Monthly Archives: May 2008

Visual Anecdote – No Doubt That Easy Lending Fuels Vancouver RE Market

This Canada Trust billboard from the window of the TD branch at 10th Ave West and Tolmie –

Vancouver RE Assessment

This from Boom and Bust at Rob Chipman’s blog 05.30.08 at 2:43 pm

excerpts –

“I’ve lived in San Francisco and New York. I recently returned to Vancouver, where I was born and raised. I don’t think the NY and SF markets can be compared to Vancouver. The former are major financial and industrial centres. NY and SF are full of high paying, professional jobs. Both centres attract immigrants and investors from around the world. Both are bigger, have better dining and entertainment. Vancouver is a place I’ve come back to because I’ve made enough money in the U.S. that I can afford to. Vancouver is a lifestyle city for which you pay a lifestyle tax. I think San Diego and Miami are more comparable cities.”

“This, make no mistake, is a bubble. At the root of this bubble are very encouraging long term fundamentals. Vancouver is a nice place, it is growing, immigrants and Eastern migrants like to live here. However, at the root of every bubble is a good story. I’d bet that 20% of the recent run-up is due to real economic fundamentals. 80% of the recent run-up can be attributed to the great credit boom. Lower interest rates, longer amortization terms, lower credit standards, stated income practices, pre-sales and access to debt led to an amazing run-up in property values. Values have now stretched affordability to its limit even in this low rate environment. Property values, if all else constant, should only increase at the rate of income increases.”

Vancouver Compared With A ‘World Class City’.

This from doubter at Rob Chipman’s blog 05.29.08 6:51 pm

“I’m on vacation in New York City. Several things strike me about this city in comparison to Vancouver that make me wonder if the Vancouver real estate inflation/bubble (depending on your bent) isn’t almost all psychology/delusion (ditto). The first thing I noticed within 24 hours of being in NYC is that Vancouver has become a pretty miserable place. People are much happier, friendlier, and more relaxed here in The Big Apple. A related observation is that the percentage of people talking on cell phones or listening to iPods seems to be much, much lower than in Vancouver. People here actually walk around and talk to one another. That “walking around” bit is the next thing that seems to be an obvious difference. In New York, people are out and about. Maybe that’s partly because there are, you know, THINGS TO DO. There are places actually open after about eight o’clock. And, next point, those places don’t all seem to be professional sporting events. In fact, and this really surprised me, pro sports seems to be far more low key here. Museums and art galleries and plays and such outnumber sports stadiums by an amount that would absolutely stagger any Vancouverite going on about “world class city status” only being achievable by building yet another stadium (or Olympics venue, for that matter; NYC is probably fortunate to have lost out on 2012).”

Moving To Montreal – “Why the difference I wonder?”

Another family moves. This from hiandre at RE Talks, 2008 May 26, 10:54pm

“Having spent my first 22 years in Montreal, and the last 18 here, it is time for me to go back “home” to Montreal. Mostly family reasons, but also financial incentives for sure. Also having young kids snow is far more fun than the constant rain… I have many fond childhood memories: snowball fights, tobogganing, skating, snowmobiling, snowshoeing, snow forts, wood burning fireplace going while snow is coming down, etc… Can buy a new quality house with 24,000 sq. foot lot for under $258k, 30 minutes from Montreal. The quality seems far and away above any entry level home you would find in BC. Many homes in Montreal are commonly built using brick, stone, hardwood floors, etc… How many entry level homes have you see with these features in BC ?  Why the difference I wonder ?  Currently selling our home in Surrey, and will be able to buy house with almost no mortgage in Montreal. So am thankful for being lucky and building this equity in just a few years.  As much of an optimist I am, this market is coming to an end in BC in IMHO. Originally was planning on selling next year, but all the signs / my intuition are pointing to “get the hell out now” Hopefully will be a soft landing for those of you staying here.”

Outrageously Poor Cashflow – “Buy & hold. Great opportunity! Tenanted up & down.”

‘Investors’ are still being encouraged to buy Vancouver Real Estate in the hope of future price increases. Here’s an example of such encouragement from the MLS, V697723, culled 25th May 2008.

This property in Point Grey (3963 W 11TH AV, 2494 sq ft house, 6044 sq ft lot) has a price tag of $2,380,000. A mortgage at 5% rate amortized over 25 years would cost the buyer $13,800 per month.

The cheeky Realtor Blurb on MLS states: “Well maintained, but no arch master piece. 3 bdrms suite down. Definitely not a drive by. Tenanted. Buy & hold. Great opportunity! Tenanted up & down.”

Even in Point Grey, this can’t possibly be fetching more than $5,000-$6,000 per month rent. Thus the realtor is encouraging someone to ‘Buy and Hold’ this ‘investment’ at negative cashflow of over $7,000 per month. This is another bald-faced bet on property price direction, and another indicator of how far prices have become removed from fundamentals in the Vancouver RE market.

“I work as an Safety officer on these sites.”

Another local condo developer has run out of money. In a comment on the CBC coverage, ‘Renews Boy’ (2008/05/22 at 2:08 AM ET) gives us further insight into the poor construction quality in the lower mainland –

I’ve worked in construction in the lower mainland for about 12 years now. Honestly, I have never seen it so bad when it comes to craftmanship that is being done on the new developments. I never see a carpenter use a hammer and nail to built a proper wall or floor. It is all done by nail gun now. The faster they can put them up the more the profit. I know of one building where the exhaust fans were covered over by the drywallers in 100 units. I have seen alot of dangerous and unsafe acts going on at several construction sites. I know because I work as an Safety officer on these sites in the Greater Vancouver Area. The mess that will happen after 2010 will be make the leaky condos look like a joke.”

Young BC-born Couple Leave Vancouver Because of RE Costs – “Early financial independence instead of mortgage servitude.”

This post from ‘Jordan’ as a comment (21 May 2008 at 10:29pm) in the recent “Anybody else here know people leaving Vancouver” thread. The importance of these kinds of losses to BC merits a front-page post:

“My wife is leaving this week to see Toronto for the first time, looking for an area we could raise our family in. We’re both 26, born and raised in BC and now have 2 young kids. She’s never been away from them for more then a night so this week is going to be hell for both of us, but we don’t see any practical alternative. It’s a heart wrenching decision leaving our families here, but we want to raise our kids in a house with a yard without selling our souls to the bank. We can get a house there for 50% less and have the mortgage paid off in about 10 years. This will help us to fulfill our dreams of early financial independence instead of mortgage servitude.”