Monthly Archives: November 2011

“The threat of a bubble has largely dissipated. But, really, there never was one.”


“The threat of a bubble has largely dissipated. But, really, there never was one.” – Robin Wiebe, senior economist, Conference Board of Canada, speaking of Metro Vancouver; as quoted in ‘Metro Vancouver resale market ‘balanced': conference board report’, Vancouver Sun, 29 Nov 2011 [hat-tip Smokin' Jayne; added to the 'What Bubble?' sidebar archive as suggested.]

In light of what is happening around the world, it is remarkable that anyone with a training in economics could look at Vancouver’s RE market and not want to issue at the very least some words of reservation. – vreaa

“If I’d paid for it all myself, the price cut wouldn’t bother me as much, but there’s a lifetime of my parent’s blood and sweat in it. Developers’ profits are outrageous. The price they set when the housing market kept going up was far more than the real value.”

Danny Deng and his bride-to-be dreamed of their lives together as they walked through the showroom for a Shanghai housing project almost three months ago. Pooling his own and his parents’ savings, a loan from his boss and a 1.1 million yuan ($172,000) mortgage, he bought an apartment and secured his fiancee’s hand.
On Nov. 19, Deng faced off a ring of security guards three rows deep wearing camouflage and carrying shields as he joined more than 100 homeowners rallying in front of the development’s sales office. His transformation from newlywed to street protester came after China Vanke Co. slashed prices for future buyers at the Qinglinjing complex, erasing about 20 percent of the value of his three-bedroom unit overnight.
“If I’d paid for it all myself, the price cut wouldn’t bother me as much, but there’s a lifetime of my parent’s blood and sweat in it,” said Deng, a 30-year-old electrical systems salesman. “Developers’ profits are outrageous. The price they set when the housing market kept going up was far more than the real value.”

– from ‘Shanghaied Home Buyers Take to Street’, Bloomberg, 29 Nov 2011

Then why, Danny, did you buy it?
We know: Because you thought that prices would continue to go up, and up, and up, right? Right.
And if they had, you’d be taking credit, not complaining, right? Right.
Speculators are the same everywhere: Shanghai, Sydney, Spain, Ireland, Vancouver.
The outcomes of speculative manias know no cultural bounds.
– vreaa


More of Danny’s story from the article:
For Deng, the pain is more than financial. Tears swell in his eyes as he recounts the moment his father handed him access to his life savings of 360,000 yuan to help make the down payment.
The gift made Deng consider himself a member of the “ken lao” generation, meaning to gnaw on the elderly.
“I was depressed, uncertain, touched and a bit ashamed,” he said, asking not to be identified by his full Chinese name because of the personal nature of his story. “I had been proud and didn’t think it was their business. But when the moment really came, I knew it was impossible to manage only by myself.”
Deng had moved to Shanghai three years earlier from a small city in the north to be closer to a girl he met in college. When talk turned to marriage, his girlfriend insisted they buy an apartment first, he said.
“At my age, I should get married and I should have my own home whether or not I can afford it so that I can be the same as my classmates,” Deng said.
Deng saw an ad on Soufun.com for pre-sales of a project called Qinglinjing, meaning “Clear Forest Path,” that was being constructed near a soon-to-be built subway station next to the future home of the Shanghai Disney Resort. Deng and his girlfriend visited a showroom to walk the wooden floors of the replica 96-square-meter (1,033-square-foot) apartment, planning how they would fill its two bedrooms, living room and study.
“We loved it,” Deng said. “It suits us for the next three to five years because we plan to raise a child soon.”
The snag was its 1.7 million yuan price tag. Chinese policy requires a minimum 30 percent deposit. Deng had saved 70,000 — not enough. That’s when he called his parents, then borrowed another 50,000 yuan from his boss, and secured a loan of 1.1 million yuan paying as much as 7.8 percent interest from Agricultural Bank of China, he said.
On Sept. 28, Deng and his girlfriend signed a contract with the developer, happy after winning discounts including 40,000 yuan off for being a member for the Soufun.com website and a 20,000 yuan markdown by collecting 20 stamps on a red “home- passport” issued by Vanke. The end price: 1.58 million, or about 13 times Deng’s annual wage.
The next month, they got married. Paying the mortgage will take up 40 percent of the new couple’s combined salary.
… “I didn’t have a choice,” Deng said of the decision to buy. “I don’t want to be too different. Otherwise, maybe for a long time, I would be alone.”

Wow. Poignant story.
And so many similarities to what is going on to Vancouver: Bank of Mom and Pop; ‘girlfriend insisted they buy an apartment'; plans to move in 3-5 years (but now likely stuck); etc.
Also, some differences, too: 40% of income? (low for Vancouver); 1,033-square-foot apartment (MASSIVE by Vancouver standards), etc.
– ed.

Realtor – “The market will come off the rails in Vancouver next year. Smart money does not chase a falling asset. Spring will be a disaster out west; it may self-perpetuate.”

“The market will come off the rails in Vancouver next year. We’re seeing some China buying reductions but there will always be some Chinese money, however smart money does not chase a falling asset no matter how much they want their kids to go to the “best Schools”. Give me a break – they are not so great that Vancouver is better at education than other cities, that losing 500K is not noticed. Spring will be a disaster out west – as soon as the mainstream media pick up on this – it may self-perpetuate.”
– A Vancouver RE broker, quoted by Garth Turner at greaterfool.ca 27 Nov 2011, who also added “The first half of this year [2011] was hot, the second half will show a dramatic cooling. Tons of sellers have given up, and will flood the market with renewed listings in the Spring [2012]“.

“Smart money does not chase a falling asset. (Price drops) may self-perpetuate.”
Readers will recognize that we’ve been saying exactly this for sometime now.
We’d ourselves probably call it ‘momentum money’ rather than truly ‘smart’ money.
But, regardless, yes, buyers will dry up into price drops; that’s what happens when speculative bubbles burst.
Price drops will beget price drops.
– vreaa

“I work in the financial industry and I know of several clients who have approached us recently about the possibility of going bankrupt. They have made some bad financial decisions over the past 5 years, a lot of it to do with risky real estate investments.”

“Although Vancouver’s real estate market has been on steroids for years, I do think this boom coming to an end. The rest of BC is not faring so well, prices and sales are down a lot in many areas outside of Vancouver. I work in the financial industry and I know of several clients who have approached us recently about the possibility of going bankrupt. They have made some bad financial decisions over the past 5 years, a lot of it to do with risky real estate investments (and also some just have too much consumer debt, lines of credit etc). Sure, Chinese might come to Vancouver and buy overpriced single family houses, but this is not representative of the entire market. I live in a decent, newer condo building and many units have been sitting unsold for months. Oh and the rent we pay? It’s half the monthly cost of a mortgage payment with 10% down, 30 year mortgage (and yes, in Canada, you only lock in your mortgage rate for 5 years, and no, the mortgage interest is not tax deductible). No wonder those units are not selling. I think 2012 and 2013 will see price declines and more bankruptcies in Canada. Household debt is at an all-time high. This trend is not sustainable.”
– comment from Sally Smith at Global Economic Analysis 20 Nov 2011

[This story is familiar in some aspects, and could possibly be a retelling of an anecdote posted previously at VREAA, from a comment at a different source and under a different handle. This may happen occasionally here. If any original poster notes us doing this, please notify us. - vreaa]

Spot The Speculators #68 – “Trev and Anna paid $1 million for a SFH near Main Street. They must spend $150K to make it livable.”

The story of ‘Trev and Anna’ is relayed and discussed at greaterfool.ca by Garth Turner, 27 Nov 2011, a must read for Vancouverites. Here is the core anecdote:
Trev and Anna paid $1 million for a place near Main Street. Sadly, it was unrenovated, so they must spend $150,000 to make it livable. “We plan to stay here 10 years,” Trev adds, “and we were fortunate enough to put down 50%.
“We’ve set aside an RESP for our kid maxed out to the level the government will contribute. I have a limited partnership investment of $50,000 which is projected to provide us with a 7% return. Our combined income at the moment is 120k per year. The house has a separate suite which will provide us $900 per month income. If times get tough then we can rent a spare bedroom to a student for $700. So, we will have $50k after renovations to invest.
Should we seriously consider selling the house when the renovations are complete, rent for a while and then re-invest? The concern is that we will be house rich. If we are planning on staying there for 10 years does this still apply?”

So:
House value (generously presumed) $1.15M.
Mortgage $500K.
Other assets $100K.
Networth $750K.
Percentage of Networth in RE 153%.

These guys are gambling on ongoing price increases.
They will potentially lose ALL of their equity in the coming crash.
(These houses will very likely sell in the $500K-$550K range again at some point).
The idea of them overextending themselves this much into a ‘livable’ Main Street SFH with tenants in the basement and perhaps one in a bedroom just boggles the mind. – vreaa

Australia – High Profile Sydney RE Weakness – No Takers At $1M-Off 2009 Prices


“It was billed as ‘Super Saturday’ but turned out to be more like soggy Saturday for Sydney’s home auction market.
The last Saturday in November is traditionally the most popular day of the year to buy and sell. But this year the clearance rate of 54.6 per cent was well down on estimates.
Actor Toni Collette’s historic Bronte home failed to find a taker, despite being offered at a discount of almost $1 million from the $4.4 million she paid in 2009. Invitations for opening bids of $3.5 million did not raise an eyebrow, let alone a hand.”

