Monthly Archives: June 2011

“If you’re willing to live in a home half or a third the size you could afford elsewhere, Vancouver is perfect.”

Dan Cooper at francesbula.com Jun 24, 2011 at 11:42 am-
“I live in a tiny condo in the Douglas Park neighbourhood, about halfway between the Mayor and the Premier if I have their locations correct. I can walk or at a pinch bike or bus to almost everything I could possibly want to do, be it stores, restaurants, sports venues, theatre and opera, shopping, parks, work, libraries or whatever else… Well, they did move the government map store from Broadway and Cambie out onto some such foresaken strip of road in the ‘burbs, but I’ve been managing somehow despite no longer having instant access to the latest geodesics. Anyway, my child continues to have a great experience in his local public school, again within walking distance. Did I mention the multiple community centres with all kinds of activity and sport options, ranging from a few blocks to a kilometre or so away? The youth sports teams? I would say that from a middle class perspective, Vancouver is a really good place to live, with the only drawback being the expense of housing. If you’re willing to live in a place half or a third the size you could afford elsewhere, Vancouver is perfect. For me, it’s been well worth that trade-off. As for visitors, as others have said they tend to go and do many of the same things I do when I’m relaxing: parks, seawall, Granville Island, theatre, restaurants…”

“If you’re willing to live in a place half or a third the size you could afford elsewhere, Vancouver is perfect.”
Hahahahaha? (Ummm… no..) Under normal circumstances, such a statement would produce a round of laughter, but Dan Cooper is serious. For him, the trade-off is worth it. For many others, not.
And, by the way, we co-incidentally agree with Dan’s math: Vancouver RE is overvalued by a factor of 2 to 3. – vreaa

CBC Runs Headline: “Canada’s ‘housing bubble’ deemed close to bursting”

CBC 29 June 2011[hat-tip ams] -
“Canada’s housing market is in a bubble that’s set to burst and prices could plunge by as much as 25 per cent, a major independent research firm warns.
“Housing valuations have lost all touch with fundamentals and household debt is at a record high,” economists at the research consultancy Capital Economics say in their most recent Canada Economic Outlook, issued Wednesday.
“Our fear is that, with the housing bubble now close to bursting and commodity prices retreating, Canada will go from leader to laggard.”
The report predicts a fall in house prices by as much as 25 per cent over the next three years.”

Many readers will already be familiar with the predictions from ‘Capital Economics': their economist David Madani made the 25%-drop prediction in a recent interview with Rob Carrick from the Globe and Mail.
We record the fact of the CBC story here, for the record, as it is noteworthy that they run a headline featuring the words ‘housing bubble’ and ‘bursting’. All part of the apparent steady increase in bubble-talk in MSM. – vreaa

UPDATE: This story was also run in the Vancouver Sun 29 Jun 2011, a similarly noteworthy occurrence. Interestingly, it isn’t featured on the online front page, or in the ‘Business’ headlines, but it was found second on the ‘most read’ sidebar.

“Dipped into the condo equity to the tune of $60K over the past four years; Won’t sell and rent because renting is just “throwing money away.” ”

TPFKAA at VREAA 23 Jun 2011 9:03am - “Got talking to a family I know. Two kids under five; a boy and a girl. The wife confided that they had dipped into the equity to the tune of 60,000 over the past four years just to make ends meet. 2 bedroom condo in 25 yo building, purchased in 2004 for 200k, now “worth” 350k, family income 3k/month net, mortgage payments 1500/month, strata fees 300, and special assessments rain down like riot debris. $900 last month, $2,000 a couple of months ago… She estimates a couple of k per year. A 2 br in same building costs $1200/month to rent. I asked why they don’t sell and rent for a while. She told me it is because the husband believes renting is just “throwing money away.” He wanted to sell and buy a house in Abbotsford about a year ago, but she did not want to leave the area they have lived in for 7 years. What is going to happen to this family if/when the equity disappears and no more RE_ATM? Even worse, their HELOCs may place them underwater.. and with a boy and a girl in a 2 br, that is no fun. What if rates rise? and the kicker… the sole income earner, the husband, works in construction. I don’t think they realise the dangers they are in thanks to being home”owners”.

Vancouver Westside Sales Drop Over 60% In One Month

Vancouver Westside, Month over Month:
SALES dropped over 60%:
28 April – 27 May 2011: 359 sales
28 May – 27 June 2011: 138 sales.
PRICES were pretty much flat through the period:
Average about $2.42M
Median about $2.15M
LISTINGS decreased from 1013 to 764

[numbers from yattermatters.com, thanks to Larry]

Start of seasonal summer slowdown, or beginning of buyer drought?
Who will be stepping up to take the über-jumbo-mortgages necessary to ‘buy’ these properties when prices start falling? – vreaa

Example of a median priced Westside property:
3261 W 38th Ave, V888979
Sold 27 May 2011; $2,098,000
2,580sqft SFH on 33x130ft lot

Poll: Vancouverites Overwhelmingly Agree Vancouver ‘Nicest City’ In Canada – “95 per cent of those living there convinced there’s nowhere better in Canada.”

Excerpts from‘Vancouver ranked ‘nicest’ city in Canada’, Vancouver Sun 28 Jun 2011 [hat-tip 'calguy'] -
“[A] survey of more than 1,500 Canadians, commissioned by the Montreal-based Association for Canadian Studies and carried out during the week of June 21, presented respondents with a list of nine major cities from coast to coast and asked them to name their first and second choice for “nicest city in Canada.” …
Twenty-five per cent of all Canadians picked Vancouver as No. 1. Quebec City drew the second most votes as Canada’s nicest city, with 20 per cent of respondents nationally. …
The overall results, noted association executive director Jack Jedwab, partly reflect the fact that Vancouver residents themselves overwhelmingly named their own city the nicest — with 94.7 per cent of those living there convinced there’s nowhere better in Canada.”
“…such “hometown patriotism,” while evident to some degree among residents from each of the cities offered as choices, was strongest in Vancouver.”
“63 per cent of B.C. residents in general chose Vancouver.”


This comment below the article from an individual representative of the 94.7%, full-patch cult member ‘len2′ 28 Jun 2011 2:34pm“excuse me, I don’t need polls to tell me what a Garden of Eden I live in, of course this is utopia. have you ever seen the moon on the rise standing by prospect point? how about from the cap river looking west, the string of pearls across the Majestic Lions Gate with a full moon in the background or underneath the Lions Gate looking south at the beautiful span, as it disappears into a forest of green. I have had the pleasure of living in this place of breathtaking beauty for over 40 plus years and I am still in AWE and THANKFULNESS when I look around me. nothing compares. I say to all you Vancoverites get out and explore your paradise, don’t just drive around, walk around the sea walls at night, visit the parks through out the lower mainland. to me this will always be heaven on earth. biased, of course I am, who would not be.”
[Note to self: Avoid getting into a bidding war on a Vancouver property with 'len2'. -ed.]

Comment:
Yes, it’s another one of those almost innumerable polls/surveys/ratings.
We don’t have access to the methodology or raw data; the actual poll results themselves doesn’t appear to yet be publicly available. The poll was “conducted last week via web panel by the firm Leger Marketing”. A “web-panel” is a group of people who have previously agreed to participate in such polls. ‘1500 Canadians’ were each presented with a list of 9 cities (Vancouver, Quebec City, Ottawa, Montreal, Toronto, Halifax, Calgary, Edmonton and Winnipeg) and asked to rank them by ‘niceness’. There also appears to have been an ‘Other’ choice.
It looks like almost all Vancouverites polled voted Vancouver #1, and that is “partly reflect[ed]” in the “overall result”. We take this to mean that the pollster is pointing out that part of the reason that Vancouver did so well is that it got all of its home-town votes. Perhaps Vancouverites actually are more invested in their city than most?
Anybody with access to the actual poll publication, please share it with us. It’d be interesting to know more about the methodology, if only for curiosity sake, and we’d like to see the actual numbers.
And, by the way, what is the rationale for funding such a study? – vreaa

Shoe-Shine Moments – “With Chinese money flooding into the city, the pizza guy offering to broker homes, and people approaching homeowners with suit cases full of money, it is fair to say that the situation is getting a little crazy.”

