“I’ve lived in Vancouver most of my life (>50 years) and what’s going on here is completely irrational. The various levels of government hyping that the Owe-limpics are going to bring in all these new people, and people are buying into it and paying ridiculous prices for housing. The house across the street was last purchased 2001/2002 for $445,000, and sold last month for $1,588,000. This house had been nicely renovated with a basement suite added. The house two down from me sold two months ago for $1,560,000 and is now back on the market for $1,888,000. Nothing has been done to it in the interim. The house around the corner was bought for $998,000 at the beginning of this year and just sold for $1,790,000! This house was updated (a bit) and had a bachelor basement suite. In 2001/2002 a well-maintained house in this neighbourhood cost about $500,000. The current price for a knock-down in this neighbourhood is now $1,500,0000+, with new houses selling for $3,200,000 to 3,500,000. These are on lots approximately 50′ x 120′. Have people gone insane just because interest rates are low? Do they really think that people are going to move here because Vancouver looks pretty on the TV?”
Speculators continue to bet on rising Vancouver RE prices, and some still appear to be anticipating that the effect of the Olympics is not yet priced into the market.
“The buzz is back. In scenes rarely seen since the Vancouver real-estate market peaked in early 2008, a horde of hungry investors lined up for hours in a downpour Saturday [28 Nov 2009] to get first dibs on pre-sale condo units in a tower to be erected in Yaletown. Cam Good, who is heading up marketing for “The Mark” by Onni, said some investors even slept outside Friday night to ensure prime line-up positions. “We’re blown away by the turnout,” Good said from inside the downtown pre-sale centre as about 50 investors scrambled around a model of the building.”
“While the global debt and credit crisis continues to haunt developments in former real-estate hotspots like Dubai in the United Arab Emirates, Good said Vancouver is back in boom times.”The [real-estate] strength in Vancouver is unlike anything in the world,” Good said.”
“Mayur Arora, who told The Province he hoped to land a top-floor unit, and his realtor K.D. Dhaliwal, said location and scarcity make the site an attractive investment. “I’m here because they are selling Yaletown at today’s prices, but the speculation is [that] prices will go up after the Olympics,” Arora said. Steve Dhana was amazed by speculator interest as he watched investors rushing to place bids on units. “The prices went up $50,000 last night,” Dhana said. He hoped to buy a unit in the $500,000 price-range, and also expected prices to surge in February 2010.”
During asset bubbles, it is relatively easy for participants to almost imperceptibly leverage themselves into more and more exposure to the inflating asset class, thus putting themselves at risk of complete wipe-out when the bubble pops. Participants actually believe that they are being prudent, and their ever expanding paper-profit bottom line reassures them and reinforces their behaviour. The fact that they are taking substantial risk and speculating on ongoing price appreciation may not be obvious to them. -vreaa
Tony Ioannou – “[We are] dealing with a lot of people who think that they have to buy now because the market is running away from them. Most of the people we are dealing with are buying a property to live in… a principle residence… very little speculation in the market.. Very few of our clients are going to ‘the end’ of what they can afford.. They might be approved for a 500K mortgage, [but] they’re taking out a 300K mortgage.. They’re not overextending themselves as they might have done a couple of years ago… We still have some off-shore money coming into Vancouver and the lower mainland but much, much less than in the past. Most of the people we are dealing with are local people just upgrading, mostly move up buyers from a small apartment to a townhouse, townhouse to a house, or up to a bigger house. We’re still dealing with a lot of first time buyers.. [they are] very cautious,… they’ve worked hard to make a downpayment they’re not going to throw it away… So they’re very very cautious and slowly entering the market.”
Garth Turner, in response to the above, said that there was a “giant argument that interest rates would not stay low”. He also pointed out that the average abode cost “between 7 and 10 times the average family income” in Vancouver which was “by world standards, severely overpriced”.