Sydney Morning Herald, 27 Nov 2011 [hat-tip canuckdownunder at VCI]

Any doubt that this market will end up with >50%-off discounts? -ed.

Toronto Rents – “There has been a gradual insidious change as more people buy houses. There is a lack of qualified renters. Rents are down in real terms.”

“Rent prices are actually depressed in Toronto in real terms – There is a lack of qualified renters. I say this because I’ve been doing this for 15 years and there has been a gradual insidious change as more people buy houses. If 70% of people now own, and 30% do not for a large part the reason is that that 30% is not qualified for a mortgage.
When I look at the criteria used for credit score with my credit checking system, the credit score used for an approved renter is 700, yet CMHC will approve a mortgage for someone with a score of 620 which makes me chuckle a little. My rental screener tells me to decline those with that score. Of course I can’t, you have to pick from the tenants that apply not those you dream about getting!
Rents have gone down in actual terms in apartment buildings. Condo rentals are skewing the market.”

Rachelle at VREAA 26 Nov 2011 5:49am

“When your credit card is maxed out, you don’t go out and get another one and continue to accumulate debt at 18 per cent interest.”

“Households don’t operate like this and neither should countries. When your credit card is maxed out, you don’t go out and get another one and continue to accumulate debt at 18 per cent interest. Instead, you figure out a way to restrain your spending and you increase your payments to reduce your debt.”
Finance Minister Jim Flaherty, Toronto, 25 Nov 2011

Canadian household debt is now >150% of disposable income, more than the US at the peak of their housing bubble. Our Minister of Finance speaks of austerity yet continues to support loose mortgage lending that encourages more and more Canadians to overextend themselves into more and more debt. – vreaa

Kitsilano – “A West Side realtor I know expects the area to drop 20% in 2012.”

“Sold my house on Vancouver’s West Side in February this year. Cashed in on the Chinese New Year buying spree. Got 200k over asking, I still can’t quite believe it. Have been renting in the same area since then. Realtor friend said market has slowed completely in this area (Kitsilano). There are a few houses that sell, but the offers over asking are gone. Now most of the updates I get via email are “price reductions”. Another West Side realtor I know expects the area to drop 20% in 2012. Some of my friends are dismissing this as the seasonal “Christmas slowdown”. They think I’m nuts and real estate will come roaring back. I haven’t seen prices slide dramatically just yet but expect the reality check will really hit in February when the listings start popping up again.”
– West Side Survivor at greaterfool.ca 20 Nov 2011 7:58pm

RE Price Effects On Grandparents, Daycare, and Working – “My parents thought it would be cool to live near their grandchildren, but that can’t happen at this point in the housing market cycle. Who will look after the kids?”

“It is heartbreakingly cruel, but the retired probably need to learn to love cheaper cities. My parents thought it would be cool to live near their grandchildren, but that can’t happen at this point in the cycle. Unfortunately the cycle may easily take us into their teens, so grandparents and grandchildren alike will miss the most magical people through the most magical period in their lives.
Which begs the question of who will look after the kids while we both work at professional jobs to accumulate enough wealth to de-risk potential home ownership (we can still do that, we’re young). Right now the answer is our awesome home daycare. Her revenue doesn’t cover the cost of her basement-and-garden space, but it’s okay because she bought the place a while ago. She can bleed out her RE gains through years of subsidizing me to go to work. If we lose her we might suddenly have to pay market price for the service. Market price is substandard facilities or care, because they can’t actually charge $2500/month: no one would go to work!”

Zerodown at VREAA 25 Nov 2011 9:34am

Every word wise. – vreaa

‘The Economist’ – Rental Income Shows Canadian Home Prices Are 71% Overvalued


‘The bursting of the global housing bubble is only halfway through’.
Home prices tumbled by 34% in America from 2006 to their low point earlier this year; in Ireland they plunged by an even more painful 45% from their peak in 2007; and prices have fallen by around 15% in Spain and Denmark. But in most other countries they have dipped by less than 10%, as in Britain and Italy. In some countries, such as Australia, Canada and Sweden, prices wobbled but then surged to new highs. As a result, many property markets are still looking uncomfortably overvalued.
To assess the risks of a further slump, we track two measures of valuation. The first is the price-to-income ratio, a gauge of affordability. The second is the price-to-rent ratio, which is a bit like the price-to-earnings ratio used to value companies. Just as the value of a share should reflect future profits that a company is expected to earn, house prices should reflect the expected benefits from home ownership: namely the rents earned by property investors (or those saved by owner-occupiers). If both of these measures are well above their long-term average, which we have calculated since 1975 for most countries, this could signal that property is overvalued.
Based on Incomes, home prices are 29% overvalued in Canada.
Based on Rents, home prices are 71% overvalued in Canada
[The most overvalued by this measure of any of the global markets studied. -ed.]
Canada has an even higher household-debt burden in relation to income than America did at the peak of its bubble.
– excerpted from ‘House of horrors, part 2′, The Economist, 26 Nov 2011. Image from the Huffington Post, Canada, where the story was headlined as: ‘Canada’s Housing Market More Overvalued Than U.S. At Its Peak, The Economist Says’.

None of the above comes as anything new to readers here.
Only wackos like Vancouver RE bears and ‘The Economist’ go on about something as passé as ‘fundamentals’.
Gravity will reassert; we will revert to the mean; perhaps overshoot. – vreaa

Sandy Garossino – “I want to tell two stories from the campaign trail…”

“One of them was a childcare worker in her forties, making less than $11 an hour, caring for children of 3 families in her home on the East Side. Rents are going up but her income is not, and she is being forced out. Despite having a job, she has no security and is hurtling toward disaster.
Another day I was meeting seniors in the west end. A group gathered and were telling me that they spend on average 60-70% of their monthly income on rent. Most had saved for decades for a comfortable retirement, and were now eating into those funds every month just to survive. All of them live with ice in their bones for fear that they will be evicted from apartments they have lived in for decades, and most believe that no landlords will take them because their monthly incomes are so low.
One woman told me that she will be through her savings in three years, and then she doesn’t know where she’ll go or what will happen to her. She worked hard and saved for 47 years, and blinked back tears as she choked on the word ‘homeless’.”

– Sandy Garossino, Independent Candidate in the recent Vancouver civic elections, at her website votesandy.ca 22 Nov 2011

Vancouver – ‘Lazy’? Or Successfully ‘Non-Ambitious’?

Inquiring minds want to know, “What makes Vancouver tick?”.
This interesting exchange recently at RETalks [23 Nov 2011 10:54am onwards]

rofina – “The better we can understand how money flows affect Vancouver, the better we can diagnose the issues. The reality of the matter is that we need to start being proactive in other ways than just hoping for a property crash. … The solutions need to be broader, rather than just focused on asset prices. The most realistic and net beneficial approach is one of bringing high paying jobs here.”

jesse1 – “The only competitive advantage Vancouver seems to have is attracting a subset of people who are willing to work for less than other parts of the country.”

rofina – “This is an interesting topic on its own. It has always puzzled me why Vancouver attracts lazy, non ambitious people. With how expensive it is, and how little nightlife there is you would reckon its not the ideal spot for a lifetime underachiever. Its a bit of conundrum in its own right.”

jesse1 – “In my view it’s not necessarily laziness, it’s a lack of business drive. A friend of mine who worked 10 years in Silicon Valley opined at how unsophisticated the business development climate is in general.”

kramster – “Non ambitious and lazy are not synonymous. Well, non ambitious when it comes to slaving for the man anyway.
Take me for example. I have to do a career development review every year. Each year I put that I don’t want to expand my responsibilities, I don’t want to move up the ladder, I just like it where I am. Because to move up would require me to go on Salary, which means the 200 hours of overtime I work each year would not get banked into time off that I can use to do the thing in life that so many people don’t. The part of your life where you’re actually having one. Not to be confused with the life where people get up and go to work with big ambitions to work harder, make more money, get divorced, get fat, lose touch with their kids, retire, get bored and go back to work and then die of heart disease. It’s an epedemic so widespread people mistake it for being the opposite of lazy. My ambitions exclude those things.
So to counter the lazy argument, and to shed some light on why it may seem that such a subset of society has taken up home here, consider the following. This season I rode my mountain bike 134 days. I went skiing 30 times and ski touring a number of times. What I did not do is go to the doctor, take medication, get sick, miss out on my family, lose touch with my friends, suffer from anxiety, watch my weight, buy something because it made me feel better or make me cool, scream at a stranger in traffic, eat emotionally or get depressed. Before I moved to this part of the world, I lived in a place that oozed all of the above and it was very hard to meet people that didn’t ask what you did for a living before they asked what you did for fun. Here, there are a much greater ratio of people that I can relate to, and they have moved here for the same reasons. To work less and play more. Lazy? You tell me if having a resting heart rate of less then 50 is a sign of laziness, or the product of putting your ambitions in the right places. Sometimes we need a good night’s sleep before we climb a mountain, hence the quiet nightlife compared to places with nothing better to do.”

Question for readers:
Is it possible to have a sustainable, self-sufficient society where everyone lives kramster’s lifestyle?

– vreaa

“What would Chairman Mao say if he knew Li was the proud owner of a Canadian residency card and a $6 million house on Vancouver’s Westside?”

