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
Nothing like a little bit of perspective.
Real-time vote counts from Vancouver civic election:
http://vancouver.ca/electionresults2011/index.htm
Only Vision and NPA candidates voted in.
Sandy Garossino a very distant 22nd in race for 10 councillor slots (despite fair visibility in last few weeks).
Face it folks, the municipal government is in the back pocket of the developer lobby. The only significant change in housing dynamics in this city will come care of Mr Market.
Any thoughts on where Adriane Carr stands?
Carr has urban planning background, not tied to development (directly). But anyone on council, whether they be anti-bubble, anti-speculation, anti-development, whatever, is still under a dysfunctional fiscal regime that is dependent upon historically volatile permit revenue to fund its operating budget. So no matter what Carr thinks about development or trying to hamstring it by causing prices to start falling (like she or anyone else on council could do anything substantial, which is questionable) the City would be forced to make punishing cutbacks or tax rises to balance its books. Neither is fun.
If I were an NPA pundit reading this (which I’m not), here is a free observation: VV will be weakened on managing operations that will be severely hampered by budget cutbacks and tax rises if prices start to fall. The pressure to raise taxes above inflation will be astronomical if developer revenue goes to pot, which is entirely possible in the next few years. Maybe not in time for 2014 but a better-than-even chance before 2017.
I figure that I’ve been reading his blog for about 6 years. The interesting thing is that Mish accurately predicted sub-prime more or less to the date, social unrest, Greece, Italy etc. You can bet on his predictions.
He’s called the bubble on Vancouver a few times. The only question is 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?
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.
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.
living in vancouver, i have fond memories of canada
Well said.
Ah, I often get in trouble for saying similar things…
Livable with “mortgage helper” AND in East Van! Only a million $$$!
Hahaha!
Fuck, this is so demoralizing…
http://www.vancouversun.com/Vancouver+mansion+sale+million/5735598/story.html#ixzz1eD1sryZs
Twilight zone…
How can people with so much money throw so much of it away? We’re talking millions of dollars. Thinking of all those marginalized and disadvantaged individuals while looking at such idiotic extravagance. What a terrible misallocation of resources.
Money laundry maybe?
My prediction: A company called 退休 Ltd. from the Cayman Islands will buy the house and Mr. K. Fan Hiu will finally be able to move to his humble little apartment.
Shedlock at it again! Buy… wait what is he recommending to buy again? Never can tell.
He predicts deflation.
Again, whatdoeshe recommend? Cash?
distance
From his blog’s advertisements, Mish appears to recommend gold. If this is the case, then I see a bit of a contradiction in his deflationary bias and a prediction of a crash in Vancouver RE. It could just be a matter of timing. That is, a global debt deflation hits asset prices then followed by massive money printing, fiat currency devaluation and then hyper-inflation. We could easily have all this taking place simultaneously in different economies unless global monetary and fiscal policies are coordinated. There’s no doubt that Mish is squarely in the bear camp and his views on interest rates and the demise of the Euro appear to be bang on. He could be right in his 75% price decline prediction but the likely path (outside hyper-inflation) is that Vancouver prices decline steadily over the next 10 years similar to what Japan experienced and what China is likely to experience.
” Mish appears to recommend gold”
According to Mish gold is money so I guess we’re both right. I will say one thing, that the “flight to safety” train of thought is prevalent in both gold and property in certain Canadian cities. Just you can’t live in gold!
if you consider gold is money. then it is all deflation in terms of gold. just everyone gets paid in dollars (fleck’s corollary).
you can’t eat cash either but that doesn’t stop it from being a critically serviceable asset. thought expt! consider 2 identical economies. one uses a money, one does not. the difference between their efficiency/productivity is the value of money as a tool in resource alloc. question is what is good money?
Don’t these Americans know that real estate only goes up?
http://business.financialpost.com/2011/11/19/mingles-moving-housing-markets/
Fluff piece by financial post. The subject in the story “works as a marketer”, they forgot to mention it is real estate marketing.
Notable quotes.
“People are getting married later, so there is a need to buy a condo sooner,” (Sorry, what???) says Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada. “People go to school later; the whole life cycle has changed.”
Scott Plaskett, a certified financial planner in Toronto, says he advises young singles to forge ahead with purchasing a home.
“They’re not getting married, so they should get on with their financial lives,” he says. “They have cash flow increasing and they can afford it, plus financially it makes tremendous sense.”
What a blanket statement.
They also mention people are buying together who are not a couple or family, yeah that always turns out great in the end.
One of the worst things to do is buy real estate as a principal residence within a partnership. This kind of advice is a sure sign of that the Vancouver RE prices peaked this summer and the bubble has popped.
just gotta scoop up the last few remaining “bag fries” if you follow..
A video I would recommend anyone to watch. Kyle Bass gets it…
It looks like the comment I made on Mish blog got his attention! lol…
Now the stupidity of Vancouver RE is for everyone to see outside the local blog community. I’m glad to see we’re starting to get some traction.
http://globaleconomicanalysis.blogspot.com/2011/11/house-wont-sell-no-problem-simply-raise.html
From the comment section:
“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).”
Yep, this will not end well in Vancouver…
knock-knock. who’s there? ken, is that you? have you got wood again? … ken!? … shiva?
ciao-out friendos. enjoy the day.
For comparison: http://seattlebubble.com/blog/2011/11/16/what-a-million-bucks-buys-west-coast-edition/