Vancouver Sun Headline – ‘Five more Metro Vancouver homeowners hosed in a falling market’

“A recent report from Central 1 Credit Union suggests a rebound in Metro Vancouver’s housing market is coming. However, at the moment there are property owners losing hundreds-of-thousands of dollars on their investments.”
There follow examples of homeowners losing money, care of @mortimer_1:
1. Burnaby. Bought $1.9M May 2016, Sold 2019 $1.495M, Loss $405K + expenses (over 21%)
2. Burnaby. Bought $3.11M 2016, Sold $2.1M 2019, Loss $1.01M + expenses (over 32.5%)
3. Vancouver Westside. Bought $2.7M Feb 2016, Sold $2M 2019, Loss $700K + expenses (over 25.9%)
4. North Vancouver. Bought $2.36M Mar 2017, Sold $2.05 2019, Loss $310K + expenses (over 13.1%)
– from David Carrigg, Vancouver Sun, 5 Dec 2019 (image: Anselm Kiefer)

Seeing terms like “homeowners hosed” and “falling market” in top-of-the-page Vancouver Sun headlines is certainly worthy of note – particularly for those of us who have been following this long enough to have endured years and years of local media entranced with rising prices. (Anybody remember the well-known local TV anchor exclaiming “I love Real Estate!” ?)
However, note that the Sun still talks about homes as “investments” – perhaps that will have to change before we’re done.
Here and elsewhere, some discussion of ‘soft landings’ that is clearly based more on hope than observation.
As noted previously, our target prices should be determined by utility value of properties, not on imagined future sale prices. Current prices are still far above those levels.
It ain’t over.
– vreaa

Vancouver RE Prices – Where is the Support?

REBGV headline detached averages have dropped from peak $1850 K to current $1486 K, about 17%.
Sleuths such as @VanREflipflops have revealed many examples of substantially higher drops.
At what price levels will support come in? and from where? and when?…
All of this currently speculative (cough, cough).
Using the price chart and other past markets as a guide, REBGV headline detached prices (real, adjusted for inflation) could drop back to support determined by prices seen in 2013 (-45% from peak), 2009 (-60%), or even 2003 (-78%).
This will still seem incredible to most, but it is the lesson from comparable speculative manias.
Are locals going to be lining up to overextend themselves into RE anytime soon? If not, prices still have a long way to drop.
– vreaa

Money Laundering & Vancouver Home Prices

“The cost of buying a home in B.C. increased by as much as five per cent last year due to more than $5 billion in dirty money from organized crime laundered through the province’s real estate sector, according to a new expert panel report.

Former deputy attorney general Maureen Maloney chaired the panel on money laundering, which released a report Thursday that concluded it “cautiously estimates that almost five per cent of the value of real estate transactions in the province result from money laundering investment.”

In addition, she concluded: “The estimated impact of that would be to increase housing prices by about five per cent.”

“Successfully reducing money laundering investment in B.C. real estate should have modest but observable impact on housing affordability,” read the Maloney report.”

– excerpt and image from ‘$5 billion laundered through B.C. real estate, inflating home prices: report’, Rob Shaw & Joanne Lee-Young, 9 May 2019

An extra 5% price rise last year? Gee, that’d be the difference between supernatural 7% a year housing price increases that have characterized our bubble, and… inflation (about 2%). [But we don’t think this means we can conclude that this has been a long term effect. It may have been, but we can’t be sure].
As readers of this blog know, we’ve long thought that the primary driver of the bubble has been local buyers prepared to extend debt to the gills to get in, and that those buyers have been particularly besotted by the ‘Chinese-are-coming’ story.
There has, of course, been a direct effect of foreign-buyer-demand, but this pales when compared to local speculation.
Money-laundering juice certainly could have contributed, both directly, and perhaps more importantly indirectly by further cementing the foreign-demand story.
Interesting to think that it may have been a critically important amount.
With a coming clampdown (or even threat of a clampdown) it’ll be interesting to see the effects this has on prices going forward.
Speculators (foreign and local) hate falling markets, and floor prices determined by fundamentals are far below.
– vreaa

“Psychologically, They’re Ill-Prepared” – “Canadian Chaos Looms”


While Canadian bank advocates and their skeptics exchange words, the formerly-white hot housing market is now in deep freeze. March sales in Vancouver collapsed by 31.4% year-over-year according to the local real estate board, the worst showing since 1986 and down 46% from the 10-year average for March. Prices also lurched lower, with the benchmark detached home price falling 10.5% year-over-year to C$1.44 million ($1.08 million). Things are more stable in Toronto, where March sales and benchmark prices were little changed from a year earlier, but those figures remain 40% and 14% below their respective levels from March 2017.

As the housing market sputters, the highly-leveraged Canadian consumer displays increasing signs of distress. According to the Bank for International Settlements, Canada’s household debt stands at 100.2% of GDP as of the end of September, by far the highest ratio among G7 economies (the U.K. is next at 86.5%), while the debt service ratio, or the percentage of disposable income allocated to principal and interest payments, rose to 14.9% in the fourth quarter per Statistics Canada, just shy of the 2007 peak.

That debt burden is starting to weigh on consumers. Auto loan delinquencies rose to 0.97% at year-end according to Equifax, Inc., the highest since 2009. At the same time, 36% of new auto loans in the fourth quarter were leases, the largest such share since 2007. Bill Johnston, vice president of data and analytics at Equifax Canada Co., noted that “we’re starting to see consumer behavior shift to keep the payments as low as possible.”

