Monthly Archives: September 2010

Spot The Speculator #17 – “Inability to meet loan payment… The company owns almost 200 pieces of real estate. Many of the B.C. holdings are encumbered by large mortgages.”

From ‘City goes after assets of Games developer’, Globe and Mail, 30 Sep 2010“Councillor Geoff Meggs said the inability of developers Peter and Shahram Malek to use other assets they own to meet their loan payment was a “red flag” for the city. … Sources say it’s not clear the exact value is of Millennium’s holdings or of the Maleks personally. That means no one knows at this point whether there is enough security to cover any shortfalls at the village if sales of the residential units never generate enough money to cover the construction loan and the price of the city’s land. … Land records show that the company owns almost 200 pieces of real estate, while Shahram Malek has 15 different properties listed under his name. The Malek family, which ran a construction business in Iran before coming to Canada in the 1980s, also has holdings in Europe and the Middle East. However, many of its B.C. holdings are encumbered by large mortgages and, in some cases, more than one lender is involved.”

Letter From Sweden

Hey! It’s different here. It can’t be different everywhere. … (The commonality is free money.) -vreaa

holgs at 30 Sept 2010 12:40am
“I sit in Gothenburg, Sweden, still waiting for the bubble here to pop. Nowhere outside of China can compete with Vancouver’s bubble, but it is pretty equivalent to Victoria, at least here in Gothenburg.
Stockholm and Vancouver are pretty similar though, with a 27% increase in condo prices in the past year in Stockholm since the “emergency” interest rates kicked in. I can’t find stats right now but I have heard anecdotes about people buying a small apartment (bostadsrätt) for 4000000:-, or about $610k.
I am Canadian and have been waiting for the global credit bubble to pop since 2004-2005, so a really, really long time. Now sitting here in Sweden where sales and prices still seem to be rising due to many factors, while the bubble finally seems to have popped in my homeland. Aaaaargh!
The problems here are many:
1.) SBAB is a huge government run bank here and is nationalized, and they offer variable rate loans at 1.5% or something ridiculous. (Don’t quote me on the percentage, but it’s really low, basically free, and all other banks need to compete with that)
2.) Nobody here amortizes their mortgages. It’s so passe to do that, why bother as long as house prices are rising?
3.) Prices have been rising here since the mid 90s, nobody in the younger generation even remembers what it was like to have falling prices. Just like Canada, the lessons of 2008 have been very quickly forgotten. The second graph linked here shows inflation adjusted prices over all of Sweden; notice the continual uptrend since 1995. Why would you believe in falling prices?…..tning.html
4.) Due to the EU, Sweden is forced to maintain its interest rates at equivalent rates to the rest of the union, and in this case (as the recession wasn’t as deep here), the rate was far too low to prevent a housing bubble from continuing its rise.)
I have never seen so many brand new Audi’s, BMW’s, and Mercedes’… Was it only two years ago we were all discussing smaller environmentally friendly cars, and how people would be using their cars for longer before buying new ones? I am positive that a majority of these cars are being bought with loans that are now affordable because the variable monthly cost of the house has dropped some 60% from 2 years ago. It is still possible to own here for almost the same amount as renting, but that is only due to the “emergency” interest rates, which you can only get on a VRM and could go back up from 1.5% to 2008’s “normal” 6% faster than most of these people realize, at which point their depreciating beemer will seem more like an anchor.
On a positive note, the rules are changing here on October 1. On that day, there is a maximum “ceiling” on each loan of 85%, so you need 15% down to buy. (As of today, you can buy with 0% down.) I have heard that there are ways around it (ie borrowing the first 15% from another bank at a higher interest rate) but in any case it may be enough of a push to finally kill this market and allow us to place a bid on a place without a bunch of no-savings kids to outbid us by 20%.
I thought it might be interesting for you all to know there is another westernized country in the world where the bubble is still going strong… I pray for it’s death staring October 1, 2010.”

