Monthly Archives: March 2012

A Weak March – Inventory High; Sales Low

Greater Vancouver RE inventory is now 16,298, a record historic high for the month of March.
Sales for March 2012 were 2,934 , down 28% YOY (cf Mar 2011), the second worse March sales for 10 years (second only to 2009).

– numbers and chart care of paulb, b5baxter, VHB, VMD, and others, at vancouvercondo.info; noted here for the chronological record.
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UPDATE regarding Detached properties
(from numbers posted at yattermatters):

Detached Prices:
FLAT YOY
(Mar 2012 $1.155M; Mar 2011 $1.155M)

Detached Inventory:
+22% YOY
(Mar 2012 6258; Mar 2011 5365)

Detached Sales:
-34% YOY
(Mar 2012 1187; Mar 2011 1799)

Bearish. – vreaa

“I am single have a awesome job in health care and OWN a condo that is not eating up my paycheques. Yes Surrey sucks but I am making good money and can walk to work in 5 min. from a condo I OWN.”

“You and that stupid girl are single, unemployed and miserable because you think so highly of yourselfs, blow what little money you have instead of saving and investing. I am single have a awesome job in health care and OWN a condo in Surrey that is not eating up my paycheques. I have no debt except my mortgage because I thing ahead, don’t you reaserch a career before you enter university? The people in this town never want to look at themselfs first they want to point the finger and blame others for their lifes problems, as a minority born, raised and educated in BC, I am glad I didn’t move downtown and end up like all of you. Yes Surrey sucks but I am making good money and can walk to work in 5 min. form a condo I OWN.”
‘vince’, commenting at soloinvancouver 23 Mar 2012 5:31pm

Debt and Compromise.
You can do it!
– vreaa

Billionaire Kwok Brothers, Developers In Coal Harbour/Richmond/UBC, Arrested In HK Corruption Investigation – “The impression is that government policies tend to favour the rich tycoons, particularly rich property developers”; “The power of the property sector is too strong, but the business-government connection is the same around the world.”

A pair of billionaire brothers in Hong Kong who have changed the skyline of Metro Vancouver with their mega-property projects have been arrested on suspicion of corruption.
Hong Kong’s Independent Commission Against Corruption (ICAC) arrested the joint-chairmen of Sun Hung Kai Properties, brothers Raymond and Thomas Kwok, on suspicion of corruption, the company said yesterday.
The Kwoks own $18.3 billion, the second-biggest family fortune in Hong Kong after Asia’s richest man, Li Ka-shing, founder of rival developer Cheung Kong (Holdings), according to Forbes magazine.

The ICAC announced on its website that the people arrested, whom it did not identify, were “alleged to have committed offences under the Prevention of Bribery Ordinance and misconduct in public office.”

In Vancouver, the Kwok brothers, through their Canadian subsidiary, Aspac Developments Ltd., are best known for transforming Coal Harbour into a prestigious waterfront neighbourhood, with the Harbour Green luxury condo towers.
Waterfront Place, Aspac’s first Coal Harbour development, was completed in September 2003. Each of the five towers was named after a famous European city: Avila, Bauhinia, Cascina, Denia and Escala.

In Richmond, the Kwoks are involved in the new urban low-rise waterfront community called River Green, which is being developed on the banks of the Fraser River near the Olympic Oval and the Vancouver International Airport.

At UBC, the tycoon brothers are behind the 17-storey highrise called The Wesbrook on the edge of Pacific Spirit Regional Park.

The arrests of the Kwok brothers triggered turmoil in Asian markets overnight, according to media reports in Hong Kong.

The family’s history is also filled with drama and scandal. The eldest brother, Walter Kwok, was kidnapped in 1997 by a man nicknamed “Big Spender” and held for a week until he was ransomed, and a feud between Walter and his two brothers in 2008 dominated Hong Kong newspapers for weeks.

The Kwok family is known to be devoutly Christian. In 2009, they funded the construction of a 450-foot Noah’s Ark, which includes a rooftop luxury hotel and nearly 70 pairs of fiberglass animals, for an undisclosed amount on a small island near Hong Kong. In the 1990s, Thomas Kwok, the middle brother, successfully pushed to establish a church in the pyramid atrium on the 75th floor of Central Plaza, one of its three tallest buildings.

