Downside Weights On The Vancouver RE Market – “One of the older guys (over 60) mention to the guy beside him that he and his wife were thinking about selling their family home, and renting, in order to get some of the money that was locked up in the house.”

“Every Friday I play hockey with a bunch of guys who are over 55. I’m a goalie, so even though I’m not 55, they let me play – I guess it’s hard to find 55 year old guys whose knees are willing to bounce up and down off the ice for an hour and half.”
“Anyways, I overheard a conversation in the dressing room last Friday. One of the older guys (over 60) mention to the guy beside him (over 70) that he and his wife were thinking about selling their family home, and renting, in order to get some of the money that was locked up in the house. The over-70 guy nodded in approval. The over-60 guy asked if he had heard of anyone doing this before, as they couldn’t see any other way to continue to fund their retirement.”
“The over-70 guy nodded, and said “Yup, we did it a couple of years ago. We’ve been renting now for two years – we had to do it, because we couldn’t afford the property taxes each year anymore”.

– anecdote from ‘Ross’, relayed by Garth Turner at greaterfool.ca 27 Mar 2013

“Boomer retirement supply” will be just one of the factors weighing on the Canadian RE market in these coming years.
In Vancouver, there will be many other downside weights. We anticipate that the largest will be the loss of speculative buying (all buying based on the idea that prices go up will stop). Another downside weight will be the knock on effects of a shrinking RE sector (loss of jobs; loss of related economic activity; people leaving). Yet another will be the disappearance of the ‘move-upper’ market (as condo prices contract, almost all wannabe move-uppers will be stuck.. they will not provide support for townhome or SFH prices). Another downside weight will be cash flow negative properties coming to market that have only been held because prices have remained strong enough (we’d expect this to include some of the empty condos we recently heard about). Collapsing RE markets in China will have a modest direct downside effect, but also a larger indirect downside effect through the psychological impact on local speculators.
This list is not comprehensive, I’m sure readers can think of other mutually-perpetuating downside mechanisms. When a speculative mania cycle turns from ‘virtuous’ to ‘vicious’, the multiplier effects reverse.
Boomer supply will be just one of the many downside weights. Many who are reliant on paper RE wealth for their retirement fiscal health will come to market; as prices drop, some will do so with urgency.
– vreaa

150 responses to “Downside Weights On The Vancouver RE Market – “One of the older guys (over 60) mention to the guy beside him that he and his wife were thinking about selling their family home, and renting, in order to get some of the money that was locked up in the house.”

  1. “Collapsing RE markets in China will have a modest direct downside effect,…”

    If that happened, there may be social unrest in China (a Chinese Spring if you will), and we might even see an influx of Chinese flocking to Canada. There are so many variables that we will never be able to anticipate them all.

    Regarding housing supply Vs boomer vacating their SFH, I believe immigration will take up some of that supply. It’s a lottery dream to be able to live in SFH in most parts of the world.

    How many boomers will downsize remains to be seen. What I think will likely happen will be a mixture of downsizer selling and an evolution of family dynamics in SFH. For example, aging parents may live in a laneway home while their children raise their family in the primary home. Or more and more basement rentals to supplement retirement income for boomers making them reluctant to sell their SFH.

    Reverse mortgages will also affect dynamics and it is a concept that is trending in the banking world in most developed economies given they all anticipate the age of great boomer retirement.

    • This is just babble, BLM. What is your actual point, other than, “there are so many variables, so many possibilities, who really knows?” That’s not really helpful. Take a clear position, man.

      • El Ninja: my position is that the great boomer sell off may not materialize as expected for some of the reasons mentioned above + immigration.

        In history, the most widely feared/expected situations rarely unravel as expected and timing is almost always unpredictable. Stay foolish, stay contrarian.

      • Contrarian? You’re kidding, right? I can’t think of anything LESS contrarian than buying, or even considering buying, RE in Vancouver at this time.

      • And you do realize you’re being contrarian to contrarians? That makes you mainstream.

    • If the RE bubble pops in China, they arent gonna rush out here to buy RE. Being Chinese my prediction is everyone will freak out and panic will ensue as rumours and speculation takes over. In China you cant trust what the govt controlled media says, so it will be the spread of rumours that will feed the panic. And foreigners are usaully the last ones in but the first ones out. Look at what happened in Richmond. All those Chinese buyers disappeared when the Japan had the Tsumani, and now no one from China wants to buy there, and that effect came quickly.

      • You’re right, if panic ensues, they will move their money out in what will become the greatest migration of personal wealth in history. Some of that will land in Vancouver.

      • Chinese are sheep. Trust me, I know. I am Chinese, am married to a mainland Chinese. Chinese people will follow and be herded like sheep. If my neighbour has a Mercedes, I need one too, no matter how much debt I get. If my cousin has a big SFH, I need one too. If all my fellow Chinese are ditching real estate, then I will too.
        But then again, you can say that about most other people.

      • I still remember the watching the news as a whole bunch of Chinese in China were buying up salt, any salt, even non food safe salt because of the situation with the nuclear power plant in Japan. One woman stated she bought because she saw other people buying, no other reason than that.

      • Olga: can immigrants still apply to have their relatives join them? I believe this is not part of the quota but I could be wrong here.

      • Lat year I’ve heard that there is a 3 years back log in the family class and they temporarily stopped accepting appl. for that. Do not know the current status.

    • We can not see an influx of Chinese flocking to Canada more then they already do – the yearly limit is used every year and they can not go over it. Recent population growth data does not support the increased influx to BC not from outside not from inside of the country.

  2. Further reading in regards to rationale in selling your home: http://www.businessinsider.com/faber-gold-wont-be-a-place-to-hide-2013-3

    (Marc Faber, perpetual bear)
    “When you print money, the money does not flow evenly into the economic system. It stays essentially in the financial service industry and among people that have access to these funds, mostly well-to-do people. It does not go to the worker. I just mentioned that it doesn’t flow evenly into the system.
    Now from time to time it will lift the NASDAQ like between 1997 and March 2000. Then it lifted home prices in the U.S. until 2007. Then it lifted the commodity prices in 2008 until July 2008 when the global economy was already in recession. More recently it has lifted selected emerging economies, stock markets in Indonesia, Philippines, Thailand, up four times from 2009 lows and now the U.S.
    So we are creating bubbles and bubbles and bubbles. This bubble will come to an end. My concern is that we are going to have a systemic crisis where it is going to be very difficult to hide. Even in gold, it will be difficult to hide.”

    • subtle but effectively a misquote (reg faber reader) … fwiw, faber has previously offered that housing in vcr and cdn cities generally is quite bubbly

      • Everything’s a bubble to him except gold but even that seems to be falling out of his favor.

      • rod_jonsson

        nice try … do you read faber newsletter?

      • Rod: I actually know him. His office is down the street from mine in Hong Kong and we’ve looked at collaborating before. Just know he is a business built upon his personality.

        He’s seen as a joke by most real analyst but he is a great medi personality like Jim Rogers.

      • Medi = media

      • I bet your business is not built upon personality

      • Faber is the Don Cherry of the investment media.

        No trader executes on his views. He’s entertaining but largely irrelevant.

      • wow … outrageous … but fun … i definitely know a few good ‘jokers’ myself … care to offer a specific critique on faber/rogers commentary? … not much pt debating vagaries

    • “No trader executes on his views. He’s entertaining but largely irrelevant.” – any particular reason that you are quoting him then?

