“I figured they’d be asking maybe $800,000 for what’ll likely be a $500,000 house in a post-bubble world. Turns out I was $300,000 under. That’s right: $1.1 million. Mind-blowing. Just mind-blowing.”

“Some of you might remember my photo essay from a few weeks ago, re: the non-stop construction insanity in my South Surrey neighbourhood. Well, one of those 200-plus new homes just came on the market. 3000 sq ft and a decent sized yard (one of the few new homes around here that does). But I tells ya, it sure *seemed* like it was slapped together in a month. If it’s like everything else they’re puking up down here, it’ll be looking pretty rough within a year. And don’t get me started on the landscaping. Does “dirt” count as landscaping?

Anywho, the place is just seven or eight doors down from our $1600 rental on Zero Ave. In other words, we both face the US. Thing is, we face a forest. They face low-rent apartments (including the obligatory crappy looking exteriors, broken cars, etc, etc) in a lousy neighbourhood of Blaine. A neighbourhood that won’t be upgraded in any of our lifetimes. They’re also close enough to the Pacific Highway border crossing that they’ll awake to the sound of long-haul semis shuffling around night after night after night.

I figured they’d be asking maybe $800,000 for what’ll likely be a $500,000 house in a post-bubble world. Turns out I was $300,000 under. That’s right: $1.1 million. Mind-blowing. Just mind-blowing.”

- Gord, at VREAA, 15 Apr 2012 5:25pm

For backstory, be sure to read:
‘Gord Goble – South Surrey Building Blitzkrieg; Thoughts and Images’
We share Gord’s fascination with the market.
- vreaa

West-Side Street Level Analysis – “I walked Arbutus to Macdonald from 19th to 22nd Ave. These homes are empty. Some have been bought and sold 3, 4 and 5 times in the last 6 years.”

“Trafalgar Park has been torn down and has been rebuilt with these large homes that are never lived in – owned and flipped by people that don’t live here. I lived near here for 9 years. I saw some of the same houses listed and sold up to 5 times… 2 within blocks of me. We have a real problem and people simply don’t believe it has happened and continues to happen.”…

“I took pictures of the kind of “tear downs” that are being taken down and pictures of the kind that is replacing them…. The streets are dead in there- no kids playing. Some of the houses are beginning to mold and sink – just built within the last 5 years!!! It’s so sad and depressing… just 10 years ago it was a middle class ‘hood with nice homes for 500k, now they are all pieces of crapola and are “listing” for $3.5 – 5 million.” …

“Type of homes that have been torn down…lot value now 2.3 million:

“Lot value 2.3 million – if sold , would be torn down:

“This is what is replacing the 1950′s homes…these list between 3.5 – 5 million:

“Lot value only- $2.3 million- will be torn down if sold- I rented one similar:

“Beautiful!!!!:

“West-side has been ruined – it’s soulless. My fear is that unless people stand up and make their feelings known – this city is done for. I refuse to just sit back, have a glass of red……as Cam Good would say…… and watch the destruction. The people are in charge, not the developers, realtors and politicians.” …

“I suggest people stand up for this city and let the politicians know that they want change. if we just sit back and do nothing it will get much worse. Politicians work for us not the other way around.” …

“I’m just pointing out empty houses near where I rent, is all. I have no obsession with the westside. I’m sure there are 1000′s of empty condos downtown and soon the houses that sell for 1 million around Nanaimo street will be bought and torn down only to sit empty as well.” …

“Go for a walk through the neighbourhood I told you about..16th to 33rd / Arbutus to Dunbar or Macdonald to make it really obvious. I am not exaggerating one bit. There you will find 4 or 5 homes per block that sit empty… New homes are empty not old homes… I lived there, I saw it- go see for yourself. Not only do they sit empty but they are being bought and sold many times (flipped) and still never lived in. It has nothing to do with me being a renter… the facts are the facts. No kids playing in the yards, nothing. I’m being told one of our city’s reporters is doing a piece on the specific issue, stay tuned. But go for a walk and see for yourself.” …

“Here is a list for you all- I walked Arbutus to Macdonald from 19th Ave. West to 22nd Ave. West. I lived in this ‘hood and have for 8 years- some of these homes listed below have been bought and sold 3, 4 and 5 times in the last 6 years. One day there will be 50 listings for sale , the next week there will be 20 listed and none will have sold- they are being pulled and placed for sale to manipulate the market in this particular area. I have been obsessed with watching this for years -odd, I know, but I hate how the city is being destroyed. There are more than this -this is just 4 streets… On a side note… I have watched these houses for years and they all have gardeners to keep grounds looking good; so don’t think they are occupied because the lawn is mowed.”

Macdonald to Arbutus:

19th ave
2789 2788 2765 2745
2642 2519 2505 2483 2450 2448 2402
2403 2395 2365 2356 2325 2315 2265

20th ave
2203 2206. 2255 2286 2285 2299 2396 2408 2411 2417 2475 2718 2730 2715 2755 2772

21st ave
2749 2690 2683 2471 2428 2335 2369 2396 2386 2375 2225 2193 2151

22nd ave
2118 2128 2328 2345 2376 2375 2457 2491 2663 2677 2749

“Just watching over the years. Never any lights on, old papers on some, gates always locked down -the ones on the front doors, no shoes out front… Christmas decorations in the windows, never any lights on, no cars out front or driving into garages..the list goes on. Living there for so long, I know. It is a very serious problem. My wife worked for a firm in the city that was mainly chinese workers. They asked where she lived …when she told them the area they said ohhhhh i know it -the chinese housewives trade those homes like stocks from China. I saw so many of the homes listed so many times and each time for approx. 500k more than the last buyer that had never moved in. I have a few friends that are left in the area -they all say the same homes are empty. The area has been destroyed and it will continue to move across the city. I had a good chat with Andrew Hassman last year (a west-side realtor)… he told me 90% of his sales were to Chinese that fly in, buy and leave. He told me not to buy.”

- vancouverbubbleman, via e-mail and series of comments at VREAA, 10 & 11 Apr 2012

“It was a big gamble at the time but I had more guts than brains. Sometimes being too smart is not going to get you there. If you study things too much you’re going to miss out. If you know too much about a deal chances are you aren’t going to buy it.”

Joe Segal’s first foray into real estate came when he had a surplus $100,000 from his retail business that he used to buy a building.
And from there he’s developed a multimillion-dollar real estate portfolio. One property he bought for $600,000 is now worth $150 million, he said.
Segal looks at each project and measures the risk/reward ratio.
“If I can digest the risk I’ll take a shot and I’m entitled to the reward,” he said.
But you have to be able to make a decision, he said.
“If you can make a decision and make it quickly you’re at an advantage,” Segal said. “If you dilly-dally and your banker won’t listen to you, you’re at a disadvantage.”
…
Natale Bosa, the president of Bosa Development Corporation, the company behind projects like Citygate near the Telus World of Science and Newport Village in Port Moody — jumped at the chance to get involved in Citygate, buying one of the parcels in 1988.
He then bought a second piece before being offered the rest of the development.
“It was a big gamble at the time but at the time I had more guts than brains,” Bosa said.
And he was able to find a banker who would lend him the money on short notice.
“You’ve got to have a nose for it,” the 68-year-old Bosa said. “You’ve got to really believe in what you’re doing. You’ve got to feel it’s going to work. And fortunately it’s worked for me.”
And a little ignorance can be a good thing.
“Sometimes being too smart is not going to get you there,” he said.
“If you study things too much you’re going to miss out. Because if you know too much about a deal chances are you aren’t going to buy it.”
…
- excerpt from ‘Vancouver’s real estate moguls share trade secrets’, Vancouver Sun, 12 Apr 2012
[Hat-tip Nix]
—

All credit to people who know to make hay while the sun shines.
These guys were fortunate with their timing, and one of them basically admits to getting lucky with at least one ‘big gamble’.
Translating this into advice on how to behave in the current Vancouver RE market would be ridiculous. It’d be a bit like taking investment tips from somebody who’s just hit their colour five times in a row on a roulette wheel.
But we know that won’t stop some people from taking this as advice all the same; the “Be bold or move to Podunk” crowd. For many it’s attractive to know that you can make a killing in Vancouver RE by not studying things too carefully.
- vreaa

“I graduated from high school in this city in 1980 and out of the 300 members of my grad class no more than 25 of them now own a house in the neighborhood we grew up in. We are not all stupid and lazy.”

“I graduated from high school in this city in 1980 and out of the 300 or so members of my grad class I would say that no more than 20 or 25 of them now own a house in the neighborhood we grew up in.
We are not all stupid and lazy.
The laughable irony is that at the 30th high school reunion that almost all of the people present came from other areas of the Lower Mainland for the reunion.
One guy I know from my class who is a lawyer mentioned to me one day that he could never afford the house he grew up in, and his father now retired was a blue collar tradesman.
For him to ever get near the old neighborhood, well, someone’s gotta die first.
In fact that is exactly how some of my classmates are now moving back to the area they grew up in, but none of them will admit to that.
It’s just a big coincidence that they move back a few months after someone kicks off.
The guts of the middle class in this city have been ripped right out of it.
I know at least 18 people who have left Vancouver simply because they realized at some point that they were NEVER going to own a house here, and spending the rest of their lives in a over mortgaged rabbit hutch was not acceptable.
Many of them are now in Alberta.
I have read that 55,000 people under the age of 45 have left Vancouver.
Vancouver is the most over rated city on earth.
Like a Hollywood movie set where the street scene looks real, if you step behind the facade of the Vancouver illusion then things here are really quite ugly.
There are a lot of serious social problems in this city that no one wants to admit exist because the Vancouver illusion must be maintained at all costs.”
- John H at greaterfool.ca 23 Mar 2012 11:05pm

What’s In A Name? – “The East Village just kind of fit us. We’re in the east, and it’s sort of a village-like area.”

“For Vancouverites who have dreamt of living in the Big Apple’s East Village, Hastings may now be the next best thing. The commercial district formerly known as Hastings-Sunrise is adopting the same moniker as the historically hip New York neighbourhood.
The trendy new name is just one aspect of an evolving rebranding campaign spearheaded by the Hastings North business improvement association .” …
“Working with brand consultants Signals Design Group* over the last eight months, the HNBIA began its rebranding process by conducting interviews and a survey with its membership—400 business owners and 200 commercial property owners—and residents in the area. The final East Village name was selected from a shortlist of 10 names.
“The East Village just kind of fit us.” says Patricia Barnes, Executive Director of the HNBIA. “We’re in the east, and it’s sort of a village-like area. We’re a neighbourhood commercial district, we have a lot of services and stores and staples that respond to our neighbourhood’s needs. We have a very loyal customer base in our neighbourhood and very friendly, very warm personal service.”
- from ‘HASTINGS-SUNRISE TO ADOPT THE NAME “THE EAST VILLAGE”, by Alexandra Samur, openfile, 19 Mar 2012 [hat-tip Aldus Huxtable]

VANHATTAN redux. -ed.

“Some are saying that there is no legitimacy to claims that working class or low income people should be able to live in the City of Vancouver.”

“Some are saying that there is no legitimacy to claims that working class or low income people should be able to live in the City of Vancouver–and that the suburbs do these groups just fine.”

“But what’s being forgotten here is that, until recently, working class and low-income people have long lived in the City of Vancouver. I grew up in the City of Vancouver in the 80s and 90s and my dad was a working class non-union labourer who really made a pittance wage. My parents rented. They could afford to rent in Vancouver, not in social housing, in private market rental housing. We had half of a house and a big yard in the City of Vancouver on a working class single wage.”

“My mum’s family was also working class–also rented a big house in Vancouver–that house would probably go for $2 million in today’s market.”

“We’ve been forced out to Surrey because of high rents in Vancouver. The move was a slow progression, for me. My first place when I was 19 and living away from my parents for the first time was a rental in East Vancouver. I shared it with two other roommates. My share of the rent was $350 a month. I had a minimum wage full time job and paying rent in Vancouver was easy. That was in the late 1990s–not so long ago. Things don’t work out with roommates so you move around a lot when you’re young. But with each move I made, the rental market became progressively more difficult. It’s not just a problem with high rents. It’s also simply a lack of vacancies–or the only thing available is total dumps (I had a nice place for $350 a month when I started out)–or they don’t allow you to take your cat. So that forced me out of the city I grew up in.”

“I left Vancouver at the very end of 2001 because already by then the rental market was getting difficult in Vancouver. I went to New Westminster–which is a great city. I believe New Westminster is the densest city in Canada. It is very urban. Great place to live if you are an SFU student–skytrain to Production Way and then a bus up the mountain. So I lived in New West and I went to SFU. Incidentally, my ancestors built New West–I’m just learning about my genealogy now but it’s fascinating. I can trace my ancestry back in New West back to 1865.”

“But then I was renovicted out of New West. Transglobe Property Management went on a buying spree in New West in 2006 and bought up lots of apartments. My apartment building had about 70 units–all 70 households evicted–had to be out by Dec. 31–New Years Eve!!! They renovated and jacked up rents after we were gone. Many longterm tenants in that building, including war veterans and one woman who lived there 40 years. So then I ended up in Surrey–along with a lot of the other people who were evicted from that building.”

