“Our province is a place of relative calm and stability, but we are surrounded in almost every corner of the world by economic turmoil” – BC Premier Christy Clark [The Vancouver Sun, 23 Sep 2011], unveiling a plan she hopes will make BC “one of the country’s fastest-growing economies by 2015″.
“We’re caught up in a very challenging global economic situation. We are in for a rough time and the provincial government can’t fix that.” - Jock Finlayson, economist for the Business Council of B.C., G&M, 18 Sep 2011
The world is experiencing deflationary effects that are the result of forces related to the deleveraging of excessive debt. BC has thus far largely remained blissfully removed, by virtue of having kept the speculative mania in RE going, by ongoing debt-fueled consumption, and by importing money. We can’t see how local RE related activity can insulate us for much longer. BC will, unfortunately, be swept up in the wave. This will occur regardless of local policy; the forces are simply too great for relatively minor ‘in house’ adjustments to alter the course of much larger external forces. This decade, a Real Estate bear market will be Vancouver’s defining social and economic event. – vreaa
Last year one of the bank economists, I think with Scotia, made the remark that all will be fine in real estate as people would just cut other expenses to stay in their houses.
That was more than telling and removed the last little bit of faith I had in either politicians or economists when it comes to the economy.
What does BC really have going for it? It’s expensive, people are moving away because they can’t afford decent housing, jobs are not plentiful (and her doing a tour talking about jobs won’t change that) and with the HST gone I wouldn’t be surprised if some manufacturers decide to leave. Yesterday she talked about increasing mining in BC-well, that will go if commodities tank. From what I hear from people in the mining business, despite what the media says, the province is actually not business-friendly towards mining industries, with all the red tape the companies have to go through.
pricedout,
for you the glass is half empty. In reality, 10s of thousands of people are moving to the lower mainland every year. Keep reading these blogs and you’ll keep digesting the pessimistic renter position.
Alternatively, stay away from all sane criticism, keep believing the ‘Limitless Demand Argument For Ongoing Market Strength’, and, like the vast majority, be surprised when the inevitable occurs.
so with your logic vreaa, add 10s of thousands of new residents and expect prices not to rise? I think we can argue limitless demand and rising prices in the face of supporting evidence.
Your logic is kinda wonky fella
The thousands of people moving to BC every year doesn’t help the millions of Canadians currently drowning in debt….
‘the604′ -> Yes, population increase contributes to demand, and under normal market conditions, applies upward effects on prices.
However, when a speculative mania has pushed prices into the stratosphere, such that they are 2 or 3 or 4 times prices supported by fundamental measures, then, when the bubble implodes, positive immigration is not enough to stop said prices from collapsing back to levels supported by fundamental demand.
Your model (‘logic’) doesn’t adequately take into account the increase in supply and the almost cessation in demand that occurs when a bubble pops.
the proof of affordability is that buyers still purchase homes. Market conditions will adjust when prices creep into the unaffordable zone; it’s called equilibrium.
By talking about an “equilibrium” being reached when “prices creep into the unaffordable zone”, you’re implying/assuming that the effect will be gentle, like a slow application of the brakes, or a ‘soft-landing’.
In reality, markets/people don’t behave like that. They fracture, they disconnect; the curve is not gradual or linear, it’s sigmoid; thresholds are hit; weird things happen, and they happen quickly.
Easy money, cash flow, ability to sell, speculative activity, psychology can all change in an instant, and what seemed like a methodical give-and-take supply-demand equilibrium can suddenly fall off a cliff.
“In reality, 10s of thousands of people are moving to the lower mainland every year.”
Doesn’t change the business case. Rents are flat. Try a stick man next time.
“So how do I make my money?” – Kevin O’Leary
eyesthebye, please pick only one handle under which to post: the604, rusty or rollie. thanks.
Equilibrium. Ah yes. I remember it well.
Right up there with… let’s see, ah….
Rational Actors
Efficient Markets
Perfect competition (which, as I recall, was contingent upon ‘perfect information’ and a ‘continuum’ of competition).
Hmmm… Personally, I prefer Santa Claus and the Easter Bunny.
Heterodox rules (and nope, that’s got nothing to do ‘orientation’ or dining on Republican al fresco – or other crustaceans, for that matter).
This may help. Oldie but goodie (and Ormerod’s best).
http://tinyurl.com/3z6ptjn
…”swept up in the wave.”…
Ah, now that would explain that “swooshing” sound that seems to be getting louder…
[Reuters] – Hundreds protest in south China over land grab
“Hundreds of villagers in southern China protested on Friday over a government seizure of land, the latest outbreak of trouble in the economic powerhouse of Guangdong province that illustrates growing public anger at the practice of land grabs.”
http://tinyurl.com/44xr699
and today’s Quote ‘O The Day!…
…”the real estate industry is the hothouse of the entire commerce!” – Jin Yanshi, former chief economist of Guojin Securities
[ChinaDaily] – Property is still key to riches
“About 23.5 percent of the 1,000 richest Chinese individuals’ fortunes comes from the property industry, up from last year’s 20.1 percent, according to the Hurun Rich List 2011, which focuses on people in the real estate industry, released on Thursday.”…
http://tinyurl.com/3sqwz6a
An oversight… [from the Reuters piece] and possibly a superior Quote O’ The Day…
“The officials here are corrupt and are colluding with the developers,” said Li, a Longguang villager who told Reuters that police beat two students on Thursday, killing one of them on the spot.
Naked officials ….yeuch.
http://www.chinadaily.com.cn/china/2010-02/24/content_9492278.htm
Other analysts are however, how shall we put it?… Less sanguine.