“Self-made millionaire Li Weijie runs his own ski and golf resort outside Beijing and considers himself a patriot: A lifesize statue of Mao Zedong on a four-meter base towers over the entrance to his resort. What would Chairman Mao say if he knew Li was the proud holder of a Canadian residency card? “I wanted access to the education system and health care of a developed country,” says Li, 43, whose other businesses include one of Beijing’s largest private taxi companies, two car dealerships, and a real estate company. Li now has a $6 million house on Vancouver’s Westside, known for its rich Chinese. His wife tools around Vancouver in a black Maybach while his 20-year-old son drives a dark gray Maserati to classes at the University of British Columbia. His wife and son live in Canada full-time.”
– from ‘China’s Super-Rich Buy a Better Life Abroad‘, Dexter Roberts and Jasmine Zhao, Bloomberg Businessweek, 22 Nov 2011

Opinion – “This is what I hear: Vancouver house prices are determined in China. The house can become the main life investment.”

“This is what I hear: Vancouver house prices are determined in China. Vancouver houses can be bought right in China. Many, with even a bit of money or more, want one foot in China and one outside, and Vancouver is the main place. A new Chinese middle class is becoming prosperous, but the lower class has not. Only a redistribution of wealth to the lower class prevents violent revolutions, of which the west has gone to the extreme of redistribution. In China, many see that situation. Also, for children’s education opportunities. In China, without a good education, such as engineering, computer science, etc., life will most likely be poor. And that education is hard to get in China, but easy to access in Canada. More and more, the available university seats in China, are taken unfairly, by the ruling classes.” and
“In Canada, the mortgage interest is not tax deductible, but there is no capital gains tax when you sell your principal residence., and I prefer it that way. The house can become the main life investment. The city is behind in mass transit and efficient transportation, to and from areas farther from the city center, where more affordable housing could be built. To avoid 2-4 hours driving, living close to the city center is abnormally attractive, which is multi-family residence for most. It now takes two good incomes to rent, and the city’s skyline is mostly high rise condo and apartments. Compare to Calgary which is far ahead on mass transit and highways, allowing quick commute from far out in all directions, where one good income is ample to afford rent in the center, and where the skyline is dominated by office and business buildings. Some maintain the distortion in Vancouver was partly deliberate by socialist planners, to promote multi residence buildings as the norm, to benefit the environment.”
– two comments from Russell Turner at ‘Mish’s blog, ‘Global Economic Analysis’, 20 Nov 2011

“I think we’ve been in bubble territory since at least 2004. I’ve been waiting and saving to see how it would turn out. In the intervening years I realized that I really can no longer stand Vancouver. I’m looking for my out.”

“I think we’ve been in bubble territory since at least 2004. I’ve been waiting (and saving) to see how it would turn out. In the intervening years I realized that I really can no longer stand Vancouver. I’m looking for my out.
When will the bubble burst?
Will it take a crash in commodity prices when China’s real estate market is in a tailspin? Or will loss of consumer confidence in China cause the fleeing of the HAM? Or will an expansion of credit suffer the consequent (inevitable) contraction as described by Von Mises and Schumpeter?
Perhaps the trigger will simply be that many people realize this isn’t such a nice place to live after all.
My feeling is that in Canada we’re always about 10 years behind the rest of the world.”

– Pococurante at VREAA 19 Nov 2011 9:19pm

“I looked for a decent house for 3 years and have given up. I am not willing to spend all my money on a tear down. Just crappy value all around.”

“I too sold my company, no I did not make near $2M, I did ok in my books and I am seriously considering putting some money into other real estate investments NOT in Vancouver. I also looked for a decent house for 3 years and have given up. I am not willing to spend all my money on a tear down. Just crappy value all around. Vancouver is nice, yes, but it also rains 8 months of the year and costs an arm and leg to do it. Central California, a little in from the coast, up in the foot-hills on a few acres… now that sounds decent.
Why does everyone stay in Vancouver if it’s so damn expensive?”

Cali Calling at VREAA 22 Nov 2011 7:07pm

“A client who is a PhD scientist moved to Vancouver about six months ago because her significant other lives and works here. She has called it quits on her Vancouver job search and moved back to California because she just couldn’t find a job here that was remotely close to what she was doing before.”

“I have a client who is a “scientist” in a specific field that I won’t mention here. Needless to say she has a PhD and even worked for years in silicon valley within the IT sector. She moved to Vancouver about six months ago because her significant other lives and works here (government job). She has called it quits on her Vancouver job search and moved back to California because she just couldn’t find a job in Vancouver that was remotely close to what she was doing in California. That is Vancouver for you, the third largest city in Canada. It seems to be Vancouver is the BPOE if you are: a government employee, realtor, mortgage broker, or blue collar construction type.”
– DEFAULT NAME at vancouvercondo.info November 3rd, 2011 at 2:48 pm

UK Government Puts In Place CMHC-Like Provisions – “95% mortgages available so that the dream of home ownership is achievable for everyone”

“It’s about people’s hopes and dreams, when you get the keys to your first flat, it’s a magic moment.”… The Government would make 95 per cent mortgages available so that the “dream of home ownership is achievable for everyone”.
– David Cameron, Prime Minister of the UK, announcing changes that would see the UK taxpayers backstopping 5% down mortgages for home buyers and giving money to property developers (Telegraph, 21 Nov 2011).

Spot The Speculator #67 – “It’s a home, it’s an investment — a bit of both.”


Melissa Yan, Yaletown condo purchaser, RE marketer.

“Melissa Yan wondered why she had to wait until she got married to buy a home.
She decided she didn’t. So the 28-year-old, who works in marketing for Magnum Projects, opted to jump into Vancouver’s hot housing market at Christmas in 2010.
She picked up a 600-square-foot, one-bedroom apartment in Vancouver’s trendy Yaletown district in a design that would fit her needs and a price tag that would allow her to enter the market and establish equity so that one day she could get an even bigger house.
“I have always known I had wanted to own, so I made it a priority for myself to put aside money for the past five years,” says Ms. Yan, who was living with family as she saved. “It’s a home, it’s an investment — a bit of both.”
Ms. Yan, who says her work in real estate convinced her she needed to buy, is one of a growing number of 20-somethings who are no longer waiting until they get married to purchase a home for the first time. She is part of a trend that adds an extra stage to the housing market.
Traditionally, people bought their first property upon marriage, looked for a move-up when their families got larger, scaled down as the kids moved out and then were off to the retirement home.
But the new reality is that more first-time buyers fit Ms. Yan’s profile.
A TD Canada Trust survey this spring found 45% of first-time homebuyers were going it on their own rather than with a co-purchaser.
“I would say a lot of my friends are doing this,” says Ms. Yan. “People are getting married later in life, too. Weddings are so expensive. I figured I would invest in an asset for now. I know it’s not my final home.”
– from ‘Mingles’ moving housing markets, Financial Post, 19 Nov 2011 [The above is the later, 21 Nov version, of the article. See below for explanation.]

Well, it turns out that Melissa’s Marketing work is actually directly related to RE marketing… From her public LinkedIn profile:
“Manage strategic real estate project marketing programs for clients. Responsible for marketing strategy, public relations, forecasting, budgeting, lead generation, event planning, media buying and negotiations. Initiate and manage strategy and direction with graphic and interior designers for marketing collateral, sales centers and show suites.”
I don’t know of we should be outraged, disgusted, sarcastic or amused by such an article… I just want to point out that FP just loss all its little remaining credibility it had in my mind for not disclosing such “details”.

– from Makaya at VREAA 20 Nov 2011 [who cited 604serf at VCI 20 Nov 2011 ("Really, “interview” someone who works in Condo Marketing about how they’re buying a condo…and not disclose that? Seriously??") for picking this up]

Note: The original article, posted 19 Nov 2011, read “She decided she didn’t. So the 28-year-old, who works in marketing, opted to jump into Vancouver’s hot housing market at Christmas in 2010.”
The ‘for Magnum Projects’ was added in a later edit, seemingly in response to observations such as those by 604serf and Makaya above. – ed.

Update: 604serf, in the comments section below, confirms that they did indeed e-mail the editor of the FP with their observations and that the article was changed as a result. Here is the response they got from the FP managing editor:
“Regarding your note about the story on single people buying more condos, We have confirmed that you are correct and the person used in the story works in condo marketing. If we had known this it would have been disclosed, and that change has been made in the online story.
Thank you for your continued readership and attention.
Cheers,
Grant”

Greenhorn (the Vancouver RE video archivist) forwarded this comprehensive ‘before’ and ‘after’ account, for the record:

Original article started like this:
[quote]Melissa Yan wondered why she had to wait until she got married to buy a home.
She decided she didn’t. So the 28-year-old, who works in marketing, opted to jump into Vancouver’s hot housing market at Christmas in 2010.
[/quote]

Was changed to this:
[quote]Melissa Yan wondered why she had to wait until she got married to buy a home.
She decided she didn’t. So the 28-year-old, who works in marketing for Magnum Projects, opted to jump into Vancouver’s hot housing market at Christmas in 2010.
[/quote]

And this 5th paragraph was changed from:
[quote]Ms. Yan is one of a growing number of 20-somethings who are no longer waiting until they get married to purchase a home for the first time. She is part of a trend that adds an extra stage to the housing market.[/quote]

to:
[quote]Ms. Yan, who says her work in real estate convinced her she needed to buy, is one of a growing number of 20-somethings who are no longer waiting until they get married to purchase a home for the first time. She is part of a trend that adds an extra stage to the housing market.[/quote]

Screen capture of original 19 Nov 2011 article here.

Other choice quotes from the FP article:

“They want to jump on the equity train right away and build equity.”
– Peter Simpson, chief executive of the Greater Vancouver Home Builder’s Association

“People are getting married later, so there is a need to buy a condo sooner. People go to school later; the whole life cycle has changed.”
– Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada.
[Orwell? No, more like Kafka. -ed.]

