“I’m surprised that everyone else is so surprised to hear anyone talk about a housing bubble” – “Canadian RE 2021 worse than U.S. bubble at 2006 peak” – David Rosenburg

“I’m surprised that everyone else is so surprised to hear anyone talk about a housing bubble…”

“Housing prices went up 17% in a year where underlying wage growth is stagnant…”

“I called the bubble in the US in 2005-2006… I was looking at price to rent ratios, I was looking at price to rent ratios… household exposure to RE… I’ve got news for you… the numbers in Canada now are worse than they were in the US 13 years ago”

[asked about colleagues who say there is a “bubble in calling bubbles in Canadian RE”] “Bubbles can go further than you think, but they don’t correct by going sideways…”

“I listen to… Stephen Poloz [BOC governor]… it’s like listening to Ben Bernanke in 2006 when he told everybody “Oh, don’t worry… house prices nationwide never go down“..

“Bubbles can last a long time, but we’re in a very unstable situation”.

excerpts from economist David Rosenberg’s Bloomberg interview, 24 March 2021

“Always the Right Time to Buy!” – Cheap Rope For Vancouver RE Buyers

As a mortgage agent, Lorina Serafico, a home-financing adviser with Scotiabank, often gets asked when is a good time to buy a home.
“If a household has the income, down payment, and the credit score to qualify for a mortgage, it is always the right time,” she said.
According to Serafico everyone needs a home, whether owned or rented.
“I consider mortgage payments as a forced savings plan,” Serafico said. “A $500,000 property you bought today will be worth $873,000 in 10 years. That’s an average of 7.45 percent annual increase, beating a medium-risk investment portfolio.” …
With more than a decade as a mortgage agent, Serafico has served numerous customers, and a number of them have started meeting with her again.
They’re usually owners of townhouses and condos, and now they’re thinking of upgrading to single-family homes.
“They like what is happening in the market. There’s more inventory; prices have stabilized; and interest rates are good,” Serafico told the Georgia Straight in a phone interview.
On March 27 this year, the Bank of Canada slashed its key interest rate—which determines bank lending rates—to its lowest level of 0.25 percent.
– excerpt from ‘Mortgage holders can seize on opportunities to upgrade’, Carlito Pablo, Georgia Straight Vancouver’s News & Entertainment Weekly, 17 June 2020

“It’s hard to make predictions, especially about the future.” – attributed to Yogi Berra.
One would think that people, especially finance professionals, had learned not to say things like “…it will be worth…”, “…7.45%…”, and “…always…”.
– vreaa

Mortgage Squeeze Anecdotes – “Two days ago my mortgage holder called and told me that, after 22 years, they would not renew my mortgage.”

“Two days ago, my mortgage holder (a Credit Union, no less) called and told me that after 22 years, I was no longer an “A-list” borrower, and they would not renew my mortgage. I have no credit cards, never late with a payment, never late with utilities, taxes, etc., etc., BUT, because of the ‘new’ mtg. rules, they could not renew my mtg. because two years ago (as a result of a series of family crises), I took a small 2nd mtg. (ridiculous rates, but I’ve met EVERY payment, etc. – the credit union wouldn’t ‘help’). My total debt is only the two mtgs. against the property and, together, they are less than 1/2 of my equity (compared to the assessed value).
My son (who is on disability) lives with me and takes care of me (as I do him), and we share our expenses with our two limited incomes. I’ll be 73 in a couple of weeks, am not well, have been isolated at “home” since the beginning of March. None of that ‘counts’.
Nor does it ‘count’ that for over 50 years, I’ve been involved in environmental and social justice issues, worked pretty much full time my whole life (never collected EI, even!), contributed to my community (have received awards), raised a family, supported many others in crisis.
In a month, I, and my son, could be homeless. I don’t even have the strength to champion my own personal needs.
To those of us that are experiencing the REALITY of the NOW – those living in corrupt care homes, or homeless, or helplessly addicted, or victims of genocide or poverty, or racism, what it’s “called” is moot.
— from commenter ‘dda’ 30 May 2020, under the article, ‘Normal Is The Problem’, by Andrew Nikiforuk, The Tyee, 30 May 2020

Also see:
A Confluence of Whammies: A Single Realtor (& Airbnb-host) with a dependent child, an elderly dependent parent, two lost tenants, and dwindling business is forced to sell their house (presumably at a loss) and take a $30,000 mortgage penalty.
TD Bank charges $30,000 mortgage penalty to woman forced to sell home due to pandemic – 1 Jun 2020, CBC News.

Your banker may seem like a friendly guy, but the banks will always look after themselves – first and last. – ed.

Wow! – CMHC CEO Evan Siddall Points To Unsustainable Debt & Calls For 18% Drop In Housing Prices – [which of course would mean a lot more off]

According to CMHC estimates, the ratio of household debt to GDP in Canada could reach 130 per cent in the third quarter of this year, a sharp increase from around 99 per cent before the pandemic. Debt as a share of disposable income, meanwhile, could also rise precipitously to 230 per cent in the third quarter, up from 176 per cent.

Siddall said those ratios are well over a critical 80 per cent threshold, above which “the Bank for International Settlements has demonstrated that national debt intensifies the drag on GDP growth.” Such high debts risk future economic growth by “effectively converting future consumption into debt service payments,” he said, at a time when households and governments are increasingly leveraged.

Adding to real estate concerns amid COVID-19, the agency also sees housing prices plummeting in the next calendar year.

“The resulting combination of higher mortgage debt, declining housing prices and increased unemployment is cause for concern for Canada’s longer term financial stability,” Siddall said.

The CMHC sees housing prices declining between nine and 18 per cent over the next 12 months. Those estimates are loosely in line with an earlier projection by DBRS Morningstar, a credit rating agency, says which says housing prices could fall between 10 and 15 per cent by 2022.

By way of comparison, the owner of a $300,000 home at a five per cent down payment could lose around $45,000 if housing prices fell by 10 per cent, Siddall said.

He said the agency is “debating whether we should change our underwriting policies” as a result of the pandemic, potentially restricting the future lending environment as debt levels soar.

“Our support for home ownership cannot be unlimited,” he said. “It’s like blood pressure, you can have too much, [but] you need some.”

– excerpt from ‘Bloody terrifying’: COVID-19 will raise household debt levels and ‘drag on GDP growth,’ CMHC warns’, Jesse Snyder, 19 May 2020, National Post

Remarkably straight talk from the organization that has played such a large part in extending rope to participants over the last 20 years. And we’d guess that ‘18%’ is just a best guess estimate of the first step. As we’ve postulated over the years, when the bubble bursts, few are going to step in and overextend themselves to go into debt to buy assets that are falling in value yet still very overpriced by every metric. The Vancouver market has been predicated on prices that only go up, and the result has been prices that are about three times those determined by fundamental utility value. Once the drops start, we see no way of this all bottoming at 18%-off. In Vancouver, the direct and indirect economic effects of a drop of 18% in RE would alone almost definitely guarantee a larger drop.
– vreaa

Prediction: Vancouver RE Prices Will Not Crash… Unless They Crash

“If homeowners can just hold off selling, the Canadian housing market will emerge fine from its current “deep freeze”.
According to a recent TD Economics housing forecast update, the market is expected to gradually recover from the effects of the COVID-19 pandemic.
After an anticipated “historic” plunge in sales in the month of April 2020, a “much stronger activity” is seen next year.
A lot of that depends on whether homeowners can avoid distressed selling during this pandemic.
“Absolutely key to our forecasts is the assumption that listings mirror sales by dropping substantially in the near-term and recovering gradually thereafter,” Rishi Sondhi, an economist with TD Economics, wrote.
By holding off on selling, homeowners can do one thing for the market.
“This puts a floor on prices and sustains relatively tight-supply demand balances across most markets, allowing for the resumption of positive price growth as provincial economies are re-opened,” Sondhi explained.”
– excerpt from ‘Homeowners avoiding distressed selling key to Canadian housing market recovery: TD Economics’, Carlito Pablo, 1 May 2020, Georgia Straight

No, folks, that ‘analysis’ is not from ‘The Onion’.
Seems like the TD analysts have found a sure fire way of maintaining every bull market, forever… (it’s easy: just get sellers not to sell).
It’s remarkable that this kind of ‘analysis’ can get parroted on & on without getting called out.
Remember: Sellers aren’t competing with Buyers, they’re competing with other Sellers. How many Vancouver RE speculators (essentially each and every buyer for the last 10-15 years) are going to realize their thus-far-paper profits? We are already seeing many anecdotal examples of people who bought in 2016 or later taking losses on resales.
– vreaa

Pre-Existing Disease – COVID Economic Stress Uncovers Longstanding Vulnerability in Vancouver RE Market

Urban planner Andy Yan, director of the City Program at SFU, thinks the pandemic has exposed Vancouver’s economic fragility. Besides real estate, Yan explains, the economy is driven by service industries such as tourism, which has been clobbered by COVID-19. Not only do tourists help fuel short-term rentals like Airbnb, but many long-term renters work in tourism and hospitality. “If you were either counting on Airbnb or on a renter living in your secondary suite helping pay for your mortgage, and now they can’t, what do you do?” Yan asks.

Add in the fact that international travel is now very difficult, and things could get much uglier. “You have the local economy not doing well, and now you’re cut off from the global economy,” Yan says. “So it feels like it’s 1978,” when Metro Vancouver resembled what he calls Detroit by the Pacific. His summary of that era: “It wasn’t good.”

When it comes to retail and office real estate, the future looks uncertain, too, Yan reckons. It’s easy to blame Amazon, but storefront retail was already struggling before the crisis, he says. “You know how COVID takes out people with pre-existing health conditions? Well, we have pre-existing economic conditions.”

As for the office property market, Yan says that before people started staying home, 20 to 30 percent of Metro Vancouver’s labour force already worked there. “If you accelerate that and it goes into now 40 or 45, maybe even 50, how much are they going to stay at home?”

Bryan Yu, deputy chief economist with Central 1 Credit Union, also sees uncertainty ahead. “Commercial is probably a little bit problematic, especially the retail side, and even for some of the commercial product as work from home becomes much more normalized,” he says. “Will companies go back to requiring that large footprint they have now, or are they moving to a more nimble, work-from-home type of environment?”

Either way, creating a new local economy won’t be easy. Given what the pandemic has revealed about the risks of relying on global supply chains, one possible scenario is that manufacturing returns to the region. But as Yan points out, the City of Vancouver converted much of its industrial land to residential in the 1980s and ’90s. “Now where does that industrial perhaps go?” he asks. “It either goes to, say, Surrey or Abbotsford, or it goes to Calgary or Winnipeg.”

For the province as a whole, the fact that tourism, retail and other service industries dominate spells trouble in a deglobalized world, Yan warns. In food service alone, more than 120,000 B.C. workers have lost their jobs, at least temporarily, Restaurants Canada estimates. “There are these green shoots in technology or highly specialized manufacturing, but they can’t generate a mass of employment,” Yan says.

– excerpt from ‘For B.C. real estate, will COVID-19 bring down the house?’ Nick Rockel, BCBusiness, Apr 23, 2020

Apt metaphors include Biblical ‘feet of clay’ and Buffett’s “when the tide goes out you discover who has been swimming naked”.
– vreaa

COVID-19 the Pin for the Highly Debt-Leveraged Vancouver RE Bubble?

“While lockdowns, job losses and uncertainty are roiling property markets from the U.K. to Australia to Hong Kong, Canada’s situation is more precarious than most. As its oil sector shriveled in recent years, Canada’s economy became ever more driven by real estate, an industry now in a state of paralysis. Nearly one in three workers has applied for income support.
What’s more, its households are among the world’s most indebted, poorly placed to weather the storm.

“I think it is the Great Reckoning,” says Douglas Hoyes, a bankruptcy trustee in Kitchener, Ontario. “We’ve been in a period for so long where it didn’t matter what property you bought or how highly leveraged you were. Well, guess what? Now it matters.”

Since the economy began shuttering in mid-March to slow the spread of coronavirus, policy makers have raced to buttress the property market. Banks are offering mortgage holidays, including to landlords with multiple loans on investment properties.

That has raised eyebrows even within the real estate industry. “Should someone with four properties really be granted financial assistance?” asks Steve Saretsky, a Vancouver realtor. “Where exactly do we draw the line?”

The country may not have much of a choice but to prop up housing. Real estate has become Canada’s largest sector. Including residential construction, it accounted for 15% of economic output last year; energy accounted for 9%.

If it collapses, there’s not much that can pick up the slack — certainly not oil nor the seemingly unflappable consumer.

Canadians have been on a two decade spending spree since a downward shift in mortgage rates began in the 1990s. Toronto and Vancouver, the two biggest housing markets, haven’t had a major correction during that time. Housing turned into a wealth-conjuring machine. As values spiraled higher, homeowners felt richer — they spent more, borrowed more, and sent prices even higher.

That virtuous circle just popped. The City of Vancouver fears it’s heading for insolvency after it surveyed residents and found that 45% of households say they can’t pay their full mortgage next month and a quarter expect to pay less than half of their property tax bills this year.

It’s a stunning contrast to 2016, when those lucky enough to own a detached house in the west coast city watched their net worth balloon on average by more than C$1,600 ($1,130) a day without ever leaving home. In one year, the city’s properties surged in value by C$47 billion, more than double the cumulative take-home income of all its residents.

Tellingly, billboards by the consumer financial watchdog began cropping up — “Don’t use your house like an ATM” — as homeowners borrowed against those gains to fund renovations, vacations, and rental properties.

Today, Canadian households owe C$1.76 for every dollar in disposable income. In Vancouver, that spikes to more than C$2.30 — a ratio that puts the so-called supercar capital of North America on par with Iceland before the global financial crisis.

Recessions tend to be deeper and last longer when households are mired in debt — an alarming prospect for a nation that may already be experiencing its sharpest contraction on record. Canadians owe C$2.3 trillion in mortgages, credit card, and other consumer debt, about equal to the country’s GDP, which is an even higher ratio than the U.S. had before its housing bust.

“You have all of these flammable items that just need a spark, some external shock,” says Anthony Scilipoti, president of Toronto-based Veritas Investment Research Corp. “And this virus is a worst-case scenario none of us would have predicted.”

Airbnb Customers Vanish

It doesn’t take much to tip a seemingly tight market into a meltdown. If only 2% of the housing stock were to be listed for sale, it would trigger the kind of supply shock behind a 1990 crash, according to Veritas.

That’s most likely to come from investors, half of whom weren’t generating enough cash to cover the cost of owning their rental properties, Veritas found in a survey last September.

For loss-making landlords, things are about to get a lot worse: about 30% of apartment rent due April 1 went uncollected, according to estimates by CIBC Economics. That’s in line with similar estimates of U.S. rental collections.

Then there are those who invested in properties for the short-term rental market that’s all but dried up because of travel restrictions. Nearly a third of Canada’s Airbnb hosts — who jointly had 170,000 active listings in late 2019 — need the income to avoid foreclosure or eviction, Airbnb said in a letter to the Canadian government last month.