This story got wide coverage in the media. Some saw it as a ‘shoe-shine-boy moment’ for the market….
From ‘Vancouver pizza boy: Sell your house now!’, Steve Ladurantaye, G&M, 24 Jun 2011 -
“As far as anecdotes go, it’s pretty damning: A pizza delivery boy knocks on the door of one of Vancouver’s best known money managers and tells him that he should sell his house to a property hungry Chinese investor.
And he doesn’t stop there — apparently the well connected pizza boy has contacts in China and has even seen Chinese buyers show up at the very houses he delivers pizzas to with briefcases stuffed full of money.
The story comes from the latest research note from Odlum Brown Ltd.’s Murray Leith. While the pizza boy’s connections may be questionable, it is an interesting snapshot into the way real estate has taken over the city’s psychology.
“With Chinese money flooding into the city, the pizza guy offering to broker homes, and people approaching homeowners with suit cases full of money, it is fair to say that the situation is getting a little crazy,” Mr. Leith says.

“Mr. Leith suggests that tightening credit in China could curtail its citizens’ investing activities abroad. And with Canadian household debt at all time highs, he said prices could soon moderate or start to decline.
That sounds a lot like calling the market’s peak, but that doesn’t mean he’s going to sell at the top. Even if the pizza boy thinks it’s a good idea.
“To take advantage of the high prices, someone fortunate enough to own a home has to downsize, relocate to a region with lower real estate prices, or rent,” he said. “Those options do not appeal to my family.”


Individuals with higher net-worth, where the value of their home makes up only 25%-40% of their net-worth, may very well be more comfortable sitting put through the coming price crash. Most of them will be able to tolerate a downdraft in paper wealth of 10%-20% of net-worth. All other owners may find the price drops harder to stomach. – vreaa

Michael Geller on Living in Vancouver – “I think there are many better places to live… where you are not worrying quite so much about whether you will ever be able to buy a home, or how to pay such large mortgage payments… and even whether you can afford to have kids…”

Michael Geller (‘a Vancouver based architect, planner, real estate consultant and property developer with four decades’ experience in the public, private and institutional sectors‘) in a comment at Frances Bula’s blog, 24 Jun 2011 12:00am. Excerpts -
“I´m currently ´living´in Javea, on the Costa Blanca about 75 minutes from Valencia on another house exchange. …
Last night, my wife and I were discussing just how our house exchange partners are enjoying life in Vancouver, compared to how we are enjoying life here.
[In Spain gas pricier; wine cheaper] From our modern villa we can walk to town, buy an incredible variety of fresh fish at a fraction of the price in Vancouver, or when eating out, enjoy a string of seafront restaurants where you can get a nice 3 course meal, with wine for 9 to 12 euros…no worry about drinking and driving… [In Vancouver drive to restaurant for meal at twice the price] Then again, unemployment is 22% in the Valencia region and although there seems to be so much more industrial activity than in Vancouver, the region is spending more than it takes in and is reportedly on the verge of bankruptcy. …
I would conclude by saying that one´s enjoyment of Vancouver as a place to live is obviously a function of where and how you live…whether you worry about money…and how satisfying your work/life balance is….

There is no doubt that Vancouver is beautiful to look at, but every time we do a house exchange we realize there are many plusses to life in other cities and countries…New Zealand and Australia both come to mind….But we don´t move because we are ‘established’ in Vancouver… our friends are there… etc.
However, if one could feel free to choose, I think there are many better places to live… where you are not worrying quite so much about whether you will ever be able to buy a home, or how to pay such large mortgage payments… and even whether you can afford to have kids… this one really troubles me whenever I hear it from young Vancouver couples…

I agree with [the opinion] that if you can resign yourself to renting, Vancouver may be a better place to live than for those struggling to buy…although those who bought homes for $100,000 that are now worth $2 million and can sell and move elsewhere and retire on their nest egg… would probably not think this way!

So my advice, start doing house exchanges as a way to enjoy relatively inexpensive holidays, and a way to experience life in other places…go to homelink.org to see what´s available.
I must admit that while I am tempted to move to another place, if only for half the year…I do always come back to Vancouver… but I´m not sure it´s because it´s better… just because it´s where I live and it might be too much effort to change!”

[Earlier comments by Michael Geller were headlined at VREAA 23 Mar 2011.]

“The prolonged period of very low interest rates entails the risk of creating serious financial distortions, misallocations of resources and delay in the necessary deleveraging in those advanced countries most affected by the crisis.”

From BBC 26 Jun 2011 -
“The Bank for International Settlements (BIS) has warned that low interest rates across the globe are a threat to world financial stability.
Central banks have cut interest rates in an attempt to boost growth after the 2008 financial crisis.
“The prolonged period of very low interest rates entails the risk of creating serious financial distortions, misallocations of resources and delay in the necessary deleveraging in those advanced countries most affected by the crisis,” the bank said in its annual report.


Interest rate increases are not necessary for the Vancouver RE price bubble to implode, but if they were to occur they would speed the process. – vreaa

Quality Of Life Calculations – “They essentially are having 20 years more enjoyment than if they lived in Vancouver.”

gse36 at RE Talks 23 Jun 2011 1:28pm -
“I know 2 people in their 40’s who just retired in Toronto ($1.2M equity in Vancouver home, paid it off, bought $600k in Toronto, plus have investment savings (and will later cash out RRSP savings)). Actively invested.
They chose retirement in Toronto as opposed to working and living in Vancouver. Sure, they could buy a condo in Vancouver, but they wanted a house. Sure, it may not be as beautiful, but there’s something to be said about having 16 hours a day to yourself and spouse (assuming 8 hrs sleep) = 112 hrs a week.
[Compare this with] what they had before: 9 hour work + 1 hr commute each way (*2) + 8 hr sleep = 5 hr left to themselves 5 days w eek. = 25 hours a week + 32 on weekend = 57 hr a week. + all the anxiety and stress from their jobs + occasional overtime, etc.
They have 2x as much free time as before. They are in excellent physical shape, and go travelling a lot (yes, and back to Vancouver too), volunteer a lot. Basically doing all the things they enjoy. Contribute back to society, and help those around them. They felt this was more meaningful than paying the bank interest and paying for a modest house.
Given there’s 20 years to normal retirement age, and they get 2x more time to do what they want than others, then they essentially are having 20 years more enjoyment than if they lived in Vancouver. More importantly, it is while they are still relatively young.”


Two working, tax contributing citizens fall off the map because the price of their home hits ‘x’. This is one type of ‘misallocation of resources’ that occurs with speculative manias in RE.
This kind of move makes perfect sense for the couple, provided they do indeed have enough funds for 30+ years of retirement. It should be emphasized that their easy retirement is being funded by another couple taking on the opposite end of the deal: a very large lifetime liability.
This reminds us of a recently suggested strategy: Sell your house in Vancouver, buy 3 or 4 or 5 almost identical properties in the US (depending on city/state), live in one and live off the rental income from the others, retire.
How long can this kind of price differential last?
– vreaa

“I declined a promotion involving a move to Calgary because it would mean giving up our 1 car lifestyle and fantastic rental condo on the seawall.”

alter at VREAA 22 Jun 2011 5:57pm“I live in Vancouver and work for a multi-national with an office in Calgary as well. I declined a promotion involving a move to Calgary because it would mean giving up our 1 car lifestyle and fantastic rental condo on the seawall, trading in a temperate climate (albeit rainy) for cold snowy winters, and longer commutes to the outdoor activities we enjoy outside of the city. I’m a regular reader of this blog and do believe housing prices are ridiculous here and wouldn’t buy even if I had the means. But despite having lots of options to move, for some reason we haven’t yet. Also had an opportunity come up in Toronto which I didn’t take either. And I have previously lived in both those cities so have a pretty good idea of what they would have to offer.”

“I know a gal and her husband out Vancouver Island way. They have bragged many times about how much their house appreciated over the last few years.”

Utopia at greaterfool.ca 21 Jun 2011 at 11:31 pm-
“I know a gal and her husband out Vancouver Island way. They have bragged many times about how much their house appreciated over the last few years. All swagger and puff and bullshit.
They laugh when I tell them about the cheap little small town prairie houses. They are much too good for that of course. The laughter is not for enjoyment either. They feel sorry (and silently superior) that they earned a housing lottery for having done nothing while the poor prairie folk are stuck picking weeds in the garden. They meanwhile, holiday in Mexico using other people’s money.
So they bought a place down there. Bragged about that too. But I know in fact they can barely make ends meet with the mortgage payments, the kids, the taxes, the new truck and all. He can hardly get a full weeks work lately, she is but a part-timer.
She actually admitted once they didn’t have money for food. The bills had eaten everything up. There was no money left over at all. What to do? She and hubby got a fat line of credit, bought tools and a trailer and then bragged about that too.
I will have to admit that I might just enjoy seeing the smug look on their faces wiped away in the correction that is coming. I wasted too much breathe warning them of the trouble that was coming already. Nothing I ever said changed their minds and they minimized my point of view like it was some weird alien thesis.”

