“A very senior colleague refinanced his home repeatedly to acquire new properties. Freaked me out, the 7-digit loans.”

“A very senior colleague refinanced his home repeatedly to acquire new properties. I knew about his acquisitions, as I was asked to witness some documents. Freaked me out, the 7-digit loans.”
ToL at VREAA 28 may 2012 11:16pm

Looks great on the way up; ghastly on the way down.
Or, for the benefit of those who haven’t heard how Buffett put it: “When the tide goes out, we’ll find out who has been swimming naked.”
– vreaa

20 responses to ““A very senior colleague refinanced his home repeatedly to acquire new properties. Freaked me out, the 7-digit loans.”

  1. Speaking of aquatic naturists…

    [CBC] – ‘Uncertain fate for Vancouver real estate prices’

    “Vancouver’s real estate market has taken another interesting turn, with listings up and sales down during what is usually a busy time of year.
    In May, average prices for houses have dropped about $150,000 compared to one year ago. That 12-per-cent drop wiped out two years of price increases. The reason appears to be that too many more sellers are trying to cash in at the same time. Listings are up by 23 per cent, but fewer are buying: sales are down 24 per cent. “Probably, on average, about a 150 or 160 homes in Vancouver are reducing their price every day in the hope of catching, getting ahead of the train and maybe get out before they can’t,” said realtor Larry Yatkowsy.”…


  2. Aldus Huxtable

    I had the fantastic endeavour of walking through the downtown core at 11pm last night. Within my half hour walk I overheard three groups of staggeringly drunk people conversing, arguing and yelling at each other about real estate, renting and mortgages. It was a tad surreal.

    • That has to be one of the most bizarre anecdotes yet.
      Perhaps the party really is over.

      • Vreaa,

        Have u ever been a RE bull at some point in this bull run? Or we’re you bearish to the point where you and the rest of the bears here that thought prices were coming down in 2004? This was the once in a lifetime opportunity to cash in. Never again this will happen in RE again. It’s all coming to an end soon.

      • Thanks for asking.
        No, I was an early bear in is Vancouver RE mania.
        I thought that housing was definitely in a bubble by 2004-2005, and overpriced before that even (and I think this will all be proven to be correct once the dust settles).

        But, to elaborate a little, I’m no ‘permabear’, I’m a contrarian investor.. There are times to be bullish and times to be bearish. Such investing involves being drawn to buy things that show value; the more extreme the better. Sure, the strength and duration of the Vanc RE boom has surprised me, but there have been plenty of opportunities to be bullish on things other than Vancouver RE these last 8-10 years.
        Momentum investors like jumping on for the ride, and that worked for Vanc RE the last 8 years, or Nasdaq 1990’s. But that’s a different style, and one that doesn’t appeal to me. And momentum investors can easily get burned, badly, especially when markets turn illiquid.

      • Vreaa,

        Are you predicting a decline of 60% in the overall Vancouver sfh market or is it just certain neighborhoods? That would be devastating if that decline was in the median or benchmark. I don’t really like using an average price because it’s so volatile and doesn’t really show true market conditions.

      • B@D@$$ (the first real ‘rap’ handle on this site?), again, thanks for asking.
        I’m of the belief that the most probable outcome after this mania is that, peak to trough, real housing prices drop 50%-66% across all geographical areas of the greater Vancouver area, and pretty much by the same amounts across all property types (condos, town homes, detached).
        This is most purely reflected in time1 to time2 sales of the same or identical properties, all other approximations are imperfect (median, mean, benchmark) but will give ballpark similar figures. Agree that raw averages are likely the worst, but we still watch them because they are so readily available.

        Agree this will be devastating, and in that sense not relishing the idea of this outcome… fearing it, more like… but that is simply what the evidence is screaming, and the market cares not what we humans fear or hope or would prefer.

    • Were they yelling at each other to buy RE or were they yelling because they bought into a bubble market? Or were you drunk too and heard wrong?

      • Aldus Huxtable

        I was entirely sober, walking home from a late work meeting. I usually treat myself to a walk and a listen to an album from start to finish, but on a weekend late night around Granville, it’s not the time for headphones for safety reasons.