Confronting a swiftly collapsing pool of renters, more than 200 Canadian listings have exploded across Vrbo and Airbnb in recent weeks pitching themselves as isolation or quarantine havens, many offering Covid-19 discounts, according to data from Toronto-based Harmari, which analyzes online classifieds. Former Airbnb rental units have also cropped up in sales listings.

Shaky Pillars

Economists and lenders have long pointed to two pillars that have underpinned housing: a robust labor market and the biggest increase in international immigration in more than a century. Neither is holding up.

Nearly 6 million Canadians have applied for income support. Lenders had deferred nearly 600,000 mortgages, about 12% of the mortgages they hold, as of April 9. Meanwhile, immigration targets, based upon an earlier growing labor shortage, will almost certainly be scaled back.

In steps that dwarf those taken during the global financial crisis, the federal housing agency and the Bank of Canada are ready to purchase billions of dollars worth of mortgages and mortgage-backed securities to backstop the market, while lawmakers passed a historic wage bill to stem job losses.

“It’s great we have a government that says they have the fiscal firepower to do this but anyone with any math skills can calculate that my daughter’s grandchildren aren’t even going to be able to pay this off,” says Reza Sabour, a Vancouver mortgage broker. “What’s the plan after?”

– excerpted almost in toto from ‘Once Safer Than Gold, Canadian Real Estate Braces for Reckoning’, by Natalie Obiko Pearson, Bloomberg, 15 April 2020

—-

One could not have imagined that it may happen this way. The Vancouver RE market has for almost 20 years seemed to some of us to have been an ever-expanding speculative bubble on extremely precarious footing, awaiting a shock sufficient enough to deflate it. Even the 2008 financial crisis did not prove up to the task, largely (and perversely) because that crisis resulted in a bailout that we didn’t need in the form of free money. But the COVID-19 corona virus, for all its horrors and uncertainties, may finally force speculation out of this market. It has already punished Vancouver economic staples such as tourism, recreation, international education, air-bnb, construction, cruise ships, immigrants with cash… it’s hard to imagine how this body-blow could be easily overcome. As of this week there are still some voices of RE optimism regarding this being another blip from which we will inevitably recover. But it seems like the full reality of the necessary response to the pandemic is only now beginning to sink in. Its effects could take RE prices a long way back towards fundamentals determined by rental income streams and local incomes (levels far below recent sales prices). This is an outcome that a minority of us have called for and desired for a long time, but not one of us would have wanted it to come about through such an undesirable and hurtful mechanism.

Vancouver appears to have weathered the ‘first wave’ of COVID fairly well, without many citizens succumbing to the virus, and without our medical services being overwhelmed. This was very fortunate. We are now, after 4 weeks of ‘shutdown’, in the very challenging position of trying to calculate how to ‘reopen’, knowing that only a very small percentage of the population are now immune (possibly 5% or even lower). The re-emergence will have to be done carefully and in a very measured fashion. Ideally, it would require very labour intensive antibody testing, case identification, and contact tracking. We are not yet set up to do this (and an affordable quick reliable antibody test is not yet available). Germany is leading the way with reopening and we’ll doubtlessly be watching closely. Regardless, our population will be vulnerable until there is either an effective treatment, a vaccine, or ‘herd immunity’ (the last of these essentially meaning that 50-80% of the population would have had to have had the illness, with a substantial number getting very ill and a small minority [but still many thousands of citizens] dying). It is hard to imagine a way out that does not involve ongoing greatly decreased social and economic activity.
This is a daunting prospect, and we hope and trust that our city will be able to survive well, and emerge healthy at the end of it all.

We wish all readers strength and good fortune, and good health for themselves and their loved ones.
Stay safe and well; stay sane.
Find productive, nurturing things to do within the lockdown restrictions.
Keep in touch with family, friends and other fellow citizens.
This will pass, but be ready for it to take some time. Likely many months.

– vreaa

Vancouver Sun Headline – ‘Five more Metro Vancouver homeowners hosed in a falling market’

“A recent report from Central 1 Credit Union suggests a rebound in Metro Vancouver’s housing market is coming. However, at the moment there are property owners losing hundreds-of-thousands of dollars on their investments.”
There follow examples of homeowners losing money, care of @mortimer_1:
1. Burnaby. Bought $1.9M May 2016, Sold 2019 $1.495M, Loss $405K + expenses (over 21%)
2. Burnaby. Bought $3.11M 2016, Sold $2.1M 2019, Loss $1.01M + expenses (over 32.5%)
3. Vancouver Westside. Bought $2.7M Feb 2016, Sold $2M 2019, Loss $700K + expenses (over 25.9%)
4. North Vancouver. Bought $2.36M Mar 2017, Sold $2.05 2019, Loss $310K + expenses (over 13.1%)
– from David Carrigg, Vancouver Sun, 5 Dec 2019 (image: Anselm Kiefer)

Seeing terms like “homeowners hosed” and “falling market” in top-of-the-page Vancouver Sun headlines is certainly worthy of note – particularly for those of us who have been following this long enough to have endured years and years of local media entranced with rising prices. (Anybody remember the well-known local TV anchor exclaiming “I love Real Estate!” ?)
However, note that the Sun still talks about homes as “investments” – perhaps that will have to change before we’re done.
Here and elsewhere, some discussion of ‘soft landings’ that is clearly based more on hope than observation.
As noted previously, our target prices should be determined by utility value of properties, not on imagined future sale prices. Current prices are still far above those levels.
It ain’t over.
– vreaa

Vancouver RE Prices – Where is the Support?

REBGV headline detached averages have dropped from peak $1850 K to current $1486 K, about 17%.
Sleuths such as @VanREflipflops have revealed many examples of substantially higher drops.
At what price levels will support come in? and from where? and when?…
All of this currently speculative (cough, cough).
Using the price chart and other past markets as a guide, REBGV headline detached prices (real, adjusted for inflation) could drop back to support determined by prices seen in 2013 (-45% from peak), 2009 (-60%), or even 2003 (-78%).
This will still seem incredible to most, but it is the lesson from comparable speculative manias.
Are locals going to be lining up to overextend themselves into RE anytime soon? If not, prices still have a long way to drop.
– vreaa

Money Laundering & Vancouver Home Prices

“The cost of buying a home in B.C. increased by as much as five per cent last year due to more than $5 billion in dirty money from organized crime laundered through the province’s real estate sector, according to a new expert panel report.

Former deputy attorney general Maureen Maloney chaired the panel on money laundering, which released a report Thursday that concluded it “cautiously estimates that almost five per cent of the value of real estate transactions in the province result from money laundering investment.”

In addition, she concluded: “The estimated impact of that would be to increase housing prices by about five per cent.”

“Successfully reducing money laundering investment in B.C. real estate should have modest but observable impact on housing affordability,” read the Maloney report.”

– excerpt and image from ‘$5 billion laundered through B.C. real estate, inflating home prices: report’, Rob Shaw & Joanne Lee-Young, 9 May 2019

An extra 5% price rise last year? Gee, that’d be the difference between supernatural 7% a year housing price increases that have characterized our bubble, and… inflation (about 2%). [But we don’t think this means we can conclude that this has been a long term effect. It may have been, but we can’t be sure].
As readers of this blog know, we’ve long thought that the primary driver of the bubble has been local buyers prepared to extend debt to the gills to get in, and that those buyers have been particularly besotted by the ‘Chinese-are-coming’ story.
There has, of course, been a direct effect of foreign-buyer-demand, but this pales when compared to local speculation.
Money-laundering juice certainly could have contributed, both directly, and perhaps more importantly indirectly by further cementing the foreign-demand story.
Interesting to think that it may have been a critically important amount.
With a coming clampdown (or even threat of a clampdown) it’ll be interesting to see the effects this has on prices going forward.
Speculators (foreign and local) hate falling markets, and floor prices determined by fundamentals are far below.
– vreaa

“Psychologically, They’re Ill-Prepared” – “Canadian Chaos Looms”

While Canadian bank advocates and their skeptics exchange words, the formerly-white hot housing market is now in deep freeze. March sales in Vancouver collapsed by 31.4% year-over-year according to the local real estate board, the worst showing since 1986 and down 46% from the 10-year average for March. Prices also lurched lower, with the benchmark detached home price falling 10.5% year-over-year to C$1.44 million ($1.08 million). Things are more stable in Toronto, where March sales and benchmark prices were little changed from a year earlier, but those figures remain 40% and 14% below their respective levels from March 2017.

As the housing market sputters, the highly-leveraged Canadian consumer displays increasing signs of distress. According to the Bank for International Settlements, Canada’s household debt stands at 100.2% of GDP as of the end of September, by far the highest ratio among G7 economies (the U.K. is next at 86.5%), while the debt service ratio, or the percentage of disposable income allocated to principal and interest payments, rose to 14.9% in the fourth quarter per Statistics Canada, just shy of the 2007 peak.

That debt burden is starting to weigh on consumers. Auto loan delinquencies rose to 0.97% at year-end according to Equifax, Inc., the highest since 2009. At the same time, 36% of new auto loans in the fourth quarter were leases, the largest such share since 2007. Bill Johnston, vice president of data and analytics at Equifax Canada Co., noted that “we’re starting to see consumer behavior shift to keep the payments as low as possible.”

– excerpt from ‘”Psychologically, They’re Ill-Prepared” – Canadian Chaos Looms’, from Grant’s Interest Rate Observer, via Zero Hedge, 11 Apr 2019

Keeping Up With Other Bubbles – Australia Suddenly Not Running Out Of Land Anymore – “Aussie House Prices Could Halve”

It was supposed to be different there, too

House prices in Sydney and Melbourne could fall by up to 25 per cent this year alone and “there’s a chance they could fall by half” in the coming “property bloodbath”, an economist has warned.
LF Economics founder Lindsay David, who has been warning of the looming property crash for the past five years, said in a report today the recent house price falls were just the beginning.
CoreLogic data for January showed Sydney and Melbourne prices were now 12.3 per cent and 8.7 per cent down from their respective peaks in July and November 2017, with Melbourne falling at “the fastest rate ever seen”.
“We think there’s a chance property prices could fall by half in Sydney and Melbourne over the long run,” David said.
“I wouldn’t be surprised by falls of at least 40 per cent. When all hell breaks loose you’ve only got so many buyers out there.”

His base case of 20 per cent falls in calendar 2019 is significantly more bearish than other experts. AMP Capital is tipping total peak-to-trough falls of 25 per cent in Sydney and Melbourne, while UBS is tipping 25 per cent with a “rising risk of 30 per cent”.
David bases his forecasts largely on the “debt accelerator”, which is strongly correlated with house price growth six months forward. Latest data indicates the debt accelerator is “falling sharply” in Sydney and Melbourne.
If that happens, Sydney and Melbourne “will suffer peak-to-trough falls never experienced before, outside of the 1890s depression and real estate collapse”.

– excerpt and image from ‘Property bloodbath’: Aussie house prices ‘could halve’, Frank Chung, news.com by way of New Zealand Herald, 20 Feb 2019

Watershed? or Dam-Collapsing? – Mainstream Media Quoting Vancouver RE Bear-Tweets, and Predicting Shrinking Realtor Numbers – “What they’re used to is not what real estate is typically like.”

“Warning: Some viewers may find the following footage distressing…”

“There’s a cottage industry emerging on Twitter, with various accounts and followers seeming to take delight in the financial woes besetting Metro Vancouver homeowners hoping to sell their homes, or selling their homes at crushing losses. … Here’s a look at five examples highlighted on Twitter of homes in Vancouver and West Vancouver where the owners took a bath, or are at least one foot away from a nasty fiscal scolding…”
– from ‘Five examples of Metro Vancouver homeowners losing big in a plunging market’, David Carrigg, Vancouver Sun, 7 Feb 2019

Now you notice? -ed.

“The softening housing market could lead to tough times for some realtors, especially those who have recently entered the profession, said the president of the Fraser Valley real estate board. “I think it’s going to be tougher for the more-inexperienced realtors, those who are three or four years in,” said John Barbisan. “What they’re used to is not what real estate is typically like.” The 35-year veteran said agents will be forced to be more like “consultants than auctioneers” as they help to connect buyers and sellers. …
According to the council, there were 25,987 licensed real estate professionals in B.C. as of Dec. 31 — a 36-person drop from Sept. 30, although still slightly higher than June 30. The dramatic increase in the number of licensees — from about 21,000 in 2012 to 26,000 in 2018 — seems to be slowing.”
– from ‘Sales slump could signal tough times ahead for B.C. realtors’, Glenda Luymes, Vancouver Sun, 8 Feb 2019

We can recall when BC Realtors crossed the 10,000 mark. Seems a fair bet we’ll go back below that number once all is shaken out. -ed.

“Within artistic communities in Vancouver it’s hard to spend more than 15 minutes at a social gathering without talking about the cost of rent or knowing of someone who is being evicted.”

Ian Wallace, Construction Site (Olympic Village) III, 2011. Photolaminate and acrylic on canvas, 183 x 244 cm.

“When you’re in Vancouver, within artistic communities, it’s hard to spend more than 15 minutes at a social gathering without talking about the cost of rent or knowing of someone who is being evicted,” says Am Johal, director of community engagement at Simon Fraser University’s Vancity Office of Community Engagement.

In my day-to-day in Vancouver, I find myself preoccupied with constant reminders of my own impermanence. Exiting my beloved Mount Pleasant rental apartment, I’m hit by a thud of anxiety each time I see a development notice erected in my neighbourhood. I pass by so many of my once-favourite galleries (and former places of employment), now repurposed or left empty. Friends and artists leave. Those of us who remain spend most of our time defending the choice to stay. Our defence often sounds optimistic, perhaps naive: staying here and making art is important, too.

In this five-part series, I intend to think through how the housing crisis is having an impact not only on the production of art in Vancouver, but also on art’s responsive and changing communities. Issues of unaffordability, including high rent and inaccessible housing, go beyond dwindling supplies of accessible gallery, home, institutional and studio spaces. Complicating these issues is that artists and art centres are often themselves gentrifying elements within a city, a phenomenon already long-acknowledged and in-process in Vancouver. If we know well by now that unaffordability generates and exacerbates inequality generally, it feels necessary to emphasize that it also generates and exacerbates inequality, and tension, including class stratification, within artistic communities, too. It can be a contradictory conversation or, at least, a circular one. But if we acknowledge the role of the arts in gentrification, we should be looking deeper at what this disparity of opportunity in culture comprises. If the art community is asked to navigate, evade or compromise an ever-tightening commercial grip, we should really be talking about who in that community is benefiting, and suffering, most from unaffordability.

– image and excerpt from Who Has the Right to Art?, Alison Sinkewicz, Canadian Art, 31 Jan 2019.