Out-Migration? – “Three friends of mine moved out of country this year, citing high home prices.”

“Three friends of mine moved out of Country this year. Citing high home prices. Young, no kids yet. 2 are married. They’re smart people with no debt, with aspirations of financial freedom. Each had downpayment of $300k+. Pity to lose them. Well, 2 of them will keep their places here so at least if prices continue to go up, they won’t lose out.”gse36 at RE Talks 23 Jun 2011 11:42am

“British Columbia’s net international migration is negative for the first time ever” (Q4 2010) “…the first time that BC’s quarterly net international migration has been negative in Statistics Canada’s database, which dates back to 1972…”
– via report from urbanfutures.com

“I made the move when the market was sleeping. I own my home free and clear. It’s taken a long time, but I do know where I came from and how I got here.”

This from craigslist: ‘British Properties (North Shore)’, 2011-06-20, 8:02AM PDT [hat-tip 'B'] -
“I’ve been here [in the British properties] for 30 years…. I used to live in Langley, but after high school I worked at a garage repairing cars and pumping gas. I saved a little, opened up a semi-successful firm of my own, went bankrupt through no fault but my own, happened to start-up again, scrimping and saving all the while raising two children (one of whom passed away rather early) and made the move when the market was sleeping. I own my home free and clear. It’s taken a long time, but I do know where I came from and how I got here. Sure it’s just a modest house with a fairly nice view.
So [for some to say] that the Chinese are taking over British Properties without ever living here, really pisses me off. But hey, you’re entitled to your opinion. Just take it from someone who actually lives up here. And know, I’m not some twisted rich snob who looks down on the rest of you, I’m just a regular guy who happend to one day find himself living somewhere else. I’ve earned it. So has anyone who owns their own home, be that on the North Shore, in Langley, Surrey, Coquitlam or Delta.
And by the way, I’m a second generation Canadian. And proud of it.”

PostCardsFromTheBlastRadius #11 – HollyWoodNorth’s GulagArchipelago – The LakeCityBurnaby Commercial RE Glut

Wow! There’s an ‘Elephant in the room’… And in Burnaby, no less!

And a TigerShark… dining!
(NoteToSelf: ‘Doing Lunch’ with sharks inevitably ends poorly.)

And how about this forlorn, rusting sentinel…?

RazorWire? In the Lower Mainland?

Everything you’ve just seen (and will see) was photographed, “OnLocation!” in Beautiful Burnaby’s LakeCity & environs.

Our explorations begin with a very special and particularly privileged corporate EconomicMigrant peculiar to BC’s LML… The ‘RunAway’ HollyWood Production.

Ooooh, Goody!!! HollyWoodNorth at work!… Or as the BurnabyHillBillies are wont to say, “MovieStars&SwimmingPools!” Let’s go have a look, shall we?

Darn&DoubleDarn… No celebrities and PublicParking’s a little scarce. Fortunately, we’re on foot today.

Hmm… No Stars here, either! – but somewhere, somebody’s definitely making a killing on OrangeTrafficCones and associated signage.

Definitely no ‘parking chaos’ on this BackLot (and as it turns out, no “Chaos” anymore either – but we’ll get back to that in a moment).

Yep. Ain’t no doubt ‘bout it. Them HollyWoodNorth Moguls – rather like their CounterParts in the CityOfAngels – just love designated private parking spots. But, Hey!? What’s that BigOrangeSign in the background all about?

That’s what. The RazorWireEconomy of vacant, disused industrial & commercial space (and by implication, vanishing enterprise, transient jobs & ‘DisposableWorkers’).

Indeed, although this particular venue was briefly resurrected as a temporary sound stage and production facility for the short-lived CBS television series, “Chaos”… Only 13 episodes and about as many weeks later and it’s just one more, “HereToday & GoneTomorrow”, “NowLeasing!” story.

And that, DearReaders is how it usually works in HollyWoodNorth – where indigenous production is virtually non-existent and the principal attractions to foreign producers of ’run-away’ productions were the Loonie@.65USD, weak local craft guilds and generous public subsidies.

So. There it is. Your visual harbinger of the HollowedOut, ‘MovieSet’/Facade economy so emblematic of our province’s graft-ridden, peculiar political economy of Construction&RealEstate, HumanTrafficking and ‘Horticulture’.

A terrible pity. And as for that forest of superfluous DesignatedParkingSignage? Well, never mind – because it makes great kindling for the CampFires ‘O The HomeLess who actually inhabit the parklands nearby.

Nothing screams out, “OpenForBusiness!” like barbed wire, chainlink and DisposableWorkers on picket duty. All that’s missing are the Pinkertons.

OK – so here’s the skinny on LakeCity’s vacant industrial/commercial premises – and it’s hardly a, ‘solitary building here&there’ kind ‘o thing… Warning: you might want to flip through these “quickly” – ‘cause there sure are a lot of them!

It’s simply amazing how quickly it adds up… 1200SqFt up there…

Becomes 2200 SqFt over here…

5,500 SqFt down the street…

10,463 SqFt around the corner…

12,500 SqFt KittyKorner from SkyTrain ‘University’…

To 15,500 SqFt…

To 60,000 SqFt…

To 63,000 SqFt (in this instance, former home to “Chaos”). See where this is going?…

Indeed, some developments have so much vacant space on offer – they have circumspectly chosen not to advertise the available square footage…

OK – this is just one district in Burnaby. If we throw in the rest of the LML – how many Millions ‘O Square Feet of commercial space are currently sitting vacant?

Sadly, and with few exceptions, the only thing growing around these industrial premises and accompanying LeasingEnticements is the grass.

As most of you have already surmised – each one of these vacant properties was once home to a business. And although Nemesis knows the ‘ordinary’ businesses that once occupied these premises don’t enjoy the Cachet/Buzz ‘o ShowBiz, they did for the most part, provide people with worthwhile, stable employment of a type not found in the GlamIndustries.

Perhaps there’s a lurking labour economist or econometrician in the audience who could provide us with a rough guide to the solution of: (x)[SqFtVacant] = (y)[JobsGone] ???

The SmallPrint on this Cushman&Wakefield signage reads, “Global Real Estate Solutions” – and that’s your next clue… Hmm. Perhaps it should say, “Arbitrage” instead of “Solutions”? Works with people and, apparently, RE too.

Ok – this is way too depressing. Time to board SkyTrain and GetGoin’.

Oops. SkyTrain’s ProductionWayUniversity Station is rubbing our noses in it, too. Three years after completion and they’re still flogging space in this development. Well, at least some of that OfficeSpace is furnished (locally sourced & ‘lightly used’ LakeCity disposals, ‘Nem’ wonders?).

Even TheResidentials’ are vying for our eyeballs & a piece of the action. To wit, a transit bench featuring the balding, collective rictus of ColdWellBanker’s “LoveTeam”.

Wandering towards the escalator and trying to ignore the commercial hoardings – for my own private amusement I briefly envisage LakeCity’s FarFuture…

A park like landscape where FlyingCars compete for AirSpace with children’s Frisbees … Where SFU’s Industrial & Urban Archaeologists of tomorrow are momentarily perplexed upon discovering the corroded remnants of sentinels, elephants, and a tiger shark… beneath a discarded transit shelter apparently dedicated to the Arcane&Taboo Rituals of RE’s “LoveTeam”.

Yikes! Startled BackToReality by yet more RezCouture/RE AgitProp.
I guess that when it comes to Vancouver, there’s really no escaping it.

———————-
Photos and commentary for the ‘BlastRadius’ series by ‘Nemesis’.
[Images Ⓒ​2011 ‘Nemesis’ – All Rights Reserved]

Update On Spot The Speculator #36 – “She just did a budget and concluded she needs over 9k per month for her payments. Crazy she didn’t do this before buying a second property!”

Jayco [at VREAA 23 Jun 2011] updates us on the story posted here 19 May 2011“I have an update on the Surrey home/condo owner who is approx 900k in debt on two properties, a fake car loan, a real car loan and a motorcycle loan. Well, her ability to borrow more has just ended and she’s still trying to get a kitchen in her basement so she can rent that space too. She just did a budget and concluded she needs to come up with just over 9k per month for all her monthly payments! Crazy she didn’t do this before buying a second property!!! Again she’s lucky if she can break 50k per year at her new job (38k base). So incoming she has…$1050 rented condo (without strata approval), Carriage house above garage $750, roommate (my ex) $400, and if she can finish the basement $750. So let’s just say 3k total on a good month! She also just told my ex, she needs to raise her rent to $700 and have another roommate move in…my ex told her that’s fine, I’ll rent my own apartment if I have to pay that much and live with a stranger. It’s really not a matter of IF this person will default on her loans, it’s just a matter of how soon!”