Tony Ioannou continued – “A lot of our clients do have a huge amount of equity, especially if they are in the market, trading up. One quick example, I’d sold a property to a young couple in 2000, a $300,000 townhouse, [with] conventional financing, I went to meet with them last week, they now have paid off their mortgage, [their property is] now worth about $500,000 , they now have a half-million-dollar down payment to go and buy their first house”.
Garth Turner retorted – “Well, that’s exactly what scares me about this whole thing, when you have people who are taking… and in the case of that couple, I’m sure that constitutes the bulk of their net worth… anytime I see people taking the bulk of their net worth and dumping it into one asset and then trading up exactly the same asset class, and increasing their exposure as they go on and on and on…// If we do have an interest rate increase,.. if we have taxes go up,.. I cannot see the Vancouver real estate market sustaining its value going forward.”
CAVEAT -The veracity of the following story has been doubted by some commenters at robchipman.net.
The fact that stories like this are either true, or are seen as true in the public imagination, is noteworthy. Many locals have purchased RE in Vancouver based on the idea that hard working Chinese immigrants will continue to support the RE market.
“Me and my wife came to Canada [from China] with $3,000 10+ year ago. We bought an apartment in 2000, and worked hard, and paid it off in 4 years. Then we bought a house in 2005, and again worked hard and paid it off a year ago (before we reach our 40s). The house has a market value around $1 million in today’s market. Now we bought another house in a much better neighborhood on the west side, with very good schools, so our kids can receive a good education. We are not alone, lots of people from China are in similar boat as us. This is a culture value real estate, willing to work hard, willing to live below the mean to invest for the future and their kids, and willing to take calculated risk, and sometimes enjoy gamble. Now, more Chinese are coming, bringing way more than $3,000 – and they all share the same culture…”
Comments section at robchipman.net (26-28 Nov 2009) is liberally peppered with anecdotal observations of slowing RE markets in and around Vancouver. Perhaps it’s all attributable to the 25 days straight of heavy rain we’ve endured. This from Anonymous 28 Nov 2009 6:57 pm -
“Third offer on my place has fallen through. Reason was the same each time. Failure to get financing. Banks may be tightening up. I know my line of credit interest rate just went up. I’m dropping my price on Monday and will get out fast before this market turns sour on me.”
CAVEAT: Rob Chipman, in a posting at his blog (the source of this anecdote) 29 Nov 2009 10:04 am, expresses doubt regarding the veracity of this anecdote (based on IP address of a multiple-poster). Híppos Purrós in the same thread 29 Nov 2009 11:08 am also expressed doubt but, interestingly, added their own anecdote – “Both of [my] girlfriend’s recent YVR RE disposals have fallen through. Buyers’ financing was withdrawn at last moment by lenders concerned about pending special assessment”.
There are many important variables affecting the Vancouver RE market that are very difficult to measure. What is the effect of intergenerational wealth transfer? How many Vancouverites own houses in lieu of RRSPs? How many current owners are planning on ‘cashing out’ in one or five or ten years time? Anecdotes serve as an imperfect window into some of those factors. This from pianoexcellence at RE Talks on 28 Nov 2009 9:56 am -
“Over the last two weeks, I’ve been hearing lots and lots of people in the ‘nearing baby boomer’ generation, of all socio-economic classes, talk about selling and downsizing. Many are not talking, but have already done it. I still do a number of piano tunings and repair engagements. A lot of these are for previous piano students parents. I taught mainly Gr 10-12 high school students, and many of them are off to university. I’ve been getting a lot of calls right before thanksgiving to get the piano ready so they can play when they come home for thanksgiving. To my suprise, a number of [these families] had moved to a smaller place. A number of my other acquaintances, even my parents, are talking about it too.”
