Category Archives: Uncategorized

In Case You Thought Our Bubble Was Due To Special Local Factors…

“Johan and Alejandra are the kind of Swedes the IMF has been warning about – piling up debt to keep up with an ever-rising property market and fund a lifestyle of travel, maids and nights out.
The couple plan to buy a flat in Stockholm for 5 to 6 million Swedish crowns ($724,000 to $869,000), initially with an interest-only bank loan, among other spending plans.
“I may travel, I may want to invest in a new business,” said Alejandra, who runs a cafe in the city centre.
Less than a month away from a general election, there are no votes in campaigning to stop the credit flowing, but there are fears that such Swedes could be the Achilles heel of a country that boasts a coveted AAA score from credit rating agencies Fitch and S&P.
Four in 10 mortgage borrowers in Sweden are not paying off their debt, and those that are repaying the principal do so at a rate that would on average take nearly a century.
Swedish property prices have nearly tripled in just two decades. In July, home prices rose at a double-digit pace from a year ago – the first time in more than four years.”

– from ‘Swedish household debt soars as poll nears’, CNBC, 24 Aug 2014

“In the capital the latest full-year figures show that the average wage is £39,920, while the average house price is about £400,000.
Prices are therefore 10 times greater than wages.
But in South Buckinghamshire, in towns like Amersham and Beaconsfield, the average home is worth 20 times as much as the annual local salary.
Outside the South East, the place where houses are least affordable is the Cotswolds, where they cost 19 times wages.
The countryside may be scenic, but that is little compensation when the average worker, putting a third of his or her salary into a mortgage, would need over 60 years to pay it off.” …
“”I shall be disappointed if I only get £550,000 for it,” says Mike Golding, as he shows me into a two-bedroom, first-floor flat he is selling. It has no garden, few proper windows, and no view to speak of.
But such prices are not excessive in Stow on the Wold, a pretty market town in the Cotswolds, where the undersupply of affordable housing is matched only by the oversupply of Barbour jackets, local organic brie and bow-windowed tea shops.
One such tea shop is run by Anna Wright and her mother.
She and her boyfriend have been looking for a house to buy, but, faced with prices like the above, they have given up looking in Stow.
“We have been priced out of the market,” she says.
“You are privileged to grow up in the Cotswolds, but there’s never an expectation of buying a house here,” she tells me.
A few doors down, 21-year-old shop worker Nicola O’Driscoll is in the same position.
She has been forced to look for a flat in Cheltenham, no less than 18 miles away.
“It’s really unfair. I feel like they don’t want youngsters to live around here. Because there’s no way they can,” she says.

– from ‘The 62 areas where houses are less affordable than London’, BBC, 18 Aug 2014

Too-cheap money has caused many speculative bubbles in housing, and perverted the relationship between income and housing prices. – vreaa

Curmudgeonly Contrarians Win Again (In The End)

“The thing that intrigues me most about his career is how, like Stephen Roche and so many of the great names who have conquered the Tour before him, the American has never encountered doping in the sport. In an extensive interview with L’Equipe on Monday he was asked if cycling still had a drugs problem? “I have no idea,” he replied. “There is none in my team. And none in any of the teams I have raced with. The Festina affair was a huge surprise to me.”
Really?
“Yes.”
And you never spoke about it in the peleton?
“Now that you mention it, no.”
Remarkable.
Incensed by the innuendo, Armstrong insists that his life is an open book. He says he is clean and has no secrets and asks us to treat his achievements with the respect they deserve. Should we? Sorry, but for some time now I’ve had a problem with fairytales in sport. For the moment I’m reserving my right to applaud.”
– Paul Kimmage, in an article ‘Reserving the right to applaud’, Irish Independent, 26 July 1999  (yes, nineteen ninety nine).

This contrarian was ‘wrong’ for at least 13 years.
Now he’s right, and the underlying facts of the matter seem so self apparent to all observers.
Of course Armstrong doped, how else could he have won 7 Tours in a row?
RE bubbles are like ‘fairytales’, too.
Of course this was a speculative mania, how else could Vancouver RE prices have risen to the point that the average home was ‘worth’ 11.5 times average annual income?
Vancouver RE contrarians have thus far been ‘wrong’ for up to 10 years, but the jury is making noises that it is returning with a verdict.
– vreaa

“What’s REALLY Good About Vancouver?”