Victoria – “They put their place on the market soon after their twins arrived and it sits languishing after 2 price drops. They are more than $50,000 underwater if they sell at their new asking price.”

This anecdote relayed by Garth Turner at greaterfool.ca 22 Jun 2011-
“I am a transit operator for BC Transit in Victoria. I can’t wait to see the real estate numbers for June. I drive set routes and so I see all the for sale signs popping up. I drive by hundreds of homes for sale and have seen 2 sell! I think F’s moves to stem the tide of lemmings (newbies) throwing themselves into the real estate market here has had an effect. Unfortunately, my friends thought I was crazy when I said we were in the final phase of a RE bubble. Many drank the Kool-Aid. One poor couple over bought and then decided to have a child. Well their child turned out to be twins! They put their place on the market soon after their blessed arrival and it sits languishing after 2 price drops. They think they are $50,000 under water if they sell at their new asking price. Sad thing is they haven’t factored in the cost of selling the place or moving costs.”

“The city has gradually ended all leases with local businesses and sold the land to developers.”

vanpire at vancouvercondo.info 22 Jun 2011 8:00am -
“I’ve lived in South Burnaby for a long time now. My neighborhood was not so special – mostly transitional residential bordering with light industrial/warehousing. As an upside there were many, many places across the street that employed people and manufactured things – a neon sign shop, a chocolate factory (for real!) a flower wholesaler, an architectural design firm, an electronic distributor. In the walking distance to my home we had a childcare, a church, a bank, a doctor’s office…
That was then. But now? The entire area was apparently owned by the city and city has gradually ended all leases with local businesses and sold the land to developers.This created a domino-effect as block by block what was once an actual city neighborhood turned into a huge condo desert, with hundreds upon hundreds of units sold mostly to chinese “investors”. City planning at its finest.
No wonder government wants the housing boom to last forever.
It’s making very easy money very fast.
Like a big party, but without hangover.”

‘Three Back Yards’ – Update On 3 SFH Development In Point Grey – One Sold, $2.55M


‘Three Back Yards’

This via e-mail from ‘a regular visitor’ to the blog -
“I’d like to revisit your post of September 28, 2010 if I may…nostalgia overcame me. We were nearby over the weekend and wondered how that development was progressing. When that sodden framing went in last autumn, we were incredulous that they were shoehorning three SFHs into such a small parcel of land! I attach some photos here; what boggles the mind is why someone would be desperate to drop a couple of million or more on one of these. So darned close together  – you can hardly get a cigarette paper between these three houses. What will happen when they have to get a ladder in there for those inevitable major repairs?! Those accompanying laneway houses seem pretty big; how small those yards are between the main houses and the laneway houses. Ugh. A friend who lives a few streets away from there (for the past 20 years or so), said there are many laneway houses being built in the vicinity. She said that some of them are so large, they obstruct the daylight that neighbouring houses used to enjoy. That’s not good in our light-deprived city…”

“Definitely feels like change is in the air, albeit at what seems like snails pace to anyone trying to survive here as a renter or wannabe buyer. As people have said on your blog so many times before, if you say anything at all about overvaluation of property in the Vancouver area you just get a blank stare and the same old stories – ‘no more land’, ‘everyone wants to live here’, etc. etc. Gets tired, doesn’t it? [But it does] give us something to talk about other than the rain and grey skies ;-)”


vreaa comment: In our 28 Sep 2010 post, we estimated that these three houses would come on the market at about $2.25M each (Point Grey; new; 2500+sqft; 33×122 ft lots).
Well, it turns out our estimation was 13% low. One of the three (likely the corner one based on the number) is registered as sold:

4698 West 11th Ave, Point Grey, Westside, Vancouver
Sold 8 Apr 2011, $2.55M
‘Bonus: Price includes a laneway house and HST!
Laneway homes are approx 370 square feet.’

Realtor photos:

.

Loot and Burn

[image by David Lang]

‘Facts’ On Foreign Investors? – “Out of the 55,512 sales in 2010 only 195 were to people outside of Canada. Foreign investors only own 0.5% of the total housing stock of 774,600 residential properties in the Lower Mainland.”

From Garry Marr, Financial Post, 23 Jun 2011 -
“Local firm Landcor Data Corp. says it has been tracking property tax assessment bills to pinpoint the percentage of transactions driven by foreign investors in Vancouver’s suburbs — a trend the real estate industry says has been driving up average prices in the country’s priciest city.
Richmond and the west side of Vancouver, favourites of Chinese investors, were the focus of a first-quarter report form Landcor’s which looked at the profile of buyers from 2008 to 2010. It found buyers from the “Middle Kingdom,” as the company put it, dominated purchases.
In 2008, there were 69 sales of homes priced at $3-million or more, the most expensive $10.5-million, and 46% were purchased by Chinese buyers. By 2010, there were 164 sales in the same category, the highest-priced being $17.5-million, and 74% went to Chinese buyers.”

“Andrew Ramlo, executive director of The Urban Futures Institute, a Vancouver research firm that worked with Ledcor, says the data proves that influence of foreign investment is not a major factor in most of the Lower Mainland.
His group points out of the 55,512 sales in 2010 only 195 were to people outside of Canada — 0.4% of all sales for the year. Furthermore, he says, foreign investors only own 0.5% of the total housing stock of 774,600 residential properties in the Lower Mainland.
“These data contradict what seems to be largely anecdotal evidence indicating foreign investment is a significant driver to residential price increases in the Lower Mainland,” he said in a report.”

Request To Readers From A Journalist For ‘La Presse’

Nicolas Bérubé, a journalist for ‘La Presse‘, the Montreal daily newspaper, would like to hear from readers who have either left Vancouver, or who are considering leaving, because of RE prices in our city.
Nicolas has lived in LA since 2006. He watched the US housing market implode first hand, and he is, like many of us, now watching the Vancouver RE market with fascination.
Nicolas can be reached at:
nicolas.losangeles@gmail.com

Spot The Speculator #46 – ‘Invested’ in five condos; Just lost two tenants; Exactly 42 bucks in the bank; Asks friend for loan; Starts to cry

Bill Gable at greaterfool.ca 21 Jun 2011 10:13pm [hat-tip 'Makaya' and 'Bailing in BC'] -
“I spent the morning with a friend, who called me and asked me if I could come over and have a coffee.
Thought it a bit odd – it was 8:30 in the morning. This gent and I went to school together, and is a great fellow. Trouble is, he has ‘invested’ in five condos. He just lost two tenants, and he has exactly 42 bucks in the bank.
His wife, also known as “The genius” was at her Mom’s trying to scrounge money. Nice, Mom is 82, and is ill. Don’t ya’ love it?
He then actually had the jam to ask for a loan. After my B/P dropped 75 points to near normal, I replied, very quietly and calmly – “Better call your Banker, and your Lawyer, and your accountant – you are in a zone I can’t even fathom – and no, I can’t lend you any money”.
Even if I wasn’t in shaky health myself, I wouldn’t lend him a sou. He started to cry.
This is the real world. This is what happens when people think they can build wealth by being in debt up to their probiscus.
I felt awful and had some lame euphemism and said my goodbyes.
He called me three hours later. Mumsie “lent” them 50 K.
I thought how lovely this was – your Mom is dying and you take money from her?
Is this what we’ve come to?
Last note – Vancouver people are still seething over the riots here.
Liveability in this burg has gone south a long time ago.
I am not confident in the future of this City and haven’t been for a long time.
If I was in the position to leave, I would.
But – I am sitting here, renting and watching the BMW’s fly down Pacific Avenue.
People walking along the street smoking dope.
Oh, and check craigslist = nice penthouse for 10 K a month!
Ain’t vancouver grand?”

“I live in Calgary and work for a Vancouver based company. I refused a promotion involving a move to Vancouver because of the cost of housing.”

