Category Archives: 15. Misallocation of Resources

Booms direct efforts in ways that don’t benefit the society in the long-run.

“No problemo. 69 per cent of the condo tower is pretty stable.”

Downtown Vancouver

“Only 31 per cent of sales have been to first-time buyers, or new immigrants from offshore, so 69 per cent of the market is pretty stable.”
– Bob Rennie, local condo salesman, as quoted in ‘Vancouver real estate moguls unfazed by axed immigration program for millionaires’, Kate Webb, Metro, 12 Feb 2014

[A post from beyond the grave. This is a one-off post-death 'rattle'. Keep well all. - ed.]

“Nothing Wrong Here!”

Maple ridge, lougheed highway and 223rd aldus huxtable
Maple Ridge: Lougheed Highway and 223rd [image and post title care of Aldus Huxtable]

“It’s kinda funny that 3 unrelated Irish blokes all said that this mess in Vancouver/Canada RE is unfolding EXACTLY like the mess did in Ireland, one headline at a time.”

“Been chatting with some Irish blokes who are here working post Irish Bubble. It’s kinda funny that 3 unrelated guys all said that this mess in Vancouver/Canada is unfolding EXACTLY like the mess in Ireland, one headline at a time. Good luck Canada!”
TBWCB at VREAA 29 Jun 2013

All bubbles are alike in essential nature, even though there may be variations in the minor details.
– vreaa

Trump on Vancouver – “Your people, they go to New York, they go all over the world, and they speak so highly.”

“I love Vancouver. I have had so much experience with Vancouver and with people who live here. You don’t even realize how important it is in terms of a destination and also your people they go to New York, they go all over the world and they speak so highly.”
Donald Trump, as quoted in ‘Trumps announce exclusive tower deal in Vancouver’, CBC.ca, 19 Jun 2013 [hat-tip jesse/YVR]

Did he try to say that people in New York speak highly of Vancouver, but just couldn’t?
– vreaa

‘Canadians obsessed with real estate, poll suggests’ – “Just as many people reported talking about real estate on a regular basis as they did about hockey.”

hi-realtor
Besotted.

“Most Canadians think about real estate on a regular basis, and a good number of them are obsessed with it, an online survey suggests.

That’s the takeaway of a recent poll by online home selling firm Zoocasa, where the real estate company commissioned Abacus Data to poll 1,000 Canadians online between June 3 and 6, 2013.

The poll found that 84 per cent of respondents across the country think about real estate on a regular basis, and 85 per cent have gone as far as shopping online for a new home in the past year.

“In ever increasing ways, Canadians seem almost obsessed with real estate. And it’s understandable,” Zoocasa president Carolyn Beatty said in a release. “For the vast majority of Canadians, their home is the largest purchase they will make in their lifetime.”

Nationally, more than a third — 34 per cent — described either themselves or a loved one as obsessed with real estate. In the Greater Toronto Area, which has the second-highest average home price in the country after Vancouver, the percentage of people who identify themselves as being obsessed jumps to 47 per cent, the highest in the country.

Zoocasa notes that the survey took place during the Stanley Cup Playoffs, and just as many people reported talking about real estate on a regular basis as they did about hockey.

Some 28 per cent of respondents say they have gone to an open house at some point in the past 12 months.”

- from ‘Canadians obsessed with real estate, poll suggests’, CBC, 20 Jun 2013 [hat-tip elchavo]

Not me!
I can quit whenever I want!
– vreaa

Don’t Worry, I’m Sure Somebody Will Sort This All Out – “Policymakers now know better and will be a lot more proactive in preventing a collapse.”

“Risks are undeniably elevated in the Canadian housing market with prices so high relative to household incomes. Many housing bears assume this overvaluation entails a hard landing but I’m not convinced it’s inevitable at the national level. One reason – which seems mostly overlooked in the debate – is that Canadian policymakers will be doing their utmost to avert such an outcome.

In a sense, Canada is fortunate to be facing the spectre of a housing bust after other countries have had theirs. Before 2008, it was generally believed house prices could never fall by much. Policymakers now know better and will be a lot more proactive in preventing a collapse.

Canadian policymakers do have the levers to affect outcomes. One is the regulatory framework for housing, which can be amended in various ways to reconfigure housing demand and supply to the extent required. Indeed, Finance Minister Jim Flaherty has tightened mortgage lending several times over the past two years to slow down price increases and give household incomes time to catch up.

Other regulatory changes include tagging Canadian banks with “too big to fail” provisions that require them to put aside more capital. Then there are the “bail-in” provisions that specify when a troubled bank will recapitalize by converting its senior unsecured debt and other liabilities into equity.

In addition to these pre-emptive steps, Canadian policymakers have no doubt given some thought to dealing with the risk that the soft landing could go off the rails. It’s hard to imagine they would allow the housing sector to destabilize the economy and financial system like it did in the U.S. and other countries.

Responses could range from cutting the Bank of Canada rate to relaxing regulatory restrictions on housing demand. Housing bears might complain about such measures but they would allow Canada to reposition back to a soft landing. That would be more preferable than inflicting the trauma that befell the countries hit with housing meltdowns.”

- from ‘Canada’s lucky to come late to the housing-crash party’, Larry MacDonald [a "retired economist"], G&M, 13 Jun 2013

A soft landing will not be engineered in the Vancouver RE market;
it is in the nature of spec bubbles that they burst, ending with a “bang and not a whimper”. Let’s hope that those in charge of Canada’s monetary policy and mortgage rates don’t do even more damage to sensible citizens by trying to avert the inevitable.
While we’re on the topic of “late to the party”, it is interesting to see the Globe and Mail’s Larry MacDonald, who up to now has gone to great lengths to reassure himself and everybody else that the RE market is not at risk [see, for instance, 'Housing bears need to relax and take the long view', G&M 1 April 2013], now stating that “risks are undeniably elevated in the Canadian housing market with prices so high relative to household incomes.” After all, prices have been outrageously high relative to incomes for many years now.
– vreaa

‘Vancouver City Hall: Housing Report Card 2012′; Plus Revised Version

The following ‘Vancouver City Hall: Housing Report Card 2012′ appears at VanCityBuzz 8 April 2013.
The cheekily truthpacked revised version below that is from a source that is as yet unknown to us (but was passed on via e-mail by ‘B’, 9 Apr 2013).

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