“I had an informal conversation with a Burnaby accountant working as a debt manager. He said most of his clients are so ridiculously over-invested in GVRD real estate that he fully expects a hard landing for Vancouver.”

“I had an informal conversation with a Burnaby accountant who has been very busy working as a debt manager. He said most of his clients are so ridiculously over-invested in GVRD real estate – significantly negative cash flow returns, average mortgage debt per client of $600K, etc – that he fully expects a hard landing for Vancouver.”
Airedales at VREAA 27 Mar 2012 2:10pm

16 responses to ““I had an informal conversation with a Burnaby accountant working as a debt manager. He said most of his clients are so ridiculously over-invested in GVRD real estate that he fully expects a hard landing for Vancouver.”

  1. The property ladder has an illusion of worth, but only if you pay the balance owing. Start with a 200k mortgage, reinvest, and suddenly it’s a 600k mortgage. Now we find out who the real ‘homeowners’ are.

    • When the fur and feathers fly we will finally know who was truthful with us and who was just talking bullshit and bluster. We will see. When the tide goes out. So sick of all the posturing and bragging about how much houses went up blah, blah, blah. Anyone else nauseated by it yet/

      • West Coast Woman

        Absolutely nauseated by it – and by the constant blustering by the real estate agents and developers, as well as the building frenzy that’s resulted from this speculative environment.

        I believe Vancouver may experience the 1930’s all over again. Bankruptcies and foreclosures are likely to begin soon. Too many of the people who have been buying real estate in this City have over-extended themselves, and when they find out their properties can’t be sold because most people can’t afford or won’t pay the outrageous prices they’re asking, they’ll be left holding the bag. Then they’ll either face foreclosure and/or bankruptcy, or they’ll leave the country so they don’t have to face the consequences.

        Since Vancouver has no real economy outside of residential construction, we may just re-experience another 1930’s type Great Depression, with many “owners” of condos and homes are forced to give them up or turn them over to the City for outstanding taxes.

        Perhaps however there is a bright side to the potential collapse of Vancouver’s housing market. At least it would extinguish the myths parroted by the developers and our City politicians that Vancouver has a shortage of land and/or housing and so we must build high density condo towers everywhere to make the City affordable.

      • Basement Suite

        “Perhaps however there is a bright side to the potential collapse of Vancouver’s housing market”

        Of course there is. Those who are left standing might actually be able to buy a home. I call the “collapse of the Vancouver housing market” the great CORRECTION. That is the medicine this city needs. Those who are hurt the most (multi-dwelling owners/speculators like so many I’ve talked to and heard about) will have earned it.

      • The consumer errors by assuming value is capacity for leverage. They are about to be schooled in economic application. God bless the renter because they will save some buyers from default and provide a base line for market stability.

  2. Yes. Appalled by the building frenzy. How many unnecessary condo towers have been built, are being built, or are in the planning stages right now? Plus all the conversion of forrest and farmland out in the valley into more housing, just because of pure speculative frenzy. I think Vancouver is going to have a real estate hangover that will last at least a decade if not more.

  3. 4SlicesofCheese

    http://www.canadianbusiness.com/article/77314–bmo-survey-suggests-2-interest-rate-hike-worries-4-in-10-homeowners

    Four-in-10 Canadians would be unsure about whether they could afford their homes if their mortgage rate went up by as little as two percentage points, according to a new study from the Bank of Montreal.

    4 in 10, my god. At least they built up a lot of equity?

    • Ralph Cramdown

      Even if they built up a lot of equity, most of them, once prices start to slide and sales to crater, will follow the market down with insignificant price reductions as their equity dribbles away over a year or three, instead of getting out in front of it, cutting aggressively and selling early.

    • Do you ever get the sense that those same people have no sense of how equity evaporates when interest rates rise so that even while debt burdens grow wealth withers? If they really knew then almost nobody would ever buy with 5% down at our current valuations.

      I was looking at some condo sales data that Greg put up over at The Economic Analyst by the way and Yikes does that ever tell a story of falling prices. Virtually all the sales are coming in below ask. The underwater sounds of glub, glub, glub do come to mind.

  4. I shall first blame governments for not doing enough, then when they do, blame them for doing too much. This is the way of things.

  5. Basement Suite

    “Four-in-10 Canadians would be unsure about whether they could afford their homes if their mortgage rate went up by as little as two percentage points”

    Well they won’t have to worry about that for many, many years.

    • True, but when prices fall they will not be able to sell without writing a (big) check and their credit rating will be toast. All this is while making regular mortgage payments! Plus, there will be a reckoning as re-fi day approaches which will weigh heavily on the psyche.

    • The scary part of that statistic is that a 2% rise in interest rate is still way below the historical average. Since the early 80’s we’ve seen rates at 21% and rates at near 0%. The notion that rates will never rise is embedded in the psyche of the house-horny. The Titanic was thought to be unsinkable too.

      • Basement Suite

        Actually the notion that rates will never rise is embedded in US policy and promises by the US fed, and the Bank of Canada following the US fed like a lap dog. Free money caused this whole thing, nobody values a million dollar loan anymore, a million dollars is nothing in this city: What the F**K??? That is how free money causes hyper inflation, for example in house prices. Ending free money would end this bubble hard, and we need an end to it. Sub 3% mortgage rates are STUPID low.

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