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