“They’re not getting married, so they should get on with their financial lives. A home is a great asset. From a financial planning perspective well down the line, these people who bought a home and built up equity in their home from a young age will have an asset that will give them the confidence to retire.”
– Scott Plaskett, a certified financial planner in Toronto
[Worked great for the last 30 years, what could possibly go wrong? -ed.]

Vancouver Couple; Late 20’s; Net-worth $112K; Household Income $135K; Visit Mortgage Broker: “Twenty minutes later he said that with our savings and our income he could qualify us to buy a $1 million house.”

“She makes $60,000 a year. He earns $75,000. In their late twenties, they have $130,000 in the bank, a chunk of it a gift from his parents. Student debt is down to $18,000. They covet a house. In Vancouver.
“At least we did,” Lynne says, “until we met Malcolm.” He’s a mortgage broker, part of a national chain of brokers which (for now) will remain mercifully nameless. “We decided to go in and talk to a mortgage guy to at least find out what we could pre-qualify for,” the high school teacher (math) says. “Twenty minutes later he said that with our savings and our income he could qualify us to buy a $1 million house. We looked at each other and thought about an $800,000-plus mortgage, and got the hell out of there.”
So now they have lowered their sights. To $750,000. And given up. “That amount of money buys crap,” Lynne says. Then wisely, “Maybe we should think about moving away from here.”
This little tale is true. I tracked the broker down and confronted him. He admitted it. And defended it. Sadly, I think he believed he was actually helping a house-horny young couple who not conceive of having a family without a front porch.”

– relayed by Garth Turner at greaterfool.ca 18 Nov 2011

They can ‘afford’ to buy a Vancouver SFH, but they note the poor value they’d get, so they are thinking of moving elsewhere. – vreaa

Realtor Opinion – “Prices are actually quite stable and have only increased modestly in value in the last year or two. Given immigration predictions, low interest rates and the fact that Vancouver has become an urban resort to the world’s wealthy, there doesn’t really appear to be as much froth as one would think.”

“As a Vancouver real estate agent I share the disbelief at the bizzaro real estate pricing we see so often here. This practice of re-listing at a higher price than a previous, unsuccessful listing is nothing new to Vancouver real estate. Last year I watched a “star” realtor list a $3.5MM condo for $8MM. Not surprisingly the listing was unsuccessful and the property remains unsold and off the market. Vancouver has managed to buck global real estate trends, however, it’s important to remember that sale prices, not list prices are indicative of the presence or absence of a bubble. The motivation for an agent to list a property at twice its justifiable market value is debatable but it does happen regularly. Many agents and sellers are pinning their hopes on the recent influx of Chinese buyers. Regardless, these tactics are not effective and do not necessarily point to a bubble. The reality of our real estate market is that prices are actually quite stable and have only increased modestly in value in the last year or two. Given immigration predictions, low interest rates and the fact that Vancouver has become an urban resort to the world’s wealthy, there doesn’t really appear to be as much froth as one would think.”
– comment from shaunkimmins at Global Economic Analysis 20 Nov 2011

‘Mish’ Headlines Vancouver and Calls For 75% Price Crash – “$50K can now buy you a pretty decent house in some parts of the US. Do you want to see what $1,050,000 buys you in Vancouver? A house that is described as ‘livable’.”

Anyone who follows economics in cyberspace knows of Mike Shedlock’s ‘Global Economic Trend Analysis’. ‘Mish’ today [19 Nov 2011] highlights Vancouver’s bubble, quoting the following letter from ‘Terry':
“I am beginning to believe that Canada’s housing bubble is making the US housing bubble look bush league in comparison. The worst part is Canadians are so delusional they still believe that “It is different here”. 50,000 dollars can now buy you a pretty decent house in some parts of the US, do you want to see what $1,050,000 buys you in Vancouver? A house that is described as “livable”.
Wow, million dollar mortgages which are fully insured by the tax payers of Canada are being handed out to 20 year-olds like they are candy and meanwhile our government still declares, just as the US government did before it’s house crash, that there is no housing bubble and that prices will remain stable and “affordable”. And the rest of the world still looks on and considers Canada to be a fiscally responsible, financially prudent country. Just another of many myths that get started and than repeated ad nauseam by the press without understanding the whole story.”

‘Mish’ adds:
“Housing bubble denial in Canada keeps getting louder and louder, as prices become more and more absurd.”…
“Note the alleged 6 bedrooms (3 converted from the basement) but only 2 bathrooms. Who are they kidding? Is this the happy hooker flop house?
Unfortunately, pictures like these are easy to find.
The longer this continues the bigger the crash. Look for prices on such properties to crash 75% or more. When it does, it will be no bargain.”

Our own prediction at VREAA is for a conservative 50%-66% off. Who is this ‘Mish’ guy, some lunatic bear?
(Actually, we can imagine 75% off for some properties.)
What do these Yanks know about markets?
– vreaa

“There are at least 7 houses within a stone’s throw from my house that have been for sale since the summer and have failed to sell. Do crashes begin at the top or bottom end of the market?”

“I have definitely noticed a change in the air since the summer, even if it hasn’t materialized in a drastic reduction in sales yet. There are at least 7 houses within a stone’s throw from my house that have been for sale since the summer and have failed to sell. One was de-listed this week. Only a couple have sold this past summer/fall and both were ‘tear-downs’ listed north of $1.5MM It seems that the houses selling in the $2-4MM range in my neighborhood are not selling. For this reason I am slightly surprised by the relatively stable sales numbers over the last few months, these sales certainly aren’t coming from my neck of the woods. Simply put, the high end stuff is just not moving, nor has it been in my area since late spring/early summer.
Do crashes begin at the top end or bottom end of the market?”

– chopper at vancouvercondo.info November 16th, 2011 at 8:28 pm

Tech Startup In Vancouver – “It’s much easier to focus, there isn’t so much noise. The disadvantage is that you also don’t have as many people with experience in the tech industry. We know everyone there is to know in Vancouver, and that’s a few dozen people.”

Why not come straight to Silicon Valley?
“We looked at numerous options other than getting hired by a big company. We could have gotten green cards if we waited a few years. But in the meantime, we found Bootup Labs [a Vancouver startup accelerator and seed fund] that gives you $100,000 [to nurture your startup idea], and that’s also helpful with visas. Basically, if you want to come here, there’s no straightforward way to do it if you want to own your own company. People do it with some tricks, but Canada is a bit friendlier in terms of immigration and helping people start their businesses.

But you’re still in Vancouver and not the Valley. Do you think that puts you at a disadvantage, particularly since a number of companies are trying to solve the same information overload problem as Summify?
“It’s a lot smaller, naturally. But there are advantages, including that it’s much easier to focus, there isn’t so much noise. You don’t hear about people trying to do startups all the time. It’s easy to obtain talent, too. People are excited to work at a startup versus a telecom company or some of their other options. And if you take care of them, they stick around. There aren’t startups trying to steal your employees.
The disadvantage is that you also don’t have as many people with experience [in the tech industry]. We know everyone [to know] in Vancouver, and that’s a few dozen people.”

– Mircea Pașoi, 24, is the cofounder of Summify, a startup that summarizes the top news stories of the day for its users by scouring their social networks for clues. From pehub.com 14 Nov 2011, cited by ‘anonymous’ at VREAA 15 Nov 2011, as an example of people moving to Vancouver.

“Even I can’t ‘afford’ a house. What am I supposed to do? Go buy a shack for $1.2M that I know is probably 4x overvalued, only to be the last sucker in before the big crash?”

“I sold my business a few years ago and retired with a nest egg of a couple million dollars. But even I can’t “afford” a house. What am I supposed to do?… Go buy a shack for $1.2M that I know is probably 4x overvalued, only to be the last sucker in before the big crash? I’m not going to take that chance so I’m forced to rent a little modest place while I wait for the madness to end. And, by the way, if you think $2M = rich in Vancouver, you are sadly mistaken. With today’s artificially low interest rates (that are keeping the real estate bubble alive), I can barely generate enough of an income to support my wife and kids.”
– anonymous commenting in ‘The Province’ (13 Nov 2011 11:14pm)

“My Vancouver house is valued around 750k. My other homes are much lower in value, but are outside the city. If you can’t manage your money well, you will always be poor, no matter what your income.”

“My Vancouver house is valued around 750k. My other homes are much lower in value, but are outside the city. If you can’t manage your money well, you will always be poor, no matter what your income.” and
“Those who live beyond their means can not afford to buy a home regardless of price. Those who manage their money well will prosper over time. For someone earning a low wage, it can take many years before they can buy a home. The size of the family also effects the ability to buy, but where the fantasy exists, is in your own mind.
I had to buy and sell houses many times over, reinvesting my money, and living very cheaply to get where I am. My children had to go without a lot of things during the early years, but they went to university, and got the things they needed. We saved our money as a family, and we can now enjoy our success. I know that I am not that smart, but I am smart enough to know that I have to save more than I spend to get rich. I still don’t make near 100k per year, but I enjoy my life, and have all that I need. I feel sorry for those who don’t.”

– stopyourwhining in the comments section of ‘Is it time to curb foreign real-estate buying in Vancouver?’, The Province, 14 Nov 2011.

 

Don R. Campbell, President of REIN, In His Own Words – “Bubble, bubble boil and trouble! I just keep hearing this whole thing about bubbles this and bubbles that… It’s not a bubble. It is a very readable cycle.”


