Monthly Archives: July 2012

Cartoon – Royal Mortgage Helper

– David Sipress, The New Yorker, 30 July 2012

S&P Downgrade Outlook On Canadian Banks – “A prolonged run-up in housing prices and consumer indebtedness is contributing to growing imbalances, applying negative pressure on economic risk for banks.”

Ratings agency Standard & Poor’s has revised its outlook downwards on seven Canadian financial institutions, citing high housing prices and consumer debt.

“A prolonged run-up in housing prices and consumer indebtedness in Canada is in our view contributing to growing imbalances and Canada’s vulnerability to the generally weak global economy, applying negative pressure on economic risk for banks,” the rating agency stated in its decision. “Growing pressure on banks’ risk appetites and profitability arising from competition for loan and deposit market share could also lead to a deterioration in our view of industry risk.”

House prices have roughly doubled over the past decade while, relative to GDP, consumer debt has risen from about 70 per cent to more than 90 per cent, S&P pointed out. And it suggested that Ottawa’s actions have not done enough to stem what could be a significant problem for the economy. “Successive government efforts since 2008 to counteract the stimulative effect of low interest rates on consumer borrowing and home prices have done less than we expected to counteract the growing level of consumer leverage and housing market risk in Canada,” S&P said. The agency is now watching to see if the most recent moves that the government has made will have better results.

– from ‘S&P cuts outlook on 7 Canadian banks’, G&M, 27 Jul 2012

‘High-Volume Local Vancouver Realtor’ – “The appraisers told me they just don’t see the value in a lot of properties and want to make sure they do not over-value in view of an anticipated market correction.”

“As you are no doubt aware there has been a huge slowing in the market and predictions are that there will be a correction of approximately 25% on detached properties and up to 30% on condos. The other prediction is that we will not see any sort of recovery for another 2 years. How much of the above is true only time will tell. One thing I do know is that The Federal government has not helped by a) cancelling nearly 300,000 investor applicants who were already 2 years into their application process and b) Making it much harder to get a mortgage without proof of income and increasing the ratio of income to borrowing. This has directly affected the numbers of people looking to buy from outside our borders.
The other problem I have personally experienced is purchasers that bought properties I had listed have hit HUGE problems getting a mortgage, as banks would not appraise the property at what they paid for it even though it was sold on the MLS and in some cases at multiple offers! The appraisers told me they just don’t see the value in a lot of properties and want to make sure they do not over-value in view again of an anticipated market correction.
Good quality properties that are priced well are still selling and there have been some big sales, as you will see from my attached stats sheet. If you don’t have to sell then don’t, if you do then make sure you price it right, choose a Realtor who will promote it right and last but not least prepare now with photos, floor plans etc., so you can come to market as soon as there is a change – even if it is nominal.”

– this letter from a “high-volume local Vancouver realtor” posted by Simeon Garratt at his website 23 July 2012, in a post entitled ‘IS THE CANADIAN GOVERNMENT KILLING VANCOUVER REAL ESTATE?’.
Simeon Garratt himself adds:
“I think that the Federal Government is directly curbing the growth in the real estate sector. Canada -Vancouver specifically- has been on the ‘hot spot’ radar of people from all over the globe. We have been ranked the best place to live, the safest place to live and have an economy that is second to none. A huge amount of our economy’s growth is based on our need to grow as a population. Currently, Canada’s population is dwindling and without the support of a strong immigration system, it will get worse.
I believe that if we focus on creating good quality jobs and giving young people quality education, we will attract higher salaries, bigger companies and housing prices will become less of a factor. It is common in most metropolis cities around the world to commute an hour to work. For some reason, we think we are the exception.”

1. The appraisers are to be commended for their caution: it is currently very hard to reconcile ‘price’ and ‘value’ for local properties.
2. We do not foresee local economic strength so powerful and so sustained that it raises local incomes such that RE prices make sense by that fundamental measure. Incomes would have to double or more for that to happen. Can you imagine that happening without mortgage rates rising?
3. We don’t know what Simeon Garratt means when he says “(we) have an economy that is second to none”, or “a huge amount of our economy’s growth is based on our need to grow as a population.” We see lots of signs that our economy is over-dependent on: the RE industry, industries directly related to RE, and the other temporary knock-on wealth effects of a speculative mania in RE.
– vreaa

600,000 square feet is to be dedicated to office space packed in around Rogers Arena and BC Place – “We have our work cut out for us to fill that space.”