“Whalley is one of the last areas of affordable rental housing near skytrain (crucial for people renovicted out of Vancouver/New West but still working in Vancouver) left in the Lower Mainland. But Mayor Dianne Watts is putting up high rise condos everywhere. She’s built a new library. City hall is moving here. It’s not King George Highway anymore, it’s King George Boulevard. It’s not even Whalley anymore, it’s Downtown Surrey. This is to become Metro Vancouver’s second tier downtown core, after Downtown Vancouver. But this is also about gentrification. I’m afraid these dumpy rentals in Whalley are going to be demolished for condos. Then where will I go? Langley? Abbotsford? No skytrain there to connect me with work and social connections back in Vancouver. Time to leave the province soon. I’d rather live in Calgary than Abbotsford.”

“Working class and low income people do have a legitimate claim to the City of Vancouver because we (and our ancestors) built the City. It’s where we grew up. We have memories there. We have friends there. We go to school there. We work there. We access services there and amenities. If you’re gay–the City of Vancouver is so important for community and for just walking down the street holding your partners’ hand. Surrey is just a dump. It’s really hard to find community here and services. Everything is worse here. Even the hospitals and the medical clinics and grocery stores are worse in Surrey. And we have to pay 3 zone $5 bus fares to go back to Vancouver to visit old friends or for jobs. Try that when you’re making minimum wage $10 an hour. Your first hour of work is just to pay for your transit costs (and a lot of jobs only give 4 hour shifts–first hour pays transit, second hour pays lunch, you only net benefit from 2 hours–$20 per shift–less CPP, EI contributions–hardly worth it to work–probably make more money staying in Surrey collecting cans than commuting to Vancouver for min. wage).”

“Having said all that, I do think there is a bit of truth in the statement that the suburbs are becoming more urban and Vancouver is becoming more suburban. I mean, there’s actually a costco in Downtown Vancouver (a mark of suburbia)–but I can’t find a costco in Surrey. I used to go to UBC as well, since I’ve been living in Surrey (en epic commute by transit!). It’s weird that we have a rapid transit skytrain system in Surrey that connects us to Burnaby, SFU area, Lougheed, New West, but as soon as you come into the City of Vancouver you have to get off the train and board a bus the rest of the way to UBC. The west side of Vancouver (where I grew up) does feel like some strange enclavish suburb where hardly anybody lives. Surrey, New West, Burnaby, Lougheed area–all way more urban than vast portions of the City of Vancouver. And the feeling of community is coming here. You can see it right outside on King George Highway (I don’t call it boulevard because I don’t like gentrification)–the diversity of pedestrians walking up and down King George is more than the diversity you get in Vancouver, in terms of class and race. Way more working class feel in Surrey. Way more black people and people from all countries of the world in Surrey–compared to Vancouver which is mainly Chinese. The gays are coming this way too. Surrey has a gay pride parade now. There’s gay pizza shop/cabaret on King George.”

“So I’m actually starting to like Surrey now. I’m not sure I want to go back to Vancouver even if it did suddenly become affordable. I mentioned that I have memories in Vancouver–but it’s disturbing to go back there and see all the changes. The way Vancouver is now is not how it is in my memories. So I can remember more easily how it was, if I stay away. My community isn’t there either, increasingly. So I’m turning a page and I’m never going back to Vancouver no matter how affordable it becomes. But I do think working class people like myself still have a legitimate claim to Vancouver if we want to live there because it’s where we’re from.”

- Joe_Blown_Away_By_High_Housing_Costs at VREAA, 23 Mar 2012 8:21am

Graphic – The Ephemeral Nature Of A Speculative Bubble

- this elegant graphic from npr. Thanks to ‘Jeff Murdock’ to pointing it out to us.  The vulnerability of a bubble, poignantly portrayed.

Bob Rennie – ‘Real Estate is a Sport’; ‘No Parking’; ‘I Love My Prius’; ‘Buy-Downs’; ‘Emerging Communities’; ‘Ghost-Town’; ‘Front-Row-Seats’; ‘Condo-Watchers’; ’69% Of Buyers Own Homes’; ‘Repatriating Money’; ‘Passive Investment?’; ‘Like Trading Baseball Cards’

Bob Rennie, Vancouver condo marketer, on the ‘Bill Good Show’, CKNW 980AM, Vancouver Radio, 9am Friday 16 Mar 2012 [hat-tip Keith] -

Bill Good:  ‘Marine Gateway’ is the first major development along the Vancouver portion of the Canada line. And 11,000 people have registered to buy one of the 414 condos that will be up for sale this weekend. It hasn’t been since ‘Woodwards’ in 2006 that a condo project has created this level of early interest. Bob Rennie, of Rennie Marketing Systems is with me in the studio. This seems.. hard to believe..

Bob Rennie:  Yeah, it’s hard to believe what we go through in Vancouver, compared to almost any other jurisdiction in North America, other than Toronto.

Good:  So, 11,000 people?

Rennie:  11,000.. but you have to look, at a certain level, that in Vancouver, real estate is a sport, everybody wants to know what’s new, so half those people are interested in what’s the latest and greatest steel refrigerator, and going to see new lay-outs, and then you’ve got a core group of real buyers that are lined up there right now,

Good:  And there’s a line-up as we speak?

Rennie:  There’s a line-up, of 60 to 100 people.. you know… everybody wants the best and the cheapest on any project, so that’s just sort of an expectation in today’s market… everybody wants the top with the views, and everybody wants the cheapest for their daughter.

Good: (laughs)

Rennie: … and that’s where you get that initial interest from.. We’ve been open now for a couple of months, and everybody has been coming down and previewing, and they understand what floor plan they want, they understand what view they want, they understand they’ll live with or without parking, because .. the whole thing that…

Good:  Where exactly is this?

Rennie: Right at the SE corner of Marine and Cambie, and it’s right on the Canada-Line… so you’re not going across the street, you’re just coming down and walking out… but it’s retail, and it’s office, and it’s residential, so it’s a new emerging community..

Good:  What’s the price range?

Rennie:  There’s two hundred homes under three ninety-nine… so, that’s the attraction, is that affordability

Good:  So, under 400 thousand, and you can get on a sky-train and be downtown in 15 to 20 minutes.

Rennie:  Yes, downtown.. and.. what is your producers name?, I’m sorry, I forget…

Good:  Jessica…

Rennie:  I was just telling Jessica, that if you look at the difference between Jessica, and Bob, 55, that at 55 we’re looking at do we let go of one car in the household… we understand the cost of insurance, and running a car, and depreciation, and payments… Whereas Jessica, and Jessica doesn’t have a car…

Good: No, she’s ahead of you… she gave up her car and walks to work..

Rennie: Jessica, and Jessica doesn’t need to drive to the local drive-in to find out what’s happening tonight, she has an iPhone, and that difference in communication, that difference in that generation, that they’re not addicted to the car the way the baby-boomer generation is.. So, as I’m telling developers, we can build without parking,.. they’re going ‘No, nobody’s going to buy without parking’.. but we’re here, so, juts over 100 units there without parking. We did the ‘Capital Residences’, downtown, the old ‘Capital Theatre’ site, with 102 units without parking… Peter Wall did the ‘Scotia Bank Centre’.. we did about 115 units there without parking. Jessica and her younger friends have no desire to own a car… not just because of the overhead but they don’t need it for lifestyle.

Good: They also know that they can get a car share program, or can rent a car for a weekend, and they seem to be satisfied with that..

Rennie: ..and the zipcars and the modo cars, they work in the city where there’s a concentration of cars to pick up… when you get into the suburbs and you say we’ll have one car for 300 condominiums, it doesn’t really work, because you don’t have a concentration… that’ll all change. But my thing is… the Mayor is looking at affordability.. you know, Telus has announced it’s building an office building… I think it’s phenomenal for the city.. but that’s going to be filled with employees that don’t want to drive an hour and a half home… so we start really having to look at these emerging neighbourhoods…

Good: So, you’re seeing a real transformation..

Rennie: Absolutely.. I think this year we’ll bring out 1800 to 2000 homes transportation oriented.. so Marine Gateway, and then we’re doing at Boundary we’re doing 3 towers later in the Fall, and then we’re just going to start previewing in Richmond, ‘The Mandarin’, which is the very first Canada-Line station. Not only that, you’ve got a million square feet of shopping and restaurants. Somebody told me, if you’re going to buy in New York, find an area that’s the least inconvenient to your lifestyle, not the most convenient, but the least inconvenient… so the fact that you’ve got restaurant shopping, dry-cleaners, not just a telephone store, but real usage downstairs.. and the transportation is the big win.

Good: Well, you talked about the cost of the car, the cost of insurance, the cost of gasoline,.. but another huge factor, downtown, is the cost of parking…

Rennie: The cost of parking but the inconvenience now of being in a car driving down Hornby, or driving down Granville, where do I turn right or where do I turn left?.. and if you hit the wrong time, you’re in your car for 20 minutes, as opposed to being on the Canada line, on your laptop, on your iPhone, and just walking 5 minutes. So, this under 35 and over 45, there’s sort of purgatory inbetween there… the different ways that we look at the vehicle..
… [commercial break] …

Good: You think you’ll come close to selling out the 400+ condos, in a weekend?

Rennie: I would think, with the level of activity, and people lining up, that we will sell 90% of it on Saturday…

Good: You just told me you gave up your big fancy car, for a Prius… Are you trying to move into a generation below you?

Rennie: I’m trying to understand.. when I turned 50, I wanted a fancy car, I’ve always promised myself I would, I still get up 4:30 and work seven days a week.. but, after 2008, I was self-conscious of a fancy car, and was only driving it once a month, I thought, let’s let it go… and, my son didn’t think I’d last with it, but they got me a Prius, and I love it

Good: And you actually drive yourself?..

Rennie: I drive myself, yes (laughs)

Good: Because the last time I saw you you were getting into a great big black Mercedes, with a driver…

Rennie: The company has a Mercedes hybrid, that my assistant, Sylvia, stays with me 7 to 7, ‘cos all my business is running from boardroom to boardroom, from developer to developer in the downtown, and, when you look at driving and you look at parking, it’s just.. I like my assistant with me… so she stays until 7 o’clock and then, after that, I’ve got my Prius, I love it..

Good: But I thought it was interesting, you’re talking about a generation, and Jessica is among that generation, she gave up her car, a year ago, she walks to work… and you’re talking about people buying on the Canada line and using the transit system and being reliant on that.. and they don’t really need a car except on occassion…

Rennie: We’re building all our new developments on affordability – Jessica -, and then, the baby boomer – Bill and Bob – and, you know, this baby-boomer generation, which is 47 to 66 years old, they don’t have as much money to play with as they thought they had, they’re not taking the risks that they used to take..

Good: Interesting..

Rennie: And, for Jessica, they have this 500sqft 1 BR with no parking on transportation, 3/4 of the building still has parking, because we can’t shift culture that fast…

Good: The baby-boomer, I suspect, is thinking of driving less.. perhaps having one car instead of two..

Rennie: They’re driving the Prius; they’re driving a hybrid, because it’s socially acceptable… you don’t have to say “I don’t want to spend $150,000 on a car, I only want to spend $32,000 on a car”, and it’s socially acceptable to be green.. and if you look at the shift with the baby-boomer, they’re protecting the money that’s left.. you know I can throw the Olympic Village into here, we’re just launching Canada House, the Arthur Erickson inspired.. on the water.. it’s 40 homes, they’re a million dollars plus, but, the homes that are selling for one point five to three point four million are ‘buy-downs’… it’s people who are selling their West-side home that foreign money happens to be buying, it’s not for the local market anymore, and then that money is being repatriated to a ‘buy-down’ in a place like the Olympic Village. Ten years ago, the West-side buyer thought “it goes Granville to Province of Alberta”, there was nothing in-between.. and now, that baby-boomer, everybody’s thought pattern has shifted.. the Olympic Village is an emerging neighbourhood, Canada Line is an emerging neighbourhood, Woodwards is an emerging very conscious mixed-use diversified community, but it’s emerging…

Good: Now, the whole Olympic Village, that was such a controversy a couple of years ago.. it has really emerged, I saw the story the other night… 65% sold now…

Rennie: We relaunched it with the receiver, February 17th of eleven, and we invented this name ‘ghost-town’.. we went out to the media and we said “it’s a ghost-town, let’s be really transparent”.. there was a perception about the Village that it was failing.. and so we thought that if we put the ‘ghost-town’ on it.. Now, I’ve always though that, that community being on the sea-wall would stabilize and it’d be okay.. and there was 472 of the 737 condominiums sold.. you go down there it’s hustling-bustling.. Terra Breads has opened, you can’t get a seat in it.. Urban Fare we expect to open before the summer.. London Drugs is coming… the community is being built out.. so now that the asset is stabilized we recommended to the receiver that we can now bring on the front building, which is two small buildings, one with 40 units, one with 20…

Good: This is the high end.

Rennie: This is the high end… front-row seats right on the sea-wall.. starting tomorrow, Saturday, for two weeks it’s open to the public, after that it’s by appointment… You know, this one million to seven million dollar inventory really isn’t an open-house inventory.. but there’s a lot of real estate sport condo watchers and Olympic Village condo watchers, and where did Sidney Crosby speak condo watchers.. sleep.. condo watchers that’s where our Olympic team stayed was in Canada (House)..

Good: So where is the market for that.. is that a local market.. off-shore market, or both..

Rennie: it… we can tongue-in-cheek say it’s not.. it’s not off-shore… it is a local market..

Good: People downsizing?