[BloomBerg] – China’s Property-Market Squeeze Is Nearing a ‘Tipping Point,’ Nomura Says
“We’re reaching a tipping point where land sales are dropping much faster than before, developers are losing more access to bank financing, and housing prices are showing weakness,” Nomura’s Zhang said in an interview in Beijing yesterday….
http://tinyurl.com/3udvgn7
Recent Chanos interview suggests that Chinese RE bubble is already imploding, and that real China GDP growth may be closer to 0% than 10%.
[Of course Chanos is short, so he may be simply talking his book, BUT he is not naive enough to think that his opinion will move markets.]
The guy I read regularly is Pettis. Here’s some recent comments: http://mpettis.com/2011/08/some-predictions-for-the-rest-of-the-decade/
He doesn’t know the timing but he sees China as having an investment bubble that has now reached meltdown. That is, there is no way to avoid massive writeoffs without adding more and more debt. The only way bad debts are resolved is for China to increase consumption and, according to Pettis based on some macro theories, that means lower interest rates and lower GDP growth, potentially a devalued yuan, and lower demand for commodities. His thesis — FWIW — is that investment booms like China’s or Japan’s book GDP inappropriately because they do not account for future liabilities — earnings from investments — so lower growth in the future is “simply accounting” for that improper forward booking.
This does not mean China’s going to “collapse”. Japan never did; anyone travelling there isn’t facing abject poverty. GDP isn’t necessarily accounting for all points of health of an economy. The point is that, with Japan previous and China today, asset values and earnings got out of whack and it takes many years for real earnings to catch up. In Japan that meant low interest rates but positive real consumption growth.
If you think BC has some parallels to this, I don’t know. BC is running a current account deficit so I’d be looking to somewhere like Spain and maybe Ireland for parallels more apt than Japan or China. All countries suffered from investment booms and busts, and I think BC has “suffered” the boom part. Something needs to step up to get the earnings to match the investments and that’s what the government is trying its darndest to do. The only question now is how they pay for all those jobs; on this front all roads lead to Rome, though borrowing right now for the government is dirt cheap. Just saying, as a business I would kill for financing rates the GoBC can get right now.
“province is a place of relative calm and stability”
Funny how hardships are always of someone else’s doing. Eat it up, BC.
“Eat it up, BC.”
–
As in “swallow the spin”, or as in “take your medicine”?
Both will apply, in that order.
“BC will, unfortunately, be swept up in the wave. This will occur regardless of local policy…”
It pains me to say it, if you’re a speck of water on the ocean, YOU ARE THE WAVE!!!
Just shows they didn’t have any plans for post-Olympics. Now we are aimlessly drifting in a turbulent sea.
Might as well vote for the NDP, as they can’t do any worse.
Chase away industry? What industry? Just thieves stealing our resources. Effem.
“Our province is a place of relative calm and stability, but we are surrounded in almost every corner of the world by economic turmoil”
So everywhere else is headed for recession but we’re immune? Does that really make sense? Let’s look at the GDP numbers:
– 24% finance, insurance, real estate, renting, leasing
– 6.5% construction
– 6.5% healthcare
– 6.5% retail
– 5.2% manufacturing (wood, metal, etc.)
– 4.7% tourism
– 2.6% mining and oil/gas
…
http://www.bcstats.gov.bc.ca/data/bus_stat/bcea/BCEAchnd.asp
Of course these figures don’t include the drugs trade, which is estimated to be $6B-$10B, which is 4-6% of GDP.
If everywhere else is in recession, tourism will be hit. If commodities plunge, mining, oil and gas, and manufacturing will be hit. If unemployment surges, retail will be hit.
So we have to pin our hopes on the largest sectors, which are finance, real estate and construction. The only hope is to keep the RE bubble growing and immigration up.
But BC immigration is already slowing rapidly and when China pops it’s reasonable to expect BC emigration will be the norm. Furthermore, the drug trade is, apparently, moving out of BC to the US. What does that leave? Lower interest rates to purchase a crack shack for 12+x annual income! Doesn’t sound like relative calm and stability to me – more like storm central for Vancouver – the global RE bubble epicentre.
Can you give me some numbers for the BC immigration slowing? I have been trying to track down these numbers for a while.
The thing about chinese popping is that does anyone account for the fact that China has a ridiculously high savings rate compared to the Western countries? I think someone put the savings rate at something like 20%. Which means that they actually have a lot of money at their disposal with a dictatorship for a government. Somehow, I would think that it is much easier to enact swift measures to soften any economic blow than in a democracy like the US. I think they need to cool off a bit as they have been growing too fast, but they could enact policies in a hurry to nip any issues in the bud. If they need to, they could leverage themselves and bailout their industry as the country is not exactly in a debt crises. If growth slows, then they could deflate their currency and lower interest rates.
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.
I have been looking at the projected period 2012 and 2013 for our startup and have found a major glue pot in the ‘recovery’ ( don’t make laugh) – credit.
Banks are scared to death – when RBC cuts their pension plan, you know the wolf is at the door – and these guys are tight with their loans, unless they can bury em at CHMC.
Lotta loan managers must be dying on the vine.
Things are going to get Japan like ugly here – and for a long stretch, and oh, buy waterfront on BC coast and get an xray with every piece of Fukushima washes up.
Man, this Movie is directed by David Lynch.
“this Movie is directed by David Lynch”
lol
Some aspects of current events do seem like that, don’t they?
How astonishing… One of Nem’s ‘BakerStreetIrregulars’ just filed the following despatch from a WestSide OpenHouse occurring earlier today!
http://tinyurl.com/3r6x8sj