“Bubble!”


“Very Readable Cycle.”

“Guess what? Bubble, bubble boil and trouble! I just keep hearing this whole thing about bubbles this and bubbles that.. and I just wish people would start paying close attention to the underlying Real Estate Cycle and the market drivers and the market influences rather than this amorphous bubble idea that keeps floating around… pun intended… that there’s this thing that’s going to burst.
Let’s talk about the condo market, that’s the one that everybody’s taking about “Oh my goodness there’s a big bubble going in condos”..
I like to invest in a property that exists, but let’s talk about prices, demand…
Take a look at some of these numbers… in 2010 there’s going to be 6,693 new condo units that were occupied and moved in… now 2011 15,902 units.. twice the number being put into the market.. big number, let’s be realistic… ah, but they were still being sold… 80, 90, 100% percent sold… but here’s the issue that you’re going to see… 2012 pre-construction totalling 25,893 units… 108 projects already being built… those condos are going to come onto the market over the next couple of years… let’s think this through quite clearly. If you’ve got that giant influx, it was pretty hot at 2010 at 6,000, it was super-hot in 2011 with 15-16,000… we’re going to add another 10,000 units over the 2011 number?.. wow, think of how that market is going to try to absorb this. Now, here is something that you’ve gotta know, is the average price will not be dropping.. why is that? quite clearly, is the contracts have been signed, they’ve been signed over the last couple of years, during this super hot market… so those contracts won’t come in and get registered into the average price of a condo until the keys are handed over, and that’s usually, what, a year and a half, two years, after the contracts signed. So the heat that we’re feeling here will carry through on the average price over the next couple of years. But as the market supply demand starts to get a little bit out of balance, starting in 2012, especially late 2012, you’ll probably start to see some discounts… or some ‘price slowdowns’ in that market as supply outstrips demand.. and contracts signed then will not play out until 2014.. so you’re not going to really see an average price collapse or bubble explode or any of these other terms I get to see tossed around all over the place.. because it’s all about the contracts and when the keys are handed over. So, let’s be realistic… We get 26,000 units coming onto the market in 2012, we have another 17,000 in 2013… people say “But Toronto is growing by 100,000 people per year.. but can’t we step back a little… when you’re either immigrating or migrating, the majority of those people are not going to be able to step in and afford $2,500 – $3,000 rent for a new unit, or have the money to buy one of these units. So, although the population is growing, the people who can afford to buy these properties aren’t growing. So why do I bring this up? Because, inevitably, you’re going to see that cross of the supply and demand line, you’re going to see incentives come into the market, and you’re going to see… let’s use the term ‘negative influences’.. on the market… you’re going to be seeing people buying five, six, seven units, from off-shore, and then wondering what they’re doing come 2013-2014, and those properties will then be dumped onto the market to try and realize some capital. So, let’s be realistic about the condo market: It’s not a bubble that’s going to go ‘kaboom’… What it is is a very readable cycle, that has market influencers, and market drivers, and your job is to step back from the frenzy, and when somebody says to you “This time it’s different”, run away as fast as you can… because over the last 20 years we’ve heard that three times only to see the market flatten and or fall off. Never buy something you don’t understand. Be smart. Invest well. See you soon.”

– ‘Real Estate Bubbles… Fact or Fiction’, self posted you-tube video, Don R. Campbell, President of the Real Estate Investment Network™, 8 Nov 2011

One man’s “very readable cycle” is another man’s bubble. – vreaa

Visual Anecdote – Shanghai Realtor Hawking RE In Traffic


Hey, driver! Want a home? Just 18,000 yuan a square meter. An agent in downtown Shanghai took to the streets in search of buyers. Yong Kai / China Daily
– from China Daily, 16 Nov 2011

Repost: It Is Dangerous To Blame The Consequences Of A Speculative Mania On One Sector Of Our Community: Let’s Make Sure We Don’t Do That.

[This was originally posted here almost exactly six months ago, VREAA 18 May 2011. Reposted in view of discussion regarding foreign ownership in local press, and in light of upcoming election. - vreaa]

Imagine you own a beach house in a resort area and you decide, at the end of a beautiful summer, to revive the memories of your youth by organizing a BBQ and bonfire on the beach in front of your home. You invite all your local friends, you organize the food, and you ask everybody to bring along their families, their friends, and their own booze. With plans for a whopping big bonfire, you also ask them to bring wood. Everybody complies, similarly eager for a beach bash. One of your buddies, Ken, has access to some really good firewood, so he brings a trunk-load of the stuff. The BBQ goes well, drink and chat flows, you and your buddies start to build the bonfire. Everybody is in a disinhibited party mood, and you all somewhat unwisely start constructing the bonfire a little too close to the house. A couple of people mention this but, the wind is blowing in the safe direction, it’s an arguably fair distance from the house anyway, and, besides, there is a fire extinguisher in the kitchen, right? Consensus is that the fire site is fine, and a really seriously large pile of wood accumulates.
So, the bonfire is lit, it looks glorious, and, in the fading light, everybody has a great time… marshmallows, jokes, dancing, singing. Everybody piles on the wood they’ve brought; everybody is particularly grateful to Ken, as his supply burns extremely well, it gives off a wonderful aroma, and it warms everybody very nicely.
You can see where this is going: The wind changes, the fire roars, the fire extinguisher is woefully inadequate, the house burns down, neighbouring houses catch sparks, the whole beachfront is destroyed, and everybody blames Ken.
Did I mention that Ken is from mainland China?


The speculative mania in Vancouver RE had its roots in the early part of last decade. Vancouver housing was already pricey by Canadian standards, the good-weather premium was baked in. Things really took off after 2003, when very low interest rates allowed home prices to divorce themselves from fundamentals such as local incomes. This effect occurred in all major Canadian centres, it was a monetary and not a local effect. Through 2004, 2005, 2006, 2007, local Vancouver speculators threw themselves onto the fire, borrowing large amounts to buy primary-residences and ‘investment’ properties at prices that were only justifiable if you thought that prices would continue up forever. People told themselves all the necessary stories to reassure each other that prices could, indeed, only go up: Best Place On Earth; Running Out Of Land; Olympics; and, yes, Limitless Demand From China. Under ‘normal’ circumstances, 2008 might have marked a top, but we all know that little about Vancouver RE is ‘normal’. Prices started dropping from the summer of 2008. Perversely, shortly thereafter, the world financial system imploded and interest rates, already at low levels, dropped to essentially zero. Vancouver RE didn’t need a bail-out, but it got one anyway. Prices had only been able to drop 15% before being re-ignited, taking out prior highs, and blazing on to their current dizzy heights. Now, with Australia finally pulling back, our real estate is arguably the most overpriced in the entire world. We are the last remaining pristine and unimploded RE bubble.

The most important fuel for this market fire, by a very, very long way, was and is local speculation. Local buyers, through all of these years, have continued to mercilessly overextend themselves to purchase property at prices that they would never dream of paying if they foresaw a significant risk of price downside. This applies to primary residences as much as it does to ‘investment’ properties. If locals had not speculated, or had speculated less, prices would not have gotten so very far divorced from fundamentals. Yes, there is a direct influence of foreign buyers on the market, more so in some areas of the city. But these buyers still participate in less than 5% of all property transactions. In the part of the city most affected by this phenomenon (the high end of the westside), realtors report that 50% of sales are to this group. That means, of course, that the other 50% of sales are to locals, overbidding on properties by arguably a factor of two or three times fundamental value. Our speculative mania has attracted non-local momentum players, and, yes, there may be a need for some consideration of specific limits on their activity; but let’s be very clear that these players are only a small part of the entire phenomenon.

There is no easy way out. That is the nature of speculative manias, they harm many on the way up, and a lot more on the way down. There is no way of ‘landing’ them ‘softly’. By their nature, they run out of fuel and implode. We have built and ignited a bonfire here that was long ago completely out of control and destined to raze the whole block. It would be very unfair and disingenuous to blame the outcome on our buddy Ken, who we invited to the party, who only brought wood with our encouragement, and whose fuel we appreciated while all seemed okay.

We are very concerned, however, that our city is setting up for such a scapegoating. Canada’s policies of multiculturalism encourage people to celebrate their differences. This is hunky-dory when everybody is rich and has adequate resources; it is easy to celebrate your neighbour’s good fortune when you are experiencing similar luck. But, if you put the economic screws on a society that has been encouraged to emphasize difference, it is probably more prone to developing ethnic fault-lines than a society that puts more effort into celebrating similarities.

There has been more and more media prominence given to foreign buyers recently. Local politicians such as Peter Ladner are pointing to this group as the cause of our lofty prices. We are concerned that many are going to be getting their wires crossed by associating foreign buyers with the existence of the bubble. There is a very real subsequent risk that many of those who suffer the consequences of the imploding Vancouver RE bubble will mistakenly blame foreign buyers and, by extension, specific ethnic groups, for the whole phenomenon, and for the inevitably devastating outcome.

As we said in our end-of-2009 predictions for the coming decade: ‘A Real Estate Bear Market Will Be Vancouver’s Defining Social And Economic Event.’ We hope that, as a society, we will be able to successfully navigate the substantial challenges of that event in a mature and wise fashion.
It is dangerous to blame a speculative mania on one small sub-sector of our community.
Vancouverites built this bonfire, and Vancouverites need to take responsibility for its consequences.
No scapegoating.