Vancouver is a fine city, let’s embrace it for its own considerable strengths. Here follows an account of things and qualities that many of us find really good about our city. It emphasizes features that have guts and soul and spirit, and those that are arguably of lasting value.
Suggestions for additions/alterations warmly welcomed, and given due consideration. The quotes in italics are from commenters.
This kind of endeavour, like the city itself, is invariably imperfect.
– vreaa

What’s REALLY Good About Vancouver?

1. The Rain
Large quantities of good, honest water that falls on our heads more days than not; bearing juicy air and verdant lushness. 
We live in a rainforest. Celebrate it; accept it.
“Nothing better than being in a cedar forest on the north shore during a rain storm.”


Did we mention the rain?

2. The Mild Weather
By Canadian standards. Seems contrary to (1) but, not so.
“Not actually needing to use a engine block heater is pretty nice. Not needing to breath through your nose in -30 degrees is also very good.”
“This was yesterday in Alberta. For many people that matters.”:


Not Vancouver

3. The Air
Clean! See (1).
“Scent of pine, fir, cedar with hint of salt air”

4. The Vistas; The Mountains
Clear day, from many vantage points around the city, mountains with or without snow, city below; stunning. Sometimes good with cloud, too.
View from Grouse Mountain (whether you choose to ride or grind).
Sunsets over the Burrard inlet, from various vantage points.
You don’t have to leave the city to leave the city.
“The splendour and diversity of the natural environment, and the way it interpenetrates the city.”
“It’s a dramatic panorama that I haven’t become tired of looking at.”

5. The Seawall; The Ocean
Kitsilano to Coal Harbour, especially the bit near the Lion’s Gate Bridge.
“I love walking around the seawall talking with a friend on misty nights in mid-winter when all the tourists are gone.”

6. Stanley Park; The Endowment Lands; The Trees
Wonderful trees, quiet paths, remarkably low traffic.
“I like that this big, public, tourist park has hidden seasons and palettes that feel like a spectacular secret, and that in such a busy city you can find quiet and solitude in there.”
“The intensity of the vegetation, the size and lushness of the trees.”

7. Easy Access to Outdoor Activities and Wilderness
Sit, Walk, Hike, Run, Bike, Blade, Climb, Paddle, Sail, Ski, Board (Snow & Skate)
“The ability to step from the urban environment into true wilderness.”

8. Beaches
English Bay; Kits Beach; Jericho; Spanish Banks; Wreck Beach
For hanging out when the sun shines, more than for swimming.

9. Kits Pool


137m of saltwater, in the rain

10. “Walkability/Rideability”; The Traffic
It’s actually easy and pleasant to get around.
The Canada Line: a great start
‘Traffic’ may seem a controversial item, but you can indeed travel in or on a vehicle, across town and back, during business hours, most days, with ease.
The Seabus to Lonsdale Quay

11. City Parks; Street Trees
200 parks; 130,000 street trees

12. Buildings
Marine Building; Hotel Europe; Dominion Building; Sylvia Hotel
Gastown facades
Museum of Anthropology
The Grace
The ‘tree-on-top’ building near English Bay


The Marine Building

13. Art
Art in public places
Vancouver Art Gallery
Art walks; Culture crawl; Commercial galleries; “Hidden galleries”
The Western Front
Emily Carr school annual shows


‘229.5 ARC X5′ by the French artist Bernar Venet, at Vanier Park

14. The Museum of Anthropology

15. Delicious Food; Good Restaurants
[Too many to mention. Imagine your own three favourite restaurant names here]
“The variety and deliciousness of much of the Asian food, the excellence of some of the high-end restaurants.”
“Fulfilling an almost depraved affinity to HK-style diners”

16. Different Neighbourhoods; Cafe Culture; Easy Urban Living
Parts of Davie, Commercial, Main, Gastown, Kits, East Van, other.
Hanging out.
“I love the chaos of Davie Street at night, and the weird festival grinning-atmosphere that it gets when it’s NOT fireworks or Canucks or soccer.”

17. “Relative Tolerance”
“For the most part, we get along.”

18. Music; Music venues
The Railway Club
The Orpheum; The Commodore; The Vogue
The Vancouver East Cultural Centre
The Chan Centre; Vancouver Recital Society; VSO
The Vancouver Folk Festival

19. Movie houses
Cinematheque; The Rio; The York (will reopen); The Ridge (will die?); The Dunbar; Many comfortable new vanilla theatres

20. VIFF
The Film Festival
“It’s not a red carpet affair and all the directors, actors, writers and producers who come here seem to be genuinely interested in talking to the audience.”