Macleans Wakes Up – ‘This is how Canada’s housing correction begins’ – “We’re not ready for what happens next”

Kirk Marsh first noticed the mood start to turn in Vancouver’s housing market a year ago. As a real estate investor who buys homes and condos then fixes them up for resale, Marsh has an excellent vantage point on the market. Since giving up his old job in tech three years ago to flip real estate—“Sitting at a desk was killing me,” he says—Marsh has bought and sold six detached homes and condominiums across the B.C. Lower Mainland. “It’s not like TV shows where you see them making $100,000 or more each time, it’s just not like that,” he says. But he’s done well, always able to find buyers and come out ahead.

Or that’s how it used to be. “Today, everything has stalled,” he says.

While visiting open houses over the past year looking for his next flip, Marsh watched the frothing crowds and bidding wars steadily dwindle away. “There’s just nobody showing up at the open houses now,” he says. “Especially downtown. Usually you’d see a group of very aggressive people coming out.” But he’s also keenly aware of the slowdown because he’s trying to unload a renovated two-bedroom condo in New Westminster, just east of Vancouver. The unit, with an asking price of $569,000, had been sitting on the market for two months as of mid-December, with almost no interest.

– excerpt and image from ‘This is how Canada’s housing correction begins’ by Jason Kirby, Maclean’s, 3 Jan 2019

The whole article is worth the read, and nails many things…
Pretty much what we’ve been warning of on these pages for …oooh… more than a decade.
You can only tell who’s been swimming naked when the tide goes out (and that includes entire countries).
Regarding Kirk, starting flipping three years ago was extremely late to the Lower Mainland party and he should count himself very fortunate if he gets out alive.
– vreaa

Vancouver Detached – Sales Down, Prices Down

“Sales volumes are incredibly weak with buyers looking for steep discounts and many sellers still unrealistic with their asking prices. However, sellers who need to sell for whatever reason are increasingly having to lower their prices. There is often a rhetoric that “sellers simply won’t sell” if they don’t get their price, and while this may be true the reality is there are still sellers who absolutely need to move on, such as estate sales, divorces or job relocation. These sellers are ultimately setting the benchmark lower.”
– charts and quote from Realtor Steve Saretsky

Classic dynamic for a declining market.
Will crucial technical price supports hold?
Will buyers “rush in” to “snap up ‘bargains'” ??
Fundamental supports are f-a-r below. -ed.

Bloomberg Calls Vancouver ‘The City That Had Too Much Money’

Known abroad primarily for its stunning Pacific Coast setting and athletic lifestyle, the city has since become one of the world’s largest sluices for questionable funds moving from Asia into Western economies. One academic terms the process “the Vancouver model”: a seamy mingling of clean and dirty cash in casinos, real estate, and luxury goods made possible by historic ties to China and by Canada’s lax record of fighting financial crime.

It’s a product of one of the largest financial flows of the 21st century: The money being frenetically shuffled by millions of wealthy Chinese into safe assets abroad, in defiance of their country’s capital controls. Since mid-2014, capital flight from China may have totaled as much as $800 billion, according to estimates from the Institute of International Finance.

In Vancouver, the tidal wave has wrought a dramatic economic, demographic, and physical transformation. Alberni Street, a formerly dowdy downtown thoroughfare, has in the past decade welcomed a two-level Prada boutique with a black marble facade, one of the largest Rolex showrooms in North America, and a 62-story tower with a five-star Shangri-La hotel. All have Mandarin-speaking staff. In May, Rolls-Royce chose Vancouver to unveil its first sport utility vehicle, which starts at more than $300,000, hosting a Champagne reception at its sleek new local dealership in an upmarket neighborhood about two miles south of Alberni. Six sold on the first day—bound, perhaps, for the “car condo,” a kind of luxe garage with customizable suites that’s being built in a majority-Asian suburb. The units start at more than C$800,000, and the first batch recently sold out.

Much of the money coming in has been legitimately earned, if sometimes extricated by gray-market means. But officials say that a substantial proportion is the proceeds of corruption or crime, including the illegal sale of opiates such as fentanyl. With public anger rising over astronomical housing prices and an economy distorted by wealthy outsiders, British Columbia’s left-leaning government—elected last year on a platform focused on calming the real estate market—is building a global laboratory for policies meant to restrain the arrival of Chinese money. The province is hiking taxes, toughening transparency rules, and tightening oversight of casinos and financial institutions.

Change will be difficult and fraught. Vancouver has been closely connected to Asia since the late 19th century, when the first Chinese laborers arrived to help build the trans-Canada railway, and the city is proud of its record of integrating immigrants. Also, beyond real estate, Vancouver’s economic base is shallow. It’s not the business capital of western Canada—that’s Calgary—and it has few major corporate headquarters or large-scale manufacturing operations. “Asian capital has kept this economy alive, end of story,” says Ron Shon, a Chinese-Canadian venture capitalist who arrived as a teenager in the late 1960s. “You can see it in every aspect of our lives.”

The money is arriving so fast, and in such volume, though, that standing by is no longer an option. Vancouver was perhaps the first major Western city to experience the full force of Chinese capital. Soon, it could be the first to learn what happens when you try to stop it.

– excerpt and image from ‘The City That Had Too Much Money’, Matthew Campbell & Natalie Obiko Pearson, Bloomberg, 20 Oct 2018

“Our family loves Vancouver, but we’re leaving because the struggle to live here is simply too hard”

Lee Abrahams and her two daughters in the living area of her tiny suite. [image: Vancouver Sun]

“In the Fraser Valley, about an hour and a half or so from Vancouver, my husband and I live in a tiny home. We occupy 400 square feet with two young children and three pets, and pay a low rent to our family for occupying their property. My husband commutes more than two hours to work, each way, five days a week. He is in a company that treats him wonderfully, but his income is low, as is the same for just about everyone trying to get by in Vancouver and its surrounding areas.

I am a writer and cannot work full time out of the home because the cost of daycare far outweighs anything I could earn despite my extensive resume. I hail from New York City and when people ask me how on earth I was able to afford living in Manhattan, it’s hard not to laugh.

“Easier than I can afford living here,” I tell them. That usually elicits quiet shock. It leaves me speechless, too.

I came here five years ago from my loud and proud city to study at Simon Fraser University. At the time, housing had yet to become the full crisis it is today. I didn’t intend to stay long term, but it seemed like a good place to start over as a single mother. I went to school full time, worked two jobs and had a childcare arrangement with a lovely family that I was able to afford.

That time was a blur. I barely saw my daughter, and I assured myself that it was all for a good cause. I made decent money, was working toward my degree, and not too long after I met my now-husband. I stayed because I worked hard to be here and just as we were considering a house, things went wildly out of control.

We were priced out of the market. My husband’s parents were looking for a house, and it was not uncommon for them to be outbid by well over $100,000 of the asking price. Nine exhausting months later, and through word of mouth, they found a seller with enough property for us to share. My husband and I have been stuck in a weird in-between since finding this property with his parents.

We range from having a great savings nest, to having it completely drained once tragedy or car repairs are needed. Or my husband gets sick and loses hundreds of dollars just from getting the flu. Thus begins the tumultuous climb to paying down the credit cards we needed to rely on, paying double bills from the month we fell behind, and then — four months later — finally having savings again. Rinse and repeat.

Despite the market slowing down, prices are still significantly higher than incomes can afford. In Maple Ridge, the cheapest area of Metro Vancouver, incomes still have to be at least $121,780 a year to afford a house. And housing and low incomes aren’t the only challenges we and others face. We are incredibly fortunate to live with a low cost of housing, but it comes at great sacrifice.”

– excerpts and image from ‘Our family loves Vancouver, but we’re leaving because the struggle to live here is simply too hard’, Lee Abrahams, Vancouver Sun, 22 Sep, 2018

Tendency Towards Corruption Is Inevitable – How Do We Minimize Its Existence?

cartoon by Cheney

Hard Earned Home Savings? Hardly.

– image care of long-time reader and very occasional contributor ‘westsidefrank’

A tip for home-owners contesting proposed new taxes: Make almost any argument you want, but do not claim that any profits that you have accrued by virtue of owning Vancouver RE are ‘Hard Earned’. This insults people who work hard, and at the same time insults anybody with a modicum of intelligence. Hundreds of thousands, sometimes millions, tax free? As Bing Thom the architect once said “I have done pretty well in my business, but I made more money from sitting on my Vancouver property than I made by working an entire lifetime. That tells you something.”
[BTW, it looks like somebody has graffitied onto that sign, under the “Angry?” question, something along the lines of: “Yeah, because I can’t afford to live in a mansion like you!”]
– vreaa

“You know your real estate is in bad shape when there is a game app that displays Vancouver’s Science World and teaches you how to be a money hungry real estate developer.”

“You know your real estate is in bad shape when there is a game app that displays Science World and teaches you how to be a money hungry real estate developer: #vanRe #vanpoli”
– tweet from Brette A. Mullins @BretteMullins 3:27 PM – 18 May 2018

“It’s sinking in that Vancouver is sinking” – “Westside prices have fallen 17% from 2016 & 11% this year; sales volumes down by 80%; 3 years worth of >$3 Million inventory”

First, a Toronto Story: “The home sold for 25 per cent less than what John had paid just five months earlier, a loss of $500,000”
“The house in Toronto was the type of property highly coveted by those in the city: fully detached on a sprawling lot, recently renovated and adorned with granite countertops, hardwood floors and a solarium. John, who asked that his name not be used for reasons that will become obvious, knew he had to make an offer. He figured he could rent it out, and if the payments didn’t cover the mortgage costs, no matter. Back in early 2017, home prices in Toronto were on an unstoppable tear, surging double-digits every month. The house would surely be worth more in no time. The home was on the market for only a few days when John’s offer was accepted. He bid nearly $1.9 million, about $360,000 more than the list price. Then everything fell apart.
John, a real estate agent, thought he had financing lined up. But the bank declined to lend him the money. John had recently formed his own brokerage, and the bank was treating self-employed individuals with far more caution in an overheated market. He consulted two lawyers, who told him that if he walked away from the deal, he could be sued. John decided he had no choice but to take a mortgage from a private lender that carried a hefty 12 per cent interest rate. He knew there was no way he could afford the payments and listed the property as soon as he took ownership.
But there was another problem. During the closing period, the Ontario government introduced the Fair Housing Plan, which included a 15 per cent tax on non-resident buyers. The plan released the air from the housing market, and prices took a nosedive. John’s investment property sat on the market for 27 agonizing days before a buyer could be found. The home sold for 25 per cent less than what John had paid just five months earlier, leading to hundreds of thousands of dollars in losses [ballpark $500,000 -ed.]. “I was so greedy,” he says now. “I will not play the game like that again.” Painful as it was, he looks back at the debacle as a learning experience. He even purchased some books about real estate investment on Amazon to learn how to do it properly.
John’s tale of misfortune isn’t exactly unique. Hundreds of Greater Toronto Area residents were caught when the housing market took an abrupt dive last year after a long run of booming activity. Home sales plummeted 32 per cent from the peak, and prices cratered by 10 to more than 30 per cent in the suburbs, depending on the municipality.”
– image and excerpt from ‘The people who bought at the peak of Toronto’s real estate bubble, and then lost hundreds of thousands within months’, Joe Castaldo, Maclean’s, 4 May 2018 [hat-tip El Ninja]

Second, some Vancouver market facts from Garth Turner: “On the Westside prices have fallen 17% from 2016 and 11% this year while sales volumes have evaporated 80%”
“Detached home sales are crashing hard. What everyone wanted two years ago sits idle and unloved. Transactions are down by a third to the lowest level ever for an April.
In West Van sales are off by half. Incredible. Only 30-odd deals. Another spring record. Sales in Richmond have been sliced almost 60%.
Over six thousand listings materialized across the province in a single day. The meme is spreading. This ship’s going down.
Overall, sales are reduced an astonishing 62% from 2016. The lowest number in 30 years.
The average sale price has declined 6% from last year, 8% from 2017 – and this is just the start.
Two Aprils ago $3.5 billion was spent on housing in Vancouver. This April that fell to $1.35 billion. That’s $2 billion less spent in a single month. If you think there will not be economic implications, you’re wrong.
On the Westside prices have fallen 17% from 2016 and 11% this year while sales volumes have evaporated 80%. There is three years’ worth of inventory for houses valued at $3 million or more – the ones the NDP has targeted for a special punitive tax.
Over 90% of the houses now selling are going for less than asking. Two years ago, almost all were over ask. In April there were as many price reductions on detached houses as there were sales. Yes, it’s sinking in, that Van is sinking.”
– excerpt from ‘The big shed’, Garth Turner, 2 May 2018 [hat-tip El Ninja]

If a serious market correction were to commence, this is pretty much what it would look like. The beginning of a lengthy, drawn out correction process… Watch as wave after wave of ‘Johns’ sell at lower and lower prices. It’ll take years to play out.
Ultimate target: The return of Vancouver RE prices to those determined by the utility of property in our economy.
– vreaa

The Carrion Have The Carcass – “I’ve lived in Vancouver since 1968; my wife was born here; we are about to leave; this town has priced us out. All that is left are the investors and the very rich visitors.”

“I have lived in Vancouver since 1968 and my wife was born here, as was her mother, and now we are about to leave because this town, and I call it a town, because it not a real city, has priced us out. The things that made Vancouver great have been hollowed out, sold off or torn away and unfortunately all that is left are the investors and the very rich visitors. The carrion have the carcass.”
– Johnny Lee, at VREAA, 22 April 2018 [image from The Vancouver Sun]

All Time High, And Climbing… $251 Billion Personal Debt Borrowed Against Canadian Homes

Canadian real estate related debt tapering? That would be ridiculous! Filings obtained from the Office of the Superintendent of Financial Institutions (OSFI) show, after a brief decline in January, the balance of loans secured by residential real estate hit a new high in February. More interesting is the segment of loans being used for personal consumption, is growing at the fastest pace in years…
Loans secured by real estate hit a new all-time high in February. The total balance of loans secured with real estate racked up to $283.65 billion, up 0.77% from the month before. This represents a 7.79% increase compared to the same month last year. It almost looked like Canadians were reeling that debt in January, with a tiny decline. Instead it made a monster move, more than making up the ground lost the month before…
The total of loans secured with residential real estate for non-business purposes spiked in February. The outstanding balance reached $251.64 billion, a 0.77% increase from the month before. This represented a 6.83% climb compared to the same month last year. This brings the total to an all-time high. … The annual rate of 6.83% is the fastest rate of growth since… well, since banks started reporting these numbers on their balance sheets. Apparently higher rates aren’t slowing borrowers down.
– chart and text from ‘Congrats! Canadians Just Set A New Record For Borrowing Against Their Homes’, Daniel Wong, Better Dwelling, 18 April 2018

When Canadian RE goes down, it will have weights around its ankles. -ed.