Rennie: People downsizing.. they’re selling their West-side homes and they’re repatriating that money.. which is breathtaking (laughs).. to other jurisdictions, such as the Olympic Village. And, the Olympic Village, I needed 2.5 to 3 years to sell it, stabilize it, and earn the brand back.. when we bring on a Marine gateway, you go down, you put 10% down, and within a year you’ll have a 25% deposit and 33 months from now you’ll pay for it. So Bill and Georgie can figure out do we need it to live in?, do we put the kids in it?, are we going to spend more and more time on the coast?, do we just keep it as a passive investment?

Good: He’s trying to sell me!

Rennie: ..but I can’t get you ahead of the line!.. But you’ve got that 33 months to figure it out… But if you buy at the Olympic Village, within 60 days I want all your money. So you have to have been selling your home or selling your home (sic). Stats, if you’d like them, Bill, is that 69% of all homes sold in Greater Vancouver, are to people that already own a home. The other 31% are to first time buyers.

Good: So there’s still a first time buyer market?

Rennie: There’s still a..

Good: There has to be.. doesn’t there?

Rennie: But I think the deception, after my recent address, putting the numbers together.. I think the part we have to understand, is that this first time buyer, when we say we’re the most expensive place to live, is based on incomes, but the 69% of buyers already own a home, it’s an equity play, they’re just trading baseball cards.. But the 31%, I’m trying to understand.. so, I’m putting the figures together.. of the over 55 year population that owns their homes clear title, and that 55 to 74 year old, when they’re selling their home, they’re helping the kids and the grand-children… they’ve… (my stats guys) and I were joking the other day that we’re gonna make t-shirts that say “My grandparents bought a home in 1978, and alls I got was a lousy one bedroom condominium”… because that money is being repatriated down to help the kids..

Good: OK, we’re almost out of time..
—

Transcribed here, for the record. -ed.

 

“We just spent a frustrating week trying to buy one of these expensive houses. Agent would not put in our offer. Said we should offer something “reasonable” when we wanted to go in at the assessed value of the place.”

“We just spent a frustrating week trying to buy one of these expensive houses. Agent would not put in our offer. Said we should offer something “reasonable” when we wanted to go in at the assessed value of the place (tear downer, asbestos, needed repairs).Told us what the seller’s bottom line was. Didn’t like that we had the condition of selling of our condo (suggested we move into a rental so we had “more money”). Then, discussed what we were going to offer when viewing the home with other realtors & buyers present. Welcome to Vancouver. You can’t even put an offer on these overpriced homes as the agents don’t want to see purchase prices come down. Now, we are without an agent, and the house is still for sale. This was almost as bad as being told previously, “don’t even bother putting in a low offer on this place – we just had a busload of Chinese come through and they are extremely interested” (actual quote from realtor). Obviously, to show that home values in Vancouver are not coming down, no sale is better than low sale. Are agents acting in solidarity together? Sure seems like it.”
- For Sale But Not To You at VREAA 14 Mar 2012 12:27pm

“You can tell a lot about this west-side tear-down bungalow listing for close to $3Million.”

3928 W 34th Ave, Vancouver
1950 SFH, 2411 sqft, 66×130 lot
Asking price: $2,988,000

“Prime building lot west of Dunbar!”
“You can tell a lot about this listing at close to three million dollars for a west side tear down bungalow in Vancouver.
First, this house was built in 1950 and it looks like very little has been done since.
Second, the house is being sold by a caucasian real estate agent which indicates that the owners are long term owners who are caucasian.
Three, this house will be paid for in cash with money from China.
Four, this house will be torn down and a new monster house will take it’s place.
Vancouver is a city that has had the guts of it’s middle class ripped right out of it.
Vancouver is quickly going from being a city to a theme park for the rich.
Within a few years the largest city in BC will be Surrey and not Vancouver.
Vancouver city is closing elementary schools and downsizing this educational system because the people buy these houses do not have children this age, and the ones that do have gone to the suburbs long ago.
Within one block of the epicentre of the Stanley Cup riots last year are new condos going up that top out at over twelve million dollars.
The peasants in the street rioting are almost all from the suburbs.
The cops who are defending the city, and who work for the city, almost all live out in the suburbs too because they can no longer afford to live in the city that they work for.
The Vancouver Police Department used to have a policy that employees had to live in Vancouver, but that was discarded long ago when they discovered that their employees could no longer afford to actually live here.
Vancouver = a postcard city.
Nice on the surface, like a Hollywood movie set.
But look a little closer and rage and anger here is manifest.”
- John at greaterfool.ca 10 Mar 2012 3:46pm

Largely agree with the sentiment.
BTW, houses like these will sell for , say $999K, or less, in the trough (and, yes, prices like $999K will return – less need to bother with all the eights. In fact, eights may even be actively avoided as too redolent of the boom-’n-bust.)
- vreaa

Westside ‘Ridge Theatre’ & ‘Varsity Ridge Bowling Alley’ To Be Demolished For Condos

“A Vancouver cinema which has shown movies in the Kitsilano neighbourhood for decades looks set to be torn down after housing developers purchased the land it stands on.
The Ridge Theatre has screened movies at Arbutus Street and 16th Avenue since 1950, but the Cressey Development Group plan to level the landmark and the Varsity Bowling Alley next door.
The group intends to build a mixed use development on the property with ground floor retail and concrete condominiums above.
President of Festival Cinemas Leonard Schein has leased the Ridge Theatre for 34 years but believes the fate of the single screen theatre seems sealed.
“That will be the end of the Ridge when they do it. I’m not sure if they’ll do it in 2012 or 2013. It’s been a long time and I’m sad to see it ,” he said.”
- CBC News, 12 Mar 2012

Found on ‘flickr’:
Ridge Theatre – 1949
3131 Arbutus Street, Vancouver, BC.
When it opened its doors in April 1950, the Ridge Theatre was hailed as “A miracle of modern architecture and construction” boasting the latest in projection equipment and creature comforts. In the late 1970s the Ridge became a repertory or “second run” theatre, a role that continues to this day.

Let’s just cut to the chase and ‘condo’ everything from UBC to Boundary Road (Endowment Lands included); interspersed with oases of coffee shops and high end fashion stores, of course.
– vreaa

—
Postscript:
It seems the Ridge does have a history with real estate:

- image from ‘Macdonald Realty Asia Typhoons Charity Event’, Macdonald Realty Blog, 26 Jan 2012

‘Frontier Centre’ Opinion – “High home prices can only be solved from the supply side. Open portions of the Agricultural Land Reserve, but only to high density development.”

“Vancouver is in desperate need of new solutions to ease its worsening housing affordability crisis. The 8th annual Demographia housing affordability survey released by the Frontier Centre found that Vancouver has the second least affordable housing market next to Hong Kong. On average, and assuming zero interest, a house in Vancouver would cost the median family more than ten years income. Three years is the threshold after which a market is considered unaffordable.
Mayor Robertson recently announced the launch of a new task force to tackle the housing affordability crisis. The only way to tackle this problem is to focus on getting more housing units on to the market.
Much of the debate around housing affordability descends into discussions about manipulating housing prices by freezing out market mechanisms.”
…
“In order to balance the concerns of housing affordability and urban sprawl, the city of Vancouver should strike a compromise: open portions of the ALR, but only to high density development. This may not be the optimum solution for families that would prefer to purchase single dwelling homes, but a significant influx of new units would be a countervailing force against runaway home prices. This would also put downwards pressure on housing in the rest of Greater Vancouver. Though opening up broad swaths of the ALR may be the ideal, this seems like a reasonable compromise.
This type of solution would rile people on both sides of the political spectrum, but it would be a dramatic improvement over the status quo. High home prices can only be solved from the supply side. The choice between maintaining the ALR as constituted or opening up portions should be obvious. Infill development can only go so far towards solving Vancouver’s housing crisis.”
…
- from ‘Time for Real Solutions to Vancouver’s Housing Affordability Crisis’, by Steve Lafleur, New Geography, 9 Mar 2012. Lafleur is a Policy Analyst with the Frontier Centre for Public Policy.
—

Assuming that “high home prices can only be solved from the supply side” leads most looking for a solution to consider ways of building new supply, and Lefleur offers a version of such a plan. But we note that, like almost every other commentator wrestling with Vancouver housing affordability, he leaves out the most obvious and necessary next step – an implosion of the bubble.
When the mania ends and prices begin their long descent, supply will come from what we’ve referred to as ‘speculative holders’ – not just the obvious flippers and developers, but all Vancouver owners who have been holding property because prices are rising. Most don’t even see themselves as speculators, but they are just that. And, when prices start their relentless decline, their reason for holding will evaporate and they will come to market. There will be lots and lots of supply, without any need to actually create more product. Seems counter-intuitive, but, there it is.
Vancouver will still have sore need for a sensible housing policy thereafter, but the milieu in which it will have to be made will be very different from that which faces us today.
- vreaa

“The Carnegie Community Action Project has created a map that shows how property values have increased in the Downtown Eastside.”

“The Carnegie Community Action Project has created a map that shows how property values have increased in the Downtown Eastside. It also tracks the decline in low-cost housing options in the neighbourhood.”

- graphic from ‘Property values shoot up in Downtown Eastside’, Charlie Smith, Georgia Straight 5 Mar 2012. [hat-tip Aldus Huxtable.]

“My parents toured a show home in a recently constructed, $1 million+ development, and my dad, a former contractor, was shocked at the shoddy construction and low-quality building materials.”

“My parents live in South Surrey and my dad is a former contractor. They toured a show home in a recently constructed, $1 million+ development, and my dad was shocked at the shoddy construction and low-quality building materials.
My spouse and I have been looking at condo rentals in Vancouver and we would not even rent, let alone buy, most of the newer ones. I can’t tell you the number of doors askew, floorboards creaking on uneven floors, and paper thin walls we have encountered.
Not to mention the ridiculous floor plans–why do people need 2.5 bathrooms when there no space for a kitchen table? The condos seem to be designed for roommates or childless couples, not families.”
- Sheesh at VREAA 2 Mar 2012 9:52am and 12:28pm

Gord Goble – South Surrey Building Blitzkrieg; Thoughts and Images

Rampant speculation. Cash back mortgages at rock bottom rates. Mania – stirred by corrupt, real estate industry-funded media outlets that routinely broadcast just one side of the story. The widespread yet wholly mistaken belief that “everyone wants to live here.” Realtors as rock stars, chanting the “real estate only goes up” mantra. Buy now or be priced out forever – by hordes of Chinese. Get your real estate groove on.

The reality? Vancouver is home to the most overpriced real estate in the world. Lower mainland owners, on average, spend an absurd 70% of pre-tax income on housing, and ownership rates are upward of an astounding 70%. Mortgages are granted on stated income. Canadians, who owe $1.50-plus for every dollar of disposable income, are some of the most indebted people on the planet.

In short, the wealth we feel is on paper only – a direct by-product of the stratospheric valuations of our homes. And if everyone who could conceivably buy has already bought, if there are no renters left to rent, when the vast majority of our population is already massively in debt, when the foreigners we’re told only want to live in Vancouver find similar homes in better climates at a third or a quarter of the price – as they already have – when interest rates bump up even a point and the mortgage defaults begin, when the crash we’ve already seen in the Okanagan, parts of Vancouver Island, in the eastern Fraser Valley, and throughout most of BC finally sticks its tentacles into the Best Rainforest on Earth, when media outlets can no longer ignore declining prices, when realtors are seen not as investment gods but as the mere salespeople they are, and when this manufactured lie we call a bubble explodes and $1 million teardowns are worth a few hundred thousand, that is the reality. Everything else is merely The Matrix. Cue Keanu Reeves.

Yet the most important reality of all is this: Housing, the buying and selling of real estate to one another, the furtherance of this bloated bubble, is key to this country’s GDP. Indeed, it currently comprises anywhere from a quarter to a third of Canada’s GDP. Without it, we wouldn’t look so seemingly grand on the international stage. We wouldn’t seem to blissfully able to blow through the global downturn. It’s completely unsustainable of course, and hundreds of thousands of families and individuals who bought into the deception will be brutally impacted when it all comes apart.

But in the meantime, it is of utmost importance to our government that the mania continues unabated as long as humanly possible. We can blame the realtors, the media, the banks and the lenders, and ignorant buyers as much as we want. But it can all be traced back to the government. A government that puts up a good face by issuing repeated debt warnings yet at the same time allows this thing to continue full-throttle. “Candy is bad for you, but here’s a real easy way for you to get as much candy as you want.”

And that’s precisely why we in the Vancouver region are witness to a housing construction boom of epic proportions.

I live in a rental house in the Douglas region of extreme South Surrey, between the Peace Arch and Pacific border crossings, south of 8th Avenue. Ten years ago, this comparatively small area – just a few square miles in size – was one part ALR land, one part golf course, one part older homes on massive lots, and one part bush/forest. Indeed, it remained comparatively sleepy, comparatively untouched even two or three years ago. But the turn of the decade signaled change. And what change.

Today, the ALR land and the golf course remain. So far. Otherwise, our neighborhood is a war zone. The battle? Time. The housing/construction/real estate mafia can see the writing on the wall. They know this house of cards, this corrupt pyramid scheme, is about to come crashing down all around them. They know the last of the greater fools is out there right now, somehow oblivious to rationality, planning their fateful purchase. And after that, a void. A gaping chasm of disinterest and wholesale inability to buy.

And so they build. Non-stop. And the marketers market. Non-stop. Anything is a potential target. The forests are gone, in their place forests of signage. Homes are seemingly built in a matter of days. Backyards and a sense of privacy are pass?. The streets overflow with construction waste. Temporary real estate offices are everywhere – from makeshift trailers to show homes and all things in between. And no land outside the ALR is wasted – homes and townhomes are rammed together and crammed into any available spot. Must…catch…the…end..of…the….mania.