- vreaa

Spot The Speculators #66 – ‘Conservative Guy’ Becomes ‘Risk Taker’ – “In 5 years we will have saved up enough to buy a larger home (with a bsmt suite of course) and keep this house as a full rental.”

“My wife and I just purchased a house (with illegal bsmt suite) with a legal carriage house in Kelowna. We worked out the financials and with the rent we can get from both the basement suite & carriage house, we can cover our mortgage entirely. We are going to live off of her paycheck and bank mine every month so that in 5 years we will have saved up enough to buy a larger home (with a bsmt suite of course) and keep this house as a full rental. We spent 5 months looking for a place and were very discerning – often turning down places with all the bells and whistles for a more modest, older home with revenue potential. I am in my mid-thirties and we even took a year off to travel (backpacking) so its not like we hit the lottery. We made the choice to buy because it made sense financially not because it was “our time to become homeowners”. We’ve taken a risk and I really believe that you need to take some risks in life for the potential to be rewarded (and I’m a naturally conservative guy).”
Shane at VREAA 14 Nov 2011 10:10pm

Shane, you seem like a very honest and straightforward guy, and we wish you well. For the sake of consistency and integrity, we have to point a few things out; and out of respect for your intellect we’ll ourselves be completely honest.
First, in your probability calculations, how heavily did you weight the significant price drop outcome? You are exposing yourself to substantial downside risk, with leverage. Kelowna may have already dropped, but it’ll drop further in the coming Canada wide RE bubble deflation.
Secondly, you haven’t purchased a single family house, you’ve purchased a multi-family dwelling. You’ve purchased the real estate you need to live in for the next five years AND you’ve purchased two other rental ‘units’ that are speculative bets on future housing price strength.
Thirdly, you’ve taken on the job of landlords. You will be paying in elbow-grease and inconvenience in addition to the math you’ve already done. You’ve also exposed yourself to tenant delinquencies in the event of an economic downturn.
Fourthly, if you do get to buy the second house before the deflation you will likely have leveraged your exposure even further. What percentage of your net-worth is currently in RE? What will that figure be after the purchase of a second house?
– vreaa

HELOC Poll – “36% of Canadians have a home equity line of credit.”

Canadians who have a home equity line of credit (HELOC): 36%
Proportion who are “quite confident of their level of knowledge” about HELOCs: 79%
Proportion of questions that tested their basic knowledge of how HELOCs work that they answered correctly: 43%

Proportion of HELOCs used for renos and ‘major purchases': 37%
For car or vacation: 29%
For a down payment on an investment property: 9%

- from a Leger Marketing Poll [n = 1,501 adult Canadians; conducted online; late Oct 2011], commissioned by TitlePLUS program, reported at Canada Newswire 15 Nov 2011 and G&M 15 Nov 2011

Globe and Mail – “Realistic way to become financially comfortable: Buy a House”

A Globe and Mail financial advice article ‘Four fatal financial fantasies’ (Amy Fontinelle, 15 Nov 2011) warns against the following assumptions:
1. I’ll receive a large inheritance.
2. I’ll win the lottery.
3. I’ll start a website and make a killing off advertising.
4. I’ll make a ton off an initial public offering (IPO).
Okay, so far so good, we agree; don’t count on any of the above.
The article then, however, claims to make a ‘Reality Check’ and lists four “more realistic ways to become financially comfortable”. The fourth of these?
“I’ll buy a house”.

Comments In ‘The Province’ Regarding Foreign Buyers – “Affordability has nothing to do with the colour of your skin; it impacts every resident of Vancouver. Politicians need to step up on this. And please, please, please, look deeper than what the RE industry has to say on this.”

From the comments section of ‘Is it time to curb foreign real-estate buying in Vancouver?’, The Province, 14 Nov 2011:

“I run and own a successful mid-sized company, if I hadn’t a bought my small house 10 years ago, I would not be able to live here. My company would go somewhere else and 60 people in Vancouver would be looking for work. It strikes me that this is not about racism, as affordability has nothing to do with the colour of your skin. A lack of affordability impacts every resident of Vancouver. The Politico’s need to step up on this. And please, please, please-look deeper than what the real estate industry has to say on this, pardon me but they cannot be viewed as owning an objective POV.”
– The Drake

“I lease a 4000 sq ft commercial property in the city my property taxes are 24,000 a year (yes 24 thousand dollars a year.) These investors are buying to make money, treat them like the businesses that employ people in this city.” and “Last year my household income was 171000 I could afford a house but I’d be strapped for cash. If I moved to another city and earned the same I could buy a house and stIll enjoy my life. There is no reason Vancouver is as overpriced as it is except for speculation.”
– Paulys (13 Nov 2011 10:52pm)

“I was born and raised in Vancouver and I have never seen anything like what is going on now. I attended two first day sale events for a highrise tower in Burnaby and a low rise townhome, also in Burnaby. Both events were packed with Chinese/Korean purchasers snapping up everything in sight. The real estate agents on site didn’t even bother to give me the time of day although initially I was interested. I felt myself to be the victim of reverse racism due to my white skin and possible perceived lack of big money to spend. I employed numerous university students and witnessed time and again the purchase of large “family” homes, all the children going through university and attaining Canadian passports. The children have all gone back home, the properties have been sold and the children come back every 5 years to renew the passports. The parents aren’t interested in doing business here due to our red tape and tax issues but want a bolthole to escape from Asia.”
– anonymous (13 Nov 2011 10:55am)

“I would totally support restrictions on foreign buyers in GVRD. I was born and raised here, have multiple degrees and work my tail off (and save a tonne) but there’s no way I’ll ever be able to afford a million dollar home – and that doesn’t buy much. Its a darn shame that good people can’t afford housing. There won’t be much more complaining from me, but this will drive me to leave the GVRD.”
– anonymous (13 Nov 2011 11:55am)

“I realize this story is about foreigners purchasing Vancouver real estate to the detriment of your average born and raised here Canadian, but I’ve just got to mention how many young people I know here in Greater Victoria who plan on moving somewhere else due to the horrendous cost of living in the Capital region.”
– DC in BC

“My parents bought a house in west Richmond for just under half a million dollars. 50K in renovations and 6 years later, it was sold for just under a million dollars. I love them, and am happy for their success, but it’s stuff like that that’s ruining Vancouver. I’m 25, and I cannot come close to affording a house with my salary (I have a full time job). I’m looking to move out of the country. I’ve had it. If it’s not real estate agents pushing up prices, we have indifferent and out-of-touch politicians looking to raise taxes, and not offer anything worthy in return.”
– Allan Hall

“I just bought a house on an acre of land, in Hawaii, for the cost of a rock bottom condo here in Vancouver. Plus, the weather is better. :) Seeya!”
– anonymous (13 Nov 2011 11:43pm)

“The purchase price was €127,000 ($177,000 CAD). The same home changed hands for €400,000 ($560,000 CAD) during the peak of the Irish housing bubble a few years ago.”

“A friend just moved to Burnaby from her family home outside Dublin to be with her boyfriend. She was telling me how her sister had just purchased a house in their Irish neighbourhood. The family was excited because she had purchased the house that backs onto their parents’ lot. The purchase price was €127,000 ($177,000 CAD). She didn’t mention how big the house was, probably modest by Canadian standards. But she did mention that the same home changed hands for €400,000 ($560,000 CAD) during the peak of the Irish housing bubble a few years ago. I can only imagine what this will mean for Coquitlam, Port Moody and North Burnaby when all those $550k houses drop below $200k, it’s going to be devastating.”
– Lex Limo, via e-mail, 11 Nov 2011 [Thanks Lex. -ed.]

Policies On Housing #7 – Non-Responders; Delinquents; Hall Of Shame

We recently e-mailed candidates and parties standing for election or re-election in the upcoming Vancouver Civic Elections with an invitation to publicize their position on the most crucial issue facing the city: Housing.
We received responses from Joe Carangi, Sandy Garossino, Tim Louis and Ellen Woodsworth. Thanks, you four.
See here for links to their positions and related discussion.

Here’s the list of candidates from whom we have yet to hear:

AFFLECK, George (NPA)    george.affleck@npavancouver.ca
AQUINO, RJ (COPE)    rj@rjaquino.ca
BALL, Elizabeth (NPA)    elizabeth.ball@npavancouver.ca
BENSON, Nicole (NSV)    nbenson@nsvancouver.ca
BICKERTON, Sean (NPA)    campaign@seanbickerton.com
CARR, Adriane (Green)    acarr@bettervancouver.ca
CHARKO, Ken (NPA)    ken.charko@npavancouver.ca
DEAL, Heather (Vision Vancouver)    clrdeal@vancouver.ca
JANG, Kerry (Vision Vancouver)    kerryjang@shaw.ca
KERCHUM, Marie (NSV)    mkerchum@nsvancouver.ca
KLASSEN, Mike (NPA)    mike.klassen@npavancouver.ca
LAMARCHE, Jason (NPA)    info@JasonLamarche.ca
LOUIE, Raymond P. (Vision Vancouver)    raymond.louie@votevision.ca
MARTIN, Terry (NSV)    tmartin@nsvancouver.ca
McCREERY, Bill (NPA)    bill.mccreery@npavancouver.ca
MEGGS, Geoff (Vision Vancouver)    geoff@geoffmeggs.ca
MURPHY, Elizabeth (NSV)    emurphy@nsvancouver.ca
REIMER, Andrea (Vision Vancouver)    andrea.reimer@votevision.ca
STEVENSON, Tim (Vision Vancouver)    tim.stevenson@telus.net
TANG, Tony (Vision Vancouver)    tony.tang@votevision.ca
WONG, Francis (NPA)    francis.wong@npavancouver.ca
YUEN, Bill (NPA)    bill.yuen@npavancouver.ca

Vision Vancouver    info@votevision.ca
NSV (Neighbourhoods for a Sustainable Vancouver)    http://nsvancouver.ca/contact-us/
NPA    info@npavancouver.ca
COPE    cope@cope.bc.ca


[See 'Policies On Housing' - The Positions Of Local Entities On The Challenges Facing Vancouver Housing' for an introduction/rationale for this series.]