“I asked a group of young people how many of them thought they’d be in Vancouver in two years, and 17 out of 18 said that they would be moving.” – Mayoral Candidate Shauna Sylvester

“I was in a session the other day with a group of young people, and I asked them how many of them thought they’d be in Vancouver in two years, and 17 out of 18 said that they would be moving. They were tired of being evicted, they couldn’t find affordable housing. My daughter, Rowan, who is 23, can’t live in Vancouver because she can’t find an affordable rental.” [Goes on to discuss her ideas about housing policy]
– Shauna Sylvester, Independent candidate for Mayor of Vancouver, from interview posted on youtube, Vancouver Sun, 5 Apr 2018

Off-The-Charts Unaffordable – Greater Vancouver Price-To-Income Ratio 28 (average home price: $1,071,800, median one-person income: $38,164)

A recent report from Zoocasa shows that even the least expensive cities in the country can require a major financial commitment for solo buyers. Experts say individuals shouldn’t be spending more than three times their annual income on a home. But according to Zoocasa’s report, the average buyer would have little choice but to break that rule.

“Overall, even in the least housing expensive markets, home ownership is a significant expense for single people in Canada,” Zoocasa CEO Lauren Haw said. “Our report found that a single homebuyer would need to spend a minimum of four times their annual income to be able to afford a home on in their own.”

“Though we expected to see Vancouver and Toronto up at the top of the most unaffordable regions list, we were surprised to see just how high the price-to-income ratio was in these cities,” said Haw. “This demonstrates that home ownership in Canada’s major urban areas on a single income would be very difficult, if not impossible by measures of affordability.”

– BNN, 30 Mar 2018

Keep in mind that a ratio of 5 (yes, five) is historically seen as ‘severely unaffordable’. – ed.

Conflicts of Interest – BC MLAs Heavily Invested In RE Making Laws About RE

Premier John Horgan and Finance Minister Carole James say the government is still working out the details of a new speculation tax on B.C. properties.

It’s a discussion their colleagues in the legislature will be keenly interested in, as many of them own two or more homes in the province.

Horgan said the government has delivered on its promise to put in place a speculation tax. But the announcement has sparked concern from owners of vacation homes who fear a hefty tax bill.

“We haven’t laid out the details,” Horgan said. “Now we’re making sure the minister of finance, with the assistance of British Columbians, will be able to fine tune that so we realize the objectives of the tax and also go forward in a way that makes sense to people.”

The February budget included a speculation tax that will be effective for the 2018 tax year. The government said the tax would initially apply in Metro Vancouver, the Fraser Valley, the Capital and Nanaimo Regional Districts, and the municipalities of Kelowna and West Kelowna.

The tax was to target properties owned by people who don’t pay income tax in the province. It will be $5 per $1,000 of assessed value this year and in 2019 will rise to $20 per $1,000 assessed value.

That means that someone with a $1-million property covered by the tax would be looking at a $5,000 tax bill for 2018 and $20,000 in 2019.

“This tax will target foreign and domestic speculators who own residential property in B.C., but don’t pay taxes here, including those who leave their units sitting vacant,” materials released with the budget said.

—-

The tax is a bold measure, [Carole James] said. “We want to get speculation out of the market. We know it’s a problem in our housing market. We know we have to address it. We know British Columbians expect us to address it. It was ignored by the previous government. We’re acting on it.”

That action could affect dozens of the province’s 87 MLAs and their families based on their public financial disclosure statements. The statements also give a window into how complicated many people’s real estate dealings are.

Horgan, for example, has a one-third interest in an investment property in Victoria. As long as it’s rented for the long-term he’ll be exempt from the speculation tax, but not if it’s sitting empty.

James owns not just the home she lives in, but she is also the joint owner with a family member of a second home in Victoria. Presumably that home is her relative’s principal residence, which would make it exempt.

But what about out-of-town MLAs who use the allowances — from $12,000 to $19,000 a year — provided for housing in the capital to help buy second homes? On the NDP side they include Bruce Ralston, Selina Robinson, Ravi Kahlon and Rachna Singh.

Shane Simpson and Scott Fraser each disclose owning a half share in a Victoria home and principal residences elsewhere. Fraser also owns an investment property in Parksville. Leonard Krog has an investment property in Victoria and a recreational property at Black Creek.

Claire Trevena owns a second home in Victoria and an investment property on Quadra Island. Spencer Chandra Herbert owns a second home in Victoria, but also has an investment property in Vancouver and a 50-per-cent interest in a recreational property in West Vancouver.

Michelle Mungall owns a second home in Victoria, two investment properties in Nelson and a third in Castlegar. All three investment properties are outside the regions where the new tax is to apply.

David Eby, by the way, owns a home in Victoria, but not in Vancouver where the constituency he represents is.

On the Liberal side, MLAs owning a second home in Victoria include Marvin Hunt, John Yap, Mike Bernier, Ralph Sultan and Jordan Sturdy.

“There’s no consideration around ‘special’ for one group or another,” James said when asked how the new tax may affect MLAs with second homes in Victoria. “We’re going to look at all of the questions and issues that have come forward and we’re going to make the decisions and bring the implementation forward.”

Among the Greens, Andrew Weaver owns a recreational property in Parksville and two investment properties in Victoria. Sonia Furstenau’s spouse has an investment property in Victoria.

Several MLAs also have recreational properties. Cabinet minister Judy Darcy has a recreational property on Mayne Island, which is included in the areas where the tax will apply. NDP MLA Janet Routledge owns a recreational property on Mayne Island and a timeshare in Whistler.

Peter Milobar shares with family members a cabin on Shuswap Lake. Greg Kyllo and spouse have a 50-per-cent interest in a recreational property at Silver Star in Vernon.

Others hold investment properties that are likely rented out. Bob D’Eith’s spouse has an investment property in Langley. Raj Chouhan’s spouse has a one-third interest in a Burnaby property. Teresa Wat owns an investment condo in Vancouver. Norm Letnick’s spouse has an investment property in Kelowna. Mike de Jong has an ownership interest in half a dozen investment properties in Abbotsford.

And then there are the oddities, situations where it’s unclear what would count as a principal residence and what wouldn’t. Michael Lee lists ownership as a trustee for a family member on a house in Vancouver (other than his residence), as does his spouse. His spouse also has a one-seventeenth interest in agricultural property in Langley.

Anne Kang and her spouse each own residential properties in Burnaby. Katrina Chen co-owns a residence in Vancouver with family and has a second home in Burnaby with her spouse. Ian Paton owns a home in Delta while his spouse owns one in Abbotsford.

George Heyman has a house in Vancouver, but with his spouse has a second house in Vancouver and a recreational property at an unspecified location in B.C.

Other properties are unlikely to be affected. Katrine Conroy has grazing land in the Kootenays, for example. John Rustad owns a wood lot license and four other pieces of rural property.

Several MLAs have interests in properties that are clearly out of reach of the tax. Doug Clovechok has an investment property in Calgary. Tracy Redies owns investment properties in Saskatoon and Virginia. Rick Glumac’s spouse has an investment property in Denver. Mike Farnworth has an investment property in the United Kingdom. Jagrup Brar has interests in properties in Alberta and India and Harry Bains has land in India.

– from ‘Many MLAs Have Personal Interest in Speculation Tax Hit’, Andrew MacLeod, The Tyee, 12 Mar 2018

File Under Tags: ‘Tolerant Vancouver Renter’ and ‘YouGottaBeKiddinMe’

“I’m an international student. When I moved here I asked for advice about the best place for me to live. I needed something close to my lab at VGH and also near to UBC, and Kitsilano sounded great. I was told to search on Craigslist, even though I’d heard it could be a bit sketchy. I thought, ‘How bad could it be’?

“The first apartments I viewed didn’t work out. They were closets downtown, or rooms separated in half by curtains. Then I found this house that seemed almost too good to be true. It was a great location, and the ad said that there were a few international people staying there. I never had a chance to Skype with the landlady, but we talked over Facebook Messenger. She seemed nice, and said that I’d have to pay a deposit right then. I did.

“When I got there, I found that there were more than 10 people living in the house. It was the smallest place on the street, and it didn’t look like it could hold so many tenants, but somehow it did. I think there was supposed to be five bedrooms, but the landlady had made plywood or fake walls, and then pushed a lot of people in a big basement. During one month I was there, we had 14 people staying. It was cramped, but I’d paid my deposit so I thought I’d stick it out.

“The first few weeks were okay. Everyone there was really nice. No one locked the doors, and people didn’t steal from each other. It was quite hippie, but nice. The landlady wasn’t around a lot, and that was cool. But then it started getting weird.

“She started moving more and more of her stuff into the house, even though she didn’t live there. She kept taking things from us. At one point, we had a washing machine and a dryer, and then all of a sudden it vanished. We got a new one that we paid for, but she told us we couldn’t have it because the neighbours were complaining. I have a suspicion she took it and sold it.

“She kept pushing more and more people into the house until it didn’t feel safe. Out of nowhere, six new international people would suddenly show up. Some would just stay in a van on the front yard, and she would charge $500 a week just for the sake of having them somewhere. Every now and again, a random person would wander in, and when we asked them who they were, they said they were there to view a room. The landlady wouldn’t say they were coming round, and after we tried to call her, she’d tell us to show them the house even though we didn’t know which room they were meant to be seeing.

“What pushed me over my limit was when she started doing odd renovations and spray painting everything. I’d go down and look at the basement, and the whole place would suddenly be bright pink, and the door would be sprayed gold. Then half the bathroom would be silver. It was just so strange.

“I found out she wasn’t technically the landlord, but was acting as a property manager. The weird thing was that I paid rent to her 16-year-old son. He would meet me on a street with two big dogs, and I would give him an envelope of money. She didn’t want to have any electronic transfers or any documentation of the rent. I don’t think she wanted the money to be able to be traced. We didn’t know who owned the place, but it looked like she handed over the rent to a guy who would randomly pull up in a van about once a month.

“I was there for five months. I definitely stayed too long, but it was tough because everything else I saw wasn’t even a room—it was a wardrobe with a curtain—or it would be really far away from my work. It was hard to find something.

“I was glad when I finally left. I haven’t been by the house since, but it’s tempting to walk past and see if it’s still standing.”

– whole story from Renters of Vancouver: “I paid rent to her 16-year-old son”, Kate Wilson, Georgia Straight, 10 Mar 2018

Vancouver “an international housing-affordability basket case” with “RE bubble risk the worst in the world” – Maclean’s

“It was such a lovely picture that the City of Vancouver managed to paint of itself over the 10 years that Gregor “Happy Planet” Robertson was mayor that it’s no wonder so many people believed it. A thriving and happily multicultural Pacific metropolis of bike lanes and balmy weather. Diversity and eco-density and backyard chickens, high-tech startups, and the ski slopes on the mountains just across Burrard Inlet.

Now, with Robertson on his way out, and his Vision Vancouver party a ruined brand, whoever comes out on top in the October civic elections will be left to deal with what’s become of the place. Vancouver is now a kind of free trade zone for gangland money launderers, absentee offshore real-estate speculators, Chinese princelings on the lam and globe-trotting tax frauds. Metro Vancouver is an international housing-affordability basket case and the epicentre of Canada’s fentanyl overdose crisis. Over the past decade, homelessness has doubled, at least 4,000 people are sleeping rough in the streets, and there are now 70 homeless camps across the region. …

For now, the job of sorting everything out has fallen mostly to David Eby, B.C.’s 41-year-old Justice Minister and Attorney-General. Two months ago, in a speech at a conference co-hosted by Transparency International Canada and the International Centre for Criminal Law Reform, Eby described Vancouver and British Columbia in the most accurately unflattering terms.

“We knew there was something strange going on, but, my God, we had no idea it was this big,” Eby said. British Columbia had become reduced to “a jurisdiction where the rules do not apply to white collar crime, fraud, tax evasion and money laundering, where even if the rules do apply, enforcement is absent.”

Over the past 10 years, the B.C. Securities Commission had collected less than two per cent of more than a half a billion dollars in fines levied against a rogue’s gallery of fraudsters, swindlers and ripoff artists. Among the beneficiaries of the previous Liberal government’s opaque “Advantage B.C.” head-office tax shelter scheme: PacNet, a collection agency the U.S. Treasury Department had listed as a transnational criminal organization with a sordid track record in money laundering and mail fraud, and China Poly Group, a shady Chinese state-owned enterprise with a payroll of 76,000, intimate ties to the People’s Liberation Army, and a portfolio that ranges from real estate development to arms and explosives and art exhibits. Advantage B.C. is now shuttered.

Among the sleazier aspects of the Liberal legacy was a peculiar toleration for dirty money being laundering through B.C.’s licensed casinos. Provincial officials were aware of the nastiness as far back as 2009. In January of that year, the Integrated Illegal Gaming Enforcement Team (IIGET) conducted a threat assessment focusing on organized crime in licensed casinos and asked the Crown-owned B.C. Lottery Corporation for expanded powers to tackle the problem. Six months later, the IIGET unit was disbanded because of “funding pressure.”

Last September, Eby appointed former RCMP deputy commissioner Peter German, an authority on money laundering, to come up with a series of recommendations on how to cut the flood of dirty money into B.C.’s casinos, Metro Vancouver’s overheated real estate market and “other areas of B.C.’s economy.” German’s report is due next month.

In the meantime, Eby has instituted a simple rule change aimed at preventing drug money from being loaned out by underground “banks” to visiting high-stakes gamblers. The change was recommended to the Liberal government in 2016 in a report by MNP LLP, a national accounting, tax and consulting firm. The Liberal government kept the report secret. Among its findings: over the course of a single month—July 2015—Richmond’s River Rock Casino accepted $13.5 million in $20 bills from mostly “high roller Asian VIP clients,” in transactions that sometimes exceeded $500,000.

The MNP LLP rule change that the Liberals ignored, but which Eby has put in place: You will no longer be able to drive your Lamborghini from your $10 million Point Grey mansion across the Oak Street Bridge to Richmond, stroll into the government-licensed River RockCasino and buy your chips with a half a million dollars in $20 bills stuffed into a duffel bag, then cash out on the same day.

It’s a start.

Last month, Vancouver showed up as the third most unaffordable city on Demographia’s list of 92 cities around the world, behind Hong Kong and Sydney. When it comes to cities undergoing a deterioration in housing affordability, Vancouver ends up the worst. Demographia classifies a property market with median home prices five times the median income to be “severely unaffordable.” In little more than 10 years, Vancouver’s housing affordability predicament worsened from a home price multiple of 5.3 to 12.6 by last year.

Andy Yan, an urban analyst with Simon Fraser University’s city program, has been tracking the deterioration in Metro Vancouver’s housing affordability for several years. In 2014, 28 per cent of detached homes in Metro Vancouver were valued in excess of $1 million. In 2016, the percentage had jumped to 43 per cent. As of July 1 last year, 73 per cent of detached houses in Metro Vancouver were assessed at $1 million or more. The 15-per-cent foreign-buyers’ tax imposed by the B.C. government in 2016 as a sop to public outrage caused only a slight pause. Within weeks, the upward climb in house prices resumed.