– ‘Billionaire brothers who changed Vancouver’s skyline with luxury towers arrested in Hong Kong’, The Province, 30 Mar 2012

More than $5 billion was wiped off the market value of Sun Hung Kai Properties on Friday, after the billionaire owners of Asia’s largest real estate developer, who have also been involved with a number of Vancouver projects, were arrested on suspicion of corruption.

The arrests on Thursday come just days after Hong Kong elected Beijing-loyalist Leung Chun-ying as its next leader, pledging land for cheaper public housing, and as soaring property prices, the most expensive in the world, have stirred public discontent. Home prices almost doubled in the five years to end-2011, according to real estate broker Knight Frank.

“This is not good for the image of Hong Kong, which used to have a high reputation for integrity,” said Joseph Wong, a former senior government official and colleague of Hui. “The impression is that government policies tend to favour the rich tycoons, particularly rich property developers. These sort of cases will only add to the suspicions.”

“This is justice. They’re among the biggest, richest men in Hong Kong. The power of the property sector is too strong, but the business-government connection is the same around the world,” Terry So, an elderly chauffeur, told Reuters near the Sun Hung Kai Centre.

The unfolding scandal has gripped Hong Kong, the world’s most densely populated city which was returned to Chinese rule by the British in 1997.
“It’s a sign they’re trying to shift the power away from the tycoons,” said Alaric Lau, a 45-year-old independent investor in equities and fixed income, who was walking near Hui’s residence.
“These are three very prominent people in Hong Kong. The arrests are a sign of how they want to do things going forward … there’s no more favoritism that extends beyond the law … it’s a sign that the Chinese government is changing.”

The potential conflict of interest in a senior government official living – rent-free, according to media reports – in an upscale residence owned by an influential property family has not escaped public and media attention.
“We always assumed there was something between property and government. Maybe there’ll be more scandals. I think it’s a starting point in changing the relationship between government and developers,” said Joe Lin, a young marketing professional, during a smoking break near the Sun Hung Kai offices.

A former company employee who didn’t want to be named, said he was “very surprised and very sad” at the arrests. “They are men of integrity. Thomas would always repeat the company’s mission – Building Homes with Heart – during meetings and ask staff to treat clients with a true heart,” he said.

A loan banker in Hong Kong, who asked not to be named as his bank is a lender to Sun Hung Kai, said there was unlikely to be any significant impact on the company’s business.
“No one’s going to start cutting their credit lines to the company. Sun Hung Kai isn’t going bust because of this. It’s not a (mainland Chinese) mid-cap, but a Hong Kong blue-chip with hard assets and very low gearing.


– ‘Billionaire Kwok brothers arrested in Hong Kong, Sun Hung Kai Properties value plunges’, Vancouver Sun, 30 Mar 2012

We don’t expect any direct Vancouver effects from this, but it could possibly have a subtle effect on local RE sentiment. It adds to the cumulative negative info about the market that appears to be seeping in.
– vreaa

Federal Budget – No Changes To Mortgage Lending

“In fact in the entire budget, for which at least one medium forest died, the words “mortgage debt” do not appear. No cautions about overborrowing or the dangerous amount of collective net worth now stuffed into a single asset.
So much for Mark Carney. His continuous warnings about overheated housing in Vancouver, condo madness in Toronto or the inevitable impact of higher interest rates.”

– Garth Turner at greaterfool.ca 29 Mar 2012

“I had hoped this budget was really going to have some significance, but its totally anti-climatic. Canada is being crippled economically with the biggest ponzi scheme this country has ever seen.”
– ‘Vancouver Mt Pleasant renter’ at greaterfool.ca 29 Mar 2012 6:08pm


It’s what he didn’t say that is noteworthy.
The dog that didn’t bark.
The Finance Minister tippy-toed around the housing bubble, knowing that if he woke the bear, so much else in his budget would become moot. The bear will wake, regardless.
– vreaa

Mortgage Broker – “The government has done plenty to put the brakes on the Vancouver market. It is quite difficult to qualify people for mortgages even for the amount of house they need.”

