RE-Tweet – “Conversation I had recently reminded me of my days living in Dublin pre-RE collapse there and the scary parallels with #VanRE now.”

“Conversation I had recently reminded me of my days living in Dublin pre-RE collapse there and the scary parallels with #VanRE now.”
– tweet, Eric Lam, @elam101, Vancouver, 22 Apr 2012
Eric describes himself as “Parent, foodie, interested in markets, real estate, design and lots of other stuff, fixed income analyst by day.”

6 responses to “RE-Tweet – “Conversation I had recently reminded me of my days living in Dublin pre-RE collapse there and the scary parallels with #VanRE now.”

  1. One of the few Vancouver-based public faces I see who “gets it”. Scary.

  2. Eric, well done — please broadcast the parallels as widely as possible!

  3. Thanks guys, flattered, although a little puzzled since my tweet didn’t have a lot of information in it. Feel like I need to expand a bit. I lived in Dublin for just under 2 years at the end of the 1990’s and then flew back and forth from London for a year (girlfriend, now wife lived there at the time). As for parallels, was always amazed at how expensive Dublin real estate was, especially compared to London. For example, I rented a gorgeous seaside 2 bedroom apartment for the equivalent of just over 2% GROSS rental yield. The disconnect was explained away by many of the same excuses you hear in Vancouver now, instead of Asian money it was rich Londoners and Eastern Europeans (more believable in my mind since London really was only an hour flight away). Dublin was a “world class” city that was ultra desirable to live in, when in reality it was just a small-medium sized regional center with a favourable tax regime and a rainy climate. Real estate was a local obsession of course, with many a taxi driver both lamenting the rising cost of living while telling me how they were going to lever up to take advantage of it. The root cause of course wasn’t that Dublin was going to become the next European financial capital, it was simply that a favourable trend with some fundamentally sound reasons (lower interest rates, decades of European transfer payments helping to raise a relatively poor country up to among the richest in Europe) was extrapolated with glee going forward by locals. Aided and abetted by too-low rates, too lax lending (based on years of bull market performance), and the useful myth of an endless supply of rich foreigners buying up everything. Sound familiar yet?

    My one caveat is that although the Dublin market seemed silly to me back in 2001, it still proceeded to levitate higher for another 5 years before finally peaking another 50% higher in 2006 before collapsing. Bubbles are tricky things to predict and for good reason since once you remove any relationship that prices have to fundamentals, then sentiment can drive prices for much longer and much higher than most people think. In fact my biggest fear for Vancouver is not that we have a correction soon, it is that prices here continue to go up, a possibility that I think many bears discount. But before the bulls get too excited they should remember that all that means is that the eventual correction will be that much more painful. Just ask the Irish:

    • Eric:
      Many, many thanks for your comment and for the further info you share. Your tweet was headlined for its clarity, and also for the (as jesse noted) rare event of a ‘public face’ pointing to the fact of the bubble.
      We agree completely regarding the lack of any commentator’s ability to time the top.
      I don’t think many bears are yelling “Pop – NOW!” any longer (we’ve had years of experience already with this mania!). Ironically, now that most of the bears are completely exhausted, the top may be ‘in’. That’d be typical market behaviour, wouldn’t it?
      You may note that my sidebar ‘Prediction’ post says the Vancouver RE Bear Market will play-out sometime this decade, we still think that’s a fair guesstimate. And we agree with you when you point out sooner better than later.

  4. The Irish also stocked the boom and at the time rising real estate prices were seen as a sign of a successful economy. Also, and a big factor imo, the holding cost of real estate in Ireland is low, property taxes were abolished some years ago. Another similarity between Dublin and Van is the poor infrastructure.

    • “Another similarity between Dublin and Van is the poor infrastructure”

      Just curious: What infrastructure in Vancouver do you find to be poor? What would you consider to be a city with good infrastructure?

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