Back in 2011, when the average price of a Vancouver home was roughly 11 times the average household income, Mark Carney, who was the Governor of the Bank of Canada at the time, warned in a speech to the Vancouver Board of Trade that Vancouver real estate was taking on characteristics of financial asset markets that become trapped in “the classic market emotions of greed and fear—greed among speculators and investors—and fear among households that getting a foot on the property ladder is a now-or-never proposition.”

The greed and the fear took hold, compounded by a real estate spending spree of billions of dollars’ worth of capital spirited out of China by a variety of illegal, semi-legal and circuitous routes around Beijing’s currency controls.

The disastrous federal immigrant investor program contributed to this state of affairs by effectively selling Canadian citizenship to millionaire investors, mostly from China. The federal program was shuttered after assessments determined that the millionaires were contributing less to the federal treasury in tax returns than refugees. But the Quebec immigrant investor program continues in the form of a type of racket. Quebec skims an $800,000 interest-free loan from the investors as soon as they arrive. Most of them never settle in Quebec. Roughly half of the Quebec immigrant investors (28,000) have moved to Metro Vancouver, another 22,000 established residence in Ontario and elsewhere. Only 6,000 have stayed in Quebec.

A South China Morning Post analysis last December concluded that only about half of the primary breadwinners of immigrant-investor households remain in Canada after they settle their spouses and children here.

Meanwhile, detached houses and condominiums in Vancouver have become assets in a shadowlands protected by Canada’s lax money control policies. The British-registered charity Tax Justice Network, in its most recent Financial Secrecy Index, pegs Canada’s financial system as even less transparent than the setup in Russia or China.

Something is clearly rotten in Metro Vancouver’s property market. Household incomes reported to the Canada Revenue Agency in Metro Vancouver’s swankiest neighbourhoods are equivalent to incomes reported in the deeply impoverished Downtown Eastside. The disconnect between declared income and apparent housing wealth persists across Metro Vancouver “until you get out to the distant suburbs,” Eby says.

Two years ago, when the average detached home price within Vancouver city limits had soared to $1.4 million, the South China Morning Post crunched some numbers tallied up by the mathematician Jens von Bergmann at the Vancouver data firm MountainMath Software. What the data showed was that one in 10 Vancouver households were reporting a household income that was less than the amount required just for property taxes, mortgage payments, utilities and so on. That’s 24,960 households claiming to earn less in a year than they were spending on accommodation.

Another confounding figure: an almost equal number of homes within Vancouver city limits were empty last year. City of Vancouver staff identified 25,497 homes either vacant or occupied temporarily or by foreign residents. Of those, 21,820 homes were empty, year round. Mayor Robertson’s remedy was to apply an empty homes’ tax of one per cent of the home’s value. The program cost $4.7 million to set up and an additional $1.5 million in annual operating expenses.

It’s gotten so that it is practically impossible to determine how much of Metro Vancouver’s real estate is owned by Canadians, or even by local residents. A recent Transparency International study found that because of the presence of shell companies, numbered companies, trusts and proxy owners (students, spouses) listed as title holders, it is impossible to know who, exactly, owns about half of Vancouver’s pricier homes.

Last month, Statistics Canada released data showing that roughly five per cent of residential properties in Metro Vancouver appear to be directly foreign owned, but that figure may reflect only “the tip of the iceberg,” according to Haig McCarrell, director of StatsCan’s Canadian Housing Statistics Program. SFU’s Andy Yan crunched StatsCan’s numbers to discover that one in five of Metro Vancouver condos valued at $1.5 million or more (a typical three-bedroom condo lists at about $1.62 million) are foreign owned.

Among the items Vancouver housing activists want to see at the top of David Eby’s to-do list is the closing of the “bare trust loophole,” a tax dodge that Ontario outlawed in the 1980s. The loophole obscures the actual owners of a property and facilitates the evasion of various federal and provincial taxes.

On Feb. 20, B.C.’s New Democrats will unveil their first provincial budget in 17 years. The Union of B.C. Municipalities has put forward 32 proposals to address homelessness and clear up the housing horror show—mainly steep speculation taxes and investments in rental housing (Metro Vancouver’s rental vacancy rate currently stands at one per cent). There’s high hopes for the new $15.9-billion federal “co-investment fund” that Ottawa announced last year. Green Party leader Andrew Weaver wants B.C. to take a page from New Zealand’s playbook and ban foreign ownership of real estate outright.

Whatever B.C.’s new government does, deflating Metro Vancouver’s obscenely bloated real estate bubble should be expected to provoke stiff, big-money resistance. Vancouver’s real estate “bubble risk” is the worst in the world, according to the Global Real Estate Bubble Index compiled by the Swiss bank UBS. But at some point, Metro Vancouver’s property bubble is just going to have to burst.

And when that happens, there will be hell to pay.”

– from ‘The battle to clean up B.C.’, Terry Glavin, Maclean’s, 7 Feb 2018 [hat-tip El Ninja]

In our years of Vancouver RE Bubble-watching, we can’t recall a more adamant mainstream article… With this degree of shrill realization reaching voices like Maclean’s, the end has to be in sight. – vreaa

Vancouver Economy Over-Dependent On Debt Spending

When a mortgage is issued, money is injected into the economy from… nowhere.
Most people don’t realize this. Most think that mortgages come from money that originated in the real economy that is actually deposited in the bank, but that is most definitely not where mortgages come from. This ignorance is very widespread… poll intelligent people you know… you will find that most do not understand that commercial banks have the power to create new money. (A recent survey of UK Members of Parliament showed that the majority of them (85% !!) did not understand the source of mortgages… stunning information).

If somebody borrows $2 Million from a Canadian bank to buy a $4 Million Vancouver home, that $2 Million is created from nowhere. Nobody earned that money; the economy gets an artificial boost unrelated to any actual economic productivity within our society.

Vancouver has seemed to do well economically over the last 15+ years, largely because of the issuance of new debt. Vancouver has ‘imported’ money… from foreign sources, yes, but also from fresh air (and the latter source is greater and more important).

RE and closely related economic activity makes up 25% of BC’s GDP (2016). Construction is by far the largest new job generator in BC. Our economy has become highly dependent on an ever expanding RE sector (and ever increasing prices).

There were $38.4 Billion mortgage loan approvals in BC in 2010 on new and existing residential properties. (At 4.7 Million population this is $8,170 per capita per annum). We’d imagine more recent figures are considerably higher.*
BC has a GDP of $250 Billion (2015), so GDP per capita is $53,250.
Some of the newly issued mortgage debt must lead to the retiring of some old mortgage debt (when a sale completes) but we do not have figures regarding net new mortgage debt, which would be interesting (any readers have that?). That figure would represent the actual amount of newly created money released into the society from mortgages.*
When one considers that the ‘new money’, now in the hands of the seller, can then be used to be invested back into local RE (and leveraged again with more mortgage debt), one starts seeing how the RE ponzi can expand so malignantly.

Furthermore, if even a fraction of the new money is spent in other areas of the local economy, this makes our economy even more dependent on RE debt issuance. Add to this the ‘wealth effect’ of RE owners saving less and spending more because they believe their home is worth more and more, and one sees how dependence on RE price-expansion can spread deeply and broadly into an economy.

We don’t see any evidence that any real economic engines supporting Vancouver RE prices have fundamentally changed. There has not been growth in non-RE local economic activity anywhere near commensurate with the increases in RE prices. All evidence is that RE prices are still in a speculative bubble, fueled by debt.

This last year has seen a stalling in detached home prices and a 25% blow-off in attached prices.
If prices blink and lenders pull in their horns (with or without rising interest rates), the superficially virtuous cycle of a speculative debt-fueled bubble will implode, prices will plummet, mortgage debt will remain, and the cycle will become very vicious.

With Vancouver’s economy so overdependent on RE, we expect the inevitable reconciliation to lead to a deep local recession and many consequent adverse stresses on our society. Let’s hope we can weather the storm.

– vreaa

*PS: we’d welcome any updated figures from readers, especially info re net new money from mortgages.
Chart above from Ben Rabidoux.

hat-tip to El Ninja for links to these images:

Vancouver City Councillors Wake Up To ‘Fierce Speculative Demand’ – “There is significant evidence speculative investment has the biggest impact on housing costs in the city.”

“Speculative investment, the purchase of property based on anticipated price growth, has the biggest impact on housing costs in the city, according to Dan Garrison, a senior planner for the City of Vancouver. Some councillors feel this problem isn’t adequately addressed in the Housing Vancouver Strategy.

“There is significant evidence of speculative investment in our housing market that is driving housing costs,” Garrison said.
Gil Kelley, general manager, planning, urban design and sustainability for the City of Vancouver, said a lot of it has to do with excessive amounts of local and global capital from small and large investors looking to shelter their money and grow their equity.
“Vancouver is a very attractive city [as] a safe harbour for both B.C. residents and foreign investors,” Kelley said. “That coupled with low interest rates make for a pretty fierce speculative demand.”

– excerpt from ‘Vancouver to curb “fierce” demand by local and foreign housing speculators’, Thinkpol, 29 Nov 2017

Amen.
As we’ve been saying for… oooh… the last decade.
Solution to Vancouver Housing Conundrum:
Price crash to the point that all speculative interest is flushed out;
property prices then return to actual utility values as determined by actual ready money in our economy.
Problem solved.
– vreaa

The Dance Around Foreign Ownership of Vancouver RE

“..the City of Vancouver wants to collaborate with the provincial and federal governments to explore the viability of “restricting property ownership by non-permanent residents.”

That line appears in Vancouver’s 10-year housing strategy released Thursday, a comprehensive plan seeking to address all elements of the city’s housing crisis.

Upon learning the city’s new housing strategy proposes looking at restricting foreign ownership, Andy Yan told Postmedia: “It’s interesting … It’s the admission that you have a problem. As with many things in life, that’s the first step.”

“This does mark a bit of a sea change,” said Yan, now the director of Simon Fraser University’s City Program. “From the accusations that observers and critics are racists, to the realization that Vancouver does indeed sit in this global marketplace for residential real estate, through which local incomes can’t compete.”

The idea to investigate foreign ownership restrictions is one of a number of “tax and financial regulations to limit the commodification of housing and land for speculative investment” proposed in the city’s report, along with ideas like introducing a speculation and flipping tax, reforming federal and provincial tax regulations and seeking to “close loopholes.”

These proposals are designated as “high” priority in the city report, to be addressed in the first year of the 10-year plan.

Dan Garrison, Vancouver’s assistant director of housing policy, said Friday: “Our thinking on that has evolved in the last number of years … Whether it’s foreign ownership or investment from other sources, certainly that piece around investment driving housing costs is something that’s really ramped up in the public mind in the last couple of years.”

The city report raises the idea of investigating the examples of Australia and New Zealand, two countries where foreign ownership has been a red-button issue, that have both taken steps to limit foreign ownership.

B.C. Finance Minister Carole James is “reviewing the tax system and evaluating existing and proposed housing tax measures,” including the role of speculation in B.C.’s housing market, as part of the planning for the 2018 budget, James said Friday in an emailed statement.

“However,” James said, “a ban on foreign ownership of homes is not being considered as part of Budget 2018 planning. British Columbians are proud to welcome thousands of newcomers each year who help strengthen our province.”

– excerpt from ‘Sea change’: Vancouver considers ‘restricting property ownership by non-permanent residents’, Dan Fumano, Vancouver Sun 25 Nov 2017

Information From Outside The Vancouver RE Bubble – U.S. Senator Lives In (don’t laugh) $500K Home

The story ‘Rand Paul is tackled from behind and ATTACKED by his Democrat-voting doctor neighbor while mowing the lawn at his home in exclusive Kentucky gated community’ [Daily Mail, 4 Nov 2017] is weird from a number of perspectives, but, viewing it from the epicentre of the Vancouver RE cult, one truly bizarre piece of info leaped out at us… Rand Paul is a US senator, and his “exclusive Kentucky gated community home” (photo above) “is worth around $500,000”. Surely this cannot be correct! Somebody must have dropped a zero. Embarrassing.

“The Position Remains Unfilled”

“I have spent time in New York, London, San Francisco, Boston, as well as worked and interviewed in each. I also have discussed the experiences of multiple friends who used to live here and who now live in these places. Forget not being in the same ballpark. Vancouver isn’t even playing the same sport. All of those cities have far, far more opportunities than here – and far better compensation. The only thing Vancouver shares with them is high real estate prices.

Most people who have worked with executive search firms or are attempting to staff a mid-to-senior-level positions with non-local talent are having a devil of a time doing so. The most recent story I heard was at a friend’s company, where they were trying to staff a VP vacancy. The assessment of the outside international executive search team was that the proposed salary – based on the desired skill-set, the size of the organization, and the cost of living here – was around half a million short of where it needed to be. Yet the company simply didn’t have the ability to go higher. Thus, the position remains unfilled. I’ll grant you that there can be some alchemy that goes into the numbers used in these executive searches, but I have heard this same sort of shortfall in multiple other instances now.

You take a growing number of stories like those, stories about being unable to hire bar staff at $18/ hour, and everything in between – and you’re left with a failing community. The moment sharks start circling and making an actual concerted movement to entice young locals away – showing them just how much better they can do – this goes from being a gradually escalating problem to a full blown crisis in the private and public sector.”

– Royce McCutcheon, commenting at VREAA, 6 Nov 2017

Jessica Barrett – ‘I Left Vancouver Because Vancouver Left Me’ – “Like Living On An Abandoned Film Set.”

“I was, by many standards, the definition of success in Vancouver. I had a permanent, full-time job at the top of my field as senior editor of Vancouver Magazine, I had a rich network of professional connections, a solid group of close friends, and stable, albeit cramped and expensive, rental housing. Yet my entire life felt like a struggle. …

I quickly found the city I’d returned to had changed — and not just in the way that condo towers had supplanted even more vacant lots, old houses or beloved music venues. The tone had turned hostile. Property values, ever the stuff of shock and awe, had begun to skyrocket, defying even the most bullish predictions. Then the “million dollar line” moved out of Vancouver, erasing the division between east and west on the affordability scale. The revelation gave rise to a #donthave1million social media campaign which, for about a minute, became something of a millennial rallying cry. The response from the city’s powerbrokers — developers, newspaper columnists, etc. — was by and large blunt and cruel: if young people couldn’t afford it here, they should just leave. I shot back with a column detailing the absurdity of a city that is simply OK with the fact that its young cannot afford to live there and mused about whether it was time for me to leave for more welcoming pastures. …

My year away had opened my eyes to the fact that other cities also offered the uber-modern urban experience that Vancouver — ever narcissistic in its examinations — likes to think it has a lock on. …

This time, finding a place for my newly formed family of three —my boyfriend, me and his dog — was defeating and degrading. My place didn’t allow pets so staying put wasn’t an option. It took us four months to find a dog-friendly apartment in our price range with a reasonable amount of space (i.e. more than 450 square feet). In the two years since my last search, the rental market seemed to have gone completely insane. Half the listings we came across were scams, and apartments in once-affordable areas of the city, like the West End, or Main Street, were going for nearly $2,000 a month. Landlords seemed to demand everything just short of a claim on your firstborn child to consider you a serious contender. One woman refused us because I wouldn’t hand over my unredacted bank statements as proof of income to a total stranger.