“The city’s planning department, concerned about the loss of key office sites on Vancouver’s small downtown peninsula to the condo boom of the 1990s and 2000s, decided several years ago that the last bit of undeveloped former industrial land that was the site of Expo 86 – Northeast False Creek – should include 1.8 million square feet of commercial space.
Of that, 600,000 is to be dedicated to office or, as the planners call it, “job space,” packed in around Rogers Arena, the home of the Vancouver Canucks hockey team, and BC Place, the government-owned stadium where the B.C. Lions play football and Whitecaps play soccer.
That 600,000 square feet is the equivalent of a whole Park Place tower in Vancouver’s business district or the new PricewaterhouseCoopers tower on York Street in Toronto.
Now, landowners in that area are trying to figure out who they’ll get as tenants.
“We have our work cut out for us to fill that space,” says David Negrin, president of Aquilini Development, one division of the Aquilini family empire that includes the Canucks, Rogers Arena and a host of other businesses and development projects. “It’s just a tough location because it’s on the edge of the [central business district].”

– from ‘Canucks owners gamble on new office district in Vancouver’, Globe and Mail, 30 Jul 2012

Dunbar House Moved To Vancouver Island – “Everyone asked if we really were knocking the old home down. We said we’d rather not, but to make money in the development world, you have to build a new home.”

CBC Announcer: “Moving is often a hassle, but moving a whole house takes some special expertise.”

Announcer: “And so the journey begins for a 97-year-old Dunbar heritage house, picked up, put on a trailer and [taken] out of town. It’s quite the sight for all the neighbors.”

Neighbourhood Lady 1: “I love these old houses. I really wish that we could keep it.”

Announcer: “However, it’s that typical Vancouver real estate story of a small house on a big lot. But, rather than the usual tear-down, this one was saved.”

Neighbourhood Gentleman: “It’s fabulous moving it..”
Neighbourhood Lady 2: “Nice to save it … Very good to save it.”

Neighbourhood Lady 3: “I wish it was in the neighborhood, I would feel less annoyed about having my power out if I’d known it was staying. It would have made a dandy lane-house.”

Announcer: “It’s too big for that, almost too big for this journey. Boulevard trees had to be cut back, Hydro had to down power lines to make way.”

Mover: “We have a lot of obstacles on the way, wires to drop and raise back up, and it is a little slower with all of the pedestrians that are here.”

George Puusepp, Former Owner: “You wouldn’t be able to afford to reproduce it that’s for sure. You can’t find the timber that they’ve got in it now.”

Ben Ford, New Owner: “We figure it’s about $140,000 for the house.”

Announcer: “That is some deal. Inside, stained-glass, old-growth fir moldings & floors. Only one room upstairs is painted. Jean Rouday’s grandfather built the house in 1915. She grew up there.”

Jean Rouday: “I painted the woodwork, so I’m the culprit… the nerve of me, right?! (laughs)”

Announcer: “The 4 km trip to the Fraser River took 5 hours. Next week it gets barged to Union Bay on Vancouver Island where, let’s face it, it will be a welcome sight.”

– from ‘Entire house moved out of Vancouver’, CBC News, 26 Jul 2012 [hat-tip to Nem]

The same story covered by the Vancouver Sun, with further perspective:

Heritage home makes incredible journey
Dunbar house transported by truck and barge to its new location on Vancouver Island