Even in the last vestiges of daylight on a Saturday evening, the work continues. And it was on Saturday, Feb 28, 2012, that I snapped these pics. Please note that one can walk from corner to corner of this neighborhood in just fifteen minutes. Despite what the photos seem to indicate, it is not big. Please also note there are in excess of 75 residences, either new or pre-build, currently for sale on the MLS. I expect that number to increase as more units are puked out and come available and as this bubble, finally and thankfully, blows apart. Strange how you can’t sell an overpriced future slum when there are no buyers.

The first image you’ll see below is the current Google Maps aerial shot of the region, likely taken some time recently. Suffice to say it’s now ridiculously inaccurate.

Not much has changed on the west (left) side of 172nd because it’s generally untouchable ALR land and a golf course. Having said that, there are two or three small pockets that aren’t ALR, and of course they’ve been torn up and built upon. And east of 172nd, it’s been a blitzkrieg.

- [Words and Pictures by Gord Goble]

—
All photos by Gord Goble, who lives in a home he rents within a half mile radius of all of the scenes in the images above.
Gord wrote an important early and rare bearish op-ed for the Vancouver Sun concerning the local RE bubble, and has been a vocal critic of the RE-bullish bias in local media.
Our thanks to Gord for the words and pictures above.

“A high Canadian dollar and an extremely high cost of housing combine to make me less competitive than my counterparts in the US. Housing prices must come down to ensure that Canada is still competitive on the international stage.”

“My concern about this continuing decrease in the US house market is that it appears to be setting them up for an increase in business. My job here in Canada could very well be done by an American faciliy within our own company, and now the US is releasing information that only seems to confirm that their economy is starting to finally grow again. A high Canadian dollar and an extremely high cost of living (housing) combine to make me less competitive against my counterparts in the US. They can agree to take lower compensation and still have a nicer house (better standard of living) than I… my productivity levels are comparable or better when comparing apples to apples, but I get less bang for my buck. Housing prices must come down to ensure that Canada is still competitive on the international stage.”
- Burbs Boy at VCI 29 Feb 2012 12:34pm

Opinion; Food For Thought – “The people of this region have a near infinite capacity for diminished expectations. Personally, I’m planning to move because I want something better.”

“It may not end.  The people of this region have a near infinite capacity for diminished expectations.  They seem to always do what they are told and accept what they are given, and no matter how ridiculous it is.  They will pay more and more for less and less.  Today it’s $700k for an old basement on a busy road in hookertown.  Tomorrow it could be $1 million dollars for a tent and a license to beg in the rain.  It’s the best place on earth you know.

That’s the true value of Vancouver: chumps.  There is an inexhaustible supply of fools who will never look elsewhere and the media apparatus to direct them.  Pay $10 for a hot dog?  Lineups for days.  Why not $100?  Limited time only.  Buy now.  These people will pay anything and do anything, regardless of whether it makes sense, and that’s why Vancouver is so valuable.  It’s not the land, or the scenery, or the climate, and it’s certainly not the standard of living.  It’s the people.

You can argue from simple mathematics that eventually this must end.  The population will be unable to pay for it.  This is true, but don’t ignore the fact that so many 60 year olds have 40 year mortgages.  When the general population can wield sums of money that they have no hope of repaying the integrity of the system is lost.  Money doesn’t mean anything in Vancouver, and under current policies Canada is sure to follow.  We have socialized credit and destroyed capitalism.  Newcomers don’t own anything in Vancouver and won’t get the opportunity.  It’s like a communist country, which is maybe why HAM finds it so appealing.

As for options, with the precedent established and the trend so firmly in place, there is no reason to bet on a reversal.  In 2008 this new system cracked and the authorities handed out gobs of money to favoured groups until it was fixed and the transformation could continue.  They invited corrupt CPC officials to immigrate and launder an unprecedented amount of money through Canada.  Anyone betting on an ounce of fairness or responsibility was badly burned.

That’s it as far as I’m concerned.  The social structure in Canada is ossifying and the economic structure is in decline.  Our neighbours to the south have once again shown the way, by restoring balance to their system after only a few crazy years.  Despite this enormous cost (or actually, because of it) sensible investment opportunities exist in the United States.  That country is dynamic again.  The fact that an American dollar today buys twice as much food, twice as much house, and twice as much gas is a harbinger of things to come.  Canadians foolishly think they are better off, but Canada is going nowhere.  Trade your Canadian dollars at par while you can, and move to the US to enjoy the standard of living you expect and get the opportunities that everyone deserves.

The worst thing you could do in life isn’t buying a $700k Vancouver basement suite, it’s sitting around waiting for that to change.  It may not change, or if it does, it may take too long, or you may not like it anymore.  So you better have a plan in motion.

Personally, planning to move because I want something better, full stop.  Vancouver is just crap with a zero on the end, and Canada is grossly overrated too.  I’m 50% out of Canadian assets because I don’t think our dollar is worth what the world says it is.  I see China imploding instead of leading the world.  Their model of over-investment is near an end.  I think the next great invention will come from the United States, and the next bull market will be born there.  They have so many small companies working on the next big thing, you have no idea.  If you want opportunity, it’s there.  They have nice houses for $100,000.  Buy one and get on with life.  It doesn’t have to be perfect.  It’s as close to economic freedom as you are ever likely to get.  I am astounded that people on this website could be offered this and somehow turn it down.

Real estate and credit bubbles were the last decade, so why is Canada still mired in it?  Who even gives a shit?  In the greater world, nobody.  And nor should they care.  And nor should you.”

- rp1 at VREAA 26 Feb 2012 1:37am

“A lawyer knocked on the door of my rented house on the Westside of Vancouver this afternoon, and offered me $2.4M. He was going door to door asking if anyone wanted to sell.”

“A lawyer knocked on the door of my rented house on the Westside of Vancouver this afternoon, and offered me $2.4 mil. He was going door to door asking if anyone wanted to sell. He said he could by-pass any realtors and left me his card. I am trying to think of a way to sell him this house!!!!!!LOL!!The insanity continues”
- Westsider at greaterfool.ca 23 Feb 2012 11:29pm

Sounds like a normal market to me. – vreaa

Whitehorse Housing Crisis – “Apparently, the higher the number of people who own a home, the more others will want one of their own. No one wants to be the only person in town renting.”

“For several years, the territory has seen the effects of the latest commodity-fueled mining rush and stimulus spending. It’s also seen a remarkable shortage of housing lots.
So, alongside the money, Whitehorse has near-zero vacancy rates sparking high rents and crazy housing prices.
The effects have rippled throughout society, with the poor and professionals alike trying to cope, in their own way, with the inflation and homelessness.
For eight weeks, Yukon News reporters and photographers fanned out to chronicle the crisis – the problems people are having, why it happened and some possible solutions.
Here is what we found…”
- ‘Gimme Shelter’, as series of special reports on the Whitehorse housing crisis, 16 Jan 2012
Excerpts:
“Apparently, the higher the number of people who own a home, the more others will want one of their own.
No one wants to be the only person in town renting.
In Whitehorse, between 1991 and 1996, these rates increased to 67 per cent from 60.
Two of every three households in the city own their own home. This exceeds the national rate.” …
“The average sale price for a single detached house in Whitehorse has increased at a relatively steady rate between 1999 and 2005.
Prices increased by 34 per cent to $199,000 from $149,600.
After that, prices skyrocketed. Between 2005 and 2008 housing prices shot up 62 per cent.
That same house that was once worth $149,600 is now worth $322,800.
Housing prices have only continued to climb in the past three years.” …
“In order to buy a $325,000 home, an annual household income of about $81,500 is required, according to the Canada Mortgage and Housing Corporation’s online mortgage calculator.
Given that the average household income was $92,308 in 2006, this would appear to be affordable for the average Yukoner.”
—-
The above link via e-mail from ‘Zerodown’, who comments:
“Having spoken to people there I echo the panicked tone of the articles. I tend to be a demand-sider on Canadian housing (sentiment, ease of credit, buyer and holder mania), but the Whitehorse market has genuine supply problems (city planning incompetence: trust me there’s plenty of land) and actual economics driving the demand (ramp in government hiring; gold rush).
That the crisis is also felt in rents (and availability) reveals a contrast to the rest of the country. People who know better are buying because they need somewhere to live, others are choosing not to move there.
Sadly, knowing the quality of local governments there, I am inclined to conspiracy theory that city council (baby boomers of course) are more than happy to watch their homes skyrocket in value while they destroy economic potential. How much of a factor is it that (nationwide) policy makers are all about 60 years old right now (Carney the obvious exception, but I mean down the totem pole a bit)?”

[Thanks, Zerodown. -ed.]

‘Sell Your Property In China’ – “This postcard was in my mailbox yesterday. Lots of lucky red colouring.”

- scan of a card flier distributed to residential addresses in Vancouver, e-mailed by ‘J’ to VREAA, 20 Jan 2012. J writes “This postcard was in my mailbox yesterday.  Lots of lucky red colouring.”

UBC Housing Action Plan Forum – Proceedings Summary – “We have lost out on many hiring cases”

UBC hosted a ‘Housing Action Plan Forum’‏ today, 18 Jan 2012. The purpose was to “focus on faculty/staff housing, provide an “early look” at the options being explored and give an opportunity for participants to ask questions and provide feedback about key issues related to the options.”

‘Anonymous UBC Professor’, who attended this event, was very kind to send along this point-form summary of the proceedings:

————————————
Statements by Prof. Nassif Ghoussoub
– Board has approved densification of the campus “to remedy the housing problem”
– The housing situation keeps getting worse, not for real estate tycoons, but for colleagues
– Property assessment have increased 40% on west side. Increased perception of wealth, but doesn’t bode well for UBC.
– Problems in recruiting and retention. Cannot recruit heads, Canada Research Chairs, Canada Excellence Research Chairs, due to housing problems.
– Staff have problems too.

- What have we done?
– Ask for input – Discussion Forums – Talk to deans
– Blog – Visited universities with similar challenges (NYC, Columbia, Harvard, Irvine, …). Inquired at Stanford, Cambridge, Oxford. They are WAY ahead. Their bread and butter is competitive hiring.
– Next steps – Discussion paper, ready by the end of March.

——————————
Presentation by Lisa Colby
– Work done  – Reviewed data from housing demand studies

Current
– Faculty & Staff rentals
– 550 units (obviously more needed)
– Claim 20% below market rent
– Leasehold
– Claim 10-20% below cost
– Prepaid to avoid developers marketing cost.
– Do not have to sell to faculty/staff (benefits to 1st gen buyers)
– This is on hold
– Financial assistance package
– $45k lump sum or interest free loan, or mortgage interest assistance
– Student housing: 8500 beds, increasing roughly 500 per year

Current land use plan:
– 50% of new units must be university affiliated
– 20% rental (10% of which are non-market)
– Plan amendments allow for SMALLER units on campus

Claim: much of demographic is looking for studio 1 bedroom
[Remark: I doubt the accuracy of this statement.]
Claim: 60% of demographic don’t have kids or dependents

Here are various options for campus development going forward.

—————-
“Equity” Options

Options 1:
– 99 year leasehold, unrestricted growth

Option 2:
– Only for faculty and staff
– Intended 20% below market rate

Option 3:
– Only for faculty and staff
– Joint ownership & leasehold: own building, rent land

Option 4: Cohousing
– Large shared facilities (kitchen, dining room, etc.)

Option 5: Coop
– Only for faculty and staff
– Members purchase shares, no equity gains
– Perhaps of interest to renters who want a larger say in their building

————–
Rental Options

Option 1: Non-market rental
– Only for faculty and staff.
– 20% below market rents
– (More appealing if students are not allowed to rent)

Option 2: Non-profit rental
– Household income must be below $64k
– Below market rents, geared to incomes

Option 3: Market rates
– Quality & space are key factors

————-
Other options
– Priority access to housing options
– Potential financial assistance plan modifications:
– Extend to more employees
– Increased value
– On-campus purchase only?
– Claim: other universities that do this also give $30-$50k, so UBC is in the right ballpark.

Key considerations:
– Options should have enduring value that help future generations

—————————————-
Open-Mic Discussion

Someone from Faculty of Medicine:
– Much of the on-campus housing is obviously empty. It is immoral to allow the general public to buy on-campus housing.
– We need a community to make the campus interesting. The general public is an important part of that.

Lisa:
– Revenues from the general public are important to the academic mission. This goes to support student housing, scholarships, academic bursaries, research chairs, etc.

Carl Hansen, Asst Prof in Physics & Astronomy
– Came 2005. Could not afford anything. Now have 3 kids. Live in rental housing. Biggest apartment they’ve seen is 1000sqft.
– Have not been able to save money
– Housing prices have gone up 120% since then.
– Does 20% below market value make a difference? 1.5m and 1.8m are the same.

Lisa:
– Due to taxable benefit, 20% is the best we can do.
– Yes, it’s important to look at the range of sizes. There is less range than there should be.

Nassif:
– This is still under discussion. Your feedback is important.

Lior Silberman, Asst Prof in Math
– We don’t want “windfall programs” (i.e., co-development programs, advanced access programs)
– Waitlist for 3 bedrooms are several years (someone says 4 years)
– Don’t confuse demand with with “what is happening because what is available”
– The units are in the wrong market. There should be a “UBC-only market”.
– If the market was limited to us, the price would naturally be what we can pay.