‘The Province’ Poll – “Should the City of Vancouver put restrictions on foreign ownership of city real estate?” – 81% Respond “Yes”


– from The Province, 14 Nov 2011

Policies On Housing #6 – “Mayoral candidates Gregor Robertson and Suzanne Anton each said they would not put limits on foreign investment, which many observers believe is behind skyrocketing real estate prices in Vancouver.”

“At a public debate last week, both Robertson and NPA leader Suzanne Anton said neither would put limits on foreign investment, which many observers believe is behind skyrocketing real estate prices in Vancouver.”
– from Stephanie Ip, 24hours, 13 Nov 2011


[This post is not to be seen as a VREAA endorsement of any of the above positions. See 'Policies On Housing' - The Positions Of Local Entities On The Challenges Facing Vancouver Housing' for an introduction/rationale for this series.]

“87% of BC residents believe real estate is a good investment”

“87 per cent of residents of B.C. who were polled believe real estate is a good investment (compared to 84 per cent of Canadians).”
[From an investment perspective, when 87% of any population take up one position, it is wisest to take the opposite position. - vreaa]

Question: “The amount at which, if your monthly mortgage payment increased this much, you would be concerned with your ability to make your payments”.
32% of canadian respondents could not make additional payments of $300 more per month

70.2% of Canadian homeowners have a mortgage and/or HELOC on their homes.
Of those, 22% (1.5 million owners) have less than 25% equity in their homes, and 47% have less than 50% equity.
10% of home owners with mortgages have taken out equity during the past year.
The average amount taken out was about $49,000.
During the past year renovation activity resulted in $28.5 billion of equity take-out by mortgage holders.

“Many Canadians believe that other people have taken on too much debt or have bought homes for which they are unprepared. But, when responses about their own situations are aggregated, most believe that they have been responsible. The contrast between these sets of responses is interesting. Actual behaviour by people and their beliefs about their own behaviour tells us more than does their beliefs about the behavior of other people: overall these responses suggest that prudence rules the land.”
[Alternative interpretation: Individuals are inherently biased towards making overly optimistic forecasts regarding their own future prospects. Thus these individuals may be accurate about seeing risk in the situations of others, but far less so when it comes to assessing their own risk. - vreaa]

- Annual State of the Residential Mortgage Market in Canada, Canadian Association of Accredited Mortgage Professionals, Nov 2011 [pdf], and discussion thereof (‘British Columbians think prices unreasonable but real estate still a good investment’, Vancouver Sun, 9 Nov 2011)

Policies On Housing #5 – Ellen Woodsworth, Cope City Council Candidate

1. What do you see as the main housing challenges facing Vancouver?
Homelessness and affordable housing is a chronic problem in our city. Many residents who wish to start a family and live in Vancouver are forced to move out of our city to find affordable housing. COPE is committed to creating a Vancouver where seniors, immigrants, youth and families are able to choose the communities they want to live in, build a family in and grow old in.

2. What measures do you propose to address those challenges?
Vancouver has been critically unaffordable for far too long. The lack of affordability is threatening families, seniors, immigrants and our local economy. COPE is committed to the following measure to address this issue:
• We will launch an “Affordability Crisis Commission” to determine the extent of the new crisis and recommend positive solutions to keep families, seniors, students, new immigrants and small businesses in our city.
• COPE will protect affordable housing by closing by-laws loopholes that allow affordable units to be replaced with high-end condo rentals
• COPE will set a target of creating 1000 affordable rental units in Vancouver every year. Real affordable housing, not high-end rental condos.
• Rent banks
• As a city councilor Ellen has voted to the 10 housing plan


3. What is your policy on housing densification?

New housing in Vancouver should be about the type of housing that is created and NOT the volume of housing or the number of units that are being constructed. However, it is important to built a wide range of housing to meet the range of housing needs in our city. Affordable housing should be the number one priority of housing densification projects in Vancouver because affordable housing will create a Vancouver where everyone can afford to live where they choose. As a Vancouver City Councillor, I supported the 10-year City of Vancouver Housing Plan.

4. Would you support policies that would lead to a drop in real estate values?
We live in a great city and a very desirable city. Seniors, immigrants, youth and families move to Vancouver because of the many opportunities that are available here. Directly building and maintaining a supply of affordable housing separate from market developments is going to promote affordability all over Vancouver and make our communities more inclusive. Housing will target specific groups like students, artists, families and seniors.

5. What is your own family’s housing situation?

We rented a row house for 32 years. It was recently sold and we are now looking for housing.


[This post is not to be seen as a VREAA endorsement of any of the above positions. See 'Policies On Housing' - The Positions Of Local Entities On The Challenges Facing Vancouver Housing' for an introduction/rationale for this series.]

“I work in the financial industry. We have a list of clients with way too much debt who we anticipate will be going bankrupt in the next 1-2 years. Also, we’ve had a few surprises…”

“I’ve had some interesting conversations with clients these last few weeks. I work in the financial industry and we are well aware that several of our clients have way too much debt (yes, a lot of it is bad decisions regarding real estate investments). We have a list of those we anticipate will be going bankrupt in the next 1-2 years. However, we’ve had a few surprises-people who we thought were fine financially are calling up and confessing that they are facing financial problems-credit card debt, loc debt etc. It’s quite surprising to hear from these people that things are not so good after all. In terms of bankruptcies, we’ve seen it coming for a few years now, but it only seems to be about now that people are facing the inevitable. Before they could run through savings, cash out RRSPs, run up that LOC in hopes that things would turn around. But now there is no money/credit left. The end of the line is here, it’s strange how it seems to be coming to so many people at the same time-I would expect to see a flood of bankruptcies over the next two years. I can’t see how the housing market will continue the way it has, people are tapped out now.”
pricedoutfornow at vancouvercondo.info 10 Nov 2011 10:20am

North Shore Owner – “I like this city less every year. If we didn’t have the family ties, we would leave in a heartbeat for better opportunities. Anyone who can leave here should get out and not look back. This city is the real estate and social equivalent of rat poison.”

“We’re in our late 30′s and were *extremely* lucky in being able to purchase a home on the North Shore where we grew up with the profits from selling our previous home at the peak of the boom. We plan to stay here for a long time, so a collapse isn’t going to affect us in the same way that it would if we planned on “cashing in” by selling the place (always a dumb thing to count on anyway!). We have well paid secure jobs and a low enough mortgage that we could handle living on one income if needed. We would never have done it otherwise. I see people my age with $500k mortgages and it makes me just cringe. I have no idea how they can live, given salaries in this town, unless they’re dealing drugs on the side, and a lot of people probably are.
The only reasons that we stay in this town is that our family is all here and we are not financially stretched. I like this city less every year, and if we didn’t have the family ties, we would leave in a heartbeat for better opportunities elsewhere. My advice to anyone who can leave here is to get out and not look back. This city is the real estate and social equivalent of rat poison.”

RESkeptic at VREAA 7 Nov 2011 10:13am

Flip Watch – 2556 Trinity Street – Bought Mar 2011 $773K; For Sale Jun 2011 $888K Ask; Price Drop Nov 2011 $868K


2556 TRINITY Street, Vancouver, BC, V5K 1E2
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 2011 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.
Well, guess what? It’s still for sale. Now for $868,000 and on the market for 205 days. MMMMMM things seem to have slowed a bit in those parts.”

Ronaldo at greaterfool.ca 9 Nov 2011 8:58pm
[featured here 17 Jun 2011]

Math on this, anybody?
At what price level does the flipper start losing?
– vreaa

“The result of this simple math? – Moving scheduled for spring/summer next year.”

“My wife and I work full time and study non-stop, household income is around 80k (after tax)… the same jobs pay 20 – 30 % more in other places and cost of living is 20 – 30% less, the result of this simple math? – moving scheduled for the spring/summer next year.”
– Not Ready To Be Slave at vancouvercondo.info November 2nd, 2011 at 9:52 am

“My wife and I and 3 small children are getting the hell out of this province. I know many in my trade that are fleeing this city, can’t be good for the economy, good luck Vancouver!”

“I am about a year away from becoming a journeyman electrician, once I get my ticket we’re GONE! My wife and I (middle class) and 3 small children are getting the hell out of this province, maybe even out of the country. Not sure where we are going yet LOL but anywhere is better than Vancouver. I know many in my trade that are fleeing this city, can’t be good for the economy, good luck Vancouver!”
– Sparky604 at vancouvercondo.info November 2nd, 2011 at 8:43 am

Policies On Housing #3b – Sandy Garossino, Independent Candidate for City Council

[We have previously featured Sandy Garossino's interview with The Mainlander as part 3a of this series. Here follows her specific response to our questions. -ed.]