While we searched we sublet, put our stuff in storage and lived out of boxes and slept on blowup air mattresses in bare rooms. My boyfriend started looking for work as a graphic designer and found the average pay in Vancouver to be $10,000 to $15,000 less than the same kind of work in Calgary, which, it bears noting, was in the middle of a recession at the time. Meanwhile, I had started my new job, which I loved, but the stress and instability of our housing situation made it difficult to focus on the demands of this new, high-stress position. …

My own collapse came when my partner declared that, although he did not wish to end our relationship, he couldn’t stay in Vancouver. I couldn’t fault him for a single reason he gave. We had finally landed in a 600 square foot coach house behind a mansion in Shaughnessy. It had a fancy address but the place itself was falling apart. The windows, which had been painted shut when we moved in, were now wedged open and wouldn’t close; the dishwasher (a major luxury we were excited to have) had broken and become a mildew factory, the door would only close when locked and would only lock if I heaved on it with my entire body weight. The heater in the bedroom buzzed so loud that I had to wear earplugs while I slept and we didn’t have a smoke detector. There was no storage, no place to put a kitchen table and nowhere else for us to go. For this, we paid $1,700 a month to a woman worth millions who clearly didn’t need the rent. It was obvious we were paying her to be onsite security for the winter months she spent in California.

The neighbourhood itself was like living on an abandoned film set. Aside from our landlord, we only ever saw construction workers, landscapers, and on occasion, the squatters who lived in the empty mansion across the street — just a line on someone’s investment sheet somewhere.”

– excerpts and photo from ‘I Left Vancouver Because Vancouver Left Me’, Jessica Barrett, The Tyee, 30 Oct 2017 [hat-tip Keith]

The whole Tyee piece is a must read.
Even for those of us familiar with all of the themes, this is a gutting story. The city really is hollowing itself out.
Greed and influence seem to have taken an even firmer grip of the reins and all momentum now is towards more and more and more of the same.
Perhaps a phoenix will rise out of the aftermath of a massive price crash.
Perhaps, later, Jessica and her family will come back. But I suspect she won’t, even if Vancouver miraculously becomes more hospitable, because she will have built a good life in Calgary (and Calgary will be the better for it).
– vreaa

“I’ve thought since early 2010 that Vancouver housing was in a bubble, and have refused to buy a house for this reason. I’ve felt that the risk of mean-reversion was far higher than the risk of missing the upside.”

“It’s all a speculative bubble. End of story. This includes housing prices in Vancouver (and elsewhere in Canada), as well as The Everything Bubble.

Any fool can lease a high end car. It doesn’t make you rich. It makes you fake – you live in a world of make-believe, which has been working out fine so far. But, all the wealth effect of rising housing prices here can be reversed in a heartbeat.

All bubbles mean-revert. Always. And the results are phenomenally painful, especially to the late-comers who thought the party would go on forever.

I’ve thought since early 2010 that Vancouver housing was in a bubble, and have refused to buy a house for this reason. I’ve felt that the risk of mean-reversion was far higher than the risk of missing the upside. Of course, I didn’t foresee interest rates staying at emergency levels for so long, and more stupidly, being actually lowered in 2015. I don’t really feel badly for having not bought, as it’s impossible to time the market and we could easily have been buying right at the peak at any time in the last 7 years. But, emotionally, I very much want to buy a house, so that my kids can grow up with better stability (my 7 year old is already living in her third rental house). Not that owning a house is a sign of stability, and our family’s/our marriage’s stability have not really been impacted by renting, but moving frequently is a huge drain of time and money. (and our credit scores are 832/850, with six figure investments/retirement savings, so we could buy if it made sense).

Now that Canadian (and Vancouver) real estate appears to have peaked and to be dropping though, I’m questioning if I even want to buy in the Lower Mainland in the foreseeable future. That would be buying into a declining asset class, which could even drop below the mean and stay there long term, due to upcoming structural demographic problems. I know this is considered impossible by the vast majority of Canadians, but if they would read about (1) asset bubbles, and (2) Japan’s economic situation for the last 20 years, a few might understand what I’m talking about.

My opinion is that, while both overseas buyers and local speculators have been absolutely desperate to get into the Vancouver housing casino game, that solid and sustained drops in prices here will have an ice water effect on their FOMO. I think that, like speculators everywhere, they will not want to actually lose money, and will do their very best to get their money out if at all possible. Those who can’t will ride it down. As it drops, the flood of speculative/store-of-value foreign “investors” will run, not walk, away from Vancouver and into safer markets in other countries.

Although I’m a 3th generation Canadian, born in Vancouver, I have lived in 4 other countries, and I understand there’s nothing magical about Vancouver. There are many special places around the world. Our ease of money laundering, ease of bypassing inconvenient and toothless taxation laws, and perceived strong laws and banking system have made us a magnet for all kinds of stolen money worldwide, money that in fairness should be helping to increase living standards in the countries of origin, not enriching a lucky corrupt few who managed to smuggle it out.

Please don’t see this as racist or against any particular ethnic or country group – I’m strongly opposed to corruption worldwide, and while I’m under no illusions, one of the things I love about Canada (and most of the other developed countries) is that levels of corruption are far lower here. You can be pretty sure that the police will help you when you need them, (without incentive payments), and not let you get away with things you shouldn’t, just because you’re rich. I welcome productive, honestly-earned foreign investment in Canada, and welcome productive, committed immigrants.

All those flashy cars bought for cash, top end clothing and jewellery being bought, dollars splashed around by young “rich” people? Well, when the money comes from dubious sources from one’s parents, it’s easy come, easy go. Or, it’s fake – the truly rich would not need to mortgage their purchases of Vancouver property, or lease those high end cars. But then, the truly rich don’t feel the need to buy such flashy excess.

Additionally, I am horrified at the massive expansion of credit and therefore debtload of all levels, worldwide – individuals, households, corporations, municipal and provincial governments. It is unprecedented and shocking — and unrepayable.

I see the result as nothing short of total economic collapse. The party simply can’t go on forever. “You can’t cure debt with more debt”. And, you can’t really inflate your way out of it, when trillions of QE mysteriously has not resulted in more than very minimal inflation. No matter how governments worldwide may try, I can’t see any way to avoid collapse, deflation, and depression. This is a terrible future vision, and I’m very saddened for the fate of my young children, and their possible children and so on. I worry so much that they won’t have health care when they need it, and that their safety will be at risk from desperate idiots who didn’t have the forethought to plan ahead and not consume beyond what they could afford. I worry about what we’re going to do when faced with seeing neighbours’ children going hungry – I can’t stand to see children hungry, but I can’t possibly feed them all.

It comes at a very bad time already, with climate change (yes, eventually the naysayers will have to admit it’s happening, whether they ever admit to the anthropogenic aspect of it or not) becoming an existential threat to populations worldwide. All it will take is one epidemic virus, with no money left to fight it, to devastate a large swath of humanity (not to mention the huge damage that so many billions of humans have already caused to every other form of life on this planet).

I’m sorry to be such a doom-and-gloomer, but I wish I could see a way forward for humanity that didn’t have this outcome. Yes, humans are incredibly adaptable and clever, especially in coming up with insane financial weapons of mass destruction (like CDOs, CDS, derivatives, rehypothecation, and all the other things that keep me up at night). These are nothing more than clever ways to transfer money from large numbers of middle class people/taxpayers to a small set of people who know how to play the game very well.

I’m not left wing, nor right wing, just somewhere in the middle like most Canadians, but I’m appalled at what we are doing to ourselves by taking on unrepayable debt just to keep up with the Joneses, to pretend we have lifestyles which we haven’t actually earned. This debt is merely pulling demand from the future, and it won’t be there when we need it – in the future, we can’t rely on the “consumer” to support our GDP growth or increasing quality of life. (and, nor is infinite growth in a finite world a real solution either)

Sadly, I can only see a return to a much more hand-to-mouth existence for much of the population of the developed world, and an even worse existence for the bulk of the world’s already poor and starving populations. The can can only be kicked down the road for so long. We just can’t extend and pretend forever, as much as our politicians don’t want to admit. I sure hope I’m wrong though.”

– ‘JCH’, commenting at VREAA, 28 Oct 2017

Many thanks, JCH. – vreaa

“It is very difficult to live here.”

“Famously liveable and famously unaffordable.”

“For nearly 40 years from his vantage point at the top of the Empire Landmark Hotel, Yunus Khan has watched Vancouver grow up. “You would barely recognise it,” he says of the city as it looked when he took his first job at the hotel, doing maintenance. Beyond the 42nd-storey window, the jagged silhouette of the North Shore mountains, the lush surprise of Stanley Park, and the cobalt passage of Burrard Inlet are just about the only landmarks that remain unchanged.

“These are all new,” Khan says, indicating a cluster of condo towers and the ultra-modern Sheraton Vancouver Wall Centre further south. Construction cranes rise around them. “Any older building you see now, it’s going. They break it down, make a high rise.”

What the view from the Empire Landmark offers is perspective: on the Canadian city’s past, present, and future. But not for much longer. The hotel, a downtown Brutalist icon from the 1970s, closes for good on 30 September. It will be demolished to make way for a proposed luxury condo development.

Khan plans to retire. He won’t miss the 60-mile round trip commute from the outer suburbs, or the frantic pace of life downtown. “Vancouver used to be a small town, easy,” he says. Now, you see all these tall buildings with the glass, it looks a bit more beautiful. But it is very difficult to live here.”

– image and text from ”We stand to wipe out a whole era’: how the 1970s could vanish from Vancouver’, Tyler Stiem, The Guardian, 27 Sept 2017 [hat-tip The (indestructible) Auteur]

And from the comments below the same piece:
‘I have visited Vancouver at least every decade and loved the place up until last year when I found that the downtown/Gastown area was being overtaken by gold-plated glass festooned high end shops a la Rodeo Drive. FFS. Oh, and there is a new Trump Tower as well. The Seattle waterfront area is going the same way, albeit without the Trump Tower. I see a pattern of homogenization of our cities. Screw that. Vive le difference. – TeeJayzed Addy

“We want young people to buy Real Estate.” – Vancouver’s Mayor

Saturn devouring his children – Goya

“In a statement released on Friday, Robertson says the proposed policy, which he intends to put in place by the end of the year, will give priority to local residents for sales of new homes in multi-family developments as part of the city’s new 10-year housing strategy. The city defines local residents as people who live and work in Metro Vancouver and whose permanent address and place of work is in the region, regardless of citizenship.

“My priority as mayor is to deliver new housing supply that is first and foremost for people who live and work in Vancouver, and this motion aims to give local residents the first opportunity to purchase a new home,” said Robertson. “In Vancouver’s red-hot housing market, local employers are crunched to retain talent, whether they’re doctors, tech workers, retailers, firefighters, teachers or nurses. I regularly hear stories about people who work in Vancouver, but are forced to move elsewhere in the region because they can’t find a place to live. At a time when we are seeing record levels of housing construction, local residents should be able to get the first shot at purchasing a home in new developments.”

“Vancouver’s Housing Vancouver strategy seeks to dramatically increase the supply of new housing, but it needs to be the right supply — homes that are affordable for people who live and work in Vancouver,” said Robertson. “We want young people and families to put down roots in the city. This motion will support that by helping make sure people who live and work here get the first opportunity to buy into new developments in Vancouver.”

– from ‘Vancouver’s mayor makes move to give locals first crack at condo pre-sales’, Scott Brown, Vancouver Sun 6 Oct 2017

Allowing our young to be first in line to buy preposterously overpriced RE, using large mortgages, will make them miserable, indentured wage slaves for life.
This will not solve Vancouver’s housing challenges, but will further impoverish our social environment.
The only ‘solution’ will be a bursting of the bubble, with a very large price crash, and a flushing out of all speculation in the market.
Such a price correction will return all properties to utility value, which is healthy.
Understandably, such a crash will never be facilitated by any incumbent government, at any level, and of any stripe.
Until then, expect many levels of government to continue to play ‘re-arrange the deckchairs on the Titanic’ with ineffectual policy tweaks (such as the one the mayor describes above).
– vreaa

“Vancouver RE Balloon Pricked; Median Price Detached Home Down >$500,000 to $1.7 million; Prices Need To Be Slashed”

Strong signs are appearing that Metro Vancouver’s real-estate balloon has indeed been pricked by China’s heightened capital controls.
Demand for multi-million dollar dwellings in Metro Vancouver is falling. “All the high-end stuff is sluggish,” says Vancouver realtor-analyst Steve Saretsky.
Sales volumes and prices on detached houses are especially dropping on the west side of Vancouver, in Richmond and in West Vancouver, where Mainland Chinese buyers had been active buying and building mansions.
Real Estate Association of Greater Vancouver figures show the median price of a detached home is down more than $500,000 since February, to $1.7 million.
Veteran Canadian real-estate data analyst Stephen Punwasi also has little doubt “Chinese capital is having a tougher time getting out of China” since leaders introduced tighter controls in January.
“Vancouver locals selling $3 million bungalows are going to have trouble finding an alternative to foreign urban land buyers, so prices need to be slashed,” Punwasi said.
– from ‘Is China bursting Vancouver’s housing bubble?’, Douglas Todd, 6 Oct 2017 [hat-tip to ‘The (indefatigable) Auteur’]

Pretty strong stuff for the Vancouver Sun.
This must give speculators (all buyers) pause.
23% down in 6 months? Gee.
Will anybody buy at these prices if they anticipate/fear future flat or decreased prices? We’d guess not, but we’ll have to wait and see how many “bargain hunters” step up to “buy the dip”.
Please see the last post for our discussion of why this is arguably an important juncture.
– vreaa

PS and BTW: The Auteur also kindly referenced a G&M article on how the BC NDP has essentially been petrified when it comes to promised housing action; in this regard we’d say this: No government can legislate or plan BC out of a gigantic speculative bubble in housing prices. There is no way to do that. Prices have become way too far removed from those determined by simple utility. The only way out is by a price crash (with no bailouts or any other silliness). That will solve the problem for a generation.

Detached Price Trend Remains Up, For Now. Speculators Hold Their Breath?