21. Comedy; Improv; Poetry slams
Dozens of venues

22. The Vancouver Aquarium
Belugas; Dolphins; Jellyfish
“That one seal that seems to recognize us every time we visit”

23. Granville Island
Especially on Canada Day, with ‘The Carnival Band
The Aquabus around False Creek

24. Cherry blossoms; Rhododendrons; Gardens; Gardening

25. Wildlife
The Crows; Bald Eagles; Coyotes; Bear


“I love watching our crows commute at sunset from all over the region, a ribbon that floats east for the night and confounds researchers because they don’t know why Vancouver crows should be so sociable.”

26. Some really good stuff has been made here…
William Gibson (writer), Jeff Wall (photographer), Douglas Coupland (writer), Arthur Erickson (architect), Jack Shadbolt (painter), Emily Carr (painter), Fred Herzog (photographer), Eric Metcalfe (painter), Jerry Pethick (artist), Joe Average (artist), Attila Richard Lukacs (painter), Veda Hille (musician), The New Pornographers (band), Dan Mangan (musician), David Newberry (musician), Etienne Zack (painter), The Carnival Band (marching band), others


Photo by Fred Herzog, 1958.

27. Character; Grit
“The tawdriness of the PNE, Hastings Racecourse, and the Pacific Coliseum.”
“The rough-and-tumble nature of the old port city/resource town.”

28. Nostalgia/Eccentricity/Quirkiness
“An interesting subculture; a renewed hope that the eccentricity of Vancouver continues.”
“I miss the older couple that used to have a Museum of the World on Main St. Anyone remember them? They didn’t have kids, the said, but spent the money on traveling; and when they were older hung pictures of all their adventures and invited the world to come visit them. You’d go in and get tea and a cookie and just walk around looking at their collection.”
“The quirkiness of a significant number of the residents.”
“Anybody remember the lady who used to walk her dressed up goose in a baby-carriage around Granville?”


Time Top, by Jerry Pethick

29. The Potential
“The still-evolving nature of the city. Its lack of establishment.”

————
Sources:
Thanks thus far to the following commenters, whose suggestions were incorporated, disguised, and/or ignored: Nemesis, terminalcitygirl, Renters Revenge, pretzels, jesse, BLM, rp1, Absinthe, RE Lurker, chubster, Aldus Huxtable, Paul Streppel, Froogle Scott, epte.

————

“How bad do you REALLY want a house in Vancouver? Part of being an adult is making sacrifices.”

The following comments found below the article ‘Would-be homebuyers shocked at Vancouver prices’ [CBC.ca 12 Mar 2012] that deals with a local couple with $315K to spend seeking a 2 bedroom condo somewhere in Vancouver:

“I read the comments here [at CBC.ca] and it reminds me of what everyone was saying 20 years ago…it’s too expensive, nobody can afford it…
20 years ago we bought in E Van for 300 grand, at 12 percent interest! That was a mortgage of 2700 a month. The same money today pays easily 600,000.
Give up all the crap you don’t need like car payments, vacations, fancy restaurants, fancy clothes, electronic this and thats and you’ll have the money.
It’s just a matter of priorities. How bad do you REALLY want a house in Vancouver?”

– kdrkim, 13 Mar 2012 12:44pm

“No sympathy here. Part of being an adult is making sacrifices. Everything you want isn’t always in your budget so you have to decide what is truly important to you and go after those things rather than sitting there complaining about how it’s someone else’s fault.”
– nsrv726, 13 Mar 2012 12:46pm

“I would like to be able to have this in East Van? Is that too much to ask?”
“Yes, that is too much to ask.
You want a Mercedes at a Chevy price. And yes, that is too much to ask.”

– CBCFanzine, 13 Mar 2012 9:28pm

“I think it’s unfair the cost of Ferraris are out of my reach. It’s not fair that I have to settle for a Honda.”
– ClosetIguana, 13 Mar 2012 8:18pm

“According to the graph he is making considerably less than the median income and he wants to live buy a place in downtown Vancouver or East Vancouver so he can be ‘be close to his friends’.
He thinks like a 12 year old haha.”