The poster boy for the Vancouver RE boom has now come up with a poster that may well end up becoming the ultimate ironic visual anecdote. Vancouver condo marketer Bob Rennie explains its meaning, and ‘rentah’ comments. This from Bob Rennie, BC Business magazine, 2 Sept 2009 -
“On the exterior walls of my new offices in Chinatown, I’ve installed a 23-metre neon work of art by Britain’s Martin Creed. It reads, EVERYTHING IS GOING TO BE ALRIGHT. And it will. Yes, we boomers are on the downward side of our peak earning years. Yes, we’ve experienced the biggest financial collapse in our lifetime. We will have to institute dramatic changes in how we entertain ourselves, where and how we travel, what we drive, where we live and how we ultimately pass on wealth to our children. For the enterprising business person, there are many opportunities out there to capitalize on this new reality. But for those praying for a return to yesterday, forget it. It’s gone.”
“Interesting. I’d say that Rennie has COMPLETELY misread Martin Creed’s work. He’s purchased it as a giant Hallmark Card, when it’s actually intended as an ironic warning. (Perhaps everything is NOT going to be alright.) Here [follow] some more works by Creed:
Ask yourself… “Is it the artist’s intention for me to take these works literally?”
Then think about what Rennie is doing.”
“I live in Vancouver and in my building the 1,040 square footer goes for… standby… $1.13 million. Your monthly maintenance is $550.00 bucks, and Gosh knows what the taxes are – but come on!!! Three up for sale in this building alone, and they aren’t moving.”
“I think part of what is supporting the market is that turnover of housing is so fast that a decent chunk of available housing is constantly in a state of renovation/pre-renovation/post-renovation. In my neighbourhood, for the last 3-4 years, the amount of housing which is unavailable due to renovation is about 10%. Right now the duplex next door is without tenants and awaiting planning approval, there’s another two in the same state within a block of me and a rental complex of 8-10 units that was bulldozed 2 1/2 years ago and has sat empty ever since. This is a consistent pattern throughout the neighbourhood and it’s been at about that level for years now. Because of the inflation in prices, owners aren’t in any rush and really don’t care much if the renovations take 2-3 years to complete because it just means the place will be worth more when they finally sell. There was a big rush of activity last year around this time when prices were falling though, which indicates to me that there will be a lot of properties listed in a relatively short time once a consistent downwards (or even neutral) trend emerges.”
“I have bought and sold property both in Vancouver and Hong Kong over the past decade. Hong Kong real estate speculation is not a sport for the faint of heart. When it moves, it moves like a greyhound on steroids, both going up and down. The run-up in Vancouver RE reminds me of HK before the 1997/98 bust, which was breathtaking in its rapid decline, and left millions in negative equity. … Back in more sedate Canada in 2007 some friends of mine asked my opinion on whether they should buy a four-bedroom 1960’s house in Burnaby for $749,000. I brought out my chart and showed them the last ten-year real estate run-up compared to the historical averages, pointed to the top [and] said to them, “Would you want to buy here?” They would, apparently. Where some see danger, others only see the missed opportunity, all those years where they could have made more money. And we’d better jump in before it’s too late. These were university educated people in their forties. Go figure. Strap in your seatbelts, Vancouver first-time-buyers, your tummy’s going to be somewhere above you when the silent whistle blows…”
“I heard today from a co-worker that he just sold his Burnaby condo and is thrilled to have come out ahead. He bought in 2007 and was pretty much stretched to the limit to make the payments. He had an unexpected expense in 2008 (I didn’t ask what) and couldn’t afford it. By then the market was dropping and he didn’t want to sell at a loss, so he threw a renter in there and moved back in with his parents. He was lucky enough to have the market then rise and he made a small profit after all fees, and is now renting happily having learned a valuable lesson.”
nico101 – “I have a house near Commercial Drive which is losing it’s tenants for the upper 2 floors on Dec 1st. I still have the basement suite tenants though. Given the timing I’m considering the whole Olympic rental thing.”
Agitprop – “My sister has had her place with a jaw dropping view in West Van, listed for a month or two….nada. The market is WAY oversupplied.”