Kera:
– Lisa asserted that people want amenities on campus. Housing survey from last year says 83% value amenities.

Anonymous:
– 2 kids
– Rental unit, 720 sqft
– “Faculty & Staff Housing” is really “Faculty housing”. Staff honestly cannot afford it.
– 50% of his paycheck goes to housing. What percentage should people pay off their paycheque to rent?
– 3% increase in rent. What is the justification?
– Loses sleep over this
– Renters are treated as second-class citizens.

Lisa:
– Definition of “affordability”: 30% of household income, assuming 10% downpayment, 5% interest over 25-year amortization. For renters, again 30% of household income.
– Reminds about below-market rental housing.

Don (CFO of some UBC housing group?):
– Market rent: 1000sqft, $2500/mo is typical for west side.
– We don’t want to go beyond the magical 20% discount that would trigger taxable benefits, that’s why we have to increase.

Lisa:
– Further explanation on taxable benefits: if the discount from market rent were greater than 20%, you’d have to pay tax.

Nassif:
– NYU, Irvine, Stanford, etc., all found ways around it. You see 40-50% subsidies there.

Eugene Barksy, Library:
– 20% discount is not enough.

Asst Prof in Faculty of Forestry:
– Came last year, father of 3
– $2200 for 1000sqft
– 46% of net income goes to rent
– Whether it’s 20 or 50% below market price, he cannot afford to buy, so he is stuck renting.

Andrew Patterson, PhD student in sociology:
– Has UBC lobbied city or province to control housing prices?

Lisa:
– We’re starting to engage with the city. No specifics at this point.

Bill Holmes, alumnus, lives in Hampton place. Income tax lawyer.
– Regarding taxable benefits, the 20% cutoff doesn’t make sense. Even if one received a 50% discount and paid tax on the 30%, you’d still come out way ahead.
– We haven’t heard how much money the board of governors is prepared to put into this.

Lisa:
– Financial assessment is not done. See the upcoming discussion paper. Their decision is partially
based on your feedback.
– There is not a firm line on 20%.

Nassif:
– We’re still computing the costs of the options.
– Our priorities are in competition with other priorities of the board.
– Market housing goes to our endowment.

Senior Faculty Member:
– We have lost out on many hiring cases.
– When bubble was not so bad, we lost CRC 1 chair to Alberta. [This was the first use of the word "bubble".]
– We missed a candidate from Irvine.
– A hire from 2003 started applying for jobs, and we very nearly lost him due to the 7-year limit
for Financial Assistance Package.

Lisa:
– There are important tradeoffs between money from market housing to support academic mission.
– Tradeoff between faculty/staff and endowment.

Satish, Asst Prof in Computer Engineering:
– There are many universities which do not have land to support their endowment.
– Using land to support endowment is a very short-term plan.
– If we fail to attract faculty, the endowment is irrelevant as the land will go to the dogs.
– Harvard has $40B, which has nothing to do with their land.
– Faculty don’t even apply here. Why live in Vancouver when you can live in Austin and visit Vancouver every 2 months?

Kera:
– Claim that UBC was given this land specifically to support the endowment.
——————–

[Thanks 'Anonymous UBC Professor' - ed.]

“I know a contractor currently putting $800k into a house near UBC that will be listed in the spring. Sale price should be over $4 million. Big chunk o’ change.”

“I know a contractor currently putting $800k into a house near UBC that will be listed in the spring. Sale price should be over $4 million. Big chunk o’ change.”
- thinktom (a local realtor) at RE Talks 11 Jan 2012 9:05pm

Would very much like to see more figures on this kind of venture.
How big is the profit margin on such a buy-reno-sell spec?
How large a ‘can’ are these contractors carrying? Risky business given market developments.
- vreaa

Toronto High Rise Buildings Under Construction – “We’re The Top!”

- from ‘Economic Dashboard’, Economic Development Committee, Toronto, November 15th 2011
[hat-tip Makaya]

Wow. – vreaa

Foreigner On Visitor Visa Buys House – 35% Down, 65% Canadian Bank Financing

“Have any [of your readers] ever seen any articles regarding “foreigner mortgage”?
Here is the story - 
One day I attended a lunch in a friend’s house; I did not realize there were her other friends coming over from China and visiting the same time.  During the lunch, our topic was buying house in Vancouver – The friend who was from China was looking for to buy a 2M house and it did not surprise me at all since I have been hearing the story about those wealthy buyer.  What surprised me was the mortgage.  This friend of mine whom is on the visitor visa and that means not yet a Canadian citizen nor Residence.  In the first place, I thought she bought her house in 100% cash since she has no any credit or nothing in Vancouver…  Till, she mentioned to me that she feels that cost of living in Vancouver is very high and I started to asked her what made her think this way; she said the hydro bill, the tax and the mortgage fee…etc.  I was kind of in shocked when I hear “mortgage”.  She later told that she has a 65% loan with the local bank and she has only paid 35% down.  She said she has a business in China and the bank required her to provide some documents from her business in China then she got the mortgage from the Canadian bank.  I had my month wide open – - believe or not.
My question is – is the foreigner really buying the house with whole cash? or it’s sooner going to be Canadian bank’s debt?
I wish someone could provide some comments or stories if they do know anything….. I have been sitting on my cash and don’t want to put them in the bubble market.”
-’Sab’ via e-mail to VREAA 11 Mar 2011

Can any readers verify whether the described financing scenario is occurring in the Vancouver market?
Further: On an obliquely related note: We recently spoke to a couple with a modest annual income who had used a cash windfall as a 30% down-payment on a BC property. They were puzzled, given the size of their down-payment, that they’d had to undergo such prolonged scrutiny by the lending bank. The degree of scrutiny was likely because their deposit was too high for the mortgage to be CMHC insured. If they’d had only 10% down, it likely would have been quicker and easier for them to ‘qualify’. – vreaa.

PostCardsFromTheBlastRadius #14 – Windsor – In the ‘RustBelt’ The RE Deals are…. “FingerLickin’Good”‏

Tecumseh Road, Windsor, Ontario, Summer 2011
—–
Photos and commentary for the ‘BlastRadius’ series by ‘Nemesis’.
[Images Ⓒ​2011 ‘Nemesis’ – All Rights Reserved]

The Disappearing Vancouver SFH?

Regular reader and commenter ‘formula1′ has pointed out an interesting statistic: that of the apparently fast disappearing SFH in the City of Vancouver.

(from a table in ‘Metro Vancouver Housing Book’, metrovancouver.org, April 2011 [pdf])

formula1 writes (at VREAA 9 Dec 2011 9:30am and 4:40pm):
“If you want an explanation of the price increases in detached the last 10 years you need look no further than the loss of supply.
We were at 67K in 1991, 65K in 1996, 65K in 2001 and 48K in 2006 – so the majority of this 20K loss happened in just 5 years. So here we are 5 years removed from the last census. If the trend holds we’re now at around 30K detached…a loss of 60% since 1991.
Kinda puts a kink in detached housing crash plans.” …
“The demand for a SFH is alive and well. The supply is on life support.

This is an interesting claim, let’s look at the figures.
A drop in detached SFHs in Vancouver from 65,390 to 48,365 between 2001 and 2006. That’s a loss of 17,025 SFHs, or 26% of the existing SFHs, or one in every FOUR SFHs, in just 5 years!! Where did all those houses go?

We find this number remarkable. If it is indeed true, we’d have to address the implications, as formula1 points out. But the numbers have what researchers call questionable ‘face validity’, meaning that, just on the face of it, it’s a figure we find we want to question. Did Vancouver really lose one in every four SFHs over 5 years? Part of our reason for asking for verification of the data is that, in our recollection of watching SFHs destroyed between 2001 and 2006, almost every time one went down one or two new SFHs seemed to rise in it’s place. Sure, some were levelled for townhome or condo developments, but surely not a total of one in every four?

We’d ask readers to help clarify this matter.

Firstly, is there anybody who can shed light on the data table or source? There is a footnote to the table in the report regarding reclassification of certain dwelling types between 2001 and 2006. Is the apparent change in SFH numbers simply in part a classification change?

Secondly, did any of you out there actually see these 17,025 SFHs disappear? Is this just something that I missed? Sure I’ve seen some go, but 17,025?? Let’s collect a rough inventory of the SFHs in Vancouver that were knocked down to make way for multi-occupant dwellings. Something like ’2004: ABC block XYZ Avenue; 80 SFHs became EFG condos (or highway, or whatever)’. It’ll be most efficient to first focus on places where this happened in large swatches. We’ll ignore SFHs that were knocked down to be replaced by a single SFH, but, on the other side of the ledger, let’s take note of SFHs that were knocked down to be replaced by two or more SFHs (contributing to a rise in the number of SFHs). Post the observed data as comments and, if it turns out to be necessary, we’ll collate later into a separate table.

Thirdly, we thank ‘formula1′ for sparking this exercise. If the number of SFHs are dropping at a rate of 25% every five years, we need to consider this effect on the whole market. ‘formula1′ does commit a logical error in assuming that the 2001-2006 trend has continued 2006-2011 and that “..we’re now at around 30K”. That’d mean that more than one in every two SFHs had disappeared in the last 10 years, a claim that is very hard to believe.

So, are SFHs indeed disappearing at a remarkable rate in the City of Vancouver?
Please shed light on this, readers.

Architect Bing Thom – “The city needs a strong vision to avoid becoming a tourist resort and a place to park money.”

“We rely on each other, so it’s really important for us all to engage in dialogue,” emphasizes Thom. Which is why – even though friends warn him that he may be alienating himself from potential clients – he has rallied publicly against the now-defunct bid for a casino at B.C. Place and the “god-awful” Canada Pavilion built in the city during the Olympics.
“Actually, I’m a very optimistic person, so it’s not that I go out of my way to be controversial,” he says with a boyish laugh, throwing up his hands. “It’s just that we have to earn democracy every day, which means caring about your community. And if you care, it’s your duty to speak up.”
Currently irking him is the “issue” of Metro Vancouver: to his mind, Vancouver needs to accept that there are no more boundaries between it and the wider metropolitan area, and to be thinking and acting regionally – especially in terms of economic development – as well as globally. “This little paradise is only here because we simply exported all the dirty stuff to the developing world such as polluting heavy industries and unwanted toxic wastes,” says Thom.
The city needs a “strong vision,” he believes, to avoid becoming “a tourist resort and a place to park money.” For example, as an architect who builds “homes – not commodities to be traded or vertical gated communities,” he applauds social-housing policies that mix people of different incomes in the same building. “It’s a way of building a real community,” says Thom, who lives nearby in a condo – that he designed himself – with his wife Bonnie, whom he met at high school in Kerrisdale.
- from ‘Lunch with Vancouver Architect Bing Thom’, BC Business, 7 Nov 2011

Land: Not Making Any More; Don’t Need To

How much of the earth’s surface would it take to provide each and every one of the 7 Billion people in the world a Vancouver-standard 33ft by 122ft lot?

Preposterous thought, right?
We’re packed into the planet so tight as it is, there certainly isn’t enough space on the globe to do it, so we’d have to be thinking of using the moon, and Mars, right?

One of the perennial bull arguments for never-ending future price strength is the old “They’re not making any more land” litany.
Well, apart from a few rare land reclamation examples, this is indeed correct. But it has also been correct through all prior RE booms and busts.

We’re so used to seeing images of busy streets, packed highways, towering condos, that we’re certain it’s all getting extremely crowded.

So, how much space would it take to provide every person on the planet with a standard lot?
Turns out it’d take a square of 1000 miles by 1000 miles, about the size of the square on the North American map below.

[*Note: Before civil engineers, town planners, and Habitat for Humanity folks chime in, let's make it clear that we are not advocating for a community like this in the midwest. And we do realize that much of the world's land is uninhabitable, etc, etc... but... you get the picture. - vreaa]

[hat-tip to Harper's Index, where a line item about how the entire world's population could be packed into Texas at the same density as NYC (10m by 10m each), got us to do the math above.]

Related posts:

“Vancouver has a finite amount of land. The prices are only ever going to go up.” – Douglas Coupland, 2000
VREAA 10 Dec 2012

Avocados and Christmas Trees – Vancouver Land Use; ALR; Food
VREAA 11 Dec 2012

Tom Davidoff Knows About RE Cycles

We recently [2 Dec 2011] posted a quote from a CTV interview with Tom Davidoff, of UBC’s Sauder School of Business, and an e-mail exchange that followed. We have since found a very sensible and informative article published by Prof Davidoff regarding the California housing bubble, reproduced below. We aren’t aware of him writing a readily available analysis of Vancouver’s market, and would greatly appreciate seeing an account of his thoughts in this regard, given his experience with the US RE boom and bust.
We suspect that, given his expertise, he could enrich and inform the online dialogue regarding our market. We’d welcome him posting something of this nature here at VREAA, but it’d be just as good to see it elsewhere on the web, or in a local paper, or publication.
Is Vancouver RE in a ‘bubble’? What are the estimated risks of price corrections? How much could prices correct? Is it different here? If so, why?
- vreaa

—
Why this housing bubble was different
Jon Lansner Interviews Tom Davidoff
The Orange County Register, 6 Mar 2010

Tom Davidoff, is an assistant professor at the Sauder School of Business University of British Columbia who has studied real estate cycles — including California’s wild home-price rides. We asked him to help us understand what’s happened …

Us: What made this housing bubble different?