  3. Good job, BLM, you are basically suggesting that anything that happens in the world will result in higher RE prices in Vancouver. :roll:

    • Bubbly: when have I said that?

      For the n-th time I’m not saying Van RE will go up. If I had to bet, I would say it will trend lower.

      All I differ from most views here is that there are still scenarios out there where buying still makes sense and that we shan’t assume anyone and everyone who buys now a ‘greater fool’.

      For eg, someone who sold their SFH and looking to downsize b/c they feel more psychological secure owning. Or someone with $2m cash with no RE exposure now. Or someone buying now to rent out but with the view to live in at some point in the future.

      Circumstances vary and can go beyond our imagination. In any market, there can be a justification to buy. In any market.

      • You keep making hints like “we might even see an influx of Chinese flocking to Canada” (and numerous similar hints in other comments). Everything what you write is converging into somehow supporting Vancouver market. It is OK if you truly believe that, but it’s annoying because this is what realtors have been saying for years.
        “In any market, there can be a justification to buy.” So? This is obvious to everybody and it’s also completely irrelevant.

      • Bubbly: I’m not sure that there exists suitable buyers out there is obvious to everybody.

        I do believe deeply that there is still strong support for Van RE and a crash is highly unlikely. I also don’t think Van RE prices are out of whack given the forces in play. Is it ridiculous? Yes. Is it sustainable? Yes (hold fire pls).

      • BLM, I think readers are at times somewhat frustrated by your elusiveness and claims to being ‘non-conforming’.
        You state that Vancouver RE may “trend lower”, but you’ve also been outspoken about not foreseeing a crash. So, just so that we know what you’re talking about, please go on record:
        How much do you think that the Vancouver market could “trend lower”? What, in real terms, is the most you see Vancouver RE prices dropping?

      • Vreaa: haha, if I could answer that, I wouldn’t be on here would I?

        The only conviction call I will make is that Van RE prices won’t crash. That there is real support in the market given the macro environment.

        What we might see is a divergence pf pricing in quality condos and shabby ones. Between SFH in central areas and suburbs.

      • Cyril Tourneur

        Macro environment? You can’t be serious. That’s basically the BPOE argument. Vancouver RE as global safe haven. Yeah right.

      • Cyril: do you not think low interest rates in the world is ultimately affecting Van RE prices? That’s what I mostly mean by ‘macro environment’.

      • vreaa said to BLM: “So, just so that we know what you’re talking about, please go on record:
        How much do you think that the Vancouver market could “trend lower”? What, in real terms, is the most you see Vancouver RE prices dropping?”

        BLM replied: “Vreaa: haha, if I could answer that, I wouldn’t be on here would I?”

        That is a characteristically slippery answer.
        We are not asking you to do anything impossible.
        We are asking for your estimate of how much you think that the Vancouver market could “trend lower” (your term).
        You are, surely, aware that all market participation is dependent on a participant’s anticipation of future market action.
        So, before you continue to go off chatting about every other thing that may or may not effect the Vancouver RE market, please go on record and answer the following question:
        “What, in real terms, is the most you see Vancouver RE prices dropping?”

      • Vreaa: I won’t do that. All I can say is that there is support in Van RE. Pricing is a figity stat that means nothing without timing included.

      • BTW, BLM, I’m myself clearly on record as saying that Vancouver RE will experience a price drop of over 50% (peak to trough, real).
        And I’m “still here”.
        So, tell us what you think, for the record.

      • “All I can say is that there is support in Van RE.”

        What a copout, BLM. Man up.

      • BLM, I appreciate your presence here and like the fact you don’t respond aggressively to provocation. Thanks.

        If you won’t guess at how deep the down-trend will be could you please quantify what you would consider a “crash”. Since you are comfortable saying there won’t be one I just want to know what you consider a crash vs. a trend.

        BTW, in the interests of full disclosure here are my thoughts:
        – I think we’ll eventually see at least 30% off peak pricing and probably more like 50%;
        – I think we’ll see a sharp decrease (2 yrs) to -30% and a slower ‘flat’ market until we reach -50%;
        – I don’t think foreign money (HAM or US) is the reason for the increase over the last 10 years I think it is the excuse;
        – I think cheap and easy Canadian-owned debt is the main reason for prices going so high;
        – I don’t think prices in Vancouver are ‘sustainable’ but they may hold out longer than I expect if the credit taps are turned on again.

        Looking forward to your answer re: the magnitude of a “crash” and to further debate.

      • @Bally you are a breath of fresh air. Thank you.

        I define a crash based on velocity (speed) and drop in value. 50% drop in one year is a crash. 50% drop in five years is not.

        I prefer to not make predictions on prices because no one really can with certainty, so seems pointless to me. Instead, I prefer to look at things from a relative value point of view (ie compared to other investments based on risk/return/liquidity/own investment goals).

        If one’s ultimate investment goal is to save enough money to buy a home, then why jump in and out of the market? Or why wait if the cash is there already but only fear of a further drop stands in your way?

        I agree with your views largely. While a 50% drop can happen, I think it will be unlikely.

        Regarding HAM money, it is very real from my perspective sitting in Asia. I define HAM not as the traditional speculative money that flows into Canada to make a quick buck and flee. They’re more as safe haven/insurance money of Mainlanders, and of diversification investments from wealthy Asians across Asia with heavy bias to HK and TW.

        Regarding your point of cheap Canadian money instead of US or Asian money, well, it really is all the same. Money is being recycled around the world like air, unless you have a closed capital account like China. One way to visualize it is that US and Asian money are buying bonds issued by Canadian banks. This makes it much cheaper for Canadian banks to lend back to Canadians. International investors of our bonds love our bonds because of our politic stability, steady economy and good credit rating.

        The higher interest rate of Canada than the rest of the OECD countries have also seen Americans, Europeans, Russians and Japanese put their money in Canadian short term deposits/money markets/commercial paper – all directly and indirectly making it cheaper for Canadians to borrow.

        What happens you ask if Bank of Canada raises rates before other countries do? You guessed it, more money will come in and still inflate asset prices like property.

        As I’ve said in previous posts, all Bank of Canada needs to do is return inflation to 3% (within it’s target), then after 10 years a 1m dollar home will actually only be worth around 650k in 10 years in today’s value. (roughly after compound)

      • @Vreaa, will you be so kind to release my reply to Bally from moderation?

      • 4SlicesofCheese

        I stopped reading after “50% drop in five years is not. “

    • OMM 0910: “You are a true believer, blessings of the State, blessings of the masses. Work hard, increase production, prevent accidents and be happy.”

    • Low interest rates in the world are ultimately affecting all prices, Van RE included, increasing demand for everything, but Van RE just happened to already overrun its support by a mile and will have to drop down or to wait to catch up with the demand – on the level where there is a mass demand. Not SOME demand from SOME people overseas. Mass immigration are the people with no money to buy housing at its current level, and if most of them are – like you implying, to be able to keep the RE prices – they are not going to fulfill the goal for the immigration as for the supply of the new workers, hence no money for the pensions and healthcare in 5-10 years, social unrest, lower social security level, the system crumbles and the safe haven does not exist anymore. RE falls out of favor from the “safe haven” investors.
      Also – the interest rate in Russia is much higher than here.

      • @olga we don’t necessarily need foreign buyers/immigrants to buy endlessly for prices to stay high or even appreciate.

        All they need to do is keep on buying our bonds (to keep our lending rates low), our companies (to created jobs through increased economic activity), etc to keep property prices high.

