“My family is from Ireland and what happened there is no different from what is happening here in Vancouver, in that the psychology of real estate has permeated everything. In both cases, greed has taken over, with people bidding up insane prices for houses that have no intrinsic worth. Platitudes such as “the land is what you’re buying” and “real estate is a great investment” overwhelm any rational discussion of what someone needs for shelter actually are. It’s all about ‘investment.’”
- Sean at VREAA 5 Sept 2011 2:04pm
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Latest Anecdotes:
- Chat Thread
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- “My best guess: this property is now an ‘investment hold’ and will be built ‘when prices recover’. Good luck on that!”
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- Graphic – Degrees of Housing Overvaluation in Canada
- The Rare Individual With A Negative Ownership Premium
- Advice Regarding Renting In Vancouver, Please – “Unfortunately, the Vancouver rental stock is absolutely atrocious. It just seems like every landlord is looking for someone to pay 100% of their mortgage on a crappy place through rental income.”
- “I just visited Manhattan for a week, and happened to snap some real estate ads on both the Upper West and Upper East sides of the island. Compare to Vancouver. It simply doesn’t compute.”
- Ben Rabidoux In Vancouver Next Week
- “The mortgage company told me they were calling in my 40-year, 0-down mortgage. I have paid nearly sixty thousand dollars towards it, but, nearly five years in, I have yet to touch the principal.”
- ‘Vancouver City Hall: Housing Report Card 2012′; Plus Revised Version
- “My folks find themselves at 65 still owing half the value of their home and recreation property to the bank. After almost 30 years of ownership in the BPOE and a number of boom markets, they have very little to show for it.”
- “Rent for $2,200 a month or buy and have a mortgage of $4,310 per month. Why would anyone buy?”
- “They were talking about two couples they knew who had recently bought a lot and planned to each build a house on it and live as neighbours.”
- Greater Vancouver Home Builders’ Association Annual First-Time Buyer Seminar Attendance Plummets
- Mom and Pop Get It Wrong In All Markets, Time And Again
- The average British Columbian homeowner is not going to pay off their mortgage by the time they retire.
- “He’s sold all his properties except his current one, which is now for sale. He explained that the market’s currently in crash mode, worst that he’s ever seen.”
- “One of my old high school buddies finally got her mother to sell the family home in Kitsilano – sold for over $1M, monies realized after debt paid off $185K.”
- “I know someone who just declared bankruptcy because her condo was assessed at $150k and she bought it presale north of $250k in 2005 or 2006.”
- Sturdy, With Views – “Calling Froogle Scott!… Is Dr. Scott ‘In The House’?” [Not In This One, Certainly]
- “She said the market was dead in Victoria and that it would remain so for a very long time. I asked how she knew. Her answer was fascinating and should scare the pants off the real estate crowd.”
- Kits Notes – “I’m pretty sure that this is the first 3+ bedroom property of any type that I’ve seen in the 5 years I’ve lived here that is priced below $700K.”
- “A beautiful Belfast home, in the equivalent of 1st Shaughnessy, bought at their RE peak in 2007 for £3.5 million, has now sold for £800K, almost 80%-off. The market didn’t suffer any significant economic shocks. Rates & unemployment didn’t skyrocket. They didn’t build more land. Sentiment just changed and the prices fell and fell.”
- “Two family members of hers are trapped, underwater, in condos on the East Side.”
- “Interprovincial migration is not saying good things about BC’s economy.”
- Vancouver RE: Not As Expensive Provided You Don’t Think – “It’s clear that our perception of affordability has been coloured by living on a continent where housing is unusually inexpensive.”
- More Undisclosed RE Industry Insiders Publicized As Clients – “In 1995, Allan and Karin Hoegg were mortgage-free. But no more. Today their Vancouver home is a valuable source of income as they plan for full retirement.”
- Rumor that some OV units will be reduced by 20%.
- Downside Weights On The Vancouver RE Market – “One of the older guys (over 60) mention to the guy beside him that he and his wife were thinking about selling their family home, and renting, in order to get some of the money that was locked up in the house.”
- “My buddy was looking to upgrade to a house in the Coquitlam area. With 200k extra for a home, that’s half of lifetime saving between him and his wife.”
- “I was walking in the Fraser neighborhood yesterday, I noticed that the population, on average, seem to be composed of workers. I belong to the top 5 percent in terms of income. Nevertheless, I cannot afford any of the houses for sale in that neighbourhood.”
- “Vancouver is an urban resort whose value mostly resides in its real estate and not much else.”
- “Rogers Communications is expanding into RE; aiming to relaunch website; providing critical data that can help potential buyers assess the value of a property from the comfort of their home computer.”