In parts of Vancouver, such as the Vancouver Eastside, the market has reached fever pitch. This article in the Globe and Mail by Kerry Gold, 19 Nov 2009 6:03 pm, has so many important anecdotal points regarding sentiment and market activity that vreaa has archived large swatches in this post, and highlighted two stories from it in the posts above.
“In the last three months, a heritage house at 274 E. 20th Ave. was listed for $959,000 and sold for $320,000 above asking, after eight days on the market. A heritage fixer-upper at 265 E. 24th was listed for $749,000 and sold for $1,033,000 within a mere 13 days. A month later, another house nearby at 214 E. 24th, was listed for $749,000 and sold for $950,000 within six days. A typical Vancouver Special at 4554 Walden St. was listed for $730,000 and sold eight days later for $958,000. All those houses were in the trendy Main Street area.”
“It’s very topical,” says realtor Rod MacKay. “Other places [in the country] are strong, but nobody’s seen anything like this. What’s really surprising is nobody anticipated the six-month dry spell being as slow as it was, and prices coming up as much. No one anticipated it bouncing back so far and so quickly.”
“At the beginning of this spring’s buying frenzy, buyers were offering $100,000 above asking in some cases. But by September and October, there were buyers – no doubt tired of being repeatedly out-bid – who are making offers so far above the asking price they couldn’t lose. In the case of the house at 265 E. 24th, it went for $284,000 above asking. “That takes a lot of stones to do that,” says the selling agent Darryl Sjerven. “There were 18 offers on that house. So you go in there, write an offer, and there are 17 other offers and you don’t know what any of them are. They could all be just $10,000 over asking. To go and write $284,000 over takes a lot of guts.”
To describe the bidding mentality these last few months, Mr. Sjerven uses the analogy of a “hang loose” hand gesture – with the three middle fingers curled under and pinkie and thumb sticking out.“Say you get five offers on a house, and suppose the house is listed at $750,000. The guy with the pinkie does not get it, he doesn’t know what’s going on,” says Mr. Sjerven. “Even though there are four other offers, he’ll offer you $700,000 subject to sale of his home and if he gets financing and everything. Then you get the typical pack in the middle, they’ll go around $785,000, or something like that. There’ll be a cluster of those people. Then there’s the thumb. It sticks right over the side and says, ‘this is my house. I want this house.’ He’s far enough ahead that it doesn’t get into further bidding or anything like that. And he buys that house.”
A few months ago, it seemed like the only houses being sold in bidding wars were the “hot properties,” the ones with three bedrooms up, new granite counter tops, and a gleaming in-law suite downstairs. More recently, the bidding wars have been over houses that aren’t so hot, such as that Vancouver Special that went for above asking.“The house wasn’t renovated or anything,” says selling agent Kenny Wong. “It was 37 years old. It had the original “shagadelic” carpets. It was on a 33-by-110 lot. It wasn’t even a standard lot. “I had a hard time selling a Vancouver Special in the winter – a lot of people made low-ball offers,” he adds. “Now they are going over asking.”
Although overall prices aren’t quite at pre-correction levels, for buyers it has felt like the spring of 2008 again.
As to where the market will be in early 2010, the current frenzy appears to be abating and realtors like Mr. Sjerven expect the lull to last over the winter and through to the end of the Olympics. Not many people like to list or buy homes around the holiday season, and few are going to want to sell around the time of the Games, when it could be hard to get around. That five-month lull will create “pent-up demand” that will trigger another frenzy, says Mr. Sjerven. “Once you clear the Olympics out of the way and we’re into April, it will be a race to those listings. Spring is going to rock.”