        There will also be funds buying through shell companies (as they have been doing discreetly for the past decade), that represent professional offshore speculators/investors, which I understand has been active in some commercial properties like hotels and potential high rise redevelopment lots.

        Curtailing sales volumes on its own won’t necessarily correct prices significantly and certainly won’t bring it back to so called fundamentals.

        Regarding higher Russia interest rates, well, so does China. Most of the wealth there is somewhat frighten of the state. They’re more comfortable putting some of it offshore and usually in RE.

        If you google, you’ll also see that Russia’s central bank has also indicated interest to diversify a larger weighting of their currency reserves to C$. Which means even more money buying C$ bonds meaning cheaper rates for lenders in Canada. If that materializes, it will be even harder for bank of Canada to raise interest rates. The higher the rates for, the more money it attracts into Canada, the higher the $C meaning exports suffer.

      • “If you google, you’ll also see that Russia’s central bank has also indicated interest to diversify a larger weighting of their currency reserves to C$”.
        ———–

        Excellent point, BLM. Actually most Central Banks around the world are in the process of diversifying their foreign exchange reserves. Now that the Canadian and Autralian dollars are officially part of the global currency reserve system we can expect this trend to increase over the next couple of years.

        Part of the appeal is that our dollar (and the Ozzie) is seen as contra cyclical due its strength being based around energy and other resources so while it will never be center stage it does offer CB’s an alternative to holding USD, Euros, Yen or even gold. It also creates a stabilizing influence during a time when others are suffering devaluation.

        This could have longer term impacts on our real estate market sso it is worth talkng about. As you pointed out, capital is flowing here by foreign buying of both our debt and currency on open markets.

        Off the top of my head the two new currencies that have joined the list are estimated to be heading for a 5% overall weighting in CB holdings as time goes by. This is a big deal. It has also improved our stature in the international community as a source of stability during a time of financial discord.

        As far as Russia goes their interest in buying CDN only mirrors what many others are doing or contemplating. There is no other special significance other than it is an alternative to holding USD which many view as being a devaluation risk.

        It is because of our countries growing influence in international circles that creates the circumstances that might limit a housing bust on a large scale. Indeed, Mr Flaherties backing away from the easy credit conditions of the past are partly designed to offset systemic risk in order to maintain the stability that is expected by the global financial system.

  4. Downside, vreaa? I thought RE was a “ladder”, or my personal favourite, an “escalator”??

    But seriously, I think there will be across-the-board selling, not just among boomers. Even young folks are overly-reliant on RE as a source of “wealth” and collateral. When prices fall, fear will compel people of all ages to get out in the hope of covering their debts. RE will also go from being cool and a “smart investment”, to being uncool and a financial headache. The costs and hassles of home ownership / property management will come to the psychological fore. The list goes on…

    • Or high commodity and RE prices will come to define our generation and the next. Like how credit cards have made commercial property more expensive forever because more transactions are made – at least in prime areas.

      • It depends on what is considered to be high RE prices – irrelevantly high like Vancouver or relatively high like Calgary at 2/3 of Vancouver prices – or moderately high like Seattle – at half of the Vancouver prices. High is not the definite description, and even after 30% adjustment RE prices will remain high in Vancouver.

      • Certainly, easy credit is one of our defining features. Imagine if it were to suddenly cease……our system would collapse overnight and lead to double digit unemployment.

  5. The property tax thing is interesting. I’ve often wondered about that, considering that taxes always go up (at least over time), and with soaring property values, even shifts down in the rates plus homeowner grants (with extra grants for older people) likely don’t cover it well enough.

    A dropping market, plus high taxes, may drive many people out.

  6. Back during the late 90’s Asian Financial Crisis we bought a 10 year old never lived in condo from a Hong Kong based owner. Since I consider it almost a certainty we will have a serious Chinese Financial Crisis within the next decade, I think we could see a lot of those empty Coal Harbour, Yaletown, Richmond etc condos unloaded then. Maybe even some of the empty west side mansions.
    My experience is some of the Asian investors in Vancouver property do not think of it as an investment in the sense we do (cash flow positive, price appreciation). It is more of an insurance policy, something reliable and liquid for the time when things will fall apart, because their experience is things do fall apart. Because of late they have been swimming in cash they have been relatively indifferent to how much they pay. But when they sell, because it will be in a crisis, they will simply take the best offer. Just the price of security.

    • Or to move in if sh*t hits the fan in Asia.

      • Agree BLM. Two major social/political movements in China in the past century remain fresh in most peoples minds. That is what lies behind the desire of so many to move money abroad. It is just seen as insurance….

        Just in case…..

    • Carioca Canuck

      This is why I have always said dirty money (and a lot of the HAM is just that) usually doesn’t worry about seeking a return………just preservation of capital, whether it be 100% of 75%…….

  7. In yet other news, “DownSizeWeights… OlderGuyz”….

    “This was the locus of creativity for Canada’s most famous architect,” said Donald Luxton, President Heritage Vancouver Society.

    [G&M] – Arthur Erickson’s home faces the wrecking ball

    …”The cottage is small, one-storey, a fixer-upper on a large parcel dominated by a garden and a pond. Spread across two lots in Vancouver’s coveted Point Grey neighbourhood, the property would be prized by developers eager to knock down the house and build a massive residence on each lot or perhaps even townhouses.

    Now, nearly four years after the architect’s death, his home is in jeopardy: Unless preservationists find donors to combat a mountain of debt, the modest cottage will face the wrecking ball.

    …Mr. Erickson bought the Vancouver property for $11,000 in 1957. Today the land is valued at more than $3.1-million, while the house is assessed for tax purposes at only $6,300.”…

    http://tinyurl.com/ckek7c2

  8. “Eeek! EEeek! Unhand me this instant you uncultured swine!”, shrieked Hostage comment as she vainly struggled to elude the remorseless clutches of… RoboRedaktor – and his ill-considered, vile advances…

  9. BLM, you are very busy today. Looks like my cynical assessment of your motives was correct :)

  10. Okay, so here’s this exchange with BLM thus far:

    vreaa said to BLM:
    “BLM, I think readers are at times somewhat frustrated by your elusiveness and claims to being ‘non-conforming’.
    You state that Vancouver RE may “trend lower”, but you’ve also been outspoken about not foreseeing a crash.
    So, just so that we know what you’re talking about, please go on record:
    How much do you think that the Vancouver market could “trend lower”? What, in real terms, is the most you see Vancouver RE prices dropping?”

    BLM replied:
    “Vreaa: haha, if I could answer that, I wouldn’t be on here would I?”

    vreaa replied:
    “That is a characteristically slippery answer.
    We are not asking you to do anything impossible.
    We are asking for your estimate of how much you think that the Vancouver market could “trend lower” (your term).
    You are, surely, aware that all market participation is dependent on a participant’s anticipation of future market action.
    So, before you continue to go off chatting about every other thing that may or may not effect the Vancouver RE market, please go on record and answer the following question:
    “What, in real terms, is the most you see Vancouver RE prices dropping?”

    BLM replied:
    “I won’t do that. All I can say is that there is support in Van RE. Pricing is a figity stat that means nothing without timing included.”