– cbcbcc, 13 Mar 2012 6:36pm

“Buddy has a choice to make: get a job that pays more money or move to a community he can afford. So tired of these whiners. Why does CBC put these ‘entitled’ people on the air? This guy is no victim.”
– jawardwinner, 13 Mar 2012 2:30pm

These comments headlined here for their common theme, that of “Those who complain about high housing prices in Vancouver simply have unrealistic expectations”.
The statement is disarming; it makes those who point to the housing bubble seem like spoiled children, they stand accused of being “entitled”.
This is convenient for those who seek a continuation of the status quo. The implication is that folks should stop being critical and get with the program (and prop up the market). The proponents often encourage prospective buyers to “work harder” but, of course, what they really mean is “borrow more”. Housing prices in Vancouver are most definitely not driven by earnings, they are driven by high leveraged borrowing.
Bubbles, by their very nature, overtly and covertly ‘conspire’ to perpetuate themselves; it’s hard to criticize them when they’re underway without looking superficially like a partypooper or a whiney brat.
– vreaa

“When I look at the actions of governments, I cannot figure out whether they are mostly stupid or mostly dishonest.”

“For most of us, housing is our biggest expense. One out of every five dollars we earn goes to build, buy, rent and run our homes. Facing high home prices, large personal debts, and an uncertain economy, fewer Canadians can buy a new home today than in the past, and they are choosing to rent instead.
Unfortunately, in many cities finding an affordable place to rent is nearly impossible. The most immediate problem is supply. Vacancy rates under 3 per cent push rents up. In Vancouver and the Greater Toronto Area, it’s 1.4 per cent.
Vacancy rates this low force our young people to move out of the city, threaten seniors on fixed incomes, and have a negative impact on local businesses.
That’s why this spring’s federal budget must put Canada’s rental housing market on solid ground, by pursuing low-cost, high-leverage policies that get jobs on the ground and build housing Canadians can afford.
Building and renovating rental housing will give cash-strapped Canadians more affordable housing options at a time when they’re being increasingly priced out. It will also create thousands of construction jobs to replace the 50,000 lost to slower new housing starts.
We’re calling on the federal government to use its spring budget to introduce cost-effective market incentives to encourage private-sector investment in rental housing.
These include:
• Low-interest loans underwritten by the Canada Mortgage and Housing Corporation (CMHC) to finance new rental construction.
• Tax reform to encourage owners to renovate and retain rental properties, providing an incentive to preserve affordable rental housing.
• Help for landlords to make rental housing more energy efficient, reducing costs and easing pressure on rents.”

Gregor Robertson, Mayor of Vancouver, in an article co-authored with Joe Fontana (Mayor of London, Ontario) in the Toronto Star, 7 Mar 2012

This from the discussion at vancouvercondo.info 12 Mar 2012:

“Why build apartments when developers can make quick and obscene profits on shabbily built condos and walk away even before the expiration of their faux warranties?
The only thing that will truly encourage construction of rental stock is a return to sanity in housing prices.”

– chilled, 12 Mar 2012 10:30am

“…“they” will start building affordable, quality rentals when people stop buying high-priced, crappy condos.
The construction industry is simply doing what makes them the most money. If you want someone to blame, blame the buyers and the governments which enable them.”

– patriotz, 12 Mar 2012 5:02pm

“Right, like the current government that decided to give ten grand to people buying a first home, which is to say, they decided to give ten grand to any developer who sells to a first time buyer, which is to say that they arranged for it so that rentals would have to bring in ten grand more to be competitive with sales. As often happens when I look at the actions of governments, I cannot figure out whether they are mostly stupid or mostly dishonest.”
– N, 12 Mar 2012 5:45pm

By the way: A plan for “tax reform to encourage owners to renovate and retain rental properties” means that tax-payers will be subsidizing landlords; this will apply even more government-backed upward-pressure on housing prices in Vancouver.
Governments can really make a hash of markets. Case in point: the CMHC itself was created with the idea of making housing affordable; by mis-pricing the risk of lending, they have supported a speculative mania in housing and made housing less affordable.
Frequent readers know our position very well:
No government can design a solution for Vancouver’s dilemma; we are trapped in a monstrous speculative mania, there is no way through but price collapse.
Government policies may precipitate the collapse, or they may give cocaine to the dying racehorse and let it limp along for a while longer (drawing in even more buyers for the slaughter), but, whatever a government does will not put off the inevitable outcome of a bubble.
– vreaa

‘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

‘Canadian Business’ Headline – “Prediction: The Canadian housing market will crash”


(graphic used by ‘Canadian Business’ to illustrate this story)

