on cash rich foreign speculators, money hoarder. Sorry, investor – they are bona fide foreign investors, albeit investing in non-productive things like real estate. They either continue to play among themselves like how China buy up all the substandard Communist Arts and elevated the prices to be on par as Picasso’s or Monet’s. You know, painting like Mao’s Cultural Revolution Propaganda … It costs the same as Picasso. And the buyer? Party Communist of China.

Else, they will just find another playground … Maybe London. Why London? Because London real estate is likely on the brink of a great collapse (as a result of Brexit). It should be pretty attractive in the near future … price wise.

England, here i come …

Shell Cottage Outskirts of Tinworth , Cornwall, England

Back to the question how can house prices possibly drop upto 50%?

I don’t know … Ask Justin Trudeau.

I too wonder  what can he possibly do to bring down house prices (by that much) without burning a hole in the economy.