    So, there you have it, for the record.
    BLM has made over 130 (one hundred and thirty) [error; actually over 270. -ed.] comments on this site, but, unlike almost every serious Vancouver RE market observer that we know, is unprepared to give even a vague estimate of price prediction. Attempts at price prediction is the very essence of market analysis… Why else spend any time considering markets if you’re not anticipating direction; if you don’t consider price targets? All serious analysis leads to that, and everything else follows from such anticipation.
    In light of this, BLM, we simply don’t see how we can see any of your comments as anything other than superficial noise; as chat.
    So, before proceeding with any more waffle about interest rates or bonds or asset bubbles or liquidity or Faber or gold or Asia, either give us predictions that we can hold you to, or give us a very good argument as to why we should take any of your comments seriously if you’re unprepared to make even the vaguest of predictions.

    • BLM reminds me of a quote attributed, I think, to Noam Chomksy. What follows is a very loose paraphrase: “If you want to appear a genius discard the main, and obvious, explanation for a problem and then substitute a specious argument and flog it for all it is worth”.

      An alternative take is the old adage “Bullshit baffles brains”.

      • I think that is also called a “Strawman”, Ford, although to be honest I have never been able to wrap my head around that term .There are just too many interpretations of what it means. Maybe the smarter kids can educate me on that point.

    • “BLM has made over 130 (one hundred and thirty)comments on this site…”

      Cool. Just curious, Boss…..how many have I left? Since I am quite a blabberer I would even be curious how many words it amounts to……have I written an online book yet?

      • You’ll note that BLM’s numbers are higher than that (see error note I previously added).
        Tally thus far:
        BLM: 289 comments (since 29 Apr 2012; heavily weighted towards recent months)
        Farmer: 1,731 comments (since 4 Oct 2011)
        None of either of your missives have ever been censored.
        [You both know that the mod queue filters occasionally hold comments up for no good reason; they are always released the moment I become aware]

        As you fellows proceed (as I’m sure you will), all I ask is that you guys keep the following in mind:
        1. People read all this stuff.
        2. At least one guy feels he has to read all this stuff.
        3. Words are valuable: Treat each like a coin, like a bullet, like something precious… don’t waste them. You are asking somebody to spend their valuable time considering your thoughts. Who is the privileged one in this exchange, the writer or the reader? [Ideally, both benefit. -ed.]
        4. “Je n’ai fait celle-ci plus longue que parce que je n’ai pas eu le loisir de la faire plus courte.” ["I would have written a shorter letter, but I did not have the time."] – Blaise Pascal
        5. Keep in mind that this site is the (i) VANCOUVER (ii) REAL ESTATE (iii) ANECDOTE Archive’.

      • Vreaa: Noted. As you must know, I share my opinion with passion so they are at least precious to me. I admit they sometimes over arch to something wider than RE. I do have respect for you not having censored anything I’ve posted, despite being labeled as the ‘worst kind [troll]‘.

        Would you consider headlining this for a discussion on a slow day?

        http://en.wikipedia.org/wiki/Canadians_in_Hong_Kong

        Hong Kong representing the 2nd largest Canadian community after the US with 300,000 citizens?

  11. Just got to this one. I’d like to pull up a BLM comment from last post, supporting infinite unfettered debt growth.
    Just know this, for every dollar printed it is worth about $8 to the real economy.
    So given that Canadian outstanding debt increased by about 200 billion last year, debt growth boosted GDP by $1.6 trillion dollars? Is that what you’re saying?
    Now, that is about 10% of GDP, so without debt growth GDP SHRANK by 8%. Do I have that right, the only reason we aren’t in a deep recession, ongoing for many years is because we are spending money we don’t have with no thought of the consequences, and this is a sustainable situation, that we can stop anytime we want?

    • Alexcanuck: I’m not at my computer so don’t have access to recent Canadian data points used for GDP numbers. I don’t believe what you’re alluding to is what I meant to say.

      The printing of money (quantitative easy, etc..) has had a greater impact on Canada’s GDP through higher inflating commodity and energy prices (Canada’s major exports).

      The bank amplification of money explanation was only used to show how one dollar through the cycle of borrowing, lending, saving can have a massive effect on the economy. Unfettered debt is obviously not good. Canadian banks right now are very safe and well within global standards of risk management. Consumers who can borrower, should continue to take advantage of unprecedented low rates. If no one borrowed, everyone’s (including savers with no debt) quality of life would suffer.

      Lending should stop when the banks determine the risk is too high (and traditional banks in politically sound countries have proven to do this well – investment banking another matter). Government should not govern risk for the private sector so long as they play by the rules. And if a few people default, that is a healthy purge and necessary for the system to continue to grow. In an ideal economy, you want steady growth, a bit of default, ample lending, ample savings and robust spending.

      • Not much of a name...

        “The printing of money (quantitative easy, etc..) has had a greater impact on Canada’s GDP through higher inflating commodity and energy prices (Canada’s major exports).”

        Then why has the RE industry grown as a percentage share of GDP over the past few years? It appears that all this extra money sloshing around has had a greater impact there rather than on the items you stated.

      • Exports dwarf RE as a direct contributor to GDP.

      • “Government should not govern risk for the private sector so long as they play by the rules.” – it does not apply to Canada as it doesn’t work this way in Canada with the CMHC taken away the risk from the mortgage lender therefore stimulating the mortgage spending versus other consumption areas and also versus saving, disproportionally.

      • Olga: CMHC no longer in the picture in a meaningful way but yet banks are still lending 5-yr at under 5%.

        Shows banks where just using CMHC to squeeze extra profit by getting better funding rates from bond investors.

  12. Vancouver Renter

    Comment section kind of sucks now that it has become a soapbox for BLM.

    Seems like he dedicates more time to the site than VREAA! Must be slow down at ReMax…

  13. I really don’t see any objectionable comments from BLM. Did I miss something?

  14. Who gives a crap about listening to BLM and his opinions? MOVE ON>>

  15. BLM offers an opinion, but I’m not even sure what that opinion is.

    Everyone here knows my position. And why are we arguing about price predictions. Prices are already dropping. In places like Richmond, ground zero of this mania, prices are already down 20-30% from peak, which is not even being reported. That means if you bought with 20-30% down (and very few do), your whole investment is gone. Less than that, youre under. Will it go back up? Maybe, and maybe not ever in our lifetime.

    Buy a house to live in but don’t buy for purely investment purposes. You are just pouring too much money into one sector with big risk.

    • Agreed Brian….

      • “Buy a house to live in but don’t buy for purely investment purposes. You are just pouring too much money into one sector with big risk”.
        ——————
        I agree too Brian. Every time I give this thought I shake my head in disbelief. In large swaths of the city you are literally underwater the day you plunk down your money and sign the documants if you only had 5% down.

        Falling prices and rising costs quickly magnify the effect.

        Such a stupid purchase right now. Once you deduct your CMHC expenses and all the related costs of acquiring and selling housing it means an emergency sale would leave you significantly poorer than before you began.

        We all expect some reasonable costs to get into housing of course but in this environment you are really playing with fire. A 5% annual loss on property values can put you alomost 15% behind the eight ball in just one years time if forced to bail out.

        What kind of an investment is that?

    • “prices are already down 20-30% from peak, which is not even being reported” – it is not a hot news anymore. Saw the discussion on the BNN today when the anchor asked the guy if he thinks that 20% drop in RE is a possibility, the guys said – no, most probably like 25% – as a matter of fact, no one looked surprised.

  16. @ BLM

    You sure took a lot of heat today. Reminds me of the F1 era…

    Good for you remaining ‘calm’ and ‘composed’ despite the attacks on you.

    I personally don’t mind your comments even if I disagree with some of your views. I guess the ‘analysts’ here are annoyed because you can’t seem to take a clear position.