- I’m only 50 and I can just about retire if I want to, all because of a single simple decision – “When prices rebounded to their former highs, then rocketed another 30% higher to what I considered to be totally unsustainable levels, I decided that only a fool would pass up a second opportunity to harvest such a massive non-taxable capital gain, and in 2011 I sold my place.”
- The Vacant Lot of Versailles, Richmond.
- “I don’t think that most people think things are going to crash, just that there is going to be a slight correction, but it was amazing to me how sentiment has changed, and the fact Vancouver RE is too high was just understood.”
- “The ‘investor’ who purchased our house put it up for sale two months later, in January 1981, but the bubble had burst.”
- For A City To Have That Kind Of Vacancy, It’s Like Cancer – “Downtown, the vacant unit rate is so high that it’s as though there were 35 towers at 20 storeys apiece – all empty.”
- “What’s the worst that can happen? You can’t pay your mortgage, so sell your house! No fear.”
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The Canadian RE market is often compared to that of the USA, but perhaps Ireland is a better comparison. The destruction of wealth that took place there when their RE bubble crashed was truly stunning.
I work with someone from Ireland. She argued with me about how real estate isn’t inflated in Burnaby. Her particular story has something to do with the houses in her neighbourhood not being priced for first time home buyers because she moved up into it. So others will have to sell to move up into it. She misses the fact that she’s describing a pyramid scheme. But after a trip to Ireland recently she was less sure of herself. She conceeded that I might have a point after all. She saw homes skyrocket into the the 700-800 Euro range only to drop right back down to the 200-300 Euro range. Last time I spoke to her she was back to predicting a modest, 10-20% drop in local prices and then years of flat. I guess it doesn’t take long for the reality distortion field to kick back in once you get within the media bubble of BC.
Great point you’re making there, lex, regarding the effect that those around you have on your cognitive ‘set’. It’s at its most extreme in cults.
Daily challenge:
“The Vancouver RE market is a cult. Discuss.”
BC and Ireland population is almost identical. BC net migration is +45,000 and Ireland net migration is -35,000. I think we’re now done with comparing Ireland to Vancouver.
Right. So what was Ireland’s net migration BEFORE their bubble burst?
LOL
Ireland has a net out-migration because of their RE-bubble-fuelled economic crash. Read the news much?
I’ve met numerous Irish travelers in Vancouver who were told by their local job centres to come to Canada or Australia as “there is plenty of work there”…..
The term “irish travellers” is generally used to describe gypsies and would be taken as pejorative in the UK.
Luckily Ireland isn’t part of the UK
actually vancouver had a negative migration number in 2010 people are leaving in droves, been across canada and the united states in the last year and there are many great places to live and raise a family at a fraction of the cost of vancouver
Yes, housing is 2-3 times over-priced, and is causing some to leave, and others to avoid coming here in the first place.
When the bubble bursts, the economy, being so overdependent on RE and related activities, will take a bad hit and probably eject even more folks.
All part of the crippling misallocation of resources caused by a speculative mania in housing.
post your stats sebastian.
I see Vancouver gaining 45,000 in 2009/10 (year end is July 1).
http://www.metrovancouver.org/about/publications/Publications/migrationcomponent.pdf
If you have stats that show something different we’d like to see it.
Jesse, were you the one who had the outmigration stats in… was it 2010 Q4? Rollie, there were changes to the temporary worker program that caused a net-migration reversal, although I’m not sure where they are.
Bubble symptom: ignoring recent data because it conflicts with the conventional wisdom:
from Stat Canada Quarterly Demographic Estimates:
The population of British Columbia was estimated at 4,563,300 on April 1, 2011, an increase of slightly more than 9,200 (+0.2%) since January 1. This is the smallest population increase for a first quarter since 2005. In the first quarter of 2011, British Columbia posted net international migration slightly over 7,000, the lowest level for a first quarter since 1998. Additionally, the province’s net interprovincial migration was slightly negative. This is the first time since the second quarter of 2003 that British Columbia has registered a loss in its exchanges with other provinces. The province’s largest deficit was in its exchanges with Alberta (-900).
from BC’s own central1 credit union
Weak population growth through 2013 will be a
limiting factor for housing over the forecast horizon.
The provincial population is forecast to expand at a
lackluster rate of 1.1% this year, and fare only slightly
better in 2012 and 2013 with 1.2% growth.
The slow pace of growth will refl ect a drop in the
number of landed immigrants to B.C. from international
markets this year and increased net outfl ow
of residents to other provinces, primarily Alberta,
in 2012 and 2013. This interprovincial net outfl ow
refl ects the stronger rebound in Alberta’s economy
and improved labour market conditions.