“I live in Calgary but work for a Vancouver based company and refused a promotion involving a move to Vancouver for this very reason… This was the only reason I refused the promotion… Cost of housing = reduced standard of living.”
– ajau at city-data.com/forum/vancouver  5 Jun 2011  [hat-tip Polly]

Spot The Speculators #45 – “They revealed that they had 3 other units in the same area. They were self employed and were banking on their condos as their retirement fund.”

matt at VREAA 19 Jun 2011 5:59pm“I went to view an apartment today which was being showed by the landlords. We got to talking and they revealed that they had 3 other units in the same area. The wife let me know that she and her husband were self employed and were banking on their condos as their retirement fund.”

China – Print, Lend, Steal, Spend

“When the global financial crisis impacted China’s exports in 2008, Beijing ordered its banks to support a massive credit expansion to create jobs and stimulate growth. The banks eagerly went into action and in 2009 and 2010 made new loans amounting to a total of 20 trillion yuan ($3.1 trillion). Of these a significant amount went to local government borrowers.” – from ‘China’s Bank Reckoning Approaches’, Wall Street Journal, 19 Jun 2011

“Thousands of corrupt Chinese government officials have stolen more than US$120bn and fled overseas, mainly to the US, according to a report released by China’s central bank. Between 16,000 and 18,000 officials and employees of state-owned companies left China with the funds from the mid-1990s up until 2008.
The officials used offshore bank accounts to smuggle the funds, according to the study posted on the People’s Bank of China website this week but which has since been removed. It said the officials smuggled about 800 billion yuan into the US, Australia, Canada and Holland through offshore bank accounts or investments, like property or collectables.”
– from ‘Chinese officials stole $120 billion, fled mainly to US’, BBC, 17 Jun 2011

Perhaps Vancouver RE has ‘benefited’ from some of these funds.
Is this an effect that we can expect to continue? – vreaa

Globe and Mail Video: 25% Basic Vanilla Pullback For Canada If Interest Rates Flat; For ‘Unstoppable’ Vancouver Pick Your Own Number [Ours is 50%-66%]

From ‘How bad could it get in the housing market?’ video at Globe and Mail, 20 Jun 2011 -
Rob Carrick: “You’re predicting a 25% decline over 3 years, is that the worst case scenario?
David Madani, Economist, Capital Economics: “No, it’s basically a baseline view .. the fact that prices have risen so much relative to income… we can’t see how income growth alone will close this very large gap between price and income…”
Carrick: “Where do rising interest rates fit into that?”
Madani: “Actually our outlook right now for the next few years is one of interest rates remaining where they are…
Carrick: “So if interest rates were to rise, that could make things substantially worse”
Madani: “Yeah…

Carrick: “The Canadian market is often distorted by what’s going on in Vancouver… I mean, that market is just unstoppable…”
Madani: “25% is an average… this is not just a Vancouver story, we see this bubble-phenomenon across Canada.. … we don’t think it’ll get as bad as in the US, but we do think a ‘substantial decline’ is in store for Canada .”

So, 25% basic vanilla pullback across Canada.
In extreme markets like Vancouver, with or without interest rate hikes?
We’d bet Madani would now say “over 50%, easy”.
We at VREAA now foresee a 50%-66% price crash for Vancouver.
– vreaa

Aftermath – Vancouver Riots 2011

 

The legacy of the ‘Stanley Cup Finals and Vancouver Riots of 2011′ may well end up being the ensuing social debate. We’ll here collect links to representative opinions, and other articles of interest. [This post will be updated with further readings; Please post suggested links, quotes or subjects in the comments. -ed. ]
———–

Theories of Causation (not mutually exclusive):

1. “Criminals, anarchists and thugs”
– Police Chief; Mayor (Globe and Mail, Van.Sun)
– No, not anarchists (Brian Hutchinson, NatPost)

2. Widespread Deep-Seated Societal Problems
Adrian Mack and Miranda Nelson, Georgia Straight

3. ‘Disenfranchisement/Disinvestment/Powerlessness’
Froogle Scott

4. Sport Fan Riot/’Fun’/’Exciting’
“Forget Freud, Forget Marx. Rioting, above all, is fun.” – Andrew Potter, Macleans
Douglas Todd, Vancouver Sun

5. Bad Parenting

6. Mob Mentality/Madness of Crowds
Chronicle Herald

7. Poor Planning by Authorities
Calgary Herald

8. The Inherent Violence of Hockey Itself

9. Other?

———–
Other subjects of interest:

Concerns About The City’s Reputation
“.. a huge black eye for the city of Vancouver” – James O’Brien, online hockey writer, NBC Sports

Comparison with the Olympics:
– Different
– Not So Different: Christie Blatchford

Comparison with G20 T.O.
– Different: Toronto Standard

City preparation
VPD response, Globe and Mail.
Police Chief acknowledged mistakes, 17 Jun 2011, Nat.Post
“Mayor Gregor Robertson was a little naive. He wanted these live events. He wanted a great big fun city.” – Leo Knight, former Vancouver city cop and RCMP, chief operating officer Palladin Security.
Debating the blame, 21 Jun 2011, G&M

The Effect of Social Media
#canucksriot
Globe and Mail, ParsonsBlog
– “…the massive online reaction to the Vancouver riots is unprecedented and as groundbreaking as WikiLeaks.” – Christopher Schneider, a UBC sociologist

Public Outings of Rioters
– various websites: ‘Vancouver 2011 Riot Criminal List’; publicshamingeternus


“For reasons I can’t really explain, I went from being a spectator to becoming part of the mob mentality that swept through many members of the crowd.”- Nathan Kotylak (pictured above)

“A UBC student photographed leaving Black & Lee Tuxedos with a piece of clothing in her hands has been called out online by one UBC donor, who is threatening to pull his annual donation if she isn’t expelled.” – Vancouver Sun, 19 Jun 2011

“Alex Prochazka, 20, a professional mountain biker, was photographed during the riots with a T-shirt emblazoned with the name of a sponsor. He has since lost multiple sponsorship deals and told The Sun, “I didn’t go there for the riot, I went for the hockey game and got caught up in the hysteria of it afterwards.”Vancouver Sun, 20 Jun 2011

Self Confessions
– Semi-Voluntary: G&M
– Unintentional: news957

Proclaimed Heroes
example1; example2; others

Backlash Against Social Media and Public Outings
“The online forums have gotten pretty ugly. It enables a whole dark side of our psyche to go public … it’s too bad and I hope it turns around quickly.” – Mayor Gregor Robertson
“I don’t think we want to live in a society that turns social media into a form of crowdsourced surveillance.” – Alexandra Samuel, Harvard Business Review

The Iconic Kissing-Couple
yahoo, cbc

The Clean-Up
Georgia Straight

The “Citizens’ Wall”

Healing? Penance? Purification? Blaming?
“Mayor Gregor Robertson says the city has been in touch with merchants and asked them not to throw the plywood away, while archival staff consider ways to save what he calls “these pieces of history.” – G&M 19 Jun 2011 [This just 4 days after the riots themselves. An attempt to instantly manufacture a palatable history. -ed.]

Notice How Nobody Is Talking About The Hockey Result
“I would like to congratulate the Boston Bruins on a game well played for the Stanley Cup.” – local Canuck fan
———–
Parodies
‘Ballad of Brock Anton’

‘You Gotta Be Here’

‘Worker’ Buys $900K House – “Accused killer slipped back to B.C. to transfer his $1.6M home into his wife’s name. She started working as a realtor in 2011.”

“An accused killer and United Nations gang leader, wanted since January in the murder of a rival, slipped back into B.C. in April to transfer his $1.6-million house into his wife’s name.
And now the palatial Burnaby residence, that was owned solely by Conor Vincent D’Monte when he was charged with murder five months ago, has been put up for sale. D’Monte and co-accused Cory Vallee are on Interpol’s Most Wanted List after being charged Jan. 24 with first-degree murder in the 2009 Langley slaying of Red Scorpion Kevin LeClair. … D’Monte, 33, attended a Metrotown law office on April 1, 2011 to sign over his Burnaby house to wife, Jennifer Kong. … Kong, who just started working as a realtor in 2011, hung up on a Sun reporter Sunday when asked about the property transfer. …
The house was built in 1988 and the annual taxes are just over $6,000. It was assessed in 2011 at $1.2 million, and is listed for $1.58 million. …
D’Monte listed his occupation as “worker” when he bought the house in 2006 for $900,000. Police say his job was to lead the day-to-day operations of the UN gang, of which he is an original member.”
Vancouver Sun, 19 Jun 2011

Interesting multifaceted anecdote:
Crime proceeds pump housing prices.
RE as money laundering vehicle.
EITHER Self-employed self-declared income gets you $900K mortgage in 2006,
OR $900K house bought with cash gets no questions asked.
Husband indisposed gangster? -> consider becoming a realtor.
– vreaa

“I have been here five years now; I still can’t figure out what all the people here do.”

