Pierre Marchildon, of Marchildon Property Investment Partners, posted a video commentary, ‘The Vancouver Real Estate “Bubble”, on youtube 7 Sep 2010 -
Excerpts:
“Today I want to talk to you about what’s happening in the Vancouver market, though it’s happening in every market all over the world. And it’s where the media… because they need news and they need something to talk about… sometimes things are really boring so they need to create some juicy stories… and, right now, because real estate prices in Vancouver, like in most cities across Canada, have climbed, in the last little while, they’re saying there’s a “bubble”… a “bubble” is about to burst… and it makes me laugh, because I have friends calling me and saying, “Hey, what do you think of this? The bubble is going to burst!”, and they want to sell their home, or rent..and you know, they’re not sure what to do… and I say that saying that “the bubble is going to burst” is like saying it’s going to rain soon and snow in a few months… well, yes, it’s called “winter”, it happens every year” … “Real estate has its seasons as well..”
“Today I’m going to show you… every decade there is bubbles… there is two, sometimes even three bubbles every decade…”
[Then proceeds to show on chart how average price of a Vancouver SFH doubled 1977-1987, 1987-1997, and 1997-2007]
“I know what you’re thinking… “I should have bought ten back then [1977]” …
“A bubble is when there is a major dramatic drop… but you can see there is a bunch of ups and downs on their way up. Every decade, real estate doubles… that’s the point of this exercise.”
“Don’t try to time the market.”
Video:
He he ho ho oh my. Business must be slow if he has time to put this together.
I love how RE guys say stuff like “And it’s where the media… because they need news and they need something to talk about… sometimes things are really boring so they need to create some juicy stories” yet when there were news stores like “Metro Vancouver home prices rise $222 per day” they all seemed to think it was business as usual and the media was just reporting proper news.
What a liar. Happening all over the world. Please look at Japan or Germany, where prices pretty much remained stagnant for the last 20 years. Or look at Detroit.
Prices go up with expansion of the economy, rising income or rising consumer credit as was the case in Japan before the 1990s. Then the economoy no longer expanded, credit ceased up as banks were no longer willing to lend, and incomes stagnated. Since then they’ve experienced deflation.
Please note, when investing in mutual funds, there is always a fine print that says, past performance should not be used as an indicator of future performance. Same principle should apply here.
Home prices in Japan were basically in freefall (ie. >60% decline from peak) from 1991 to 2005 and staged a modest recovery for a few years while RE everywhere else was on a rocketship to Pluto. I can only imagine how much worse things would have been had the Japanese not been the savers that they were. China is currently going through the same transformation, however, it is so much larger. It should also be interesting to see how average N. Americans fare as this bubble deflates given their overwhelming piles of debt and lack of savings.
Gosh, someone should send this guy on a speaking tour of the US.
I’m sure that lots of people, whose house values have gone down 70% over the last 5 years, would be comforted to know, that they only have another 5 years to go, until their houses are worth twice what they bought them for!
People should better not to trust sleek relators.
Six months ago these people fed the very same media daily news stories on how people are camping overnight to buy a downtown condos, how people should buy now before HST, etc. Now, when they are hurting, they blame the media.
Every decade real estate doubles? Sure, if you look at the chart and carefully pick your start points (not to mention, only consider prices since the 70s). But, yeah, whatever : “don’t try to time the market”.
This guy seems really interested in getting us to buy homes. Almost like he has some self interest in it or something….
I grew up in Kitsilano, in a house built in 1913 on West 7th. The block was comprised of sets of identical houses, 2 of each style. My parents bought the house in 1946, just after the war when prices were heating up up – they paid $3,000 for it (25′ lot). We researched the history of the house and it turned out that the houses sold for $3,000 new back in 1913 so I think that story about real estate doubling every ten years (or whatever it is he’s saying) has just been proven false.
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that tie he is wearing is buck heinous
The choice of starting points is really convenient for a person trying to convince others to invest. If he chose 1980 as a starting point, the result would have been a bit different, wouldn’t they? Then his discussion would go along the lines: if I didn’t buy in 1980, I could have bought the same house in 1986 for 1/2 price in real-terms. Of if I didn’t buy one in 1995, I would have had it for 2/3 of the original price in 1998. Or if I didn’t buy it in 2010, I could have bought it in 2015 for 1/2 -2/3 of the original price. Then the closing statement would change from “don’t try to time the market” to “try understanding the market and don’t listen to people whose wealth streams from successful sales of real-estate products”.
Toronto, your comment is bang on. Many people are faced with a bad case of generational myopia.
If you have never seen 17% mortgages, you don’t think they ever existed, much like the blindness to the cyclical nature of RE. Then add the baby boomer excess, and we have trouble here in River City.