Tom: We can compare the boom and bust cycle in housing in the late 1990s and 2000s to that in the 1980s. The increases and decreases were much sharper this time than the 1980s. This time around, I think it was more clear that there was a bubble. Where I disagree with some people is that it wasn’t the coastal areas like Orange County that made it clear — at least, after the fact — that there was a bubble. In the 1980s, the big price gains were in areas like the coasts where it’s hard to add new supply (there was an earlier oil boom and bust in some energy industry areas like Houston. Those “oil patch” markets are elastically supplied and I would guess the bust in prices was predictable). The problem with using prices in areas where it’s hard to add new supply to judge whether or not we’re in a bubble is that it’s hard to say what the right price of a home is in those markets, even relative to rent. Was there a bubble in the 1980s? In hindsight, hard to say yes, as if you bought a house in 1989 in New York or San Francisco and held it for 15 years you made out like a bandit.

In markets like Las Vegas or Phoenix, or arguably most of the Central Valley and Bakersfield, in the long run you can build lots of new supply, and the location of new homes isn’t much worse than the location of existing homes. You don’t have the same downtown or ocean premiums in those markets. So when prices get far away from the cost to build new homes in markets where it’s not hard to build new homes, you start to suspect over pricing. Like a lot of other economists, I personally didn’t suspect an impending bust probably until sometime in 2006. My problem was that I was too focused on the coastal markets. I wondered about Las Vegas, but felt like there was a world in which prices in places like Boston and coastal California were justifiable. I wish the Cassandras, who deserve credit for prescience, had been griping about Las Vegas instead of San Francisco. I think any economist who really gave prices in the relatively easily supplied markets serious thought would have been very worried as early as late 2004 and certainly mid-2005.

Another difference is where the bad loans were. In the 1980s, I think largely because of tax laws and regulations, the bad loans and excessive pricing was largely on the commercial and rental residential side. In the 2000s, exotic owner occupied residential loans were also a problem.

Us: If this bubble was different, will the recovery be of the unexpected variety, too?

Tom: The recovery may be fast or slow. I can believe that we are at a bottom, and I can also believe that there will be a continuing wave of mortgage defaults on both the residential and commercial sides that could certainly lead to price declines of 10 percent or more in many U.S. markets. The massive number of owner occupied homes with mortgages much larger than current market prices, and even market prices in the foreseeable future, is different from anything at least since the Depression. In the long run, barring very rapid global warming, prices should not be below replacement cost in a lot of the “sand” markets where they currently are. So price below replacement cost would usually be a good signal for time for prices to start rising. The potential for mass defaults and an attendant second dip in lending and GDP makes that argument harder to swallow.

Us: Are bubbles a quasi-natural economic occurrence that are going to happen in real estate every so often?

Tom: “Bubble” is a tricky word. In markets where it’s hard to replace the existing stock, like the coasts, people will always value homes in large part based on what other people think they are worth. That means that prices can fluctuate a lot even without anything changing in the real economy. So I suspect coastal U.S. prices will continue to look like a roller coaster. Ditto stocks like google, masterpieces of painting, etc.

Getting prices to move like that in places like Phoenix requires that both buyers and lenders are not motivated to consider the likelihood of huge losses. I hope we don’t see the lack of discipline in owner residential lending that allowed the giant bubbles in markets that should be disciplined by supply for a long time. Between the legitimate benefits to financial innovation and the political power of financial institutions, I suspect it won’t be too long before the next crazy price increases arise in some asset class. A guess is that it won’t be housing next, but housing will surely have another turn. By the logic of Willie Sutton, the money to be made in housing finance is too tempting to be ignored.

Us: What policy changes could prevent such economic distortions in real estate, if any?

Tom: I don’t think price volatility on the coasts requires much “economic distortion.” The problem in the real “bubble” markets of the 2000s was that both owners and lenders had the incentive to ignore the very real possibility of large losses. Both parties had valuable default options that left downstream investors and taxpayers on the hook for losses, so that only the upside mattered. For now, the market is probably self-policing. Once investors are no longer spooked, it may be necessary to (a) limit or tax high risk loans or (b) do a lot of work to make sure downstream investors are aware of risks and (c) force financial institutions to pay for the “too big to fail” burden that they place on taxpayers.

—

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

“Rent prices are actually depressed in Toronto in real terms – There is a lack of qualified renters. I say this because I’ve been doing this for 15 years and there has been a gradual insidious change as more people buy houses. If 70% of people now own, and 30% do not for a large part the reason is that that 30% is not qualified for a mortgage.
When I look at the criteria used for credit score with my credit checking system, the credit score used for an approved renter is 700, yet CMHC will approve a mortgage for someone with a score of 620 which makes me chuckle a little. My rental screener tells me to decline those with that score. Of course I can’t, you have to pick from the tenants that apply not those you dream about getting!
Rents have gone down in actual terms in apartment buildings. Condo rentals are skewing the market.”
- Rachelle at VREAA 26 Nov 2011 5:49am

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

Why not come straight to Silicon Valley?
“We looked at numerous options other than getting hired by a big company. We could have gotten green cards if we waited a few years. But in the meantime, we found Bootup Labs [a Vancouver startup accelerator and seed fund] that gives you $100,000 [to nurture your startup idea], and that’s also helpful with visas. Basically, if you want to come here, there’s no straightforward way to do it if you want to own your own company. People do it with some tricks, but Canada is a bit friendlier in terms of immigration and helping people start their businesses.“
…
But you’re still in Vancouver and not the Valley. Do you think that puts you at a disadvantage, particularly since a number of companies are trying to solve the same information overload problem as Summify?
“It’s a lot smaller, naturally. But there are advantages, including that it’s much easier to focus, there isn’t so much noise. You don’t hear about people trying to do startups all the time. It’s easy to obtain talent, too. People are excited to work at a startup versus a telecom company or some of their other options. And if you take care of them, they stick around. There aren’t startups trying to steal your employees.
The disadvantage is that you also don’t have as many people with experience [in the tech industry]. We know everyone [to know] in Vancouver, and that’s a few dozen people.”
…
- Mircea Pașoi, 24, is the cofounder of Summify, a startup that summarizes the top news stories of the day for its users by scouring their social networks for clues. From pehub.com 14 Nov 2011, cited by ‘anonymous’ at VREAA 15 Nov 2011, as an example of people moving to Vancouver.

Peddling Influence In Municipal Government – Civic Politicians and Vancouver’s RE Industry

In March 2011 we calculated that Christy Clark received more than 50% of her campaign funds for the race for the leadership of the BC Liberal Party from RE-related industry.

Now, at the Municipal level:

“In this case, the money speaks a lot. If you look across the range of contributions and you try to group them broadly, the property development and construction business is the largest collective group of contributors.” – Patrick Smith, political science professor, SFU
- from ‘Running Against Developers in Condolandia’, Ben Christopher, The Tyee, 9 Nov 2011
[hat-tip 'Jeff Murdock']

“It’s clear that Vision Vancouver and NPA received a lot of funding from development companies during the last election.” – Nicole Benson, Candidate, Neighbourhoods for a Sustainable Vancouver (NSV)
- The Tyee, 9 Nov 2011

“Both main parties are completely beholden to real estate developers, more so than any time in the city’s history. This isn’t good and I have to wonder just how much monied backslapping and handshaking is going on. This is how the BC Liberal Party imploded, by allowing their donors and top, most accommodative friends unfettered access to the keys of the province: No door was off-limits, no industry remained unmolested–friends and insiders ravished them all.
Well, look for Vision’s attempts to destroy the viaducts to be one such example. The developers with the most to gain are Vision’s biggest corporate cheque writers…that’s if you don’t count the American money of unknown origin, pouring in from the radical, left-wing Tides Foundation.
And this isn’t an issue for the NPA to raise? Of course it is, but they can’t, seeing as though the same monsters, who buy favour, are writing them cheques as well.”
- Alex Tsakumis, on his blog ‘Rebel With a Clause’, 7 Nov 2011
[hat-tip 'Nemesis']

“Vision’s executive director, Ian Baillie, insists that there is no quid pro quo relationship between campaign donors to his party and the candidates they support.”
- The Tyee, 9 Nov 2011
[Don't you love it when these guys say this with a straight face?
Why would companies possibly give money to politicians if they didn't want to curry favour?
What else could possibly be on their minds?
- vreaa]

Property Prices Collapse in China – “When Beijing’s pet analysts are saying prices could halve in a few months, we can be sure they are thinking the eventual sell-off will be worse.”

“Residential property prices are in freefall in China as developers race to meet revenue targets for the year in a quickly deteriorating market. The country’s largest builders began discounting homes in Shanghai, Beijing, and Shenzhen in recent weeks, and the trend has now spread to second- and third-tier cities such as Hangzhou, Hefei, and Chongqing. In Chongqing, for instance, Hong Kong-based Hutchison Whampoa cut asking prices 32% at its Cape Coral project. “The price war has begun”…
Citi’s Oscar Choi believes prices will decline another 10% next year, but that’s a conservative estimate. Even state-funded experts are more pessimistic. For example, Cao Jianhai of the prestigious Chinese Academy of Social Sciences sees price cuts of 50% on homes if the government continues its cooling measures.
When Beijing’s pet analysts are saying prices could halve in a few months, we can be sure they are thinking the eventual sell-off will be worse.”
- excerpted from ‘Property Prices Collapse in China. Is This a Crash?’, Gordon Chang, Forbes, 6 Nov 2011

Effects on Vancouver RE?:
1. A very, very small direct negative effect (a handful of prospective buyers who may have been dependent on funds from these Chinese projects will now be unable to buy here)
2. A very much larger indirect negative psychological effect:
– Things “Chinese” and things “Real Estate” can ‘crash’.
– ‘China’ feels closer to home for Vancouverites than does ‘Ireland’, ‘Spain’, ‘Phoenix’ etc.
– The simple experience of hearing ’32%-off’ and “price cuts of 50%” has a bracing effect.
- vreaa

Open Invitation To Candidates and Parties In The Upcoming Vancouver Civic Elections – Publicize Your Position On Vancouver Housing

“On November 19, 2011 Vancouver residents will vote for 1 Mayor, 10 Councillors, 7 Park Commissioners and 9 School Trustees in the municipal election.”
- City of Vancouver, 2011 Election Information

We see approaches to the challenges of housing as a central issue in the upcoming elections. The following is an excerpt from a letter that has been sent to specific candidates and parties and is posted here to solicit positions from any entities involved in the elections who may not have received an e-mail but would like to make their position known. Positions will be headlined, and linked in the ‘Policies On Housing’ – The Positions Of Local Entities On The Challenges Facing Vancouver Housing’ post and sidebar.
Formal replies via e-mail, please, to vreaa@hotmail.com

Dear Candidate:
_Invitation to publicize your position on housing policy._
The ‘Vancouver Real Estate Anecdote Archive’ (VREAA) is a local blog that focuses on the personal stories of Vancouver citizens meeting the challenges of housing during a real estate price boom.
We are currently running a series of posts called ‘Policies On Housing’ in which we feature the positions of local political groups/entities who may end up shaping future policy.
We would like to invite you to lay out your policy in that regard, around the following questions:
1. What do you see as the main housing challenges facing Vancouver?
2. What measures do you propose to address those challenges?
3. What is your policy on housing densification?
4. Would you support policies that would lead to a drop in real estate
values?
5. What is your own family’s housing situation?
Your answers to these questions will be headlined as a separate post, and discussion will ensue.
This is an opportunity for you to have your position on this central issue publicized and debated.
Please send your reply to: vreaa@hotmail.com
Sincerely
‘jesse’ (frequent contributor at VREAA) &
‘vreaa’ (vancouver real estate anecdote archivist)

—//end

“Man, I really hope some candidates engage on this. Definitely prepared to listen and consider making choices based on what candidates say here on this issue.” – Royce McCutcheon, Vancouver citizen, reader and poster, VREAA 2 Nov 2011

Spot The Speculator #63 – “I run the numbers in my head: This guy is paying $8K mortgage for this?! He paid $1.6 million for a house I would not buy for $400K !?”

“I decided last week to look for a rental home.. and it turns out to feel like a study of Vancouver real estate behaviours. This is actually great fun.
So today I go visit a 4 bdrm home in Point Grey. Smells like a sponge, feels like a sponge. Asking: $3300. I run the numbers in my head: this guy is paying $8000 mortgage for this?!?!? He paid $1.6 million for a house I would not buy for 400K !?!??! Maybe he paid cash… Well, what a poor return on investment, even less than inflation. Not to mention the $5000 taxes.
Obviously this was an amateur landlord. The paint was peeling off the window in large chunks, and he expected me to bring in my kids? The appliances were from the 80s. For God’s sake, if you rent for $3200, you could buy a brush and some paint. The basement showed signs of freshly scrubbed mold. The door between the master bdrm and the attic looked like an outhouse door. All skylight windows had missing handles. The attic was filled with moldy dusty insulation from the 70s. I even felt sorry for the owner.
So the HAM-guy says: Do you like it?
Me: Too humid, sorry
Him: You know, I own 3 other empty homes and I am looking for tenants, including a 5 brdm in Dunbar.
Well, the vacancy rate is 2%. So either he has 20 rental homes, or he only has 3 houses and recently realized he is loosing money on them, so he should better rent them. Who knows?
I left, feeling I was leaving a completely surreal place… “Insanity” is a euphemism.”
- ‘jumping in’ at vancouvercondo.info October 28th, 2011 at 6:54 pm

Cambie Corridor Speculation – “People are overpaying for land”

Six months after Vancouver City Council approved a plan to transform the Cambie Street corridor, homes in the area have nearly tripled in value and some residents fear development will ruin the neighbourhood. Ten homes on Cambie Street near 41st Avenue recently sold for $3.4 million each, nearly three times their assessed value.
City planner Brent Toderian says the city is trying to cool down land speculation in the neighbourhood. Toderian says the city has been meeting with developers and realtors to discuss land transactions after getting wind of some very high deals negotiated in the months after the Cambie corridor plan was approved.
He says the final prices didn’t appear to have factored in community amenity contributions the city negotiates with developers in order to pay for infrastructure and services associated with increased density
“People were overpaying for land — thus we sent messages out into the marketplace to say you’re going to have to adhere to the expectation of the plan if you wish to succeed in development.”
- from CBC 27 Oct 2011 [hat-tip 'subterranian']

Tyee and his Wife – “One thing that has changed in the past year is our perspective: we no longer believe a crash is inevitable, or that it would make any real difference to us.”