    I can see why they feel this way.

    • Oh, poor BLM. He was asked a few straightforward questions. As usual, they were either ignored or dodged with babble. This is a distraction from an otherwise great discussion. And what exactly are BLMs “views”, anyway, HD? I haven’t seen anything resembling a clear opinion.

      • Just to be clear.

        I am not trying to victimize BLM but merely pointing out that he took a lot of criticism today.

        She/He does go in circle when asked to give a clear opinion but I don’t mind it like stated before.

        Again, I understand why it can be frustrating for some readers.

        She/He stays cool most of the time, I am willing to give her/him that much.

      • This exercise is a valid one.

        When you look at all the facts and make an attempt to visualize how the future might play out….well, it is not so easy. I am on record for a maximum drop of 40% that is gradual over time but there is no way any of us can know for sure.

        Too many damn variables and the future itself is one huge unknown when global financial stability is still a worry for so many people. I will say that I think Canadians who are selling have been fairly resilient in refusing to lower prices too much.

        Good for them. (but can they hold out forever!)

  17. BLM is a masterful troll: he injects pseudo-academic FUD into every conversation to confuse and derail, but never comes out and says anything concrete for fear of having to defend an actual position.

    He also never takes bait and never rises to challenges. He sits calmly in the corner of the bus, knitting and waiting for his stop, carefully waiting for lulls in the conversation to inject an open-ended question or statement of possibility that will side-track and undermine without being obviously hostile.

    I work with turds like this, which is why I’m adept at spotting it.

    They have a vested interest in preventing consensus and undermining confidence. They constantly fill the air with “what if” and “could happen” statements, knowing that the universe is a weird place and analytical people cannot stand to let a posited possibility go unconsidered. Even a wildly unlikely one, like Vancouver RE being *propped up* by the collapse of the Chinese financial system! (Har. Har.)

    Others on the bus who are trying to carry on a conversation or resolve a question are then slowly, incrementally derailed and sidetracked, now spending large amounts of mental energy on thinking about highly unlikely events and questioning their own wisdom. If they call the turd on his FUDdism, he calmly states that he’s not saying that it *will* happen; just that it *could*.

    The fact is that RE bubbles are not as complex as our little buddy makes them out to be, and we all know that. Yes, a meteor could strike. Yes, the Chinese could flee in droves and create price support.

    But that’s not what’s happening and probably not what’s going to happen.

    VREAA, unless BLM comes out and says something meaningful I think that you should expunge him from the record. He is not contributing value to our dialogue or to the historical record that this site was designed to preserve.

    • “Information warfare is about the exercise of power on the information front. … It is about using information to influence others in ways that serve your mission.” – Distinguished Prof. Dorothy Denning, NPS

      [NoteToBurnabonian: MasterfulTroll? Not really. A* for effort though...]

    • Oh my goodness, I thought it was only me. +10000. This guy has turned VREAA into a circus of discussion about him. He knows just enough economics to spew a thought but he can’t collate those thoughts into a premise. Beware, he’s likely here because VREAA is becoming mainstream and he’s been told to try to temper the attitudes with FUD (as said above).

  18. PS lest anyone think that I am a revisionist, or opposed to healthy debate of opposing views, I am not. In fact, I am a skeptic at heart and a devil’s advocate by birth and education.

    It’s the part of my nature that prevented me from buying in 2005 despite *all* available evidence (to me, being in my 20’s,) at the time. Our crazy market just didn’t *feel* right, and I engaged all of the older and wiser and better-informed people who told me that I was a fool for not buying, on every level, even when I didn’t know exactly why I was questioning their wisdom.

    To me, BLM is not a skeptic at all. He’s using the assumption that everyone is here for a considered discourse as leverage: he sees it as your weakness. He knows that as long as he injects his FUD with a calm and positive demeanour, it will be indistinguishable from constructive debate.

    If he were part of the community and interested in a debate or discussion, he would make an actual point and then open himself for analysis and counterargument.

    In 130 posts, none of us even know what his point is! No one can challenge him as he is challenging others because he hasn’t actually said anything.

    Deleting those posts would not be revisionism; it would be more like turning up the SPAM filter to include the IP addresses of bored and lonely realtors — i.e. no harm done!

    • But I thought the internet was the ultimate source for freedom of expression, Burnabonian, especially as it is annonymous. Yet you want to exercise the right to clamp down on the views of others you don’t agree with and completely expunge their thoughts from the discussion.

      What if they did that to you?

  19. Get your money out of CANADIAN BANKS:
    The official 2013 Canadian budget contains an explicit provision that Canada will pursue the bail-in model for systemically important banks for future bank failures!

    Titled ECONOMIC ACTION PLAN 2013

    From Plan 2013 Page 144: (pg 154 of pdf)

    “The Government also recognizes the need to manage the risks associated with systemically important banks—those banks whose distress or failure could cause a disruption to the financial system and, in turn, negative impacts on the economy. This requires strong prudential oversight and a robust set of options for resolving these institutions without the use of taxpayer funds, in the unlikely event that one becomes non-viable.”

    From Plan 2013 Page 145: (pg 155 of pdf)

    The Government proposes to implement a bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital.

    This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada. Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants…

    This risk management framework will limit the unfair advantage that could be gained by Canada’s systemically important banks through the mistaken belief by investors and other market participants that these institutions are “too big to fail”.

    http://www.jsmineset.com/2013/03/27/strong-move-to-scare-big-money-out-of-too-big-to-fail-banks/

    • Yes, it is true Woa. The banks liabilities are your savings if push comes to shove. It means in effect that your funds on depost will be converted to bank equity or shares in the unfortunate event of a failure. This will allow the bank to continue to function with you as one of their new shareholders and it recognizes that the our Federal deposit guarantees are not really worth the paper they are written on. In fact, the taxpayer would be on the hook in the case of one of the big boys going under as the deposit insurance scheme is so poorly funded. The idea is to avoid taxpayer risk by placing more of the burden on those who keep funds on deposit at troubled institutions.

      In short….it does matter who you bank with now so use your head.

  20. You can DEFER property tax if you are older (over 55) or have kids under 18 (or in college). This is not everyone, but it covers a lot of folks. This policy has delayed people making rational choices about whether they can afford property taxes. Anyone using this program is adding more than 0.50% of assessed value in debt to the pile annually, because the tax must be paid when you die or sell or kids graduate college. This cancels out a portion of the amortization, if any.

  21. The trick would be to keep having children until you hit 33. Assuming that child makes it into post-secondary for 4 years, you’ll be 55 and can continue deferment until you die. never pay municipal tax in BC.

    (Not sure your kid will make it post-secondary? Have one when you are 37.)

  22. Open letter to denizens of Vreaa,

    My position, again, is that even in this market Van RE makes sense for certain buyers. The non/lowly leveraged, especially those jumping in and out of the market to maximize their gains with the ‘eventual goal’ of owning a home again.

    Investors too, who could use Van RE as part of a small diversification play. Or new immigrants who can afford to pay full in cash for rental properties to generate local cash flow for daily expenses.

    I know these views are not shared by many, if any of you. I am also astutely aware that I will never have consensus from the readers of this blog.

    Why do I bother? I can’t say. I do know that I enjoy this blog in an odd way and the conversations with ‘some’ of the readers.

    Perhaps I do babble on at times without a conviction call and while some call that pointless, so are price predictions.