“The article makes reference to our situation paralleling the US situation, and that is also utter nonsense in so many ways that I wouldn’t even start to get into them all. We do not offer loans at 100%+ LTV, we do not offer teaser loans to subprime clients and qualify them on the teaser rates, and we do not offer NINJNA (no income, no job, no assets) mortgages. As it is, in the Vancouver market, it is quite difficult to qualify people for mortgages even for the amount of house they need. The government has done plenty to put the brakes on the Vancouver market as it is. The harder the government makes it to lend money, the more that the market tilts in favor of the wealthy and the more difficult it will be for average and lower income earners to get ahead. That is a much greater thing to fear for the future.
I have said this many times, but the lending that really needs more regulation is the credit card and unsecured lending industries. What regulation have they been scrutinized under other than a regulation that requires them to disclose how long it takes to pay off a credit card bill with minimum payments? It is that ability to spend money so easily at such high interest rates that is really hurting people. However, the housing market is the one that gets constantly attacked. “Pay no attention to that man behind the curtain.”
I live and work in the highest priced market in Canada, and this is where it is hardest for people to buy. In most of Canada, housing is SO much more affordable than here. Most of the country has nothing at all to worry about.”

– Jeff Evans, Richmond mortgage broker, posting as ‘Jeff’ at greaterfool.ca 28 Mar 2012 9:01pm

“I have been enjoying all the radio, TV and print ads from the major banks telling everyone about 2.99% for 4 years as if they are offering you something special. I do have that available with other lenders as well, but I have something even better… 2.89% for 4 years! That is better than the banks are offering!
Contact me today and we can get you locked in for this special offer.”

– Jeff Evans at his site bc-mortgage-brokers.ca, 20 Mar 2012

What do you call a mortgage that starts at a 2.89% rate and then, after 4 short years, resets to a rate that is perhaps substantially more than that?
“Teaser”, perhaps?
– vreaa

Whistler RE Bust Continues – “A unit originally sold in the Four Seasons Whistler for about $1.1 million was recently resold for only $520,000. … It’s not anything wrong with Whistler or that Whistler is worth less”

Those who own a condo unit in a Whistler hotel are sitting on great potential, but at the moment the units are not showing great value.
Real estate consultant Denise Brown with Re/Max Sea to Sky Real Estate reported that a unit originally sold in the Four Seasons Whistler for about $1.1 million was recently resold for only $520,000.


“We’ve seen the prices come down significantly,” she said.
According to Brown, this segment of the real estate business is at the bottom of the cycle so prices are good right now. She said the people who are happiest in the condo hotel market are those who are in for the long-term and have made a lifestyle choice in purchasing a condo unit in a hotel.
“It is only those people who are looking for a lifestyle that own their own property in a complex that they like and believe in and want to use with their family,” she said.


Pat Kelly, from the Whistler Real Estate Company, said when condo hotel units first became available in Whistler expectations were high.
“People were buying on vision,” said Kelly. “Revenue has not met expectations in the last few years.”
According to Kelly, the lower than expected revenues produced through hotel condo units has combined with exchange rates, high strata fees, high property taxes and fixed overhead costs to drive prices down.
“The market is now valuing these things properly,” Kelly said. …
“Some of our friends to the south have had to do some pretty significant financial rationalization, which has caused them to want to sell things,” he said.
According to Brown, the people who were relying on the hotel condo units to produce high returns beyond covering all the costs associated with owning this type of property are getting out of their investments.


“It’s not anything wrong with Whistler or that Whistler is worth less,” said Kelly. “It is just that people are prepared to spend less.”

- from ‘Hotel condominium units hit hard by current economy’, John French, Pique, 1 Mar 2012

—-

“Great potential, but at the moment the units are not showing great value.”
“It’s not anything wrong with Whistler or that Whistler is worth less.”
(This from the same guys, we’ll bet, who used to say stuff like “real estate is worth whatever somebody is prepared to pay for it”.)
– vreaa

“I had an informal conversation with a Burnaby accountant working as a debt manager. He said most of his clients are so ridiculously over-invested in GVRD real estate that he fully expects a hard landing for Vancouver.”

“I had an informal conversation with a Burnaby accountant who has been very busy working as a debt manager. He said most of his clients are so ridiculously over-invested in GVRD real estate – significantly negative cash flow returns, average mortgage debt per client of $600K, etc – that he fully expects a hard landing for Vancouver.”
Airedales at VREAA 27 Mar 2012 2:10pm