“Here’s the final installment of ‘My Sister is Trying to Sell Her House in Coquitlam.'”

oneangryslav2 at 29 Sep 2010 12:55pm“Here’s the final installment of ‘My Sister is Trying to Sell Her House in Coquitlam.’
To recap: put it on the market for (now I can be specific) 689K at the end of June, had some looks and a few open houses over the course of about 8 weeks, then lowered the price to 655K in late August. This caused a spike in interest and it was sold about 10 days later for full list.
The new owners? A young, married couple with a newborn, who had sold their old place (townhouse) and had to be out by the end of September, and were in a rush to find a place to buy and move into (like the thought of renting for six months never occurred to them–though, if they purchased the townhouse a few years ago they would have benefited from the rising market and the capital gain upon sale and who wants to be “throwing money away on rent” anyway!).
They will be putting in a kitchen downstairs in order to have a mortgage helper. It’ll be interesting to see what kind of financial shape this young family is in in 2020. As for my sister and her family? Renting, and plan on doing so for about two years.”

‘Under’ Construction – The Mouldy Shoe-Box Knockdowns of 2050-2060

Three houses awaiting completion on the 4700 block of West 11th Avenue.
There is nothing unusual about the ones in the photos, there are dozens of others just like them under construction all over the lower mainland. These three would currently come on the market for about $2.25M each, as per nearby comparables (Point Grey; new; 2500+sqft; 33×122 ft lots).
Concrete basements; almost everything else will be plywood, drywall and stucco. Quite possibly the worst materials for our climate. There’s a good chance they’ll need new roofs before their mortgages are paid off.
Behold the mouldy shoe-box knockdowns of 2050-2060.
As Buffett said, “Price is what you pay, Value is what you get”.  – vreaa

[Thanks to ‘westsidefrank’ for the photos]

scullboy at 28 Sept 2010 6:05am – [in response to an article in the Vancouver Sun 27 Sep 2010 suggesting a need to relax construction rules] “I have lived in most of the provinces (with the exception of the Prairies) and I have to say Van/BC has the worst. buildings. EVER. You can rent nice flats and apartments all over Montreal, some of them date from the early part of the 20th century. The windows may still be single paned glass but the construction is still rock solid. When you walk in to some of the apartment buildings, you can *feel* how solid they are. Maybe it’s because they aren’t made of pressboard, so the acoustics are different… I don’t know. We’ve survived 2 hurricanes in the last 5 years out here in Halifax and except for damage caused by uprooted trees, the region did just fine. Hell even in Toronto most of the units feel solid (though I’m not sure about those buildings at Spadina and Front).BC is the only place I’ve ever lived where it’s common to see those massive rain screens. Homeowners in BC are the only people in the country stupid enough to buy the “it’s different here, we have special housing needs” bullshit.
If anything Van/BC needs TIGHTER restrictions on building. Frankly I don’t hold out much hope that the city/provincial homeowners are bright enough to clue into that. If anything I’d expect the “It’s different here” meme to produce an even more stupid and greedy batch of buyers to accept even shoddier construction.”

Anonymous at 28 Sept 2010 8:22am“My house in Winnipeg was built in 1910 out of 2×8 redwood… [We lived in it through the 1980’s] …The beams in the basement were so hard you couldn’t drive in a nail. In February, when it was -40 deg. outside we were wearing short sleeves around the house.
Fast forward 20 years in time and 2,000 km in space and here I am in a rackety townhouse built entirely out of 2×4s with almost no insulation, wet and moldy where the lightest gust of wind blows right through it… my bills are double those from frigid Manitoba and we wear hoodies in the house half of the time.”

mflat at 27 Sep 2010 4:48pm – “Took a long walk from downtown to Main & 25th to check out some houses. First up was V840359, listed at $720K. This is a Vancouver Special built on one of the worst bogs in the city. Take a walk down 18th sometime, and have a laugh at all the tilted foundations where neighboring roofs are almost touching due to the house angle. The house listed was like a horror slum on the inside. The worst part of it was the room angles, with sloping floors, and walls/ceilings that felt trapezoidal due to the sunken foundation. No thanks.”

ulsterman at 28 Sep 2010 8:51pm“I believe this to be one of the most galling aspects of the insane housing prices on the LM. Not only are they insane to anyone in the world beyond the bubble of the “Playground of the Gods”, but the quality is so pathetically poor.
When my civil/structural engineering dad came to visit me in 2005, he was shocked by the flimsiness of the houses built and being built. I have a distinct memory of helping him cut a hole in the wall of our modest little Irish home – we had a lot of fun (not) drilling through the two layers of brick separated by insulating foam. Our little house – two layers of red brick – solid as a rock 60 years after construction, and yours today for about C$200k in Belfast. And yes, the median income there is the same as the income here. Shocking concept, I know.”