“Detached homes made up 30 per cent of all sales in September and represented 62 per cent [5,869] of all the homes listed for sale on the MLS® [9,466]. This dynamic has slowed the pace of upward pressure that we’ve seen on detached home prices in our market over the last few years.”
The sales-to-active listings ratio for September 2017 for detached homes is 14.6 per cent …
The benchmark price for detached properties is $1,617,300. This represents a 2.9 per cent increase from September 2016.
– from the REBGV Sept 2017 stats package

“Average prices in British Columbia are forecast to grow 2.2 per cent this year and remain unchanged in 2018, CREA said.”
– from ‘CREA cuts 2017/2018 outlook for home sales in Canada’, G&M, 15 Sep 2017

To reiterate, from our last post:
In a market that has come to expect 7% growth p.a. (with peaks to 25% p.a. being seen as normal) a substantial period of flat price growth will feel odd; almost like a contraction.
The eternal question for Vancouver RE is: “Will people be willing to step up and buy if prices are not rising?”
This is the essence of our longstanding belief that “all buyers are speculators” — we believe that people buy at these price levels not for utility, but largely for anticipated price growth. We believe they certainly would not be buying without anticipated price growth.

So, what will happen to Vancouver RE prices if prices stop rising? What happens if the speculative component of buying disappears?
We believe that this will result in prices dropping to a level that reflects the value of the utility of the property, and that currently such values are far, far below asking prices.

It’s too early to say, but it does seem that prices in some sectors of the market have stagnated.
Talk at the corner of Rumour & Grapevine is of $3M, $4M, $4M+ – ask-price homes getting no interest whatsoever, and being removed from market. Also of condos over $1M getting little interest. If the supply of eager buyers is limitless, why is this happening?
Perhaps that house isn’t ‘worth’ $4.5M if there is no longer a chance of it being ‘worth’ $5.5M next year. Perhaps its actually ‘worth’ closer to $1.5M (a price that would already value it richly for its actual utility), or even (preposterously!) $1M if we consider local incomes and historic norms. [This argument can be scaled for all levels of the market].

– vreaa

“Am I Buying This Home To Use It, Or For Anticipated Price Growth?”

Gambling chit or home?

“Average prices in British Columbia are forecast to grow 2.2 per cent this year and remain unchanged in 2018, CREA said.”
– from ‘CREA cuts 2017/2018 outlook for home sales in Canada’, G&M, 15 Sep 2017

“Paradise, meet purgatory: Average Metro earner reaps $72,000 a year, pays $1.4 million for a home”
– headline from The Province, 14 Sep 2017 [hat-tip to brian]

In a market that has come to expect 7% growth p.a. (with peaks to 25% p.a. being seen as normal) a substantial period of flat price growth will feel odd; almost like a contraction.
The eternal question for Vancouver RE is: “Will people be willing to step up and buy if prices are not rising?”
This is the essence of our longstanding belief that “all buyers are speculators” — we believe that people buy at these price levels not for utility, but largely for anticipated price growth. We believe they certainly would not be buying without anticipated price growth.

So, what will happen to Vancouver RE prices if prices stop rising? What happens if the speculative component of buying disappears?
We believe that this will result in prices dropping to a level that reflects the value of the utility of the property, and that currently such values are far, far below asking prices.

It’s too early to say, but it does seem that prices in some sectors of the market have stagnated.
Talk at the corner of Rumour & Grapevine is of $3M, $4M, $4M+ – ask-price homes getting no interest whatsoever, and being removed from market. Also of condos over $1M getting little interest. If the supply of eager buyers is limitless, why is this happening?
Perhaps that house isn’t ‘worth’ $4.5M if there is no longer a chance of it being ‘worth’ $5.5M next year. Perhaps its actually ‘worth’ closer to $1.5M (a price that would already value it richly for its actual utility), or even (preposterously!) $1M if we consider local incomes and historic norms. [This argument can be scaled for all levels of the market].

– vreaa

Postscript anecdote:
“I’ve started my active research in the detached market in my area. Inquired today about a detached 3br house in Langley (BC) nice neighbourhood, south-facing yard. Last Saturday we missed the open house, so I called the following Wednesday and inquired if they had taken any offers. “They listed after the long weekend and were going to take offers on the Tuesday but received no offers.” To which I replied “So do you think we could offer below asking, if we were interested?” He replied “Oh yea, definitely.”
– from PupPatrol 09.15.17 at 6:04 pm at greaterfool.com

“I’d been brainwashed by this market into thinking that paying for a million-dollar home means getting a total dump” … “When housing is so unaffordable that you drive out people who hold up the fabric of society, what’s going to happen?”

“Vancouver has become a hotel.” – Bing Thom, architect

“A family from England’s Midlands region arrived in Vancouver last July. The professional couple came here for work and set about looking for a house to purchase for their family of four.
After viewing a series of overpriced properties on the city’s east side, they plan to give it three more months. If they still can’t find anything, they consider Ontario.
K. Singh says her family lived well in England; both she and her husband make white-collar salaries. But in Vancouver, they have had to adjust their standard of living. Another family – friends of theirs who moved from England at the same time – have already returned.
“I had heard rumours. I wasn’t entirely surprised, but I was taken aback by the intensity of the situation, really,” Ms. Singh says. “I didn’t think it would be this bad. Some of our friends decided to go to Australia and they didn’t have the same battle.
“We are ordinary working people. All our taxes are paid – all kosher. When you do that, you don’t usually have a huge amount of money to begin with. We suffered a hit because of Brexit and the pound fell drastically.
“I worry about where society is going, because when it gets to that level [of unaffordability] and you drive out the people who hold up the fabric of society, what’s going to happen?”.
…
Ms. Singh says her family is too large for a condo and she has friends and family that want to visit from England, so she needs a house, but nothing fancy. She doesn’t think that’s a tall order.
“You’ve got two sets of people in this world,” she says. “There are the people who want to get what they can for themselves – nothing will ever be enough for them.
“I fall into the second bracket: you just want to pay the bills, have a bit for a rainy day, live comfortably with family, and have friends and family to come and stay.
“That’s not too much to ask, is it?”

—

Daina Lawrence found an east-side house for her young family after eight weeks of searching.
“After we went through the process, I realized that I’d been sort of brainwashed by this market into thinking that paying for a million-dollar home means getting a total dump,” Ms. Lawrence says. “I came to think of that as normal – which is brutal in hindsight.”

– two anecdotes from ‘Mouldy mini-mansions, pricey average homes: Vancouver house hunting is a wild ride’, Kery Gold, G&M, 25 Aug 2017 [hat-tip The Auteur]

Stoking The Housing Boom – “B.C. should close the bare-trust loophole for owning properties. Former Liberal finance minister Mike de Jong promised to get rid of it, but he reneged.”

The phenomenal popularity of Canada’s new 10-year visas is a key factor behind the latest housing booms in Vancouver and Toronto, say immigration specialists.
“I often travel to China, where I see the great pride many take in investing their money in Canada” —­ particularly by taking advantage of 10-year visas to buy real estate, said George Lee, a Burnaby immigration lawyer.
In 2015, Canadian immigration officials issued 390,000 10-year, multiple-entry visas to residents of Mainland China, the largest cohort, with another 162,000 going to people from India.
The former Conservative government began offering the 10-year visas in February 2014. As a result, in that first year, the number of travel visas handed to Chinese nationals tripled to 337,000.
Lee says the visas, which allow people to travel freely to Canada each year and stay for at least six months at a time, have sparked an explosion in foreign travel and property speculation in Canada, particularly from China.
The multiple-entry visas have caused a migration “chain reaction,” Lee said, which often leads to international students becoming proxies for offshore real-estate investors.
…
Hyman is particularly concerned about how a diverse range of real-estate speculators in B.C. use various means to obscure the legal ownership of property.
A multiple-entry visa offers “many people exactly what they want,” said Hyman.
“They want to be seen as tourists. They want to be off the radar of the Canada Revenue Agency,” including by being able to claim they’re not residents of Canada for income tax purposes.
The multiple-entry visa gives wealthy foreign nationals increasing opportunities to use their low-income-earning offspring and others as proxies, sometimes called “nominees,” to buy Canadian property on their behalf, according to Lee and Hyman.
Many wealthy foreign nationals employ their international-student children as channels for investing in real estate, they say, noting there are 130,000 foreign students in B.C., 51,000 of whom are from Mainland China.
“Some people are transferring their wealth to their dependents and then relinquishing their permanent resident status in Canada. They’re applying instead for 10-year visitors’ visas,” Hyman said.
He is particularly aware of foreign nationals, as well as domestic Canadians, using “bare trusts” and other loopholes to purchase properties and avoid paying taxes in B.C.
His worries echo a Transparency International report that says stronger tax enforcement is desperately needed in Canada and especially for Metro Vancouver, where governments can’t identify the owners of almost half the region’s 100 most valuable homes.
“B.C. is losing tens of billions of dollars in unpaid taxes related to property,” said Hyman.
Too many dubious ways exist — the immigration lawyer said — for real estate investors to obscure their identities and avoid paying Canadian income taxes, B.C.’s 15-per cent foreign buyers tax, B.C.’s property transfer tax or capital gains tax on real-estate profits.
To combat exploitation of Metro Vancouver’s housing market, Hyman said, one of the first things the new NDP government of B.C. should do is close the bare-trust loophole for owning properties.
Former B.C. Liberal finance minister Mike de Jong promised in October, 2015, to get rid of the loophole, said Hymen, but he reneged.
The Ontario government is far ahead of B.C. on this regulation, Hyman said. It closed the loophole in 1983.

– from ‘New 10-year visas stoke housing booms in Vancouver and Toronto’, Douglas Todd, Vancouver Sun, 6 Aug 2017

Housing accounted for the bulk of Canada’s economic growth last year. Brace for the end of the boom.

“Canada’s long housing boom has drawn thousands into the sector, from realtors and home stagers to construction workers, and a looming slowdown threatens to trigger an exodus that could wipe out many of those jobs and force the economy to shift down.

While housing has long been the main engine of Canadian growth, economists say a drop in home sales has already started to weigh on the economy and if price declines follow, consumer spending and jobs will suffer.

“To a lot of people, it is a get-rich-quick scheme,” Toronto realtor David Fleming said about the real estate market. “But history shows when the market turns, half of the agents leave.”

Realtors’ ranks in Canada’s largest city and hottest housing market have surged 77 percent since 2008 to more than 48,000 – nearly 10 times the pace of Canadian job growth. Nationwide, that number has risen 26.9 percent.

By comparison, there are over 13,500 realtors in Chicago, according to the Chicago Association of Realtors.

With Canadian home construction jobs rising at nearly the same pace as real estate jobs, housing has become the top driver of employment and economic growth, accounting for the bulk of Canada’s economic growth last year.

As the nearly one million housing sector jobs now far outstrip those in oil and gas extraction and mining combined and approach the size of the manufacturing sector, economists brace for a painful reckoning if the housing slowdown turns into a long correction.

More than half of the analysts polled by Reuters in May said a sharp housing correction was somewhat or very likely in Toronto and Vancouver, but unlikely nationally.

Recent data showed nation-wide home resales fell 6.7 percent in June, the largest monthly drop since 2010 and the third straight monthly decline as sales in Toronto tumbled, and sales are expected to slow further as interest rates rise.

While most housing bears have been focusing on how much home prices could drop, economists are also trying to work out how badly a resulting decline in consumer spending and housing jobs could hurt the broad economy. …

Veteran realtors who have seen the industry swell with inexperienced agents have no doubts that a slowdown will decimate their ranks.

“It is definitely overpopulated,” said Shawn Zigelstein, a realtor in the York Region, north of Toronto. “A downturn will weed out of some of those agents who got into the business for the wrong reasons.”

Already, many realtors are struggling in the crowded market. Nearly half of Toronto’s licensed realtors did fewer than two deals last year, according to Brian Torry, general manager at Bosley Real Estate in Toronto. Less than a third did five or more transactions.

“It is a tough industry to break into,” said Jared Gardner, 38, who got his real estate license last year and works in the Toronto area.

Fleming believes many agents are already making less than minimum wage once license, membership and brokerage fees are paid, and it can only get tougher if sales continue to dry up.”

– from ‘In Canada, a nation of realtors braces for the end of the boom’, Reuters, 1 Aug 2017

Mispricing of risk (too cheap money) has caused severe misallocation of resources, with speculators chasing hot sectors and being rewarded for risky behaviour. This has resulted in a ballooning of RE and related activities. Our economy has become overdependent on a concentration of activity, in an unsustainable fashion.
This phenomenon has been clear to some people for many years, yet it has been allowed to continue, encouraged even, because those with any control over monetary policy, the importing of money, or mortgage rates suffer conflicts of interest. The herd has been encouraged to run faster and faster, in one direction, and the imbalance has become more and more extreme.
This will all end. Laws of physics apply here as much as laws of economics – Canada can’t become a giant perpetual motion machine, with most of us doing nothing but selling houses to each other. Once the superficially ‘virtuous’ cycle, fueled by speculation, turns in the opposite direction, and becomes ‘vicious’, this sector collapse, and there will be all sorts of knock-on effects.
There will be great damage, but there will be good consequences, too:
The seemingly intractable housing ‘crisis’, that we now hear about constantly, will greatly benefit from a crash in prices. Housing that is priced close to those prices determined by fundamentals (the actual utility of the property) is healthy for an economy and a society.
– vreaa

Miloon Kothari, Former UN Investigator, Reviewing Vancouver Housing Crisis – “Hyper-speculation. Casino Capitalism. Gentrification. Collusion. Corruption. Criminal Investigations. A Lottery Which Reduces A Social Resource Like Housing To A Commodity.”

“Overall, I’m actually quite shocked on several fronts. One is that the housing crisis that I observed in 2007, 10 years ago, has become worse on virtually every level, whether you look at the level of homelessness, densification of poverty, the crisis of rental housing and the lack of housing options for low-income people. So that’s been quite surprising. These adverse housing and living conditions are partly fed by the hyper-speculation and gentrification you see all across the city.
I’m also quite disturbed by the fact that the city government, instead of playing the role of protecting housing options that lower-income people have, has been either through acts of commission or omission actually abetting this whole process. The kind of gentrification that you see happening in the Downtown Eastside, and that you see now in Chinatown is also being done through a process of rezoning, through the development of condominium buildings that drive up land values for adjacent areas. There doesn’t seem to be a commensurate attempt to increase the housing options for lower-income and modest-income people. You either see a shortage of shelters or inadequate conditions in shelters, a complete reduction in the number of single resident occupancy units, or the type of decrepit situation that you see at the Balmoral.
I don’t know what the logic is there, but [it’s] similar to the logic in other cities, where municipalities, in collusion with developers, deliberately let a particular area deteriorate and then it becomes an emergency. And then, when renovations happen, those properties don’t ever go back to the people who lived there before…”
—
“There’s no reason why the gentrification that is happening in the Downtown Eastside or Chinatown should be allowed. An entire area could be zoned off from this speculation to protect the low-income people living there. It has to be a political choice. It requires leadership at the political level. One can’t rely on the planners without the political sanctioning of such a policy. If you are doing rezoning, it could be limited to developing social housing for those most in need, not for the rich. A few token units for seniors and low-income people are insufficient. So I don’t see the city doing an adequate job in trying to stem that tide of gentrification.
The only conclusion you can reach is that there has to be collusion between the city machinery, developers, and obviously homeowners are de facto part of that too. That is who is benefiting from this system as it is. And it’s hurting the vast majority of the people who live here. We’re talking about millions and millions of dollars being made in this corrupt structure. People should be thoroughly embarrassed by this. If this were a similar situation in other countries, there would be investigations and hard questions being asked. Why are interest rates so low? Why are the banks being downgraded for being overexposed in the housing market? There should even be criminal investigations related to the real estate sector. The story of the unbridled real estate market in Vancouver is casino capitalism as its worst — a lottery which reduces a social resource like housing to a commodity.”