Michael at VREAA 13 Jun 2011 11:15am -
“I have been here now five years, I still can’t figure out what all the people here do. The Tech people I know all seem to hope for the big break or work for a US company that once upon a time decided it was cheaper here than in the US, but that seems to be changing quickly too.
Anything, at least in the computer field, that has proven successful has moved to other places, mainly the US, either on it’s own power or being sold to a US company.

Having hung around the “startup” world here in Van for a bit I think what is happening is that this is the place where quite a few smart people come to play, mainly outdoors. On the side they develop an idea and because wages here are low (comparatively) they start their business here.
They soon realize that the cost of doing business here is high, that the good employees want to have money they don’t have so they either move or sell the business (Flickr comes to mind) and the cycle repeats.

There really isn’t that much high-tech success here, it’s mostly a lot of self celebrating of the “high technology” field. Vancouver was a small border town with a large rail yard and some industries that lived off of the interior (e.g. sawmills, tanneries in False Creek). Once those industries were “cleaned up” there wasn’t really a lot left.
Interesting times ahead for Vancouver, and BC as a whole, that’s for sure.”

Spot The Speculator #44 – “The adage ‘better late than never’ always applies to home buying.”

“Looking back my biggest money mistake was waiting too long to buy a house. I also bought Nortel stock and lost money, but missing out on long-term housing price gains was far more costly. The irony is that at the time, in my 20s, I was an economist at the federal housing agency CMHC specializing in analyzing the housing market. You would think I would have taken quick advantage of home ownership. But in my years following graduation from the University of British Columbia, I was more interested in spending than saving and since buying a house requires a down payment, it seemed a large hurdle. Spending was easier since making the minimum payment to the credit card company was all that was required to keep the debt at bay. Eventually I saw the light, paid off my credit card and car loan and began to save for a down payment. Eventually I bought a semi-detached condominium in downtown Vancouver for $200,000 and the benefits were immediate.

Here are three reasons why buying a house is a good idea:

1. You build equity
The amount you owe declines with each mortgage payment.
The difference between what you paid and what you owe is your equity and it is one of the most valuable assets most family’s have. The sooner you start, the faster your equity grows.

2. It is an appreciating asset
Home prices decline when the economy turns down, but the long-term trend has been and will continue to be rising prices. The reason is supply and demand. As someone once remarked – “Buy land. They ain’t making any more of the stuff.” Land supply constraints for residential development exist in most markets.

3. Demographics trends are favourable.
Meanwhile, there is population growth it producing demand. Canada has 34 million people now. In 1961 it was about 18 million.

These three trends underpin the long-term upward trend in housing prices.
Another benefit when you consider buying a house is that it is a levered investment generating a rate of return much higher than simple price appreciation. That 5 or 10 per cent down payment yields an overall rate of return well above the return from stock or bond markets.
The costs of homeownership are substantial and ongoing. The monthly interest payments, property taxes, utilities, and repairs and maintenance add up to the largest expense for a household.
But if you are renting, you are paying these costs indirectly without the benefit of capital appreciation, principal repayment, and the non-financial benefits of homeownership such as control over your physical surroundings.
Also, paying off your mortgage is a form of forced savings and much better than paying off the landlord’s mortgage.
Over time housing prices appreciate and are a good hedge against inflation. In 1961, the average house price was about $12,000 and today it is around $360,000, a 2,900 per cent increase or a 7 per cent compound annual rate of return. Since it is a levered investment, the rate of return on the initial investment is closer to 10 per cent or 6 per cent inflation adjusted.
How does this compare to other investments? The Toronto Stock Exchange index rose about 1,900 per cent or 6.2 per cent compounded annually in the same period, including dividends the total annual return was about 8 to 10 per cent. The risk-free long-term Government of Canada bond yield averaged about 7.7 per cent or 4 per cent inflation adjusted

I am not suggesting the next 50 years will witness a similar large appreciation in house prices since the pace of population growth and development will probably be lower than in the past 50 years.
Indeed, some commentators point to record high price-to-income ratios as a sign of over-valuation and warn the housing market is near a tipping point and the price bubble will burst.
Yes, it will become increasingly difficult for first-time buyers to achieve homeownership since affordability will decline in the long term. Fundamental housing supply-demand forces will drive higher prices while incomes lag. But this should not discourage potential buyers from their goal, but they need to adapt to those circumstances and be smarter with their money than I was.
I feel fortunate to have become a homeowner many years ago when the price-to-income ratio was considerably lower. The adage it is better late than never always applies to home buying.”

- Helmut Pastrick, Chief Economist with Central 1 Credit Union, in “This housing expert waited too long to buy”, moneyville.ca, 9 Jun 2011

“They aren’t making any more land; housing only goes up; leverage is good; it’s never too late to get in.”
Almost unbelievable. – vreaa

 

House Prices Up 25% YOY (But Skewed By 3 Areas); Buying From China By “Remote Control” Via Internet


From Global TV 17 Jun 2011  [ care of video archivist Greenhorn] -

Excerpt:

Announcer: “In Richmond, West Vancouver and on Vancouver’s Westside, 25% of the sales come with bidding wars.”

Mahmood Ladhani, BMO Area Manager: “There are some bidding wars happening within our markets, where people are getting passionate about buying a home.”
Announcer: “Some of the off-shore buyers aren’t even coming to view the homes, they’re doing it by remote control.. viewing the images on the internet and making bids.”

Ladhani: “In certain parts of Vancouver you start to see helicopters flying around and … you know people are taking pictures, and.. you start to see people just buying stuff through the internet.. realtors are very active with the overseas market.. it’s driving up prices because people aren’t taking a look at the properties, they’re actually just making bids on it.”


Thoughts:
1. More info regarding market losing breadth towards top.
2. ‘Passionate’ about buying houses? ‘Panicked’ and ‘Desperate’ also apply. All signs of a mania. Remember, locals are doing more than 80% of this buying. They are all buying expecting future price gains.
3. Sky-Cams and “Remote” buying by internet? We particularly like the sinister shot of the surveillance device under the chopper. A higher order of hyper-efficient buyer has taken over!.. We’re becoming game-pieces in some kind of intercontinental computer game!.. (are the implications). All smack of top o’ the bubble stuff but, as we’ve said before, we’ve made so many prior incorrect calls on the matter we’re not making them any more. We’re just patiently waiting for the inevitable to play itself out.
– vreaa

Market Narrowing; Market Darlings

Yeah, SFHs on the Westside have been on a rip (but perhaps even they are pausing currently; not quite flying off the shelves like they were a month or two back). In other areas and other property types, things are less than rosy:

“A friend of mine who is a realtor on the North Shore told me yesterday that not all prices are soaring and she is struggling to unload a townhouse built in 2008. The owner paid $650K new and wants to sell it for $679K. There have been no offers and they refuse to drop their price.”DM at VREAA 14 Jun 2011 9:18am

“I rented for 3 years near Rogers arena in a two year old building – when we moved in, similar units to what I was renting (2bedroom, 2 bath, 850-ish sq ft) were asking $525,000. That was in the spring of 2007. Here we are in 2011, 4 years later, and those types of units are still asking the same – and there’s lots of them listed. So I’m really not convinced about this whole rising prices thing.”Jeff at VREAA 14 Jun 2011 10:54am

Levels of property are so inter-related (move-up dependence; also shared factors such as interest rates and economic strength) that they will all end up dropping by roughly the same percentage in the coming downturn.
Until then, we are seeing market narrowing into the ‘darlings’, a common phenomenon near market peaks. – vreaa

“My brother in law and sister recently moved from Vancouver back to Ontario due to the cost of housing.”

“My brother in law and sister recently moved back to Ontario due to [the cost of housing]. He makes about $90k a year which doesn’t even get him in the door for a mortgage. The real kicker is that he still works in BC.
He flies here every 2 weeks, stays with my brother and then go back cheque in hand. That is a huge drain on the economy as he gets his wages here but spends it in Ontario and that reinforces it’s economy not ours. The biggest impact is that that is where he pays his income and sales taxes as income taxes are deducted on where you live not on where you earn the money.
If I was in that position I wouldn’t think twice about doing the exact same thing.”

– ssiguy at city-data.com/forum/vancouver  7 Jun 2011  [hat-tip Polly]

The Disinvested – A Few Disparate Thoughts On The Vancouver Riots

by Froogle Scott, VREAA, 16 June 2011 -

Rioters = people less invested in a society, or at least capable of being less invested for an evening, when fueled with booze and testosterone.