    If I could get the following views across on record then I hope I would have succeeded, in an ever so small way, in moderating the unrelenting pessimism that is on this blog. Perhaps to have added some healthy dose of non-herd, non-mob-like mentality thought to the discussions.

    1. Not every buyer in this, or any market, is a fool by default; there exists sensible reasons for certain buyers even at perceived tops. (this may be obvious to some but not to everyone)

    2. Discounting the macro environment (implications from economic policies beyond our borders) in understanding Vancouver RE prices is akin to complaining how McDs can cost C$10 for a meal in London and saying it is unsustainable and deflation must set in. Yes prices are stubbornly high from a personal point of view but simply saying prices will fall because they are too high isn’t digging deep enough into the problem. As I keep alluding to, the moon has a much bigger pull on tides than the ocean itself.

    I know I’ve taken far too much bandwidth on this blog and its readers. Vreaa has been most generous in not muffling me, despite at times challenging me, as any good editor should.

    What I promise to do is to tone it down and respect the views here. Not to carelessly challenge everything I disagree with and not to provoke readers with my pseudo economics (which does at times come across as that as I try to make it easy to understand for all readers here).

    My greatest value to this blog, IMHO, is to explain to anyone who would like a layman’s explanation of abstract financial/banking/macro economic influences to Van RE’s market. (While some disagree with anything I say, I do feel there are others who have gained from my presence, whether they agree with my views or not).

    Again, I apologies for the aggravation I cause but not for my views.

    • We note that in one and the same post you characterize the “mentality” here is that of the “herd” and “mob”, while at the same time you “promise to tone it down and respect the views here”.
      Not a good start, IMHO.

      Are you aware that the views held by the vast, vast majority of Vancouverites regarding Vancouver RE are almost identical to yours? — That ‘macro’ events will offer ‘support’ for the market, such that no substantial price drops occur? That there will ‘always be buyers’? That in the ‘current interest rate climate’ Vancouver RE is arguably a good investment?
      You are solidly in the middle of the pack with your beliefs. If you don’t realize that you simply aren’t reading broadly enough.

      • Herd mentality in above context was in regards to the discussion here, not the general market.

        Mob mentality as in a witch hunt on me any anyone who who does not toe the party line of this blog.

        I don’t expect consensus of course, on a bear blog, but quite disheartening to see some of your readers don’t even try and engage me for a proper counter argument.

        Some of the accusations/ name calling against me have been quite harsh (far beyond my misinterpreted labeling of herd/mob mentality) but I know it comes with the territory.

        I do get the sense here that I should just step away from further commenting as this is all going well off topic.

      • That aside, with regard to your position.. you do realize that it is mainstream in Vancouver?
        (This is indeed relevant to topic content).

      • PS: there is no ‘party line’ on this blog. The whole idea sounds like too much work.

        Our one preference is that participants argue in good faith, as we do.

      • Vreaa: I see mainstream as this, broadly speaking.

        If we took a ‘popular vote’ today, 50% would say there will be a meaningful correction.

        The other half would say there is strong support for prices or further appreciation. Of this half, probably less than 20% really understand the argument.

        I am the 1% that do not have a vested interest in Vancouver RE and would be delighted with a crash so that I could move back to buy a place and raise my family there.

      • BLM: “If we took a ‘popular vote’ today, 50% would say there will be a meaningful correction.”

        With respect, BLM, that shows that you are somewhat out of touch with what’s going on ‘in the trenches’ of the Vancouver market. The vast majority of market participants do not expect any correction could possibly go further than about 10%-15%-off. Seriously, that’s the truth. (And I take it from your earlier comments that you’d define “meaningful” as greater than 15%-off.)

      • Vreaa: I appreciate I may be out of touch given I’m not there.

        I’m glad though, that I’ve reached a similar conclusion as the majority without being in the immediate field of distortion that sometimes happens to bulls too close to the situation.

        I don’t need further discrediting. I trust your readers recognize I’m just spewing bull (no pun intended) out of my mouth.

        Simply take my views as to better represent the other 50% on your blog, if that’s fine with you.

    • @BLM
      Bullshit – And you are full of yourself.

      Your arguments (setting aside your completely laughable ‘knowledge’ of economics and incorrect ‘stats’ about the effects of debt, etc.) are basically like this (explicitly or hinted or implied):

      1) If China booms, money will flow to Vancouver RE
      2) If China crashes, money will escape to Vancouver Market
      3) Europe is in crisis, so money is escaping from there to Vancouver
      4) When Europe rebounds, money will flow to Vancouver
      5) Vancouver boomers do not need to downsize, so supply will be low
      6) If some boomers do downsize, they will buy in Vancouver and support the market
      etc etc.

      You cover all sides – (warning – hyperbole) anything that happens anywhere in the world somehow positively involves Vancouver RE. Yet at the same time you claim to have no vested interest, you refuse to give any clear opinion besides empty babble and many times discredited BS. You present bullshit usually used by realtors and think that you are a contrarian.

      In short, you are full of shit. Feel free to call it a which hunt, mob mentality or whatever, I don’t care.

      • +1

        If it were a witch hunt, we would be taking a composed and reasonable person who was making rational and well-supported arguments and throwing him to the lions for the sin of contradicting our religion.

        This case is the opposite scenario: everyone here is all ears, ready to be presented with data or logic from anyone who cares to share a sound, rational argument. The trouble with BLM is that we can’t make heads or tails of most of what he writes. 140 posts later we are sick of the unfounded, unsound, self-contradicting, inflammatory sludge that flows from his keyboard.

        If you are a sad, angry person who is looking for an internet community to torment, you have found your mark. We are beaten: totally susceptible to your brand of trolling.

        Now PFO.

      • Correct except pt 4

      • Burnabomian, I’ll go back to knitting at the back of the bus, thank you very much.

      • Is this much hostility really necessary?

      • @Farmer, thanks for speaking up for me. I appreciated it, even though we don’t see eye-to-eye on some views.

        I’m not entirely sure why everyone was a bit short on me yesterday. Maybe perhaps I’ve been posting too frequently, which I’ve decided to tone down (no posts in the latest anecdotes!)

        Predicting how much prices will fall by is really pointless if you can’t define the time it happens and for how long it stays. 2008 was a great example of how prices fell but bounced back up, meaning anyone who predicted a 30% correction had little to speak for shortly after – and look at where it ended back up.

        Again, I appreciate you sticking up for me here and in the other post. Part of what I want to achieve with my posts is to bring some thought into what the broader forces are at play that influence prices. If anything, to give the bears here a slightly different take on things – even though 90% of them will dismiss it. And other less obvious facts (to some at least) such as too much savings sitting in banks is as dangerous to the economy as too much debt issued by banks.

        All these factors play just as important a factor to RE prices as to the sustainability of prices themselves.

      • Oh, that’s cute. BLM has a cyber buddy.

        “Predicting how much prices will fall by is really pointless if you can’t define the time it happens and for how long it stays.”

        Not making any prediction at all is even more pointless. What are we doing here if not making predictions, however difficult and multifactorial? As vreaa says, this is the essence of market analysis. If you are just pointing out variables and hedging bets, you are wasting everyone’s time. The value is in pulling together these variables and applying to them intelligence / logic / experience to form an actual opinion. It’s called thinking.

        I, for the record, concur with vreaa’s 50-66% real price drop prediction, based on what I believe ultimately drives the value of any asset: the income it can produce (in this case, rent). Maybe even more of a fall, given markets’ tendency to temporarily overshoot.

