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Comment by cmrdporcupine | Hacker News Reader

The housing market is delusional in the US but it's even crazier here in Canada. We never had the 2008 correction that the US had, and things just continued to climb. In southern Ontario housing prices are so out of wack of what earning potential is that it just boggles the mind.

I thought the COVID crisis would blow this all up, but it hasn't. In fact rural land values keep climbing because of wealthy Torontonians now seeking to have cottages and the like outside of the city.

I don't even know what to say about it at this point. Admittedly the economic situation isn't as dire here because the gov't has spent freely to help keep people afloat, but it just seems so irrational to me that housing prices continue to go up at almost 10% a year when the economic fundamentals are so messed up.

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Canada confuses me. I feel like the income disparity there is huge. Everything costs way more than it does here in the US and yet incomes seem far lower. I’m speaking based on my experience dating someone in Toronto and also the job offers I turned down from Toronto based tech companies.

A salary will be like 25% less but cars are 25% more expensive? Yet I see some really fly automobiles flying around the TO.

> Everything costs way more than it does here in the US

Except the big one of health care. Daycare, tuition, infrastructure, etc. are also mostly covered depending on where you are. So a lot more is paid for by taxes.

> job offers I turned down from Toronto based tech companies.

Tech salaries are much lower here to be sure, but we just have satellite offices of large tech firms beyond Shopify.

The brain drain south is a well known issue up here. If it were not for the healthcare nonsense in the USA, I probably would have gone too.

There are also these considerations:

1. Canada's immigration system is merit-based. Firms in Canada import skilled immigrants to fill tech vacancies in a way that US-based companies cannot. In Canada, it can take as little as a few weeks to get a temporary work permit for a foreign tech worker. Once they are in the country, they can apply for permanent residency through a provincial program and have PR status (this is like a green card) within a year.

2. Canadian tech firms are generally smaller. It is well known that smaller firms pay less across the board, in all industries, let alone tech.

Google "Canada brain drain"

What came first, the chicken or the egg? Is brain drain causing the atrophy of salaries or are shit salaries pushing common sense individuals elsewhere?

I don't think the brain drain causes the salary atrophy on its own. I think it's a lot to do with lower investment rates, and high skilled immigration to Canada. I'd love to see an analysis though.

Base salaries for our industry look like they've been improving lately in the GTA. But not so much for other industries.

Housing is reflecting growth in the money supply. All that QE is causing inflation, but the inflation is not uniform. It shows up in assets like real estate, gold and other precious metals, the stock market, and of course speculative bubbles like cryptocurrency.

Isn’t a lot of that related to foreign investments? Or was that mostly limited to Vancouver?

I have to say too that a large part of the reason greater Toronto area and Vancouver area real estate has climbed so high is that it started out relatively low after the early-90s crash and was undervalued for a long time. And those cities have grown like gangbusters and are now huge metropolitan mega-areas and so their economics start to look like other large North American metropolitcan areas. Toronto especially is now the 3rd or 4th largest city in the US/Canada combined, depending on how you count it, so it's not a surprise that its prices would start to reach up into NY/Chicago/LA type ranges.

Canada is a politically stable economically stable and fairly wealthy place (in the major cities) with fairly high immigration rates, and the immigration is merit based and fairly prosperous. So growth has been steady.

That growth kinda snuck up on us, though, even for those of us living here it seems crazy that these cities are "worth" so much now.

No, it wasn't mostly foreign investments, although that added fuel to the fire.

You can see the Canada housing bubble represented in that Canadian households are among the most indebted on the planet (it's heavy with mortgage debt).

Here's a chart showing the prominent split with the US, where they go different directions after 2007-2008 (Canada's bubble and debt accumulation kept going and the US began deleveraging and improving its household fiscal condition and debt to equity ratio in housing):

https://i.imgur.com/gCAsd5Y.png

Not sure if a disposable-income denominator is fair when there are such large discrepancies in taxation and public provision of big-ticket expenses.

If you get taxed harder in Canada but then don't have to pay for healthcare or education privately than in the US, then it makes no sense to just say 'look disposable income in Canada is lower, thus debt:disposable income is higher, thus Canada is worse off'. You'd first have to correct for the fact disposable income is lower because taxes are higher, because healthcare and education are publicly financed and therefore individuals require less disposable income and could be just as well off.

Second, just look at mortgage delinquency rates between the US and Canada for an impression on affordability.[0]

Third, debt doesn't matter much, not all debt is made equal. A 15% creditcard loan for $10k is much worse than a $20k 3% loan, in terms of bankruptcy risk, even if the debt to income ratio is worse on the latter loan. You can't just look at debt to income, and again, especially not disposable income between countries which very different systems without correcting for it.

Absolute debt doesn't say much, debt servicing does, and in particular servicing of interest rates. That's actually at historic lows for Canada [1], which is totally different from the US[2]. Canada's debt servicing ratios are much lower than in the US. And that's why, in part, the delinquency rates are much, much lower, and why it's not quite so simple to conclude that Canada is in a RE bubble compared to the US.

[0] https://i.insider.com/596f5f88a47cb502028b4f17?width=750&for... [1] https://www.macleans.ca/wp-content/uploads/2014/03/can_mort_... [2] https://www.macleans.ca/wp-content/uploads/2014/03/us_mort_d...

Canadians end up owning a decent amount of wealth by the time they retire compared to many nations. That debt isn’t like credit card debt.

Median wealth per household is about 200k vs 77k in the USA.

Edit: used per-household stats instead

What are the implications (if any) of this?

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