“My wife and I rent a basement suite in Vancouver, and occasionally we shake our heads that we’re pushing 40 and living in a space that barely notches above student housing. For a long while we’d been looking down our noses at people shelling out what seemed to be exorbitant prices for tiny, well-marketed properties. We waited, a bit haughtily, for the oft-predicted crash to bring prices back down to our level. While waiting in this particular basement for the past three years, we’ve paid $40,000 to our landlord.
As basements go, ours is fine, no mould-spore filter required. But it’s hard not to feel churlish when the subject of real estate comes up. At parties, we sip from the house cocktail shared by many young (and not-so-young) middle-class renters in Vancouver: two parts seething resentment, one part liberal guilt. To protest too much about our situation seems bourgeois, given we eat organic vegetables, drink good wine, and go on vacation every few months. We blunt our bitterness by counting our blessings, which are many—and it’s hard to stir a revolt on a full stomach and a glass of Merlot.
One thing that has changed in the past year is our perspective: we no longer believe a crash is inevitable, or that it would make any real difference to us. Like one of those Re/Max balloons, prices have risen so far out of our reach that even if they deflated significantly we still couldn’t get on board. Yet on our incomes, as a childless couple, we have a choice. Unlike James and Tina, we just might be able to purchase a property that suits our needs. Or we could leave.”
- anecdote from ‘Going, Going, Gone’, by Tyee Bridge, Vancouver Magazine, 1 Nov 2011

When the last prospective buyer with a bearish perspective capitulates, the speculative mania is over.
At least that’s pretty much how the market dictum goes. And we acknowledge we’ve been saying that for years now.
We empathize entirely with Tyee’s position.
But, this really is a speculative mania.
They never, ever end with permanently high plateaus.
Prices will revert to means determined by fundamentals, and that’s a long way below today’s prices.
- vreaa

“He said every house he tried to put an offer on was bought by developers with no conditions.”

“A month or two ago, a guy at work described his experience looking for an old starter house in Coquitlam. I think he was looking around the Coquitlam/Burnaby boundary. He said every house he tried to put an offer on was bought by developers with no conditions. He was not considered by the sellers because it was easier to sell to the developers, so he gave up looking.”
- Summer at vancouvercondo.info October 22nd, 2011 at 9:09 am

“In ‘Burquitlam’, whole blocks of old houses are being leveled for townhouses.”
- Patiently Waiting at vancouvercondo.info October 22nd, 2011 at 9:26am

Leif and Heidi – “The longer I’m here, the more I’m convinced this market is unstoppable. If this was any other regional city, prices would adjust. It’s not really Canada anymore.”

“Leif, 31, is an intern architect, and Heidi, 32, a full-time student at Emily Carr. Former Winnipeggers, they had already owned homes in Saskatoon and Winnipeg when they arrived in Vancouver in 2009, bringing with them $75,000 in equity. Despite their modest income, they were optimistic that their good fortune in the real-estate market on the Prairies would set them up for a decent fixer-upper in Vancouver. They quickly realized their income and savings would only buy them a one-bedroom condo—if that.
“Coming here was a slap in the face,” says Leif. “We thought we were lucky getting that down payment together, but it’s pennies here.” Recently he spotted a new one-bedroom in Kitsilano for $300,000; to prove a point, he went on MLS and found a home in Winnipeg for the same price: an old-stock character house with four bedrooms and two baths on three floors. It was 2,400 square feet; the Kits condo was 400. “The longer I’m out here, the more I’m convinced this market is unstoppable. If this was any other regional city, prices would adjust. But that’s not how it is here,” he says. “I don’t want to sound like we’re feeling sorry for ourselves, because we could happily move back. But we realized that Vancouver is not a regional market. Real-estate-wise, it’s not really Canada anymore.”
- anecdote from ‘Going, Going, Gone’, by Tyee Bridge, Vancouver Magazine, 1 Nov 2011

A bubble, by definition, appears ‘unstoppable’ to almost everybody in its sphere of influence. – vreaa

Alex and Erin – “What frustrates us is that there’s no way to grow wealth or security while living in this city, making what we make—which anywhere else would be considered a really good living.”

“Alex and Erin are doubtful about their future. Smart, practical, and into the city’s culture of dining, outdoors, and high-tech, they’re the Everycouple of Gen F’s 20-somethings. They rent a 500-square-foot apartment in Hastings-Sunrise and love living in Vancouver—even if it means having a living room not much larger than a snooker table. Alex, 28, is a young chef who moved here from Medicine Hat in 2005. After completing culinary school in January, he was hired at the new Hawksworth restaurant in the Rosewood Hotel Georgia. Erin, who grew up in North Vancouver, is 26 and until recently was a pr manager at 1-800-GOT-JUNK. A Twitter lover, she broadcasts their gourmet experiments to the world in 140-character bites. They’ve chosen careers that tie them to Vancouver, or a city of this size, and necessity aside they enjoy the city’s vibe.
They’re not optimistic about putting down roots. As a cook in an upscale restaurant, Alex can count on earning around $29,000 a year. Erin makes more with freelance copywriting and PR, but not much. “Together we make about $70,000, which sounds like a healthy combined income at our age,” Erin says, “and we’re not destitute. What frustrates us is that there’s no way to look at growing wealth or security while living in this city, making what we make—which anywhere else would be considered a really good living.” They’d like to buy a condo in five years or so, but that’s a stretch. “It would have to be in Port Moody or something, which means you’re commuting. Even if we lived on macaroni and cheese for three years, we couldn’t make it work here.”
Erin has over $40,000 in student debt from her UBC years and her Kwantlen diploma, and while pr was a consciously practical choice, getting ahead is tough. “The pr departments are small to begin with, unlike in Toronto,” she says. “So there are piles of people coming in at junior levels who can’t move up because people aren’t moving out of senior positions—the director has been there for five or 10 years and will be for at least another 10.”
- anecdote from ‘Going, Going, Gone’, by Tyee Bridge, Vancouver Magazine, 1 Nov 2011

James and Tina – “Today, any starter home in the Lower Mainland is far out of our financial reach. We didn’t ever think that we’d be 35 years old having never lived above ground level.”

“James and Tina live in Point Grey, in a two-bedroom basement suite in a Vancouver Special. Tina, 34, a former music teacher, is now a stay-at-home mom. James, 35, teaches music and directs the 260-student Dr. Annie B. Jamieson Elementary School string orchestra. He also gives private cello lessons to bring in extra cash. Their twin boys were born last May, and their challenge as a new family of five is how to afford not groceries but space. The search for a larger home has not gone well. Real estate, they say, has been “a continual source of depression” for seven years. “We feel fortunate to be healthy, have three wonderful children, and have jobs that are mostly satisfying and interesting,” James says. But they’re tired of living below ground. “Our dehumidifier and industrial mould-spore-removing air filter are playing too large a role in our lives.”
On their combined income—at around $80,000, it’s well above the regional family median of $68,000—they’re still knocking their heads against the subfloor of the real-estate boom. While in their 20s, they saved for a down payment and made offers on six houses in Vancouver and Burnaby. Despite bidding over the asking price almost every time, says James, they always lost out. “Today, any starter home in the Lower Mainland is far out of our financial reach. We didn’t ever think that we’d be 35 years old having never lived above ground level.” They love Vancouver, and want to stay close to their families and their roots. But, like many middle-income earners here—web designers and police officers, young architects and teachers—they find themselves rehashing halfhearted talks of packing everything into a moving van. “Maybe we’ll head to Victoria,” says James, “somewhere we can realize our dream of living above ground.”
Tina and James are part of what, real-estate-wise, might be called Vancouver’s Generation Fucked. As the city becomes a global “lifestyle destination,” tens of thousands of middle-class households are getting a hard lesson in diminished expectations. Unless the members of Gen F want to raise their children in a one-bedroom condo, their salaries will qualify them to be no more than permanent renters in Vancouver.”
- anecdote and image from ‘Going, Going, Gone’, by Tyee Bridge, Vancouver Magazine, 1 Nov 2011

Brad Lamb Is Not Worried – “We are the number one condo market for new development on the planet. This talk of bubble is ridiculous.”

Announcer: “Remember that so called real estate bubble that’s been predicted to burst for what seems like forever? (laughs)… well it certainly didn’t happen last month… Canadian home sales rose almost 3% in Sept and 11% from the same month last year.”
—
Brad Lamb: “We are the number one condo market for new development on the planet.”
Announcer: “Brad Lamb is a RE broker and developer who has “been selling Toronto property for two decades, he says 2011 could be a record breaker.”
Brad Lamb: “I’m building over 2000 condos across Canada at present, and I’d say that 50% of those are under 520sqft.”
–
Announcer: “Yet there are worries that developers may be building too many condos in Toronto.”
Will Dunning, economist: “… we don’t know how they’ll be absorbed in the market place.”
Announcer: “Brad Lamb, who builds them, is not worried.”
Lamb: “This talk of bubble is ridiculous. But, we’re going to have recessions, we have them every 15 or 10 or 8 years, and when it happens, people are going to put their hands in their pockets and not buy real estate.”
-CBC Radio, “World at 6″, 17 Oct 2011

“An IT recruiter told me there are almost no quality people. He sees the same applicants again and again. He said that he has never seen such a shortage.”

“A software developer that worked on one of my projects has moved to Ontario. Another one announced that his wife is pregnant and once the baby arrives, they are moving back to Europe.
In the past few years, I have been looking for several software developers for my business. The positions were mostly for senior or at least intermediate developers and were advertised on craigslist, BCTechnology and Monster. The funny thing was that for every single position from all sources, the pool of applicants was virtually the same – same people and most of them were not very skilled. Out of those few that were skilled, some left or are leaving soon.
Recently, I talked to an IT recruiter. He told me basically the same thing – there are almost no quality people and he sees the same applicants again and again. He said that he has never seen such a shortage.
So there is the silver lining – if you are a quality software developer, it should be easy for you to find a job, because many quality people have left.
However, salaries for these positions are still lower than in Toronto or Montreal. That may eventually change in bigger companies. I doubt that small companies can afford to pay more, because the owners need to make money too.”
- bubbly, at VREAA 12 Oct 2011 5:47pm

‘Going Going Gone’ – Vancouver’s ‘Generation F’

Jesse alerted us to an excellent article: ‘Going Going Gone’, by Tyee Bridge, Vancouver Magazine, 1 Nov 2011. We will headline some extracted personal anecdotes in coming days, but, until then, we suggest the whole article as a must read, and headline it here for discussion.
Excerpt:
The dilemma many employers face, says Michael Heeney, a principal of Bing Thom Architects, is that once their employees want to have a family in their 30s and early 40s, they leave the city. “When they have one child in a two-bedroom apartment they can get away with it, but as the child gets older, or they have a second child, it really doesn’t work very well here.” When they leave, he notes, they don’t go to Surrey and commute, but light out for distant centres like Chicago. “These are people who are at their absolute most valuable, because they’ve been working in the business for 10 or 15 years. They’re the backbone, the boiler room of your business. And we’re losing that investment. In many ways, our most significant export is talented people.”

50%-Off in West Kelowna

- an image from ‘Ben’, sent to greaterfool.ca, headlined by Garth Turner 9 Oct 2011; saved here for the chronological record

By the way, Nemesis previously headlined this development in ‘PostCardsFromTheBlastRadius #8 – The Okanagan Bust – ‘Tuscany Villas’, Shields Down!’ [VREAA 15 May 20111]
(excerpt: “We..Are..The..Borg!
Lower your shields and surrender your Deposits!”)
[Prescient. Perhaps that should have been "Lower your deposits!" -ed.]

This all means, of course, that peak to eventual trough in West Kelowna will end up being a lot more than 50% off.
Coming soon to a place near you. – vreaa

For an article on the Kelowna condo developer, see ‘Too Big Too Fast?, kamploopsnews.com 7 Dec 2010.

Calls For ‘Activism’ Regarding State Of Vancouver RE Markets – What Action, Exactly?

A number of thoughtful readers have made suggestions, increasingly so in recent months, that we all somehow attempt to “do something” regarding the state of Vancouver’s housing market.
‘mjw’s personal anecdote [7 Oct 2011] about two UBC professors leaving for Alberta as a consequence of housing prices, concludes with “I think that some sort of activism is needed to highlight and make people aware of the game that is being played out.”
Recent suggestions by ‘Vesta’, ‘jesse’, ‘Gord’, and others, were discussed in a thread headed ‘Consequences, Intended and Otherwise‘[14 Sep 2011].
Today at VREAA, Vesta again calls for some kind of action, and talks of “a small group starting to coalesce”, of “someone in this city very involved in politics and very concerned with what is happening”, and again asks people to “write/phone City Council, MLAs, etc”.