What’s really interesting is that there were only 2900 BC births in Q1-11. Furthermore, BC will see international immigration cut in half this year compared to last and then in half again for 2012. Do you think it’s a coincidence that prices are down since June?
True population grew in 2010.
What has amazed me in the past 10 years is how BC’s “manufacturing” base has deteriorated. This has been picked up by a boom in construction, in other words manufacturing jobs were lost and construction jobs gained almost 1 for 1. The problem should not be understated here: one activity is for investment the other is for production/consumption. One day I’ll elaborate on the difference in more detail but quickly, a focus on investment means that consumption needs to increase in the future. If that is not possible then that leads to a severe recession.
BC has replaced production with investment, just like Ireland did, and that eventually comes home to roost. I agree with the comment above that Ireland and BC have much in common, though I don’t think BC will face the horrid economic conditions Ireland will be facing for the next few years; nonetheless it won’t be pretty. People need jobs; it’s worth asking where those jobs are going to come from.
Speaking of hi tech, here’s a recent report courtesy BC Stats
http://www.bcstats.gov.bc.ca/pubs/bcbi/bcbi1108.pdf
The problem BC faces is it has proven difficult to produce a long-lasting tech infrastructure. Very few companies remain today as a blue-chip employer compared to 10-15 years ago. The turnover of companies is amazing. (Compare to even Seattle with several large firms like Tektronix or $MSFT, let alone San Francisco.)
BC either absolves itself to be a niche player or asks some hard questions about its chronic mis-allocation of capital.
What kind of policy really exists here in BC to create a healthy economy? They have essentially gutted the forest industry, they should encourage logging AND upgrading, not just shipping the timber away.
Likewise, the game industry, THE thing that put Vancouver on the map for many people in my generation / circle is bleeding people east, mainly Montreal but also Toronto (Ubisoft opened it’s new mega studio in Toronto, not Vancouver, they only have a studio here because they bought it).
The reality is that the tech sector is made up of a handful of small companies, mostly clustered around Gastown, who are successful to a different degree but none of them really hires a lot of people or will hire a lot of people in the future because many are just one trick ponies.
Go back to the BC Stats website btw and take a look at the GDP breakdown, you quickly realize that at least a quarter of the economic activity is directly related to residential real estate.
” you quickly realize that at least a quarter of the economic activity is directly related to residential real estate.”
http://www.bcstats.gov.bc.ca/data/bus_stat/bcea/BCEAchnd.asp
I’m not seeing it. Can you explain how you make this claim?
“The reality is that the tech sector is made up of a handful of small companies, mostly clustered around Gastown”
Care to back this up with data? Most tech jobs I’m aware of are in Burnaby and Richmond due to favourable tax and zoning regimes but that’s just anecdotal. If you want me to list the companies I can point you towards some online tech company directories and we can do a straw poll on location.
I don’t disagree the BC tech sector struggles from time to time but it’s one area where the province has produced value, which is more than I can state for much of the real estate activity. In my view the province should continue to foster R&D, and that’s more than producing FPSs and iPhone games. In fact the province has several programs designed to foster certain sector-specific R&D ventures that put BC at a distinct advantage in terms of funding efficiency compared to other jurisdictions. Going out and hire the absolute best local employees (and there are some who are still around), treat them well, and BC has a good chance of producing some good results. I’m bearish in general on BC’s economy but that doesn’t mean the entire economy is a write off.
Well just in time to answer your question, premier Christy Clark has just announced her job creation plan!
Was Seattle always the hub of hi-tech or was it because Microsoft is based there and hence that started it all.
Vancouver can’t match SF because there isn’t the quality of universities there like Berkeley, CalTech, and Stanford to pump the graduates here. I don’t see how Vancouver will become some sort of Hi-Tech hub even if we tried to align our policies. I just don’t see the quality graduates from UBC and SFU. Now, due to our immigration policies, what might happen is companies like MS, Google, IBM might want to immigrate potential engineers from India or China to Vancouver and then eventually to the US, that might work.
It would be a mistake to directly equate the quality of the school to the quality of the graduates. UBC/SFU may not have the lead on quality of its graduates but it does spit out a few gems from time to time, and some actually decide to stay in Vancouver. You just have to be able to find them and get them to work for you.
Here are some links:
Employment by sector. Notice how mfg decreased and construction increased.
http://housing-analysis.blogspot.com/2011/07/bc-employment-by-sector.html
Population growth
http://housing-analysis.blogspot.com/2011/07/bc-population-growth-to-q1-2011.html
Population grew in 2010 in net, Q4 2010 saw a net outflow, mostly due to a malaise in immigration and a (large) net outflow of non-permanent residents. This coincides with the government tightening its temporary visa program last year, one assumes in an effort to foster employment of permanent residents.
