vreaa is taking liberties with this ‘end-of-the-decade’ note by departing from archiving anecdotes and instead posting a prediction:
A remarkable decade comes to a close. The dot.com bust, 9/11, the US sub-prime housing mess, extreme loonie volatility, failing forestry, commodity roller-coaster rides, the stock market crash of 2008, global recession. Each of these events affected Vancouver’s economy in an exceedingly limited fashion. The strength of the Real Estate market saw us through, and RE was without doubt the social and economic story of the decade. Now, factors threatening market health have steadily accumulated, and in our opinion they are approximating a critical mass. A virtuous cycle is about to turn vicious. All evidence suggests that Vancouver Real Estate is heading for a very significant bear market. Unfortunately, conditions have become so distorted that a simple return to normal will have profound and prolonged consequences for our city. The coming housing bust will effect all Vancouverites, and the fallout will not be good. For our city, this RE crash will quite likely be the defining social and economic event of the next decade. The factors in the drama are distilled below. Comments welcome. – vreaa
‘The Vancouver RE Bubble And Bust’
.Act One – Background Stories:
“Best Place On Earth”.
“Running Out Of Land”.
Chinese Economic Growth.
Wealthy Foreign Buyers.
2010 Winter Olympics.
Grow-Ops; “Multi-Billion Dollar Underground Economy”.
“Real Estate Always Goes Up In The Long Run”.
Free Money; Government Distortion Of Lending Risk.
‘Affordability’ Based Solely On Monthly Carrying Cost.
“Prices Are Going Up”; Bidding Wars.
RE Dominates Social Dialogue; “My Neighbour Made 10 Years’ Salary Flipping.”
Uncritical Media; Vested Interests; Government Compliance.
“Buy Now Or Be Priced Out Forever”, Buying Panic.
Housing Predominantly Valued As Wealth Accumulation Vehicle.
The Major Players:
Overextended Local RE Owners.
Local Investors; Households That Own Two or More Properties.
Developers, With Lots Of Product.
Speculators, Waiting To Run For The Exit.
Boomers, Waiting To Cash Out For Retirement.
Equity So Life Changing, I’ll Cash Out Soon
Foreign Investors, Who Have As Yet Seen Nothing But Vancouver Gains.
Act Two – The Stage Is Set; Current Conditions:
‘Rent to Price’ and ‘Income to Price’ Ratios At Historic Extremes; Both Suggest Housing > 2x Overvalued.
Ownership Levels At Record Highs.
Slow Economy, Strong Loonie, Moribund Industries.
Rising Unemployment, Negative Savings Rate, Dropping Disposable Income, Household Debt.
Misallocation of Capital.
Demand From The Future All Used Up; Depleted Pool Of FTBs.
Olympic Rental Market Underwhelming.
Double Top On Technical Analysis (For What That Is Worth).
Irrational Local Confidence; “We’re Different”; Complacency; Bull Hubris; Bear Capitulation.
Act Three – Coming Action:
Dropping Rents, Increasing Vacancy Rates, Worsening Fundamentals.
Mortgage Terms Tighten; At Least 10% Down, 30 Years Maximum Amortization.
Post-Olympic Blues; Olympic Nomad Exodus; Post-Olympic Supply.
Spring 2010 Supply.
Rising Interest Rates.
Price Falls Commence.
Rising Taxes, HST.
Prices Drop Below Jan-Mar 2009 Trough Lows (15% Off).
“Prices Are Going Down”; Dearth Of Bids.
Foreign Investor Supply
Seller Urgency; Irrational Fear.
Stagnation; Multi-Year Bear Market; BC Economy Struggles.
RE Vacates Social Dialogue; “My Neighbour Lost Everything .”
Housing Predominantly Valued As Shelter.
Prediction 2010-2019: A Real Estate Bear Market Will Be Vancouver’s Defining Social And Economic Event.
VREAA will continue to collect stories from the Vancouver RE Bubble ‘n Bust. Please post or e-mail stories from the trenches. The majority will be headlined. The blog posts read like a chronological series of stories. The category and tag sidebars allow you to access specific types of stories. -vreaa
[update: 31 Dec 2009, 'Foreign Investor Supply' added]
Regarding the possible relationship between Vancouver RE and Chinese stock & RE markets [27 March 2010].
The Stigma Of Renting In Vancouver [26 May 2010].
Price Drops Will Beget Price Drops [11 August 2010].
Regarding debt & the bubble, Two Charts: All You Need To Know About Canada’s Housing Bubble [26 August 2010].
A Housing Crash Rescue Cannot Be Legislated [6 Sep 2010].
Five Charts: Predicting Future Vancouver Housing Prices [11 Sep 2010].
Stealth Speculators & Shadow Inventory [17 Dec 2010].
“As frustrating as it may be” on the Wrong Side of the Bubble, the Bearish Position Remains Right [24 Jan 2011].
Disillusion Row, Numbers 1-12: Distracted and demoralized locals, many thinking of leaving. [2 Feb 2011]
On Government Intervention [16 Apr 2011]
The Third Fundamental: Total Housing Market Value to GDP – BC in the Stratosphere [7 May 2011]
It Is Dangerous To Blame The Consequences Of A Speculative Mania On One Sector Of Our Community: Let’s Make Sure We Don’t Do That. [18 May 2011]
Misallocation Of Human Capital During Speculative Bubbles – “What do you call societies that depart from meritocracy? What tends to happen to them in the long term?” [30 May 2011]
Was that it? ‘The Top’? [Possibly] [12 Oct 2011]
Land: Not Making Any More; Don’t Need To [9 Dec 2011]
Denying The Obvious Bubble – Close Your Eyes; Think Happy Thoughts; Don’t Use Nasty Words; Bad Things Will Go Away [7 Jan 2012]
Regarding the over-dependence of our economy on the property sector. [19 Jun 2012]