Interesting that the typical riot shot or ‘riot pose’ adopted by the young male participants, is one with arms thrust upward and outward in a V, as if proclaiming some kind of victory, or drawing power from the carnage behind. Ergo, these are people who spend most of their time walking around feeling powerless?

The boutique and upscale display window, the BMW or Hummer, is the magnet for trashing, upscale consumer goods the key item for looting.

The riot appears to be a fun event for the participants, but also something that helps define them, assert their individuality — ironically, while part of a mob. The Canucks fail to make them feel good about themselves, so they take matters into their own hands. Surreal to see “Kesler” and “Luongo” and “Sedin” running around inside the Bay and outside smashing and looting. If the real Luongo can’t get it done, I’ll just do it myself.

A few disparate thoughts, perhaps held together by the notion of ‘investment’ — the various meanings of that term, the lack of it, and perhaps the distortion of its meaning by the broader Vancouver society. We feel invested if we own a house or a condo, or earn enough to buy $500 hockey tickets, or designer handbags and shoes, or fancy automobiles. As the society has become increasingly focused on consumerism and sensory experience, on houses and home renovation, and the price of admission to that society climbs increasingly higher, the notion of what constitutes a healthy society in which everyone can feel invested becomes increasingly murky.

I don’t think the rioters are ‘dispossessed’ in any real sense of that word, but I do think that a riot of disaffected, bored bottom-feeders in a consumerist hierarchy tells you something about the nature of the broader society.

Information About Buyers

Larry Yatkowsky at his blog, yattermatters, 16 Jun 2011, kindly releases to us a Greater Vancouver Real Estate Board monthly survey of realtors. “The survey is restricted to members who have made at least one sale in the preceding 30-day period.” It covers 1246 sales over Jan-May 2011. Excerpts (click on tables to enlarge) -

Therefore: More than 80% of buyers are locals.
About 15% of buyers come from outside of the lower mainland (a little more than half of those from outside the country).

One third of buyers are FTBs.
70% of buyers are moving up or laterally (FTBs + similar + move-up).
20% of mortgages are high ratio.


Conclusion:
The speculative mania continues to be driven by local buyers, a significant portion of whom are highly leveraged. -vreaa

“It’s one thing for Joe Public to be speculating on real estate, but when realtors are effectively buying and selling to each other while inflating the price it adds another level to the pyramid.”

“The house above, at 2556 Trinity Street, frame covered with a coat of stucco, was built 60 years ago. It has two tiny bedrooms, one bath, contains just 940 square feet and is butt-ugly. It was listed in March and sold in two days to a realtor who paid $773,000. Now it’s back on the market, this time aimed at Asian buyers – at the ‘lucky’ price of $888,000. That’s an increase of 15% in 75 days, and multiple offers are expected. Says blog dog Doug: “It’s one thing for Joe Public to be speculating on real estate, but when realtors are effectively buying and selling to each other pocketing the commissions or cutting them out completely while inflating the price adds another level to the pyramid and one more ball in the air.” – Anecdote and opinion from Doug via Garth Turner at greaterfool.ca 15 Jun 2011

The Coming “Housing Prices Crashed Because Of The 2011 Riots” Meme


Scott Peterson, reporter, on ‘Vancouver riot cost’ from cbc.ca 16 Jun 2011- “Another thing here that you can’t really put a price tag on is the damage to the City of Vancouver, and the goodwill as a place to do business, after all the goodwill that was built up after the Olympic Games, this is certainly going to return the reputation of a no fun city in the sense of this crack-down.
It doesn’t look good internationally because we’ve seen headlines from like ‘The Guardian’, to ‘Al Jazeera’, even, and, in Hong Kong, these headlines get around the world.
And, another caveat here, the Bank of Montreal waded in this morning with a report saying that after the 1994 loss, the first time around, Vancouver housing prices corrected by 26%… [first announcer "Really?"]… So, a little bit of a co-incidence here and maybe a little bit of foreshadowing, considering how Carney was out there last night talking about how overvalued Vancouver house prices were.”

It is interesting enough, from the ‘socionomics’ perspective, that a CBC report on the riots should include mention of property prices.
More interesting is the inevitability of the coming meme.
Vancouver’s speculative mania in real estate is ripe for implosion, and, at some point would have collapsed under its own massively over-bloated size. The mania is the cause of its own collapse; no other cause need be invoked.
There is now a very high chance that the coming collapse will be blamed on the 2011 riots. This is a fallacious logical link, but just watch people march it out. It serves a psychologically defensive purpose, too; a primitive attempt at protecting one’s own opinion of oneself.  “If it were not for the unpredictable fluke of those damn riots, property would have continued up, and I would have been right” is easier to stomach than “I was wrong”. This is a sub-category of  the “Hoocoodanode?” defence.
Any statement, in the coming months or years, attempting to link housing price collapse to the 2011 riots (in a causative rather than co-incidental fashion) will deserve scorn and ridicule. We’ll collect any such statements in the ‘Hoocoodanode?’ sidebar, and we may even start a separate category, if warranted. – vreaa

Vancouver Riots

Game Day – Carney On The Road In Vancouver – “The risk is that expectations become extrapolative, prompting the classic market emotions of greed and fear.”

15 Jun 2011, 8am: Big Day! No, not this evening’s Stanley Cup Game 7 on home ice, but BOC Governor Mark Carney, on the road, speaking here in Vancouver. We don’t know what he’s going to say, yet, but we expect it to be pertinent to our speculative mania in housing and the nosebleed debt levels BC-ites are carrying. He’ll be subtle, but he’ll warn us nonetheless. Nail-biting stuff.

UPDATE; excerpts from the speech:

“Some markets are already severely unaffordable even at current rates.”

“Given such developments, one cannot totally discount the possibility that some pockets of the Canadian housing market are taking on characteristics of financial asset markets, where expectations can dominate underlying forces of supply and demand. The risk is that expectations become extrapolative, prompting 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.”

Entire speech here: (pdf)

“…or (B) The locals are trying to keep up with the Chinese version of the Joneses and heavily indebting themselves in the process.”

A must read commentary by Ben Rabidoux (at The Economic Analyst 14 June 2011) on a must read report, ‘Have Canadian Consumers Reached
Their Limits?’, Certified General Accountant Association of Canada
. Excerpts-

“If we are to preserve our orthodox economic system, it is time to empower Canadians to engineer an economy which relies less on immediate consumption, excessive leveraging, and hardship – one that commands a cultural shift more befitting of our resources and our experiences.” – CGAAC

“I also find it amusing that in BC, the land where wealthy immigrants are purchasing homes with suitcases full of cash….or so the story goes….the debt service ratio and total indebtedness is by far the worst of all provinces. How do we reconcile this data except to say that: A) The buyers overwhelmingly appear foreign, but are still taking on mortgages to buy….or B) The locals are trying to keep up with the Chinese version of the Joneses and heavily indebting themselves in the process. Neither of these are good. Clearly it is debt that is driving the BC market, just as in every other market in Canada, though the Hot Asian Money story is quite likely what is causing the locals to line up in droves for a lifetime of debt servitude.” – from Ben’s commentary
[Frequent readers here know that this has been our thesis for some time; the debt numbers back that up. - vreaa]

One chart of oblique interest (answers that question “Is that Beemer purchased or loaned?”):

“I find it surprising that even I am feeling bearish, despite being a homeowner. Are any of you former bulls feeling the same way?”

hazuchan at RE Talks 6 Jun 2011 7:30pm“I find it surprising that even I am feeling bearish, despite being a homeowner. Are any of you former bulls (like me) feeling the same way?”

Why should owning real estate effect whether you foresee ongoing RE market strength or future weakness? [rhetorical question].
It is obviously human nature to ‘talk one’s book’… so much so that when our analysis runs against our actual position it feels odd. It’s the first step in changing a belief, and later, acting on the new belief to change a position.
There has been so much information accumulating out there that suggests ‘bubble’. Information that has been getting increasing airtime from different quarters, MSM included.  More and more players – former bulls/complacent owners/potential buyers/potential sellers – are filtering and filing this information.
This is quite probably why ‘hazuchan’, a local RE owner who appears to read quite widely, is experiencing this ‘feeling’.
The ‘pumps’ are being ‘primed'; preparing for action.- vreaa

Realtors Soliciting Homes For Sale – “Wow – this arrived at the house today”

- Image e-mailed to VREAA by reader, with note: “Wow – this arrived at the house today”

“I thought if I sold my house in London, UK, I could buy a much bigger place in Vancouver. I had no idea Vancouver was so expensive.”