      • El Ninja: It’s not that I don’t want to make a prediction of when prices will fall but that I can’t say with confidence (whereas I believe much more passionately about my views). If it means that much to you and others here, then sure, let me go with 15% down by the end of 2014 (mainly after we get clarity from the US Fed on their easing programs which are set to expire next year).

        While predictions or guidances are obviously important to an analytical argument, so are examining trends and understanding the broader forces that are in play.

        Fundamentals have been the most reliable way of predicting outcomes and Vancouver’s RE will be no exception. The question here is for how long (maybe decades, I say) and if fundamentals will catch up before hand.

    • BLM – some comments to your views on record:
      – 1. “Not every buyer in this, or any market, is a fool by default; there exists sensible reasons for certain buyers even at perceived tops. (this may be obvious to some but not to everyone)” – no one here disagrees, there are buyers in every situation by diff. reasons. The important thing to know their numbers/proportion/significance and if their demand is able to stop the bubble from the bursting. We do not know that but neither do you.

      2. “Discounting the macro environment (implications from economic policies beyond our borders) in understanding Vancouver RE prices is akin to complaining how McDs can cost C$10 for a meal in London and saying it is unsustainable and deflation must set in.” – no one is trying to discontinue the macro factors but they only work in the combination with the inside of the country factors and also they are not stable. It can work both ways. For example Chinese investors losing their money in RE in China might not be able to free up their money there as they expected after it grows and buy their target property in Vancouver etc. The macro environment is fluid and it can not only increase but also decrease demand. There might be found other more attractive targets to invest/places to live besides of Vancouver that is loosing its attractiveness as the RE prices too high. If the RE corrects here by 30% it may became better again, who knows.
      If you want to discuss some of your points, it is better to pick 1 or 2 at once and go over it carefully to lay out your arguments with the numbers/data and to let people answer instead of repeating every unsubstantiated claim that is already said here in Vancouver before by the people that were claiming that the RE prices will grow forever (they do not grow since the summer of 2011).

      • He also claims that both higher and lower interest rates in Canada will positively affect RE prices. You just can’t make this shit up!

      • Bubbly better way to look at is, is there’s no way for Canada to raise rates before the US. Hope this wording suites you better.

      • Wow, BLM, you are a rare specimen. Not many people are so full of shit like you. You just keep tweaking/changing your own words and contradict yourself multiple times within few lines on one page.

      • Times are tough, Boyz&Girlz….

        ‘They’re’ relying on Interns…

        Capiche?

        [NoteToEd: And 'they' can't even be bothered to mask their TZ... or deal with 'continuity' issues. By the way, it's tricky adjusting those ciggies to precisely the right amount of ash... On the other hand, one does get to visit some very interesting BackLot AirStreams... depending on how one blows smoke. TeeHee!... Just kidding. All I ever wanted to do was play with the PanaFlex Millenium XL2. How dumb is that, eh?]

      • The worst kind… a troll that doesn’t even know he’s a troll.

  23. Ralph Cramdown

    I was thinking about our mutual friend yesterday. I was doing some spring cleaning in my yield oriented portfolio. Selling stuff that has gone up to where its fairly priced or overpriced forces me to find new ideas to reinvest the cash. So I sold a few names that I’d bought when they were paying 6+% but had advanced to where they were only paying 3-4%. Probably I sold to somebody like our friend, who knows that investments that are paying 5 or more percent are too risky, but when their price runs up 25 or 30% with no change in the dividend, they’re safer.

    Blessed are the counterparties, for otherwise, who would we sell this stuff to?

    • And you now have zero-yielding cash. I’m sure they’re thinking the same thing.

    • Goes to show the risk-adjusted return is much lower now! What the markets used to accept for 6% is in return is now willing to accept 3%-4% return! Meaning people are becoming more desperate for yield. (Unless of course there have been a material change to the security you are talking about).

      It’s good to keep in mind the individual trader does not influence the price of stocks at all. It is institutional money that usially have so much capital under management that they sometimed cannot buy in one go with the fear of moving prices up as they acquire. So, if institutional money is pricing risk for the said stock at 3%-4% when it used to yield 6%, it says something.

      I think you’ll be hard presses to find anything else to yield 6% with the same risk return as when you first acquired the said security.

      • I just read three paragraphs and learned nothing of any use whatsoever, much less anything relevant to the topic of this blog.

  24. Yeesh – this is getting to be a difficult blog to read. Starting to feel like a secret fraternity or a den of rabid bears. What’s wrong with the opinion that Vancouver RE is driven by HAM whether you are on this side of the Pacific or the other. My entire extended family who have been cashing out of Vancouver to move back to Asia or to the US or Alberta or Ontario have the exact same opinion of BLM. The name of the game if you want to get ahead but still have to work for a living, is to sell to HAM as “they have the money” and it’s getting progressively more difficult to make any meaningful money in the lower mainland as a small business owner.

    • Ralph Cramdown

      I’ve been unwilling to commit one way or another on the HAM driven market question. Not enough data, and too many interested parties on both sides of the argument.

      But in the past week or so, I’ve started leaning toward the HAM argument, and it was another blog that contributed. I’ve been reading Bronte Capital’s blog, and am coming around to the argument that there are no good refuges for Chinese savers (or looters, kleptocrats, whatever you want to call them). If you’ve got clean money, the government expects you to invest it at rates significantly lower than inflation. Other in-country investment choices seem poor and fraught (more looters). If your money’s dirty, things are much worse. So capital preservation off the books is key. Unregulated foreign real estate markets would seem ideal. The thing that puzzles me is that gold would also seem ideal…

      Just my thoughts.

      • @Ralph The Chinese like gold but they like property better. If they have access outside of China, they will like that the property could (if they wanted to) generate cash flow and that it is domiciled in a legally/politically sound country.

        Gold needs to be stored somewhere and it isn’t as sexy to tell their peers they hold gold overseas. As a status thing, if they say they hold property in Vancouver, it implies they are global, have access to a foreign lifestyle (something not even money can buy for some) and all this adds somewhat to the premium that they’re willing to pay.

        Because Vancouver is well known to the Chinese, they flock there despite Calgary offering better value.

        I know you hold my views with skepticism but again, sitting in Asia, all this is as obvious as pie. When you invest halfway across the world, you tend to look at value differently and follow your peers’ footsteps – ie Vancouver over Calgary or Winnipeg.

      • BLM’s comment sums up almost exactly what a consulting economist working throughout Asia said to me two summers ago when he was back to visit family here in Canada. He even went a bit further to indicate that I have no idea how much Asians value Vancouver for reasons that will remain impossible for me to comprehend especially given that I know Calgary as place to live is twice the city Vancouver is and despite that I worked in Asia for 5 years. There’s very good reasons why HAM is going into Vancouver and locals are leaving. It’s more or less the same reason why I increasingly dislike travelling to Vancouver – it’s becoming just another overly-crowded dirty Asian city.

      • @Airedales Glad to see someone else on this blog trying to get those here to see things from a bigger perspective. I can understand someone being unsure about HAM (as defined as immigration, sticky investment/safe haven and foreign speculation money) but to dismiss it as irrelevant is silly.

        Hong Kong, the gateway to China, alone has the 3nd largest population of Canadians outside of the US. http://en.wikipedia.org/wiki/Canadians_in_Hong_Kong

        How can anyone dismiss any linkage between the economies? 300,000 Canadians in Hong Kong who have free access to invest in Canada whether they live there or not. How many households (attached and detached) are there in Vancouver?