        I’ve never heard conversations like this before. Women yelling at each other that “it doesn’t matter if I can’t afford the payments one day, I can always go back to renting” another young man saying to his friend “no way man, I just want a place that’s worth $500,000. It’s gotta be worth $500,000”

    • reality check

      yeah right

      • Aldus Huxtable

        Entirely serious. To hear one conversation, no big deal, coincidence, to cover twenty blocks and encounter three passing conversations seems worthy of mention.

  3. interesting pix … http://tinyurl.com/7bygtzs … not really news but puts some numbers to it and permits closer lookage … listings v sales going in opposite direction … total ytd $ vol down 35% – 40% yoy … represents comparable rev hit in related industries … prices are backward looking, reflect conditions/sentiment, say, 2-3 mos (rough guess) ago … i.e. current median/avg price indicative for period just before listing ramp from high 700s … loose conjecture >> air pocket upcoming for west side median/avg ???

  4. There are definitely huge tax benefits in his case. He invested in revenue properties long before the 9-11 and the dot bust, but after that he concentrated on landed properties and presales. Can’t give a personal opinion, after all I’m not in the same league. Sigh!

    Recently, while on a business trip to Asia, I heard that a lady surgeon just sold her bungalows at Sentosa island for S$140M. Some weeks later, a neighbor put his bungalow on the market for S$120M.
    Friends’ modest 2- to 3-bedroom-condos purchased some years ago @S$1.5M-S$2M each have doubled in values in the last 2-3 years.
    A mini cooper costs S$170K inclusive, as the current CoE (certificate of entitlement, to purchase a car) is around S$90K.
    Top buyers of landed luxurious properties are from China.
    Top gamblers at the casinos are from China.
    Somebody’s spouse, a bank loan officer, told me everyone wants to go to Singapore (casinos) and buy a property or two there.
    ^0^ *o* … speechless.

    • It’s over, ToL…

      [BloomBerg] – Billionaire City Belies Capitalism’s Victories

      …”Hong Kong’s wide-open economy might have a problem that few want to admit: It may be a case study in the flaws of one brand of capitalism.

      The city is more than a proxy for concerns about China. It’s a laboratory for the brand of finance-driven capitalism that not so long ago was heralded as the model for others to follow. Small, laissez-faire Hong Kong was the world’s special- enterprise zone. Now the world awaits a judgment on the Anglo- Saxon economic model.

      Economic Canary?

      As test cases go, Hong Kong hardly looks like a breakthrough. The free-market crowd adores the city for its low taxes, unrestricted entry of foreign capital and rule of law. It is routinely ranked the freest economy anywhere. Never mind that its leader is picked by China; its currency is pegged; it is home to the only state-backed Disney theme park; and a handful of oligarchs rule the place. To the true believers, this is market-freedom central.

      Yet what have Hong Kongers gotten out of their emancipated economy? The highest income-inequality gap in Asia. A widening divide between rich and poor is tolerable if it is tempered with hope that it is bridgeable. But Hong Kong’s government is failing on this front. Politically connected tycoons have enriched themselves from monopolies in power generation, real estate, transportation and telecommunications. The 99 percent are falling further behind.”….


      [NoteToEd/DearReaders: DejaVu much?]

      • I thought so too Nem. But I was careful not to impart any personal opinions, as I was only a visitor in transit.
        However, Hong Kong is in a stronger position financially, imho, than the island-state of Singapore, whose ministers are among the best paid in the world. http://en.wikipedia.org/wiki/Cabinet_of_Singapore
        Perhaps, it isn’t relevant as amongst their top dogs, many already own a piece of BPOE long before the prime-ministeralship happened.

        wrt the “politically connected”, Bo’s murderous wife, is known as “Horus” GU overseas and she is reported to hold a Singapore PR.

        A few of those I met on this trip are hedging their currency to Canadian$ / bonds. When I updated them on CMHC & OSFI, I noted nervousness on their faces.

      • And they have good reason to worry, TOL. In May alone the Loonie lost almost 6 cents as commodities took a face plant and the US Dollar went above .83 cents. They are hedging the wrong currency in a world where a housing bust in Asia and elsewhere precipitates large declines in the consumption of commodities that countries like Canada and Australia produce. Longer term they would be much better off simply staying in their own currency.

      • Farmer, I appreciate you solid knowledge of global economics, and thanks for sharing with us less savvy in that direction.

        The anecdote mentioned earlier was not in the correct currency (it could be in bahts or in ringgits). However, a sale price of S$39M for a 99-year leasehold bungalow on Sentosa island is still ridiculously over inflated.

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