Shawn Conner, Vancouver Sun July 27, 2012

When George Puusepp heard the Dunbar house he had lived in for almost two decades was being moved, he travelled from his new home in Kamloops to witness the event.
On Thursday, Puusepp was among the onlookers who watched as the pine green heritage house, which had been freed from its foundation at 3725 West 37th Ave., was loaded onto a transport truck to make its way to the Fraser River where it would be placed on a barge.
“It’s very strange, but very gratifying,” said Puusepp, as the 1,800-square-foot home inched through the streets of Dunbar.
“I’m really glad they didn’t tear it down,” the 69-year-old retired high school teacher told The Sun.
The house, built in 1915, was the first home in the area to be built out of lumber. “The inside is all first-cut fir – wide planks, no knots,” said Puusepp, who lived in the home between 1986 and 2003. “You never see that any more.”
Dozens of neighbours came out to watch the slow journey of the sturdy structure, which has original stained-glass windows on the side and a veranda out front. Crews from BC Hydro and Telus, as well as from moving company Nickel Brothers, came out to ensure that power and phone lines did not interfere with the truck and its cargo, which measured more than 10 metres at its height.
The salvation of the house is a triumph for all involved, said Guy Taylor, of Averra Developments, which purchased the house and lot in December.
“When we said we were going to build a new house on the site, everyone asked if we were really knocking [the old one] down,” said Taylor. “We said we’d rather not, but to make money in the development world, you have to build a new home.”
Averra contacted Nickel Brothers, who agreed to take it off their hands. As luck would have it, co-owner Jeremy Nickel knew just the right buyer.
Ben and Jen Ford had hired the company to move a house before, and had helped with a few others. The Dunbar house was exactly the kind of classic home the professional renovators were looking to purchase for their family.
“This is the kind of house we’d been hoping they could find for us for years,” said Jen Ford, who had come in to watch the move from Gabriola Island, where the couple now lives with their four daughters.
The family will move into the house once it reaches the community of Union Bay on Vancouver Island.
“It’s got all the period features and the character,” said Ford. “It’s in such good shape for its age. Usually at this stage a house is pretty rundown.”
Nickel Brothers sold them the house for the cost of the move, she added, an estimated $130,000. “You couldn’t build it for that, that’s for sure.”
The move wasn’t without its snafus. Spectators and technicians waited patiently in the July heat Thursday, while crews lowered a power cable that stretched across an intersection so the house could get through.
“I’ve been doing this about 25 years,” said Rick Picard, sales manager at Nickel Brothers. “It’s one of the most complicated moves I’ve been involved with.”
BC Hydro field inspector Bob Coulter was at the site to sign off on the temporary removal of power lines by a contractor. As the house once again began its westerly progress Coulter remarked, “Sure is a beautiful home.”

So long; Adieu.

“We will buy a house in Spain in 2014. We would be happy to pay $150K Canadian for a detatched Villa with Ocean views and a pool. I have to disagree with the predictions for a housing crash here in Vancouver.”

“I’m waiting to buy a house in Spain. A country house 5 to 20 K away from the drab concrete settings of the coast. I used to live in Gibraltar in the mid 80s when the Costa Del Sol was pretty much sand dunes and an acre of waterfront was $40,000.
We will buy in 2014 which is when we would be happy to pay $150K Canadian for a detatched Villa with Ocean views and a pool. I have no idea if the market would be at the bottom then but that is one hell of a deal and we would be very happy to purchase at that price. We have duel Citizenship .
I have to disagree with the comments about a housing crash here in Vancouver.
It’s pretty solid on all fronts. There may be a level or even a 10% correction but there will be no crash.
I used to think there would be a crash (since 2004) but after much thought I became aware that as crappy as Vancouver is during the winter etc its still the warmest and most interesting place in the entire country to live. Our banking system is tight. Commodities + resources are in abundance.
Canada is rocking on the business front as is evident in the real estate prices across the country. If you have cash its a very safe country to bring your treasure to.
It’s just not comparable to Spains economic woes and the parallel is stretching it a bit.”

– comment by ‘a different fred’* at VREAA 29 Jul 2012 3:50pm [*’fred’ is not the same fred who posts many trollish comments. ed.]

Vancouver RE Discussed On CBC, Again – “Patti Croft recommends cashing out and is thinking about it herself”; “Patricia Croft kept insisting Canada would be the *only* country to engineer a soft landing in real estate.”

1. “Anyone else catch The House on CBC radio this morning [14 Jun 2012]? Tsur Somerville [UBC Sauder School Of Business RE economist] and Patti Croft [Bay Street analyst], mostly falling over one another with the usual “not-a-bubble”, but with some pretty bearish sentiment lurking beneath the conciliatory tones (considering the sources):
– Nationally speaking, they see a 10-15% overvaluation.
– They openly admit that this national number is mostly be driven by Vancouver and Toronto, implying enough overvaluation there to significantly sway national numbers.
– Patti recommends cashing out and is thinking about it herself.
– Tsur seems to have given up on recommending metrics and now suggests “if you like it, buy it”.
– Even though there’s no bubble, Canada will earn a feather in its cap by successfully engineering a soft landing.
Also, apparently you now need 50% overvaluation to have a national bubble.”

Many Franks at VCI 14 Jul 2012 11:28am

2. The CBC financial roundtable discussion on The National [CBC TV] last night focussed heavily on debt. The same four folks appeared that were there last time. Patricia Croft kept insisting Canada would be the *only* country to engineer a soft landing in real estate. She said it twice.
Dr. Nick Riveria, VCI, 25 Jul 2012 10:22pm