– excerpt from ‘”Psychologically, They’re Ill-Prepared” – Canadian Chaos Looms’, from Grant’s Interest Rate Observer, via Zero Hedge, 11 Apr 2019

Keeping Up With Other Bubbles – Australia Suddenly Not Running Out Of Land Anymore – “Aussie House Prices Could Halve”

It was supposed to be different there, too

House prices in Sydney and Melbourne could fall by up to 25 per cent this year alone and “there’s a chance they could fall by half” in the coming “property bloodbath”, an economist has warned.
LF Economics founder Lindsay David, who has been warning of the looming property crash for the past five years, said in a report today the recent house price falls were just the beginning.
CoreLogic data for January showed Sydney and Melbourne prices were now 12.3 per cent and 8.7 per cent down from their respective peaks in July and November 2017, with Melbourne falling at “the fastest rate ever seen”.
“We think there’s a chance property prices could fall by half in Sydney and Melbourne over the long run,” David said.
“I wouldn’t be surprised by falls of at least 40 per cent. When all hell breaks loose you’ve only got so many buyers out there.”

His base case of 20 per cent falls in calendar 2019 is significantly more bearish than other experts. AMP Capital is tipping total peak-to-trough falls of 25 per cent in Sydney and Melbourne, while UBS is tipping 25 per cent with a “rising risk of 30 per cent”.
David bases his forecasts largely on the “debt accelerator”, which is strongly correlated with house price growth six months forward. Latest data indicates the debt accelerator is “falling sharply” in Sydney and Melbourne.
If that happens, Sydney and Melbourne “will suffer peak-to-trough falls never experienced before, outside of the 1890s depression and real estate collapse”.

– excerpt and image from ‘Property bloodbath’: Aussie house prices ‘could halve’, Frank Chung, by way of New Zealand Herald, 20 Feb 2019

Watershed? or Dam-Collapsing? – Mainstream Media Quoting Vancouver RE Bear-Tweets, and Predicting Shrinking Realtor Numbers – “What they’re used to is not what real estate is typically like.”

“Warning: Some viewers may find the following footage distressing…”

“There’s a cottage industry emerging on Twitter, with various accounts and followers seeming to take delight in the financial woes besetting Metro Vancouver homeowners hoping to sell their homes, or selling their homes at crushing losses. … Here’s a look at five examples highlighted on Twitter of homes in Vancouver and West Vancouver where the owners took a bath, or are at least one foot away from a nasty fiscal scolding…”
– from ‘Five examples of Metro Vancouver homeowners losing big in a plunging market’, David Carrigg, Vancouver Sun, 7 Feb 2019

Now you notice? -ed.

“The softening housing market could lead to tough times for some realtors, especially those who have recently entered the profession, said the president of the Fraser Valley real estate board. “I think it’s going to be tougher for the more-inexperienced realtors, those who are three or four years in,” said John Barbisan. “What they’re used to is not what real estate is typically like.” The 35-year veteran said agents will be forced to be more like “consultants than auctioneers” as they help to connect buyers and sellers. …
According to the council, there were 25,987 licensed real estate professionals in B.C. as of Dec. 31 — a 36-person drop from Sept. 30, although still slightly higher than June 30. The dramatic increase in the number of licensees — from about 21,000 in 2012 to 26,000 in 2018 — seems to be slowing.”
– from ‘Sales slump could signal tough times ahead for B.C. realtors’, Glenda Luymes, Vancouver Sun, 8 Feb 2019

We can recall when BC Realtors crossed the 10,000 mark. Seems a fair bet we’ll go back below that number once all is shaken out. -ed.

“Within artistic communities in Vancouver it’s hard to spend more than 15 minutes at a social gathering without talking about the cost of rent or knowing of someone who is being evicted.”

Ian Wallace, Construction Site (Olympic Village) III, 2011. Photolaminate and acrylic on canvas, 183 x 244 cm.

“When you’re in Vancouver, within artistic communities, it’s hard to spend more than 15 minutes at a social gathering without talking about the cost of rent or knowing of someone who is being evicted,” says Am Johal, director of community engagement at Simon Fraser University’s Vancity Office of Community Engagement.

In my day-to-day in Vancouver, I find myself preoccupied with constant reminders of my own impermanence. Exiting my beloved Mount Pleasant rental apartment, I’m hit by a thud of anxiety each time I see a development notice erected in my neighbourhood. I pass by so many of my once-favourite galleries (and former places of employment), now repurposed or left empty. Friends and artists leave. Those of us who remain spend most of our time defending the choice to stay. Our defence often sounds optimistic, perhaps naive: staying here and making art is important, too.

In this five-part series, I intend to think through how the housing crisis is having an impact not only on the production of art in Vancouver, but also on art’s responsive and changing communities. Issues of unaffordability, including high rent and inaccessible housing, go beyond dwindling supplies of accessible gallery, home, institutional and studio spaces. Complicating these issues is that artists and art centres are often themselves gentrifying elements within a city, a phenomenon already long-acknowledged and in-process in Vancouver. If we know well by now that unaffordability generates and exacerbates inequality generally, it feels necessary to emphasize that it also generates and exacerbates inequality, and tension, including class stratification, within artistic communities, too. It can be a contradictory conversation or, at least, a circular one. But if we acknowledge the role of the arts in gentrification, we should be looking deeper at what this disparity of opportunity in culture comprises. If the art community is asked to navigate, evade or compromise an ever-tightening commercial grip, we should really be talking about who in that community is benefiting, and suffering, most from unaffordability.

– image and excerpt from Who Has the Right to Art?, Alison Sinkewicz, Canadian Art, 31 Jan 2019.