Q2 2011 stats are out in about 2-3 weeks. I’ll update the data, it will be interesting to see if population growth remained subdued as it did for the previous quarters; if it has, I might be prone to put more worthiness in the possibility that there is a new vector in migratory patterns that would, in time and after duly considering all the data as it becomes available, change expectations on future outlays of local and foreign derived capital.
Thanks, Jesse!
And as per Ireland, here’s an interesting article on their migration patterns.
http://www.migrationinformation.org/Feature/display.cfm?ID=740
Net migration was highest in 2005, but just before the housing bust it was still positive at around 40K.
Absinthe, the peripheral EU countries are facing falling wages, high unemployment, and deflation. Their youth unemployment is high, I think in Greece and Spain it’s 30%+. At some point this is going to lead to an out-migration of workers, mostly those who are adaptive, highly-trained, and most capable of supporting a country’s aging and retiring population. Not good.
Now it’s worthy of asking if BC could suffer a similar fate. I’m more optimistic but this does not preclude out-migration to where jobs (and houses…) are more plentiful. I might argue an exodus would be different from that of Ireland, in BC it could be trades-level workers leaving but knowledge sector workers stay. There are some good things Canada and BC does to foster small innovative businesses compared to most EU countries I’ve seen. Food for thought. (And no this does not mean I’m bullish on BC in net.)
Joe Q.
Our housing “crashed” in 2008 yet we maintained the same number of immigrants. I’d be willing to bet any housing correction would likely only effect our immigration by adding more (increased affordability being the incentive to move here)
Rollie -> I’d be willing to bet any housing correction would likely only effect our immigration by adding more (increased affordability being the incentive to move here)
—
Interesting; we really see the dynamics here so differently…
We’ve done this before but, again:
You imagine hordes running in to snap up Vancouver RE at 10-15% off; I imagine a similar drop starting a price cascade as a substantial number of owners start coming to market in an attempt to realize precarious paper profits.
The effect you describe may cause a bit of a bounce at 2009 lows, but no more than a bit, and once the 2009 lows go, 50%-off is the first support.
BTW, we anticipate we’ll get a chance to test these respective hypotheses at some point in the next couple of years.
Will 10-15% off be the extent of the correction, or not?
@Rollie — you’re just reciting a variation of the “everyone wants to live here” argument. Nice thought but it just ain’t so.
Foreign immigration numbers are limited by the federal and Quebec governments not housing prices. It’s actually the other way around. Interprovincial migration is, for the most part, determined by economic activity – ie. jobs and high housing prices with low economic activity are generally a constraint on immigration while a postive factor for emigration.
Furthermore, the 2008 drop in prices was due to the credit (ie. money) crisis which created a vaccum when international buyers were less able to move their cash. With emergency measure by the US to provide liquidity to the global financial markets, the free flow of credit was restored. If you don’t believe me, look up the Libor-OIS spread as an indicator of global credit conditions and look at the historical chart.
Also, look at the huge increase in the spread over the past month and I wish you good luck if you are long Vancouver real estate.
My opinion (uneducated, and without data to back it up) is that Canada is weathering the global recession well because of decent employment for unskilled workers. Some of those unskilled jobs are in construction, and some are in natural resources (oil, gas, mining, forestry, etc.), and a few in agriculture.
In contrast, both Ireland and the USA had the construction jobs during the boom, but much fewer natural resource jobs. Once the construction jobs were gone, that meant skyrocketing unemployment, lower consumption, and an economic nightmare.
Our risks for unemployment are either the RE bubble bursting on its own, or a bust in commodities. The commodities bust could also accelerate the RE bust.
Interestingly, BC’s resource-sector jobs are becoming a relatively small part of the economy. Construction jobs have filled the void and I’m far from convinced that a resource sector boom will be able to fill the void. Something to watch is the provincial government taking on more debt either on its books or carefully hidden. I hope the opposition figures this out; they should because they were quite the hands at fiddling with numbers in their day.
I think you really are on the right track. For instance, why is the BC government cutting employment and why was there a ministerial recommendation to cut roungly 15% of BC Hydro employees. I believe the numbers are expected to be 300 this year – mostly in Vancouver/Burnaby.
BC (Vancouver) has decent jobs? Who knew? I thought the place subsisted on getting up and making each other breakfast.
Sorry folks, you’ll need to go to Calgary or Toronto to find a city with a real economy and real prospects. This makes the current RE situation a real conundrum in my mind.
Close, not breakfast, selling each other real estate.