|Canada’s housing market is the most expensive in the world – 60% overvalued by historical standards – and one simple reason explains it.
As the original title of this article* from advisoranalyst.com suggests, “Did Canada Just Pop Its Housing Bubble?” that just might be the case.
[The following is presented by Lorimer Wilson, editor of www.munKNEE.com and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
The article goes on to say in further edited excerpts:
Home Price to Rent & Home Price to Income by Country Comparisons
Up until now Canada has been very open to foreign investors, which means that in an age of unprecedented global liquidity cash-rich wealthy individuals who are looking for places to park their excess funds can do so in its housing market. That is about to change, however, with the Canadian government announcing that it is scrapping its controversial investor visa scheme, which has allowed waves of rich Hongkongers and mainland Chinese to immigrate since 1986.
Click on X to see table:
U.S. & Canada Home Price Index Comparisons
Canada’s home price index hardly missed a beat over the past dozen years while the U.S. home price index plunged… (different scales but point is to illustrate drastic difference when financial crisis started – and where the liquidity went).
Click on X to see chart:
Canadian Investor Visa Scheme Scrapped
According to the South China Morning Post, “46,000 Chinese millionaires in the queue (out of a total of 59,000) will reportedly have their applications scrapped and their application fees returned.
The decision came less than a week after the South China Morning Post published a series of investigative reports into the controversial 28-year-old scheme…revealing how the scheme spun out of control when Canada’s Hong Kong consulate was overwhelmed by a massive influx of applications from mainland millionaires. Applications to the scheme were frozen in 2012 as a result, as immigration staff struggled to clear the backlog.
Under the scheme, would-be migrants worth a minimum of C$1.6 million (HK$11.3 million) loaned the government C$800,000 interest free for a period of five years. The simplicity and low relative cost of the risk-free scheme made it the world’s most popular wealth migration program…
The Immigrant Investor Program, which has brought about 185,000 migrants to Canada, was instrumental in facilitating an exodus of rich Hongkongers in the wake of the 1989 Tiananmen massacre and in the run-up to the handover. More than 30,000 Hongkongers immigrated using the scheme, though SAR applications have dwindled since 1997.
In Search of a Soft landing
The Canadian government is looking a liquidity-splurging gift-horse in the mouth and saying “no, thanks” – an impressive decision to take given the potential weakness in the real economy. We’ll see how long it takes for the decision to be unwound or altered.
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
*http://www.advisoranalyst.com/glablog/2014/02/13/did-canada-just-pop-its-housing-bubble.html (Copyright 2007 – 2013 AdvisorAnalyst.com / All rights reserved)
Related Articles: [Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
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