      • How many of 300,000 Canadians in Hong Kong are going to invest in Vancouver RE versus elsewhere – being half local they are very well aware that Van RE is the most overpriced one. How many households do 300,000 people represent – about 100,000? How many of them are able to afford to invest at all and to Van RE in particular? How many of them are the people from the Hong Kong immigration wave of 1990 that returned back to Hong Kong and lost some of their money on Van RE they bought in 1990 and sold in 2000? I bought a townhouse in Richmond in 2001 from the couple of Hong Kong immigrants, they bought it for 280 K and sold it to me 10 years later for 203 K.

      • Olga62: Many of the Canadians who returned to Hong Kong continue to hold property in Vancouver. Some in SFH if they have friends and relatives behind to rent to or more commonly in condos as they require less maintenance.

        The survey does not include a breakdown in households but in comparison to Vancouver’s population, that number is still significant. Their children, despite being born in Hong Kong upon their return, will continue to have Canadian citizenship.

        As for whether they can afford in Vancouver RE even in this market? You bet they can. These 300,000 represent the affluent (otherwise they would have been unlikely able to immigrate to Canada in the first place). These are not families that can only afford one property. Many have been continually owning in both Vancouver and Hong Kong.

        Regarding the couple you sold to, had they returned to Hong Kong and bought a property back in HK in 2001 for 203k, it would be worth roughly C$1m-1.2m now, so don’t feel sorry for them – unless of course they didn’t buy back.

        This is just Hong Kong. I believe there are around another 100,000 people in Taiwan with Canadian citizenship. Southeast Asia, Korea, India and China will, together, represent much more than Hong Kong alone.

      • What I know from the talks with the former Hong Kong citizens (dual Canadian now) is that they most of them spent significant part of their money in Canada unwilling first and unable later to find a job or to create a meaningful business. Of course some of them kept their homes, but many of them had to sell these in order to afford to move back, why would they desire to invest back to Van RE if they have been already lost here. I do not feel any sorry for them and it is really outside of the subject of this blog.
        I do not see anything wrong with the opinion that Vancouver RE is driven by HAM – is driven as an ignition but it is sustained by the local demand, as a fuel, which is now almost run out at the current price level. It has to undergo a significant correction in order to meet a mainstream demand/ability to participate and sustain itself.

      • @Olga62 Your assessment of Hong Kong returnees is largely the same as that I’ve been hearing. But enough continue to hold/buy Van RE to create the empty condo/SFH phenomena and skew supply ratios for the locals. You see, many left Vancouver leaving friends and relatives behind so they return to visit – partly why YVR has the most flight connections to HKG.

        Many of the Taiwanese and Koreans have had the same legacy. Now we’re seeing the Mainland Chinese following the same footsteps.

        So the point here is that Vancouver’s local population and economy does not correlate as directly with the RE market as say Calgary or Toronto (at least TO, also a draw for Asian immigrants, is big enough to absorb the inflow).

        The question now is do we treat the the regular influx of immigrants and departed immigrants as forces that will continue to play a part of Van RE? If so, then should they actually be counted as a fundamental in assessing Van RE prices? Personally, I think new immigration aside, the legacy factor of returnees will continue to play a huge part in Van RE – exhibit A, Coal Harbour.

        Sitting in Hong Kong has allowed me to witness the potency of Mainland Chinese money and the phenomenal wealth of the top 10% of the locals here. Adverts for properties as investments from Arizona to Vancouver to TO to Malaysia to London to Australia fills the newspapers meaning there have been buyers. Car parks here have been going for as much as C$300k-C$400k so the allure of real foreign property is very real.

        I also agree with your view that after foreign money is in place, local markets need to be able to support it in the long run for prices to sustain. The thing to keep in mind though, is that rising real estate prices have also generated enormous wealth for the locals – ie. those who cashed out waiting to buy back and those who cashed out on their investment properties.

        Foreign money is like a nuclear rod, it takes a long time to cool after a fusion reaction (I hope I got that analogy right, but you get the point). If it doesn’t cool, then yes, at some point there will be a meltdown.

        And if I may, regarding the couple you bought from. They may have seen their loss in selling to you as having the same effect as paying rent at $1,000 a month over the 10 years. Hong Kong came calling and they were willing to part with their loss.

      • “Sitting in HongKong…” – TimeStamped@11:15PDST

        [NoteToEd: Do the math and...]

  25. [This comment in response to a question by Farmer, about numbers of comments from BLM, and for himself, was posted above but I'm posting it again down here so that everybody on this thread gets a chance to see it.]

    You’ll note that BLM’s numbers are higher than that (see error note I previously added).
    Tally thus far:
    BLM: 289 comments (since 29 Apr 2012; heavily weighted towards recent months)
    Farmer: 1,731 comments (since 4 Oct 2011)
    None of either of your missives have ever been censored.
    [You both know that the mod queue filters occasionally hold comments up for no good reason; they are always released the moment I become aware]

    As you fellows proceed (as I’m sure you will), all I ask is that you guys keep the following in mind:
    1. People read this stuff.
    2. At least one guy feels he has to read all this stuff.
    3. Words are valuable: Treat each like a coin, like a bullet, like something precious… don’t waste them. You are asking somebody to spend their valuable time considering your thoughts. Who is the privileged one in this exchange, the writer or the reader? [Ideally, both benefit. -ed.]
    4. “Je n’ai fait celle-ci plus longue que parce que je n’ai pas eu le loisir de la faire plus courte.” ["I would have written a shorter letter, but I did not have the time."] – Blaise Pascal
    5. Keep in mind that this site is the (i) VANCOUVER (ii) REAL ESTATE (iii) ANECDOTE Archive’.

    • BTW, for perspective, over the last 1000 comments:
      BLM 146
      Farmer 101
      Nemesis 75
      vreaa 70
      YVR Housing Analyst (@YVRHousing) 38
      olga62 33
      bubbly 30

      [wordpress spits out this data; they were not manually counted!]

      • Cool. It was a busy week communicating with all of you!

        In my defence I will just say I have gone more than a month with absolutely nothing to say. Anyway…point taken. Maybe I need a new hobby.

      • Farmer: I risk a slap on the wrist for this but being the maverick that I am:

        http://www.american.com/archive/2013/march/the-next-real-estate-bubble-farmland

      • Really good article, BLM. Many thanks. Confirms some of what I have been saying but adds new worries over debt. I won’t respond to it in detail of course but will only add that what I suggested previously about leasing land or doing crop shares is the better way to go. Land prices on the farm are indeed too high all over the world. Just like Vancouver Real Estate. So there could be trouble coming. This is my last post for awhile in any event. I was really put off by the viciousness of some of the comments on this thread and no longer feel like participating. The emphasis on the numbers of posts (scored a repeat as if that was necessary) versus the absence of comment on nasty remarks is telling. Just scroll through any one of the past articles. They are ckock full of discussions having nothing whatsoever to do *Vancouver or *Real Estate or *Anecdotes.

        Anyway. All the best BLM. Cheers.

      • Vancouver Hipster

        Farmer- “I was really put off by the viciousness of some of the comments on this thread and no longer feel like participating.”

        Coming from a man who does not think twice before calling other posters “racists” on this board. Wow!. Have a good one dude.

  26. Before I start reading this thread, CTRL+F+BLM reports the number occurrences at 90 (of 148 comments). The Keynesian tilt to every possible comment and rebuttal is alive and well. Are you sure he isn’t being paid to do this?

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