And updated with this contrarian word:
say what? at 28 Sep 2010 11:24pm – “Plywood, OSB, wood in general is structural and has nothing at all to do with building envelope. First step toward eliminating leaky walls: overhangs and sloped roofs! Second step: proper installation of building envelope, especially around windows. Flimsy construction? That plywood provides shear strength primarily, and there are many interior sheeted shear walls, required here by engineers, that you would never seen in a non-earthquake zone. The walls themselves are bolted down to foundation and the successive floors are tied down to foundation using metal straps or rods, all of which was not the case in the past. Softwood lumber is not treated with anything, it is just dried in a kiln. Wet lumber and plywood dries out once under cover, and takes on moisture content proportional to air humidity, and at that moisture content does not deteriorate. Outside walls are required to be 2×6 for greater insulation… the list of things I read that are just wrong or clueless goes on and on.
Before you denounce this post as the rantings of a rabid housing bull whose livelihood depends on the Vancouver real estate ponzi, just take a breath and read the next sentence. Houses here are needlessly complex in design, and drastically overpriced. The market here will eventually fail in dramatic fashion, causing rampant unemployment amongst the hated dependent industries.”

“A buddy of mine on the Island put his home on the market in August…..not a sniff. He is freaking out as he had hoped to ‘move-up’ and is carrying a big monthly mortgage.”

pb at RE Talks 27 Sep 2010 10:25 am“I have a buddy on the Island. Just finished the renos on his home. Put it on the market in August…..not a sniff. His house is in a very desirable neighbourhood. He is freaking out as he had hoped to move “up” and is carrying a big monthly mortgage. I told him there are still buyers out there, and to be willing to move south with his negotiations in order to dump….
Went to a downtown art show this weekend. Unanimously, the boomer crowd talked of …”stick a fork in it.” This, the same group (many I know) were speaking a different tune a couple years ago…. They were afraid that the CMHC insuring mortgages may have been the biggest mistake ever….they were afraid that in a severe RE downturn it wasn’t fair that taxpayers should have to bail out negligent buyers…”

Avoiding Vancouver – “You know how many people I know who have moved out of the ‘Best Place On Earth?’ People who make their money here, and try to be SFH owners, are fighting an invisible force. It is like head-tax for the right to be here.”

unicas on RE Talks 27 Sep 2010 at 5:44pm“You know how many people I know who have moved out of the ‘Best place on earth’? My clients, my tenants, my former co-workers and others. To Kelowna, Alberta, Ontario, the U.S. In fact, in the past one and half year, I have 4 tenants, young ones, quit the lower mainland.
I never bash a person who rents in Vancouver. If I were to start over again knowing what I know today, I wouldn’t choose to stay here. A million dollars is a lot of money in most places, for that here you can hardly buy a decent shelter to sleep.
For people who make their money here and try to be SFH owners, without help of family, they are fighting an invisible force most people in North America don’t ever have to deal with. It is like head-tax for the right to be here. For those young and with transferable skills, to move away is not a bad thing. you dont lose much except the best place on earth tag on your door.”

“I bought a new single detached house in Markham, Ontario, after leaving Vancouver 2 months ago.”

LY at 27 Sep 2010 2:43pm“I bought a new single detached house 2900 sq ft lot size [likely larger? – ed.] in Markham, Toronto after leaving Vancouver 2 months ago. I know it is not the time to buy but my kids are growing up and my cash is just earning 1% in the bank. I wrote just to show how super-bubbly Vancouver housing price are compared to bubbly Toronto.
I bought the new house for $489,000 with builder absorbing the HST, plus $15,000 upgrade (granite, hardwood first/second floor) this month.
It is a 3 bedroom with den, 3 bath, with basement, single garage plus a yard. Location is around good top rank schools. Markham is like Richmond or Coquitlam in Vancouver.
I rented in Richmond BC for 5 years and I couldn’t buy any old single detached house of that lot size even in Coquitlam near the mall. I could have only bought a shoebox-size 10 years or older townhouse, or an overpriced condo. So I left Vancouver for Toronto and it was a good decision. If housing prices are to crash next year, Vancouver would be the epicenter of the that disaster.”