“The average price for Canadian homes sold in November stood at $360,396, according to the Canadian Real Estate Association. Meaning that in just 10 years, prices have doubled.” …
“Optimists may find comfort in the market’s resilience. In fact, a December press release from Re/Max boasts of a residential real estate market that “defied conventional logic and exceeded expectations in 2011.” But why should we take comfort in a market that defies logic? That is one of the key elements of a financial bubble.” …
“There is little argument among economists that houses in most major Canadian markets are, at the very least, overvalued. By some metrics, houses are less affordable now than at any point over the past 30 years. Rising prices draw people to the market in part because they’re afraid they will eventually be shut out. But what many fail to consider is that when ordinary Canadians are unable to afford real estate—even when borrowing at unusually low interest rates—the market will adjust. Unless our incomes go up, house prices have to come down. And there is a very good chance this will happen in 2012.” …
“Both the U.S. and the U.K. have already suffered crashes north of 20%. While different factors underlie their real estate markets, it nevertheless stretches credibility to believe that Canada will remain an anomaly.” …
“The heads of three of the country’s major banks (CIBC, RBC and BMO) expressed concern about the housing market at an investor conference this month. All agreed that increasing housing supply and growing debt means the market is reaching its peak. While they don’t foresee a crash, they acknowledged prices are likely to drift downward. Bank of America Merrill Lynch, meanwhile, predicts prices could fall between 5% and 10% this year. There is also a possibility prices will drop much farther over the next few years, perhaps as far as 25%. The scary part is that the direction of the economy ultimately might not even matter. If interest rates rise and the monthly cost of carrying a mortgage edges up, there’s little doubt that prices will fall, as rising rates make homes less affordable. But interest rates don’t have to rise for the boom to come to an end.”

“David Madani, an economist with Capital Economics, says that the reason prices keep rising, despite fundamentals that indicate they should be moderating, is because a bubble mentality is driving the Canadian market. “It’s this belief that prices are going to continue to go up, which becomes a self-perpetuating force,” he says. He explains that in good times, rising prices create a sense of urgency among home buyers who don’t want to miss out on the chance to benefit from soaring prices. So people pile in, pushing prices higher. This creates the appearance that housing is an asset that can only rise in value, and even more pile in.
But this line of thinking can reverse, and people can overreact to a declining market too. The greed that previously drove buying behaviour turns into fear that prices will fall indefinitely. This can be a self-perpetuating force. The result is that prices can dip farther than where economic fundamentals suggest they should be.”

“An argument sometimes used to defend the strength of the housing market is that foreign investors, predominantly wealthy Chinese citizens, are buying property here because Canada is a safe haven in a turbulent global economy. There are no actual data to support this claim, however. Even assuming it’s true, the presence of financially motivated buyers helping to prop up the market doesn’t inspire confidence. “They’ll just liquidate their positions,” Madani says. “They’re a much greater flight risk.” Any listings they dump on the market will only serve to drive prices down further.”
“When prices do start to fall, don’t expect a quick rebound like we saw three years ago. The average home price fell by 8.5% between August 2008 and March 2009, according to the Teranet-National Bank House Price Index, in a decline sparked by the financial crisis. By November, the market had already recovered. Part of the reason for the quick rebound was massive government intervention.” …
“That doesn’t mean that those considering buying a house today should necessarily let the prospect of a correction deter them. A house is firstly a place to live, not an investment. Bubbles occur, in part, because we forget that distinction. So buyers need to be comfortable knowing their houses might not increase in value over the next few years—and also that they could be worth much less.”
– excerpts from ‘Prediction: The Canadian housing market will crash’, Canadian Business, 12 Jan 2012

Exactly what the bears have been saying for years now; it is noteworthy that this argument is now being laid out by the MSM. All of these mainstream articles ‘prime the psyche pumps’, in that all market participants likely now know of the bubble ‘theory’. Once price action confirms their fears, buyers will freeze and sellers will rush to market. Just watch.
We agree with pretty much every word in the article, except for:
1. “That doesn’t mean that those considering buying a house today should necessarily let the prospect of a correction deter them.” [Of course it should deter them, unless they enjoy giving away money and hobbling their own financial future well-being. They can simply wait, and then later buy the same house for less money, or a lot more house for the same money.]
2. “There is also a possibility prices will drop much farther over the next few years, perhaps as far as 25%.” [For parts of Canada, perhaps, but these predictions are way too optimistic for the Vancouver market. Prices here will drop 50%-66%, and in some BC recreation areas as much as 80%, peak to trough.]
- vreaa