– from ‘Vancouver Housing Crisis ‘Worse on Virtually Every Level,’ Says Former UN Investigator’, an excellent interview with Miloon Kothari by Am Johal, The Tyee, 20 June 2017

‘Flip Vancouver’ Speculator Invite Flyer

– flyer targeting local RE speculators, found downtown June 2017, archived for the record [thanks to Westside Frank]

“Local Speculators Are Cashing In While We Blame Foreigners” and Other Truths – Geoff Dembicki, The Tyee

You’ve heard it a million times. The reason so few of us can afford Vancouver is because there aren’t enough new homes being built. This is the version of reality that real estate industry leaders and their political allies want us to believe.
But an investigation of the industry by The Tyee has revealed reality to be much more complex. Over the past six months I spoke at length with financial analysts, economists, industry consultants, realtors and many others to learn the true causes of Vancouver’s housing crisis and who is profiting from it. They were in broad agreement that real estate is at the centre of a massive realignment between our society’s rich and poor — and one that few leaders in the industry seem willing to publicly acknowledge. Here are the key takeaways from those conversations.

1. The industry no longer sells homes — it sells investments

Real estate has historically been a local industry. The people who buy and sell a city’s homes tended to live in that city. Yet that all began to change a decade or so ago. And one of the major reasons for it is a big shift in our global financial system. It’s a complicated subject. But what you need to know is that the global capital investors use to invest in things is growing much faster than the actual economy. There is so much capital, investors don’t know what to do with it all. Desperate for quick financial returns, many investors are pouring this capital into real estate, turning local markets into global investment opportunities. One of the results, according to trackers such as Bain & Company, is “skyrocketing home prices.”

2. Wealthy people are profiting from the housing crisis

The explosion of global capital coincided with an explosion of global wealth. Worldwide, the number of people worth $30 million or more has grown 60 per cent in the last 10 years. These elites have a different relationship to real estate than regular people. High housing prices aren’t a hindrance to the ultra-rich. The pricier homes become, the more desirable they are as a marker of social status. That’s why one top investor not long ago compared Vancouver condos to contemporary art. Rich people are less likely than the rest of us to live in the homes they purchase. A poll done by the group Knight Frank suggested the most popular reason rich people acquire real estate “is as an investment to sell in the future.” Which means they profit when prices rise.

3. Rapidly rising house prices are deepening class divides

Unaffordable homes are not just a drag on people’s incomes. The housing crisis is doing lasting damage to social mobility. If you are hoping to improve your income, your best bet these days is to live in — or relocate to — a large, globally connected city. Over 90 per cent of new jobs in Canada over the past several years were created in just three such cities: Vancouver, Toronto and Montreal. And of those, Vancouver has Canada’s fastest growing economy. But housing is so pricey that those opportunities are denied to many people. One real estate economist worries that “we are driving a very large wedge between the lowest income earners and the highest income earners.”

4. Industry leaders are convinced the middle class is dying

The real estate industry is aware social mobility is declining. Its leaders know there is huge demand for cheaper homes. But they prefer to profit from income inequality rather than doing anything about it. That’s one takeaway from a major real estate industry trends report produced by PwC and the Urban Land Institute. “The middle class has been hollowing out,” it concluded. With land prices going up in big cities, the industry is increasingly focused on building luxury homes for wealthy people. Not everyone thinks it’s a wise strategy. “Time will tell if that’s going to come back to haunt us,” said one CEO. “Not everybody makes $75,000 to $100,000 a year.”

5. Your intimate data is being used to drive home sales

Even if you don’t earn much money, you can still be valuable to the real estate industry as a source of data. It’s likely not news to you that almost everything you do online — and off — is tracked and sold to advertisers. But what is new is that the real estate industry is now trying to get in on the action. Companies are creating technology that mines public records and notifies realtors when a potential client gives birth, declares bankruptcy or files for divorce. Industry forecaster Swanepoel predicts “this technology will be huge.” But at what cost to privacy? Or our right to control our identities? “I don’t think anybody has the answer,” said one observer.

6. Political leaders aren’t telling the full story about housing

What we can be certain of is that politicians aren’t telling the full story about the true causes of unaffordability. British Columbia Premier Christy Clark has argued “the only way to really solve” the housing crisis is to build more condos. And during the provincial election, her BC Liberals took any chance they could to blame the red tape and protesters they claim are standing in the way. Yet the majority of new condo units are sold to speculators. More supply isn’t helping locals. The market does what it knows best: maximizing profits. Which is why industry insiders like Richard Wozny argue the “only group at fault are politicians” — those who know what the problem is but refuse to fix it.

7. Local speculators are cashing in while we blame foreigners

The most substantial step the BC Liberals took towards fixing Vancouver’s housing crisis was the 15 per cent Foreign Buyers Tax. At first the tax seemed to work: home sales and prices fell. But prices are once again rising. And this time transactions involving overseas buyers are at relative lows. “Everything we see suggests that there is a whole lot more domestic investment activity in the real estate sector than foreign investment,” said the head of Canada Mortgage and Housing Corp. Foreign money is a big cause of crazy home prices. But so are Canada’s historically low interest rates, which make it “almost stupid to not buy property,” argued the site Better Dwelling.

8. Income inequality is causing a boom in luxury retail

Real estate has become a zero-sum game in Vancouver. Those at the top are doing better than ever, while everyone else struggles. It’s a fair assessment of our wider economy. Recent data from Stats Canada showed that average Canadian incomes have stopped increasing. Yet the ranks of the ultra-rich in Canada are growing faster than in the U.S. — between 2006 and 2016, the number of people worth over $30 million rose 50 per cent in this country. These elites want to flaunt their wealth. And the boom of luxury retailers across the country is happy to oblige them. “High-end retail will prosper as the high-end population does well,” noted one real estate analyst.

9. People within the industry want serious solutions

What the May provincial election showed is that people across the province, but particularly in urban regions, want serious change. They are sick of being priced out of their cities. They’re fed up with an economy that privileges the wealthy. And they’re tired of being lied to. The NDP-Green coalition now has an opportunity to make things better. Leaders of the two parties promised housing policies that “will have an impact,” local realtor Steve Saretsky told The Tyee. He is one of many people within the real estate industry who supports solutions to our current housing crisis. “A lot of realtors I’ve spoken with want some sanity to the market,” he noted. “They know it isn’t sustainable.”

– text and image from ‘Nine Things the Real Estate Industry Doesn’t Want You to Know’, Geoff Dembicki, 19 Jun 2017 [an article important enough that we are archiving it here in its entirety] (hat-tip to Keith)

Longtime readers of this blog will be familiar with many of these factors.
A very good article and hats off to Geoff Dembicki for pursuing.
The potential future for our city is that it will either increasingly look more and more like a gated airport/casino, or it will suffer a massive RE price crash.
– vreaa

“Nuthin’ That A Good Ol’ 75%+ Price Crash Won’t Fix…” – BOC Governor Stephen Poloz *

(Yeah, the font is too small to read exactly, but, you get the idea.)

Massive and risky home loans are increasing in number across Metro Vancouver, while mortgage fraud cases are also on the rise, connected to the growth of so-called “shadow banking,” a Postmedia investigation shows.
The trend of increasingly risky loans underlying Metro Vancouver’s high home prices is illustrated by Bank of Canada figures that show the rapid growth since 2014 of large mortgages made to people with relatively low incomes.
This is a growing danger for Vancouver’s real estate market, because under new tighter lending standards introduced for banks in fall 2016, the Bank of Canada says that many of these big mortgages can no longer be insured, and won’t be issued again by federally regulated lenders.
As a result of the tighter federal lending rules, borrowers trying to buy million-dollar-plus properties in Vancouver’s market are increasingly taking out dangerous loans from shadow bankers in a fast-growing and poorly regulated financial market.
There is also evidence of growing links between shadow banks and traditional banks, according to the Bank of Canada’s June 2017 report, as people borrow large amounts from shadow lenders to use as down payments in order to qualify for lower-interest loans from federally regulated banks.
“Price increases in Vancouver and Toronto have an element of speculation to them,” Bank of Canada Governor Stephen Poloz said last week, while issuing the bank’s biannual financial system review. The review showed “riskier characteristics are increasingly evident” in new mortgages.
A December 2016 Bank of Canada report estimates shadow lenders now account for $1.1 trillion in debt — about half as much as the traditional banking sector — and that over the past decade “these new players have become more important and have changed the face of the Canadian mortgage market … (as) tightening bank regulation can lead to migration of activity from the traditional banking sector to the shadow banking sector.”
…
Postmedia’s review of over 30 regulatory or civil court cases shows a trend of allegations that home buyers and real estate professionals are involved in deceptive mortgage applications that include exaggerating the incomes of borrowers, forged documents of home ownership used by multiple borrowers to obtain mortgages, phoney claims of offshore assets used to back home loans, falsely inflated collateral accepted by subprime lenders to fund real estate development loans, and falsified CRA tax return documents.
For Hilliard MacBeth, an Alberta-based author and wealth manager, the Bank of Canada loan risk statistics and the related growth of shadow banking in Vancouver and Toronto herald a crisis.
“These properties in Vancouver are so expensive that you need people either laundering money or loan fraud or people borrowing such large amounts of money that should never be allowed, in order to keep it going,” MacBeth said. “If everyone is reporting their incomes honestly in Vancouver, there is no way that housing prices can stay where they are.”
– image and excerpts from ‘Risky mortgages, shadow bankers threaten Vancouver housing market’s stability’, Sam Cooper, Vancouver Sun, 16 Jun 2017 [hat-tip to The Auteur; and hats-off to Sam Cooper for pursuing this]
—
(* The author has exercised their right to poetic license in the writing of the title of this post.)
But, seriously now folks, notice how none of the mainstream players and commentators consider the option of a price crash as a solution to most of Vancouver’s housing problems.
A price crash, a real price crash, would flush out all speculators and all appetite for speculation for about two decades, perhaps even three. The price of accommodation in our fair city would drop to fair fundamental values (perhaps lower for a brief period). All housing would be used, as there would be no pie-in-the-sky jackpot for those who wanted to hold ‘units’ like poker chips. Lending would tighten to the point that one would have to be able to support a purchase with demonstrated income (novel idea!).
Sure, people would get hurt, but people are hurtin’ now, and who is to say who should be hurtin’ and who shouldn’t?
Real estate and related activity would drop from, what?.. its current inflated 30% of the economy to a more historically normal less than 10%. Kids would go to classes rather than smoking weed while tacking cheap shingles to roofs without harnesses. We’d be able to talk about things other than RE at BBQs (I know this may be difficult, but we can do it!). Our minds (and behaviours) would stop being blown and distorted by stories of professionals making more money via their modest house than that saved and invested from an entire 40 year career of honest earnings.
Homes would become homes again.
Vancouver would never be cheap, or ‘free’.. nobody’s expecting that. But ‘honest’ prices, determined by those who actually want to use properties and are prepared to fund them from their own actual funds, would be a very good thing for the longer term health of the city.
– vreaa

Reconsidering High-Rises – “These people do not want a neighbourhood. They want a locked gate, a gated community in the sky.”

How many times should we say it? Don’t build residential towers. Don’t make or let people live in them, least of all families. They are antisocial, high-maintenance, disempowering, unnecessary, mostly ugly, and they can never be truly safe. No tower is fireproof. No fire engine can reach up 20 storeys, period.
Towers are again raising their heads across the urban landscape, creatures of egotistical architects, greedy developers and priapic mayors. We gasp at their magnificence, their extravagance, their sheer height. Yet like Grenfell they are alien creatures in a British city. They do not converse with their context, they thumb their noses at it.
…
There is no need to build high at all. The developers’ cry, that cities must build high to “survive”, is self-serving rubbish, the more absurd when their towers are left half-empty. The principal reserve of residential space in British cities is derelict land and the under-occupation of existing houses. Unless we wish to build at the squalid densities of Mumbai and Hong Kong, high buildings require space round them and extensive ground servicing.
Hence the most “crowded” parts of London are not around towers but in eight-storey Victorian terraces. The boulevards of central Paris have treble London’s residential density without towers. Westminster council’s aborted Paddington Pole, at some 60 storeys, had fewer housing units than the high-density street housing suggested by its opponents. The tall blocks wanted by Boris Johnson for Clerkenwell’s Mount Pleasant estate are at a lower density than the low-rise town houses proposed by the consultants Create Streets.
Besides, people are entitled to the city they want. When in the 1980s Liverpool’s Militant movement asked Everton’s inhabitants what should be done with their towers, the reply was pull them down and give us back the streets. It was done.
Today’s surge in tower building – some 400 are in the pipeline of London’s uncontrolled property market – is driven by a quite different demand. It is from high-income migratory couples and foreign buy-to-leave investors. These people do not want a neighbourhood. Their social life is dispersed. They want a locked gate, a concierge and a pied-à-terre with a view. They want a gated community in the sky. When I moved from a tower flat to a street flat, I encountered a completely different city, exchanging what amounted to a self-catering hotel for a community of neighbours.

– image and excerpt from ‘The lesson from Grenfell is simple: stop building residential towers’, Simon Jenkins, The Guardian, 15 Jun 2017

Wake Up Canada! – Countries By Population Density

The red square on the map above represents the amount of space it would take to provide every household in Canada with a 66ftx122ft lot (which is twice the size of a standard Vancouver lot).

Population density (people per square km):

Monaco 18,589
Singapore 7,797
Hong Kong 6,644
Taiwan 650
South Korea 513
Netherlands 412
India 401
Israel 394
Philippines 347
Japan 335
United Kingdom 268
Germany 232
Nigeria 208
Italy 201
China 144
Denmark 134
France 123
Portugal 112
Jordan 111
Austria 105
Turkey 102
Egypt 93
Spain 92
Iraq 85
Greece 82
Morocco 77
Croatia 74
Mexico 63
Yemen 54
Iran 49
South Africa 43
United States 33
Canada 4 (yes, four — not a typo)

C’mon people! Open your eyes! Think!
– vreaa

Fun Facts:
Did you know that Vancouver Island is bigger than Belgium?
If the entire population of Canada moved to Vancouver Island, the population density there would be 1,145 people per square km.
If the entire population of Canada moved to the island of Newfoundland, the population density there would be identical to that of Japan (330 people per square km) and less than that of the Philippines, Israel, India, the Netherlands and South Korea.

Related post: ‘Land: Not Making Any More; Don’t Need To’ (2011)

The amount of space it would take to provide every person on the planet with a standard Vancouver size lot.