This exchange at city-data.com/forum/vancouver  1 Jun 2011, on a thread regarding Vancouver RE prices  [hat-tip Polly] -

LondonUSA: “Is it really that expensive in Vancouver? Is it talking about in the city or suburbs? Where I live [is] still technically in London but in the suburbs my house (4 bedrooms, 3 bathrooms) would easily go for £450,000 if not more. If this was sold I could buy a much bigger place in Vancouver, I thought, exchange rate taken into account.”

rockerode: “yep. i just did a search for 4 bedroom 3 bathroom houses in vancouver, and the cheapest is £420,000 house in one of the less desirable locations in vancouver. you need at least £600,000+ for decent housing, otherwise you gotta rent.”

LondonUSA: “£450,000 is $720,000. I could buy but would not be able to sustain a reasonable living standard. I had no idea Vancouver was so expensive. Are theses places in the city or suburbs?”

Stanley Cup Finals and Vancouver Housing Prices

The 7th game of the Stanley Cup Finals comes to Vancouver this Wednesday, 15th June 2011. Boston Bruins and Vancouver Canucks tied at 3-3, obviously.

The behavioural economists may be interested in some of the parallels between Canuck play-off success and the housing markets. Apparently ‘jesse’ has already pointed out elsewhere [link anyone?] that the last two occasions the Canucks made the finals came close to peaks in Vancouver housing:
– June 1994 was at the top of the late 80′s/early 90′s bubble, followed by years of price declines.
– June 1982 was in the middle of the fastest and biggest RE bust Vancouver has seen since the 1930′s.

Now, before we all scoff at this as random chance association (which is a possible explanation, of course), consider the possibility that there may be a relationship between market strength and team performance:
1. Via psychological factors: thus: high housing prices -> wealth-effect -> over-the-top-enthusiastic-fans -> better team performance -> finals.
[I'm sure we've all been particularly impressed by the strength of home ice advantage in this series; the psychology of the fans appears to have a massive effect on team performance.]
2. Via economic factors: thus: fans flush with RE_ATM funds/wealth effect -> spend more money on tickets and trinkets -> team richer -> material benefits and psychological boost -> finals.
[Anybody care to do an analysis of ticket prices in Vancouver vs Boston? Could these numbers possibly correlate with local housing market strength? We wouldn't be at all surprised if they do.
Rusty, in a post here at VREAA pointed out that he could have purchased a package to see games 3 and 4 in Boston, including hotel and flight, for $995. Here in Vancouver, single tickets for game 5 were trading online for $2K-$5K ask.]

All of this talk may sound bizarre but there is a whole school of analysis that looks at these relationships, namely socionomics.
Ever heard of ‘Skirt Length Theory’ and bull markets? Not the best market timing devices, to be sure, but, similarly, not to be discarded out of hand.

And, before you disregard the possibility of this relationship completely, consider that the fans in Boston have not been moved to produce signs alluding to housing finance. These fan signs from Game 2 here in Vancouver:
‘NUX TIX OR MORTGAGE PAYMENT?’ and ‘HOPE THEY DON’T TAKE THE HOUSE’ [For close ups and discussion, see VREAA post, 5 Jun 2011]:

“So the real estate agent told them to put down the 5% ($20,000) and that later, when the condo site is at 95% sold, she will do them a “favour” and resale it to another buyer for $100,000 profit. They signed.”

This story from Mike, as told in a post by Garth Turner at greaterfool.ca, 12 Jun 2011 -
“Mike’s buddy was trying to close some condo deals. He works for a development company in hallucinogenic Vancouver, where a private event was held for 40 or 50 clients of a top real estate agent.
“My friend was helping with the admin work for the contracts for that day,” Mike explains. “He mentioned there were two couples that were on the fence to sign. So the real estate agent sat them down and told them to put down the 5% ($20,000) now and that later when the condo site is at 95% sold, she will do them a “favour” and resale it to another buyer for $100,000 profit. She told them they would make a $80,000 profit in one year. They signed.”

400% return in 1 year.
Risk?…
– vreaa

“I live in a 3 year old condo, they are basically selling for the same price they did last year. I am thinking of dumping it, I am ahead and the home warranty is running out.”

Jonny at greaterfool.ca 7 Jun 2011 9:18pm“Are housing prices in Vancouver really up as high as they say YOY, 21% in BMO article, 10% in another, or is the number skewed because of the very high end market? I live in a condo, the price is up but not 21%, they are basically selling for the same price they did last year for a 3 year old building. I am thinking of dumping it, I am ahead and home warranty is running out.”

East Vancouver Realtor Accused Of Domestic Slavery

Noted, for the record. From Vancouver Sun, 9 June 2011 -
An east Vancouver couple are being accused of forcing a woman into domestic slavery after police found a Filipino woman illegally living in the couple’s home.
Vancouver police investigated and found the woman was being exploited after she was brought to Vancouver from Hong Kong by the couple in 2008.
“The woman was forced into domestic services and was working 24 hours a day, allegedly seven days a week, caring for the family,”

Oi Ling Nicole Huen and Franco Yiu Kwan Orr have been each charged, under the Immigration and Refugee Protection Act, with human smuggling and human trafficking.

The couple’s $1.39-million home on Grant is currently up for sale.
Huen, a realtor at the Richmond branch of Magsen Realty, became licensed in November 2009, according to the Real Estate Council of B.C.

“The number of resumes I see at work from people currently in Vancouver looking to leave, or that have already left is pretty surprising.”

westcoastfella [living in Toronto] at RE Talks 11 Jun 2011 8:08am -
“The number of resumes I see at work from people currently in Vancouver looking to leave, or that have already left is pretty surprising. The simple fact is they make more in Toronto and pay less for everything around them, and when you’re raising a family and have no tangible ties to Vancouver, it can sometimes be an easy decision to make. My observations are anecdotal for sure, I’m one guy in one industry. But the people I hire are technical engineers earning 70-120K a year (so 60-90 in Vancouver) – not the sort that Vancouver wants to be losing in droves.”

“My brother works in the film industry in Vancouver, and after a few years of nonstop employment, no longer has steady work. He said that there is nearly nothing filming now (which is understandable given its the summer), but more alarming, there is little on the horizon for the fall. 4 regular TV shows film there in the winter, and a handful of movies – but not enough to employ the industry in any significant way, he estimated 40-50% of the usual workers are looking for work. He is leaving this summer to go to Toronto or Montreal, or possibly Europe. The high dollar is stopping some projects from coming here at all, and a lot of others are moving east.”

“I’m not too surprised that the local Vancouver media has not picked up on it, given the negativity of the implication – I’m sure they’ll finally start reporting on it when its too late.”

Spot The Speculators #43 – “I know someone who bought three condos in the same building, each of them for $400-$500K. She probably makes around $60K as an immigration consultant.”

Makaya at VREAA 8 Jun 2011 3:33pm“I know someone [local] who bought three condos within the same building (not at the same time), all of them $400-$500K. She probably makes around $60K as an immigration consultant…. She convinced one of my friends to do the same thing, which she eventually did. And when I was trying to convince her not to do so, the only thing she replied to me was “it’s the only way you can get rich”. My friend at that time was working on a 6 month contract (no permanent job), put up 30% of the equity and got a mortgage for the rest of it. She paid $450K + renovations for it.”

“On my walks around Kits and Downtown, over the past 3-4 months I have seen more property available for rent signs than I have seen in the past 5 years.”

Aldus Huxtable at VREAA 8 Jun 2011 1:59pm and 3:34pm-“On my walks around Kits and Downtown, over the past 3-4 months I have seen more property available for rent signs than I have seen in the past 5 years. Quite a number of friends I have made who were traveling from the UK and Australia have all absconded from Vancouver to elsewhere in Canada for in their words “a better cost of living”. I’ve spoken to a few building managers who have had to lower prices for the first time in years due to a lack of rental applications.People are beginning to go elsewhere, because at a certain point, something becomes bad value for money.”… “I have lived here for 20+ years now and have year by year over the past 8 years seen a majority of long term local friends depart to Montreal, Toronto, Winnipeg, Edmonton, Calgary and Kelowna due to the price of property. People who have grown up here, cannot afford to live close to their families and are forced to move elsewhere. Strangely enough, everyone who has moved away laughs at the cost of living here and insists they’ve given up nothing asides from their friends by leaving.”