Housing Meltdown Part 2 - Debt Saturation Point

The following is a partial repost:

The information for this post was obtained from the Demographia web site here:

Many economists and commentators and citizens deny there is a housing bubble in Canada. Results of a recent article published by Demographia says something quite different.

A market is considered to be in bubble territory if the median price for housing exceeds 400% of the median household income. A market is considered to be healthy if the housing price is equal or less than 300% of household income.

Household income compared to median house price:

Toronto 520%

Montreal 490%

Winnipeg 330%

Saskatoon 440%

Saint John 280%

Victoria 790%

Vancouver 930%

From the above list, we can see that Saint John, New Brunswick is considered a healthy market. Winnipeg is slightly overpriced, but is healthy overall.

Montreal, Toronto, Victoria and Vancouver are certainly overpriced with potential for substantial declines.

Potential declines in housing values to reach 300% "affordable levels":

Toronto $152,600 (-42%)

Montreal $ 94,600 (-38%)

Winnipeg $ 16,800 (-9%)

Saskatoon $ 77,200 (-31%)

Saint John $ 0 - Potential increase of $12,100

Victoria $276,300 (-62%)

Vancouver $366,300 (-68%)

Now, let us consider Australia:

Sydney 960%

Melbourne 900%

Brisbane 660%

Perth 630%

Plenty of potential for 50% plus declines in Australia.

And consider the UK:

London 720%

Liverpool 550%

Bristol-Bath 590%

Potential for 30 to 50% declines in the UK.

To quote the Demographia survey:
The premium in Vancouver is at least $750,000, $450,000 in Auckland, $200,000 in Montreal, $400,000 in San Diego, £300,000 in London and £100,000 in Liverpool.
This is money that households do not have for purchasing other goods and services, the result of which can be to diminish job creation and growth in commercial sectors, such as retailing.

Consider this interview with F.A. Hayek just before he died regarding the arrogance and futility of this type of central planning and it's relative - central banking.