Initial thoughts:

Thanks, Vesta.
We think you know that we are pretty much on the same page as you in hoping that the housing distress can be resolved. We would very much like to see Vancouverites being able to get on with productive activities that are not hobbled by excessively draining RE costs. Housing costs are at the very least a distraction, sometimes a disaster.
We do believe that getting the word out, educating, is the very best form of activism.
But, other than describing what we see, what is the desired ‘message’? On this we are unclear.
Our concerns are that a great deal of coming distress is ‘baked into the cake’… There is no way we could hope to ‘educate and extricate’ the City of Vancouver from this mania without a great deal of pain.
We can educate those who will listen such that they try to get out early, but only a very small minority would ‘escape’. And, realize that every ‘escapee’ would have to sell to someone who then takes the subsequent fall… so there would be no resultant net gain for the group.
Understanding the nature of speculative manias, we see no way forward but for a flushing-out of all speculation from the system. This will result in a price crash of 50%-66%, and general (temporary) mayhem for the economy and the society. Many will be devastated by that outcome. As we wrote some time ago, a real estate bear market will be Vancouver’s defining social and economic event for this decade.
There simply is no way of landing this bubble ‘softly’… there never is. Never.

Having said that, what is the very best overall outcome we could hope for?
How do well meaning citizens who understand what is going on direct the ‘action’ of any proposed ‘activism’?

We are very, very strongly opposed to any actions that would further ‘socialize’ the risk of being in the housing market. We would see such action as bordering on criminal. Such mispricing of risk has been an important cause of our bubble in the first place. We are strongly opposed to ‘bail-outs’ of any kind. In fact, we believe that the government should back even further away from back-stopping speculation, by tightening CMHC-backed lending. Buyers and lenders have to take full risk for their actions. So, please, no suggestions that public money be used to attempt to bankroll a soft landing in any way: such action would further punish the prudent (and, by the way, would be doomed to fail before it even started).
But, this may not be very helpful: we’re telling you what we don’t want.
What do those calling for ‘action’ suggest we call for?
- vreaa

“Our youth is getting screwed over at the expense of realtors, developers, and a government that’s all too eager to bend over backwards and let a rampant real estate market guide itself.”

“Our youth is getting screwed over at the expense of realtors, developers, and a government that’s all too eager to bend over backwards and let a rampant real estate market guide itself.”
- JCVdude, youtube, 24 Jan 2011 (quote at 3:15 on video)

Somehow we missed this video when it was posted earlier this year. It covers many of the commonly discussed issues relating to the speculative mania in Vancouver housing. Good production values for an informal video; nice general Vancouver footage; worth the watch/listen. We are impressed with JCVdude’s very reasonable and controlled expression of his frustration. – vreaa

Subprime Canada – “Had a client call today about possibly buying a rental property with 0% down and a 3% variable rate mortgage.”

“Had a client call today about possibly buying a rental property with 0% down and a 3% variable rate mortgage. Trouble is, client already has a bunch of debt (hundreds of thousands), “owns” a house in a location that has seen prices dropping for awhile now and has zero cash. If client gets a mortgage for the rental property it wouldn’t surprise me in the least, sadly. This is what it’s come to. Hello, subprime Canada!”
- pricedoutfornow at vancouvercondo.info September 30th, 2011 9:57 pm

Macleans on the Futility of Prudence – “My fear is that most people in Canada are now debtors and not savers, and so governments will enact policies to help them because they make up most of the population. Savers may get screwed on the way down, too.”

“Steven Patterson and his family moved to Vancouver from Cambridge, Ont., in mid-2008, just as the financial crisis hit. After years of scrimping and saving to pay off their first mortgage, they had earned a tidy profit when they sold the Cambridge house and put the proceeds into GICs, where the money would be safe and easily accessible should they decide to buy another home in B.C. Three years later, Patterson, a 42-year-old IT manager, is still sitting on the sidelines, renting, while real estate prices march ever upward in a city where a three-bedroom bungalow covered in warped siding can fetch $1 million.
That might seem like a prudent move in an uncertain economy, but Patterson says his cautious approach has come at a steep price: all his money is steadily being eaten away by inflation, which the meagre interest income from his GICs can’t cover — particularly after the taxman takes a cut. Meanwhile, several of Patterson’s friends have taken advantage of those same low interest rates, loaded up on debt, and bought into Vancouver’s frothy housing market in recent years. And they have enjoyed a windfall—at least on paper—as the value of their homes continues to climb. As for Patterson, “I’m only a few thousand dollars ahead—minus inflation,” he says, clearly frustrated. “So actually, I’m way behind, and I don’t have a house.”
Welcome to the world of ultra-low interest rates, where profligacy is richly rewarded and saving is, well, for suckers. Those who’ve opted to be austere with their personal finances have found themselves on the losing end as governments and central bankers have worked to get people to borrow and spend in the wake of the global recession. While emergency interest rate cuts were to be expected after the financial crisis seized up lending markets, it’s been nearly four years since central banks started slashing rates to the lowest levels in history.
—
As a result, those saving money have seen almost nothing in the way of returns for a painfully long time. In fact, after accounting for inflation, anyone who dares to be prudent risks seeing the value of their money decline. If one were to put $10,000 into a five-year GIC at two per cent this year, and assume headline inflation goes no higher than the current rate of 2.7 per cent, the future value of that investment in 2016 will have shrunk to around $9,670.
For seniors and others living on fixed incomes in particular, low rates threaten to wipe out their savings. Yet it’s also depressing for those in the second half of their careers who don’t have an appetite for risk but feel they now have no other choice. “People in their 50s are worried about what they’re going to retire on,” says Susan Eng, vice-president of advocacy at CARP, which works on behalf of aging Canadians. Between the carnage in stock markets and the collapse of interest rates, “there’s a huge amount of anxiety. You’re asking for a lot of trouble with this situation.”
—
Some will argue people like Patterson are simply bitter because they didn’t buy into Vancouver’s soaring housing market. And yes, those who take risks should enjoy the potential for greater rewards. That principle is at the heart of capitalism. Only, in the current environment where central banks have pushed down interest rates to abnormally low levels, and government policies encourage consumption over thrift, the dynamics of risk and reward have been severely distorted.
This isn’t how it’s supposed to work. From the moment children are given their first penny, it’s driven into us that saving is a virtue and the path to financial security starts with that ceramic piggy bank on the dresser. Only now, with policy-makers in a desperate race to reignite economic growth, all that has been turned on its head. Yes, Bank of Canada governor Mark Carney and Finance Minister Jim Flaherty have repeatedly warned Canadians not to take on too much debt, but their policies, and those of their colleagues in countries like the United States and Great Britain, have had the opposite effect, encouraging people to buy homes, cars, flat-screen TVs or take a plunge into volatile stock markets—anything, that is, but save.
—
“We’ve got ourselves into a position where debt and spending seem to be highly valued, but saving, which is prudent and helps people plan for their futures, seems to be almost looked down upon,” says Simon Rose, who works with Save Our Savers, a British organization that’s taken up the fight for downtrodden penny counters. “It’s unfair that the problems of the economy should be disproportionately shouldered by savers rather than those with a tendency to borrow too much and get into trouble.” No one is saying Canadians should abandon thrift and go on a wild spree of gluttonous consumption. Indeed, Ottawa has set up tax-free savings accounts to encourage people to save. But the competing priority of spurring economic activity means the interests of savers have taken a back seat and made it that much harder to act responsibly. What’s more, while central bankers have undone basic thinking about saving in the name of juicing the economy, a growing chorus of critics claim that strategy has not only failed to turn things around, but the dogged pursuit of low rates might be weakening the recovery
—
Sometimes Lee Tunstall wonders why she bothers saving at all. A child of parents who grew up during the Second World War and instilled in her the importance of living within her means, Tunstall, a consultant in Calgary, has rented the same apartment for 17 years and dutifully contributes to her conservatively managed RSP account. Yet all around her, friends have piled on huge mortgages and run up towering lines of credit debts in the past few years to buy homes and new Bimmers for the driveway. “If you are a saver you’re absolutely losing money to inflation, and if you go into the markets you’re losing money there too, so why bother?” she says. “Sometimes I think, ‘Why don’t I just join the herd and do what everybody else is doing, buy the toys and live it up like everybody else?’ “
Tunstall would have plenty of company were she to give up her frugal ways. Gone are the days when Canada was a nation of savers. In 1980, the personal saving rate peaked at above 20 per cent and was still around 13 per cent in 1995. Today it stands at just 4.1 per cent. At the same time, over the last decade Canadians have increasingly relied on debt to maintain their lifestyles. The average household now owes $151 for every $100 of disposable income, a higher level than even American households reached in 2007 as the air rushed out of the U.S. housing bubble. This week, Moody’s, the credit-rating agency, said it is increasingly uneasy with the consumer debt mountain rising in Canada. “We are concerned that Canadians are relying on low interest rates to support high debt levels,” the agency said in a statement.
Much of that growth in debt has taken place since 2007, when the Bank of Canada cut its overnight rate from 4.5 per cent to a low of 0.25 per cent in 2009. The dramatic cuts, along with stimulus programs targeted at the real estate sector, revived house prices, which had begun to tumble. As of June, the Teranet-National Bank House Price index has nearly doubled over the last decade, while in markets like Vancouver, prices have soared a whopping 140 per cent. That shouldn’t have been a surprise; reckless behaviour gets a boost when government and central bank policies punish individuals for not taking part. But while the cuts were a boon to mortgage borrowers, they’ve sideswiped the saving crowd.
One way to measure the impact is to look at how much interest income is being lost as a result of low rates. Stephen Johnston, a Calgary money manager, estimates that with roughly $1.2 trillion on deposit at the banks and rates roughly three percentage points below their historical average, savers are losing out on $30 billion to $40 billion every year in interest income. He argues this amounts to a massive subsidy for the country’s banks, since the rate depositors are paid to part with their money is far less than what the banks can earn lending that money out to other people as mortgages. “Deposit rates now cost the banks nothing, but that’s not free,” he says. “Someone else is paying the price, and it’s little old ladies and people on fixed incomes who can least afford it.”
—
With Canada’s overnight rate at an almost-princely one per cent compared to the U.S., savers have at least had that going for them. Unfortunately, Canada’s economy shrank by 0.4 per cent in the second quarter, reviving calls for more rate cuts. At the very least, Carney now says the need for a rate hike has been “diminished.”
—
For its part, the Bank of Canada is in a difficult spot. If it leaves rates low indefinitely, there’s the very real risk more Canadians will decide saving is a suckers’ game and start to pile on debt. Yet when the bank eventually does raise rates, which it must, someday, over-indebted households could spark a fresh crisis. “Previous generations used to buy a house that was twice their household income, but now families are spending 10 to 12 times what they earn,” says David Trahair, a financial author whose new book, Crushing Debt: Why Canadians Should Drop Everything and Pay Off Debt, is due out in November. “The central banks are in a bind because they can’t increase interest rates or it will be extremely punitive to these people with mountains of variable rate debt.”
Whatever happens, Ritchie Hok, an actuary living in Ottawa, is convinced savers will ultimately wind up paying the price for others’ imprudence. At the peak of the U.S. housing bubble, Hok lived in Minneapolis and saw the excesses first-hand. While there he resisted those who urged him to get into the market; a wise move given prices are down 40 per cent there. Now that he’s in Ottawa, though, he’s hearing all the same arguments for why he should take advantage of low rates and buy a house before prices rise even further. He’s convinced Canada’s housing market is a bubble that will eventually burst, and when it does, policy-makers will rush to people’s rescue. “My fear is that most people in Canada are now debtors and not savers, and so governments will enact policies to help them because they make up most of the population,” he says. “Savers may get screwed on the way down, too.”
If Hok is right, the frugal few could be in for even more pain ahead. Why is it again that it pays to save?
- liberally excerpted from ‘What’s the use of saving money?’, Jason Kirby and Chris Sorensen, Macleans, September 27, 2011

As street-smart youngsters may say: “Word!”. -ed.

Broad and Deep Negative Effects – “When housing prices do fall the effect on the economy is often much greater than many people expect. Homes are not riskless investments.”

“As I talk with economists from countries whose housing values have risen markedly but not experienced sharp declines, I have been struck by two things. First, they are often confident that national (versus regional) house-price reductions are unlikely. And secondly, most assume that a decline in house prices would have a measured impact on the economy should that in fact occur. But the experience of Japan in recent decades and the U.S. more recently should provide some caution – given that the economic retrenchment that followed these significant declines in home values exceeded most people’s expectations.”  /
“… sharp declines in housing prices can have additional negative effects, with broad implications for macroeconomic outcomes and monetary policy – broader, perhaps, than may be assumed and incorporated into most statistical models of the economy. …
(When) housing prices do fall the effect on the economy is often much greater than many people expect.
A key lesson from the past several years is that homes are not riskless investments.”
- excerpts from a speech given in Stockholm 28 Sep 2011, by Eric Rosengren, President of the Federal Reserve Bank of Boston.
[Taken from a recommended article by Ben Rabidoux, The Economic Analyst, 28 Sep 2011]

Housing is in a speculative mania in Vancouver and the unwinding of that bubble will have broad and deep negative effects on our economy and our society. – vreaa