At this point in the real estate cycle, to be luring individuals who are “worrying about living paycheck to paycheck” into RE ‘investment’ could be seen to be imprudent. Listeners to Vancouver Radio station ‘CKWX News 1130′ this week (16-20 Nov 2009) were exposed to this 60 second ad about once an hour. The meaty bits are italicized. Or click here to subject yourself to the AUDIO -
“Hey, would you like to kick yourself? That’s what you would be doing if you ignore this opportunity. Today’s real estate market could be at rock bottom, and when markets hit bottom, the winners are buying. Come to a free learn to be rich workshop and discover how to join the winners based on the teachings of Robert Kiyosaki, best selling author of ‘Rich Dad, Poor Dad’, the number #1 book on personal finance. Rich Dad’s learn-to-be-rich workshop is free and happening in the Vancouver area today through Friday. This totally free workshop will introduce you to tools and strategies that could create extra cash flow and free you from worrying about living paycheck to paycheck.Don’t kick yourself next year saying “Why didn’t I invest when I had the chance?” This is your chance. Register now online at richdad*******.com or call 800-399-****. Get a free gift for attending. Registration is free. Call now 800-399-****.”
“I had an interesting discussion with a well heeled Asian real estate investor (tens of millions invested) a few months back. His belief was that as an investor, there were better opportunities in the U.S. real estate market over the long term. His views on Vancouver was that a correction would eventually occur and could be partly triggered by the exodus of large scale Asian investors to American markets that have retrenched and now offer better prospects for longer term returns than Canada. While Vancouver has a large Asian population, many large scale Asian investors have bought properties throughout the country over the last ten to twenty years. Rebalancing their portfolio is largely a business rather than an emotional decision.”
“I am not a renter, I am a west side homeowner. I sold my investment home in late 2005 and am waiting to buy a rental property when fundamentals make sense. Investors aren’t buying into the hype, at least smart investors.”
“Sold my condo in Vancouver. Didn’t get what I wanted but did make a profit so this is good. I’m with Garth [Turner] in that the worst is yet to come and I’m in cash.”
Vancouver Realtor Tom Everitt Seals the Deal. Also starring uncanny thinktom look-alike, Richard Kind (super-geek ‘Cousin Andy’ in ‘Curb Your Enthusiasm’).
“I bought several condos in a highrise building in North Burnaby 10 years ago, some were sold but I added more. The market price of 2br was 125k 10 years ago, rent was $780/m; today the price is 260k, rent is $1300/m.”
“There are homes in the North Burnaby area with standard 33 ft lots selling for over a million dollars! And this is not just one home but several. The market is hot all around, even homes in the 700-850k range are selling within 2 weeks.”
This story came to VREAA as an e-mail from pianoexcellence, a poster on the RE Talks BC discussion board -
“I cashed out of my PR and my Squamish condo. I sold the Squamish condo in May 2008 and my PR in June 2009. I made a lot of money and am thankful for the role that RE has played in my life as I am only 28. I threw all my gains on the Squamish condo at the TSX in Jan 2009 and have made a killing (after momentarily crapping my pants during the crash in Feb). I am waiting to put the rest of my equity from my PR into div stocks but am looking for a suitable entry point. Until then, it sits in GIC’s. There…ho0ray real estate!!!”
“I have ["sold high" and made a huge return on (my) investment]… this market was too good not to sell into, particularly after coming through such troubling times. I sold all three of my downtown investment properties over the past three months. I am holding onto one small older rental unit that breaks even with a good 5-year rate on it. Whether this was the right move or not for the market remains to be seen, but it was the right move for me and my family. We no longer have a mortgage on our PR which we can live quite comfortably in for many years to come. I am saving for a future downpayment, but waiting for a buyer’s market before re-entry.” And later added – “Unlike [pianoexcellence] I held onto my principal residence and an investment property, so I still have some exposure to the market, which is good if it goes up, and not a bother at all if the market falls. Rental cashflows and PR is paid off, with $ in the bank to pay off the rental property mortgage if I ever needed to. A crash would just be seen as a buying opportunity for me.”