Thanks for getting in contact. Here follow Sandy’s responses to your questions regarding her position on housing policy.
This is an important issue for Sandy and we appreciate being able to share her thoughts with your readers.
Sincerely,
Sandy and team

1. What do you see as the main housing challenges facing Vancouver?
Battling homelessness is a constant challenge. My worry is that a housing crisis has now spread into what is termed in Hong Kong as the Sandwich Class—those with incomes above subsistence levels but below the wealth required to buy medium level property. Excessive buying of residential property for investment, rather than shelter purposes has driven housing prices to stratospheric levels relative to local median incomes. A housing crisis for the middle class stresses the entire system including our ability to house the homeless.
The larger context is the challenge that faces all global investors. Apart from labouring for wages, the way to make money is to build or invest in a business, buy stocks and bonds, or speculate on assets like real estate or gold.
In the current climate of global uncertainty, almost nothing in the world is matching Vancouver real estate for return on investment, security, and long term value. My concern is that our real estate market has morphed into a stock market, and human beings who need affordable homes are being forced out of competition.
Vancouver’s future rests on a healthy knowledge economy as well as small and medium sized businesses that will provide long-term employment. Both these sectors need young people and immigrants with good prospects and disposable incomes. Because housing prices have now detached from the local economy, we cannot offer a promising future to the very people we need to build it.

2. What measures do you propose to address those challenges?
The most important thing is to recognize that we have a problem and we must commit to solving it. We have to gather critical data, including clear information on the extent of non-resident purchasing of investment properties. We can then have an informed discussion about solutions such as incentivizing capital toward rental properties or investment in local businesses, taxing unoccupied properties at the business rate, or considering innovative zoning options. This is a sensitive issue and we need a made in Vancouver solution. Lets bring experts together to generate savvy solves that turns this into an opportunity for Vancouverites.

3. What is your policy on housing densification?
My mind is not made up on density. We must take care to add density of residences for human beings as opposed to density of investment units. A second priority is that density should be absorbed by the City on terms that meet neighbourhood objectives.
Adding density in an attempt to moderate housing prices is unlikely to work. We have to look at the demand side. That said, there are many positive benefits of the right kind of density and I am open to those.

4. Would you support policies that would lead to a drop in real estate values?
This is a time for great care in policy development.
We may well be in a real estate bubble and a sharp drop in values for other reasons is not out of the question, regardless of government policies. However, government’s role should be to modulate severe market swings and not precipitate them. Shocking the market has potential to wreak havoc on households, especially those who may be over-leveraged or recent buyers.
I think we can be more surgical in our responses. Finding solutions that look at targeting specific real estate practices can help solve some of these problems while also encouraging investment in other asset classes.

5. What is your own family’s housing situation?
I have been a homeowner for 24 years. My first house was purchased in 1987 in Point Grey for $125,000, with parents and in-laws supplementing our down payment. The opportunities that created such security for our generation have vanished and it is vital that we stand up now for young people and families.
As a homeowner, I understand the concerns of Vancouverites about possible drops in real estate values and the risks associated with broad, generic approaches to housing policies. We need to find specific, pragmatic solutions tailored to the Vancouver market.


[This post is not to be seen as a VREAA endorsement of any of the above positions. See 'Policies On Housing' - The Positions Of Local Entities On The Challenges Facing Vancouver Housing' for an introduction/rationale for this series.]

Policies On Housing #4 – Tim Louis, COPE City Council Candidate

My answers to your questions are below. Please let me know if you have any additional questions or concerns.
Best,
Tim

1. What do you see as the main housing challenges facing Vancouver?
Affordability. The average person is no longer able to afford the purchase of an apartment or a house. Even worse is the situation for people who are homeless.

2. What measures do you propose to address those challenges?

If elected I will propose the creation of a blue-ribbon committee to determine whether or not Vancouver taxpayers are getting good value for money from Vancouver City Council’s property endowment fund. This fund is worth over 1 billion dollars. I believe that the City of Vancouver could be using it to build social housing at no cost to the taxpayer.

3. What is your policy on housing densification?
As my mentor the late Councillor Harry Rankin said, “If it was not for development we would all be living in caves.” For me the question is not for or against development, but development for who — development for the benefit of the developer, or development for the benefit of the people who will live in it and for the benefit of the neighbourhood around it. I would like to see City Council empower neighbourhood councils to make all rezoning decisions that are above a certain size. I am not opposed to higher densification per se. It is the negatives that come with higher densification that I am concerned about, in particular, traffic congestion. We need to look at ways to allow developers to build car-free accommodation.

4. Would you support policies that would lead to a drop in real estate values?

People who already own homes would be unfairly hurt by a policy that would lead to a drop in real-estate values. If the current homeowner has taken out a mortgage for say 90% of the worth of their home, and values then drop by 10%, the homeowner has lost 100% of her or his equity. I am strongly supportive of policies that would bring new housing to market at below market cost.

5. What is your own family’s housing situation?
I am very fortunate. My partner Penny and I purchased our home in 1988. It came with some wonderful tenants for whom we have not raised the rent once since 1988.


[This post is not to be seen as a VREAA endorsement of any of the above positions. See 'Policies On Housing' - The Positions Of Local Entities On The Challenges Facing Vancouver Housing' for an introduction/rationale for this series.]

Seller Epiphany – “I sold and have $2M in the bank. My original plan was to wait until prices settled before buying a knockdown and building again. But a feeling has come over me I thought I could never have: I am beginning to hate Vancouver.”

Alex sold his house two months ago for $2.5 million. The buyers were Chinese, from Mainland China. “What else?” he asks. After all, this was West Vancouver. “They wanted our furniture too. We are now renting a furnished house. I have $2,000,000 cash in my account.”
“My original plan was to wait until prices settled before buying a knockdown and building again. But for the last two weeks a feeling has come over me I thought I could never have. Something snapped. I am beginning to hate Vancouver. I use to defend Vancouver to death against the East. Yes, I made lot of money here. But Vancouver is beginning to disgust me. The arrogant, snooty belief that nothing can go wrong here. The multiple offers for homes. The fact there is no industry or decent paying jobs here except if you are a Real Estate agent who drives around in a Porsche and advertises on billboards like a fashion model or actor.”
“Meanwhile we continue to build higher and higher on the North Shore mountains destroying the environment. The Governments have prostituted themselves to the highest bidder, selling citizenship for money and changing the nature of our neighbourhoods. This is not a healthy change. Marine Drive has become gridlocked. Disgusting monster homes with huge retaining walls being built. Everything has become too expensive here and beyond logic.”

Alex in West Vancouver as relayed by Garth Turner at greaterfool.ca 9 Nov 2011

The interesting thing is that Alex has probably had these thoughts brewing for years. They have now crystalized with the sale of his house. The emotional attachment to the hopeful bullish position has departed, so the thoughts rise up, and become conscious and articulated.
There exists a super-saturated solution of these thoughts in the minds of Vancouver owners. They know that housing is very, very overvalued; they know that Vancouver is a nice city, but limited in all sorts of ways.
What will it take for everybody to suddenly realize the truths they already know? What will the seed be around which the realization rapidly forms?
What will do it is falling prices.
Unlike Alex, very few will be able to sell before they admit these thoughts.
The moment prices pull back substantially, RE will look different.
Owners will realize what they already know: that their $1.1M SFH or $400K condo are very modest structures, very overvalued, with lots of downside risk.
This realization will bring sellers to market as they attempt to realize their fantasized paper gains.
Prices will drop further; price drops will beget price drops.
The irrational strength on the way up will become irrational weakness on the way down.
This is how markets work, how speculative manias unwind.
– vreaa

“My Dad sold out of Kerrisdale in 2009 and Mom is in a big hurry to get back in. He is not and this leads to a bit of strife.”

“i think my dad is really enjoying your blog. he sold out of kerrisdale in 2009 and mom is in a big hurry to get back in. he is not and this leads to a bit of strife. i left vancouver 20 yrs ago, had a front row seat to the dotcom bubble living in the bay area and also the us housing bubble. the wishful thinking and tortured logic about how “this time it’s different” is always interesting to read and understand. i think the one new thing about the van housing situation is the (unanticipated) magnitude of ham. there was a taste of this before with the migrants who feared hk going back to china would be business -ve. but, that was much smaller in scope and occurred at a time when the market was somewhat depressed still. the current version is maximally steroidal due to ww monetary easing. for disillusioned renters, when the world around has gone insane, all you can do is keep your head. when a society chooses to expend its resources wastefully, the result is ultimately detrimental to all, even those who believe themselves to have benefited. for nervous owners, i would sell unless you are willing to absorb a potential 50% reversal – there is still time for a few more to get out.”
chubster at VREAA 2 Nov 2011 1:37pm

Spot The Speculators #65 – “It’s more fun to blame the Chinese, but really what went wrong in Vancouver is the baby boomers bought up all the property, drove up the prices, and drove out the lower class, including their own kids.”

“My parents own a million dollar house in North Vancouver and a quarter million dollar apartment in Lower Lonsdale.
How about a couple hundred bucks a month to help out on rent so I can afford to live in the city where people like my parents have skewed the prices?
Not a chance.
It’s more fun to blame the Chinese, but really what went wrong in Vancouver is the baby boomers bought up all the property, drove up the prices, and drove out the lower class, including their own kids.”

Iain at VREAA 9 Nov 2011 10:20pm

We are in a speculative mania caused largely by locals buying as much RE as possible by borrowing at very low rates, leveraging and overextending themselves.
Iain’s parents may look innocent enough, but if you consider their age and the percentage of their net-worth in RE, you’ll see than many in this position are very over-dependent on RE for the fiscal health of their retirement. – vreaa