This extended anecdote and discussion from rentah at vancouvercondo.info on Sept 28th, 2009 at 9:28am –
“I’ve been a bear since at least 2004: A prospective buyer, looking for some semblance of sanity in RE valuations in Vancouver.
I see the profoundly out-of-whack fundamentals, the price/income and price/rent ratios that suggest prices should correct by >50% at some point.
My technical analysis of the price chart suggests we’ve had a sucker bear market rally into a double top. We’re still below July 2008 prices despite money being free. We were ironically & temporarily rescued by the fall 2008 economic crash and the resultant low interest rates.
From a sentiment perspective there is a surfeit of hubris in the bull camp. On some bull sites the bulls are running around like drunken soccer fans after a European Cup victory, kicking around the bears with impunity.
There are also stories of bears capitulating. There have been confessionals regarding folks buying, and major bear voices on the bull sites have fallen quiet.
All of the above suggests a double top is in place.
The most likely outcome now is price weakness as interest rates rise (next summer?) and listings start outstripping demand again. This will all occur through a time of ongoing weak economy and high unemployment. And once prices drop below the trough prices of winter 2008-2009 (15% off peak), the wheels will come off and we will see the really significant drops. My targets remain at least 50% off peak prices (real)
HOWEVER, [consider these quotes from realtor Maggie Chandler’s website]: “Vancouver is the Swiss Bank account of International Real Estate”, “The Olympics will at least double the number of people in the world that have heard of Vancouver and this will result in the growth going forward. The next 10 years will be more exciting than the last ten as we see escalating demand. Five to seven years out you’ll be glad you bought today.” [Reading this] any bear is remiss if they do not consider the bull case.
IMHO, the only things that could keep this bubble going are:
1. Cheaper than free money.
By this I mean ongoing very low interest rates, PLUS a series of government incentives to buy houses. This includes any further stimulus packages that rob from general taxpayers to support the housing market, in any form. This would be fundamentally very, very unfair on prudent citizens who don’t own property. Any such moves would lead me, personally, to consider taking this battle public. One could very vocally take to task any politician who moved to keep this asset bubble afloat at the cost of the general taxpayer base, and at the inevitable cost of FUTURE Canadian taxpayers. I don’t think we’d be alone in such a fight, but we would be in the minority, as homeowners make up a strong lobby group.
2. Some kind of freaky ’safe-haven’ status for Vancouver.
The fact that housing prices have crashed just about everywhere in the whole world except in Vancouver, may just make rising prices here a self fulfilling prophesy. This is the argument that Vancouver will become the new Monaco, with wealthy folks attracting each other and higher prices driving even higher prices (a la the Chandler suggestion). I personally believe that the chances of this happening are very, very low, but not quite 0%. I also believe that these arguments continue to simply be stories that local speculators are telling themselves, and each other, as they continue to buy, buy, buy. But, one has to prepare for all possible eventualities. What I wouldn’t do, if this came to pass, is chase the bubble prices and buy. I’d likely move, or just keep renting and investing.”